Discovery limitations in tax certiorari proceedings compared to traditional litigation - by Nicole Forchelli and Nathan Jones

 

 

Compared to an ordinary civil action, discovery in a tax certiorari proceeding commenced under Article 7 of the New York Real Property Tax Law (RPTL) differs in several fundamental respects. The primary reason for these differences can be found in the purpose of the actions. Plenary civil actions are available to resolve a broad range of disputes. RPTL tax certiorari challenges are defined as summary proceedings, established to create a speedy and equitable procedure for both the taxpayer and taxing authority. By design, such proceedings are narrowly targeted to reduce time and costs for litigants and the courts. As every real property taxpayer generally has the right to challenge their taxes and assessment for each tax year, the court system does not have sufficient resources to handle broad discovery permitted in ordinary civil actions — and the related motion practice — for the high volume of tax certiorari proceedings filed each year. Furthermore, tax assessment challenges are intended to be remedial in character; burdening the average taxpayer with unnecessary litigation costs would undermine that purpose.

First, disclosure is generally not freely available. In a civil action, disclosure is governed by CPLR Article 31 and may be obtained as of right by all parties; the court’s role is primarily reactive, it may issue protective orders or orders to compel compliance. In a tax certiorari proceeding, parties must obtain leave of court first for virtually all discovery outside of specific mandated disclosures discussed below. CPLR 408, which governs special proceedings, provides that leave of court shall be required for disclosure except for a notice to admit under CPLR 3123. The party seeking disclosure must make a motion for leave of court before serving any discovery demand. Aylward v. City of Buffalo, 101 A.D.3d 1743 (4^th Dept 2012). 

Second, the scope of discovery is limited by design. Civil actions permit broad, party-initiated discovery encompassing any matters material and necessary to the claims and defenses in the case. Tax certiorari proceedings confine discovery to the correctness of the assessment and the reliability of expert opinions of valuation along carefully tailored lines discussed below. Motions made pursuant to CPLR 408 for discovery beyond the mandatory minimum are to be carefully scrutinized to determine whether the information is truly necessary for the limited dispute. Among the factors weighed are whether the party seeking disclosure has established that the information sought is material and necessary, whether the request is carefully tailored to obtain the necessary information and whether undue delay will result from the request. Suit-Kote Corp. v. Rivera, 137 A.D.3d 1361 (3d Dept 2016). The Court must also “balance the needs of the party seeking discovery against such opposing interests as expedition and confidentiality.” Town of Wallkill v. N.Y. State Bd. of Real Prop. Servs., 274 A.D.2d 856, 859 (3d Dept 2000). Once leave is granted, the actual disclosure takes place pursuant to CPLR 3101(a) and applies the same substantive standard as in civil actions — all matter material and necessary — but only to the extent of the Court’s leave.

Third, tax certiorari proceedings include unique disclosure requirements. Section 202.59 of Title 22 of the NYCRR imposes a sequential regime of limited mandatory disclosure that has no analog in ordinary civil discovery. Section 202.59(b) requires the petitioner to disclose, in advance of filing the note of issue, either a statement that the property is not income-producing, or a verified or certified statement of the income and expenses on the property for each tax year under review. Section 202.59(g) establishes a unique procedure for the simultaneous exchange of expert appraisal reports, at the pretrial conference under section 202.59(e), or, if the court dispenses with a pretrial conference, at least 10 days before trial.

In practice, attorneys representing petitioners in tax certiorari cases often informally turn over relevant financial documents to foster settlement discussions. But either way, best practices limit disclosure to information that is directly relevant to the narrow, tailored purpose of the tax certiorari proceeding.

Nicole Forchelli is a partner and a member of the tax certiorari, municipal and litigation practice groups, and Nathan Jones is a partner and a member of the tax certiorari, litigation and land use and zoning practice groups at Forchelli Deegan Terrana LLP, Uniondale, N.Y.