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The more things change, the more
they remain the same. As we enter
a new year, New York’s Appellate
Division faces the same and greater
challenges: increasing caseloads, sta
shortages, judicial vacancies, and
legal disputes that are even more
complex. As usual, however, the
Appellate Division’s Justices are rising
to the occasion. Below, we summarize
some of the Appellate Division’s
leading decisions from the final
quarter of 2014.
First Department
Corporations. The business
judgment rule is “in” this season.
Ruling on a shareholder challenge
to a fashion house’s going-private
transaction, the First Department in
Erie County Employees Retirement
System v. Blitzer1 evaluated a corpo-
ration’s approval of its controlling
shareholder’s going-private buy-out
using the deferential business
judgment rule rather than the
“entire fairness” standard.
In 2012, Kenneth Cole Productions
(KCP) announced a proposal by
its majority shareholder, fashion
designer Kenneth Cole, to take the
company private. Minority share-
holders sued. New York County
Supreme Court dismissed the lawsuit,
applying the business judgment rule.
The shareholders appealed, arguing
that the transaction should have been
reviewed under the tougher “entire
fairness” test.
In an unsigned, unanimous decision,
the First Department armed. The
court referred to three safeguards
implemented in the buy-out. First,
the transaction required approval
of the majority of the minority
(non-Cole) shareholders. Second,
KCP established a special committee
to evaluate Cole’s proposal. Third,
Cole himself did not participate when
KCP’s board voted on the merger.
There were “no allegations sucient
to demonstrate that the members of
the board or the special committee
did not act in good faith or were
otherwise interested.”
Privilege. The common interest
doctrine allows parties to share
their counsel’s legal advice without
waiving the attorney-client privilege,
even when litigation is not pending
or reasonably anticipated, the
First Department ruled in Ambac
Assurance Corp. v. Countrywide Home
Loans.2 The decision diverges from
the rule in the Second Department,
leaving the doctrine’s reach in
New York state courts unclear.
While negotiating a merger
(ultimately consummated),
Countrywide Financial Corporation
E. Leo Milonas
Litigation
+1.212.858.1615
eleo.milonas@pillsburylaw.com
Frederick A. Brodie
Litigation
+1.212.858.1628
fab@pillsburylaw.com
E. Leo Milonas is a litigation partner at
Pillsbury Winthrop Shaw Pittman LLP. He is
a former Associate Justice of the Appellate
Division, First Department, and the former
Chief Administrative Judge of the State of
New York. Frederick A. Brodie is a litigation
partner in Pillsbury’s New York office. Both
are members of the firm’s appellate practice
team. Pillsbury litigation associates Dina
E. Yavich and Andrew J. Kim and law clerks
David Babbott-Klein and Stephen R. Weingold
assisted in preparing this column.
Pillsbury Winthrop Shaw Pittman LLP
Litigation
Appellate Division Review
Business Judgment Rule, Privilege, Child Support, Animal Rights
This article was originally published in the New York Law Journal on January 16, 2015.
by E. Leo Milonas and Frederick A. Brodie
