Chapter Twenty-Three
Rochester, New York
Summaries of Recently Released Decisions to Be Included In the Next Issue of the Digest (uncorrected)
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COURT OF APPEALS
CIVIL PROCEDURE/ATTORNEYS
Findings in a Sanctions Proceeding Against an Attorney Should Not Have Been Given Collateral Estoppel Effect in an Attorney-Disciplinary Proceeding
The Court of Appeals reversed the Appellate Division finding that sanctions imposed upon an attorney, stemming from the attorney's representation of a client in a civil matter, should not have been given collateral estoppel effect in an attorney-disciplinary proceeding:
This case is distinguishable from Matter of Levy (37 NY2d 279, 281 [1975]), where we determined that it was neither unreasonable nor unfair to impose collateral estoppel in a disciplinary proceeding after the attorney had been convicted of a criminal offense. There, we held that the attorney would not be permitted to relitigate the issue of guilt after he was convicted following a criminal trial, at "which rigorous safeguards were imposed to insure against an unjust conviction" ... .
By contrast, the determination here was made on papers — without cross-examination or the opportunity to call witnesses. ... While the issue of whether [the attorney] had made false statements in her written declaration concerning her prior knowledge of [an annuity] agreement may have been relevant, it was certainly not the focus of the hearing ... . The cursory nature of the sanctions proceeding itself failed to provide a full and fair opportunity to litigate the issue. Matter of Dunn, 2015 NY Slip Op 01556, CtApp 2-24-15
CRIMINAL LAW
Failure to Make a Finding of Necessity Re: Restraining Defendant at Trial with a Stun Belt Is Not a Mode of Proceedings Error---Error Must Be Preserved by Objection (No Objection Here)
The Court of Appeals determined that the trial court's failure to make a finding of necessity re: the defendant's wearing a stun belt (a restraint device) at trial was not a mode of proceedings error. Therefore the error must be preserved by objection. Here the defendant consented to the restraint. People v Cooke, 2015 NY Slip Op 01557, CtApp 2-24-15
DEFAMATION/PRIVILEGE/ATTORNEYS
Pre-Litigation Statements Made by an Attorney (Here In a Cease and Desist Letter) Are Protected by Qualified, Not Absolute, Privilege---Such Statements Are Privileged If Not Motivated by Malice and If Pertinent to Anticipated Litigation
The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, determined that statements made by an attorney prior to the commencement of litigation are protected by a qualified, not absolute privilege. A qualified privilege will not protect statements motivated by malice. Here statements made by an attorney in a cease and desist letter were made in good faith and were pertinent to anticipated litigation, and therefore protected by qualified privilege:
... "[A]s a matter of policy, the courts confine absolute privilege to a very few situations" ... . We recognize that extending privileged status to communication made prior to anticipated litigation has the potential to be abused. Thus, applying an absolute privilege to statements made during a phase prior to litigation would be problematic and unnecessary to advance the goals of encouraging communication prior to the commencement of litigation. To ensure that such communications are afforded sufficient protection the privilege should be qualified. Rather than applying the general malice standard to this pre-litigation stage, the privilege should only be applied to statements pertinent to a good-faith anticipated litigation. This requirement ensures that privilege does not protect attorneys who are seeking to bully, harass, or intimidate their client's adversaries by threatening baseless litigation or by asserting wholly unmeritorious claims, unsupported in law and fact, in violation of counsel's ethical obligations ... . Therefore, we hold that statements made prior to the commencement of an anticipated litigation are privileged, and that the privilege is lost where a defendant proves that the statements were not pertinent to a good-faith anticipated litigation ... . Front Inc v Khalil, 2015 NY Slip Op 01554, CtApp 2-24-15
LANDLORD-TENANT/FRAUD/CIVIL PROCEDURE/CORPORATION LAW
Because the Landlord Engaged in Fraud, the Four-Year Rent-Overcharge Statute of Limitations Runs Back Four Years from When the Rent Overcharge Action Was Brought/Criteria for Collateral Estoppel Explained (Not Met Here)/Question of Fact
Re: Piercing Corporate Veil
The Court of Appeals, in a full-fledged opinion by Judge Read, over a dissent, determined that the four-year statute of limitations in rent-overcharge actions, where the landlord engaged in fraud, does not begin to run when the first overcharge payment is made, but rather extends back four years from when the overcharge action is brought. Here there was evidence the landlord used a fictitious tenant and rent to justify the rent charged the tenants. The landlord argued the tenants' action was time-barred because it was brought more than four years after the first overcharge payment was made. In addition to the statute-of-limitations ruling, the Court of Appeals held the collateral estoppel doctrine was not correctly applied by the courts below and there was a question of fact whether the corporate veil should be pierced due to the principal's control over the corporate-landlord and the principal's fraudulent acts:
Julie Conason (Conason) and Geoffrey Bryant (Bryant) (collectively, tenants) are the rent-stabilized tenants of an apartment in a residential building in Manhattan. Megan Holding LLC (Megan) is the building's owner and tenants' landlord. ... Conason asserted an overcharge claim against Megan in April 2009, almost five and one-half years after she occupied the apartment under a vacancy lease. The principal issue on this appeal is whether CPLR 213-a's four-year statute of limitations completely bars this claim. Because of the unrefuted proof of fraud in the record, we conclude that section 213-a merely limits tenants' recovery to those overcharges occurring during the four-year period immediately preceding Conason's rent challenge, and that the lawful rent on the base date must be determined by using the default formula devised by the New York State Division of Housing and Community Renewal (DHCR or the agency) ... . * * *
CPLR 213-a fixes a four-year statute of limitations for claims of residential rent overcharge; specifically, this provision states that
"[a]n action on a residential rent overcharge shall be commenced within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced. This section shall preclude examination of the rental history of the housing accommodation prior to the four-year period immediately preceding the commencement of the action" (emphasis added) (CPLR 213-a; see also Rent Stabilization Law [Administrative Code of City of NY] § 26-516 [a] [2]; Rent Stabilization Code [9 NYCRR 2520.6 [f]; 2526.1 [a] [2]). * * *
Collateral estoppel comes into play when four conditions are fulfilled:
"(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits" ... . ... . ...
Civil Court's findings of fraud are not entitled to preclusive effect because two of the four prerequisites for collateral estoppel are unmet: the issues in Civil Court (breach of the warranty of habitability) and Supreme Court (evidence of fraud sufficient to render the rent on the base date unreliable) are not identical (the first condition), and findings of fraud were not necessary to support the judgment entered on the April 8th order, which awarded tenants rent abatement on account of Megan's breach of the warranty of habitability and directed Megan to remedy code violations (the fourth condition). Conason v Megan Holding LLC, 2015 NY Slip Op 01553, CtApp 2-24-15
REAL PROPERTY TAX LAW
Property Occupied by Owner's Relative Living Rent-Free Does Not Qualify as "Owner-Occupied" for Purpose of a Tax Assessment Review Pursuant to Real Property Tax Law 730
The Court of Appeals, in a full-fledged opinion by Judge Rivera, over a dissent, determined petitioners' property did not qualify as "owner-occupied" within the meaning of Real Property Tax Law (RPTL) 730(1)(b)(i). Petitioners, the owners of a single family home, did not live there but an owner's mother lived there rent-free. Petitioners filed a "small claims assessment review" petition seeking a tax assessment review (SCAR) under RPTL 730. The Court of Appeals held that the meaning of "owner-occupied" could not be stretched to include a relative of an owner living rent free in the property:
The history of the SCAR program establishes that its purpose is to address the plight of small homeowners. Limiting access to the SCAR program to owners who occupy their property reasonably restricts the program to those most likely to have limited resources and who are most economically in need of the SCAR program's expeditious and inexpensive procedures. Hence, interpreting "owner-occupied" to mean what it says, namely a property occupied by its owner, is not such a "literal and narrow interpretation[]" as to thwart the statutory purpose ... . Matter of Manouel v Board of Assessors, 2015 NY Slip Op 01555, CtApp 2-24-15
APPELLATE DIVISION
ARBITRATION
Criteria for Vacation of an Arbitration Award Explained (Not Met Here)
The Second Department explained the criteria for vacation of an arbitration award:
A party seeking to overturn an arbitration award on one or more grounds stated in CPLR 7511(b)(1) bears a "heavy burden" ... , and must establish a ground for vacatur by clear and convincing evidence ... . An arbitration award must be vacated if a party's rights were impaired by an arbitrator who "exceeded his [or her] power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made" (CPLR 7511[b][1][iii]). An arbitrator exceeds his or her power where the "award violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator's power" ... . An award will be vacated as indefinite only if it leaves the parties unable to determine their rights and obligations, if it does not resolve the controversy submitted, or if it creates a new controversy ... . Matter of Quality Bldg Constr LLC, 2015 NY Slip Op 01643, 2nd Dept 2-25-15
CIVIL PROCEDURE
Motion for Discontinuance Without Prejudice Should Not Have Been Granted Because It Allowed Movant to Escape Potentially Adverse Determinations
The Second Department determined Supreme Court should not have granted plaintiffs' motion for a discontinuance without prejudice, a motion made in response to defendant's (Parkway's) motion to dismiss for failure to respond to Parkway's 90-day notice:
"A motion for leave to discontinue an action without prejudice should be granted unless there are reasons which would justify its denial" ... . Such a determination "rests within the sound discretion of the court," and the motion should be granted "[i]n the absence of special circumstances, such as prejudice to a substantial right of the defendant, or other improper consequences" ..., including an adverse determination of the court ..., or the consequences of a potentially adverse determination ... .
Here, the plaintiffs cross-moved, inter alia, for leave to discontinue the action without prejudice in response to Parkway's separate motion pursuant to CPLR 3216 to dismiss the complaint on the ground that the plaintiffs had failed to timely respond to its 90-day notice. The Supreme Court's determination to grant that branch of the plaintiffs' cross motion which was for leave to discontinue the action without prejudice allowed the plaintiffs to avoid the potentially adverse consequences of having failed to timely respond to Parkway's 90-day notice (see CPLR 3216), and an adverse determination of Parkway's motion for summary judgment. Baez v Parkway Mobile Homes Inc, 2015 NY Slip Op 01596, 2nd Dept 2-25-15
CIVIL PROCEDURE
Plaintiff Need Not Submit Any Evidence In Response to a Motion to Dismiss Alleging Failure to State a Cause of Action, Even If Defendant Does
The Second Department explained how a motion to dismiss for failure to state a cause of action (CPLR 3211(a)(7)) should be handled when evidence is submitted in support of the motion. The court noted that the plaintiff need not submit any evidence and can stand on the pleadings alone:
"A court is, of course, permitted to consider evidentiary material submitted by a defendant in support of a motion to dismiss pursuant to CPLR 3211 (a) (7)" ... . "If the court considers evidentiary material, the criterion then becomes whether the proponent of the pleading has a cause of action, not whether he has stated one'" ... . "Yet, affidavits submitted by a defendant will almost never warrant dismissal under CPLR 3211 unless they establish conclusively that the plaintiff has no cause of action" ... . The plaintiff "may not be penalized for failure to make an evidentiary showing in support of a complaint that states a claim on its face" ... . The plaintiff may stand on his or her pleading alone to state all the necessary elements of a cognizable cause of action, and, unless the motion to dismiss is converted by the court to a motion for summary judgment, the plaintiff will not be penalized because he or she has not made an evidentiary showing in support of the complaint ... . In light of these standards, it is clear that the defendant's motion should have been denied. The complaint stated a cause of action, and the defendant's submissions did not "conclusively establish that the plaintiff has no cause of action" ... . Clarke v Laidlaw Tr Inc, 2015 NY Slip Op 01602, 2nd Dept 2-25-15
CIVIL PROCEDURE/FORECLOSURE
Lack of Standing Defense Waived If Not Raised In Answer or Pre-Answer Motion to Dismiss---Lack of Standing Is Not a Jurisdictional Defect--Sua Sponte Dismissal on that Ground Improper
The Second Department reversed Supreme Court's sua sponte dismissal of a complaint seeking foreclosure and sale on the ground plaintiff lacked standing. The defendants did not answer the complaint or make a pre-answer motion to dismiss, so the lack of standing defense was waived:
A court's power to dismiss a complaint, sua sponte, is to be used sparingly and only when extraordinary circumstances exist to warrant dismissal ... . Here, the Supreme Court was not presented with extraordinary circumstances warranting the sua sponte dismissal of the complaint and cancellation of the notice of pendency. Since the defendants did not answer the complaint, and did not make a pre-answer motion to dismiss the complaint, they waived the defense of lack of standing ... . Furthermore, a party's lack of standing does not constitute a jurisdictional defect and does not warrant a sua sponte dismissal of the complaint by the court ... . HSBC Bank USA NA v Simmons, 2015 NY Slip Op 01609, 2nd Dept 2-25-15
CIVIL PROCEDURE/MUNICIPAL LAW/EMPLOYMENT LAW
Four-Month Statute of Limitations for Challenging Termination of a Firefighter Runs from the Effective Date of Termination, Not the Date of Notification
The Second Department noted that the four-month statute of limitations for challenging the termination of a probationary firefighter ran from the effective date of the termination, not the date of notification of the termination:
"[A] proceeding against a body or officer must be commenced within four months after the determination to be reviewed becomes final and binding upon the petitioner" (CPLR 217[1]). Where, as here, a governmental employee is not entitled to a hearing in connection with his or her discharge, the limitations period for commencing a CPLR article 78 proceeding to challenge that discharge "runs from the notice of discharge or the effective date of discharge, if later" ... .
Here, although the petitioner was notified of the termination of his probationary employment by letter dated September 13, 2013, and was told not to report for further shifts, the notice set the effective termination date of the petitioner's probationary employment as September 23, 2013. Accordingly, ... the statute of limitations began to run on September 23, 2013. Matter of Bruno v Greenville Fire Dist, 2015 NY Slip Op 01630, 2nd Dept 2-25-15
CONTRACT LAW
Unambiguous Release Standing Alone Warrants Summary Judgment
The Second Department explained that an unambiguous release allows a judgment as a matter of law without resort to extrinsic evidence:
"[A]bsent fraudulent inducement or concealment, misrepresentation, mutual mistake or duress, a valid release that is clear and unambiguous on its face constitutes a complete bar to an action on a claim that is the subject of the release" ... . "Whether the language set forth in a release unambiguously bars a particular claim is a question of law appropriately determined on a motion for summary judgment based upon the entire release and without reference to extrinsic evidence" ... . Beys Specialty Inc v Euro Constr Servs Inc, 2015 NY Slip Op 01598, 2nd Dept 2-25-15
CONTRACT LAW/TORTIOUS INTERFERENCE WITH CONTRACT/UNFAIR COMPETITION
Tortious Interference with Contract and Unfair Competition Causes of Action Proven--Elements Explained---Punitive Damages Not Warranted--Purpose Explained
The First Department, in a full-fledged opinion by Justice Sweeney, determined that the trial judge (bench trial) properly found that JC Penney (JCP) had tortiously interfered with the exclusivity provision of a contract between Macy's and Martha Stewart Living Omnimedia (MSLO), but that the trial judge had improperly dismissed the cause of action alleging tortious interference with the confidentiality provision of the contract and the cause of action for unfair competition. The First Department agreed with the trial judge that punitive damages were not warranted. Macy's had entered a contract with MSLO which gave Macy's the exclusive right to manufacture and sell MSLO products. JCP was found to have knowingly and forcefully engaged in negotiations with MSLO which resulted in MSLO's breaching both the exclusivity and confidentiality provisions of the Macy's contract:
To sustain its claim of tortious interference with contract, Macy's must prove (1) that it had a valid contract with MSLO; (2) that JCP had knowledge of Macy's contract with MSLO; (3) that JCP intentionally induced MSLO to breach its contract with Macy's; (4) that MSLO breached its contract with Macy's; (5) that MSLO would not have breached its contract with Macy's absent JCP's conduct; and (6) that Macy's sustained damages ... .
* * * On the record before us, the evidence establishes that JCP had, as the court found, a "certainty" or "substantial certainty" that it actions would result in a breach, particularly in light of the unambiguous language of the contract requirement that all MSLO goods in the Exclusive Product Categories, including all such goods sold in any MSLO Store, had to be manufactured by Macy's. * * *
... Macy's alleges that JCP induced MSLO to disclose the terms of its agreement and confidential financial information. This was a violation of the confidentiality provision of the agreement. Macy's sufficiently demonstrated that the material disclosed does not fall under any exception to the confidentiality provisions as required by law or legal processes. Further, Macy's demonstrated that the scope of disclosure was not properly limited with respect to the information provided and the personnel receiving it. As noted, JCP sought this information almost from the inception of its discussion with MSLO. The information was tantamount to trade secrets, as JCP's executives acknowledged. * * *
It is well settled that "the primary concern in unfair competition is the protection of a business from another's misappropriation of the business' organization [or its] expenditure of labor, skill, and money'" (Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663, 671 [1981]...). Indeed, "the principle of misappropriation of another's commercial advantage [is] a cornerstone of the tort" (52 NY2d at 671). Allegations of a "bad faith misappropriation of a commercial advantage belonging to another by exploitation of proprietary information" can give rise to a cause of action for unfair competition ... .
Here, the agreement between Macy's and MSLO provided Macy's with valuable exclusive rights to the Martha Stewart trademark and MSLO's designs in the Exclusive Product Categories, which, as the court found, gave Macy's a competitive advantage. It is conceded that the MSLO brand had significant value in the retail world, and the record shows JCP was fully aware of Macy's commercial advantage as the exclusive distributor of these branded products. JCP's actions in attempting to misappropriate this commercial advantage by inducing MSLO to breach its agreement falls squarely within Ruder and Finn's definition of unfair competition ... . * * *
...In order to be entitled to punitive damages, a private litigant "must not only demonstrate egregious tortious conduct by which he or she was aggrieved, but also that such conduct was part of a pattern of similar conduct directed at the public generally ... . Punitive damages are "a social exemplary remedy, not a private compensatory remedy" Macy's Inc v Martha Stewart Living Omnimedia Inc, 2015 NY Slip Op 01728, 1st Dept 2-26-15
CRIMINAL LAW/EVIDENCE
Insufficient Foundation for Introduction of Grand Jury Testimony as Past Recollection Recorded---No Showing Recollection Was "Fairly Fresh" and Accurate at the Time of the Grand Jury Appearance
The First Department, in a full-fledged opinion by Justice Andrias (disagreeing at length with the rationale of the concurring opinion), reversed defendant's perjury conviction because a witness' (Woods') grand jury testimony was wrongly admitted under the past recollection recorded hearsay exception. Woods testified and remained available to testify when the hearsay exception was invoked. Woods claimed that he did not know whether he had actual knowledge of past events or whether his memory stemmed from the many "prep" discussions he had had with the prosecutor over a six-year period. There was a six-year gap between the underlying events and Woods' grand jury appearance. The First Department determined the prosecutor did not lay a sufficient foundation for admission of the grand jury testimony in that it was not shown that Woods' recollection was "fairly fresh" at the time of the grand jury testimony:
Although there is no rigid rule as to how soon after the event the statement must have been made ..., here the assurance of the accuracy of the recordation and its trustworthiness are diminished by the six- year gap between the underlying events, which concluded in 2000, and Woods's grand jury testimony in 2006 * * * .
The People argue that Woods's testimony is admissible despite the six-year gap because the trial court found that he was "feigning a lack of memory." However, even if Woods's lack of memory demonstrates that he was unable or unwilling to testify, it does not abrogate the People's obligation to satisfy the foundational requirement that the recollection was fairly fresh when [*5]recorded or adopted.
Nor was Woods able to "presently testify that the record correctly represented his knowledge and recollection when made" ... . Although Woods testified that he believed his grand jury testimony was truthful and accurate, he also testified that "[a]s I sit here right now, I can't tell you if everything that's in that Grand Jury that I said was ... accurate"; that although he "wanted to be accurate" and "wouldn't testify untruthfully," he could not swear that "what's in the ... Grand Jury ... was exactly what happened," and that he could not "remember [if] ... what I was talking to was my clear recollection or ... was resulting from [my prep sessions] with people." Thus, Woods's testimony reflects that although he would not have purposefully lied to the grand jury, he could not presently state that his testimony accurately reflected his own recollection of the events in question at the time that he testified before it ... . People V DiTommaso, 2015 NY Slip Op 01592, 1st Dept 2-14-15
CRIMINAL LAW/EVIDENCE
People's Failure to Provide Timely Notice of the Intent to Present Witnesses to Rebut the Testimony of Defendant's Alibi Witness Required Reversal
The Second Department reversed defendant's conviction because the prosecutor failed to show good cause for her failure to provide timely notice of rebuttal witnesses. Defendant had provided a "notice of alibi." Defendant's alibi witness was his girlfriend, who testified defendant was home with her at the time of the offense. The prosecutor did not provide reciprocal notice of rebuttal witnesses who would testify that cell phone records demonstrated defendant was not at home with his girlfriend at the time of the offense. In spite of the lack of timely notice, the trial court allowed the rebuttal testimony after an adjournment:
CPL 250.20(1) provides, among other things, that within eight days of service of a demand by the People, a defendant "must" serve upon the People a "notice of alibi," and that "[f]or good cause shown, the court may extend the period for service of the notice." The reciprocal provision, CPL 250.20(2), provides, among other things, that "[w]ithin a reasonable time after receipt of the defendant's witness list but not later than ten days before trial," the People "must" serve and file a list of the witnesses the People propose to offer in rebuttal to discredit the defendant's alibi at the trial, and that "[f]or good cause shown, the court may extend the period for service" of the People's witness list.
CPL 250.20(3) provides that if the defendant calls an alibi witness at trial without having first served the requisite notice pursuant to CPL 250.20(1), the court "may exclude any testimony of such witness," or "may in its discretion receive such testimony, but before doing so, it must, upon application" of the People, "grant an adjournment not in excess of three days" (CPL 250.20[3]). CPL 250.20(4) provides that the provisions of subdivision (3) "shall reciprocally apply" when the People seek to offer alibi rebuttal witnesses without having given the requisite notice pursuant to CPL 250.20(2).
Here, the People contend, in effect, that, unlike CPL 250.20(2), which requires the People to show "good cause" for an extension of time to serve the list of alibi rebuttal witnesses, CPL 250.20(3) and (4) do not require such a showing for the court to exercise its discretion in receiving such testimony absent any compliance with the notice requirement. We disagree ... . A construction of the statute which requires good cause to be shown before trial, but not during trial, when late notice would be most prejudicial, is both contrary to the plain meaning of the statute, as well as contrary to the intent of the Legislature in amending the statute to comply with the Due Process Clause ... . To hold otherwise would mean that CPL 250.20(3) and (4) completely eviscerate the timeliness of notice requirements of CPL 250.20(1) and (2). People v Crevelle, 2015 NY Slip Op 01661, 2nd Dept 2-25-15
ENVIRONMENTAL LAW/CIVIL PROCEDURE/MUNICIPAL LAW
Four-Month Statute of Limitations for Challenging Department of Environmental Conservation's (DEC's) and Town's Ruling on Proper Remedial Measures for a Hazardous Waste Site Was Restarted When a Different Factual Presentation Was Invited
The Second Department reversed Supreme Court and determined that a recent reconsideration of the proper remedial measures for a hazardous waste site on petitioner's property restarted the four-month statute of limitations for challenging the Department of Environmental Conservation's (DEC's)/Town's ruling, even though the conclusion reached after reconsideration was the same as was reached in 1995:
"[A] proceeding against a body or officer must be commenced within four months after the determination to be reviewed becomes final and binding upon the petitioner (CPLR 217[1]). An administrative determination becomes final and binding' when (1) the administrative agency reached a definitive position on the issue that inflicts actual, concrete injury; and (2) the injury inflicted may not be significantly ameliorated by further administrative action or by steps available to the complaining party'" ... .
In general, a request for discretionary reconsideration does not serve to extend the statute of limitations or render an otherwise final determination nonfinal ... . This is because "[a] motion to reconsider generally seeks the same relief, and advances factual and legal issues that were previously litigated at the administrative level" ... .
However, where "the agency conducts a fresh and complete examination of the matter based on newly presented evidence," an aggrieved party may seek review in a CPLR article 78 proceeding commenced within four months of the new determination ... .
Here, a different factual presentation was invited ... by the DEC, and conducted by the Town. Matter of Riverso v New York State Dept of Envtl Conservation, 2015 NY Slip Op 01644, 2nd Dept 2-25-15
FAMILY LAW
Extraordinary Circumstances Justified Award of Primary Physical Custody to Nonparent--Criteria Described
In affirming Family Court's award of primary physical custody to the grandmother, the Third Department explained the "extraordinary circumstances" criteria for awarding primary physical custody to a nonparent:
Family Court's finding of extraordinary circumstances is supported by the record. It is clear and settled that a "parent has a claim of custody of his or her child, superior to that of all others, in the absence of surrender, abandonment, persistent neglect, unfitness, disruption of custody over an extended period of time or other extraordinary circumstances" ... . "It is the nonparent's burden to establish extraordinary circumstances and, when that burden is met, custody is determined based upon the child's best interests" ... . The pertinent factors to be considered in determining whether extraordinary circumstances exist "include the length of time the child has lived with the nonparent, the quality of that relationship and the length of time the biological parent allowed such custody to continue without trying to assume the primary parental role" ... , an analysis that considers "the cumulative effect of all issues present in a given case" ... . Matter of Curless v McLarney, 2015 NY Slip Op 01680, 3rd Dept 2-26-15
FREEDOM OF INFORMATION LAW (FOIL)
FOIL Request for Police "Intelligence Division" Documents Re: Surveillance of "Middle Eastern, South Asian or Muslim Persons" Properly Denied
The First Department determined the New York City Police Department (NYPD) properly denied a Freedom of Information Law (FOIL) request seeking documents generated by the Intelligence Division of the NYPD which related, in part, to broad categories, such as businesses "frequented" by Middle Eastern, South Asian or Muslim persons. The court determined the requests were "overbroad," exempt under the Public Officers Law (law enforcement privilege and danger to life and safety), and would constitute an invasion of privacy. With regard to "danger to life and safety" and "invasion of privacy," the court wrote:
The court also properly found that the requested disclosure "could endanger the life or safety of any person" (Public Officers Law § 87[2][f]). Granting the broadly worded request for a trove of NYPD Intelligence Division documents replete with sensitive information about the unit's methods and operations, which could be publicly disseminated and potentially exploited by terrorists, would create "a possibility of endangerment" ... . In addition, the court properly recognized that the requested records are exempt from FOIL because disclosure would constitute an unwarranted invasion of personal privacy ... . Petitioners emphasize the public interest in scrutinizing whether NYPD engaged in improper surveillance or profiling of certain communities, but this is outweighed by the privacy interests at stake given the specific purpose of this counterterrorism police operation. The revelation that a certain person, business, or organization was the subject of counterterrorism-related surveillance would not only have the potential to be embarrassing or offensive, but could also be detrimental to the reputations or livelihoods of such persons or entities. Matter of Asian Am Legal Defense & Educ Fund v New York City Police Department, 2015 NY Slip OP 01559, 1st Dept 2-24-15
INSURANCE LAW/CONTRACT LAW
Damage to Building Caused by Silica Dust Excluded from Coverage Under "Pollutants" and "Faulty Workmanship" Policy Exclusions
The Third Department determined the insurer was entitled to summary judgment based upon the exclusions of coverage in the policy. The insured sought coverage of damage caused by silica dust disbursed throughout the insured's building. The Third Department held that the "pollutants" and "faulty workmanship" exclusions in the policy precluded coverage, and the "ensuing loss exception" did not apply:
"[A]n insurer seeking to invoke a policy exclusion 'must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case'" ... . To determine whether a policy provision is ambiguous, courts are guided by "the reasonable expectations of the average insured upon reading the policy" ... . The meaning of any part of such a policy must be determined upon consideration of the policy as a whole ... . In addition, "[a]n insurance contract should not be read so that some provisions are rendered meaningless" ... . Upon applying these rules of construction, if "an insurance policy's meaning is not clear or is subject to different reasonable interpretations," such an ambiguity must be resolved in favor of the insured ... . Because we find that both policy exclusions apply to bar coverage here, we grant defendants' motion and dismiss the complaint.
Defendants were entitled to summary judgment based on the pollution exclusion clause. Pursuant to that exclusion in the policy, defendants will not cover loss resulting from the "[d]ischarge, dispersal, seepage, migration, release or escape of 'pollutants.'" As defined in the policy, "'[p]ollutants' means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, waste and any unhealthy or hazardous building materials (including but not limited to asbestos and lead products or materials containing lead)." The record contains unrebutted evidence that silica dust can cause lung disease and respiratory problems, placing such dust within the policy definition of a pollutant as "unhealthy or hazardous building material[]," as well as a "solid . . . irritant or contaminant" ... . Broome County v The Travelers Indem Co, 2015 NY Slip Op 01697, 3rd Dept 2-26-15
INSURANCE LAW/CONTRACT LAW
Misrepresentation that Dwelling Was "Owner-Occupied" Justified Rescission of the Fire Insurance Policy
The Second Department determined the representation in a fire insurance policy that the dwelling was "owner-occupied" was a material misrepresentation which allowed rescission of the policy. Even if the property owner was unaware of the misrepresentation at the outset, he ratified the contract by permitting it to be renewed:
"[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation" ... . "A representation is a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof" (Insurance Law § 3105[a]). "A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented" (...Insurance Law § 3105[b]). "To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application" ... .
Here, the defendant demonstrated, prima facie, that the application for insurance contained a misrepresentation regarding whether the premises would be owner-occupied and that this misrepresentation was material ... . Contrary to the plaintiff's contention, the defendant established that the material misrepresentation is attributable to him since, even if the application for insurance had been submitted without his actual or apparent authority, he ratified the representations contained in the application by accepting the policy for owner-occupied premises and permitting it to be renewed for years thereafter on the same terms ... . Morales v Castlepoint Ins Co, 2015 NY Slip Op 01618, 2nd Dept 2-25-15
MENTAL HYGIENE LAW/EVIDENCE
Rules of Evidence Properly Relaxed to Allow Hearsay In Proceeding to Modify Guardian's Power to Control the Social Environment of the Incapacitated Person
In affirming the denial of a petition to modify the court-appointed guardian's power to control the social environment of Mary WW, the incapacitated person (to compel the guardian to allow petitioner to visit Mary WW), the Third Department agreed with Supreme Court that hearsay was admissible in the proceeding:
.... [P]etitioner contends that, in denying her motion, Supreme Court improperly relied upon the hearsay statements of witnesses who had contact with Mary WW. We disagree. Although the rules of evidence are generally applicable to proceedings brought under Mental Hygiene Law article 81, Mental Hygiene Law § 81.12 (b) provides that the court may waive such rules "for good cause shown." Here, we note that Mary WW. initially consented to the guardianship, it was recommended by the court evaluator and none of Mary WW.'s children, except for petitioner, objected. Moreover, it is undisputed that Mary WW. now suffers from severe dementia and was unable to attend the modification hearing, which occurred nearly four years after the guardianship was established. In view of this, it was necessary for other witnesses to testify concerning her interactions with petitioner. Significantly, petitioner was not prejudiced, as she was present at the hearing and denied the allegations. Under these circumstances, we find that Supreme Court had good cause for relaxing the rules of evidence and considering the hearsay statements of witnesses who had contact with Mary WW. Matter of Mary WW..., 2015 NY Slip Op 01704, 3rd Dept 2-26-15
NEGLIGENCE
Summary-Judgment Proof Requirements for a Defendant in a Slip and Fall Case Explained (Again)--Not Met Here
The Second Department, reversing Supreme Court, again stated the summary-judgment proof requirements for a defendant in a slip and fall case:
In a slip-and-fall case, a defendant moving for summary judgment has the initial burden of making a prima facie showing that it did not create the condition on which the plaintiff slipped, and did not have actual or constructive notice of that condition ... . To constitute constructive notice, a dangerous condition must be visible and apparent and must exist for a sufficient length of time before the accident to permit the defendant to discover and remedy it ... . To meet its burden on the issue of constructive notice, a defendant "must offer some evidence as to when the area in question was last cleaned or inspected relative to the time when the plaintiff fell" ... . Mere reference to general cleaning practices, with no evidence regarding any specific cleaning or inspection of the area in question, is insufficient to establish a lack of constructive notice ... . Arcabascia v We"re Assoc Inc, 2015 NY Slip Op 01595, 2nd Dept 2-25-15
NEGLIGENCE/EVIDENCE
Speculation About Cause of Fall Required Summary Judgment In Favor of Defendant
The Second Department determined defendant was entitled to summary judgment in a slip and fall case. The plaintiff testified he did not know what caused him to fall. The testimony of a witness about tree roots in the area of the fall did not establish that plaintiff tripped on the roots:
"Ordinarily, a defendant moving for summary judgment in a trip-and-fall case has the burden of establishing that it did not create the hazardous condition that allegedly caused the fall, and did not have actual or constructive notice of that condition for a sufficient length of time to discover and remedy it" ... . "However, a defendant can make its prima facie showing of entitlement to judgment as a matter of law by establishing that the plaintiff cannot identify the cause of his or her fall without engaging in speculation" ... . "Where it is just as likely that some other factor, such as a misstep or a loss of balance could have caused a trip and fall accident, any determination by the trier of fact as to causation would be based upon sheer speculation" ... .
Here, the defendants made a prima facie showing of their entitlement to judgment as a matter of law by establishing, through the submission of the plaintiff's deposition testimony, that the plaintiff could not identify the cause of his fall without engaging in speculation. ...
Contrary to the Supreme Court's determination, the plaintiff failed to raise a triable issue of fact in opposition. The affidavit of Angelo Mamone, who was walking alongside the plaintiff when he fell, did not raise a triable issue of fact, since Mamone did not aver that he observed the plaintiff trip, but only observed that there were tree roots in the path where the plaintiff fell. His conclusion that tree roots were the cause of the fall was speculative. Moreover, the portion of a police report relied upon by the plaintiff contained inadmissible hearsay and, thus, was insufficient to raise a triable issue of fact ... . Goldberg v Village of Mount Kisco, 205 NY Slip Op 01608, 2nd Dept 2-25-15
NEGLIGENCE/EVIDENCE
Proof of the Cause of Plaintiff's Slip and Fall Need Not Be Based Upon Plaintiff's Personal Knowledge
Although proof the cause of a slip and fall cannot be based on speculation, the Second Department noted the proof of the cause need not be based upon plaintiff's personal knowledge:
A defendant may establish its prima facie entitlement to judgment as a matter of law by submitting evidence that the plaintiff cannot identify the cause of his or her fall ... . If a plaintiff is unable to identify the cause of a fall, any finding of negligence would be based upon speculation ... . "That does not mean that a plaintiff must have personal knowledge of the cause of his or her fall. Rather, it means only that a plaintiff's inability to establish the cause of his or [her] fall—whether by personal knowledge or by other admissible proof—is fatal to a cause of action based on negligence" ... . Pol v Gjonbalaj, 2015 NY Slip Op 01625, 2nd Dept 2-25-15
NEGLIGENCE/MUNICIPAL LAW
Circumstances Under Which NYC Residential Property-Owner May Be Liable for a Sidewalk Slip and Fall Based Upon Efforts to Remove Snow Explained (No Liability Here)---No Liability for Incomplete Snow Removal
In finding that the property-owner (Gonzales) was not liable for an ice/snow slip and fall on the sidewalk abutting the partially owner-occupied three-family residence, the Second Department explained the circumstances under which such a property-owner's snow-removal efforts might lead to liability, noting that there would be no liability for incomplete snow removal:
The plaintiff allegedly slipped and fell on a sidewalk abutting a three-family house owned by the defendant Maria Fe Gonzales. Since the subject premises were partially owner-occupied and used exclusively for residential purposes, Gonzales was exempt from liability imposed pursuant to Administrative Code of the City of New York § 7-210(b) for negligent failure to remove snow and ice from the sidewalk ... . Thus, Gonzales may be held liable for a hazardous snow and ice condition on the sidewalk only if she undertook snow and ice removal efforts that made the naturally occurring condition more hazardous or caused the defect to occur because of a special use ... . Unless one of these factors is present, Gonzales, an abutting owner of a three-family residence, may not be held liable for the removal of snow and ice in an incomplete manner ... . Mullaney v City of New York, 2015 NY Slip Op 01519, 2nd Dept 2-25-15
NEGLIGENCE/EDUCATION-SCHOOL LAW
School Failed to Demonstrate Assault on Student Was Unforeseeable---Summary Judgment Properly Denied
The Second Department determined the defendant school district was not entitled to summary judgment because it failed to demonstrate the alleged assault on another student was unforeseeable:
"Schools are under a duty to adequately supervise the students in their charge and they will be held liable for foreseeable injuries proximately related to the absence of adequate supervision" ... . In determining whether the duty to provide adequate supervision has been breached in the context of injuries caused by the acts of fellow students, it must be established that school authorities had sufficiently specific knowledge or notice of the dangerous conduct which caused injury; that is, the third-party acts could reasonably have been anticipated ... .
Here, in support of that branch of its motion which was for summary judgment dismissing the causes of action alleging negligent supervision, the District failed to establish, prima facie, that the alleged assault was an unforeseeable act or that it had no actual or constructive notice of prior conduct similar to the subject incident ... . Cruz v Brentwood Union Free Sch Dist, 2015 NY Slip Op 01604, 2nd Dept 2-25-15
NEGLIGENCE/EMPLOYMENT LAW
"Independent Contractor Rule"
The Second Department noted the general rule that one who hires an independent contractor will not be liable for the contractor's negligence:
"As a general rule, one who hires an independent contractor may not be held liable for the independent contractor's negligent acts" ... . Here, the defendant established, prima facie, that the alleged negligence was committed solely by an independent contractor and that, by reason of the above-described "independent contractor rule," it could not be held liable ... Braun v Star Community Publ Group LLC, 2015 NY Slip Op 01599, 2nd Dept 2-25-15
NEGLIGENCE/EVIDENCE
"To a Reasonable Degree of Medical Probability" Properly States the Standard for Expert Opinion on Proximate Cause
The Second Department noted that it was sufficient that the expert stated there was "a reasonable degree of medical probability" plaintiff's injury was caused by the accident:
The usual language is "to a reasonable degree of medical certainty," but the phrase "degree of medical certainty" has been deemed sufficient (see Matott v Ward, 48 NY2d 455, 459). In Matott, the Court of Appeals held that the relevant inquiry is "whether it is reasonably apparent' that the doctor intends to signify a probability supported by some rational basis'" (id. at 461 ...). Here, the phrase "reasonable degree of medical probability" satisfied that standard. It should also be noted that that language is the statutory standard in New Jersey for determining if there is sufficient evidence of serious injury to sue for noneconomic loss (NJ Stat § 39:6A-8[a]...). Further, [the expert] explained the foundation for his opinion, noting that the plaintiff initially appeared at an early stage of his condition immediately after the accident, and that his condition progressed thereafter ... . Thus, his opinion was supported by a rational basis ... . Kahvejian v Pardo, 2015 NY Slip Op 01612, 2nd Dept 2-25-15
REAL PROPERTY ACTIONS AND PROCEEDINGS LAW (RPAPL)
Question of Fact Re: the "Hostility" Element of a Prescriptive Easement
In finding that the prescriptive easement cause of action should not have been dismissed, the Third Department explained the proof requirements:
A party claiming a prescriptive easement must show, by clear and convincing evidence, that the use of the easement was open, notorious, hostile and continuous for a period of 10 years ... . Although the element of hostility is presumed upon a showing of the other elements, where "the relationship between the parties is one of neighborly cooperation and accommodation," no such presumption arises and, rather, permission will be inferred ... . "Generally, the question of implied permission is one for the factfinder to resolve" ... .
Here, the evidence submitted on the summary judgment motions indicates that a neighborly relationship existed between plaintiff, individually, the Trust's tenants and defendants' predecessors in title. However, inasmuch as there is no evidence of express permission granted to use defendants' property, and the relevant parties are not "related by blood or part of a select group of friends," summary judgment dismissing the claim for a prescriptive easement on the ground that plaintiff was unable to establish hostility was not warranted ... . Gulati v O'Leary, 2015 NY Slip Op 01693, 3rd Dept 2-26-15
REAL PROPERTY TAX LAW
Criteria for "Charitable" Exemption to Real Property Tax for Provider of Housing for the Elderly Explained
In finding there were questions of fact about whether petitioner, a provider of housing for the elderly, qualified for the "charitable" property tax exemption pursuant to Real Property Tax Law (RPTL) 420-a, the Third Department explained the relevant criteria:
The "critical factor" in determining whether a facility used for housing the elderly qualifies for an exemption by virtue of being "charitable" is whether the facility subsidizes rent or charges less than fair market rental rates ... . Consideration is given to whether the facility retains the ability to terminate a resident's lease for nonpayment, whether residents are charged for supplemental services and the number of residents who are dependent on government benefits ... . Simply providing housing for elderly low-income individuals does not constitute a charitable purpose ... . Matter of The Church Aid of the Prot Episcopal Church in the Town of Saratoga Springs Inc v Town of Malta Assessor, 2015 NY Slip Op 01689, 3rd Dept 2-26-15
REAL PROPERTY TAX LAW/TRUSTS AND ESTATES/CIVIL PROCEDURE
Charitable Trust's Challenge to Tax Foreclosure Time-Barred---Four-Month Statute of Limitations Applies to Action for Declaratory Judgment---RPTL, not the EPTL, Controls
The Third Department determined the action challenging the tax foreclosure on parcels of land owned by a charitable trust set up to hold land for Native Americans must be dismissed as time-barred. The court further determined that County Court had subject matter jurisdiction because the matter was subject to the Real Property Tax Law (RPTL), not the Estates Powers and Trust Law (EPTL), and there was, therefore, no requirement that the Attorney General be notified of the tax foreclosure proceedings:
Under RPTL article 7, a property owner claiming to be aggrieved by an assessment of real property on the basis that the assessment is excessive, unequal or unlawful, or that the property is misclassified, may file a petition challenging the assessment, but "such a proceeding shall be commenced within thirty days after the final completion and filing of the assessment roll containing such assessment" (RPTL 702 [2]; see RPTL 704 [1]; 706 [1]). Where a party is alleging that the assessment is void — either through a challenge to the methodology of assessment or the jurisdiction of the taxing authority to assess particular property — the party may instead bring a proceeding pursuant to CPLR article 78 or a declaratory judgment action ... . Both of those options are governed by a four-month statute of limitations ... . The Court of Appeals has expressly rejected plaintiffs' argument that, because the property is allegedly mandatorily exempt from taxes, the assessment is illegal and void and may be challenged at any time ... . Plaintiffs concede that they had notice of the Town's determination regarding the taxable status of the parcels, and filed a grievance to administratively challenge the tax bills when the property was first listed as not tax exempt, but they failed to appeal when the Town denied the grievance. Plaintiffs did not file any further grievances, actions or proceedings until they commenced this action more than a year after the final foreclosure proceeding was concluded. Accordingly, while an action for declaratory judgment was a proper method, the statute of limitations bars plaintiffs' challenges to their tax assessments ... . Turtle Is Trust v County of Clinton, 2015 NY Slip Op 01698, 3rd Dept 2-26-15
TRUSTS AND ESTATES
Principles of Ademption Applied to Property Transferred Out of the Estate
The Third Department found the doctrine of ademption applicable to the lifetime transfer of property which divested the testator of ownership:
[The principles of ademption] are set forth in EPTL 3-4.3, which states that "[a] conveyance, settlement or other act of a testator by which an estate in his property, previously disposed of by will, is altered but not wholly divested does not revoke such disposition, but the estate in the property that remains in the testator passes to the beneficiaries pursuant to the disposition. However, any such conveyance, settlement or other act of the testator which is wholly inconsistent with such previous testamentary disposition revokes it." Ademption will not lightly be found under EPTL 3-4.3, which is construed strictly given that its terms permit a testator to nullify dispositions without engaging in the elaborate formalities ordinarily required to revoke his or her will, either in whole or in part ... . Matter of Braunstein, 2015 NY Slip Op 01703, 3rd Dept 2-26-15
TRUSTS AND ESTATES/FIDUCIARY DUTY, BREACH OF/FRAUD/CIVIL PROCEDURE/WORKERS' COMPENSATION
Re: Breach of Fiduciary Duty and Fraud Causes of Action---Application of the "Repudiation Rule" and the "Discovery Rule" to the Statute of Limitations Explained
Plaintiff (a governmental agency charged with administering the workers' compensation system) brought this action against workers' compensation trusts alleging the trusts became insolvent because of defendants' misconduct. Plaintiff alleged breach of fiduciary duty, fraud, breach of contract and sought common law indemnification. The bulk of the decision is devoted to determining the timeliness of the actions. The decision addressed the "repudiation rule" and the "discovery rule" in fraud actions, as well as many other issues not summarized here:
...[T]he repudiation rule, which provides that "the applicable statutory period . . . does not begin to run until the fiduciary has openly repudiated his or her obligation or the relationship has been otherwise terminated" ... . The Court of Appeals has instructed that, under the repudiation rule, "the time starts running when a successor [fiduciary] is put in place" ... . After the fiduciary "has yielded . . . to a successor, . . . [t]he running of the statute [of limitations] then begins, and only actual or intentional fraud will be effective to suspend it" ... . * * * ... [T]he repudiation rule acts as a toll of the limitations period for all misconduct committed by the fiduciary prior to repudiation of its obligation or termination of the relationship. In other words, all of the alleged misconduct prior to the severance date is included in the actionable portion of the claim. * * *
...[A] portion of plaintiff's breach of fiduciary duty claim is grounded in its allegations that the ... defendants breached their fiduciary duties to the trusts by fraudulently concealing or misrepresenting the financial condition of the trusts, the danger of operating deficits and issues associated with underwriting deficiencies, and that [defendants] did so as part of a scheme to increase membership and thereby increase its own commissions. These are fraud allegations, and they are essential to this portion of the fiduciary duty claim. That is, the relevant portion of the claim is "based on fraud" and "there would be no injury but for the fraud" ... . As such, that portion of the fiduciary duty claim is subject to a six-year limitations period ... . * * *
The "discovery rule" is found in CPLR 213 (8), which provides that claims based on fraud "must be commenced [within] the greater of six years from the date the cause of action accrued or two years from the time [a] plaintiff . . . discovered the fraud, or could with reasonable diligence have discovered it." It is settled that "[t]he inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was possessed of knowledge of facts from which [the fraud] could be reasonably inferred" ... . New York State Workers' Compensation Bd v Consolidated Risk Servs Inc, 2015 NY Slip Op 01699, 3rd Dept 2-26-15
UNEMPLOYMENT INSURANCE
Interpreter Working for Office of Court Administration Was an Employee, Not an Independent Contractor
The Third Department determined claimant, a Spanish interpreter working for the Office of Court Administration (OCA), was an employee, not an independent contractor, but declined to extend the holding to others similarly situated:
Whether an employer-employee relationship exists "is a factual issue for the Board to resolve and its decision will be upheld if supported by substantial evidence" ... . "While no single factor is determinative, control over the results produced or the means used to achieve those results are pertinent considerations, with the latter being more important" ... . We find that substantial evidence supports the Board's decision that OCA exercised sufficient supervision, direction and control over this claimant's work activities to establish an employer-employee relationship, but decline to extend this holding to others "similarly situated."
During the nearly 2½ years that claimant worked at the Bronx Family Court, she was required to work a set schedule from 9:30 a.m. to 4:30 p.m. ... . When first assigned to that court, she was scheduled to report for a few weeks, but it was not long before claimant was scheduled monthly in advance ... . Although claimant did not have to accept assignments, once she was on the schedule, she could not take time off, nor was she allowed to send someone in her place ... ; if she knew she needed time off, she was expected to tell her supervisor in advance so she would not be put on the schedule ... . Upon arriving at work each morning, claimant reported to the senior court interpreter, who told her where to report. OCA set claimant's rate of pay ... and, upon reporting to the court, she was paid — by direct deposit into her personal checking account — whether or not she actually provided interpreting services ... . * * * Matter of Viau..., 2015 NY Slip Op 01691, 3rd Dept 2-26-16
WORKERS' COMPENSATION
Re: a Third-Party Settlement, Consent of Special Fund Required Before Carrier Entitled to Reimbursement from Special Fund
The First Department determined an employee must obtain the consent of the Special Fund (or judicial approval) before accepting a third-party settlement:
Workers' Compensation Law § 29(5) permits an employee to settle a lawsuit arising out of the same accident as gave rise to his workers' compensation claim for less than the amount of the compensation he has received only if the employee has obtained written consent to the settlement from the carrier or, in the alternative, judicial approval. We find that, just as the employee is required to obtain the carrier's consent prior to settlement, the carrier is required to obtain the Special Funds Conservation Committee's consent prior to the settlement where it is entitled to reimbursement by the Committee pursuant to Workers' Compensation Law § 15(8)(d) ... . Ace Fire Underwriters Inc Co v Special Funds Conservation Comm, 2015 NY Slip Op 01574, 1st Dept 2-24-15
WORKERS' COMPENSATION
Supreme Court Has Power to Issue Judicial Consent to Settlement Nunc Pro Tunc Where Workers' Compensation Carrier Failed to Timely Seek Consent to a Third-Party Settlement from the Special Funds Conservation Commission
The Second Department determined Supreme Court erred when it held that it not have the power to provide judicial consent to a third-party settlement nunc pro tunc. The Second Department explained the requirements for consent to a third-party settlement where the Special Fund will reimburse the carrier:
The Workers' Compensation Board has previously determined that where, as here, a carrier failed to timely obtain consent of the Special Funds Conservation Committee to settlement of a personal injury action, the carrier may still obtain reimbursement from the Special Disability Fund, but only if it obtains a nunc pro tunc order from a court directing the Special Funds Conservation Committee to consent ... . A request to compel nunc pro tunc consent to a settlement is addressed to the discretion of the Supreme Court ... . In seeking a discretionary nunc pro tunc order from a court directing consent to settlement, a petitioner must first establish that (1) the delay in seeking judicial relief was not caused by the petitioner's fault or neglect; (2) the amount of the settlement was reasonable; and (3) the party whose consent is sought was not prejudiced by the delay ... .
Here, because the Supreme Court erroneously believed that it had no power to issue a nunc pro tunc order directing the Special Funds Conservation Committee to consent to settlement, it did not exercise its discretion. Accordingly, we remit the matter to the Supreme Court ... . Matter of Empire State Transp Workers' Compensation Trust v Special Funds Conservation Comm, 2015 NY Slip Op 01635, 2nd Dept 2-15-15