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Motion to Amend Pleadings to Conform to the Proof Was Properly Granted by the Trial Court—Although the Counterclaim Was Not Pled, the Subject of the Counterclaim Was Central to the Trial—Amendment Did Not Prejudice the Plaintiffs

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined the Appellate Division abused its discretion when it reversed Supreme Court’s grant of a motion to amend the pleadings to conform to the proof. Although not pled as a counterclaim, whether the defendant was entitled to payments under a settlement agreement, and whether the settlement agreement extinguished defendant’s liability under promissory notes held by the plaintiffs, were central to the lawsuit and were the subject of judicial admissions.  Therefore amending the pleadings to conform to the proof did not result in prejudice to the plaintiffs:

 This Court has in the past recognized that, absent prejudice, courts are free to permit amendment even after trial… . Prejudice is more than “the mere exposure of the [party] to greater liability” … . Rather, “there must be some indication that the [party] has been hindered in the preparation of [the party’s] case or has been prevented from taking some measure in support of [its] position” (id.). The burden of establishing prejudice is on the party opposing the amendment … .

Applications to amend pleadings are within the sound discretion of the court, and that of the Appellate Division … . Courts are given “considerable latitude in exercising their discretion, which may be upset by us only for abuse as a matter of law” … . Nevertheless, we have found such an abuse of discretion where the Appellate Division reversed a trial court’s grant of an amendment and the record established that the opposing party suffered “no operative prejudice” as a result of the mere omission to plead a defense … . Kimso Apts LLC v Gandhi, 2014 NY Slip OP 08219, CtApp 11-25-14

 

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Successive Tenants of Same Apartment Limited to a Single Policy Limit Re: Recovery for Lead Paint Exposure

The Court of Appeals, in a full-fledged opinion by Judge Smith, over a dissent, determined that the children in two families who were successive tenants of the same apartment were restricted to recovery for exposure to lead paint to a single policy limit, and not multiple policy limits based upon annual policy renewals.  The two families’ recoveries were limited to the single $500,000 policy limit:

In September 1991, Allstate Insurance Company issued a policy of liability insurance to the landlord of a two-family house in Rochester. The policy was renewed annually for the years beginning September 1992 and September 1993. It stated on the declarations page a $500,000 limit for “each occurrence,” and contained the following noncumulation clause:

“Regardless of the number of insured persons, injured persons, claims, claimants or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declarations page. All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.”

Felicia Young and her children lived in one of the two apartments in the house from November 1992 until September 1993. In July 1993, the Department of Health notified the landlord that one of the children had been found to have an elevated blood lead level and that several areas in the apartment were in violation of State regulations governing lead paint. The Department listed the violations and directed the landlord to correct them. The landlord made some repairs, and the Department advised him in August 1993 that the violations “have been corrected.”

After the Young family moved out of the apartment in September 1993, Lorenzo Patterson, Sr. and Qyashitee Davis moved in with their two children. Again a child was found to have an elevated blood lead level, and the Department of Health sent another letter saying that violations had been found and instructing the landlord to correct them. (This letter was sent in December 1994, but the parties seem to assume that the elevated readings resulted at least in part from events on or before September 29, 1994, the last day of Allstate’s coverage.) * * *

Young’s children and Nesmith’s grandchildren were exposed to the same hazard, lead paint, in the same apartment. Perhaps they were not exposed to exactly the same conditions; but to say that the “general conditions” were not the same would deprive the word “general” of all meaning. Nesmith argues that, because the landlord made an effort to correct the problem after Young’s children were exposed and before Nesmith’s grandchildren moved in, the “conditions” that injured her grandchildren must have been new ones. But she makes no claim, and the record provides no basis for inferring, that a new lead paint hazard had been introduced into the apartment. The only possible conclusion from this record is that the landlord’s remedial efforts were not wholly successful, and that the same general conditions — the presence of lead paint that endangered children’s health — continued to exist. Because Young’s children and Nesmith’s grandchildren were injured by exposure to the same general conditions their injuries were part of a single “accidental loss,” and only one policy limit is available to the two families. Nesmith v Allstate Ins Co, 2014 NY Slip Op 08217, CtApp 11-25-14

 

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Corporation Created by Seneca Nation to Operate a Golf Course Was Not Entitled to Sovereign Immunity—Contractor Hired to Build the Course Can Sue to Foreclose a Mechanic’s Lien

The Court of Appeals, in a full-fledged opinion by Judge Pigott, over a dissent, determined that a corporation created by the Seneca Nation for the operation of a golf course (Lewiston Golf) was not entitled to sovereign immunity and, therefore, could be sued by the company with which the Seneca Nation contracted to build the golf course.  The contractor brought suit to foreclose on a mechanic’s lien:

Indian tribes possess the common law immunity from suit traditionally enjoyed by sovereign powers, unless waived. In Matter of Ransom, we set out several factors for courts to [*6]use to determine whether an entity, such as a corporation or agency, that is affiliated with an Indian tribe has the right to claim sovereign immunity against suit.

“Although no set formula is dispositive, in determining whether a particular tribal organization is an ‘arm’ of the tribe entitled to share the tribe’s immunity from suit, courts generally consider such factors as whether: [1] the entity is organized under the tribe’s laws or constitution rather than Federal law; [2] the organization’s purposes are similar to or serve those of the tribal government; [3] the organization’s governing body is comprised mainly of tribal officials; [4] the tribe has legal title or ownership of property used by the organization; [5] tribal officials exercise control over the administration or accounting activities of the organization; and [6] the tribe’s governing body has power to dismiss members of the organization’s governing body. More importantly, courts will consider whether [7] the corporate entity generates its own revenue, whether [8] a suit against the corporation will impact the tribe’s fiscal resources, and whether [9] the subentity has the power to bind or obligate the funds of the tribe. The vulnerability of the tribe’s coffers in defending a suit against the subentity indicates that the real party in interest is the tribe.” (Ransom, 86 NY2d at 559-560 [internal quotation marks, citations, and square brackets omitted; numbering added].) * * *

…[T]he primary purpose of creating the golf course in Lewiston was to act as a regional economic engine and thereby serve the profit-making interests of the Seneca Nation’s casino operations in the area. While this may result in more funds for government projects on the Seneca Nation’s reservations and elsewhere that benefit members of the tribe, … the purposes of Lewiston Golf were sufficiently different from tribal goals that they militate against Lewiston Golf’s claim of sovereign immunity. However, the purposes factor of Ransom is not determinative… . While some of the remaining Ransom factors favor the conclusion that Lewiston Golf is protected by sovereign immunity, the most important ones strongly support the opposite conclusion. Sue/Perior Concrete & Paving Inc v Corporation, 2014 NY Slip Op 08218, CtApp 11-25-14

 

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Anonymous Tip Alone, In the Absence of “Predictive Information,” Sufficient to Provide “Reasonable Suspicion” Justifying a Vehicle Stop

The Court of Appeals, in a short memorandum decision followed by lengthy concurring/dissenting opinions, determined that anonymous tips were sufficient to justify a vehicle stop in two cases (tips alleged possession of a weapon), but insufficient in a third case (tip alleged driver was sick or intoxicated). The concurring/dissenting opinions dealt with whether the “Aguilar-Spinelli” test or the “totality of the circumstances” test should be applied where reasonable suspicion (not probable cause) was required to justify a vehicle stop, and whether an anonymous tip alone, in the absence of so-called “predictive information,” could be sufficient to justify a vehicle stop.  The significance of the decision is that an anonymous tip alone was found sufficient, under both the “Aguilar-Spinelli” and “totality of the circumstances” tests, in two of the three cases:

Regardless of whether we apply a totality of the circumstances test or the Aguilar-Spinelli standard (see Spinelli v United States, 393 US 410 [1969]; Aguilar v Texas, 378 US 108 [1964]), there is record support for the lower courts’ findings that the stops were lawful in People v Argyris and People v DiSalvo. The police had reasonable suspicion to stop defendants’ vehicle based on the contents of a 911 call from an anonymous individual and the confirmatory observations of the police. Specifically, because sufficient information in the record supports the lower courts’ determination that the tip was reliable under the totality of the circumstances, satisfied the two-pronged Aguilar-Spinelli test for the reliability of hearsay tips in this particular context and contained sufficient information about defendants’ unlawful possession of a weapon to create reasonable suspicion, the lawfulness of the stop of defendants’ vehicle is beyond further review. Furthermore, under these circumstances, the absence of predictive information in the tip was not fatal to its reliability … .

In People v Johnson, whether evaluated in light of the totality of the circumstances or under the Aguilar-Spinelli framework, the reliability of the tip was not established. The caller’s cursory allegation that the driver of the car was either sick or intoxicated, without more, did not supply the sheriff’s deputy who stopped the car with reasonable suspicion that defendant was driving while intoxicated (see generally People v DeBour …) . Although the deputy observed defendant commit a minor traffic infraction, this did not authorize the vehicle stop because he was outside his geographical jurisdiction at the time of the infraction (see CPL 140.10 [2] [a]), and defendant’s actions in committing the violation did not elevate the deputy’s suspicion sufficiently to justify the stop of defendant’s car. People v Argyris, 2014 NY Slip Op 08220, CtApp 11-25-14

 

Defendant’s Inability to Articulate a Reason for the Withdrawal of His Plea Was a Proper Basis for Refusal of His Request for An Adjournment of Sentencing to Consider Withdrawal of the Plea

The Court of Appeals, over a dissent, determined defendant’s request for an adjournment of sentencing to consider whether he should withdraw his plea was properly denied (despite the absence of prejudice to the People) because defendant was unable to articulate a reason for withdrawing the plea:

Whether to grant an adjournment is within Supreme Court’s discretion … . Based upon the colloquy at sentencing, defendant had more than a fair amount of time to speak with counsel regarding his interest in withdrawing his plea. Although defendant was out of custody for two months, having been released on his own recognizance following his plea allocution, the record reflects that he only contacted defense counsel the day before sentencing in order to discuss his plea concerns. Despite defense counsel’s inability to meet with defendant that day, defense counsel stated during sentencing that she had spoken with defendant that morning. People v Spears, 2014 NY Slip Op 08221, CtApp 11-25-14

 

Question of Fact Whether Residential Facility Exercised the Care a Reasonable Parent Would Have Provided In Supervising Infant Plaintiff Who Wandered Away from the Facility and Was Struck by a Car

Reversing the Appellate Division, the Court of Appeals determined there was a question of fact whether a residential facility (Saint Cabrini) in which infant plaintiff had been placed (as a neglected child) exercised reasonable care in supervising her. Plaintiff left the facility without permission and moved away when approached by staff members. She ultimately walked into the road where she was struck by a car:

The dissenting Justices concluded that Saint Cabrini had not “carried its initial burden of demonstrating the absence of triable issues of fact as to whether its staff met [the] duty to provide the degree of care to plaintiff that a reasonable parent would provide” (id.). Viewing the evidence in the light most favorable to plaintiff, we agree that Saint Cabrini has not met its threshold burden. It is up to the jury to decide if a parent of ordinary prudence in similar circumstances would have necessarily employed different means to protect plaintiff under the facts of this case.  DT v Rich, 2014 NY Slip Op 08223, CtApp 11-25-14

 

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The Failure of the Record to Indicate Whether Notes from the Jury Were Properly Addressed by the Court Constitutes a “Mode of Proceedings” Error

The Court of Appeals, in a full-fledged opinion by Judge Graffeo, over a partial dissent, determined the failure of the record to indicate whether notes from the jury were properly addressed by the court (pursuant to People v O’Rama, 88 NY2d 270) constituted “mode of proceedings” errors requiring reversal in the absence of preservation:

Although not every violation of CPL 310.30 is immune from normal preservation principles …, a failure to apprise counsel about the specific contents of a substantive note from a deliberating jury violates the fundamental tenants of CPL 310.30 and qualifies as a mode of proceedings error … . The record therefore must indicate compliance with adequate procedures under O’Rama because reviewing courts “cannot assume” that the proper procedure was utilized when the record is devoid of information as to how jury notes were handled … . The “presumption of regularity” … cannot salvage an … error of this nature … . People v Silva, 2014 NY Slip Op 08215, CtApp 11-24-14

 

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Class Action Mechanism Is Available Where the Relevant Statute Imposes a Non-Mandatory Penalty and the Penalty Is Waived by the Class

The Court of Appeals, in a full-fledged opinion by Judge Lippman, over a dissent, determined that class action suits brought by tenants pursuant to CPLR 901 (b) were properly allowed to go forward.  The suits alleged the tenants, who were in rent-stabilized apartments, were overcharged when the landlords decontrolled the apartments despite their receipt of tax benefits under the J-51 program.  The Court of Appeals, in 2009, determined that the receipt of J-51 tax benefits precluded the landlords from decontrolling the apartments.  The central issue was the availability of the class action mechanism, which is generally not available where the suit seeks the imposition of a penalty.  Here the treble damages (penalty) provision of the Rent Stabilization Law (RSL 26-516) was waived by the plaintiffs. The waiver was deemed valid, clearing the way for the class actions:

CPLR 901 (b) prohibits any claim for penalties to be brought as a class action. It states, “[u]nless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action” (CPLR 901 [b]). The language of CPLR 901 (b) itself says it is not dispositive that a statute imposes a penalty so long as the action brought pursuant to that statute does not seek to recover the penalty. * * *

From a policy standpoint, permitting plaintiffs to bring these claims as a class accomplishes the purpose of CPLR 901 (b). Preemptively responding to the argument raised by defendants here, the State Consumer Protection Board emphasized the importance of class actions: “The class action device responds to the problem of inadequate information as well as to the need for economies of scale” for “. . . a person contemplating illegal action will not be able to rely on the fact that most people will be unaware of their rights — if even one typical person files a class action, the suit will go forward and the other members of the class will be notified of the action either during the proceedings or after a judgment is rendered in their favor” (Mem of State Consumer Protection Bd, Bill Jacket, L 1975, ch 207).

Where a statute imposes a non-mandatory penalty, plaintiffs may waive the penalty in order to bring the claim as a class action … . Borden 400 E 55th St Assoc LP, 2014 NY Slip Op 08211, CtApp 11-24-14

 

Disclaimer Notice Sent to Insureds’ Insurer, But Not to Insureds, Invalid

The Court of Appeals, in a full-fledged opinion by Judge Smith, determined that the failure to notify the insureds of a disclaimer of liability invalidated the disclaimer.  The property owner and managing agent were insured under two different policies.  They were named insureds under their own policy (with GNY) and additional insureds under a contractor’s insurer (Scottsdale). An employee of the contractor was injured. The contractor’s insurer sent the notice of disclaimer to the insureds’ own carrier (GNY), but not to the insureds themselves.  The notice did not meet the requirements of Insurance law 3420(d)(2):

Insurance Law § 3420 (d) (2) says:

“If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage . . . it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant” … .

It is undisputed that Scottsdale did not give notice of its disclaimer directly to its additional insureds or to the lawyer who had been retained to represent them. Scottsdale argues that the disclaimer notice it sent to GNY was sufficient to satisfy the statute. We disagree.

GNY was not an insured under Scottsdale’s policy; it was another insurer. While GNY had acted on the insureds’ behalf in sending notice of the claim to Scottsdale, that did not make GNY the insureds’ agent for all purposes, or for the specific purpose that is relevant here: receipt of a notice of disclaimer. GNY’s interests were not necessarily the same as its insureds’ in this litigation. There might have been a coverage dispute between GNY and the insureds, or plaintiff’s claim might have exceeded GNY’s policy limits. Because the insureds had their own interests at stake, separate from that of GNY, they were entitled to notice delivered to them, or at least to an agent — perhaps their attorney — who owed a duty of loyalty in this matter to them only. … [T]he obligation imposed by the Insurance Law is “to give timely notice of disclaimer to the mutual insureds . . . not to . . . another insurer.” Sierra v 4401 Sunset Park LLC, 2014 NY Slip Op 08216, CtApp 11-24-14

 

Notifying One’s Broker of an Accident Does Not Constitute Notification of the Insurer

The Court of Appeals, over a partial dissent, determined that the plaintiff’s providing notice of an accident to plaintiff’s broker did not constitute notice to the insurer.  The decision focuses on distinguishing Mighty Midgets v Centennial Ins. Co. (47 NY2d 12 [1979]) where the roles of the broker the insurer were “uncommonly intertwined:”

We have long held that a policyholder’s timely notice to a broker does not “constitute the notice contemplated by the [insurance] policy since a broker is normally the agent of the insured and notice to the ordinary insurance broker is not notice to the liability carrier” Our decision in Mighty Midgets does not alter this fundamental principle. Strauss Painting Inc v Mt. Hawley Ins Co, 2014 NY Slip Op 08214, CtApp 11-24-14

 

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