Pasternack v. Lab. Corp. of Am. Holdings
| Decision Date | 30 June 2016 |
| Citation | 27 N.Y.3d 817,37 N.Y.S.3d 750,2016 N.Y. Slip Op. 05179,59 N.E.3d 485 |
| Parties | Doctor Fred L. PASTERNACK, Appellant, v. LABORATORY CORPORATION OF AMERICA HOLDINGS, Also Known as LabCorp, et al., Respondents. |
| Court | New York Court of Appeals Court of Appeals |
Shapiro Arato LLP, New York City (Cynthia S. Arato and Daniel J. O'Neill, of counsel), for appellant.
Seyfarth Shaw LLP, Atlanta, Georgia (Frederick T. Smith of counsel), and Seyfarth Shaw LLP, New York City (Gina R. Merrill of counsel), for LexisNexis Occupational Health Solutions Inc. formerly known as ChoicePoint, Inc., respondent.
Kelley Drye & Warren, LLP, New York City (Robert I. Steiner and Sarah L. Reid of counsel), for Laboratory Corporation of America Holdings, respondent.
ABDUS–SALAAM
, J.
In this action sounding in, among other things, negligence and fraud, plaintiff Fred Pasternack seeks to recover damages from defendants Laboratory Corporation of America Holdings (LabCorp) and ChoicePoint, Inc., arising from defendants' alleged misconduct in performing and evaluating a random drug test that he was required to take as an airline pilot. We have accepted two certified questions from the United States Court of Appeals for the Second Circuit, asking us to determine (1) whether drug testing regulations and guidelines promulgated by the Federal Aviation Administration (FAA) and the Department of Transportation (DOT) create a duty of care for drug testing laboratories and program administrators under New York negligence law, and (2) whether a plaintiff may establish the reliance element of a fraud claim under New York law by showing that a third party relied on a defendant's false statements resulting in injury to the plaintiff. We answer both questions in accordance with this opinion.
The underlying facts and procedural history are summarized as follows:
Plaintiff is a physician and part-time Northeastern Aviation Corporation airline pilot. He was required to submit to random drug testing pursuant to FAA regulations as part of its mandate to ensure “safety in air commerce and national security” (49 U.S.C. § 44701
[a][5] [procedures for transportation workplace drug and alcohol testing programs]; see also 49 C.F.R. part 40). ChoicePoint entered into a contract with Northeastern where it agreed to help administer Northeastern's drug program, including performing the services of a medical review officer (MRO). LabCorp, which provides specimen collection and drug testing services for private entities, entered into a contract with ChoicePoint to perform those services for Northeastern. When performing their duties under these contracts, both ChoicePoint and LabCorp were required to comply with the DOT Regulations and the DOT's Urine Specimen Collection Guidelines (collectively, the DOT Regulations and Guidelines). The stated purpose of the DOT Regulations “is to establish a program designed to help prevent accidents and injuries resulting from the use of prohibited drugs or the misuse of alcohol by employees who perform safety-sensitive functions in aviation” (14 C.F.R. 120.3
).
On June 1, 2007, plaintiff was notified by Northeastern that he had been selected for random drug testing. On June 5, 2007, at about 1:10 p.m., he appeared for drug testing at a LabCorp site located in Manhattan. The urine sample plaintiff first produced at the test site was an insufficient quantity for testing. This is referred to under the DOT Regulations as a “shy bladder” situation. The DOT Regulations and Guidelines set forth procedures to be followed in such a situation, which include urging the employee to drink up to 40 ounces of fluid distributed reasonably through a three-hour period, or until the employee has provided a sufficient urine specimen (49 C.F.R. 40.193
; United States Department of Transportation, Office of Drug and Alcohol Policy and Compliance, Urine Specimen Collection Guidelines [Dec. 2006] ). At the time that plaintiff was tested, the DOT Guidelines provided that “[t]he collector must specifically tell the employee that he or she is not permitted to leave the collection site and if they do so, that it will be considered a refusal to test” (DOT Guidelines at 20 [Dec. 2006] ).1
According to the complaint, Theresa Montalvo, a Patient Services Technician for LabCorp, told plaintiff that he would need to produce another urine sample, but did not explain the shy bladder procedure to him or urge him to drink additional fluids, and instead told him to return to the waiting room. Plaintiff did return to the waiting room, but believed it was unlikely that he could produce a sufficient urine sample before needing to depart the collection site for a scheduled aviation medical examination he was performing. He told Montalvo that he needed to leave, but would return to complete the test. Montalvo did not inform him that leaving the collection site would be considered a “refusal to test.” She did tell him that she was required to notify Northeastern that he was leaving and asked when he would return. Plaintiff told her she was free to contact Northeastern and that he would return the next day. He returned to the LabCorp facility around 4:00 p.m. that same day, and Montalvo called Northeastern and obtained permission to take a second urine sample from plaintiff. She noted on the chain-of-custody form (CCF), which Northeastern had given plaintiff pursuant to the DOT Regulations, that he had left and returned and that Northeastern had approved the second collection. Upon his return, plaintiff produced an adequate sample, which tested negative for prohibited drugs.
Plaintiff's CCF was later reviewed by an MRO at ChoicePoint, who determined that because plaintiff had left the collection site before the test was completed, there had been a “refusal to test” under the DOT Regulations. ChoicePoint reported this determination to the FAA, which prompted the FAA to interview Montalvo regarding the circumstances surrounding the urine specimen collection. As alleged by plaintiff, during the interview and in her subsequent signed statement, Montalvo did not tell the FAA investigators that plaintiff had told her during the initial collection that he planned to return to complete his collection. In November 2007, by emergency order, the FAA revoked all of plaintiff's airman certificates, finding that he had engaged in a refusal to test. It subsequently terminated plaintiff's designation as an Aviation Medical Examiner (AME) for the FAA, which gave him the authority to conduct FAA-mandated examinations for pilots. Thus, he was unable to pilot any flights or function as an AME.
Plaintiff appealed the termination of his AME designation to the FAA and that appeal was denied. He also appealed the revocation of his airman certificates to the FAA. A hearing was held before an administrative law judge (ALJ) at which both plaintiff and Montalvo testified. Plaintiff claimed that he left the collection site with Montalvo's acquiescence, while she testified that he rushed out of the facility before she could explain the shy bladder procedures to him. As previously noted, it was undisputed that Montalvo did not advise plaintiff that he would be deemed a “refusal to test” if he left the facility. The ALJ upheld the revocation, as did the National Transportation Safety Board (NTSB). Plaintiff appealed the NTSB's decision to the Court of Appeals for the D.C. Circuit, which vacated the decision and remanded the matter to the NTSB, holding that the NTSB's finding that Montalvo had been precluded from explaining the shy bladder procedure to plaintiff was not supported by substantial evidence (see Pasternack v. National Transp. Safety Bd., 596 F.3d 836 [D.C.Cir.2010]
). In September 2010, the NTSB remanded the case to the ALJ, directing that the ALJ make the necessary credibility findings concerning the interaction between plaintiff and Montalvo. On remand, the ALJ again concluded that plaintiff had refused to test. The NTSB again affirmed. Plaintiff appealed to the D.C. Circuit, which ruled in his favor once more, holding that “substantial evidence does not support the NTSB's determination that the collector did not impliedly give [plaintiff] permission to leave” and reversing the NTSB (Pasternack v. Huerta, 513 Fed.Appx. 1, 2 [D.C.Cir.2013]
). Subsequently, the FAA reinstated plaintiff's airman certificates and AME designation and expunged the refusal to test from his record.
In June 2010, while his administrative appeal was still pending, plaintiff commenced this lawsuit to recover damages from LabCorp and ChoicePoint for the loss of his AME certification and airman certificates. The lawsuit alleged negligence and fraud in administering the test.
On August 1, 2011, the District Court granted ChoicePoint's motion to dismiss (see Pasternack v. Laboratory Corp. of Am., 2011 WL 3478732, 2011 U.S. Dist LEXIS 88311
[S.D.N.Y., Aug. 1, 2011, No. 10–Civ–4426(PGG) ] ), concluding that plaintiff had not alleged any facts that supported a finding that ChoicePoint owed a duty of care to plaintiff. On September 6, 2012, the District Court granted plaintiff's motion for leave to file a proposed second amended complaint as to LabCorp, but denied plaintiff's motion for leave to amend his complaint as to ChoicePoint, concluding that it would be futile (see Pasternack v. Laboratory Corp. of Am., 892 F.Supp.2d 540 [S.D.N.Y.2012]
). Plaintiff filed a second amended complaint as to LabCorp, asserting claims for negligence, gross negligence, negligent misrepresentation, fraud, and injurious falsehood. Subsequently, the District Court granted LabCorp's motion to dismiss (Pasternack v. Laboratory Corp. of Am., 2014 WL 4832299, 2014 U.S. Dist LEXIS 137671 [S.D.N.Y., Sept. 29, 2014, No. 10–Civ–4426(PGG) ] ), holding that with respect to the negligence claims, under New York law, LabCorp had no duty of care to properly apply federal drug testing regulations and guidelines, and regarding the fraud claims, that under New York law,...
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