Flores v. LOWER E. SIDE SERV.

• Decision Date: 29 March 2005
• Citation: 795 N.Y.S.2d 491,828 N.E.2d 593,4 N.Y.3d 363
• Parties: MOSES FLORES, Plaintiff, v. THE LOWER EAST SIDE SERVICE CENTER, INC., Defendant and Third-Party Plaintiff-Appellant. PROCIDA REALTY AND CONSTRUCTION CORP., Third-Party Defendant-Respondent.
• Court: New York Court of Appeals Court of Appeals

4 N.Y.3d 363

828 N.E.2d 593

795 N.Y.S.2d 491

MOSES FLORES, Plaintiff, v. THE LOWER EAST SIDE SERVICE CENTER, INC., Defendant and Third-Party Plaintiff-Appellant.

PROCIDA REALTY AND CONSTRUCTION CORP., Third-Party Defendant-Respondent.

Court of Appeals of the State of New York.

Argued February 16, 2005.

Decided March 29, 2005.

Mauro Goldberg & Lilling LLP, Great Neck (Kenneth Mauro and Jennifer B. Ettenger of counsel), and Kral, Clerkin, Redmond, Ryan, Perry & Girvan, New York City, for defendant and third-party plaintiff-appellant.

Abrams, Gorelick, Friedman & Jacobson, P.C., New York City (Steven DiSiervi of counsel), for third-party defendant-respondent.

Chief Judge KAYE and Judges G.B. SMITH, CIPARICK, ROSENBLATT, READ and R.S. SMITH concur.

OPINION OF THE COURT

GRAFFEO, J.

Workers' Compensation Law § 11 permits an owner to bring a third-party claim against an injured worker's employer in only two circumstances: where the injured worker has suffered a "grave injury" or the employer has entered into a written contract to indemnify the owner. The issue in this case is whether the "written contract" provision in section 11 requires a signed agreement.

Defendant and third-party plaintiff Lower East Side Service Center (LES) is the owner of a multi-story building in Manhattan that was undergoing rehabilitation. Initially, LES hired third-party defendant Procida Realty and Construction Corp. to act as its on-site representative, having retained another firm to function as general contractor on the project. Following a dispute between LES and the other firm, Procida agreed to assume the role of general contractor. In March 2000, LES sent Procida a written contract including a provision for Procida to indemnify LES for injuries "arising out of or resulting from performance of the Work" on the $3 million project. In accordance with the terms of the agreement, Procida purchased liability insurance and obtained payment and performance bonds. In a June 23, 2000 memorandum entitled "Attachment 4-Scope Clarifications" and forwarded to LES, a Procida representative acknowledged the existence of an agreement, clarifying that under "this contract" Procida assumed no responsibility for work performed by the previous general contractor. For reasons undisclosed in the record, Procida did not sign the March 2000 contract or the June 2000 addendum, but it performed the work specified in the contract and was paid in conformity with the documents.

In September 2000, plaintiff Moses Flores, a laborer employed by Procida, sustained an eye injury while performing demolition work on the project. In addition to obtaining workers' compensation benefits, Flores commenced this personal injury action against LES as owner of the building. LES filed a third-party action against Procida asserting, in addition to common-law claims, that Procida was obligated to indemnify LES for Flores' injuries pursuant to the indemnification clause in the March 2000 contract. In its answer to the third-party complaint, Procida "admit[ted] the existence of an agreement between the parties," reserving the right to refer to the provisions of the "written agreement, if any."

Following the completion of discovery and the filing of a note of issue, LES moved for summary judgment on its third-party complaint and Procida cross-moved for summary judgment dismissing LES's claims. Although it acknowledged the existence of a contract in its answer, Procida asserted that there was no binding indemnification agreement with LES. Procida relied on the fact that the March 2000 contract was never signed, arguing that LES was precluded from seeking contractual indemnification because Workers' Compensation Law § 11 authorizes such a claim only when there is an executed document. LES countered that, notwithstanding the failure to sign the agreement, Procida's course of conduct demonstrated that it had assented to the terms of the contract months before Flores was injured. Noting that section 11 does not expressly state that an indemnification agreement must be signed, LES contended that the statute authorized enforcement of any "written contract" that was entered into prior to the date of injury. Supreme Court denied LES's motion and granted Procida's cross motion to dismiss the third-party complaint. After disposing of the common-law claims, Supreme Court reasoned that the contractual indemnification clause in the written agreement was unenforceable under Workers' Compensation Law § 11 because Procida did not sign the document. On appeal, the Appellate Division affirmed, concluding that a contract that was never executed was not "entered into" within the meaning of the statute. This Court granted LES leave to appeal and we now reverse, reinstate the contractual indemnification claim and grant summary judgment to LES.

I.

Workers' Compensation Law § 11, as amended by the Omnibus Workers' Compensation Reform Act of 1996 (L 1996, ch 635, § 2), prohibits most third-party claims for contribution or indemnification against an employer for injuries sustained by an employee acting within the scope of employment. But the statute sets forth two exceptions: the employer may be impleaded when the employee has sustained a "grave injury" or when there is a "written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution to or indemnification of the claimant" (Workers' Compensation Law § 11).

In our prior cases construing section 11, this Court has "attempt[ed] to effectuate the intent of the Legislature" (Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 583 [1998] [citations omitted]). "As the clearest indicator of legislative intent is the statutory text, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof" (id.). In this regard, we have declined to second-guess the policy choices made by the Legislature, adhering to the literal terms of the statute. Thus, in Castro v United Container Mach. Group (96 NY2d 398 [2001]) and Meis v ELO Org. (97 NY2d 714 [2002]), this Court strictly interpreted the "grave injury" designations specified by the Legislature.

We have had several opportunities to interpret the grave injury exception, but this is the first case requiring us to address the contractual indemnification exception to the prohibition against third-party claims. As previously observed, although the Legislature clearly intended to restrict claims against employers when it adopted the "grave injury" standard, it chose not to abrogate "the power of a third party to recover under express contractual obligations between the employer and the third party" (Majewski, 91 NY2d at 582). Instead, the Legislature preserved the right of parties to enter into binding contractual indemnification agreements. Procida maintains that a contract is only "entered into" within the meaning of section 11 when it is actually signed. In the absence of statutory language indicating that the written indemnification agreement must be executed, LES relies on the common-law rule that a contract need not be signed to be enforceable. Because the Legislature did not express a clear intent to deviate from the common law, we agree with LES.

We have long held that a contract may be valid even if it is not signed by the party to be charged, provided its subject matter does not implicate a statute — such as the statute of frauds (General Obligations Law § 5-701) — that imposes such a requirement. In Brown Bros. Elec. Contrs. v Beam Constr. Corp. (41 NY2d 397 [1977]), a landowner entered into a written agreement with a general contractor for the construction of a shopping plaza. The general contractor in turn contracted with Brown, a subcontractor, for electrical work. When the general contractor failed to pay Brown, the owner requested that Brown complete the work, which Brown did. When Brown submitted its bill for services to the owner, the owner refused to pay on the basis that it had never executed a written contract with Brown. After trial, the lower courts found that there was an enforceable agreement, and this Court agreed that "the course of conduct between [the owner] and Brown, including their writings. . . was sufficient to spell out a binding contract," notwithstanding the failure of the parties to sign an integrated agreement (Brown, 41 NY2d at 399). We concluded that the absence of an executed document did not end the inquiry, stating:

"In determining whether the parties entered into a contractual agreement and what were its terms, it is necessary to look . . . to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds . . .

"And, while it is the responsibility of the court to interpret written instruments . . . , where a finding of whether an intent to contract is dependent as well on other evidence from which differing inferences may be drawn, a question of fact arises" (Brown, 41 NY2d at 399-400 [citations and internal quotation marks omitted]).

Thus, under the analysis in Brown, an unsigned contract may be enforceable, provided there is objective evidence establishing that the parties intended to be bound (see also Matter of Municipal Consultants & Publs. v Town of Ramapo, 47 NY2d 144 [1979] [publishing contract was enforceable even though it was never signed by a representative of the town]).

When it enacted Workers' Compensation Law § 11, the Legislature clearly intended to limit the number of indemnification claims against employers by requiring that indemnification agreements be memorialized in a ...