Matthew Isabella et al., Plaintiffs, Doris A. Hallock et al., Third-Party Respondents,v.Michael W. Koubek, Third-Party Appellant.BriefN.Y.February 18, 2014To be Argued By: Arthur J. Siegel ~— • STATE OF NEW YORK COURT OF APPEALS MATTHEW ISABELLA AND MARY ISABELLA, HIS WIFE, Plaintiffs, DORIS A. HALLOCK AND PETER T. HALLOCK, Defendants/Third-Party Plaintiffs/Respondents v. MICHAEL W. KOUBEK, Third-Pasty Defendant/Appellant REPLY BRIEF FOR THIRD-PARTY DEFENDANT/APPELLANT MICHAEL W. KOUBEK Arthur J. Siegel, Esq. Bond, Schoeneck &King, PLLC Attorneys fog Michael W. Koubek 111 Washington Avenue Albany, NY 12210 Telephone: (518) 533-3000 TABLE OF CONTENTS TABLE OF AUTHORITIES ..................................................................................... ii PRELIMINARY STATEMENT ............................................................................... 1 POINT I SINCE THE HALLOCKS CANNOT SUE PLAINTIFF'S CO- EMPLOYEE OLDENBORG FOR CONTRIBUTION, THE HALLOCKS SHOULD NOT BE PERMITTED TO USE V&T LAW § 388 TO SUE KOUBEK AS OWN~~R ............................................... 1 A. Workers' Compensation Law § § 11, 29(6) and CPLR § 1401 Preclude The Hallocks From Suing Koubek ......................................................................... 1 B. The Lack of An Employment Relationship Does not Authorize aThird-Party Action Against Koubek ................................................................................... 2 C. V&T Law §388 Was Enacted To Provide Financial Security To Plaintiffs, Not To Create A Contribution Remedy For Defendants ................................ 5 D. The Intended Consequences of Joint And Several Liability Cannot Be Avoided By Misapplication of V&T Law §388 ............................................. 6 E. The Issues In This Case Impact The Real Parties In Interest ......................... 9 POINT II THE HALLOCKS HAVE FAILED TO SHOW WHY KENNY V. BACOLO SHOULD NOT BE APPLIED TO THIS CASE ............... 11 POINT III THE HALLOCKS HAVE NOT SHOWN WHY THE HOLDING IN TIKHONOVA V. FORD COMPELS A FINDING OF VICARIOUS LIABILITY......................................................................................... 11 POINT IV THE HALLOCKS HAVE NOT DEMONSTRATED THAT CLAMP V. ESTATE OF HALE WAS CORRECTLY DECIDED ................... 12 CONCLUSION .......................................................................................................13 TABLE OF AUTHORITIES CASES Page No. Clamp v. Estate of Hales, 10 Misc. 3d 988 (N.Y. Sup. Ct. Greene 2005) ............................................. 12, 13 Continental Auto Lease Corp. v. Campbell, 19 N.Y. 2d 350, 352 (1967) ................................................................................. 5 Fung v. Japan Airlines Co., Ltd., 9 N.Y.3d 351 (2007) ............................................................................................ 1 Kenny v. Bacolo, 61 N.Y. 2d 642 (1983) ................................................................................. 11, 13 Mowczan v. Bacon, 92 N.Y. 2d 281 (1998) ......................................................................................... 5 Murdza v. Zimmerman, 99 N.Y. 2d 375 (2003) .........................................................................................5 Naso v. Lafata, 4 N.Y. 2d 585 (1958) .......................................................................3, 8, 9, 12, 13 Nassau Roofing &Sheet Metal Co. v Facilities Dev. Com., 71 NY2d 599, 603 ................................................................................................2 Raquet v. Braun, 90 N.Y.2d 177 (1997) .................................................................................... 2, 12 Rauch v. Jones, 4 N.Y. 2d 592 (1958) ..................................................................................passim Tikhonova v. Ford Motor Co., 10 A.D. 3d 185 (lst Dept. 2004) aff d 4 N.Y. 3d 621 (2005) ..................... 11, 12 STATUTES Vehicle &Traffic Law § 388 ............................................................................passim CPLR § 4545 (a) ........................................................................................................ 8 ii New York Workers' Compensation Law § 29(6) ........................................... 1, 9, 13 New York Workers' Compensation Law § 11 ................................................... 6, 7, 9 CPLR § 1401 ......................................................................................................... 1, 2 Workers' Compensation Law § 29 (1) ...................................................................... 8 iii PRELIMINARY STATEMENT This Brief is submitted on behalf of Third-Party Defendant-Appellant Michael W. Koubek ("Koubek") in reply to the Brief of Defendants-Third Party Plaintiffs-Respondents, Doris A. Hallock and Peter T. Hallock ("the Hallocks"). POINT I SINCE THE HALLOCKS CANNOT SUE PLAINTIFF'S CO-EMPLOYEE OLDENBORG FOR CONTRIBUTION, THE HALLOCKS SHOULD NOT BE PERMITTED TO USE V&T LAW § 388 TO SUE KOUBEK AS OWNER A. Workers' Compensation Law ~~ 11, 29 6) and CPLR ~ 1401 Preclude The Hallocks From Suing Koubek The Hallocks assert that they should be permitted to commence athird-party action against Koubek because he is not an employer or co-employee entitled to protection under The Worker's Compensation Law. This oversimplifies the issue and misses two essential points: 1) Koubek's alleged liability is not independent but is wholly derivative under V&T Law § 3 88 from a statutorily protected co- employee and 2) the Hallocks seek contribution not for the independent negligence of Koubek but for the negligence of co-employee Oldenborg. The Hallocks have not challenged the well established principle that "Workers' Compensation Law § § 11 and 29 (6) restrict an employee from suing his or her employer or co-employ for an accidental injury sustained in the course of employment." Fund v Japan Airlines Co., Ltd., 9 N.Y.3d 351, 357 (2007) (emphasis supplied). Therefore, Oldenborg is just as protected from suit as Plaintiff's employer. The Hallocks, by not commencing a contribution action directly against Oldenborg, or even arguing that one exists, acknowledge the effect of CPLR § 1401, which prohibits contribution claims against those protected by "sections eleven and twenty-nine of the worker's compensation law, or the worker's compensation law of any other state or the federal government..." CPLR § 1401. This Court in Raquet v. Braun, 90 N.Y.2d 177 (1997) explained the limited circumstances under which a contribution claim can be commenced: The "critical requirement" for apportionment by contribution under CPLR article 14 is that "the breach of duty by the contributing party must have had a part in causing or augmenting the injury for which contribution is sought" Nassau Roofing &Sheet Metal Co. v Facilities Dev. Com., 71 NY2d 599, 603. Id. at 183. This "critical requirement" is absent here. The Hailocks' single contribution claim is directed to Koubek, whose liability is entirely passive and derives from statute, not from his own negligent conduct. Since Oldenborg has no third-party liability for this accident by operation of the Workers' Compensation Law, there is nothing for which Koubek can be vicariously liable. B. The Lack of An Employment Relationship Does not Authorize a Third- Party Action Against Koubek As both District Court and the Second Circuit correctly pointed out, Plaintiff cannot commence an action against Koubek under V&T Law §388 because, under 2 the principles enunciated in Rauch v. Jones, 4 N.Y. 2d 592, 595 (1958), only Oldenborg's negligence, and not Koubek's, was at issue. Despite this precedent, the Hallocks still argue that their contribution claim, concededly based solely on Oldenborg's negligence, should be allowed simply because 1) the Hallocks do not have an employment relationship with Koubek, and 2) non-employees are not specifically mentioned in the Workers' Compensation Law. First, just like the Hallocks, Plaintiff is neither an employer nor a co- employee of Koubek, but is still precluded from suing Koubek. Second, since Koubek has never been charged with any active negligence, Plaintiff, also like the Hallocks, could, if permissible, only sue Koubek for vicarious liability for the negligent acts of Oldenborg, and not for any independent negligence. Therefore, for all intents and purposes, both the Hallocks and Plaintiff are in the same legal relationship with Koubek, and both are precluded from seeking vicarious liability against Koubek. Accordingly, under the tenets confirmed in Rauch and Naso v. Lafata, 4 N.Y. 2d 585 (1958), the Hailocks should also be precluded from commencing a third-party-action against Koubek under V&T law §388. The Hallocks, in an effort to distinguish themselves from Plaintiff, assert that as Defendants and Third-Party Plaintiffs they are seeking contribution and not 3 direct damages. Significantly, they have no independent claim for personal injuries or monetary damages. On the contrary, their single contribution claim is derived entirely from Plaintiff's injuries and damages. The Hallocks' only cause of action for contribution in their Third-Party Complaint requests the following: 21. If the plaintiffs in this action should recover any judgment against the defendants/third-party plaintiffs, P. HALLOCK AND D. HALLOCK, then the defendants/third-party plaintiffs will be damaged thereby, and will be entitled to judgment over and against the third-party defendant M. KOUBEK, to the degree commensurate with the respective degrees of negligence as determined by the trier of fact in this matter and will be liable to the defendants/third-party plaintiffs, P. HALLOCK AND D. HALLOCK, for all of the recovery, if any, of the Plaintiffs. 22. By reason of the foregoing, the third-party defendant M. KOUBEK, will be liable to the defendants/third-party plaintiffs P. HALLOCK AND D. HALLOCK, in the event of any recovery herein by the plaintiffs, and the defendants/third-party plaintiffs P. HALLOCK AND D. HALLOCK are entitled to contribution from the third- party defendant, M. KOUBEK, for any verdict or judgment which may be recovered against the defendants/third-party plaintiffs. A. 67.' Therefore, not only is Koubek's negligence entirely vicarious and based solely upon Oidenborg's negligence, but the Hallocks' Third-Party Complaint is based solely on Plaintiff's claims of negligence and damages, both of which are "A" refers to the Appendix, previously filed with the Court. precluded under the Worker's Compensation Law. As this Court in Rauch explained: The Statute [Workers' Compensation Law] having deprived the injured employee of a right to maintain an action against a negligent co-employee, bars a derivative action which necessarily is dependent upon the same claim of negligence for which the exclusive remedy has been provided. Rauch, 4 N.Y. 2d at 596. For these reasons, the Hallocks cannot acquire a right from a party, in this case Plaintiff, who never acquired that right in the first place. C. V&T Law X388 Was Enacted To Provide Financial Security To Plaintiffs, Not To Create A Contribution Remedy For Defendants The Hallocks argue that by allowing them to pursue a third party claim under V&T Law § 388, they can avoid the hardship of having to pay the full judgment. The Hallocks have misconstrued the purpose of V&T Law §388. It was not designed to provide relief to defendants seeking contribution. Rather, V&T Law §388 "expresses the policy that one injured by the negligent operation of a motor vehicle should have recourse to a financially responsible defendant". Murdza v. Zimmerman, 99 N.Y. 2d 375, 379 (2003) citing Continental Auto Lease Corp. v. Campbell, 19 N.Y. 2d 350, 352 (1967). Moreover, "The thrust of the statute is designed to give injured persons access to a financially responsible insured entity that might provide for a more realistic recovery of damages." Mowczan v. Bacon, 92 N.Y. 2d 281, 284 (1998). The Hallocks are not seeking ~~ recovery for their own injuries but only for contribution to reduce the amount they would pay under the judgment. Under these circumstances, V&T Law §388 should not be available. District Court and the Second Circuit both correctly concluded that V&T Law § 388 cannot be used by Plaintiff to reach Oldenborg or Koubek because Plaintiff received from Oldenborg an exclusive remedy through Workers' Compensation. Thus the Hallocks cannot plausibly argue that they have authority under V&T Law §388 to assert Plaintiff's rights for which a remedy under Workers' Compensation has already been provided. In any event, the Hallocks are not seeking from Koubek what was paid by Oldenborg's employer in Workers' Compensation benefits, nor are they trying to recover for their own injuries from the owner of an irresponsible and uninsured motorist. Rather, they are attempting to be reimbursed for personal injury damages assessed against them. This is not the intent of V&T Law Section 388. D. The Intended Consequences of Joint And Several Liability Cannot Be Avoided By Misapplication of V&T Law §388 The Hallocks, by attempting to apply V&T Law §388 to receive contribution from Koubek, are attempting to do an "end run" around the joint and several liability to which they are subject, In the process, the Hallocks are implicitly trying to bypass Workers' Compensation Law § 11, which limits third- party claims against employers to cases involving grave injury, which is not the case here. D The Hallocks argue that they "will be forced to pay greatly more than their equitable share." Respondent's Brief, at 8. However, under New York's common law rules of joint and several liability, this result, for better or worse, is deliberate and commonplace. The intended effect of this common law rule does not justify circumventing the exclusivity of Workers' Compensation or expanding V&T Law § 388 to include claims where there is no active owner negligence. Allowing an indirect, statutorily precluded claim against an employer will be in derogation of Workers' Compensation Law § 11, which provides as follows: An employer shall not be liable for contribution or indemnity to any third person based upon liability for injuries sustained by an employee acting within the scope of his or her employment for such employer unless such third person proves through competent medical evidence that such employee has sustained a ̀grave injury'. Id. Simply because the Hallocks may not have recourse against a negligent employer or co-employee of Plaintiff does not mean that new liabilities should be created. The Hallocks would be in the same purported "inequitable" position if Oldenborg had owned as well as drove the subject vehicle in which Plaintiff was injured, or if Oldenborg had not been Plaintiff's co-employee but had insufficient insurance to pay her equitable share. The Hallocks are not without recourse. Because Plaintiff has received Workers' Compensation benefits, the Hallocks would be entitled to a reduction of any judgment under the collateral source rule for medical expenses and wages paid ~l to Plaintiff by the Workers' Compensation carrier. See CPLR § 4545 (a) and Workers' Compensation Law § 29 (1). In addition, had other independent tortfeasors besides Plaintiff's co- employee contributed to Plaintiffs' injuries, the Hallocks would still have been free to seek contribution from them. The Hallocks also assert that this case differs from Rauch and Naso because: Plaintiff has reached outside of the worker's compensation scheme to bring in [sic.] direct action as against the Hallocks. The Hallocks have been found to be 10% at fault, and are willing to pay their equitable share of the judgment. However, Koubek as the owner of the vehicle is liable for the acts of his permissive users. The Hallocks, therefore, seek contribution for the 90% of liability attributed to Koubek. (Respondents' Brief at 12.) This argument is flawed because under Workers' Compensation Law, there is simply no third-party liability on the part of the permissive user, Plaintiff's co- employee, Oldenborg. Koubek cannot assume liability that does not exist. Indeed, had District Court properly granted summary judgment to Koubek, there would have been no trial to apportion "third-party liability" to Oldenborg in the first place, and no percentage of fault against Oldenborg would have been determined. The Hallocks, as with many defendants who face full liability because they cannot commence athird-party claim against a negligent but immunized employer, needed a defense verdict to avoid any responsibility for Plaintiff's full damages. Since the Hallocks were instead found by a jury to be 10 percent at fault, they cannot complain that their failure to secure a defense verdict allows them unique contribution rights that directly contravene Workers' Compensation exclusivity. E. The Issues In This Case Impact the Real Parties In Interest The Hallocks mischaracterize this dispute as one "truly between the Hallocks' automobile carrier and Koubek's automobile carrier." Respondents' Brief at 13. Rather, this case implicates only one type of insurance: that required to be purchased by employers under Workers' Compensation Law to provide protection from employee and third-party claims. This dispute brings into focus two well-established statutory rules: 1) an employee, such as Plaintiff here, either directly or indirectly, cannot obtain recovery from his or her employer or co-employee in excess of the Workers' Compensation benefits, and 2) athird-party, such as the Hallocks, is precluded from seeking contribution against an employer unless there is a grave injury. Workers' Compensation Law, §§ 11, 29 (6). As this Court articulated in Naso v. Lafata, 4 N.Y. 2d 585 (1958): No more unequivocal expression could have been used by the Legislature as indicative of an intendment on its part to limit to workmen's compensation the recovery available to an employee injured under the circumstances. Id. at 589. E Although the resolution of this controversy may narrowly impact the insurance companies involved, the central legal issue to be decided is whether a third-party plaintiff can utilize V&T Law § 388 to pierce and undermine the protections afforded to individuals such as Oldenborg who, as the co-employee of Plaintiff acting within the scope of her duties as an employee, is totally immune from suit. As set forth above, this must be answered in the negative. Allowing the Hallocks to commence athird-party action against Koubek also potentially allows Plaintiff to ultimately recover from his co-employee, through Koubek, in excess of his limited entitlement under the Workers' Compensation Law. For example, in the event the Hallocks had a $25,000 policy and Koubek had a $1,000,000 policy, Koubek, and by extension, Plaintiff's co- employee Oldenborg, would pay Plaintiff $775,000 of the settlement. This likely scenario would directly circumvent the exclusivity of the Workers' Compensation remedy. The overwhelming and persuasive authority from decisions of this Court, informed by respect for the exclusivity of Worker's Compensation and the recognized limitations of V&T Law §388, compel the conclusion that the Hallocks' third party claim should have been dismissed as a matter of law. 10 POINT II THE HALLOCKS HAVE FAILED TO SHOW WHY KENNY V. BACOLO SHOULD NOT BE APPLIED TO THIS CASE The Hallocks cannot distinguish Kenny v. Bacolo, 61 N.Y. 2d 642 (1983), other than to argue that it addresses a virtually identical Federal Longshoreman's and Harbor Worker's Compensation Action. Nor have the Hallocks challenged this Court's reasoning in dismissing the third-party claim in Kenny: It was also proper to dismiss the third-party complaint as to Bacolo and Decker Tank &Equipment Company. As plaintiff's co-employee, Bacolo is immune from any suit for contribution based upon injuries he may have caused to Plaintiff. (citations omitted) Decker Tank was sued, as the owner of the leased truck, on the theory that it was vicariously liable for the driver's negligence. Inasmuch as the driver, Bacolo, is statutorily immune from suit, there can be no liability imputed to Decker Tank and no action can be sustained against it. (citing Rauch supra.) (other citations omitted) Id. at 645. Accordingly, under the principles articulated in Kenny, the Hallocks' third- party action should have been dismissed, and the question certified by the Second Circuit should be answered in the negative. POINT III THE HALLOCKS HAVE NOT SHOWN WHY THE HOLDING IN TIKHONOVA V. FORD COMPELS A FINDING OF VICARIOUS LIABILITY The Hallocks have also not advanced any argument as to why the case of Tikhonova v. Ford Motor Co., 10 A.D. 3d 185 (1st Dept. 2004) aff d 4 N.Y. 3d 621 (2005), supports their position, other than citing dicta from the Appellate Division not adopted by this Court and relying upon the slight hesitation expressed by the Second Circuit. This is not unexpected given that the Tikhonova Court: 1) plainly distinguished Rauch and Naso; 2) was not considering an exclusive Worker's Compensation statute and 3) found that there was "no relevant statutory scheme providing for an exclusive remedy, nor is there any corresponding public policy concern." Id. at 191. Although it is true that the Second Circuit, in the exercise of caution, indicated that they could not "automatically conclude that derivative liability against the owner is barred merely because direct liability against the driver was statutorily prohibited" (A-14), the Hallocks have not recited any policy or other reason why an exception should be made and derivative liability assessed under the facts presented here. POINT IV THE HALLOCKS HAVE NOT DEMONSTRATED THAT CLAMP V. ESTATE OF HALE WAS CORRECTLY DECIDED Finally, the Hallocks have not supported the holding in Clamp v. Estate of Hales, 10 Misc. 3d 988 (N.Y. Sup. Ct. Greene 2005) other than to 1) rely upon that Court's misinterpretation of Raquet v. Braun, 90 N.Y. 2d 177 (1997) involving an "active negligence" contribution case and 2) reiterate the Clamp Court's ruling that 12 the lack of an employment relationship alone opens the door for vicarious liability, despite the previous rulings by this Court in Rauch and Naso to the contrary. The Hallocks have failed to provide a single reason why this Court should reject its established precedent in Rauch, Naso and Kennv in favor of the isolated holding in the Clamp case.2 CONCLUSION Based upon the foregoing, Koubek respectfully requests an order answering the certified question posed to this court in the negative and concluding that a defendant may not pursue athird-party contribution claim under new York Vehicle and Traffic Law §388 against the owner of the vehicle, where the vehicle driver's negligence was a substantial factor in causing the plaintiff's injuries, but the driver is protected from suit by the exclusive remedy provisions of New York Workers' Compensation Law § 29(6). 2 The Second Circuit stated that the "force" of Clamp was that it involved "the same factual scenario and statutes..." (A-12-13) This was as far as the Second Circuit would go to acknowledge the relevance of Clamp, deferring to this Court the task of examining the Court's reasoning. However, the Second Circuit did point out that the Clamp Court failed to cite either Naso or Kennv in reaching its holding, both of which were recognized by the Second Circuit as important Court of Appeals precedents on the issues before it. 13 DATED: January 31, 2014 BOND, SCHOENECK &KING, PLLC Attorneys for Third-Party Defendant/Appellant Michael W. Koubek By: _~ Arthur J. Sie el, Esq. 111 Washington Avenue Albany, NY 12210 (518) 533-3000 asiegel(a~bsk.com 14