Think twice before you decide to omit alternative grounds for affirmance from your appellate brief. The New York Court of Appeals recently held that collateral estoppel does not prevent the re-litigation of an issue that was an alternative basis for a trial court’s judgment, where an appellate court had affirmed the decision without addressing that issue. While you cannot control whether the appellate court ultimately reaches the alternative grounds for affirmance in its ruling, there is little chance that it will do so – and that your client will benefit from collateral estoppel effect on the alternative ground – if you don’t brief it.
In Tydings v. Greenfield, Stein & Senior, LLP, 11 N.Y.3d 195 (2008), the plaintiff, Frieda Tydings, brought a legal malpractice claim against the law firm that had represented her, Greenfield, Stein & Senior, LLP (“GSS”), alleging that the firm had been negligent in defending a proceeding to compel an accounting. Tydings had served for several years as trustee of a trust created by a relative, Ricki Singer. Tydings resigned as trustee on January 1, 1997 and was succeeded by another relative. For more than six years after her resignation, Tydings rendered no accounting. On August 20, 2003, Singer filed a petition in Surrogate’s Court seeking an accounting from both Tydings and her successor.
GSS represented Tydings in the Surrogate’s Court proceeding, but it did not assert a statute of limitations defense. The Surrogate ordered Tydings to provide an accounting, and she complied. Singer then objected to Tydings’s accounting. Tydings, no longer represented by GSS, moved to dismiss Singer’s objections based on the statute of limitations. The Surrogate denied Tydings’s motion on two alternative grounds: (1) Tydings had not shown that the statute of limitations had expired before the proceeding to compel an accounting began; and (2) Tydings asserted the statute of limitations defense too late.
The Appellate Division affirmed the Surrogate’s order denying Tydings’s motion to dismiss Singer’s objections to her accounting. (New York’s permissive appellate rules allow for appeals from denials of motions to dismiss.) Although the Surrogate’s order had been based on two alternative grounds, the Appellate Division’s decision was based on only the second ground. The Appellate Division did not even mention the first ground for the Surrogate’s decision, i.e., the merits of Tydings’s statute of limitations defense. The Appellate Division held only that Tydings had “waived her statute of limitations defense by failing to raise it in response to the grantor’s petition to compel an accounting.” Singer v. Tydings, 30 A.D.3d 211, 211 (N.Y. App. Div. 1st Dep’t 2006).
Tydings then brought a legal malpractice action against GSS in Supreme Court. The gist of Tydings’s claim was that GSS had been negligent in failing to assert a timely statute of limitations defense, and that Singer’s petition to compel an accounting would have been dismissed but for GSS’s negligence. GSS moved to dismiss Tydings’s malpractice claim on the basis of collateral estoppel, arguing that Tydings was bound by the Surrogate’s alternate holding in the earlier case that Tydings had failed to prove that the statute of limitations expired before the proceeding to compel an accounting.
Supreme Court granted GSS’s motion and dismissed Tydings’s malpractice action, but the Appellate Division reversed, holding that the Surrogate’s decision on the merits of Tydings’s statute of limitations defense should not receive collateral estoppel effect. The Appellate Division also discussed the merits of the statute of limitations issue, opining that, contrary to the Surrogate’s decision, the statute of limitations defense would have been meritorious had it been asserted. Tydings v. Greenfield, Stein & Senior, LLP, 43 A.D. 3d 680, 683 n.1 (N.Y. App. Div. 1st Dep’t 2007).
On appeal, the Court of Appeals first noted the general rule, under the Restatement (Second) of Judgments: “When a decision rests on two independent grounds, either of which could support it alone, . . . neither holding is binding for collateral estoppel purposes.” An earlier Court of Appeals decision, Malloy v. Trombley, 50 N.Y. 2d 46 (1980), however, had departed from the Restatement rule. The court in Malloy accorded collateral estoppel effect to one of two alternative grounds for a Court of Claims decision from which no one had appealed.
In Tydings, the court refused to extend Malloy, declining to apply collateral estoppel “where the losing party in the earlier case tried, unsuccessfully, to get appellate review of the alternative holding now being invoked against her.” Unlike the plaintiff in Malloy, Tydings had appealed the first decision against her and challenged the Surrogate’s statute of limitations decision, but was unable to get an appellate ruling on the issue. The Court of Appeals concluded, “It is significantly less clear here than it was in Malloy that the losing party had a full and fair chance to overturn the earlier decision.” Several Appellate Division and federal court cases had reached the same decision as the Court of Appeals – declining to apply collateral estoppel to a lower court’s alternative holding after an appellate court had affirmed the lower court’s judgment without considering that holding – and GSS cited no contrary cases from any jurisdiction.
The Court of Appeals held that “New York law is the same” as federal law as described in Gelb v. Royal Globe Insurance Co., 798 F.2d 38, 45 (2d Cir. 1986): “[I]f an appeal is taken and the appellate court affirms on one ground and disregards the other, there is no collateral estoppel as to the unreviewed ground.” Therefore, the Surrogate’s decision on the statute of limitations issue did not bind Tydings in the subsequent malpractice action against GSS.