New York Hospital Medical Center of Queens, Appellant,v.Microtech Contracting Corp., Respondent.

Brief

N.Y.January 6, 2014

To be Argued by: TIMOTHY J. O’SHAUGHNESSY (Time Requested: 15 Minutes) APL-2013-00073 Suffolk County Clerk’s Index No. 35567/10 Appellate Division, Second Department Docket No. 2011-08990 Court of Appeals of the State of New York   THE NEW YORK HOSPITAL MEDICAL CENTER OF QUEENS, Plaintiff-Appellant, – against – MICROTECH CONTRACTING CORP., Defendant-Respondent. REPLY BRIEF FOR PLAINTIFF-APPELLANT Of Counsel: MATTHEW W. NAPARTY TIMOTHY J. O’SHAUGHNESSY MAURO LILLING NAPARTY LLP 130 Crossways Park Drive, Suite 100 Woodbury, New York 11797 Tel.: (516) 487-5800 Fax: (516) 487-5811 Appellate Counsel to: FARLEY, HOLOHAN & GLOCKNER, LLP Attorneys for Plaintiff-Appellant Date Completed: August 15, 2013 TABLE OF CONTENTS PRELIMINARY STATEMENT .................................................. 1 POINT I THE VAST MAJORITY OF THE ARGUMENTS IN MICROTECH'S BRIEF PASS BY THE HOSPITAL'S POSITION LIKE SHIPS IN THE NIGHT .................................... 2 POINT II THE LLOYD CAPITAL CASE DEMONSTRATES THAT, IN THIS CASE, THE ILLEGAL CONTRACT SHOULD NOT BE ENFORCED ......................................................... 8 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 i TABLE OF AUTHORITIES Cases Amoah v. Mallah Management, LLC, 57 A.D.3d 29 (3rd Dept. 2008) ................................ 12 Clarke v. Town of Russia, 283 N.Y. 272 (1940) ......................................... 4 Garcia v. Pepe, 42 A.D.3d 427 (2nd Dept. 2007) ............................... 3 Hettich v. Hettich, 304 N.Y. 8 (1952) ............................................ 7 International Span gels Corp. v. Marrow Manufacturing Corp., 294 N.Y. 295 (1945) ........................................ 11 Lloyd Capital Corp. v. Pat Henchar, Inc., 80 N.Y.2d 124 (1992) ................................... passim Palma v. N.L.R.B., __ F.3d _, 2013 WL 3455518 (2nd Cir. 2013) ................ 4 Ramroop v. Flexo-Craft Printing, Inc., 11 N.Y.3d 160(2008) ........................................ 5 Sackolwitz v. Charles Hamburg & Co., 295 N.Y. 264 (1946) ....................................... 7, 8 Thompson v. Grumman Aerospace Corp., 78 N.Y.2d 553 (1991) ........................................ 6 Statutes WCL § 11 ................................................... passzm 8 USC § 1324a .............................................. passim ii PRELIMINARY STATEMENT Plaintiff-Appellant New York Hospital Medical Center of Queens ("hospital") respectfully submits this reply brief in further support of its appeal from the Appellate Division's order entered September 26,2012 (109-16). This brief specifically is submitted in response to the Brief for Defendant-Respondent, dated July 16, 2013 ("Resp. Br."). Astonishingly, almost the entirety of Microtech's brief is addressed to arguments that the hospital has not made or, at best, recasts the hospital's sole argument on this appeal as some other argument. As the Court is aware at this point, the hospital's position is that because Microtech violated federal law when it hired the Lema brothers, the employment contract between Microtech and the Lemas cannot be enforced in Court and thus Microtech may not raise it as a defense to the hospital's action for indemnification and/or contribution. Also astonishingly, in its briefMicrotech only once mentions 8 USC 1324a and never acknowledges the undisputed fact that Microtech hired the Lemas without even so much as a pretense of compliance with it. Microtech's "Counter Question Presented for Review" is whether an employee's "status as an illegal immigrant" results in the employer's loss of the bar against third-party claims for indemnification and contribution (Resp. Br. at 4). But as we hope our appellant's brief made clear, it was not the Lemas' status as illegal immigrants that leads in effect to the loss of that bar, but the fact that Microtech utterly and blatantly failed to comply with clear and undisputedly applicable law when it hired the Lemas. POINT I THE VAST MAJORITY OF THE ARGUMENTS IN MICROTECH'S BRIEF PASS BY THE HOSPITAL'S POSITION LIKE SHIPS IN THE NIGHT In Point I of its brief, Micro tech argues that this Court should not read an exception into the Workers' Compensation Law or "change the clear wording of WCL § 11" (Resp. Br. at 7). But we obviously are not asking this Court to issue a chapter of the Laws of New York. Nor is this a case of statutory construction (cf. Resp. Br. at 7-8). We are not asking this Court to change the Workers' Compensation Law but rather to refuse to give effect to the contract between the Lemas and Microtech because it is illegal. Microtech does not argue, and could not plausibly argue, that in fact there is no common-law doctrine that illegal contracts are not recognized by the Courts. In Point II of its brief, Microtech argues that the fact that WCL § 11 includes two exceptions to the bar against indemnification and contribution 2 indicates that the Legislature did not intend a further exception for cases involving illegal workers. Again, it is not the fact that the Lemas were "illegal workers," but rather that Microtech violated section 1324a, that is dispositive. Moreover, employers can waive the protection of WCL § 11 by signing an agreement for indemnification or contribution. Employers can also waive the protection of WCL § 11 by failing to timely raise it as a defense (see Garcia v. Pepe, 42 A.D.3d 427 [2nd Dept. 2007]). Here, Microtech waived its protection by its intentional act of violating every aspect of section 1324a. In Point III of its brief, Micro tech finally makes its first and only reference to 8 USC 1324a (Resp. Br. at 14). Microtech asserts that under the hospital's theory, a violation of section 1324a removes the prohibition against indemnification and contribution "when it comes to" employment of illegal immigrants (Resp. Br. at 14). This is not correct: a violation of section 1324a by the employer results in an illegal contract of employment that may not be relied upon by the employer when arguing that the injured individual, to whom the owner paid damages, was its employee and therefore WCL § 11 applies. The Second Circuit Court of Appeals recently held that an undocumented worker may not recover back pay under the National Labor Relations Act regardless of whether the employee, the employer or neither violated section 1324a, reasoning that for the worker to have been employed in the period in question would have 3 required someone to violate section 1324a (Palma v. N.L.R.B., _ F.3d _, 2013 WL 3455518 at *5-*10 [2nd Cir. 2013]). Microtech cannot just wish away its blatant violation of section 1324a. This Court recognized the illegality of an employment contract for Workers' Compensation purposes in Clarke v. Town of Russia (283 N.Y. 272 [1940]). There, a justice of the peace of the Town was killed while working as an employee of the Town on a highway project. The common law prohibited employment by a Town of one of its officers. This Court held that the contract of employment on the highway project was void and denied the estate's action for Workers' Compensation benefits. The point of Microtech's Point III is that in previous cases involving the WCL and an undocumented worker, this Court has not found that the WCL did not apply. To state this proposition is to demonstrate that it is completely irrelevant. Microtech does not claim that this Court ever has had before it the question that the hospital raises on this appeal. Microtech offers Ramroop v. Flexo-Craft Printing. Inc. (11 N.Y.3d 160 [2008]), as an example of a case in which an undocumented worker had a recovery under the WCL and this Court did not strike down the recovery. But the 4 recovery the worker had received in the past was not before this Court. Simplifying somewhat, the injured worker sought additional benefits available to those who, among other things, would participate in a board-approved rehabilitation program. This Court held that he could not receive the additional benefits because he could not participate in such a program because he was not authorized to work in this country. This Court did not address whether the injured worker had been entitled to primary benefits because the question was not before it. In Point IV of its brief, Microtech simply continues to cite cases where workers had recoveries of Workers' Compensation benefits or were barred from suing their employers under the common law by the WCL. The cases held either that there was an employer-employee relationship between the two, and thus the WCL applied, or that the injury did not arise from an intentional act of the employer, which apparently was an exception to the WCL in the past. Here, there is no question that there was an employer-employee relationship between the Lemas and Microtech. Once again, we are forced to explain that Microtech' s conduct rendered the contract of employment illegal and therefore Microtech cannot raise it in this action to avoid liability. 5 Despite the fact that in our appellant's brief we explicitly stated that we are not arguing in this Court that IRCA preempts WCL 11 in this situation, Microtech could not resist stating that "this Court has already ruled" that IRCA does not preempt employees' claims for lost wages (Resp. Br. at 23-24, 35). In Point VI of its brief, Micro tech takes the absurd position that there was no contract between it and the Lemas, but rather only an employee/employer "relationship," and therefore there was no illegal contract between them. Of course, there was an oral contract but there was no written contract. If there was no contract of employment between them, the Lemas were bystanders and would have sued Microtech directly and not faced the bar of the WCL. The only case cited by Microtech on this point, Thompson v. Grumman Aerospace Corp. (78 N.Y.2d 553, 558 [1991]), was a "special employee" case and thus is not relevant here, where Microtech paid the Lemas' wages and controlled the "manner, details and ultimate result" of their work. Microtech does get around to arguing, as we expected, that the cases cited in our appellant's brief involved plaintiffs suing on contracts that were found to be illegal and that we had not found a case in which a defendant was attempting to defend a case based on an illegal contract (Resp. Br. at 27-30 & nn.2-3; cf. App. Br. at 23-24). But Microtech has no response to our citation of Hettich v. 6 Hettich (304 N.Y. 8 [1952]), our statement that Microtech has no cases stating that illegal contracts may be used to defend a case or our argument that there is no reason in logic or policy why a Court should enforce an illegal contract as a defense to a lawsuit (App. Br. at 23-24 ). Instead, Microtech makes only the absurd statements that the hospital "makes no claim that a contract existed," Microtech allegedly "has not been accused of wrongdoing" and that Microtech's conduct was not "patently illegal" (Resp. Br. at 27, 28, 29). The potential parade ofhorribles posited by Microtech if this Court agrees with the hospital will never come to pass (Resp. Br. at 32). Only where the employer violates section 1324a and thus, as here, the contract of employment is illegal, will an employee be able to sue the employer for personal injuries. All that an employer need do to avoid this is to comply with the law and make the employee show proper documentation of the employee's authorization to work in the United States (see Sackolwitz v. Charles Hamburg & Co., 295 N.Y. 264, 270 [1946], citing WCL § 14-a [all that employer must do to avoid paying double compensation to injured underage worker is comply with law and obtain employment certificate]). Workers' Compensation insurance premiums in New York may have been the highest in the country before the partial bar against third-party 7 indemnification and contribution, but that situation has not obtained in New York since 1996 (Resp. Br. at 33; see L. 1996, c. 635, § 2). And the bar is just that, a partial bar: the Legislature permitted employers to agree to indemnification and contribution provisions if they choose and provided for the continuation of indemnification and contribution if the employee suffers a "grave injury" (id.). POINT II THE LLOYD CAPITAL CASE DEMONSTRATES THAT, IN THIS CASE, THE ILLEGAL CONTRACT SHOULD NOT BE ENFORCED We cited Lloyd Capital Corp. v. Pat Henchar. Inc. (80 N.Y.2d 124 [1992]) in our appellant's brief and explained why it is not controlling here (App. Br. at 17-18). Microtech argues that Lloyd Capital applies (1) because IRCA has its own regulatory sanctions and civil liability and (2) because IRCA merely adjusts the relations between employer and employee (Resp. Br. at 22-24). As to the former, at issue in Lloyd Capital was a loan by the plaintiff to a small business. The federal Small Business Administration ("SBA") notified the plaintiff after the loan was made that the interest rate was too high under its regulations and that the regulations did not permit a commitment fee, which the plaintiff had charged. The plaintiff in response adjusted the interest rate and 8 credited the defendant the amount of the commitment fee. The defendant defaulted and the plaintiff brought a foreclosure action. In Lloyd Capital, the SBA had sent the plaintiff several notices that the terms of the loan were in violation of its regulations. Further, this Court observed (80 N.Y.2d at 128 [citations omitted]): The SBA enforces the [Small Business Investment Act] and its attendant regulations by requiring licensed lenders to make detailed filings and reports, and through periodic examinations. The SBA may redress violations by the revocation and suspension of licenses and cease and desist orders. In addition, private parties may recover penalties where the violation also exceeds the permissible bounds of applicable State law. Here, the federal government did nothing. Microtech does not point to any similar regulatory scheme under IRCA. It is true that there are potential civil penalties for a violation of section 1324a, and repeated violations may be a crime, but Micro tech provides no citation of authority or other evidence that the federal government undertakes any meaningful enforcement of section 1324a. In fact, there are no reported decisions under section 1324a. 1 The Economist recently stated that it is estimated that as many as 90 percent of the agricultural workers in California's San Joaquin Valley are not authorized to work in the United States (The Economist, August 3, 2013 [http:// www.economist.com/ news/ united-states/21582548-californias-recovery-not-fixing-chronic-problems-its-heartland- down-farms [3d paragraph]). 9 As to the latter argument, we showed in our appellant's brief that IRCA was enacted to further national policy on the fundamental subject of immigration (App. Br. at 18-21 ). Lloyd Capital found that the statute there merely sought to "encourage the growth of small businesses by compensating for the difficulty they may have in obtaining financing from conventional lenders" as opposed to "protect[ing] public health and safety" (80 N.Y.2d at 128, 128 [citations omitted]). Furthering national immigration policy is certainly more on the order of protecting public health and safety than making it easier for small businesses to get loans.2 Microtech had no response to our showing of the important national interests to be furthered by IRCA. In International Spangels Corp. v. Marrow Manufacturing Corp., 294 N.Y. 295 (1945), which is cited in Lloyd Capital, this Court did not permit the plaintiff to sue for goods sold and delivered because the plaintiff could not show that the goods were sold at a price permissible under wartime price controls. Similarly here, IRCA has the nation's very welfare as its purpose. 2 At one point Microtech states that it is the hospital's position that IRCA' s purpose is to adjust the legal relationships between employers and employees (Resp. Br. at 23). But to the contrary, it is our position that !RCA's purpose is much more profound than merely adjusting legal relationships between employers and employees, as the Small Business Investment Act adjusted relationships between small businesses and lenders. 10 Furthermore, in Lloyd Capital the plaintiff had brought itself into compliance with SBA regulations, i.e., at the time that the defendant raised the defense that the terms of the loan allegedly were illegal, the terms were no longer illegal. Here, in contrast, Microtech never rectified its illegal actions in hiring the Lemas and the personal injuries to the Lemas cannot be undone. Microtech does not argue that the "loss" it would sustain if forced to indemnify or pay contribution to the hospital would be "wholly out of proportion" to its offense; in Lloyd Capital this Court stated that a party will be permitted to sue on an allegedly-illegal contract if"the denial of relief is wholly out of proportion to the requirements of public policy" (80 N.Y.2d at 127 [citation omitted]). Microtech takes a citation from Amoah v. Mallah Management. LLC (57 A.D.3d 29, 32-33 [3rd Dept. 2008] [quotation marks and citation omitted]) completely out of context. The statement at issue is one in the Congressional Record that IRCA was not intended to diminish "labor protections in existing law." However, the Workers' Compensation Law is not labor protection but rather an adjustment of the rights of workers and employers under the common law that has benefits and drawbacks for both stakeholders. The type of labor protection referred to in the Congressional Record includes workplace safety laws such as Labor Law § 240( 1 ), which Micro tech violated. 11 Discussing preemption, which is irrelevant on this appeal, Microtech refers to the States' police power to protect workers (Resp. Br. at 23-24). Again, this is a reference to statutes such as Labor Law § 240( 1 ), which Microtech violated. Microtech is in no position to claim that it is a defender of section 240( 1 ). Thus, Lloyd Capital demonstrates why Microtech should not be permitted to rely on its illegal contract to defend this case: there is no effective government regulatory scheme or enforcement mechanism for violations of section 1324a as there was in Lloyd Capital; the interest to be vindicated is a fundamental national policy; and the "loss" to Microtech is in no way "wholly out of proportion" to Microtech' s deliberate acts of hiring the Lemas knowing they were not authorized to work in the United States and putting them to dangerous work with no instructions or protection. 12 CONCLUSION The order appealed from should be reversed, Micro tech's motion denied and the hospital granted such other and further relief as the Court deems proper. Dated: Of Counsel Woodbury, New York August 15, 2013 MATTHEW W. NAP ARTY TIMOTHY J. O'SHAUGHNESSY Respectfully submitted, MAURO LILLING NAP ARTY LLP By: 130 Crossways Park Drive, Suite 100 Woodbury, New York 11797 (516) 487-5800 Appellate counsel to: Farley, Holohan & Glockner, LLP Attorneys for Plaintiff-Appellant 13