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In a Class Action Suit, Class-Representatives’ Failure to Keep In Touch With Their Lawyer Justified Their Withdrawal as Class Representatives

The Third Department determined Supreme Court should have allowed representatives of the class (in a class action lawsuit) to withdraw based upon the representatives’ failure to keep in touch with their lawyer:

Supreme Court abused its discretion in declining to permit the seven class representatives to withdraw from this action. CPLR 3217 (b) provides that an action or proceeding may be discontinued “upon order of the court and upon terms and conditions, as the court deems proper.”  While the decision to grant such an application is generally committed to the sound discretion of the trial court …, a party cannot ordinarily be compelled to litigate and, absent special circumstances – such as prejudice to a substantial right of the defendant or other improper consequences – discontinuance should be granted … . * * *

Class representatives have a duty to adequately and vigorously represent the interests of class members … .  Thus, if a class representative fails to maintain contact with class counsel or is otherwise no longer willing or able to serve in that capacity, he or she cannot fulfill the duties of a class representative and should withdraw … .  The remedy under such circumstances is not to penalize the entire class by forcing an unwilling plaintiff to remain in the litigation. Hurrel-Harring v State of New York, 517131, 3rd Dept 12-19-13

 

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Civil Contempt Does Not Include the Element of Willfulness/Adverse Inference May Be Drawn Re: Assertion of Privilege Against Self-Incrimination in Civil Contempt Proceeding

In a full-fledged opinion by Justice Angiolillo, the Second Department cleared up some confusion created by conflicting authority concerning whether willfulness was an element of civil contempt.  The defendant was held in contempt based upon his failure to deposit the proceeds of the sale of marital property with the court. The Second Department concluded willfulness is not an element of civil contempt.  In addition, the Second Department explained that the defendant’s assertion of his Fifth Amendment privilege against self-incrimination in the contempt proceedings did not preclude the court from drawing an adverse inference and did not relieve the defendant of his burden of proof:

…[W]e conclude that, for the plaintiff to prevail on her motion to hold the defendant in civil contempt, she was required to prove by clear and convincing evidence “(1) that a lawful order of the court, clearly expressing an unequivocal mandate, was in effect, (2) that the order was disobeyed and the party disobeying the order had knowledge of its terms, and (3) that the movant was prejudiced by the offending conduct” … . The use of the words “willful” and “willfully” in some of our cases involving civil contempt …, should not be construed to import the element of willfulness into a civil contempt motion made pursuant to Judiciary Law § 753(A)(3). “It is not necessary that the disobedience be deliberate or willful; rather, the mere act of disobedience, regardless of its motive, is sufficient if such disobedience defeats, impairs, impedes, or prejudices the rights or remedies of a party” … . * * *

“[T]he Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them” … . “In New York, unlike the rule in a criminal case, a party’s invocation of the privilege against self-incrimination in a civil case may be considered by the finder of the facts in assessing the strength of the evidence offered by the opposing party on the issue which the witness was in a position to controvert” … .  El-Dehdan v El-Dehdan, 2013 NY Slip Op 08404, 2nd Dept 12-18-13

 

 

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Six-Year Breach of Contract Statute of Limitations Applied to Third Party Beneficiaries (Here the Plaintiff Villages and Towns) of Contracts Between the Counties and the Defendant Sewer-Construction Companies

The Court of Appeals, with two concurring judges, determined that the causes of action alleging the faulty construction of sewers resulting in settling of the roadways within the plaintiff villages and towns was time-barred. The plaintiff villages and towns were third-party beneficiaries to the sewer-construction contracts entered into by the counties encompassing the plaintiff villages and towns. The complaints alleged a “continuing nuisance.”  The court held that the actions were time-barred whether analyzed under a contract or nuisance theory (the continuing nuisance theory was rejected on the merits).  The court further held that the six-year breach of contract statute of limitations applied to third-party beneficiaries of the contracts (here the plaintiff villages and towns):

A breach of contract action must be commenced within six years from the accrual of the cause of action (see CPLR 203 [a]; 213 [2]).  “In cases against architects or contractors, the accrual date for Statute of Limitations purposes is completion of performance” (Newburgh, 85 NY2d at 538…).  This rule applies “no matter how a claim is characterized in the complaint” because “all liability” for defective construction “has its genesis in the contractual relationship of the parties” (Newburgh, 85 NY2d at 538 …). Even if the plaintiff is not a party to the underlying construction contract, the claim may accrue upon completion of the construction where the plaintiff is not a “stranger to the contract,” and the relationship between the plaintiff and the defendant is the “functional equivalent of privity” (Newburgh, 85 NY2d at 538-539 … ). * * *

The Appellate Division properly applied Newburgh to these actions commenced by third-party beneficiaries to the construction contracts.  Newburgh extended the completion of performance accrual rule to actions against architects or contractors brought by “intended beneficiar[ies]” of construction contracts (id.).  Here, the Counties contracted with defendants to install the sewer system for the benefit of municipalities like plaintiffs, a fact which was surely “known to all parties at the time the contracts were negotiated” (id.).  Town of Oyster Bay v Lizza Industries Inc …, 214, 215, 217, 217, 218, 219, 220, 221, 222, 223, CtApp 12-17-13

 

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Defaulting Defendant Forfeits the Right to Discovery Re: Inquest on Damages

The Second Department determined that a defaulting defendant could not compel plaintiff to submit to an independent medical examination:

Although ” a defaulting defendant is entitled to present testimony and evidence and cross-examine the plaintiff’s witnesses at the inquest on damages,’ a defendant forfeits the right to discovery by defaulting in answering the complaint” … . Contrary to the Supreme Court’s determination, the defendant was not entitled to any further discovery, since its right to discovery was forfeited by its default in answering the complaint .. . Accordingly, the Supreme Court erred in denying the plaintiff’s cross motion for a protective order and directing him to submit to an independent medical examination. Kolonlowski v Daily News LP, 2013 NY Slip Op 08230, 2nd Dept 12-11-13

 

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Numerous Core Issues Discussed in Complicated Case Stemming from Mold in a Complex of Apartments Which Necessitated Termination of All the Leases

In perhaps the most complicated decision this writer has ever read, the Second Department reversed many of Supreme Court’s rulings and sorted out the defense and indemnification responsibilities for an astounding array of insurance companies.  The lawsuits arose from the intrusion of water and mold into a complex of rental apartments causing the termination of all the leases. The general contractor and a large number of subcontractors all had insurance policies issued by many different companies. Among the issues addressed: (1) “[C]ontract language that merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured”…; (2) Whether damage from water intrusion and mold is an “occurrence” within the meaning of the policy-language; (3) Whether the law of the insured’s domicile should apply; (4) The use of extrinsic evidence to determine an insurer’s duty to defend; and (5) Disclaimer based upon late notice.  QBE Ins Corp v Adjo Contr Corp, 2013 NY Slip Op 08238, 2nd Dept 12-11-13

 

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Purported Lack of Standing Is Not a Jurisdictional Defect/Sua Sponte Dismissal of Complaint Reversed

In reversing Supreme Court, the Second Department noted that a court’s power to dismiss a complaint sua sponte should rarely be used and further noted that a purported lack of standing is not a jurisdictional defect warranting sua sponte dismissal:

The Supreme Court improvidently exercised its discretion in, sua sponte, directing the dismissal of the complaint. ” 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, there were no extraordinary circumstances warranting sua sponte dismissal of the complaint. Moreover, the defendants, having failed to answer the complaint or make pre-answer motions to dismiss the complaint, waived the defense of lack of standing … . “Furthermore, a party’s lack of standing does not constitute a jurisdictional defect and does not warrant sua sponte dismissal of a complaint by the court”… .  Onewest Bank FSB v Fernandez, 2013 NY Slip Op 08233, 2nd Dept 12-11-13

 

 

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Subpoena Which Could Result In Compelling a New York Reporter to Reveal Her Sources in an Out-of-State Proceeding Should Not Have Been Issued by a New York Court

In a full-fledged opinion by Judge Graffeo, with three dissenting judges, the Court of Appeals reversed the Appellate Division and held that a New York reporter (Winter) could not be subpoenaed to testify in Colorado.  Under Colorado law, it was likely the reporter would have been compelled to reveal her sources for a story about a notebook provided by James Holmes to his psychiatrist.  Holmes was the shooter in a mass shooting in a movie theater in Aurora, Colorado, during a midnight showing of a “Batman” movie.  The court determined that the public policy underlying New York’s Shield Law would be violated if the subpoena were issued and, therefore, issuance of the subpoena was prohibited:

…New York public policy as embodied in the Constitution and our current statutory scheme provides a mantle of protection for those who gather and report the news — and their confidential sources — that has been recognized as the strongest in the nation.  And safeguarding the anonymity of those who provide information in confidence is perhaps the core principle of New York’s journalistic privilege, as is evident from our colonial tradition, the constitutional text and the legislative history of the Shield Law.  * * *

It is therefore evident based on the New York Constitution, the Shield Law and our precedent that a New York court could not compel Winter to reveal the identity of the sources that supplied information to her in relation to her online news article about Holmes’ notebook.  Holmes does not argue otherwise but relies on our decision in Matter of Codey (Capital Cities, Am. Broadcasting Corp.) (supra, 82 NY2d 521) for the proposition that, when New York functions as the “sending state” in relation to a CPL 640.10(2) application, issues concerning testimonial privilege — including the applicability of the absolute privilege afforded by the Shield Law — simply cannot be considered by a New York court.  …

CPL 640.10(2) is New York’s codification of the Uniform Act to Secure the Attendance of Witnesses From Without a State in Criminal Proceedings, which has been adopted by all 50 states. * * *

We … conclude that an order from a New York court directing a reporter to appear in another state where, as here, there is a substantial likelihood that she will be compelled to identify sources who have been promised confidentiality would offend our strong public policy — a common law, statutory and constitutional tradition that has played a significant role in this State becoming the media capital of the country if not the world.  Matter of Holmes v Winter, 245, CtApp 12-10-13

 

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Workers’ Compensation Board’s Finding Re: Extent of Disability Should Not Be Given Collateral-Estoppel Effect in Related Negligence Action

The Court of Appeals, in a full-fledged opinion by Judge Lippman, determined that collateral-estoppel effect should not be given to a finding by the Workers’ Compensation Board in a related negligence action.  Plaintiff, a delivery person, had been struck by a piece of plywood which fell from a building under construction in 2003.  The Workers’ Compensation Board found that plaintiff’s disability from the accident ceased as of January, 2006. In the related negligence action, the defendant sought to limit plaintiff’s proof of disability to the period prior to January, 2006.  The court held “that there is no identity of issue and that collateral estoppel therefore should not be applied:”

…[D]efendants have failed to meet their burden of establishing that the issue decided in the workers’ compensation proceeding was identical to that presented in this negligence action.  We have observed that the Workers’ Compensation Law “is the State’s most general and comprehensive social program, enacted to provide all injured employees with some scheduled compensation and medical expenses, regardless of fault for ordinary and unqualified employment duties” … .  The purpose of awarding such benefits is to provide funds on an expedited basis that will function as a substitute for an injured employee’s wages … .  We have observed that the term “disability,” as used in the Workers’ Compensation Law, “generally refers to inability to work” … .  In addition, the Board uses the term “disability” in order to make classifications according to degree (total or partial) and duration (temporary or permanent) of an employee’s injury … .  The focus of the act, plainly, is on a claimant’s ability to perform the duties of his or her employment.

By contrast, a negligence action is much broader in scope.  It is intended to make an injured party whole for the enduring consequences of his or her injury — including, as relevant here, lost income and future medical expenses. Necessarily, then, the negligence action is focused on the larger question of the impact of the injury over the course of plaintiff’s lifetime.  Although there is some degree of overlap between the issues being determined in the two proceedings, based on the scope and focus of each type of action, it cannot be said that the issues are identical. Auqui v Seven Thirty One Limited Partnership, 212, CtApp 12-10-13

 

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Regulations Promulgated by Administrative Bodies Are Quasilegislative Acts—Any Challenge to the Regulations Must Be Brought in an Article 78 Proceeding Alleging the Regulations to Be Arbitrary and Capricious

The Third Department assumed, without deciding, that the plaintiffs, three New York residents and electricity ratepayers, had standing to bring an action challenging the Regional Greenhouse Gas Initiative (RGGI) which implemented a carbon-dioxide-emission cap and trade program for New York power plants.  The challenged RGGI regulations had been promulgated by the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA). The court determined the complaint was properly dismissed because, although couched in terms of a request for a declaratory judgment, the action should have been brought as an Article 78 proceeding subject to the four-month statute of limitations:

Although declaratory judgment actions are typically governed by a six-year statute of limitations (see CPLR 213 [1]), “a court must look to the underlying claim and the nature of the relief sought and determine whether such claim could have been properly made in another form” …. “Where, as here, governmental activity is being challenged, the immediate inquiry is whether the challenge could have been advanced in a CPLR article 78 proceeding” … .  “While it is well established that a challenge to the validity of legislation may not be brought under [CPLR] article 78, this principle does not apply to the quasilegislative acts and decisions of administrative agencies,” which are subject to a four-month statute of limitations … .

Here, plaintiffs’ first three causes of action challenge the validity of the RGGI regulations promulgated by DEC and NYSERDA pursuant to the statutory authority granted to those respective administrative bodies pursuant to the Environmental Conservation Law and the Public Authorities Law.  The enactment of such regulations was “quasi-legislative” and, as such, plaintiffs’ challenges thereto were capable of being reviewed in the context of a CPLR article 78 proceeding … .  Although at times couched in terms of constitutional infirmity and illegality, the essence of plaintiffs’ claims against DEC and NYSERDA is that the RGGI regulations are “arbitrary and capricious” and that the decision to promulgate such regulations was “affected by an error of law” (CPLR 7803 [3]…).  Thrun v Cuomo, 516556, 3rd Dept 12-5-13

 

 

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Question of Fact About Whether the Three-Year Statute of Limitations for Professional Malpractice Was Tolled by the “Continuous Representation” Doctrine

The Second Department determined plaintiff had raised a question of fact about whether the “continuous representation” doctrine tolled the statute of limitations.  The complaint alleged that the defendant engineering and architectural firms failed to provide design and construction services which complied with the disability-accessibility design requirements.  The causes of action sounded in professional malpractice and breach of contract. Here the work was completed more than three years prior to the action (three-year statute of limitations applies even to the contract cause of action).  But the firms were later used to remedy the deficiencies uncovered by the Attorney General:

“[A]n action to recover damages for malpractice, other than medical, dental or podiatric malpractice, regardless of whether the underlying theory is based in contract or tort” is subject to a three-year statute of limitations (CPLR 214[6]…). “A cause of action to recover damages for professional malpractice . . . for defective design or construction accrues upon the actual completion of the work to be performed and the consequent termination of the professional relationship”… . However, a professional malpractice cause of action asserted against an architect or engineer may be tolled under the “continuous representation” doctrine if the plaintiff shows its reliance upon a continued course of services related to the original professional services provided … .

The “continuous representation” doctrine, as applied to professionals including architects and engineers, “recognizes that a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed of the manner in which the services are rendered” … . The doctrine applies when a plaintiff shows that he or she relied upon a continuous course of services related to the particular professional duty allegedly breached… . * * *

The law recognizes that the supposed completion of the contemplated work does not preclude application of the continuous representation toll if inadequacies or other problems with the contemplated work timely manifest themselves after that date and the parties continue the professional relationship to remedy those problems … . In this regard, a motion to dismiss pursuant to CPLR 3211(a)(5) will be denied unless the facts establish that a gap between the provision of professional services on the particular matter is so great that the representation cannot be deemed continuous as a matter of law … . Regency Club at Wallkill LLC v Appel Design Group PA, 2013 NY Slip Op 08067, 2nd Dept 12-4-13

 

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