Century Indem. Co. v. Brooklyn Union Gas Co.
| Decision Date | 11 March 2022 |
| Docket Number | Index 603405/2001 |
| Parties | CENTURY INDEMNITY COMPANY, Plaintiff, v. BROOKLYN UNION GAS COMPANY et al., Defendants. |
| Court | New York Supreme Court |
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 037) 574, 575, 576, 577, 578, 579, 580, 581, 582 583, 584, 585, 586, 587, 588, 589, 590, 591, 592, 593, 594 595, 596, 597, 598, 599, 600, 601, 602, 603, 604, 605, 606 607, 608, 609, 610, 611, 612, 901, 1122 were read on this motion to EXCLUDE EVIDENCE AT TRIAL.
The following e-filed documents, listed by NYSCEF document number (Motion 045) 789, 790, 791, 792, 793, 794, 795, 796, 797, 798, 799, 800, 801, 802, 803, 804, 805, 806, 807, 808, 809, 810, 811, 812, 813, 814, 815, 816, 817, 818, 819, 820, 821, 822, 847, 848, 849, 850, 851, 1082, 1083, 1084, 1085, 1086, 1087, 1088, 1089, 1090, 1091, 1092, 1093, 1094, 1095, 1096, 1097, 1098, 1100, 1101, 1102, 1122 were read on this motion for PRECLUSION .
O'Melveny & Myers LLP, New York, NY (Jonathan Rosenberg and Leah Godesky of counsel), and Los Angeles, CA (Daniel Petrocelli and Craig P. Bloom of counsel), for plaintiff. Covington & Burling LLP, Washington, D.C. (Jay T. Smith, Eric Bosset, and Michael Lechliter of counsel), and San Francisco, CA (Gretchen Hoff Varner of counsel), for defendant Brooklyn Union Gas Company.
This decision addresses two pretrial motions in limine filed by parties to the insurance-coverage litigation between Brooklyn Union Gas Company and Century Indemnity Company. This litigation stems from Brooklyn Union's government-mandated cleanup of the Gowanus Canal to remediate environmental harm from former manufactured-gas plants (MGPs).
Brooklyn Union, along with two dozen or so other companies named by the federal government as parties potentially responsible for the Gowanus Canal cleanup, entered into a private dispute-resolution process intended to allocate the significant costs involved in designing the environmental remedy for the Canal. As part of this process, Brooklyn Union and the other parties to this process participated in an arbitration-like proceeding before a neutral decision-maker called an allocator.
Based on submissions and testimony from the parties, the allocator applied equitable principles to arrive at an apportionment of remedial-design costs based on his assessment of each party's respective responsibility for the pollution now driving the need for (and costs of) the government-mandated cleanup of the Canal. The allocator's final determination, memorialized in a 2019 written decision, imposed 55.57% of the remedial-design costs on Brooklyn Union.[1] (See NYSCEF No. 1122 at 1, 15, 72-77 []; see id. at 6 n 3 [].)
In motion sequence 045, Century moves to have this court grant issue-preclusive effect in the upcoming trial to findings made by the allocator in his decision. In motion sequence 037, Brooklyn Union moves to exclude the allocation decision from evidence at trial altogether.
Century's motion is denied. Brooklyn Union's motion is granted.
Century's motion seeks to preclude Brooklyn Union from relitigating "Four Factual Findings" assertedly made in the allocation decision. (NYSCEF No. 817 at 1 [].) In opposing this motion, Brooklyn Union makes two arguments that apply to all four findings. Those arguments are addressed below in Section I.A. The parties' arguments with respect to each finding individually are dealt with in Section I.B. This court concludes that none of the findings in question satisfies the requirements of issue preclusion. The motion is denied.
It is undisputed that issue preclusion in New York has at least four elements: (i) "[T]he issues in both proceedings are identical"; (ii) "the issue in the prior proceeding was actually litigated and decided"; (iii) "there was a full and fair opportunity to litigate in the prior proceeding"; and (iv) "the issue previously litigated was necessary to support a valid and final judgment on the merits." (Conason v Megan Holding, LLC, 25 N.Y.3d 1, 17 [2015].) Brooklyn Union, citing the Court of Appeals's decision in Kaufman v Eli Lilly & Co. (65 N.Y.2d 449, 456 [1985]), contends that a party seeking to invoke issue preclusion must also satisfy a fifth element: that the issue decided in the prior proceeding also be decisive of the second action.[2] (See NYSCEF No. 811 at 15-16.) None of the allocation findings at issue on this motion will resolve the upcoming trial. Therefore, Brooklyn Union contends, they cannot be accorded preclusive effect. (See id.) This court disagrees.
Brooklyn Union is correct that the Court of Appeals stated in Kaufman that issue preclusion is warranted only if the party seeking preclusion demonstrates that the issue is decisive of the later action. (See 65 N.Y.2d at 455.) But a year before Kaufman, the Court of Appeals concluded in Ryan v New York Telephone Co. (62 N.Y.2d 494, 500-501 [1984]) that decisiveness in this sense is not required for issue preclusion.[3]
Since then, two different lines of Court of Appeals precedent have developed. Neither line acknowledges the other. One line requires decisiveness. The other does not.[4] (Compare e.g. Conason, 25 N.Y.3d at 17 [four elements], with Howard v Stature Elec., Inc., 20 N.Y.3d 522, 525 [2013] [five elements].) The Appellate Division, First Department, also has two lines of conflicting precedent.[5] (Compare e.g. Gjonaj Realty & Mgt. Corp. v Capacity Group of NY LLC, 173 A.D.3d 534, 535 [1st Dept 2019] [] [internal quotation marks omitted]), with Rojas v Romanoff, 186 A.D.3d 103, 108-109 [1st Dept 2020] [].)
In the current action, this distinction is not academic. Applying the five-element Kaufman test warrants denial at this point of Century's motion at this point: This court does not see how the findings for which Century seeks preclusion could decide the current coverage action. Nor does Century contend otherwise.[6] On the other hand, applying the four-element Ryan test entails rejecting Brooklyn Union's decisiveness-based challenge to preclusion and going on to consider Brooklyn Union's other categorical and individualized arguments against Century's motion.
This court concludes that it must apply the four-element Ryan test. The court must follow "the most recent controlling authority." (Vaughan v Leon, 94 A.D.3d 646, 649 n 2 [1st Dept 2012].) And the Court of Appeals's 2015 decision in Conason and the First Department's 2021 decision in Rojas, both employing the four-element Ryan test, came after the most recent decisions of those courts using the five-element Kaufman test (Howard in 2013; Gjonaj Realty in 2019, respectively).[7]
As discussed above, issue preclusion requires a full and fair opportunity to litigate the issue in question. Brooklyn Union argues on two grounds that it lacked a full and fair opportunity to litigate any of the findings for which Century seeks preclusion. This court is unpersuaded.
First, Brooklyn Union argues that a full-and-fair-opportunity was absent because a provision in the allocation agreement stated that the decision would not have binding effect in any later dispute over allocating cleanup costs (as opposed to remedial-design costs). (See NYSCEF No. 811 at 17.) But the First Department decision in Feinberg v Boros, cited by Brooklyn Union, holds that the weight to be given this type of ex ante limitation provision depends on the extent to which it "accurately reflects . . . the parties' expectations not to fully litigate issues" in the arbitration proceeding. (99 A.D.3d 219, 228 [1st Dept 2012].) Here, the extensive and vigorous litigation among the parties to the allocation proceeding (including Brooklyn Union) indicates that the limitation provision did not reflect the parties' intention to contest issues in the proceeding in only a partial or limited fashion.
Second, Brooklyn Union contends that the full-and-fair-opportunity element of issue preclusion requires an opportunity to appeal the allocation decision. (See NYSCEF No. 811 at 17-18.) Neither Brooklyn Union nor Century cites New York precedent that addresses a challenge on this ground to the preclusive effect of an arbitration (or arbitral-type) award. Nor has this court's research uncovered any precedent on this point. This court concludes that Brooklyn Union's argument is creative but unavailing.[8]
Brooklyn Union's position cannot be reconciled with the realities of arbitration and arbitration-related preclusion jurisprudence as they exist in New York. As Century points out (see NYSCEF No. 817 at 16), CPLR 7511 stringently limits the right of a party to an arbitration proceeding to challenge the ultimate decision or award. A court may not vacate or modify an arbitral award based on the arbitrator's mistake of law, or for that...
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