The New York Court Of Appeals Confirms The Constitutionality Of The Cplr’s Security For Costs ProvisionsPrint Article
- Posted on: Nov 30 2018
In litigation, the prevailing party is frequently entitled to the reimbursement of statutory costs. See, e.g., CPLR § 8101. What happens if a defendant is awarded costs, but the plaintiff refuses to pay? Certainly, if the defendant is within the jurisdiction, the plaintiff can decide if it is cost effective to pursue the defendant to collect the costs. If, however, the plaintiff is in a different jurisdiction, efforts to collect awarded costs could be more difficult. The New York Legislature recognized this problem and enacted the “Security for Costs” provisions of the CPLR (Article 85) to ensure that New York residents sued in New York by out of state plaintiffs should not be forced to pursue out of state plaintiffs in other jurisdictions to collect awarded costs.
The court in Clement v. Durban, 147 A.D.3d 39 (2nd Dep’t 2016), affirmed, ___ N.Y.3d ____ (November 14, 2018), recognized that the requirement that out of state plaintiffs post security for costs has long been a part of New York’s laws because “[s]ecurity for costs is a device ordinarily used against a nonresident plaintiff to make sure that if he loses the case he will not return home and leave defendant with a costs judgment that can be enforced only in plaintiff’s home state” and because by “directing a nonresident to post a bond, the defendant is protected from frivolous suits and is assured that, if successful, he will be able to recover costs from the plaintiff.” Clemente, 147 A.D.3d at 42 (citations and some quotation marks omitted).
Article 85 of the CPLR governs security for costs. CPLR § 8501(a), which permits a defendant to be awarded security for costs as of right, provides that “[e]xcept where the plaintiff has been granted permission to proceed as a poor person or is the petitioner in a habeas corpus proceeding, upon motion by the defendant without notice, the court or a judge thereof shall order security for costs to be given by the plaintiffs where none of them is a domestic corporation, a foreign corporation licensed to do business in the state or a resident of the state when the motion is made.” CPLR § 8501(b) gives the court the discretion to award a defendant security for costs in certain situations, such as where the defendant is a trustee or a receiver.
Pursuant to CPLR § 8502, if security for costs are awarded to the defendant, all proceedings are stayed (other than those that seek to review the award of security for costs) until the security is posted, and, if the security is not posted within thirty days of the order, the defendant can move to dismiss the action.
Finally, pursuant to CPLR § 8503, “[s]ecurity for costs shall be given by an undertaking in an amount of five hundred dollars in counties within the city of New York, and two hundred fifty dollars in all other counties, or such greater amount as shall be fixed by the court that the plaintiff shall pay all legal costs awarded to the defendant.” While the amounts set forth in CPLR § 8503 may seem insignificant and, accordingly, moving for security for costs might not be worthwhile, courts can, and have, directed plaintiffs to post security for costs in significantly greater amounts.
Thus, in Small v. Stern, 65 A.D.2d 1326, 1327 (2009), the Second Department affirmed the lower court and directed plaintiffs to post security for costs in the amount of $10,000.00 because the plaintiffs did not reside in New York and a significant bond was necessary in the “complex medical malpractice action in which defendants would incur significant expense.”
The Second Department, in Manente v. Sorecon Corp., 22 A.D.2d 954 (1964), after finding the trial court’s order limiting security for costs to $250.00 was an “abuse of discretion,” modified the order by directing that plaintiff “file and serv[e] an undertaking in the sum of $4,500.00.” The Manente Appellate Court’s determination was based on the fact that: the “[d]isbursements in t[he] action, to the present, amount to $4,062.48 for the printing of records and briefs in two prior appeals to this court from judgments in plaintiff’s favor[;]” “[o]n each appeal th[e] court reversed the judgment and granted a new trial, with costs to abide the event[;] and, “[i]f successful on a third trial or appeal, defendant’s statutory costs may amount to about $375.” Manente, 22 A.D.2d at 954 (citation omitted).
The constitutionality of the CPLR’s security for costs provisions was challenged in Clement. The Plaintiff in Clement, who was a New York resident when she was involved in an automobile accident with a New York City Police Department vehicle, commenced a personal injury action in Kings Supreme Court. During the pendency of the action, Clement moved to Georgia prompting the defendant to move for security for costs in the amount of $500.00. In opposition to the motion, Clement argued that the security for cost provisions of the CPLR violated the Privileges and Immunities Clause of the United States Constitution. The motion court granted defendant’s motion and plaintiff appealed.
The Second Department, in Clement, recognized that the appeal “raises a constitutional issue of first impression in the appellate courts.” In unanimously affirming the motion court, the Second Department held that “the statutes, insofar as they are challenged, do not deprive nonresident plaintiffs of reasonable and adequate access to New York courts, and thus, do not violate the Privileges and Immunities Clause. The Second Department granted permission for plaintiff to appeal to the Court of Appeals.
On November 14, 2018, the Court of Appeals in Clement affirmed the Second Department and upheld the constitutionality of Article 85 of the CPLR. In so doing the Court recognized that “[t]he Privileges and Immunities Clause is the preeminent constitutional directive “to constitute the citizens of the United States [as] one people” and that “[i]n keeping with that goal, the Supreme Court has interpreted the clause to require the State to treat all citizens, resident and nonresident, equally and applies to only those privileges and immunities bearing upon the vitality of the Nation as a single entity.” (Citations, internal quotation marks and brackets omitted.)
“[A]ccess to the courts of the State” is one of the fundamental privileges protected by the Privileges and Immunities Clause. While neither the United States Supreme Court nor the New York Court of Appeals “have insisted on equal treatment for nonresidents to a drily logical extreme,” the Supreme Court has explained that “the Privileges and Immunities Clause prevents a state from imposing only unreasonable burdens on nonresidents, including with respect to access to the courts of the state.” Clement, __ N.Y.3d at __ (citations and internal quotation marks omitted). The Court of Appeals noted that in the specific context of access to courts “the Supreme Court has held that the Privileges and Immunities Clause does not require States to erase any distinction between citizens and non-citizens that might conceivably give state citizens some detectable litigation advantage.” (Citations, internal quotation marks and brackets omitted.)
The Court of Appeals set forth the two-step analysis that “governs Privileges and Immunities Clause challenges to statutes providing for disparate treatment on the basis of residency.” First, the Court stated that it “must decide whether the [statute] burdens one of those privileges and immunities protected by the Clause” and “[w]hen the provision implicates access to the courts, the court must assess whether nonresidents are given access on reasonable and adequate terms for the enforcing of any rights they may have.” (Citations, internal quotation marks, brackets and ellipses omitted.) Thus, even where nonresidents do not get exactly the same access to courts, constitutional requirements are satisfied where their access is reasonable and adequate.
As to the second prong, “should the court determine that the plaintiff’s exercise of a fundamental right has been impinged, the burden shifts to the defendants, who have the opportunity to prove that the challenged restriction should be upheld even though it deprives nonresidents of a protected privilege.” (Citation and internal quotation omitted.) Restrictions should be invalidated only if it “is not closely related to the advancement of a substantial state interest.” (Citations, internal quotation marks and brackets omitted.) “A state may defend its position by demonstrating that (i) there is a substantial reason for the difference in treatment; and (ii) the discrimination practiced against nonresidents bears a substantial relationship to the State’s objective.” (Citations, internal quotation marks and brackets omitted.)
In applying the constitutional analysis to the Security for Costs provisions of the CPLR, the Court of Appeals first pointed out that the posting of security for costs for nonresident access to courts is “a fixture in states across the country.” (Citations omitted.)
Specifically, the Court of Appeals found that Article 85 of the CPLR does not violate the Privileges and Immunities Clause “because nonresidents are provided reasonable and adequate access to the New York courts.” In so holding the Court stated:
For these reasons, we conclude that sections 8501 (a) and 8503 do not unduly burden nonresidents’ fundamental right to access the courts because they impose marginal, recoverable security for costs on only those nonresident plaintiffs who do not qualify for poor persons’ status pursuant to CPLR 1101, or fit any other statutory exemption. Where these nonresident plaintiffs do not prevail in their litigation, they must pay the same costs required of non-prevailing residents, but are simply required to post the security applied to those costs at an earlier date. Conversely, should nonresident plaintiffs prevail, their security is refunded, with any accrued interest. Even if, as plaintiff contends, this provides resident litigants with some detectable litigation advantage, imposing a relatively minor hardship on a limited class of nonresident plaintiffs is not enough to constitute an impermissible burden, such that nonresident plaintiffs do not have reasonable and adequate access to the courts.
(Citations and internal quotation marks omitted.) Finally, because the plaintiff failed to meet her burden on the initial prong of the analysis the Court of Appeals did not address the second prong.
The Security for Cost provisions of the CPLR can oftentimes be used by a defendant to not only ensure the recovery of awarded costs, but to test the bona fides of a plaintiff’s claim. The Court of Appeals has made clear that these provisions are valid and Constitutional.