4th Department: Wilk v. James

This appeal followed the denial of defendants’ motion for summary judgment by the Supreme Court of Erie County. Plaintiff Joanne Wilk, administratrix of decedent Steven Wilk, filed a wrongful death action against defendants David James, Louis Baumann, Carlo Perfetto, and Western New York Urology Associates.

On February 16, 2004, the decedent called Defendants, complaining of kidney stones. Defendants reviewed a CT scan of the decedent’s abdomen taken one day prior and instructed the decedent to go to the hospital in order to receive a catheter, since their facility did not have enough staff present to perform the procedure. Defendants also instructed the decedent to schedule a follow-up appointment immediately after his hospital procedure. The decedent, however, did not schedule a follow-up appointment with Defendants, and he was transported to the hospital three days later, complaining of immobility in his legs. After several surgeries, the decedent passed away on March 3, 2004, due to a “cerebral infarct with herniation.”

Plaintiff alleged that Defendants deviated from the standard of care by failing to order a CT scan of the decedent’s abdomen and pelvis on February 16 and that, but for such deviation, Defendants or other medical providers would have diagnosed the purported underlying cause of the decedent’s condition. In order to establish Defendants’ departure from accepted medical practice and that the departure was the proximate cause of the decedent’s eventual death, Plaintiff’s expert witness testified that Defendants should have diagnosed the decedent’s condition on February 16 based on his complaints of kidney stones and pain.

The appellate division held that general allegations of medical malpractice, which were merely conclusory and unsupported by competent evidence, were insufficient to defeat Defendants’ summary judgment motion. Here, Plaintiff only introduced evidence that the CT scan of the decedent’s back could have possibly revealed the fatal injury, but not that Defendants should have performed the scan. Plaintiff introduced no other evidence to show that Defendants deviated from good and accepted medical practice. The court held that, since Plaintiff did not introduce any evidence to establish that Defendants departed from good and accepted medical practice, their motion for summary judgment should be granted.

View Full Decision on Westlaw

108 A.D.3d 1140, 969 N.Y.S.2d 359 (4th Dep’t, 2013)

4th Department: Rawlins ex rel. Rawlins v. St. Joseph’s Hosp. Health Center

This appeal addressed the time limit on discovery concerning standards of medical practice and the requirements the opposing party must meet to preclude such discovery. In the Supreme Court for Onondaga County, Angela Rawlins brought suit on behalf of the infant plaintiff, Christopher Rawlins. As the plaintiff’s guardian, Angela Rawlins sought damages from the defendant, St. Joseph’s Hospital, for injuries the plaintiff allegedly sustained during his birth on August 27, 2002. The supreme court denied in part the plaintiff’s motion to compel certain discovery responses from the defendant. The plaintiff appealed, challenging the supreme court’s ruling with respect to thirty-seven of his fifty-six discovery requests. On appeal, the appellate division held that the supreme court abused its discretion in denying plaintiff’s motion with respect to eight of the discovery items, remitting to the supreme court four of the items for further fact-finding. The appellate division further held that the remaining twenty-nine items were properly denied by the supreme court and that it did not abuse its discretion in denying these items by defining the period of time at issue as the period from January 1, 2001, to December 31, 2002, because that time period included the date of the plaintiff’s birth.

In the supreme court, the plaintiff sought to compel discovery of national standards of fetal monitoring, birth protocols, materials concerning cesarean sections, medical associations’ guidelines, and the defendant’s unredacted policies and procedures. The appellate division addressed individually eight of the plaintiff’s discovery requests. In modifying the supreme court’s denial of these discovery requests, the appellate division first noted that CPLR 3101 requires “full disclosure of all matter material and necessary in the prosecution or defense of an action.” N.Y. C.P.L.R. 3101(a) (McKinney 2009). The appellate division also recognized that “[e]ntitlement to discovery of matter satisfying the threshold requirement is, however, tempered by the trial court’s authority to impose, in its discretion, appropriate restrictions on demands which are unduly burdensome.” Kooper v. Kooper, 74 A.D.3d 6, 10 (2d Dep’t 2010).

Based on this recognition, the appellate division rejected the defendant’s argument that, because certain discovery items were available to the public, it was unduly burdensome for the defendant to produce. The appellate division also rejected the defendant’s contention that its lack of knowledge as to the existence of certain discovery items precluded their disclosure. The appellate division ultimately found that eight of the thirty-seven challenged discovery items were “material and necessary” to the plaintiff’s action. N.Y. CPLR 3101(a). However, the appellate division remitted four of the discovery matters to the supreme court for further fact-finding to determine whether the defendant, in fact, possessed certain items and what, if any, portion of the defendant’s unredacted policies and procedures were privileged.

View Full Decision on Westlaw

108 A.D.3d 1191, 969 N.Y.S.2d 687 (4th Dep’t 2013)

4th Department: Pinnacle Charter Sch. v. Bd. of Regents of Univ. of State of N.Y.

In April 2012, defendant Board of Regents of the University of the State of New York (“Board of Regents”) denied the application of plaintiff Pinnacle Charter School (“Pinnacle”) to renew its charter to operate a school in the City of Buffalo. Pinnacle and the individual plaintiffs—parents of infant students enrolled at Pinnacle—sought preliminary and permanent injunctions enjoining the Board of Regents from enforcing the denial of the application and permitting Pinnacle to continue operating its charter school. Plaintiffs alleged that the decision of the Board of Regents to deny their applications was made in violation of their rights to due process, the requirements of the state Administrative Procedure Act, and the rights of the individual plaintiffs’ children to a sound basic education under the Education Article of the State Constitution. Plaintiffs alleged further that section 2852(6) of New York’s education law statute is unconstitutional to the extent that it limits judicial and administrative review of the Board of Regents’ action.

Defendants appealed the Supreme Court of Erie County’s decision to grant Plaintiffs’ motion seeking a preliminary injunction. The appellate division held that the supreme court erred in granting Plaintiffs’ motion because Plaintiffs failed to demonstrate a likelihood of success on the merits with respect to any of their claims. The court found that, although the supreme court properly granted defendants’ cross motion to dismiss the complaint for failure to state a cause of action for negligent misrepresentation, it should have gone further and granted defendants’ motion to dismiss the complaint in its entirety.

With respect to the first and second causes of action—violation of due process rights under the State and Federal Constitution—the Court agreed with defendants’ argument that the New York Charter Schools Act creates no constitutionally protected property interest in the renewal of a charter. The court ruled that the first and second causes of action failed to state a cause of action. Here, the court reasoned that Pinnacle’s charter expressly provided that nothing required the Board of Regents to approve renewal. Further, the court reasoned that the limitation on administrative review set forth in section 2856(6) does not effect an unconstitutional denial of due process inasmuch as Pinnacle has no constitutional right to an administrative appeal.

With respect to Plaintiffs’ third cause of action—the alleged violation of the state Administrative Procedure Act—the court found that the Board of Regents acted pursuant to its discretionary authority in denying Pinnacle’s application and that it was not required to promulgate any rules pursuant to the Act. The court affirmed the lower court’s dismissal of the fourth cause of action, inasmuch as Plaintiffs did not have the special relationship or privity required with the Department.

As to the fifth cause of action—that denial of the renewal application violated individual Plaintiffs’ children’s rights to a sound basic education—the Court reasoned that even assuming the Plaintiffs had standing to allege a violation of the Education Article based upon the failure of the Buffalo School District to offer a sound basic education, Plaintiffs failed to state a cause of action for such a violation.

The court vacated the lower court’s preliminary injunction and granted defendants’ cross motion to dismiss the complaint in its entirety.

View Full Decision on Westlaw

108 A.D.3d 1024, 969 N.Y.S.2d (4th Dep’t 2013)

4th Department: Grace v. Law

This appeal addressed whether a defendant waives or abandons a legal malpractice claim (1) after voluntarily discontinuing the foundational medical malpractice action, and (2) by not appealing a trial court’s order that significantly reduced his original claim.

Plaintiff John Grace commenced a legal malpractice action against Robert L. Brenna, Jr. and Brenna, Brenna & Boyce, PLLC (“the Brenna defendants”), and Michael R. Law and Phillips Lytle, LLP (“the Law defendants”). Plaintiff alleged that the defendants were negligent in representing him in regards to a medical malpractice action arising from his treatment for an eye condition at the Veterans Administration Outpatient Clinic in Rochester (“VA”).

In 2006, after the VA treatment, the Brenna defendants commenced an administrative tort action on behalf of Plaintiff against the United States. Six months later, the Brenna defendants recommended that Plaintiff retain the Law defendants to pursue a federal medical malpractice claim under the Federal Tort Claims Act, which was subsequently filed in the District Court for the Western District of New York. A conflict later arose, causing the Law defendants to shift sole responsibility for the federal medical malpractice suit to the Brenna defendants.
The District Court dismissed the federal medical malpractice claim against the VA, finding that the primary treating physician was an independent contractor and not an employee of the VA. Plaintiff then instructed the Brenna defendants to discontinue the federal action, despite remaining claims, and brought this legal malpractice claim alleging that the defendants were negligent in failing to name the primary treating physician and his employer—the University of Rochester—in the initial complaint in federal court.

The appellate division rejected the defendants’ argument that Plaintiff had waived or abandoned his legal malpractice claim by voluntarily discontinuing the remaining claim of his medical malpractice action and by failing to appeal from the federal district court ruling that dismissed the majority of his claims. Further, the court rejected the defendants’ proposed expansion of a per se rule that this type of action should bar a defendant from being able to bring a legal malpractice claim. The court reasoned that such an expansion (1) would force parties to prosecute meritless appeals to their judicial conclusion in order to preserve their right to commence a malpractice action; (2) would increase the cost of litigation and overburden the court system; (3) could result in expiration of the statute of limitations on the legal malpractice claim; and (4) could discourage settlements by requiring parties to exhaust the appellate process.

Additionally, the defendants failed to establish that any negligence on their part was not a proximate cause of the plaintiff’s damages. The court affirmed the denial of the Law defendants’ motion to dismiss the claim as time-barred because Plaintiff raised a triable issue of fact whether the continuous representation doctrine applied to toll the statute of limitations.

View Full Decision on Westlaw

108 A.D.3d 1173, 969 N.Y.S. 2d 661 (4th Dep’t 2013)

New York Court of Appeals: People v. Echevarria

The defendants, Alex Echevarria, Andrew Moss, and Martin Johnson, were arrested after selling controlled substances to undercover police officers. In each case, a pretrial hearing was held pursuant to People v. Hinton to determine whether the courtroom should be closed to the general public during the testimony of the undercover officers involved to protect their safety. 31 N.Y.2d 71 (1972). During the hearings, the undercover officers testified about their continued participation in undercover operations, their pending cases, the violence they have experienced, and the precautions they have taken to conceal their identities during visits to the courthouse. In each case, the trial court closed the courtroom to the public during the testimony of the undercover officers to protect their safety.

On appeal, the defendants maintained that they were entitled to a new trial because of the deprivation of their constitutional right to a public trial when the trial was closed to the public during the officers’ testimony. The defendants brought their challenge on two prongs of the four-part standard that must be satisfied to justify closing a courtroom under the Sixth Amendment: “‘[T]he party seeking to close the hearing must advance an overriding interest that is likely to be prejudiced,’ [and] ‘the trial court must consider reasonable alternatives to closing the proceeding . . .’” Waller v. Georgia, 467 U.S. 39, 48 (1984).

As to the first component, after a thorough analysis of case law, the Court held that the trial court did not err in finding a nexus between the officers’ safety and their testimony in an open courtroom. In buy-and-bust cases such as this, a nexus or “specific link must be made between the officer’s safety concerns and open-court testimony.” People v. Ramos, 90 N.Y.2d 490, 498 (1997). As to the second component, the Court explained that the defendants’ argument here—that the trial court must always explicitly explain what alternative measures it considered—has been rejected in the past.

The Court held that there were no Sixth Amendment violations in any of these cases where a Hinton hearing took place and where the courtroom was closed for only limited portions of the trial to protect the safety of the undercover officers. The defendants were not deprived of their Sixth Amendment right to a public trial when the trial courts narrowly-tailored the closure of the courtroom.
Additionally, defendants Echevarria and Johnson asserted that they were entitled to a new trial because of erroneous jury instructions on the agency defense. In Echevarria’s case, the Court held that the jury instructions given were erroneous because the jury was instructed on only two of six relevant factors, both unfavorable to him, and that he was entitled to a new trial. In both Johnson’s and Moss’s cases, the appellate division’s order was affirmed.

View Full Decision on Westlaw

21 N.Y.3d 1, 966 N.Y.S.2d 747 (2013)

New York Court of Appeals: J. P. Morgan Chase Sec., Inc. v. Vigilant Ins. Co.

In this appeal, the Court of Appeals addressed the circumstances required to dismiss an insurance claim as violating public policy because it seeks coverage for conduct done with the intent to harm. The controversy arose from a 2003 Securities and Exchange Commission (“SEC”) investigation of Bear Stearns & Co., Inc. (“Bear Stearns”), which subsequently merged with J.P. Morgan Chase, now party to this case. The investigation focused on Bear Stearns’s alleged late trading, a practice characterized by placing trades after the markets have closed for the day. As a result of the SEC’s findings, Bear Stearns settled by agreeing to pay $250 million into a victim compensation fund for those mutual fund investors harmed. Although “[neither] admitting [nor] denying the findings,” Bear Stearns also agreed that it would not seek indemnification for the $90 million civil penalty portion of the settlement. 21 N.Y.3d at 330. The settlement contained no such restriction concerning the remaining $160 million, characterized by the SEC as a disgorgement payment.

When Bear Stearns sought indemnification, the defendant insurers denied all its claims in connection with the SEC investigation and lawsuit. These included claims for the $160 million disgorgement, $40 million in legal fees, and $14 million from a private settlement. Although the relevant insurance policy provided for excluding coverage of losses arising from “deliberate, dishonest, fraudulent, or criminal” acts, the exclusion only applied unless and until a final judgment declaring such conduct to be true. Id. at 332. As a result, Bear Stearns sued the insurers.

The defendant insurers moved to dismiss the complaint, arguing that indemnifying Bear Stearns for any portion of the SEC settlement violated public policy. In response, Bear Stearns alleged that it was not unjustly enriched to the extent that profits arising from its conduct went straight to its customers. Acknowledging that prior case law has barred an insured from seeking coverage of conduct done with the intent to harm, the Court held that the SEC’s findings failed to clearly establish Bear Stearns’s intent to cause harm, even though they clearly established intent to break the law. In doing so, the Court distinguished cases that barred an insured from indemnification of SEC-ordered disgorgement where the SEC’s findings “‘conclusively link[ed]’ the disgorgement payment to improperly acquired funds in the hands of the insured.” Id. at 337 (quoting Millennium Partners, L.P. v. Select Ins. Co., 68 A.D.3d 420, 420 (N.Y. App. Div. 2009) (internal quotation marks omitted)).

The Court was careful to disclaim any support of questionable trading practices. Instead, it emphasized that the defendant insurers’ burden of proof in showing a clear intent to cause harm was particularly high at such a preliminary stage in the proceedings. Based on its finding of no conclusive showing of intent to harm, the Court reversed the Appellate Division’s dismissal and reinstated Bear Stearns’s claims.

View Full Decision on Westlaw

21 N.Y.3d 324, 992 N.E.2d 1076, 970 N.Y.S.2d 733 (2013)

New York Court of Appeals: Cunningham v. N.Y. Dep’t of Labor

This appeal addressed a public employer’s use of GPS tracking on an employee’s vehicle, whether a warrant is required for such action, and whether the search here was reasonable.

The petitioner, Michael Cunningham, was an employee of the State Department of Labor (“State”). Suspecting that Petitioner was submitting false time reports to conceal unauthorized absences from work, the state Inspector General was brought into an investigation and attached a GPS device to Petitioner’s vehicle without his knowledge. After tracking Petitioner’s vehicle for two months and surveying his apartment and E-ZPass records, the State brought eleven charges against Petitioner, with four of the charges exclusively based on the GPS tracking. Based on the charges, Petitioner was terminated. The appellate division affirmed the termination, and Petitioner appealed.

Petitioner argued that, without a search warrant, the use of the GPS was an impermissible search and that the results of the search must be suppressed. While the attachment of a GPS to a vehicle to track a suspect’s movements is a search subject to constitutional limitations, a warrant is not required if the workplace exception is invoked. Under the workplace exception, a public employer can conduct a warrantless search to investigate work-related misconduct. Petitioner argued the exception should be limited to the workplace itself and to property that is an extension of the workplace. The Court rejected this argument, instead holding that an employee who chooses to use his car during the business day fits into the workplace exception.

However, even if a search, as here, does not require a warrant, the search is only constitutional if reasonable. The reasonableness of a search is based on whether the action was justified at inception and “whether the search as actually conducted is reasonably related in scope to the circumstances which justified” the interference. While the employer in this case had sufficient reasons to distrust Petitioner, the search was not reasonable in scope because it tracked activity, such as all evenings and weekends, that did not concern the State’s investigation. The Court thus held that, because of the relentless tracking capability of a GPS, a search is unreasonable where an employer conducts a GPS search without making a reasonable effort to avoid tracking an employee outside of business hours. Therefore, the four charges dependent on the GPS search were dismissed.

View Full Decision on Westlaw

2013 WL 3213347, N.Y. Slip Op. 04838 (2013)

New York Court of Appeals: Barenboim v. Starbucks Corp.

The New York Court of Appeals considered two issues certified by the Second Circuit regarding the legality of the Starbucks Corporation’s (“Starbucks”) tip-splitting policy. In a putative class action lawsuit filed in 2008 in the Southern District of New York, the plaintiffs alleged that it was unlawful for shift supervisors to participate in Starbucks’s tip-splitting policy because those tips belonged exclusively to Starbucks baristas (rather than to both baristas and shift supervisors). In a separate complaint filed in the Southern District of New York, a group of Starbucks assistant store managers likewise asserted that they were eligible to participate in the tip pool and that baristas, shift supervisors, and assistant store managers should all be eligible for tip pool disbursements.

Recognizing that questions of New York law remained unresolved, the Second Circuit certified the following two issues to the New York Court of Appeals: (1) What factors are used to determine whether an employee is an agent (considering whether the employee’s managerial role is so substantial that the employee would be ineligible to share in the tip pool); and (2) does New York labor law allow an employer to exclude an employee from receiving distributions from the tip pool even if that employee is statutorily eligible to participate in tip-splitting?

The Court first focused on the term “agent” as stated in section 196-d of New York’s labor law statute and the degree to which the responsibilities of shift supervisors and assistant store managers were sufficiently supervisory. Considering the New York State Department of Labor’s (“DOL”) amicus brief, the Court concluded that tip-pool eligibility extended to employees (1) exercising principal or regular service to patrons, and (2) having limited supervisory responsibilities.

Second, the Court assessed whether Starbucks had the right to exclude an employee, who would otherwise be statutorily eligible to share in the tip pool, from participating in a company’s tip-splitting arrangement. The Court held that Starbucks was not required to include all those employees not statutorily barred from sharing in the tip pool. In addition, the Court recognized that there could be an outer statutory limit to an employer’s ability to exclude a statutorily eligible employee from sharing in the tip pool. In this case, however, the Court concluded that Starbucks’s policy of excluding assistant store managers from sharing in the company’s tip-splitting arrangement was lawful under section 196-d.

In his dissent, Judge Smith suggested that section 196-d did not apply because the statute was intended to prevent deceptive practices involving an employer keeping money from an employee, not the common tip pool addressed in the present case. Judge Rivera, in her dissent, expressed concern that the majority left too much unsaid regarding the outer limits of an employer’s right to exclude statutorily eligible employees from sharing in the tip pool. Judge Rivera suggested that the majority should have declined to answer the second certified question because an employer’s discretionary authority to exclude certain employees from sharing in the tip pool is not germane to the court’s conclusion that Starbucks lawfully excluded assistant store managers from participating in the company’s tip-sharing scheme.

View Full Decision on Westlaw

2013 WL 3197602, N.Y. Slip Op. 04754 (2013)

New York Court of Appeals: Altshuler Shaham Provident Funds, Ltd. v. GML Tower, LLC

This mortgage foreclosure action arises from a failed redevelopment of the Hotel Syracuse complex in downtown Syracuse, New York. In September 2005, defendants GML Tower LLC, GML Syracuse LLC, and GML Addis LLC purchased property to make up the hotel complex. The entities received a $7 million loan for acquisition of the properties. In 2007, Perfect Provident Fund, Ltd., the predecessor of plaintiff Altshuler Shaham Provident Funds, Ltd. (“Altshuler”) entered into a loan agreement with GML Tower and Ameris Holdings, Inc. (“Ameris”), whereby Altshuler agreed to lend GML Tower and Ameris $10 million, divided into tranches of $5.5 and $4.5 million. After the first tranche timely closed, the lender assigned a promissory note and mortgage to Altshuler, which was recorded on May 3, 2007 (“2007 mortgage”). The second tranche failed to close in accordance with a Memorandum of Understanding between the parties.

In March 2008, GML Tower and Ameris entered into “Amendment No. 1” (“2008 amendment”) of the 2007 loan agreement with Altshuler, which changed the improvements to be built and the terms and conditions of the release of the remaining funds. On the same date, GML Tower and GML Addis entered into an agreement (“2008 mortgage”) with Altshuler. In December 2008, Altshuler commenced this foreclosure action against Ameris, GML Tower, GML Addis, and other defendants Hayner Hoyt Corporation (“Hayner”), Syracuse Merit Electric (“Merit”), and the Pike Company, Inc. (“Pike”). Hayner, Merit, and Pike filed notices of mechanic’s liens. Altshuler sought foreclosure on the tower and Addis buildings, as well as recoupment of the $10 million loan and first priority to the proceeds of the foreclosure sales.

In this action, Hayner, Merit, and Pike cross-moved for summary judgment, seeking an order that their liens were superior to the 2008 mortgage that Altshuler sought to foreclose. In May 2010, the supreme court determined the 2007 loan agreement was indeed a building loan contract, which ensured that Lien Law 22 applied to this case. The judge concluded that the entire $10 million mortgage was subordinate to the subsequently filed mechanic’s liens and granted the cross motions.

Altshuler appealed and in April 2011, the appellate division affirmed the lower court’s decision. In July 2011, the same panel denied Altshuler’s motion for leave to appeal to the Court of Appeals. In October 2011, the Supreme Court of Onondaga County stayed the foreclosure sale of the tower building. However, in March 2012, the supreme court vacated the stay of the enforcement.
A building loan contract must be filed in the clerk’s office of the county where land subject to the contract is located per section 22 of the Lien Law. Failure to comply with the requirements changes the ordinary priority of liens, with a properly filed mechanic’s lien taking priority over the interests of the parties to the contract. Thus, section 22 subjects a lender’s interest to the subordination penalty. Here, Altshuler did not file the agreement before recording the mortgage, and the 2007 mortgage was made pursuant to the unfiled agreement. Additionally, the 2008 amendment should have been filed because it was a compilation of edits of the 2007 loan agreement.

Lastly, the Court considered whether Altshuler was entitled to priority with respect to the $5.5 million of the loan proceeds used to refinance the existing mortgage. The 2007 loan agreement ($5.5 million to pay off the mortgage) closed before any monies were advanced for construction, and the 2007 mortgage in this amount was recorded before any contractor began work on the project. Thus, the $5.5 million of the loan proceeds were not subject to the subordination penalty.

View Full Decision on Westlaw

21 N.Y.3d 352, N.Y. Slip Op. 04273 (2013)