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January 2017
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Greetings to all and welcome to 2017!  We hope that all of you enjoyed the holiday season.  Here are some interesting items to read about.





Parties May Be Subject to Sanctions for Producing Unprepared Witnesses

            A judge in the Southern District of New York recently sanctioned a law firm because its witness was "patently unprepared" for his deposition. In a trademark dispute between two popular fragrance brands, the plaintiffs sent a deposition notice pursuant to FRCP 30(b)(6) to defendant, seeking testimony about the ingredients and chemical composition of defendant's fragrances. The defendant produced a retail salesman, who, at his deposition, was unable to answer questions on the topic. When asked who would be more knowledgeable on the information sought in the deposition, the witnesses identified the company president.
            Thereafter, District Judge Jesse Furman ordered the defendant to produce another witness who could testify as to the noticed topics. Defendant subsequently produced a board member and investor of the company. During his deposition, the investor admitted that he had not done much to prepare and had not spoken to the company president or any other employee, but that he had read some documents and spoken to defendant's counsel. When asked about the ingredients of defendant's product, he answered: "I am not a chemist, I wouldn't know." He was also unable to answer questions about what type of testing was used to select defendant's fragrance compositions or how safety reports are used.
              Following the deposition, plaintiffs moved for sanctions under Rule 37 of the Federal Rules of Civil Procedure. Judge Furman granted the motion, noting that because the witness lacked a background in chemistry and had no day-to-day involvement in the operations of the company, it was necessary for him to gather background information prior to his deposition. His failure to do so, Judge Furman found, was "egregious and worthy of sanctions." In sanctioning the defendant, Judge Furman precluded it from introducing at trial any factual testimony or documents regarding the chemical composition of its fragrances, its compliance with health and safety laws, and tests or studies of its perfumes. He also ordered defendant to reimburse plaintiffs for reasonable expenses and attorney's fees.
            This case serves as a cautionary tale to both law firms and their clients. When certain testimony is sought during a lawsuit pursuant to FRCP30(b)(6), parties and their attorneys should ensure in advance that they produce the individual who is best prepared to testify as to the particular information sought, as failure to do so may result in consequences that are potentially detrimental to the case

M&B Succeeds in First Department Appeal

            M&B recently succeeded in obtaining a reversal for two clients, an individual and his electrical contracting company convicted of participating in a scheme to defraud and falsifying business records in connection with his company's entering into contracts with the Department of Environmental Protection ("DEP").
            In February 2015, the Supreme Court of New York County, after a jury trial, convicted the individual defendant of Scheme to Defraud in the First Degree, in violation of Penal Law 190.65(1)(b) and his company of Scheme to Defraud in the First Degree and of Offering a False Instrument for Filing in the First Degree, in violation of Penal Law 175.35.
            M&B appealed to the First Department Appellate Division, making a number of arguments relating to the insufficiency of the evidence presented at trial and the highly prejudicial evidentiary errors committed by the trial court. After oral argument by Partner M. Todd Parker, the Appellate Division agreed that the trial court committed two crucial evidentiary errors that deprived the defendants of a fair trial: (1) it violated the Confrontation Clause of the Sixth Amendment by allowing the introduction of testimony that a non-testifying co-defendant, had pleaded guilty in relation to this case; and (2) it erroneously admitted bank records that identified that co-defendant as the Vice President of the corporate defendant.
            The Sixth Amendment Confrontation Clause bars the use of testimonial statements made by an individual who does not testify at trial when that testimony is used against the defendant, unless the defendant "opens the door" to such testimony, i.e. the defendant inquires as to the subject of the testimony before it is brought up by the other side. An out of court statement is considered "testimonial" when made to law enforcement officers, other government officials, or under oath in court or courtroom-like settings. The New York Court of Appeals has held that the guilty plea of a non-testifying co-defendant is "testimonial" and therefore its admission violates the Confrontation Clause. The Appellate Division agreed with M&B's argument that the defendant did not "open the door" to the testimony regarding the co-defendant's guilty plea in connection with this case, and thus its admission was a violation of the Confrontation Clause.
            The Appellate Division also ruled that the trial court erred in admitting certain bank records which identified the non-testifying co-defendant as an officer of the corporate defendant, thus allowing the jury to conclude that the corporation was guilty based on the actions of that co-defendant. M&B argued that the bank records contained hearsay, i.e., the codefendant's statement to the bank that he was Vice President of the corporate defendant which may only be admitted under an exception to the evidentiary rule barring the admission of hearsay, but that the bank records did not meet the criteria for admission pursuant to the business records exception.
            The business records exception, which is codified in the New York Civil Practice Law and Rules, allows business records to be admitted into evidence if (1) it is in the regular course of business to make the record; (2) the party introducing the record shows that it was made during the regular course of business; and (3) the record was made about the time of the event which it documents or within a reasonable time thereafter. Additionally, the offering party must show that the party making the statements contained in the document had a business duty to provide accurate information to the party making the document. The Appellate Division agreed that the bank records introduced by the trial court did not meet this final requirement because the non-testifying co-defendant who provided information to the bank was not under any duty to provide the bank with accurate information. The Appellate Division ruling shows that satisfying the foundation requirements for the admission of business records in New York State courts is not a mere formality and the failure to lay the proper foundation with respect to crucial documents can lead to the reversal of a conviction.

New Overtime Regulations Are Now in Effect

            Effective December 31, 2016, many New York workers became eligible for overtime-and their employers became responsible for paying them more than they earned last year. This is the first of several annual increases slated to go into effect.
            For over a decade, certain salaried workers earning over $23,660 were not entitled to overtime, no matter how many hours they worked. In New York, that threshold has now been raised substantially, although the details vary depending on the size of the employer and the location where the work is performed:
NYC Large Employers (11 or More Workers)

12/31/2016 = $42,900
12/31/2017 = $50,700
12/31/2018 = $58,500
NYC Small Employers (10 or Fewer Workers)

12/31/2016 = $40,950
12/31/2017 = $46,800
12/31/2018 = $52,650
12/31/2019 = $58,500
Long Island and Westchester

12/31/2016 = $39,000
12/31/2017 = $42,900
12/31/2018 = $46,800
12/31/2019 = $50,700
12/31/2020 = $54,600
12/31/2021 = $58,500
Rest of New York State

12/31/2016 = $37,830
12/31/2017 = $40,560
12/31/2018 = $43,264
12/31/2019 = $46,020
12/31/2019 = $48,750

            Employers throughout New York State were required to increase their exempt executive and administrative employees' salaries by December 31, 2016 to meet the new minimum salary requirements-or to reclassify the exempt employees and begin paying overtime. Those who did not may now face liability under the wage-and-hour laws.
            If you have questions regarding overtime requirements or wage issues in general, please contact Chris Neff, cneff@mb-llp.com or Chaim Book, cbook@mb-llp.com or Todd Parker, mparker@mb-llp.com.

Moskowitz & Book, LLP  | cbook@mb-llp.com  | http://mb-llp.com/

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