​In prior newsletters, we discussed the New York Court of Appeals in Freedom Mortgage Corp. v. Engel (2021) which held (1) the filing of a foreclosure action accelerates all payments on a mortgage and starts the six-year clock for all payments and (2) the voluntary dismissal of the foreclosure action de-accelerates the mortgage, and stops the clock on future payments.

At the very end of 2022, New York’s governor signed the Foreclosure Abuse and Prevention Act.  That law implements several provisions that favor borrowers over lenders in home mortgage foreclosures.   One section overrules Engel, eliminating a lender’s ability to deaccelerate a debt by voluntarily discontinuing a foreclosure action or by sending a deacceleration letter to the borrower.  This means that, once accelerated, the statute of limitations begins to run, and cannot be reset without the borrower’s consent. 

Another section of the new law deals with CPLR 205(a), which extends the statute of limitations by six months while a claim is pending and later dismissed other than for certain specified reasons.  The new law exempts actions on certain negotiable instruments secured by real property from 205(a), and instead enacts a more restrictive CPLR 205-a to govern such claims. 

The new section does provide for a similar six-month extension, but with more restrictions, most notably that a successor-in-interest cannot invoke its provisions.

Another section of the new law amends subdivisions 4 and 5 of General Obligation Law §17-105. GOL §17-105(1) provides that an agreement to waive the statute of limitations to foreclose on a mortgage is effective if expressly set forth in writing and signed by the party to be charged. The amended language in subdivisions (4) and (5) provides that an acknowledgment, promise or agreement, express or implied, shall not postpone, cancel, reset, toll, revive or otherwise extend the statute of limitations, unless it is made as provided in this section.

​Finally, the new law takes effect immediately and applies to all applicable action, including pending actions, so long as “a final judgment of foreclosure and sale has not been enforced.”

A recent Third Circuit decision, Popa v. Harriet Carter Gifts, Inc., 52 F.4th 121 (2022), considered whether a commercial website that allows third parties to track customer input may violate Pennsylvania’s wire-tapping statute.  Reversing the district court, the Third Circuit held that such actions may violate the statute and give rise to liability.  It remanded the case to determine whether the customer had implicitly consented to the tracking.

Ashley Popa searched the internet for a set of pet stairs. She browsed the website of Harriet Carter Gifts, added a set of stairs to her cart, but then left the website without making a purchase. She later discovered that, unbeknownst to her as she was browsing the website, a third-party marketing service Harriet Carter was using, NaviStone, tracked her activities across the site.   Navistone used the website to implant a small piece of Javascript code, often called a “cookie,” on her browser, which then transmitted her search and “add to cart” selection to its own servers.  Popa sued under Pennsylvania’s Wiretapping and Electronic Surveillance Control Act.

The Third Circuit first noted that under Pennsylvania’s law, to show liability Popa would have to show that the defendants “intercepted” her communications.  But the statute gives that term a broad meaning, basically any “acquisition of the contents of any wire, electronic or oral communication through the use of any electronic, mechanical or other device.”  The defendants’ acts qualified.

Next it dealt with a line of cases that held that where the interception takes place by the intended recipient, there is no violation.  Although many Pennsylvania cases had so held, the Third Circuit noted that the Legislature, in codifying this law, had limited it to law enforcement, and even then prior approval of a supervising officer is required.  The implication is that other than law enforcement, the wiretap law can be violated by the recipient.

Another issue was whether Popa had consented to this interception.  Pennsylvania  is a “two-party consent state,” meaning that both parties to a conversation must consent to its recording.  Most states, and federal law, provide that the consent of one party suffices.  But California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Montana, New Hampshire, Pennsylvania and Washington require consent of both parties.

​Pennsylvania law does not require express consent or actual knowledge; implicit consent, or a showing that the party “should have known” her conversation was being recorded suffices to avoid liability.  The Defendants argued that the website’s privacy policy alerted Popa to the possibility her information would be tracked.  The Third Circuit remanded for consideration of this issue.

The use of cookies and other tracking devices on commercial websites is common.  Operators are well advised to make clear disclosure of this fact, and perhaps require affirmative agreement before the site can be used.

​It is a basic tenet of U.S. trademark law that rights in a trademark are gained through use of the mark in the United States.  Priority in trademark rights, and the ability to stop others from using the same mark, is based on actual use in the marketplace.  But a recent Trademark Trial and Appeal Board decision,  Empresa Cubana Del Tabaco D.B.A. Cubatabaco v. General Cigar Co., Inc. (TTAB 2022),  recognized an exception to this rule, based on a 1929 treaty, the Inter-American Convention for Trade Mark and Commercial Protection, commonly referred to as “the Pan American Convention.”

The proceeding was the latest installment in a 25-year legal battle between Empressa Cubana, a Cuban company, and General Cigar, a U.S. company based in Virginia, over the trademark COHIBA for cigars.  Empressa Cubana has been barred for 60 years by the Cuban embargo from selling its cigars in the United States.  The dispute has lead to several court opinions, including from the Second and Federal Circuits.

In the latest dispute, Empressa Cubana brought a proceeding to cancel two registrations by General Cigar, based largely on the Pan American Convention.  The United States joined that treaty in 1929, and most countries in Latin America, including Cuba, are signatories.  The treaty protects (1) nationals of contracting states, and (2) domiciled foreigners who own a manufacturing or commercial establishment or an agricultural development in any of the contracting states.

The treaty provides that where a protected party seeks to register its mark in another member country and is refused registration because of another “interfering” registration, the latter can be cancelled if (a) the petitioner had legal rights in another member state prior to the registration and (b) the owner of the interfering registration had knowledge of the prior mark in another member state.

​Empressa Cubana showed that it had trademark rights in Cuba since the 1960s, and that General Cigar, who had applied for its registration in 1992, had knowledge of this.  On that basis, the Board cancelled General Cigar’s two registrations.
The implication is that any trademark rights in any country that is a member of the Pan American Convention may be given priority over local users in other member states.  U.S. trademark owners, particularly those with products or marks that are used in Latin America, now need to pay attention to rights that other companies may have in these countries, and their impact on U.S. rights. 

The Federal Arbitration Act makes contractual agreements to arbitrate disputes enforceable.  But these rights, like any contractual rights, can be waived.  It often happens that a party to such a contract will spend months or years litigating before invoking an arbitration provision.  A court may conclude that the party has waived its right to arbitrate.

A recent Supreme Court decision, Morgan v. Sundance, Inc. (2022) has made it easier to find a waiver in this situation.  Many Courts of Appeal applied a specific test for arbitration clauses, requiring a showing that another party has been harmed or prejudiced before a waiver will be found.  In the Morgan case, that lead the Eighth Circuit to find no waiver.
The Supreme Court in Morgan rejected that law, holding that waiver is not determined by arbitration-specific rules, but by the general law of waiver, which does not require a showing of prejudice. It noted that while the FAA does embody a strong federal policy to enforce arbitration agreements, that policy “is to make “arbitration agreements as enforceable as other contracts, but not more so . . . The federal policy is about treating arbitration contracts like all others, not about fostering arbitration.”  There is thus no requirement to show prejudice.

The Morgan decision did not specify what standard to apply to determine waiver, and lower courts have been divided as to what standard now applies.  In 2010, the Second Circuit adopted a three-prong standard to determine waiver, with courts considering:  “(1) the time elapsed from when litigation was commenced until the request for arbitration; (2) the amount of litigation to date, including motion practice and discovery; and (3) proof of prejudice.”  La. Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F.3d 156, 159 (2d Cir. 2010).  After Morgan, should courts apply that standard, only omitting the third prejudice prong? Or, should they completely discard it in favor of a more general standard for waiver of rights under a contract, i.e., whether the contractual right was “knowingly, voluntarily and intentionally abandoned?”     

In Herrera v. Manna 2nd Avenue LLC (S.D.N.Y. 2022), the court was unsure about this question,  but avoided it by holding that under either standard, there was no waiver.   One New York court concluded that under Morgan’s reasoning, the general waiver standard applies.  Deng v. Frequency Elecs., Inc. (E.D.N.Y. 2022)  Another held that the Second Circuit standard, minus the prejudice requirement, should still apply.   Carollo v. United Cap. Corp. (N.D.N.Y. 2022).  So the precise standard to apply for waiver remains unclear.

What is clear, however, is that now a party that fails to assert a right to arbitrate as early as possible may lose it.  As one court observed:  “The judicial system was not designed to accommodate a defendant who elects to forego arbitration when it believes that the outcome in litigation will be favorable and then suddenly change course and pursue arbitration. The waiver doctrine exists to prevent parties from invoking the judicial process and thereby defeating the key purpose of arbitration: saving the parties’ time and money.” 

We previously wrote about the landmark Court of Appeals decision in Freedom Mortgage Corp. v. Engel (2021), which dealt with application of the statute of limitations in mortgage foreclosure decisions.  Since Engel, courts have grappled with its application in various circumstance.  See our prior article here.  A recent Court of Appeals decision, Everhome Mortgage Co. v. Aber (2022) resolved one such issue.

The Engel court held (1) the filing of a foreclosure action accelerates all payments on a mortgage and starts the six-year clock for all payments and (2) the voluntary dismissal of the foreclosure action de-accelerates the mortgage, and stops the clock on future payments. However, courts were split as to whether an involuntary dismissal also deaccelerates the mortgage and stops the clock running on the statute of limitations.  The Second Department held that the second part of Engel does not apply to involuntary dismissals, while the Second Circuit has held it does. 

In Everhome Mortgage, the Court of Appeals sided with the Second Department.  That case involved a second foreclosure action that was held time-barred.  The lender had filed a prior action (which accelerated the debt under Engel), but that first action was dismissed without prejudice, based on the lender’s failure to appear for a court conference.  The lender waited over six years from the filing of the first action to file a second.  Agreeing with the Appellate Division, the Court of Appeals held that the action was time-barred, as the involuntary dismissal did not de-accelerate the loan.