A Cautionary Tale Regarding Procedural Pitfalls: Part 2

In yesterday's post on the October 1, 2014, decisions by Justice Oing of the New York County Commercial Division in Loreley Financial (Jersey) No. 3, Ltd. v. Morgan Stanley & Co. Inc., 2014 NY Slip Op. 32622(U) and 2014 NY Slip Op 32624(U), we discussed the decision in 2014 NY Slip Op 32624(U), in which the court held that despite having been given leave to file an amended complaint, the court had no jurisdiction to hear the amended complaint the plaintiffs filed after judgment dismissing the action had been entered. This post looks at the decision in 2014 NY Slip Op. 32622(U), in which the court addressed the defendants' motion to dismiss the plaintiffs' newly-filed action on statute of limitations ground.

The plaintiffs' new action was not filed within the limitations period for their claims. The plaintiffs argued that the newly-filed "action relates back to the prior action because they filed it within six months of withdrawing the appeal of the prior action." The court disagreed, explaining:

CPLR 205[a] provides that where an action is terminated, the plaintiff may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination. Termination, for purposes of CPLR 205[a], occurs when appeals as of right are exhausted. In other words, the six month period runs from the date of entry of the order determining [the] appeal. The question, which appears to be one of first impression, is when does the six month period begin to run where there is a voluntary withdrawal of a timely appeal--at the time of the voluntary withdrawal, which would necessarily require a finding that such act should be deemed an appellate determination, or at the time the appealed order herein was entered, namely July 1, 2013. In resolving this issue, this Court is mindful of the following observation: "it is not the purpose of the statute to permit a party to extend the time to commence a new action by merely taking appellate action."

Keeping that underlying principle in mind, this Court holds that plaintiffs' voluntary withdrawal is not an appellate determination. Indeed, plaintiffs never perfected the appeal prior to withdrawing it. By doing so, for the purposes of CPLR 205[a], plaintiffs did not take an appeal. Procedurally, had they perfected their appeal, an order would have been required to have the appeal dismissed. In that circumstance, the six month statute of limitations would have run from that dismissal order. Given that plaintiffs chose to withdraw their unperfected appeal, the termination date is July 1, 2013, the date in which this Court's order dismissing the prior action was entered. As such, this action is untimely.

(Internal quotations and citations omitted) (emphasis added).

The Loreley Financial decisions show how procedural pitfalls can trap counsel. One can understand how the plaintiffs in Loreley Financial thought that their claims were preserved--they had permission to replead, a stipulation staying the time to move and a timely-filed original action. But the court found otherwise. We look forward to seeing what the First Department does with these decisions.