In a Case of First Impression Amongst New York Appellate Courts, the Appellate Division, Second Department, Determines the Operative Date for Requiring Both Leave of Court and Stipulation of the Parties Before a Claim May be Discontinued Pursuant to CPLR 3217(b) When a Referee is Assigned to “Hear and Report”

• Posted on: Sep 30 2022

By Jonathan H. Freiberger

For any number of reasons, a party asserting a claim or claims in a litigation may decide that it no loner wishes to pursue them.  In such a case, CPLR 3217 outlines the manner in which claims, depending on the stage of litigation, may be discontinued.  Among others, an action can be discontinued without a court order: “by serving upon all parties to the action a notice of discontinuance at any time before a responsive pleading is served or, if no responsive pleading is required, within twenty days after service of the pleading asserting the claim and filing the notice with proof of service with the clerk of the court” (CPLR 3217(a)(1)); or, “by filing with the clerk of the court before the case has been submitted to the court or jury a stipulation in writing signed by the attorneys of record for all parties, provided that no party is an infant, incompetent person for whom a committee has been appointed or conservatee and no person not a party has an interest in the subject matter of the action” (CPLR 3217(a)(2)). 

Sometimes a court order is necessary to discontinue a claim.  Thus, CPLR 3217(b) provides that “[e]xcept as provided in subdivision (a), an action shall not be discontinued by a party asserting a claim except upon order of the court and upon terms and conditions, as the court deems proper.  After the cause has been submitted to the court or jury to determine the facts the court may not order an action discontinued except upon the stipulation of all parties appearing in the action.”  It is this provision that is the subject of today’s Blog article.

On September 28, 2022, the Appellate Division, Second Department, decided Emigrant Bank v. Solimano.  Lender in Solimano commenced a mortgage foreclosure action.  Borrower answered the complaint and asserted numerous affirmative defenses including, but not limited to, lack of standing and failure to comply with RPAPL 1304.  [Eds. Note:  this Blog has frequently addressed these defenses.  See, e.g., [here], [here], [here], [here], [here], [here] and [here].]  Lender moved for summary judgment on the complaint and for an order of reference.  Borrower cross-moved to dismiss the complaint based on her affirmative defenses.  Recognizing “evidentiary errors”, lender withdrew its motion prior to the return date and made a second motion for summary judgment and for an order of reference.  The parties’ motions were denied, the court having found triable issues of fact as to borrower’s affirmative defenses.  Pursuant to CPLR 4311 and 4320, the matter was referred to a curt attorney for trial and to report to the court.

At the close of lender’s case, borrower “made an application pursuant to CPLR 4401 for judgment as a matter of law dismissing the complaint insofar as asserted against her on multiple grounds—that the plaintiff’s sole witness was not authorized to testify, and that the plaintiff otherwise had failed to establish its standing and its compliance with the notice requirements of RPAPL 1304 and paragraph 22 of the mortgage.”  [Eds. Note:  this Blog has frequently addressed evidentiary issues in proving affirmative defenses in mortgage foreclosure actions.  See, e.g., [here], [here], [here], [here], [here], [here] and [here].]  

The referee’s report concluded that due to lender’s evidentiary failures it did not establish its case.  On the day that lender was due to make its motion to confirm the referee’s report, it filed a consent to change counsel “and by cover letter, expressed an intention to discontinue the action.”  Borrower then sent a letter to the referee urging that the court did not have the “authority to grant the plaintiff leave to discontinue absent the consent of all of the parties, and advising that the defendant did not consent to a discontinuance.”  Shortly thereafter, lender moved to discontinue or, in the alternative, to dismiss the action without prejudice.  Borrower cross-moved to confirm the referee’s report and for the entry judgment dismissing the complaint.  Supreme court, inter alia, denied the discontinuance motion reasoning that “once the referee’s report was submitted to the court for consideration, a discontinuance of the action could not be ordered by the court without the stipulated consent of the defendant, which was lacking here” and granted borrower’s motion to confirm the referee’s report and to dismiss the complaint.

Lender appealed.  The Second Department affirmed and explained why the case presented a matter of first impression amongst the appellate courts of New York:  

CPLR 3217(b) permits the discontinuance of an action by a party with leave of court or by a stipulation of the parties before the cause is submitted to the trier of fact for a determination of the facts; but once the cause has been submitted for a determination of the facts, a discontinuance may only be granted upon both leave of court and a stipulation of all parties appearing in the action. While the mechanics of the statute are clear when an action is tried before a judge or jury, no appellate case has yet addressed the question of when an action is considered “submitted to the court” under CPLR 3217(b) when the matter is referred to a referee to hear and report, and the report is thereafter subject to confirmation, rejection, or modification by the Supreme Court.

In deciding the matter, the Court noted that once “an action or a proceeding has advanced to the point of deliberation and fact-finding, there can be no discontinuance except by leave of court upon such terms and conditions as the court deems proper and a stipulation of all parties appearing in the action.  In other words, at this juncture, the requirements imposed upon the discontinuing party are double-layered. The refusal by a defendant to consent to a discontinuance, for whatever reason, operates as a veto on the issue, as it prevents the court from even reaching its discretionary authority to consider the requested discontinuance.”  (Citations omitted.)

When a matter goes to trial, the Court stated, “the submission of the case to a jury for its findings of fact, or the submission of the case to a court during a bench trial, operates as a bright line separating the discontinuance that may be sought using the pre-deliberative mechanisms of CPLR 3217(a)(2) and (b) from the mechanism of CPLR 3217(b) which attaches once the deliberative phase begins.”  However, the question of when this happens when a matter is referred to a court attorney referee appointed to “hear and report” is not so clear and has not previously been decided by appellate courts in New York.  

In deciding the issue, the Court found:

as a matter of first impression, that where an action is referred to a court attorney referee to hear and report, the time that is most akin to the submission of the case to the court or the jury for a determination of the facts is the return date of the motion to confirm the referee’s report. Prior to that time, the conclusion of the trial before the referee is not final as the referee, while setting forth his or her findings of fact and conclusions of law, has no authority to determine the matter (see id. § 4320). Likewise, the resulting report is not conclusive as it is subject to confirmation, rejection, or modification by the Supreme Court. The filing of a motion to confirm, reject, or modify the referee’s report is subject to the due process right of each of the parties to then be heard on the motion, similar to the closing arguments that are presented prior to the commencement of the deliberative process in actions before a court or a jury. Instead, and logically, the motion’s return date is the unique event that sends the referee’s report and the parties’ fully-submitted arguments to the court for a deliberative determination of the factual and legal issues of the case. That event requires that discontinuances be permitted only upon a stipulation signed by the parties and leave of court (see id. § 3217[b]).

Where a referee is appointed to “hear and determine”, “the point at which a party may discontinue a cause of action requiring both leave of court and a stipulation signed by all parties is the conclusion of the evidentiary portion of the trial and the summation arguments of counsel, when the commencement of the deliberative phase of the case begins.”

The Court decided additional issues not discussed herein.

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.