June 28, 2022

Volume XII, Number 179

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June 28, 2022

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June 27, 2022

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The Changing Landscape of Electronic Service

For a moment in March 2020, litigation stopped abruptly when the first case of COVID-19 was confirmed in New York. Within a matter of weeks, the New York State Courts shifted to online operations and, amazingly, the administration of justice continued virtually. Now, nearly two years later, the use of technology to conduct remote hearings and conferences is firmly entrenched in the legal community of New York, making it possible for judges, their support staff, attorneys and litigants to litigate from anywhere with Internet access.

But the use of technology has not only changed the manner in which attorneys interact with the courts. Oftentimes, litigators and their clients do not even operate out of an office building on a daily basis, but are scattered in residences throughout the state and country with home printers, rather than fully stocked copy rooms, and business mail being delivered to a nearly empty office and then scanned to the appropriate recipient. This has a great impact on the ability to serve and the timing for receipt of legal process and interlocutory papers throughout the life of a lawsuit, and many have begun utilizing electronic means to effect service. However, this practice should be exercised with caution and a careful review of the quickly changing statutory framework and case law.

Recently, on a motion to reargue the denial of a motion for default judgment in Contrs. Compensation Trust v $49.99 Sewer Man, Inc., Justice Richard M. Platkin of the Albany County Commercial Division considered the permissibility of service of a flash drive containing an electronic copy of an 809-page Complaint and 242-page “Schedule A” on the New York Secretary of State. 2022 NY Slip Op 22004, *1 (Sup Ct, Albany County 2022).

First, the Court rejected Plaintiff’s argument that certain corporate defendants were properly served via substitute service on the New York Secretary of State (“SOS”) because the SOS accepted the flash drives and the statutory fee for the service. Plaintiff claimed that the SOS’s conduct was an agreement by defendants to accept service by electronic means under the Uniform Rules for the New York State Trial Courts, which permits service of initiating papers “by electronic means if the party served agrees to accept such service.” 22 NYCRR 202.5-b (f)(1); accord 22 NYCRR 202.5-bb (b)(3). The Court held that the SOS is limited to accepting process served via the method prescribed by statute, and service is not complete until that occurs.

The Court found additional support for its conclusion in that the Legislature recently found it necessary to amend the Business Corporation Law (“BCL”) and the Limited Liability Company Law (“LLC”) to permit electronic service. Recent amendments to BCL § 305 et seq. and LLC § 302 et seq., signed into law by the Governor on April 16, 2021, provide that, starting January 1, 2023, if a business entity files a certificate designating an email address for electronic service, the Secretary of State will transmit any papers served upon it to the email address designated by the business entity, but will not send paper copies. However, service is not effective until “the secretary of state has reviewed and accepted service of such process,” versus with service by hand which is “complete when the secretary of state is so served.” See 2021 N.Y. ALS 56, 2021 N.Y. Laws 56, 2021 N.Y. Ch. 56, 2021 N.Y. AB 3006, 2021 N.Y. ALS 56, 2021 N.Y. Laws 56, 2021 N.Y. Ch. 56, 2021 N.Y. AB 3006.

The Court in Contrs. Compensation Trust further opined on the applicability of the amendments to the case had they been in effect at the time of the lawsuit, and found that service was still wanting because “(i) the Corporate Defendants did not affirmatively elect to receive service by electronic means, and (ii) the Complaint was delivered on a flash drive, rather than through a secure portal operated by the Department of State.” 2022 NY Slip Op 22004, *2.

Next, with respect to certain individual defendants, the plaintiff in Contrs. Compensation Trust argued that none of the individuals objected to service of the Complaint on the flash drive, so they accepted service by electronic means, and waived any objection thereto. However, the Court held that the defendants’ “failure to appear in the action does not constitute their affirmative ‘agree[ment] to accept’ service by electronic means within the meaning of 22 NYCRR 202.5-b (f)(1).

While Contrs. Compensation Trust deals with summons service, the same basic concept applies also to the service of non-efiled interlocutory documents, discovery demands and discovery responses, which is perhaps more likely to occur without obtaining express consent from the opposing party as emails are exchanged throughout the course of a legal proceeding. For both the service of commencement pleadings or interlocutory papers, if service is not made by e-filing, the party has to consent to electronic service. See 22 NYCRR 202.5-b(f)(1) (for summons service) and for interlocutory service, 22 NYCRR 202.5-b(b)(2)(i) (“electronic service shall be made only upon, a party or parties who have consented thereto”) and CPLR § 2103(b)(7) (“such transmission shall be upon the party’s written consent…”).

Accordingly, Contrs. Compensation Trust serves as a reminder that even though practices have changed during the pandemic and service of hard copies is difficult with fewer people in the office (and perhaps even less likely to reach the intended recipient than with email), the statutes and Uniform Rules governing service must be adhered to as written, and written consent must be obtained for electronic service.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 40
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About this Author

Emily D. Anderson Attorney Business Law Sheppard Mullin New York
Associate

Emily D. Anderson is an associate in the Business Trial Practice Group in the firm's New York office. She is also a member of the Construction team. 

Emily has extensive experience litigating construction and real estate related-claims on behalf of contractors, owners, subcontractors and sureties before the state and federal trial and appellate courts of New York and before arbitration panels.  She has been involved in numerous matters relating to breach of contract issues, delay damage claims, suretyship, mechanic’s liens, trust fund diversion...

212-896-0661
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