Court of Appeals settles question regarding motion court's discretion to grant leave to serve a late notice of claim under New York Municipal Law

by Thomas R. Maeglin

An issue that has generated a range of results in courts across New York - who has the burden of establishing prejudice caused by a late notice of claim against a public corporation - has been definitively addressed by the New York Court of Appeals, and the answer is, both.

The problem arises commonly in litigation against public corporations, such as municipalities, schools, and building authorities. Claims against them are subject to General Municipal Law section 50-e(5), which requires a claimant to serve a notice of the claim on the prospective defendant within ninety days after the claim arises. Serving notice after ninety days gives the defendant grounds for obtaining dismissal of a subsequent action. However, a court in its discretion may extend that time, provided it considers a number of factors including whether the delay in serving the notice of claim substantially prejudiced the public corporation in maintaining its defense on the merits. Who must show prejudice, or lack of it, and how that party must go about it, is the knotty question that has now been answered.

In Newcomb v. Middle Country Central School District, ___ N.Y.3d ___, 2016 N.Y.Slip Op 08581 (2016), the high court adopted a burden-shifting approach which was already in use in some jurisdictions. Oddly, appellate courts in all four judicial departments had issued decisions that seemed to contradict each other, sometimes placing the burden on the plaintiff to show a lack of substantial prejudice, other times placing the burden on the public corporation to show it had been prejudiced, or sometimes on both by means of a burden shifting process.

The claimant in this case was a student who was struck and injured by a hit-and-run driver in front of his high school. The family reported the accident to the school, which lay within the defendant school district, and served timely notices of claim on the State, town and county. They sought the police department's file, but an open investigation made obtaining that file impossible. Therefore, they hired their own investigator and obtained photos of the scene within 90 days of the accident. Follow up requests for the police file were denied until six months later. Upon review, the police photos showed there had been a large sign obstructing the view at the corner of the intersection where the accident occurred. The sign had not appeared in the investigator's photos, because it had already been removed. In the police photos, the lettering of the sign was too small to read. The family promptly requested a larger copy. When that larger copy arrived, now about eight months after the accident, the family found that the sign advertised a play given at another school in the same school district. This meant a possible claim against the school district, for creating a dangerous and hazardous condition with its obstructing and distracting sign. A notice of claim was served on the district, but it was now five months since the 90-day deadline had expired. The claimant thus filed an urgent motion for leave to serve a late notice of claim, or to deem the notice timely.

The family argued that the school district had not been substantially prejudiced, given that it had actual knowledge of the essential facts regarding the claim, both through the details the family had reported within the 90-day deadline, and through the district's removal of the sign. Any delay was excusable due to the ongoing police investigation which through no fault of the family, barred disclosure of the police photos. The district had known of the accident, removed the sign, and had access to the police report and photos. The intersection was otherwise unchanged, so nothing prevented the district from performing its own inspection and investigation. The district opposed the motion in an attorney's affirmation, arguing that it did not, in fact, have actual knowledge of essential facts, given that nothing reported to it mentioned the sign. It was the petitioner's burden, the district argued, to establish a lack of prejudice, and when a notice of claim is not served within ninety days or a reasonable time thereafter the court can simply infer substantial prejudice because witnesses' memories will have faded. The family replied that it was the district's burden to show that it had been prejudiced, which it could not do with only an attorney's affirmation making conclusory statements about prejudice and fading memories.

The motion court considered factors specified in General Municipal Law section 50-e(5), and found that the district did not have actual knowledge of the essential facts because it had no notice that the sign may have contributed to the accident, and the police report did not mention the sign. Crucially, it found that the petitioners had not demonstrated that their delay had not caused substantial prejudice to the district. Students had graduated, school personnel had moved on, and this "presumably hindered" the district's ability to collect information; prejudice could be inferred because "the mere passage of time creates prejudice with respect to fading memories of witnesses." The motion for leave was denied. The Appellate Division affirmed, agreeing that the district did not have actual knowledge of facts connecting the sign to the accident, and finding that the petition failed to demonstrate that the late notice would not substantially prejudice the district's ability to defend against the claim. The case was appealed to the Court of Appeals.

Chief Judge DiFiore, writing for a unanimous court, announced the new standard:

"We hold that the burden initially rests on the petitioner to show that the late notice will not substantially prejudice the public corporation. Such a showing need not be extensive, but the petitioner must present some evidence or plausible argument that supports a finding of no substantial prejudice. ... Once this initial showing has been made, the public corporation must respond with a particularized evidentiary showing that the corporation will be substantially prejudiced if the late notice is allowed." (p. 12).

The approach "strikes a fair balance" in the Court's estimation. Furthermore, continued the Chief Judge, a former District Attorney and Deputy Village Attorney, "the public corporation is in the best position to provide evidence as to whether the late notice has substantially prejudiced its ability to defend the claim on the merits."

One immediate effect of the Court of Appeals decision is to bring into question any case against a public corporation dismissed for late notice of claim where the time to appeal has not yet expired and where, like the lower court in Newcomb, the court "applied the incorrect legal standard by placing the burden solely on petitioner to establish lack of substantial prejudice and by failing to consider whether the petitioner's initial showing shifted the burden to the [public corporation]."

In the longer term, the Newcomb rule could create a more favorable environment for claimants against public corporations under the General Municipal Law. True, the claimant now must make an initial showing of "no prejudice" in order to shift the burden to the defendant. However, that showing "need not be extensive" and the claimant can do so using only a "plausible argument", whereas the public corporation "must respond with a particularized evidentiary showing that the corporation will be substantially prejudiced". The high court appears to be giving claimants a lower threshold than the public corporations in terms of their burdens of persuasion and proof. Moreover, the bar set for the public corporation is high: a "particularized evidentiary showing" that it has, in fact, been prejudiced by the late notice of claim. Finally, the "particularized evidentiary showing" requirement could be difficult to satisfy in some cases because at the early stages of litigation, when a motion to dismiss or for leave to serve late notice of claim is most likely, demonstrable prejudice may not be apparent. It may only be later, when the names of missing witnesses, the importance of lost evidence, or the significance of circumstances come to light, that the defendant can meet its burden under Newcomb, at which point it may simply be too late.