Firm News: Gartner + Bloom

In our August 6, 2014 article, we explained the import of the New York State Court of Appeals' Cornell decision -- without medical community acceptance of causation between mold and bodily injury, courts in New York State will dismiss lawsuits for bodily injury premised on mold.

Since the Cornell decision came down, this Firm has used it twice to dismiss mold-related bodily injury claims against our clients: first in June of 2014 in Benton v. 80 Cranberry, and now in August of 2016 in a case called Sylla-ba v. The Colton Condominium. (Both of these decisions can be accessed on the Firm's website, www.gartnerbloom.com, under Publications.)  In Sylla-ba, Justice Cynthia Kern reiterated what the Court of Appeals held: an 'association' between mold and the alleged symptoms of a plaintiff is not the same as 'causation' between them; therefore, proving that there is such an association is insufficient for the bodily injury claims to survive dismissal.  

Cornell should have resulted in a sharp drop in the number of mold-related personal injury lawsuits brought in New York's state courts; yet these lawsuits continue to be brought in roughly the same numbers as before Cornell. We suspect the reasons for this counter-intuitive statistic are, (1) the plaintiffs' bar's unfamiliarity with the 2014 Cornell decision (viz., the flawed belief that if you can get one doctor to say 'mold caused the plaintiff's illness', that such is sufficient), (2) the use of a mold-related bodily injury claim as an 'add on' claim to bolster the settlement value of the case, and (3) publication in the popular press of other states' mold verdicts and settlements.

So, we repeat what we wrote in our August 6, 2014 entry: Absent a major change in the science of mold illness, the next few years will see many more summary judgment decisions in favor of land owners and against mold plaintiffs.

                                                         -APX 8/15/2016
        

This past week has seen an outbreak of legionella in buildings in the South Bronx section of New York City.  Legionella is the bacterium that causes legionnaires disease and flourishes in the water of air conditioning and central heating systems. Utmost concern is for the health and safety of building residents, and pending New York City regulations address this concern by imposing on building owners new registration, testing, and maintenance requirements. Given the number of deaths and hospitalizations already reported, building owners and their insurers should be aware of the following facts and suggestions:

1. There have been fewer than a dozen reported legionella/personal injury decisions in New York State in the last decade, and far fewer such decisions involving residential buildings. As in any toxic tort lawsuit, the legionella claimant will have the burden of proving that the building owner negligently allowed a toxin to develop (namely, legionella), and that the claimant was exposed to the toxin in an amount that caused injury to the claimant -- two very difficult though not impossible burdens to meet. (For a detailed discussion of the burden of proving causation in toxic tort lawsuits, see our prior blog entry titled Mold up in the Air: Settled.)

2. A building owner must report to its insurance carrier immediately any notice of bodily injury or property damage arising from the outbreak. A building owner should also notify its HVAC/cooling tower contractor, and the insurer for that contractor, of the incident(s).

3. The insurance carrier for its part must assemble a pre-lawsuit response team -- legal, engineering, medical, and environmental -- to investigate the premises and establish the facts.

4. New York City is now inspecting and testing building cooling systems. As these test results will be admissible in any subsequent lawsuit, building owners (or, preferably, their insurance carriers) should retain environmental consultants to photograph, monitor, and report on how the City performs the testing.

5. Finally, if the cooling tower or HVAC system is going to be dismantled or modified significantly, care should be taken to avoid a spoliation penalty.  (For a detailed discussion of this topic, see our prior blog entry titled Spoiling the Evidence, Spoiling the Case.) 

-APX 8/10/15

G + B is pleased to announce the relocation of our New York offices. To accommodate our continued growth, you will now find us in significantly larger premises at 801 Second Avenue occupying the entire 11th floor. Our new state of art facilities are designed to serve our clients more effectively, and comfortably and efficiently accommodate our current professional and support staff as well as our anticipated expansion over the next several months and years.

Drop by to say hello and tour the new place!

The Firm is pleased to announce that Ken Bloom and Arthur Xanthos have received the New York Metro Area SuperLawyers distinction for 2014. Ken received the SuperLawyer award in the area of construction litigation (http://digital.superlawyers.com/superlawyers/nyslrs13?pg=81&search_term=bloom&doc_id=-1&search_term=bloom#pg81) while Arthur received his in the area of business litigation (http://digital.superlawyers.com/superlawyers/nyslrs14#pg77).

It is customary to recommend to a range of clients that they agree to binding arbitration as a mechanism to resolve future disputes under an agreement. Arbitration is often regarded as a cheaper, quicker alternative to litigation.  The typical arbitration clause reads as follows: "Any dispute arising under this agreement shall be resolved by arbitration before the American Arbitration Association in New York City under the commercial arbitration rules then in effect." It is just as customary in the same agreement to choose a particular State law, e.g., New York law, to govern the resolution of future disputes.  A simple version of this choice of law clause reads as follows: "This agreement shall be governed by the laws of the State of New York."

Yesterday, the New York State Appellate Division, First Department, had the opportunity to consider a case involving an agreement containing both clauses.  A limited liability company's operating agreement contained both an arbitration clause and a choice of law (New York) clause. But the commercial arbitration rules (mandated by the arbitration clause) conflicted with New York State law (mandated by the choice of law clause) in one important respect: commercial arbitration rules permit an arbitrator under some circumstances to assess punitive damages against a party to the arbitration.  New York State law, on the other hand, does not permit an arbitrator to assess punitive damages.  So when an agreement contains both clauses (commercial arbitration rules, and New York State choice of law), may an arbitrator award punitive damages?

Yes, said the Appellate Division in a sharply divided 3-2 decision. Matter of Flintlock Constr. Servs. LLC v. Weiss, 2014 NY Slip Op 05818 (8/14/2014).  The majority held that the operating agreement's choice of law provision, in the absence of additional limiting language, "is insufficient to remove the issue of punitive damages from the arbitrator".

The Flintlock decision is problematic for two reasons: First, what do contracting parties do about their already executed agreements that now have conflicting clauses? It is barely overstatement to say that the overwhelming majority of shareholder agreements, operating agreements, asset sale agreements, and even employment agreements contain both of these clauses.  Second, how should such agreements be drafted going forward?  Pending an appeal of the Flintlock decision, attorneys should follow the First Department's direction and place limits on the arbitrator's power to impose punitive damages.  The new clauses might read as follows:

              "ARBITRATION. Any dispute arising under this agreement shall be resolved by arbitration before the [NAME OF ARBITRATION TRIBUNAL] in [LOCATION].  The arbitration shall be conducted under commercial arbitration rules then in effect, but the arbitrator(s) shall resolve the dispute in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. The arbitrator(s) shall have the limitations on his, her and their power and authority as are found in New York State law, including without limitation no power or authority to award or assess punitive damages."

                "CHOICE OF LAW. This agreement, its validity, construction, and enforcement, shall be governed by the laws of the State of New York, without giving effect to principles of conflict of laws."

                                                                                            APX 8/15/14