Inter-Cmty. Mem'l Hosp. of Newfane v. Hamilton Wharton Grp., Inc.

• Decision Date: 16 March 2012
• Citation: 941 N.Y.S.2d 360,2012 N.Y. Slip Op. 01901,93 A.D.3d 1176
• Court: New York Supreme Court — Appellate Division
• Parties: INTER–COMMUNITY MEMORIAL HOSPITAL OF NEWFANE, INCORPORATED and Integrated Care Systems, LLC, doing business as Newfane Rehabilitation & Health Care Center, Plaintiffs–Respondents–Appellants, v. The HAMILTON WHARTON GROUP, INC., Walter B. Taylor, as managing Director of New York Health Care Facilities Workers' Compensation Trust and individually, Defendants–Appellants–Respondents,Cathy Madden, Linda Villano, Phyllis Ettinger, Patricia Huber, Rosa Barksdale, Sam Harte, Daniel Mushkin, Timothy Ferguson, Jane Doe and John Doe, as trustees of New York Health Care Facilities Workers' Compensation Trust, Defendants–Respondents,Matthews, Bartlett & Dedecker, Inc., now known as M & T Insurance Agency, Inc., et al., Defendants.

2012 N.Y. Slip Op. 01901

93 A.D.3d 1176

941 N.Y.S.2d 360

INTER–COMMUNITY MEMORIAL HOSPITAL OF NEWFANE, INCORPORATED and Integrated Care Systems, LLC, doing business as Newfane Rehabilitation & Health Care Center, Plaintiffs–Respondents–Appellants,

v.The HAMILTON WHARTON GROUP, INC., Walter B. Taylor, as managing Director of New York Health Care Facilities Workers' Compensation Trust and individually, Defendants–Appellants–Respondents,Cathy Madden, Linda Villano, Phyllis Ettinger, Patricia Huber, Rosa Barksdale, Sam Harte, Daniel Mushkin, Timothy Ferguson, Jane Doe and John Doe, as trustees of New York Health Care Facilities Workers' Compensation Trust, Defendants–Respondents,Matthews, Bartlett & Dedecker, Inc., now known as M & T Insurance Agency, Inc., et al., Defendants.

Supreme Court, Appellate Division, Fourth Department, New York.

March 16, 2012.

Milber Makris Plousadis & Seiden, LLP, Williamsville (Brian Wisniewski of Counsel), for Defendants–Appellants–Respondents The Hamilton Wharton Group, Inc. and Walter B. Taylor, as Managing Director of New York Health Care Facilities Workers' Compensation Trust and individually.

Watson Bennett Colligan Johnson & Schechter, L.L.P., Buffalo (Melissa A. Day of Counsel), for Defendant–Appellant–Respondent Daniel Mushkin.

Hogan Willig, Amherst (Steven G. Wiseman of Counsel), for Defendants–Appellants–Respondents Sam Harte and Timothy Ferguson.Zdarsky, Sawicki & Agostinelli LLP, Buffalo (Joseph E. Zdarsky of Counsel), for Plaintiffs–Respondents–Appellants.Wilson, Elser, Moskowitz, Edelman & Dicker LLP, Albany (Benjamin F. Neidl of Counsel), for Defendant–Respondent Phyllis Ettinger.Gross, Shuman, Brizdle & Gilfillan, P.C., Buffalo (R. Scott Atwater of Counsel), for Defendant–Respondent Rosa Barksdale.Law Office of Bruce S. Zeftel, Buffalo (Bruce S. Zeftel of Counsel), for Defendants–Respondents Cathy Madden and Patricia Huber.Law Offices of Patrick J. Sullivan, Mineola (Patrick J. Sullivan of Counsel), for Defendant–Respondent Linda Villano.Saltarelli & Associates, P.C., Tonawanda (Mark E. Saltarelli of Counsel), for Defendant–Respondent John Doe, as Trustee of New York Health Care Facilities Workers' Compensation Trust.

PRESENT: SCUDDER, P.J., CENTRA, PERADOTTO, LINDLEY, AND MARTOCHE, JJ.

MEMORANDUM:

Plaintiffs, formerly active members in a group self-insurance trust fund created pursuant to Workers' Compensation Law § 50(3–a), commenced this action seeking to recover, inter alia, damages for the amounts that had been levied against them to account for the trust's financial deficits. As relevant to the appeal, plaintiffs sued defendants The Hamilton Wharton Group, Inc. (HWG) and Walter B. Taylor, HWG's sole owner and controlling principal (collectively, HWG and Taylor), as program administrator and managing director of the trust, as well as individual trustees, for negligence, gross negligence, breach of contract, and breach of fiduciary duty. As a preliminary matter, we note that the motion of defendant Phyllis Ettinger seeking to strike point IV of plaintiffs' reply brief was denied by this Court, with leave to renew the motion at oral argument of the appeal. Ettinger in fact renewed the motion at oral argument, and we hereby grant it. We further note that plaintiffs have abandoned any contentions with respect to the dismissal of the causes of action for negligence, gross negligence, and breach of fiduciary duty against all of the individual trustees ( see Ciesinski v. Town of Aurora, 202 A.D.2d 984, 984, 609 N.Y.S.2d 745; see also Johnson v. Bauer Corp., 71 A.D.3d 1586, 1587, 898 N.Y.S.2d 397). We also do not consider two additional arguments. With respect to the first argument, the failure of any party to “furnish this Court with a copy of [the second] amended complaint prevents consideration of [the] argument that such pleading moots the appeal” ( Pier 59 Studios L.P. v. Chelsea Piers L.P., 27 A.D.3d 217, 217, 811 N.Y.S.2d 24; see American Express Travel Related Servs. Co. v. North Atl. Resources, 261 A.D.2d 310, 310–311, 691 N.Y.S.2d 403). With respect to the second argument, i.e., that plaintiffs have a potential derivative cause of action for breach of contract, that argument is raised for the first time on appeal and thus is not properly before us ( see Ciesinski, 202 A.D.2d at 985, 609 N.Y.S.2d 745).

We agree with HWG and Taylor that Supreme Court abused its discretion in granting plaintiffs leave, sua sponte, to replead the second and third causes of action, for negligence and gross negligence, respectively, against them. “New York does not recognize tort claims arising out of the negligent performance of a contract” ( Verizon N.Y., Inc. v. Barlam Constr. Corp. [Appeal No. 2], 90 A.D.3d 1537, 1538, 935 N.Y.S.2d 420; see Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 551, 583 N.Y.S.2d 957, 593 N.E.2d 1365) and, here, plaintiffs have not alleged the breach of a duty independent of a contract ( see Pacnet Network Ltd. v. KDDI Corp., 78 A.D.3d 478, 479, 912 N.Y.S.2d 178). The court speculated that plaintiffs might be able to plead a viable cause of action under one of the three exceptions set forth in Espinal v. Melville Snow Contrs., 98 N.Y.2d 136, 138–140, 746 N.Y.S.2d 120, 773 N.E.2d 485, but even assuming, arguendo, that plaintiffs' allegations are true and according them the benefit of every possible favorable inference (see generally Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511), we conclude that plaintiffs cannot state a cause of action under any Espinal exception ( see Sommer, 79 N.Y.2d at 552, 583 N.Y.S.2d 957, 593 N.E.2d 1365). We therefore modify the order accordingly.

We further conclude that the court abused its discretion in the third ordering paragraph in sua sponte allowing plaintiffs, upon repleading the second and third causes of action, to assert a new cause of action for indemnification. “Leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit” ( Letterman v. Reddington, 278 A.D.2d 868, 718 N.Y.S.2d 503; see CPLR 3025[b]; Nastasi v. Span, Inc., 8 A.D.3d 1011, 1013, 778 N.Y.S.2d 795; Nizam v. Friol, 294 A.D.2d 901, 902, 741 N.Y.S.2d 805), and “[t]he decision to allow or disallow the amendment is committed to the court's discretion” ( Edenwald Contr. Co. v. City of New York, 60 N.Y.2d 957, 959, 471 N.Y.S.2d 55, 459 N.E.2d 164; see Fingerlakes Chiropractic v. Maggio, 269 A.D.2d 790, 791, 703 N.Y.S.2d 632). Here, however, plaintiffs did not seek leave to amend their amended complaint to add the indemnification cause of action, so “they necessarily have not established that any proposed amendment ‘is not patently lacking in merit’ ” ( Bialy v. Honeywell Intl. Inc., 49 A.D.3d 1328, 1330, 853 N.Y.S.2d 801, lv. denied 10 N.Y.3d 714, 862 N.Y.S.2d 335, 892 N.E.2d 401). We therefore further modify...