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Spoiling the Evidence – Spoiling the Case, by Arthur Xanthos

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The legal doctrine of spoliation permits a court to punish a party who destroys crucial evidence prior to the other party having had an opportunity to inspect that evidence.  Sometimes the punishment for spoliation is dismissal of the case (if done by plaintiff) or preclusion of a defense (if done by defendant).

Spoliation considerations arise often in premises liability and toxic tort cases.  For example, if a plaintiff disposes of personal property that was damaged from a water leak, and the defendant has no other means of assessing the damage to that property, the court can dismiss the plaintiff's property damage claims.  Similarly, if a plaintiff renovates or remediates his allegedly toxic apartment prior to giving the defendant an opportunity to test whether that apartment was truly toxic, then the court can dismiss plaintiff's claims relating to the toxic nature of the apartment.  See, e.g., Theodoli v.170 E. 77th 1 LLC, 40 Misc. 3d 135(A)(N.Y. App. Term 2013).

In our experience, it is not uncommon that a plaintiff in a case we are defending disposed of her "moldy" clothes, or fixed  her water-damaged walls, prior to bringing the lawsuit; but such actions leave the plaintiff open to spoliation penalties, possibly including the dismissal of the entire case.

A database search of reported New York State case law reveals 247 decisions from 2000 through 2006 that mentioned spoliation.  In the next seven year period (2007 through 2013), the number of such decisions was 555.  What accounts for the 225% increase in spoliation decisions?  There are several reasons.

A motion for spoliation penalties is straightforward, can be made anytime -- pre-trial, in limine, or during trial, and has virtually no downside and significant potential upside.  Further, and perhaps most relevant, courts in the First Department appear to be imposing stronger spoliation penalties more often than they have in the past.

Theodoli v.170 E. 77th 1 LLC, a case handled by this Firm, is illustrative of the trend toward stronger spoliation penalties.  There, a tenant's mold and toxic tort claim was dismissed because he renovated his apartment prior to the defendants' environmental consultant gaining access to test the apartment.  On motion, the environmental consultant testified that once an apartment is "cleaned", it is no longer possible to determine whether the apartment was previously toxic.  So, because the tenant had destroyed crucial evidence and prevented the defendant from testing the apartment in its allegedly toxic state, his mold and toxic tort claim was dismissed. That decision came down in the Fall of 2013.

The start of 2014 saw the continuation of the judicial trend toward strong spoliation penalties.  On January 9, 2014, the First Department came down with a spoliation decision in Malouf v. Equinox Holdings, 2014 N.Y. App. Div. LEXIS 163.  Plaintiff Malouf injured herself on a Life Fitness treadmill at an Equinox gym.  She sued the Equinox gym, which in turn sued the maker of the treadmill.  Equinox, however, had disposed of the subject treadmill prior to the lawsuit; so no party was able to examine it.  The court punished the Equinox for its spoliation by dismissing the Equinox's claim against the maker of the treadmill; the court also precluded the Equinox from arguing at trial that the treadmill in question worked properly -- a punishment which could be the functional equivalent of summary judgment for the plaintiff.


The trend in spoliation case law offers two simple lessons, one proactive and the other prophylactic.  First, courts are more willing to entertain spoliation motions and less reluctant to impose strong spoliation penalties; therefore, counsel should be constantly mindful of the potential for making a spoliation motion, and should pursue diligently the discovery necessary to secure strong spoliation penalties against the adversary.  Second, counsel should from the beginning advise the client on the need to avoid spoliation penalties, by preserving damaged property and by maintaining the status of any object, item, or environment that is crucial to the lawsuit.           

                                                                                                     -APX 1/24/14

Arthur Xanthos, Malouf v. Equinox Holdings, mold, mold litigation, premises liability, spoliation, Theodoli, toxic tort

Adjacent Landowner Liability for City Sidewalk Defects, by Arthur Xanthos

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For nearly a decade, the New York City Administrative Code has imposed on landowners the responsibility of maintaining the sidewalks adjacent to the landowner's premises.  Thus, a passerby who slips and falls on the sidewalk outside your building can look to the building owner as a possible defendant.


By definition, condominium boards are not landowners.  So if a passerby slips and falls on a sidewalk adjacent to a condominium building, who is the adjacent landowner for purposes of liability?


This Firm has seen plaintiff counsel sue the condominium itself, which we believe eventually results in a dismissal because the condominium is not a landowner and the NYC Administrative Code provision is interpreted strictly.  So that leaves one other possibility on whom to impose liability for a sidewalk defect -- the owner of the particular condominium unit closest to the site of the trip and fall (occupied most likely by a ground floor commercial tenant of the unit owner).


In light of uncertain litigation with these quirky facts, ground floor condominium unit owners who rent out their unit should obligate the tenant to maintain and repair the sidewalk adjacent to the unit, and to defend and indemnify the unit owner (and the condominium board of managers) in the event of a lawsuit.  We note that while many form leases obligate tenant to keep the adjacent sidewalk clean, they leave unclear the responsibility for sidewalk maintenance and repair.


Of course, the condominium unit owner should also insist on proof that the tenant has adequate liability insurance and has named the unit owner (and, of course, the board of managers) as additional insureds on the insurance policy.
     

                                                                                                 -APX 1/19/14
Arthur Xanthos, condominiums, lawsuit, liability, negligence, personal injury, premises liability

The Legal Fees Sword, by Arthur Xanthos

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Many proprietary leases between a Co-op and a shareholder-tenant contain a boilerplate legal fees provision, obligating the shareholder-tenant to pay reasonable attorneys fees if the Co-op has to sue to enforce a provision of the lease. Because most lawsuits between Co-ops and shareholders are relatively quick summary proceedings in landlord-tenant court, the attorneys fees in question tend to be modest.

Sounds great, right? Except that sometimes it’s the shareholder-tenant who sues the Co-op (e.g., on a claim that the Co-op has breached the warranty of habitability), and by operation of the Real Property Law it is the shareholder-tenant who will be owed the reasonable attorneys fees if he or she prevails. These shareholder initiated lawsuits usually are plenary actions in Supreme Court, take years to litigate, and the attorneys fees in question can be substantial.   Our Firm's experience is that most Co-ops are willing to take that risk; thus, the boilerplate legal fees provision remains, well, boilerplate in most proprietary leases.

We believe however that serious consideration should be given to removal or modification of the legal fees provision in proprietary leases. Here is why. Assume a shareholder-tenant’s apartment is flooded due to a burst pipe from inside a wall. For whatever reason (inattentive Board, inexperienced managing agent), the apartment is not repaired for several months, and the shareholder-tenant relocates to a hotel. Disillusioned with the slow pace of repair, the shareholder-tenant repairs the apartment herself and sues the Co-op in Supreme Court for out-of-pocket expenses (the hotel bills, dry cleaning cost), the cost of repair (putting up new walls and ceiling), the damage to her personal property (furniture, artwork), a refund of maintenance payments for the period in question, and attorneys fees under the proprietary lease. The shareholder-tenant's lawsuit is based, in part, on the allegation that the Co-op breached the proprietary lease. If the shareholder-tenant prevails on her claim, she is likely entitled to attorneys fees, and the amount will be far more than the typical amount generated in the usual summary proceeding. That is because a fully litigated plenary action almost always generates significantly more legal fees than a summary proceeding generates. Worse for the Co-op, the award of attorneys fees to the shareholder-tenant (and for that matter, any award refunding maintenance payments) is almost never covered by the Co-op’s general liability insurance policy. Thus, a Co-op that has the boilerplate legal fees provisions in its proprietary lease and loses such a case will, (a) have to pay with out-of-pocket, non-insurance dollars, and (b) have to explain to its shareholders the reason for the hit to the Co-op's finances.

With no attorneys fees provision in the proprietary lease, the Co-op never faces this scenario; but must a Co-op forgo entirely the right to collect attorneys fees in all cases involving shareholder-tenants? Maybe not. Consider this: a proprietary lease that allows recovery of legal fees but only up to a specified dollar amount, say $15,000.00. In the majority of non-payment proceedings against shareholder-tenants, the Co-op will in most instances be made whole, as the legal fees generated will not exceed the specified dollar amount (i.e., $15,000.00). On the other hand, the maximum exposure the Co-op would face in Supreme Court if a shareholder-tenant prevailed would similarly be limited to $15,000.00, and most likely result in a “savings” of tens of thousands of dollars. In this light, a modified attorneys fees provision can be considered an additional insurance policy for the Co-op. We are unaware of any reported case addressing the validity of such a modified attorneys fees provision, but there is no good reason why a well-drafted limited attorneys fees provision wouldn’t be enforced in accordance with ordinary contract principles.

                                                                                             -APX 1/17/14
Arthur Xanthos, attorneys fees, co-ops and condo, legal fees, proprietary lease, shareholders, tenants

Noises Off, by Arthur Xanthos

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What is a Co-op obligated to do when one shareholder-tenant complains that another shareholder-tenant is too noisy? Consider the following: Shareholder-tenant on 4th floor sues Co-op and shareholder-tenant on 5th floor. The complaint alleges that the 5th floor tenants are unreasonably noisy, and that the Co-op has failed to resolve it. As real estate development in New York City continues to accelerate, such complaints are becoming commonplace.

Co-ops are landlords, so by law they are deemed to have warranted to tenants that the premises are habitable. An unreasonably loud building obviously can make an apartment uninhabitable. But what if the ‘noise’ complained of is caused by another shareholder-tenant? Further, what if the noise is sporadic, or difficult to record or measure objectively? Such cases pose nettlesome problems for co-ops, managing agents, and their carriers, because money damages are often not the primary goal of the plaintiff. How do you resolve a claim where the plaintiff wants peace and quiet, the defendant-tenant argues that the noise is the natural by-product of a happy, busy family life, and the Co-op cannot control the noise or the plaintiff’s reaction to it?

In our practice, we have seen or suggested several, non-orthodox settlement possibilities: (1) The Co-op can pass and enforce more stringent carpeting and padding rules; (2) Subject to cost, the Co-op can invest in soundproofing materials at the ceiling, floor, or wall interfaces; (3) The parties can explore an apartment swap, or a buyout/sale; (4) The Co-op can monitor noise (via a property manager or superintendent) and assess reasonable fines based on violations of a well-defined noise policy; and (5) If warranted and authorized under the proprietary lease, the Co-op can attempt a dispossess proceeding based on the offending tenant creating a nuisance. See, e.g., Domen v. Aranovich, 1 N.Y.3d 117 (2003). Failing resolution, a strong summary judgment motion on behalf of the Co-op is imperative, keeping in mind that as recently as a few days ago the First Department kept a Co-op in a lawsuit while dismissing the offending, noisy tenant from the case! Brown v Blennerhasset Corp., 2014 N.Y. App. Div. LEXIS 188, 1-3 (1st Dept. Jan. 14, 2014).

                                                                                                   -APX 1/17/14
Arthur Xanthos, board of directors, Brown v. Blennerhasset, co-op and condo, noise complaints, premises liability, proprietary lease, real estate, tenant, warranty of habitability

Mold Up in the Air, by Arthur Xanthos

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On January 13, 2014, the New York State Court of Appeals heard oral argument in the appeal of Cornell v. 360 W. 51st Realty, which is the latest First Department word on whether and when a claim alleging bodily injury due to mold can survive for presentment to a jury.
Cornell was decided by the First Department on March 6, 2012, and is generally regarded to have made it easier for a plaintiff’s mold claim to survive summary judgment under a Frye analysis.  (Fryerequires that for a plaintiff’s claim to survive, it must be generally accepted in the relevant scientific community that the offending agent (mold, asbestos, etc.) causes the claimed injury.)
A decision is likely months away but if the questions from the Court of Appeals bench during oral argument are any indication, Cornell stands an excellent chance of reversal or modification.
The Justices focused primarily on the difference between the word “causation”, and the term “association”.  While science recognizes many associations, it recognizes far fewer causations -- and that is the entire point of Frye.  If the relevant scientific community does not generally accept that A (e.g., mold) causes B (e.g., asthma), then plaintiff cannot prove causation and must be turned away. The Cornell plaintiff showed “association” between mold and illness; will that be enough for plaintiff’s case to survive for presentment to a jury?
About two years ago, this firm handled a Frye hearing in Supreme Court, Kings County in which the sitting Justice presciently asked the same question the Court of Appeals just did -- what is the difference between causation and association?  In other words, do scientists (doctors) use “association” to mean the same thing that a layperson means by “causation”?  This question gets at the very root of the confusion in some of the case law on whether to allow expert testimony under Frye.
Hypotheticals, some absurd, highlight the issue.  There may be a strong association between men with grey hair, and mortality; or between membership in a sailing club, and sunburn; or between those who make appointments with Dr. Smith, and sickness.  But it would never be argued seriously that the former causes the latter.  That, in a nutshell, is why New York requires proof that causation is generally accepted in the relevant scientific community.
So Cornellwill likely turn on whether the Court of Appeals views causation and association as starkly different as these examples illustrate, or whether it accepts the more highbrow argument that causation and association are the same thing, differing only in the degree of experimental proof available for each.
                                                                                    - APX 1/16/14
Arthur Xanthos, causation, Cornell v. 360 W. 51st Realty, Court of Appeals, Fraser, Frye, mold, mold litigation, negligence, premises liability, tenant, toxic tort, warranty of habitability