The 'Necessarily Affects' Requirement of CPLR 5501

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[authors:  Thomas Newman and Steven Ahmuty, Jr.]

New York Law Journal - November 8, 2012

Thomas NewmanCPLR 5701 permits an immediate appeal from a nonfinal (interlocutory) order that "involves some part of the merits" or "affects a substantial right." Appellate review of certain nonfinal orders, however, may be deferred until the entry of a final judgment provided such nonfinal order "necessarily affects the final judgment." Specifically, CPLR 5501(a)(1) provides that an appeal from a final judgment brings up for review "any nonfinal judgment or order which necessarily affects the final judgment."

This month, we examine the recent decision in Siegmund Strauss Inc. v. East 149th Realty1, in which the Court of Appeals clarified the "necessarily affects" requirement of section 5501(a)(1) in the context of a nonfinal order dismissing the defendants' counterclaims and third-party complaint. The Appellate Division declined to review this nonfinal order on the defendants' appeal from the final judgment in favor of the plaintiff, concluding that the order did not "necessarily affect" the final judgment because, even if the order were to be reversed, the judgment for plaintiff "would still stand."2

The Court of Appeals concluded that the Appellate Division's definition of "necessarily affects" was too narrow for this particular case. The court held that "because Supreme Court's dismissal of the counterclaims and third-party claim necessarily removed that legal issue from the case (i.e., there was no further opportunity during the litigation to raise the question decided by the prior non-final order), that order necessarily affected the final judgment" and was therefore reviewable on the defendants' appeal from the final judgment.3 The Court of Appeals remitted the matter to the Appellate Division for review of the nonfinal order.

Immediate Review

By way of background, New York is generous with appeals "as of right" to the Appellate Division from nonfinal orders of the Supreme Court. While a nonfinal order that "necessarily affects the final judgment" is reviewable on an appeal from the final judgment (see, CPLR 5501[a][1]), the aggrieved party need not defer appellate review to the end of the case. Almost every type of nonfinal order is separately appealable to the Appellate Division as of right, about the only qualification being that it "involves some part of the merits" or "affects a substantial right" (CPLR 5701[a][2][iv-v]). Every order of sufficient importance to be worth the cost of an appeal is likely to fall into one of these two categories and is therefore assured immediate appellate review, should the aggrieved party so desire.

CPLR 5701(b) lists a few relatively inconsequential orders that are not appealable to the Appellate Division as of right. Under subdivision (b), an order is not appealable as of right where it (i) is made in an Article 78 proceeding, (ii) requires or refuses to require a more definite statement in a pleading, or (iii) orders or refuses to order that scandalous or prejudicial matter be stricken from a pleading. Such orders are appealable only by permission (CPLR 5701[c]).

Deferred Review

Certain other orders, though not specifically listed in CPLR 5701(b), have been held to be non-appealable by the courts. For example, court-imposed limitations on the appealability of orders deciding motions in limine are well established. If in doubt, the would-be appellant should check the case law under CPLR 5701 to determine whether the nonfinal order in question is appealable as of right.

Although CPLR 5701 permits immediate review of most nonfinal orders, such review may be deferred until after the entry of final judgment (assuming a timely appeal therefrom) provided the nonfinal order sought to be reviewed "necessarily affects the final judgment." As noted, CPLR 5501(a)(1) provides that an appeal from a final judgment brings up for review "any nonfinal judgment or order which necessarily affects the final judgment…provided that such nonfinal judgment or order has not previously been reviewed by the court to which the appeal is taken."

Since an appeal from a final judgment automatically brings up for review any nonfinal order which necessarily affects the final judgment, the notice of appeal from a final judgment need not specify which nonfinal orders, if any, are being brought up for review under section 5501(a)(1). The inclusion of a general statement in the notice that the appeal is taken from "each and every part" of the judgment is sufficient to preserve for appellate review any prior nonfinal order within the contemplation of section 5501(a)(1).

There is no hard and fast rule as to when a prior nonfinal determination "necessarily affects" a subsequent final determination so as to qualify for review under section 5501(a)(1). The Court of Appeals had previously stated that a nonfinal order necessarily affects a final judgment "if the result of reversing that order would be, inevitably and mechanically, to require a reversal or modification of the final determination."4 Other cases speak in terms of whether a reversal of the nonfinal order "would strike at the foundation on which the final judgment was predicated,"5 or whether the nonfinal order "vitally influenced" the final judgment.6 According to comments by the late Arthur Karger, a nonfinal order "necessarily affects" a final judgment "if the result of reversing that order would necessarily be to require a reversal or modification of the [final] judgment" and "there shall be no further opportunity during the litigation to raise again the questions decided by the [nonfinal] order."7

'No Further Opportunity' Test

This brings us to Siegmund Strauss, in which the Court of Appeals utilized Karger's "no further opportunity" test in determining that a prior nonfinal order "necessarily affected" the final judgment and was therefore reviewable on an appeal from that judgment. Siegmund Strauss arose from a dispute over the right to possession of certain commercial property. Plaintiff Strauss negotiated with defendants Windsor and Twinkle to merge their corporations and operate in premises leased by Windsor at 110 E. 149th St. in the Bronx. The Rodriguez defendants owned Windsor and Twinkle. Strauss and the Rodriguezes drafted but did not execute an agreement to merge their businesses by which (1) Strauss would move into the premises and purchase Windsor's assets for $100,000; (2) Windsor and Twinkle would dissolve; and (3) the Rodriguezes would purchase a one-third interest in Strauss.

Even though this agreement had not yet been executed, Strauss moved into the premises, Twinkle ceased its operations, and all of Windsor's and Twinkle's employees, including the Rodriguezes, became Strauss' employees. Shortly thereafter, the parties' relationship soured. Strauss unsuccessfully sought to buy the Rodriguezes out of the merged corporation. Strauss then removed the Rodriguezes from the payroll and locked them out of the premises. Strauss also allegedly failed to pay the Rodriguezes the agreed upon sum of $100,000 for Windsor's assets.

Strauss sued the Rodriguezes and the landlord (East 149th Realty Corp.) seeking, among other things, a declaratory judgment that it was the rightful tenant of the premises. In their answer, the Rodriguezes counterclaimed against Strauss and asserted a third-party claim against Strauss' principals for fraud, conversion and tortious interference with contractual relations. The Rodriguezes, however, did not assert a breach of contract claim and in their answer denied that an agreement existed between the parties.

By an order entered Aug. 6, 2007, the trial court granted Strauss' motion to dismiss the counterclaim and third-party complaint for failure to state a cause of action, holding that the Rodriguezes' allegations only made out a breach of contract claim, not the tort claims asserted in their answer. The Rodriguezes did not appeal from this order. By an order entered Feb. 25, 2008, the trial court denied the Rodriguezes' motion to amend their answer, counterclaims and third-party complaint to assert a breach of contract claim against Strauss and its principals. The Rodriguezes appealed from this order, but never perfected the appeal, opting instead to appeal from the final judgment.

Following a bench trial solely on the issue of possession of the leased premises, the court adjudged Strauss the lawful tenant of the premises. A final judgment was entered in favor of Strauss on April 7, 2009. The Rodriguezes appealed to the Appellate Division from this judgment, and sought to bring up for review the August 2007 and February 2008 orders.

The Appellate Division affirmed the judgment in favor of Strauss, holding that the Rodriguezes' appeal from the April 2009 judgment did not bring up for review the prior nonfinal August 2007 and February 2008 orders. In reaching this conclusion, the Appellate Division relied on Professor David Siegel's oft-cited formulation of the "necessarily affects" test: "[Professor Siegel] suggests asking the following question: 'assuming that the nonfinal order or judgment is erroneous, would its reversal overturn the judgment? If it would, it is a reviewable item; if it would not, and the judgment can stand despite it, it is not reviewable."8

Applying this test, the court held that because the April 2009 judgment would remain standing if the August 2007 and February 2008 orders were to be reversed, these orders did not "necessarily affect" the April 2009 judgment and thus were not reviewable on the appeal from that judgment:

Here, if the orders granting dismissal of the counterclaims and denying the motion to amend the answer were reversed, the Rodriguez defendants' claims would be reinstated and they would be permitted to pursue a claim for breach of contract. However, the judgment which declared that Strauss was entitled to possession of the leased premises would still stand.9

And, since the Appellate Division held that these nonfinal orders did not necessarily affect the final judgment, any right of direct appeal from these orders terminated with the entry of that judgment.10

The Court of Appeals concluded that the Appellate Division's ruling did not comport with prior Court of Appeals jurisprudence in which a nonfinal order that dismissed a cause of action or counterclaim pleaded in a complaint or answer was deemed, either implicitly or explicitly, to "necessarily affect" the final judgment: "To satisfy 'necessarily affects' in this context, it is not required, as the Appellate Division held, for the reinstatement of the Rodriguezes' counterclaim upon a reversal or modification to overturn completely the judgment which declared that Strauss was entitled to possession of the leased premises."11

Supreme Court, pursuant to CPLR 3211(a)(7) dismissed the Rodriguezes' counterclaims and the third-party complaint. Specifically, Supreme Court dismissed the Rodriguezes' fraud and conversion claims because it determined that the facts as alleged only made out a claim for breach of contract. Thus, consistent with an aspect of the necessarily affects requirement recognized by Karger, the August 2007 order necessarily affected the final judgment because it was in that order Supreme Court dismissed the counterclaims and third-party claim pursuant to CPLR 3211(a)(7). Put another way, because Supreme Court's dismissal of the counterclaims and third-party claim necessarily removed that legal issue from the case (i.e., there was no further opportunity during the litigation to raise the question decided by the prior non-final order), that order necessarily affected the final judgment. In light of the foregoing, the Appellate Division erred in holding that the Rodriguezes appeal from Supreme Court's April 2009 final judgment did not bring up for review the August 2007 non-final order because the August 2007 order necessarily affected the April 2009 final judgment.12

Because the court found that the August 2007 order of dismissal was reviewable, and that order addressed the counterclaims and third-party claim as originally pleaded, the court found it unnecessary to address the February 2008 order denying the defendants' motion to amend their answer. Accordingly, the Appellate Division's order was modified to the extent of remitting the matter to that court for review of the August 2007 order of dismissal.

While it may be tempting to read Siegmund Strauss as promulgating an across-the-board rule that a nonfinal order dismissing a cause of action or counterclaim always qualifies for post-judgment review under CPLR 5501(a)(1), we hesitate to urge so broad an interpretation. As the court itself stated, "Although it is difficult to distill a rule of general applicability regarding the 'necessarily affects' requirement, Karger has put forth a definition that is helpful in resolving many cases" (emphasis added).13

When in doubt, serious consideration should be given to an immediate appeal from a significant adverse nonfinal order.

Thomas R. Newman is of counsel to Duane Morris and author of "New York Appellate Practice" (Matthew Bender). Steven J. Ahmuty Jr. is a partner at Shaub, Ahmuty, Citrin & Spratt. They are both members of the American Academy of Appellate Lawyers.

Notes

This article originally appeared in the New York Law Journal and is republished here with permission from law.com.

  1. —N.Y.3d—, 2012 WL 5199393 (Oct. 23, 2012).????
  2. Siegmund Strauss, Inc. v. East 149th Realty, 81 A.D.3d 260, 265 (1st Dept., 2010).
  3. See, 2012 WL 5199393.
  4. Buffalo Electric v. State, 14 N.Y.2d 453,460 (1964).
  5. See, Matter of Aho, 39 N.Y.2d 241, 248 (1976).
  6. See, Long v. Forest-Fehlhaber, 55 N.Y.2d 154, 158 n.5 (1982).??.
  7. See, A. Karger, Powers of the New York Court of Appeals §9:5, at 304-305, 311 (3d ed. Rev.) Karger served as law secretary to the late Chief Judge Irving Lehman of the Court of Appeals.
  8. 81 A.D.3d at 265, citing D. Siegel, New York Practice §530, at 940 (5th ed.).
  9. 81 A.D.3d at 265.
  10. Id. at 267, citing Matter of Aho, supra, 39 N.Y.2d at 248.
  11. See, 2012 WL 5199393.
  12. Id.
  13. Id.

Published In: Civil Procedure Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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