Hakala v. Deutsche Bank Ag

• Decision Date: 05 September 2003
• Docket Number: Docket No. 02-7501.
• Parties: Jonathan HAKALA, Plaintiff-Appellant, v. DEUTSCHE BANK AG (Formerly Bankers Trust Corp.), Deutsche Bank Alex. Brown, Inc. (formerly BT Securities, Inc.), Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

343 F.3d 111

Jonathan HAKALA, Plaintiff-Appellant, v. DEUTSCHE BANK AG (Formerly Bankers Trust Corp.), Deutsche Bank Alex. Brown, Inc. (formerly BT Securities, Inc.), Defendants-Appellees.

Docket No. 02-7501.

United States Court of Appeals, Second Circuit.

Argued: January 17, 2003.

Decided: September 5, 2003.

Herbert Monte Levy, New York, N.Y., for Appellant.

Cliff H. Fonstein (Kenneth J. Turnbull, on the brief), O'Melveny & Myers LLP, New York, N.Y., for Appellees.

Before: LEVAL and CABRANES, Circuit Judges, and BERMAN, District Judge.^*

LEVAL, Circuit Judge.

Plaintiff Jonathan Hakala appeals from the dismissal by the United States District Court for the Southern District of New York (Constance B. Motley, Judge) of his petition to vacate an arbitration award by reason of untimeliness under N.Y. C.P.L.R. § 7511(a). That statute provides,

An application to vacate or modify an [arbitration] award may be made by a party within ninety days after [its] delivery to him.

Hakala contends that because an earlier timely filing of his action was dismissed for a curable procedural irregularity, N.Y. C.P.L.R. § 205(a) allowed him to refile within six months, which he did. Section 205(a) provides,

If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff... may commence a new action upon the same transaction or occurrence ... within six months after the termination....

The district court ruled, however, that § 205(a) is not applicable to an application to vacate an arbitration award under § 7511(a). The district court based its ruling on a decision of the New York Court of Appeals that § 205(a) applies to a "Statute of Limitations," which "merely suspends the remedy provided by a right of action," but does not apply to a "condition precedent," which "conditions the existence of a right of action" on timely suit. Yonkers Contracting Co., Inc. v. Port Auth. Trans-Hudson Corp., 93 N.Y.2d 375, 378, 690 N.Y.S.2d 512, 712 N.E.2d 678 (1999) (emphasis in original). The district court concluded that the ninety-day requirement of § 7511(a) was a condition precedent because "Article 75 both created the cause of action and attached a time limit to its commencement." Hakala v. Deutsche Bank AG, No. 01 Civ. 3366, 2002 WL 498629, at *5 (S.D.N.Y. Apr.1, 2002) (quoting Yonkers Contracting) (internal quotation marks and brackets omitted).

We believe that § 205(a) was applicable and accordingly direct that the suit be reinstated. We vacate the judgment and remand for further proceedings.

BACKGROUND

BT Securities, Inc., now Deutsche Bank Alex. Brown, Inc., hired Jonathan Hakala in July 1989 to head its high-yield bond trading desk, and fired him in August 1991. On or about August 14, 1997, Hakala commenced arbitration, claiming that BT Securities had fired him illegally to retaliate for his opposition to its income-reporting practices and breached its compensation agreement with him. On November 22, 1999, the arbitration panel denied Hakala's claims in their entirety.

Within the ninety-day time period allowed by C.P.L.R. § 7511(a), Hakala filed a petition in the Southern District of New York, seeking to vacate the arbitration award on the grounds that the arbitrators had rendered their decision in manifest disregard of the law. As a citizen of New Jersey suing a New York bank, Hakala was entitled to bring the petition in federal court under 28 U.S.C. § 1332 by reason of the diverse citizenship of the parties. His attorney, however, failed to plead the basis of federal jurisdiction. On September 25, 2000, the district court dismissed the petition sua sponte for failure to allege diversity of citizenship or other basis of federal subject matter jurisdiction See Hakala v. Deutsche Bank, No. 00 Civ. 1335, 2000 WL 1425049 (S.D.N.Y. Sep.26, 2000).

In dismissing the action, the district court did not offer Hakala an opportunity to amend his pleadings to cure the deficiency of pleading, and Hakala's attorney neither moved for reconsideration nor advised the court that the parties were in fact diverse. Instead, Hakala filed a new petition in New York State Supreme Court on March 23, 2001, within six months of the district court's dismissal of the earlier suit. Deutsche Bank promptly removed the case to the Southern District by reason of diversity jurisdiction. The case was referred to the original district judge as a "related matter," but that judge rejected the assignment. The case was then reassigned to a second judge, and soon thereafter to Judge Motley.

On April 27, 2001, before a judge had been assigned to the case, Deutsche Bank filed a motion to dismiss, arguing two grounds: (i) that Hakala's petition failed to plead his claim with the specificity required under Fed.R.Civ.P. 8(a), and (ii) that it was untimely under the ninety-day limit of C.P.L.R. § 7511(a). Under applicable calendar rules, the answering papers would ordinarily have been due in mid-May. Hakala's attorney, apparently assuming that no reply would be due until the case had been assigned to a judge, did not respond. He did not receive notice of the assignment to the second judge, nor of the reassignment to Judge Motley. He learned of the reassignment by telephone from opposing counsel, in the summer of 2001. He then wrote a letter to the court dated August 1, 2001, requesting a briefing schedule on the motion to dismiss. On August 2, before receiving the letter, the court calendared a pre-trial conference for September 25. Hakala's lawyer, apparently believing the scheduling of the conference was in response to his letter requesting a briefing schedule, deferred filing any answer to the defendant's motion to dismiss. On August 16, 2001, however, Judge Motley, finding that Deutsche Bank's motion to dismiss was unopposed since April, granted the motion and dismissed the action.

Hakala's lawyer went on vacation shortly after the court entered its dismissal order, apparently making no provision to be advised of court orders. When he became aware of the dismissal upon his return from vacation, he filed a timely notice of appeal. On December 4, 2001, the parties entered into a stipulation, which the Second Circuit approved, dismissing Hakala's appeal without prejudice and giving him thirty days to file a motion under Fed.R.Civ.P. 60(b)(1) seeking relief from the dismissal on grounds of "mistake, inadvertence, surprise, or excusable neglect." The district court granted the motion, but immediately dismissed the action with prejudice on the grounds that the action was untimely under the ninety-day requirement of C.P.L.R. § 7511(a). Hakala appeals from that decision.

DISCUSSION

The resolution of this appeal turns on whether the grace period provided by § 205(a) for the refiling of an action dismissed by reason of some curable defect applies to a petition under § 7511(a) to vacate an arbitration award. If § 205(a) applies to such a suit, the plaintiff's refiling was timely, and the suit should not have been dismissed. If § 205(a) does not apply, the refiled action was time barred.

In Yonkers Contracting, the New York Court of Appeals addressed the question when § 205(a) does and does not apply. As noted, the Court of Appeals explained that § 205(a) will provide a plaintiff with an additional time allotment for refiling when the time limits for the institution of such an action are specified in a statute of limitations, "which merely suspends the remedy provided by a right of action," but not when the limitation period is specified in a statute establishing a "condition precedent" to the maintenance of such an action. 93 N.Y.2d at 378, 690 N.Y.S.2d 512, 712 N.E.2d 678. That formulation leaves open the question when a time limitation functions as a statute of limitations and when it functions as a condition precedent. The district court understood the Court of Appeals's discussion in Yonkers Contracting to mean that § 7511(a)'s time limit functions as a condition precedent, and so bars application of § 205(a). We respectfully disagree.

Yonkers Contracting was an action for damages brought by a general contractor against a subsidiary of the Port Authority of New York and New Jersey. N.Y. Unconsol. Law § 7107 waived sovereign immunity for suits against the Port Authority if such suits were brought within one year of accrual of the claim. The plaintiff originally instituted its suit within the one-year period; that suit was dismissed, however, by reason of the plaintiff's failure to exhaust required administrative procedures before suing. Within six months the plaintiff reinstituted the action. The trial court, however, dismissed the resumed action on the ground that it was not begun within a year of accrual of the claim as required by § 7107. The Court of Appeals affirmed the ruling, concluding that § 205(a)'s grace period was not applicable.

The result in Yonkers Contracting was undoubtedly harsh. A plaintiff which had instituted an action in timely fashion and suffered a dismissal intended as provisional, by reason of a curable defect, was precluded thereby from ever reinstituting the action. The New York Court of Appeals, however, had substantial reason to justify the harsh result. The Court gave three reasons for its conclusion that the time limitation of § 7107 fell into the category of condition precedent, making § 205(a) inapplicable. The first reason was that the right to sue in that case resulted from a statutory waiver of sovereign immunity. Yonkers Contracting, 93 N.Y.2d at 378-79, 690 N.Y.S.2d 512, 712 N.E.2d 678. The second reason was drawn from the Court of Appeals's prior assertion, in Romano v. Romano, 19 N.Y.2d 444, 447, 280 N.Y.S.2d 570, 227 N.E.2d 389 (1967) of a "general rule" that "if a statute creates a cause of action and...