CIT Project Fin. v Credit Sussie First Boston LLC

[*1] CIT Project Fin. v Credit Sussie First Boston LLC 2005 NY Slip Op 50406(U) Decided on February 25, 2005 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 25, 2005
Supreme Court, New York County

CIT Project Financial et al., Plaintiffs,

against

Credit Sussie First Boston LLC et al., Defendants.



600847-2003

Bernard J. Fried, J.

By this Motion the defendants ("CSFB") seek an order "reviewing and vacating or, alternatively, modifying paragraph 1 of the Preliminary Conference Order issued by the Honorable Beverly Cohen, Judicial Hearing Officer." It is contended that this paragraph [FN1], which required that CSFB produce all "project finance bonds" during the period from December 20, 2001 through June 13, 2003, is overly broad, and requires the production of documents which are allegedly "wholly unrelated to this dispute".

In response, plaintiffs contend that this motion should be denied for two independent reasons: (1) it is time-barred; and (2) Judge Cohen's Order correctly applied the standard for pre-trial disclosure. I discuss these two contentions in turn.

By my Order, dated, October 26, 2004, pursuant to CPLR 3104, I directed that Judge Cohen, JHO, supervise all discovery issues in this action. Thereafter, by Order signed on January 5, 2005 and filed in the Office of the County Clerk on January 6, 2005, she directed inter alia, the now-challenged discovery. This motion, to review Judge Cohen's Order, was filed and served on January 20, 2005. It is provided in section 3104 (d) that review of an order made by a [*2]JHO "shall be by motion made in the court in which the action is pending within five days after the order is made". Because this motion was not made within the requisite time period, plaintiffs seek denial of the motion as untimely. In response, defendants contend that the time should not begin to run until the opposing party serves the order and notice of entry, citing CPLR 5513 (a)("Time to take appeal"). Counsel for the defendant conceded, at argument, that he "did have actual notice of this order".

The two time periods are clearly distinct and serve different purposes. Section 3104 (d) sets a five day requirement in order to foster the prompt resolution of disputed discovery issues in order to move the lawsuit. Confirming this conclusion is subparagraph (d), which also provides that notice of a review motion "shall suspend disclosure of the particular matter in dispute" and requires the review motion to "succinctly" state the reason the order is considered "objectionable". These procedures accommodate the on-going nature of discovery, and by providing five days to serve the motion the legislature established a scheme for the expedited review of the challenged discovery order. (Cf. 22 NYCRR §202.44 [Motion to confirm or reject judicial hearing officer's report or referee's report]). On the other hand, appeals are governed by complex statutory procedures, including special requirements for stays. Each regime is separate, and the failure to timely seek review is sufficient reason for me to deny this application. However, even assuming that the motion is not untimely, it fails for a separate reason.

While there is no standard of review set forth in section 3104 (d), I do not believe that it should be de novo, as seems to have been suggested at argument, when the defendants' response to my question as to the applicable standard was that the court "has [the] ability to review all discovery orders in this case. And what [the court] should do is exercise [its] independent judgment regarding the propriety of this" order. Of course, even if this was an application to review a reference to hear and report under CPLR 4001, it would not be a de novo review, rather "[t]he findings of ...a referee will not be disturbed if supported by the evidence in the record" (e.g., Slater v. Links at North Hills, 262 AD2d 299 [2nd Dept., 1999]).

Thus, it seems that, as here where there is of course no evidence, the corresponding review standard should be whether the referee's decision or order, is clearly erroneous or contrary to law. This is the standard in the federal courts where a district judge has designated a magistrate judge to hear and determine a pretrial matter, not dispositive of the case (Fed R. Civ. Proc., Rule 72; see also, 28 USC § 636 [b]), and it seems to be completely appropriate in the analogous situation involving the reference to a judicial hearing officer to supervise pretrial discovery.

Turning then to the order of Judge Cohen: she concluded that project finance bonds are to be produced by the defendant. This is a case which involves project finance bonds; indeed; the Warehousing Agreement provided that CSFB was engaged "for the purpose of acquiring a portfolio consisting primarily of...project finance securities". While the securities at issue in this action are power bonds, the Warehousing Agreement refers to project finance securities. Moreover, CSFB has made an issue of the availability of project finance bonds. This raises the [*3]distinct possibility that this evidence will be "material and necessary" (Allen v. Crowell-Collier Pub. Co., 21 NY2d 403 [1968]). Therefore it cannot be said that Judge Cohen's Order is clearly erroneous or contrary to law.

For the foregoing reasons, I decline to disturb Judge Cohen's Order.

Dated: February 25, 2005ENTER

______________________

J.S.C. Footnotes

Footnote 1:Paragraph 1 provides: Defendant shall produce non-privileged documents, to the extent such information is maintained by Defendants in the ordinary course, identifying their inventory and trading in project finance bonds satisfying the Eligibility Criteria set forth in Annex A to the Warehousing Agreement at issue at any time during the period of December 20, 2001 through June 13, 2003. Responsive documents shall identify the issuers, trade dates, settlement dates, proceeds, unit prices, mark-ups and the purchasers and/or sellers of such securities.