Fada Indus. v. FALCHI BLDG CO.

• Decision Date: 22 June 2001
• Citation: 730 N.Y.S.2d 827,189 Misc.2d 1
• Parties: FADA INDUSTRIES, INC., Plaintiff,<BR>v.<BR>FALCHI BUILDING CO., L.P., et al., Defendants.<BR>KOOLWEAR, INC., Third-Party Plaintiff,<BR>v.<BR>GENERAL ACCIDENT INSURANCE CO., Third-Party Defendant.
• Court: New York Supreme Court

189 Misc.2d 1

730 N.Y.S.2d 827

FADA INDUSTRIES, INC., Plaintiff,

v.FALCHI BUILDING CO., L.P., et al., Defendants.

KOOLWEAR, INC., Third-Party Plaintiff,

v.GENERAL ACCIDENT INSURANCE CO., Third-Party Defendant.

June 22, 2001.

Speyer & Perlberg, Melville, for third-party defendant.

Milner & Coburn, New York City, for Koolwear, Inc., defendant and third-party plaintiff.

Morenus, Marchese & Cardoza, Westbury, for Falchi Building Co., L.P., and another, defendants.

Nicoletti, Horning, Campise & Sweeney, New York City, for plaintiff.

OPINION OF THE COURT

PATRICIA P. SATTERFIELD, J.

This Court holds that a cause of action based upon negligent spoliation of evidence may be asserted by an insured in a third-party action against its insurer based upon the insurer's alleged loss or destruction of key evidence crucial to the insured's defense in the underlying action.

This is an action to recover for damages to property caused by a water leak on March 15, 1998. In June 1999, Fada Industries, Inc., a tenant in a building located at 31-00 47th Avenue, Long Island City, New York, commenced this action against Falchi Building Co., L.P., and ATC Management, Inc. (codefendants), the owner and manager of the building, respectively, and Koolwear, Inc. (Koolwear), the cotenant whose water heater allegedly was responsible for the water leak; codefendants cross-claimed against Koolwear. Prior to the commencement of the action, Koolwear's insurer, General Accident Insurance Co. (General Accident), on or about April 21, 1998, during the course of its investigation of Koolwear's claim for property damage, allegedly caused the removal of the offending water heater from Koolwear's premises; the water heater subsequently was lost or destroyed while in the possession of an agent of General Accident. Koolwear thereafter, on or about October 19, 2000, commenced a third-party action against General Accident seeking recovery for the negligent loss of the water heater based upon two theories: (1) that the loss impaired its ability to defend the action brought by Fada, and (2) the loss has prevented it from impleading those entities which negligently manufactured, installed, and/or repaired the water heater. Defendant moves to dismiss the third-party complaint on the ground that it fails to state a cause of action; Koolwear cross-moves for leave to serve an amended third-party complaint.

Motion to Dismiss

General Accident moves to dismiss the third-party complaint on the ground that it fails to state a cause of action because the negligent destruction of evidence, which is the substance of Koolwear's third-party action, is not a recognized tort in the State of New York.^[1] On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction, the facts as alleged in the complaint are accepted as true and the plaintiff is afforded the benefit of every possible favorable inference. (Leon v Martinez, 84 NY2d 83; Santos v City of New York, 269 AD2d 585; Jacobs v Macy's E., 262 AD2d 607; Doria v Masucci, 230 AD2d 764; Hinrichs v Youssef, 214 AD2d 604.) In assessing a motion under CPLR 3211 (a) (7), a court properly may freely consider affidavits submitted by the plaintiff for the limited purpose of ascertaining whether they may remedy defects in the complaint or they establish conclusively that plaintiff has no cause of action. (Rovello v Orofino Realty Co., 40 NY2d 633.) Such "affidavits may be used freely to preserve inartfully pleaded, but potentially meritorious, claims." (Id. at 635.) "[T]he criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one." (Guggenheimer v Ginzburg, 43 NY2d 268, 275.) The determination to be made is whether the facts as alleged fit within any cognizable legal theory. (Leon v Martinez, supra, 84 NY2d at 88.) However, bare legal conclusions as well as factual claims that are flatly contradicted by the record are not presumed to be true on a motion to dismiss for failure to state a cause of action, and are not entitled to any such consideration. (Mayer v Sanders, 264 AD2d 827; Meyer v Guinta, 262 AD2d 463.) Moreover, where the plaintiff's submissions conclusively establish that there is no cause of action, the cause of action should be dismissed. (Rovello v Orofino Realty Co., supra, 40 NY2d at 636; Held v Kaufman, 238 AD2d 546.)

The issue raised on this motion presents another opportunity to examine the question of whether spoliation of evidence is an actionable tort within New York State. Two lower court decisions, Pharr v Cortese (147 Misc 2d 1078) and Weigl v Quincy Specialties Co. (158 Misc 2d 753), which relies upon Pharr, are the two instances in which the spoliation of evidence theory has been rejected as a cognizable tort action by the courts of New York, notwithstanding the absence of appellate authority. The Weigl decision, especially, has been the basis for several federal court decisions that repeatedly state in words or substance that New York courts follow the majority view and do not view spoliation of evidence as a legally cognizable tort action. (See, Black Radio Network v NYNEX Corp., 44 F Supp 2d 565, 586; Tietjen v Hamilton-Beach/Proctor-Silex, 1998 WL 865586, *3, 1998 US Dist LEXIS 19404, *7 [ND NY, Nov. 25, 1998, McAvoy, Ch. J.]; Whittlesey v Espy, 1996 WL 689402, *1, 1996 US Dist LEXIS 17638, *2 [SD NY, Nov. 26, 1996, Jones, J.]; Mondello v Dun & Bradstreet Corp., 1996 WL 239890, *3, n 1, 1996 US Dist LEXIS 6189, *7, n 1 [SD NY, May 9, 1996, Sweet, J.], all citing Weigl v Quincy Specialties Co., 158 Misc 2d 753.) At issue is whether the facts of this case warrant a departure from the majority view.

It is beyond cavil that the Pharr and Weigl decisions were limited to the facts of those particular cases.^[2] In reaching its decision, the Pharr court rejected "two cases, from other States, which have recognized a cause of action for the spoliation of evidence, namely, Smith v Superior Ct. (151 Cal App 3d 491, 198 Cal Rptr 829 [1984]) and Bondu v Gurvich (473 So 2d 1307 [Fla 1984])." (147 Misc 2d at 1080.) The court reasoned: "The reliance is misplaced. In both of those cases the spoliation of evidence made it extremely difficult or impossible for the plaintiffs to maintain or prove their causes of action." (Id.) The court, in Pharr, stated that "[u]nder the facts of this case, the court declines to accept Pharr's invitation to create a new cause of action." (Id.)

Several years after Pharr, the Supreme Court, New York County, in Weigl v Quincy Specialties Co., a workers' compensation case, stated (158 Misc 2d at 756):

"The courts of New York follow the majority view and do not recognize spoliation of evidence as a cognizable tort action. A review of the relevant case law in this jurisdiction has disclosed no case precedent which recognized spoliation as a valid tort action. Rather in Pharr v Cortese (147 Misc 2d 1078 [Sup Ct, NY County 1990]) the court refused to sustain intentional spoliation of records as a viable cause of action under the factual evidence of that case."

The Weigl court, however, acknowledged that "this jurisdiction does recognize a common-law cause of action against an employer for negligently and intentionally impairing an employee's right to sue a third-party tortfeasor notwithstanding the employee having received workers' compensation benefits" (id. at 757), and granted the plaintiff leave to serve an amended complaint to substitute the spoliation claims with those causes of action. The Pharr and Weigl decisions, thus, both intimate that, on a proper set of facts, spoliation of evidence might be recognized as a cognizable tort.

Koolwear contends that since all of the cases relied upon by General Accident are fact specific, "spoliation of evidence should be recognized as a viable cause of action upon the facts here presented." General Accident counters that "cases upon plaintiffs' right to bring suit based upon a defendant's interference with their right to sue another party are limited to those instances where the plaintiff is the employee [whose] employer destroyed evidence to prevent the target defendant from bringing them in as third-party defendants." General Accident concludes that this Court should not recognize spoliation of evidence as an independent tort, particularly since such a tort is not recognized in the majority of jurisdictions in this country. General Accident further argues that the only exception to this arguably ironclad rule is those cases that stand for the proposition that a spoliation of evidence cause of action only is sustainable when asserted by an employee against an employer, citing DiDomenico v C & S Aeromatik Supplies (252 AD2d 41).

In DiDomenico v C & S Aeromatik Supplies (supra), the Appellate Division, Second Department, approved the striking of an answer and cross claims based upon the employer's spoliation of all of the physical evidence thereby impairing the plaintiff employee's right to sue a third-party tortfeasor, and granted summary judgment to a codefendant because the employer also was responsible for the destruction of all the evidence by which the codefendant might have defended itself against the plaintiff's allegations. The Court granted the plaintiff employee's summary judgment motion on his common-law cause of action against his employee, as well as the defendant's summary judgment motion seeking indemnification from the employer, which is the relief sought here against General Accident. (See also, Kirkland v New York City Hous. Auth., 236 AD2d 170 [dismissal of third-party action appropriate where crucial evidence was negligently destroyed]; Mudge, Rose, Guthrie, Alexander & Ferdon v Penguin Air Conditioning Corp., 221 AD2d 243 [dismissal of complaint warranted where plaintiff negligently lost key piece of evidence before defendants could examine it]; Sage Realty Corp. v Proskauer Rose, 275 AD2d 11 [same]; New York Cent. Mut. Fire Ins. Co. v...