Alisandrelli v. Kenwood

• Decision Date: 14 November 1989
• Docket Number: No. 88 Civ. 8002(LLS).,88 Civ. 8002(LLS).
• Citation: 724 F. Supp. 235
• Parties: Michael ALISANDRELLI, Plaintiff, v. Martin S. KENWOOD, Individually, and d/b/a Franklin Associates, Defendants. Martin S. KENWOOD and Franklin Associates, Third Party Plaintiffs, v. JIM HOLLENBECK ROOFING CORPORATION, Third Party Defendant.
• Court: U.S. District Court — Southern District of New York

724 F. Supp. 235

Michael ALISANDRELLI, Plaintiff, v. Martin S. KENWOOD, Individually, and d/b/a Franklin Associates, Defendants.

Martin S. KENWOOD and Franklin Associates, Third Party Plaintiffs, v. JIM HOLLENBECK ROOFING CORPORATION, Third Party Defendant.

No. 88 Civ. 8002(LLS).

United States District Court, S.D. New York.

November 6, 1989.

As Amended November 14, 1989.

Finkelstein, Levine, Gittelsohn and Tetenbaum, Newburgh, N.Y. (George A. Kohl, II, Elliot S. Tetenbaum, of counsel), for plaintiff.

Johnston McShane & Marantis, P.C., New York City (Bruce W. McShane, of counsel), for defendants.

OPINION AND ORDER

STANTON, District Judge.

Plaintiff moves in limine for an order that any judgment he recovers for future damages in excess of $250,000 not be structured pursuant to Article 50-B of the New York Civil Practice Law and Rules ("CPLR"), §§ 5041-5049 (McKinney's 1989 Supp.). The motion is denied.

BACKGROUND

Plaintiff Michael Alisandrelli was working as a roofer when he was severely injured in a fall from the roof of the Squire Cinema, a movie theater owned by defendant Franklin Associates ("Franklin"). Alisandrelli commenced this diversity action against Franklin, and its managing partner, defendant Martin S. Kenwood, for violating N.Y. Labor Law § 240 subd. 1 (McKinney's 1986) and negligently causing his injuries. The defendants impleaded Alisandrelli's employer, Jim Hollenbeck Roofing Corporation ("Hollenbeck"), claiming that Hollenbeck is liable to them for any damages Alisandrelli recovers.

In an order dated September 22, 1989 this court by summary judgment granted plaintiff's claim under section 240 subd. 1 of the New York Labor Law and defendants' claim for indemnification from Hollenbeck. The only remaining issue is the amount of damages.

Plaintiff moves in limine for an order that any judgment he recovers for future damages in excess of $250,000 not be structured pursuant to Article 50-B of the CPLR.¹ He claims that Article 50-B is procedural in nature, and thus should not be applied by a federal court exercising diversity jurisdiction under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) and its progeny. Accordingly, he urges that any judgment he recovers should, in accordance with the federal practice², be entered in a lump sum.

The motion is denied.

DISCUSSION

1. Erie and its progeny

The Rules of Decision Act states, "The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply." 28 U.S.C. § 1652.

In Erie, the Court overturned the prior rule of Swift v. Tyson, 16 Pet. 1, 10 L.Ed. 865 (1842), that federal courts sitting in diversity need not, in matters of "general jurisprudence", apply the nonstatutory law of the state. The Court in Erie noted that Swift had led to the undesirable results of discrimination in favor of noncitizens, prevention of uniformity in the administration of state law, and forum shopping. Erie, 304 U.S. at 74-77, 58 S.Ct. at 820-822. Thus, the Court held, "Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State." Id. at 78, 58 S.Ct. at 822.

In Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), the issue was "whether, when no recovery could be had in a State court because the action is barred by the statute of limitations, a federal court in equity can take cognizance of the suit because there is diversity of citizenship between the parties." Id. at 107, 65 S.Ct. at 1469. The Court held that the state statute of limitations barred the suit:

But since a federal court adjudicating a State-created right solely because of the diversity of citizenship of the parties is for that purpose, in effect, only another court of the State, it cannot afford recovery if the right to recover is made unavailable by the State nor can it substantially affect the enforcement of the right as given by the State.

* * * * * * In essence, the intent of that Erie decision was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court. Id. at 108-09, 65 S.Ct. at 1469-70.

In Byrd v. Blue Ridge Rural Electric Cooperative, 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958) the Court refined York's "outcome-determinative" test. The issue in Byrd was whether a federal court exercising diversity jurisdiction was obliged to apply a state rule requiring the judge, rather than the jury, to determine whether an employer was immune from an employee's claim under the state workmen's compensation law. The Court found the state rule to be "merely a form and mode of enforcing the immunity, Guaranty Trust Co. v. York, 326 U.S. 99, 108, 65 S.Ct. 1464, 1469, and not a rule intended to be bound up with the definition of the rights and obligations of the parties." Id. at 536, 78 S.Ct. at 900. Nonetheless,

were "outcome" the only consideration, a strong case might appear for saying that the federal court should follow the state practice.

But there are affirmative countervailing considerations at work here. The federal system is an independent system for administering justice to litigants who properly invoke its jurisdiction. An essential characteristic of that system is the manner in which, in civil common-law actions, it distributes trial functions between judge and jury and, under the influence — if not the command — of the Seventh Amendment, assigns the decisions of disputed questions of fact to the jury. Jacob v. New York, 315 U.S. 752 62 S.Ct. 854, 86 L.Ed. 1166 (1942). The policy of uniform enforcement of state-created rights and obligations, see, e.g., Guaranty Trust Co. v. York, supra, cannot in every case exact compliance with a state rule — not bound up with rights and obligations — which disrupts the federal system of allocating functions between judge and jury. Herron v. Southern Pacific Co., 283 U.S. 91 51 S.Ct. 383, 75 L.Ed. 857 (1931). Thus the inquiry here is whether the federal policy favoring jury decisions of disputed fact questions should yield to the state rule in the interest of furthering the objective that the litigation should not come out one way in the federal court and another way in the state court. Id. at 537-38, 78 S.Ct. at 900-01 (footnotes omitted).

Because of the strong federal interest, and the likelihood that the federal rule would not alter the outcome, the Court concluded that the federal rule should be applied.

In Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) the Court held that the manner of service of process in diversity actions is governed by Fed.R. Civ.P. 4(d)(1) rather than state law. The Court stated that when a Federal Rule of Civil Procedure "is in direct collision with the law of the relevant State", id. at 472, 85 S.Ct. at 1144-45, the federal rule should be applied if it "transgresses neither the terms of the Enabling Act nor constitutional restrictions." Id. at 471, 85 S.Ct. at 1144 (footnote omitted). Where there is no Federal Rule of Civil Procedure directly on point, "the message of York itself is that choices between state and federal law are to be made not by application of any automatic, `litmus paper' criterion, but rather by reference to the policies underlying the Erie rule". Id. at 467, 85 S.Ct. at 1141 citing York, 326 U.S. at 108-112, 65 S.Ct. at 1469-1471. Those policies are the "discouragement of forum shopping and avoidance of inequitable administration of the laws." Id. at 468, 85 S.Ct. at 1142 (footnote omitted).

Thus, in determining whether to apply Article 50-B here, Erie and its descendants instruct that several factors are of consequence: (1) whether application of the rule affects the outcome of the litigation; (2) the likelihood of inviting forum shopping; (3) whether divergent state and federal rules will cause inequitable administration of the laws; and (4) the existence of an overriding federal interest in the application of the federal rule. See Jarvis v. Johnson, 668 F.2d 740, 743-44 (3rd Cir. 1982).

2. The CPLR provisions

In 1985 the New York State Legislature, in response to a liability insurance crisis, enacted Article 50-A (CPLR §§ 5031-5039) (Chapter 294, Laws of 1985). Article 50-A requires that a structured judgment be entered when a plaintiff in a medical, dental or podiatric malpractice action recovers more than $250,000 in future damages. The Governor's Program Memorandum (reprinted in New York State Legislative Annual 1985, pp. 131-34) explains that the purpose of the structured judgment is to moderate the cost of medical malpractice premiums, while assuring adequate and fair compensation for injured persons:

The bill would require the payment of large awards of future damages in medical malpractice actions in periodic installments, rather than in a single lump sum. The injured party is thereby guaranteed that compensation for future health care costs, lost earnings and other needs will be available to meet those expenses as they arise. Although the interest earned on a lump sum judgment is taxable to the plaintiff, the entire amount received in periodic installments can be received taxfree. Benefits accrue, as well, to the defendant/insurer: paying a judgment in periodic installments reduces the overall cost of the judgment by permitting the insurer to retain and invest the balance of the award before the installments come due. Some additional savings result from relieving the defendant from the obligation to make payments toward the plaintiff's future health care and other non-economic

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