Q&A: conducting litigation in USA (New York)

Litigation

What is the structure of the civil court system?

The trial-level federal court is the district court. It may hear any civil case that is based on federal law (as opposed to state law), as well as civil cases that meet the standard of ‘diversity’, which requires that the plaintiffs reside in different US states than the defendants (or different nations, as long as there are not litigants on both sides of the ‘v’ from foreign countries), and that the amount of the claim exceeds US$75,000. District courts are divided among 94 geographic districts. Every district court also has within it a bankruptcy court, which hears bankruptcy proceedings.

An appeal from a district court is heard in the federal court of appeals that presides over its district. There are 13 courts of appeals, which altogether have a maximum of 179 judges. Most appeals are heard by a panel of three judges.

A decision by a court of appeals may be appealed to the Supreme Court, the highest court in the United States. The nine-member Supreme Court’s docket is for the most part discretionary, and the Court accepts only a small fraction of the petitions for appeal that it receives.

In addition, there are several specialised federal civil courts. The Court of Federal Claims primarily hears monetary claims against the United States. The Court of International Trade hears cases concerning import transactions. The Tax Court hears cases regarding federal taxation. The Court of Veterans Appeals reviews decisions of the Department of Veterans Affairs.

State courts typically follow a similar structure, with a trial court, an intermediate court of appeals and a state Supreme Court.

What is the role of the judge and the jury in civil proceedings?

Generally, the jury decides ultimate issues of fact, after being instructed on the applicable legal standard by the judge.

During the pretrial discovery process, the judge sets deadlines and resolves disputes among the parties, including those regarding production of documents and examination of witnesses. If either party makes a motion to dismiss all or part of the case before trial, or to rule on other matters, the judge will decide it. However, if either party requests a jury trial, then all disputes regarding facts in the case must be reserved for the jury at trial. The judge will therefore only decide questions of law, such as whether a particular statute applies or whether the complaint meets the minimum requirements to state a claim. (If no party requests a jury, the judge may decide questions of fact at a ‘bench trial’.) During a jury trial, the judge will determine what evidence the jury is allowed to hear and will instruct the jurors regarding how to apply the law to the facts of the case.

Federal judges are nominated by the President of the United States and confirmed by the US Senate. Jurors are selected at random from the district where the trial will take place, and may be questioned by each party before being selected. Each party may choose to eliminate a certain number of potential jurors before the trial begins.

What are the time limits for bringing civil claims?

The time limit for bringing a claim, known as the ‘statute of limitations’, is generally defined by the federal statute on which the claim is based, or by reference to the law of the state where the federal district court is located. The time limits vary depending on the type of claim. For most civil claims, the statute of limitations will expire between one and six years after the events that gave rise to the claim.

Both sides of a potential lawsuit may agree to temporarily stop the clock on a statute of limitations by signing a ‘tolling agreement’. Such agreements are interpreted as contracts and must therefore be drafted very carefully to avoid unintended results.

Are there any pre-action considerations the parties should take into account?

Unless required to proceed in a particular forum by contract, a plaintiff may generally choose whether to bring an action in state or federal court. Therefore, before beginning an action, a plaintiff should consider which forum offers the most advantages.

Although some state courts allow limited pre-suit discovery, the rules in federal courts do not permit any investigative discovery until after an action has been filed.

How are civil proceedings commenced? How and when are the parties to the proceedings notified of their commencement? Do the courts have the capacity to handle their caseload?

Civil proceedings are commenced by the filing of a complaint with the court. The plaintiff must also prepare a summons, to be signed by the clerk of the court. A defendant is notified of the proceedings when the plaintiff serves him or her the signed summons and complaint.

Federal courts generally have the capacity to manage their caseloads, and cases will typically be listed on a public docket within a day of filing. However, the speed with which a case will proceed through the phases of discovery and reach trial varies significantly from district to district and judge to judge. In general, civil cases take 1–3 years from initiation to conclusion, though more complex cases may take significantly longer. According to data published by the Administrative Office of the US Courts, as of 31 December 2022, the median time from filing to disposition in all civil actions in federal court was 12.3 months, while the median time from filing to trial in all civil actions in federal court was 34.6 months.

What is the typical procedure and timetable for a civil claim?

The summons and complaint must be served upon the defendant within 90 days of the complaint being filed. The defendant must file a response (typically an answer or a motion to dismiss) within 21 days of service of the summons and complaint. After that, most deadlines for discovery, motions and all other aspects of the case will be dictated by a scheduling order entered by the judge.

A 2011 study by the federal judiciary determined that the median time from the filing of the complaint to the issuing of a scheduling order was between 77 and 125 days, depending on the district. The median time for the conclusion of discovery set by the first scheduling order was between 143 and 240 days later.

Can the parties control the procedure and the timetable?

Procedures in federal court are set by the Federal Rules of Civil Procedure. The timetable is controlled by the judge, who sets most deadlines in a scheduling order. The parties often submit a draft scheduling order with their preferred timetable, which the judge may approve with or without modifications. As the case progresses, the parties may seek extensions of deadlines, which the judge has discretion to grant or deny.

Is there a duty to preserve documents and other evidence pending trial? Must parties share relevant documents (including those unhelpful to their case)?

Federal and state laws impose a duty to preserve relevant documents and evidence from the time a party can reasonably anticipate litigation. Parties that violate this duty may be subject to serious sanctions that can determine the outcome of an action.

A party must share non-privileged relevant documents that are responsive to requests from the other parties in the case, including documents that are unhelpful to its case.

Are any documents privileged? Would advice from an in-house lawyer (whether local or foreign) also be privileged?

Yes. There are several types of documents that are considered privileged. The ‘attorney–client privilege’ protects communications between a client and external counsel, as well as communications with in-house counsel located in the United States, concerning legal issues (the situation is less clear, however, with respect to in-house counsel located in foreign countries, where communications between in-house counsel and clients are not necessarily privileged). The ‘work product privilege’ protects documents prepared in anticipation of litigation or for trial. These privileges can be waived if the documents or communications are shared with third parties.

Do parties exchange written evidence from witnesses and experts prior to trial?

A party may seek written responses to interrogatories from other parties prior to trial, but may not seek written evidence from lay witnesses who are not parties. However, non-party lay witnesses may be questioned at a deposition before trial. Note, however, that US court rules provide for pretrial document production from both parties and non-parties that is much more wide-ranging than other jurisdictions.

An expert witness must submit a report during discovery containing a complete statement of his or her opinions, the facts and date considered in forming them, any documents that will be used to support those opinions, and his or her qualifications, experience and compensation for work in the case.

How is evidence presented at trial? Do witnesses and experts give oral evidence?

Evidence is presented primarily via the oral testimony of witnesses. Statements made by counsel at trial are not considered evidence. Documents may be offered in evidence and shown to the jury, provided sufficient foundation has been offered to demonstrate their admissibility and authenticity. If a witness was questioned during a pretrial deposition but is unable to appear at trial, portions of his or her testimony may be read to the jury or shown by video.

What interim remedies are available?

A court may grant a preliminary injunction or temporary restraining order, ordering a party to refrain from taking a particular action. In federal court, a party seeking an injunction must show a likelihood of success on the merits, irreparable harm, and that the public or private interests implicated by the injunction favour that party. In terms of the specific relief available, a court may issue an order of attachment, seizing specific property that may be the subject of an eventual judgment. It may appoint a receiver to oversee a party’s property during the pendency of a suit. It may issue a notice of pendency, which effectively makes a parcel of real property impossible to sell. Rarely, a court may order garnishment of a party’s wages in advance of trial. The requirements for obtaining such remedies – including with respect to foreign proceedings – vary by state.

Notably, federal courts do not have authority to issue injunctions temporarily freezing a defendant’s assets pending the outcome of a foreign lawsuit or arbitration. However, both federal and state courts have wide discretion to grant more narrow forms of interim relief, which are governed by state law.

In New York, the standard for obtaining a preliminary injunction is similar to the federal standard: the plaintiff must generally show a probability of success on the merits, irreparable harm and that the balance of equities favours the plaintiff. A plaintiff may obtain an order of attachment as security for a potential judgment, including in support of international arbitrations subject to the New York Convention.

What substantive remedies are available?

The most common remedy in civil lawsuits is money damages, which compensate the plaintiff for a loss. Restitution – which requires the defendant to return its gains to the plaintiff – is also available on some claims, such as unjust enrichment. Specific performance is also available as a remedy for breach of contract where damages would not provide an adequate remedy.

Punitive damages are rare in civil cases. They are not available for breach of contract. However, some federal and state-level statutory causes of action permit punitive damages in civil cases, and the party seeking such damages is generally required to establish grossly negligent or malicious conduct.

Both prejudgment and post-judgment interest are available on money judgments. Federal courts determine the rate of interest based on the laws of the states in which the federal courts are located. In New York, the Civil Practice Law and Rules (CPLR) sets the statutory rate of interest at 9 per cent per year.

What means of enforcement are available?

In civil cases, the most common sanctions are monetary fines, which may be imposed on a party or counsel for violations of rules of procedure (eg, destroying or failing to preserve evidence). In addition, adverse inferences may be applied by a judge in a bench trial or provided as jury instructions in a civil case.

Contempt orders are very rare in civil cases, but they are potentially available for egregious misconduct, such as repeatedly flouting court orders.

Are court hearings held in public? Are court documents available to the public?

Court hearings are held in public, and court documents, including pleadings, witness statements and orders, are available to the public with few exceptions. Documents containing particularly sensitive or confidential information may be filed with the court ‘under seal’ – meaning visible only to the parties – with court permission.

Does the court have power to order costs?

The general ‘American rule’ is that each side bears its own fees and expenses, irrespective of the outcome of the case. While courts will sometimes award some modest increments of costs, such as court filing fees, to the prevailing party, and federal courts have discretion to require a claimant to post security for the costs that the opposing party may incur, there remains a general presumption against cost-shifting, absent a contractual or statutory basis to do so.

Are ‘no win, no fee’ agreements, or other types of contingency or conditional fee arrangements between lawyers and their clients, available to parties? May parties bring proceedings using third-party funding? If so, may the third party take a share of any proceeds of the claim? May a party to litigation share its risk with a third party?

Contingency fee arrangements between lawyers and clients are available in the United States. Under such agreements, lawyers agree to accept a percentage of the recovery that the client receives.

Third-party funding by professional investors seeking to invest in claims is available in the United States. At present, the industry is not regulated at the federal level, although some states have imposed limitations on the interest rates that third-party litigation funders can charge to consumers.

A third-party litigation funder may agree with a claimant that the third-party litigation funder will take a share of any proceeds on the claimant’s claims. Parties to litigation are permitted to share risks with third parties, including claimants selling some proportion of any recovery to investors in return for an upfront payment. Liability insurance, in which a defendant pays a fixed sum to an insurer to offset a proportion of any liability, is also allowed.

Is insurance available to cover all or part of a party’s legal costs?

Litigation expense insurance is available to cover all or part of a party’s own legal fees and costs, although it is not widely used in the United States. To the extent that it is available in the United States, most insurers’ policies will exclude coverage for an opponent’s costs.

May litigants with similar claims bring a form of collective redress? In what circumstances is this permitted?

Yes, class actions are available in the United States. At the federal level, class actions are permitted where a large number of plaintiffs allege that they have suffered similar injuries caused by the same defendant or defendants. Plaintiffs may generally bring class actions for any type of civil claim, but they must satisfy applicable legal and procedural requirements. For example, the Federal Rules of Civil Procedure require putative class action plaintiffs to satisfy the following factors before the class can be certified:

• the class must be so numerous that joining all members of the class would be impractical;
• there must be common questions of law or fact;
• the putative class must have representatives whose claims or defences are typical of the class;
• the putative class must have representatives who fairly and adequately protect the interests of the class;
• the common questions of law or fact must predominate over the questions affecting individual members; and
• a class action must be a superior form to all other available methods for fairly and efficiently adjudicating the dispute.

In New York, the CPLR requires putative class action plaintiffs to satisfy substantially similar procedural requirements.

On 20 October 2020, New York’s Court of Appeals – the state’s highest court – issued a noteworthy decision regarding cross-jurisdictional class action tolling. In Chavez v Occidental Chemical Corp, 35 N.Y.3d 492 (2020), the Court of Appeals held that New York law recognises cross-jurisdictional tolling of statutes of limitations for absent class members of a putative class action filed in another jurisdiction. In addition, the Court of Appeals held that tolling ends when there is a clear dismissal of a putative class action, including a dismissal for forum non conveniens or denial of class certification for any reason. This decision is significant because it is consistent with the Supreme Court’s decision in American Pipe v Constr Co v Utah, 414 U.S. 538 (1974), in which the Supreme Court held that the same principles apply to class action tolling in federal class actions.

On what grounds and in what circumstances can the parties appeal? Is there a right of further appeal?

In general, a party in a federal action may appeal as of right from a final judgment. The same is true in state courts, but some state court systems (like New York) also permit interlocutory appeals (that is, appeals from non-final judgments).

The most common grounds for parties to appeal decisions in civil cases are errors of law (eg, applying the wrong legal standard to the facts of a particular case) and abuse of discretion (eg, where the lower court exceeded its discretion in deciding a motion or request for a ruling).

At the federal level, the party who loses at the district court can appeal that decision to a panel of the court of appeals for the federal circuit in which that district is located. After the court of appeals issues its decision, the losing party can request that all active judges of that court of appeals rehear the case, but such rehearings – which are called rehearings en banc – are disfavoured by the Federal Rules of Civil Procedure and are only permitted where en banc consideration is necessary to secure or maintain uniformity of the court’s decisions or where the proceeding involves a question of exceptional importance. The party who loses at the court of appeals may then request that the Supreme Court review the appeals court’s decision by filing a petition with the Supreme Court for a writ for certiorari, but Supreme Court review is usually discretionary, and the Court only grants about 3–4 per cent of those petitions each year.

In New York, decisions of the state trial court are appealable as of right to five-judge panels of the appellate division in the judicial department in which the trial court is located. After the appellate division issues a decision, the parties can seek leave to appeal to the highest court in New York – the Court of Appeals (unless the basis for the appeal is a double dissent at the appellate division on a question of law in the appellant’s favour or an appeal involving a constitutional question, in which case the appeal to the Court of Appeals is as of right).

What procedures exist for recognition and enforcement of foreign judgments?

Under US law, an individual seeking to enforce a foreign judgment must file a lawsuit in the United States, and that court will determine whether to recognise and enforce the judgment. The United States is not a signatory to any convention or treaty that requires recognition of foreign court judgments. Recognition of foreign judgments is therefore governed by the laws of individual states. Generally, US courts will consider recognition and enforcement of judgments for a fixed sum of money, but will not enforce judgments for taxes, fines or penalties of any kind.

Are there any procedures for obtaining oral or documentary evidence for use in civil proceedings in other jurisdictions?

A federal statute, 28 U.S.C. 1782, allows an ‘interested person’ in a proceeding in a foreign or international tribunal to obtain evidence in the United States for use in that proceeding. The interested person must file a petition in a federal district court seeking authority to serve a subpoena on a person or business in that district. With a subpoena, the interested person can seek documents or testimony from parties and non-parties to the foreign proceeding.