Juan C. Gonzalez
jgonzalez@sacslaw.com
{00957797.1}
1983 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 588-3300
Facsimile: (516) 488-2324
SHAUB, AHMUTY, CITRIN & SPRATT, LLP
ATTORNEYS AT LAW
77 WATER STREET, SUITE 702
NEW YORK, NEW YORK 10005
(212) 599-8200
Facsimile: (212) 850-5545
info@sacslaw.com
January 22, 2016
By Overnight Delivery
John P. Aisello
Clerk of the Court
New York State Court of Appeals
20 Eagle Street
Albany, New York 12207
Re: In re Steam Pipe Explosion at 41st Street and Lexington Av. (SSM)
APL-2015-00281
SACS File No.: 44-00399
Dear Mr. Aisello:
We are appellate counsel to Lewis Brisbois Bisgaard & Smith LLP, attorneys for
defendant/third-party defendant/appellant Team Industrial Services, Inc. (hereinafter “Team”) in
the above-captioned appeal. This letter is submitted in response to this Court’s sua sponte
examination of the merits of Team’s appeal. Due on or before January 25, 2016, this letter
submission is timely.
Brief Facts and Procedural History
This is a consolidated litigation arising from the July 18, 2007 explosion of a steam pipe
at the intersection of 41st Street and Lexington Avenue in Manhattan that is owned and operated
by Consolidated Edison, Inc. and Consolidated Edison Company of New York, Inc. (hereinafter
“Con Ed”). The Con Ed steam pipe explosion caused massive property damage and personal
injuries, spawning over one hundred lawsuits.
This appeal is before this Court as a result of an order of the Appellate Division, First
Department, entered October 27, 2015, which granted Team leave to appeal from an order of the
same court, entered April 21, 2015, modifying an order of Supreme Court, New York County
(Jaffe, J.), entered December 9, 2013, and granting the motion of Con Ed to compel Team to
produce its voluminous litigation files, including 48 bankers boxes, from an unrelated 2001
Texas oil refinery fire in an action captioned Diamond Shamrock Refining Company L.P. v.
Cecorp, Inc. et al., No. 2003-CI-04886 (Bexar Cnty. Tex. Dist. Ct., filed Mar. 31, 2003)
(hereinafter “Diamond Shamrock”). See In re Steam Pipe Explosion at 41st St., 127 A.D.3d 554
(1st Dep’t 2015).
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Con Ed’s Motion to Compel And
Supreme Court’s Proper And Reasoned Decision
At issue on this appeal is Con Ed’s vexatious, dogged pursuit of dozens of bankers boxes
generated by Team’s prior counsel in the unrelated 2001 Diamond Shamrock oil refinery fire
litigation in Texas. In this case, Con Ed seeks Team’s entire Diamond Shamrock litigation file
on the patently incorrect premise that as pertains to the allegations against Team in both actions,
the 2001 Diamond Shamrock fire and the 2007 Steam Pipe explosion in Manhattan are
‘substantially similar’ to warrant production of over 48 bankers boxes of files. But as
demonstrated by the motion court’s reasoned decision, the opinion of dissenting Justices
Friedman and Sweeny, and as further explained below, the motion court employed the correct
standard to conclude that the two incidents are substantially dissimilar.
By contrast, a majority of the Appellate Division erred as a matter of law, and also
abused its discretion as a matter of law, by employing an incorrect, broader discovery standard
that of necessity led to a contrary conclusion. The majority’s decision creates confusion
regarding discovery of prior incidents and will inevitably result in more permissive discovery in
an era when courts are understandably trying to rein in unnecessary and burdensome discovery.
Following a meticulous and painstaking in camera review of nearly a dozen bankers
boxes from the Diamond Shamrock litigation, the motion court (Jaffe, J.) determined that the two
incidents were not ‘substantially similar’ so as to warrant the burdensome discovery Con Ed
seeks, and, thus, were not discoverable pursuant to CPLR 3101(a)’s materiality standard. See
Steam Pipe Explosion at 41st Street and Lexington Ave., 2013 WL 6409975 (Sup. New York
Cnty. 2013) (Jaffe, J.). Indeed, the motion court’s in camera review entailed an examination of
all operative documents, including all pleadings, written discovery demands and responses,
expert disclosures and reports, deposition transcripts, among other things, approximating 20,000
documents. Honing in on the substantial similarity requirement to discovery of prior incidents,
Justice Jaffe critically distinguished the two incidents on three substantial bases (id. at 3)
(emphasis added):
1. The dissimilar nature of the two incidents: In Diamond Shamrock: “[T]he
condition or nature of the two accidents was not substantially the same. In
Diamond Shamrock, the conditions of the accident were a defective and
leaking valve in a unit in a refinery”; In Steam Pipe Explosion: “The incident
at issue here involves a steam system overloaded by a large amount of rain in
a short period of time [which was] unable to release [such] accumulated steam
properly [allegedly] due to blocked steam traps, which caused a steam pipe to
burst and explode”;
2. The dissimilar allegations as to Team in each action: In Diamond
Shamrock: “Team’s alleged application of too much sealant to the leak and
improper erection and installation of a leak enclosure unit, which allegedly
contributed to causing the nozzle of the valve to rupture, and subsequent
chemical release and fire”; In Steam Pipe Explosion: “[T]he allegations
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against Team are that when it made various leak repairs on the steam system
over the years, it injected too much sealant which then migrated from the
pipes into the system and eventually blocked the traps”;
3. The dissimilar mechanism of injury vis-à-vis Team in each action: In
Diamond Shamrock: “The mechanism of injury there, as it concerns Team,
was its failure to design the leak enclosure unit properly and its excessive
application of sealant into the unit which caused the nozzle to rupture, either
by the pressure of the sealant application or the sealant itself”; In Steam Pipe
Explosion: “The mechanism of the injury as to Team is that Team’s sealant
migrated rather than stayed attached to the pipes and blocked steam traps.”
Therefore, Justice Jaffe concluded that Con Ed “failed to demonstrate how the Diamond
Shamrock incident”, particularly how Team’s knowledge from that incident:
that excessive sealant application or pressure, combined with a defective valve
and improper leak unit, could cause a chemical release and fire, would have given
[Team] notice that [in this Steam Pipe action] excessive application of sealant to
pipes within a steam system could cause the sealant to migrate into the water and
block steam traps, and, combined with a system overwhelmed by too much rain
within a short period of time, could cause a burst steam pipe and an explosion.
That the Diamond Shamrock incident may have placed Team on notice generally
of dangers associated with excessive sealant is insufficient to show that Team had
notice of the specific problem at issue here.
Steam Pipe Explosion at 41st Street and Lexington Ave., 2013 WL 6409975, at * 4 (Sup. Ct.
New York Cnty. 2013) (Jaffe. J.).
The Appellate Division’s Majority Decision And
Justices Friedman’s and Sweeny’s Reasoned Dissent
By Decision and Order entered April 21, 2015, a majority of the Appellate Division held,
inter alia, that the motion court applied the wrong legal standard in determining that Con Ed was
not entitled to discovery of the massive Diamond Shamrock litigation file. Specifically, the
majority held that the motion court applied “too harsh” a standard for determining
discoverability by applying, instead, an admissibility standard:
In our view, the motion court applied too harsh a standard in determining that
documents concerning the prior Diamond Shamrock incident are not discoverable.
We are not concerned with the ultimate admissibility of the evidence at trial, but
with the discovery of information concerning the prior incident, as to which a
more liberal standard applies (see Dattmore v Eagan Real Estate, 112 AD2d 800,
800 [4th Dept 1985] [permitting discovery of records concerning prior accidents,
noting that even if they are ultimately found to be inadmissible, “this is not the
test for disclosure under CPLR 3101(a), which is to be liberally construed”]). The
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motion court’s reliance on cases involving the exclusion of testimony or the
evaluation of evidence submitted in opposition to a defendant’s motion for
summary judgment underscores that it applied a more restrictive standard in
evaluating the discoverability of evidence concerning Diamond Shamrock and
other incidents (see e.g. Gjonaj v Otis El. Co., 38 AD3d 384 [1st Dept 2007];
Nichols v Cummins Engine Co., 273 AD2d 909 [4th Dept 2000], lv denied 96
NY2d 703 [2001]).
In re Steam Pipe Explosion at 41st St., 127 A.D.3d 554, 555-556 (1st Dep’t 2015).
The majority, however, never identified precisely what admissibility standard the motion
court purportedly applied. It is clear, however, that the motion court was resolving a discovery
dispute, and it is equally clear that ‘substantial similarity’ retains the same meaning in both
discovery and admissibility disputes. Moreover, by mischaracterizing the motion court’s
resolution of the issue by nomenclature proxy, the majority itself employed the wrong legal
standard for resolving the instant discovery dispute. As Justices Friedman and Sweeny in their
dissent correctly observed, disclosure of the massive Diamond Shamrock litigation file should
not be based upon a heretofore unrecognized “superficial” similarities standard (i.e., both actions
involved sealant). Instead, the proper standard of ‘substantial similarity’, as pertains to the role
that excess sealant played in the two actions, must focus upon “etiology” (i.e., how the sealant
allegedly caused or contributed to the accident in each case, and whether the cause in the prior
accident was ‘substantially similar’ such that Team would have had notice of a potential problem
that it should have avoided in this case based upon its knowledge of what occurred in Diamond
Shamrock). Justices Friedman and Sweeny further observed that “even if one could reasonably
disagree with Supreme Court’s determination of this question, it cannot be denied that the
determination is based on a thorough, logical, and reasoned analysis that is well within Supreme
Court’s ‘broad discretion in supervising disclosure’ (Occidental Gems, 11 NY3d at 845 [internal
quotation marks omitted]), especially in a matter as complex as this one, involving
approximately 100 actions arising from the same pipe explosion that, as of this writing, have
been pending for more than six years.”
Subsequently, the same panel of the Appellate Division granted Team’s motion for leave
to appeal to this Court, certifying (1) that “its determination was made as a matter of law and not
in the exercise of discretion” and (2) the following question: “Was the order of Supreme Court,
as modified, on the law, and otherwise affirmed, by this Court, properly made?”
We note that positive relief issued to Team on this appeal will have a definite impact on
the proceedings below. In July of 2015, Team complied with the Appellate Division’s order
compelling it to produce 48 bankers boxes from the Diamond Shamrock litigation. In addition,
Con Ed was allowed two depositions based upon this document production. As such, if this
Court agrees with Team that the Appellate Division abused its discretion as a matter of law,
reverses the Appellate Division’s order and reinstates the motion court’s order, we would ask
that it issue a further directive upon remand ordering Con Ed to disgorge the 48 bankers boxes of
documents produced and bar Con Ed from using at trial any fruit of the poisonous tree. See
Gama Aviation Inc. v. Sandton Capital Partners, LP, 113 A.D.3d 456 (1st Dep’t 2014) (order
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compelling production of documents reversed, “motion denied, and defendants directed to return
the documents previously produced * * * and no paper or electronic copies may remain in
counsel’s possession.”).
Legal Discussion
The Majority Erred As A Matter of Law, And Also Abused Its Discretion
As A Matter of Law, By Employing An Erroneous And Unduly Broad
Discoverability Standard That Looks To Superficial Similarity Between
Prior And Current Accidents To The Exclusion Of Virtually All Other Factors
As articulated in detail by Justices Friedman and Sweeny in their dissenting opinion, the
majority erred and itself applied the wrong standard in reversing the motion court’s in-depth
determination that the pertinent facts and allegations in the Diamond Shamrock litigation were
not ‘substantially similar’ so as to warrant the extraordinary expense and burden of production.
In applying the wrong standard for discovery in this context, the Appellate Division abused its
discretion as a matter of law, a question which this Court is empowered to review. See 425 Park
Ave. Co. v. Fin. Adm’r of the City of New York, 69 N.Y.2d 645, 648 (1986) (“it was an abuse of
discretion as a matter of law to grant petitioner’s motion for discovery”); see also U. S. Pioneer
Elecs. Corp. v. Nikko Elec. Corp. of Am., 47 N.Y.2d 914, 916 (1979) (same).
The Appellate Division majority held that “the motion court applied too harsh a standard
in determining that documents concerning the prior Diamond Shamrock incident are not
discoverable.” In re Steam Pipe Explosion at 41st St., 127 A.D.3d at 555. The issue is not
whether the ‘substantial similarity’ test applies to resolve Con Ed’s motion to compel discovery
of a prior incident involving Team. The issue, instead, is whether in the majority’s view the
motion court applied “too harsh” of a standard for gauging what constitutes ‘substantial
similarity’.
We respectfully submit that it was the majority, and not the motion court, that applied an
incorrect legal standard that failed to consider all relevant (e.g., ‘material’) facts in play between
the two incidents as pertaining to the targeted defendant – here, Team. The majority correctly
observed that courts should not be concerned with the ultimate admissibility of the evidence
sought to be discovered. The only evidence that the majority cited for this inaccurate critique of
Justice Jaffe’s decision, however, is the motion court’s string-cite reference to several cases
applying the well-defined, uncontroversial meaning of ‘substantial similarity’, but in the context
of evidence admissibility disputes. This, however, was not a basis for the Appellate Division to
conclude that an incorrect legal standard was applied. See e.g. People v. Olson, 9 N.Y.3d 968,
969 (2007) (“Mere reference to People v. Gaimari, 176 N.Y. 84, 68 N.E. 112 (1903) “does not
indicate that the Court failed to apply the proper legal standard for analyzing defendant's
challenge to the weight of the evidence supporting the conviction.”). Yet, on this basis alone, the
majority took a remarkable and unwarranted leap to conclude that the motion court applied a
stricter admissibility test (id. at 555-556) (citations omitted):
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The motion court’s reliance on cases involving the exclusion of testimony or the
evaluation of evidence submitted in opposition to a defendant’s motion for
summary judgment underscores that it applied a more restrictive standard in
evaluating the discoverability of evidence concerning Diamond Shamrock and
other incidents.
Conspicuously missing from the majority’s explanation, however, is anything in the
motion court’s decision that would indicate that it was employing a rule of evidence governing
admissibility, or otherwise assessing the admissibility of any or all of the documents contained in
nearly a dozen bankers boxes it painstakingly reviewed in camera. Clearly that was not, and
could not have been, the case. It is well-settled that evidence of prior incidents is discoverable if
they are “substantially similar” to the subject incident so as to render them “material and relevant
to establishing” whether an alleged tortfeasor – in this case Team – was on notice of the
allegations against it in this case. Herbert v. Sivaco Wire Corp., 289 A.D.2d 71, 72 (1st Dep’t
2001).
But other than faulting the motion court for referencing in passing cases that discuss the
meaning of ‘substantial similarity’ in the context of evidence admissibility, the majority nowhere
in its opinion identified how the motion court applied ‘too harsh’ a standard. The motion court’s
reference to cases discussing the admissibility of prior incidents, however, is without
consequence because the words ‘substantial similarity’ mean the same regardless of context. As
it is clear that the motion court was not deciding a question of admissibility, it is irrelevant that it
made passing reference to cases discussing ‘substantial similarity’ in a different context. Indeed,
the majority was too quick to assume and then conclude that the motion court applied the wrong
standard by mere citation to such cases when, in fact, the First Department is itself guilty of
committing the same ‘sin.’ Had the Appellate Division considered that it too has on prior
occasions resolved discovery disputes under the ‘substantial similarity’ standard while citing to
cases discussing that phrase in the context of admissibility of such evidence, it would have had
no other basis for concluding that the motion court applied an incorrect standard. See Olson, 9
N.Y.3d at 969. For example, in Herbert v. Sivaco Wire Corp., 289 A.D.2d 71 (1st Dep’t 2001),
the First Department reversed the trial court and held that certain evidence in a product liability
suit “should have been produced” because “such prior incidents involve[d] * * * substantially
similar” difficulties with the product in question, making them “material and relevant to
establishing whether * * * the product was hazardous and, if so, whether [defendant] had notice
of such hazard.” Id. at 72. Notwithstanding that Herbert only involved a discovery dispute over
prior incidents, the court in that case nevertheless cited to Hyde v. Rensselaer Cnty., 51 N.Y.2d
927 (1980), a case that concerned the admissibility of prior incidents that were ‘substantially
similar.’ See id. at 929 (“proof of a prior accident, whether offered as proof of the existence of a
dangerous condition or as proof of notice thereof, is admissible only upon a showing that the
relevant conditions of the subject accident and the previous one were substantially the same.”
See Herbert, 289 A.D.2d at 72 (“That being the case, the sought material should have been
produced”), citing Hyde, 51 N.Y.2d at 929.
The majority’s faulty reasoning is as follows: since the motion court cited to cases
discussing the phrase ‘substantial similarity’ in the context of evidence admissibility, it must
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have assessed the sought-after evidence under some test for their admissibility. It was the
Appellate Division majority, however, that erred and applied the wrong standard, and further
abused its discretion as a matter of law. Rather than applying a ‘substantial similarity’ test, as
Justices Friedman and Sweeny correctly observed, the majority applied what can only be
described as a “superficial similarity’ test that considers in the abstract whether both cases
involved sealant. But the ‘substantial similarity’ test is not concerned with abstract, superficial
similarities. As the dissent point out, the motion court employed the correct standard by actually
comparing the relevant aspects of the Diamond Shamrock oil refinery fire with the steam pipe
explosion in this case as it pertains to the issue of notice to Team of the risk of sealant migrating
into the pipes, and, coupled with a pipe system overwhelmed by too much rain water in a short
period of time, blocking the pipe’s steam traps and thereby causing them to burst and explode.
As the dissent astutely observed, in reversing the motion court, the majority focused in
the abstract simply on the fact that in both cases, excess sealant was involved, but ignored the
fact that the “mechanisms of causation” in each case were “so different” and did not warrant the
extraordinary burden of production (In re Steam Pipe Explosion at 41st St., 127 A.D.3d at 558-
560) (emphasis added):
[T]he majority focuses, to the exclusion of virtually all other factors, on the
circumstance that, both here and in the Diamond Shamrock litigation, Team’s
adversaries have alleged that the subject accident was caused, in part, by Team’s
application of an excessive amount of sealant in performing repair work on the
equipment in question (here, a steam piping system; in Diamond Shamrock, an oil
refinery valve). However, Supreme Court, through its detailed analysis of the
highly technical facts of the two cases, discerned that * * * notwithstanding that
the alleged application of excessive sealant is a common factor in the two cases,
the mechanism of the accident’s causation in each case is so different from the
mechanism of causation in the other case that evidence from the earlier case is
highly unlikely to be probative of Team’s liability in this matter. In the Diamond
Shamrock incident, pressure from the application of too much sealant directly
caused a fracture in the valve, which immediately gave rise to a chemical leak
and a fire. In this case, by contrast, the alleged application of too much sealant to
steam pipe leaks over time, rather than directly causing the pipe to burst, resulted
in sealant material coming loose and migrating through the pipes (like loosened
plaque migrating through a person’s arteries) and eventually contributing to the
blockage of steam traps, which then, during a period of heavy rainfall, resulted in
the buildup of excessive pressure and an explosion.
Beyond pointing to the common factor of the alleged application of excessive
sealant, the majority fails to refute Supreme Court’s reasoning in determining that
the above-described dissimilarity between the etiology of the two incidents
renders the Diamond Shamrock litigation file irrelevant to the instant matter. The
majority errs in accusing Supreme Court of “apply[ing] too harsh a standard in
determining . . . discoverab[ility]” because Supreme Court’s determination was
based on the dissimilarity of the two incidents. But even if one could reasonably
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disagree with Supreme Court’s determination of this question, it cannot be denied
that the determination is based on a thorough, logical, and reasoned analysis that
is well within Supreme Court’s “broad discretion in supervising disclosure”
(Occidental Gems, 11 NY3d at 845 [internal quotation marks omitted]), especially
in a matter as complex as this one, involving approximately 100 actions arising
from the same pipe explosion that, as of this writing, have been pending for more
than six years.
In sum, the majority took the extraordinary step of incorrectly characterizing the
applicable standard employed by the motion court, and in the process, itself failed to employ the
very standard it accused the motion court of not employing. It is clear that the motion court,
however, employed the only standard available in these types of discovery disputes: looking at
all relevant factors, it determined whether the two incidents were substantially similar. But the
majority did more than incorrectly characterize what the motion court did. It also abused its
discretion as a matter of law by employing an erroneous and unduly broad discoverability
standard that looks at a superficial similarity between prior and current accidents, “to the
exclusion of virtually all other factors” as the dissenting Justices discerned. In short, the
majority’s employ of a superficial ‘similarity’ standard of discoverability effectively ignores the
“materiality” requirement of CPLR 3101(a), eviscerates decades of case law which courts and
litigants have come to rely upon in setting a “substantial similarity” bar to discovery of prior
incidents and, by consequence, opens the discovery gates to future litigants to pursue
superficially similar incidents and actions and will encourage the very type of burdensome and
costly fishing expedition and resulting harassment that for decades courts in New York State
have carefully guarded against.
Conclusion
Accordingly, this Court should (1) reverse the order of the Appellate Division for the
reasons articulated by dissenting Justices Friedman and Sweeny and those herein, remit this
matter to the Appellate Division (2) for entry of an order (i) reinstating the order of the motion
court that denied Con Ed’s motion to compel production of the Diamond Shamrock litigation
files, (ii) directing Con Ed to disgorge and return to Team’s counsel the 48 bankers boxes
already produced, together with the two depositions taken following such production (iii)
precluding Con Ed from introducing or otherwise relying upon any evidence at any trial in this
litigation going forward based upon the discovery afforded by the Appellate Division’s order,
and (3) grant Team such further and different relief as this Court deems just and proper.
Very truly yours,
Juan C. Gonzalez
Of Counsel:
Timothy R. Capowski
Juan C. Gonzalez
/s/ Juan C. Gonzalez
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cc:
Frances E. Bivens
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Attorneys for Defendants/Third-Party Plaintiffs
Consolidated Edison, Inc. and Consolidated
Edison Company of New York, Inc.
Henry G. Miller
Clark, Gagliardi & Miller, P.C.
99 Court Street
White Plains, New York 10601
(914) 946-8900
Attorneys for Defendants/Third-Party
Plaintiffs Consolidated Edison, Inc. and
Consolidated Edison
Company of New York, Inc.
Richard W. Babinecz
Carole A. Borstein
David M. Santoro
4 Irving Place
New York, New York 10003
(212) 460-4600
Attorneys for Defendants/Third-Party Plaintiffs
Consolidated Edison, Inc. and Consolidated
Edison Company of New York, Inc.
Christopher J. Murdoch, Esq.
Corporation Counsel of the City of New
York
Assistant Corporation Counsel
100 Church Street, Room 4-203
New York, NY 10007
(212) 788-0645
Attorney for Defendant/Third-Party
Defendant City of New York
Robert Sheps, Esq.
Sheps Law Group P.C.
25 High Street
Huntington, NY 11743
(631) 249-5606
Plaintiff’s Liaison Counsel
CORPORATE DISCLOSURE
Pursuant to Rule 500.1(t) of the Rules of the Court of Appeals, appellant Team Industrial
Services, Inc. hereby discloses a list (annexed hereto) of all of "its parents, subsidiaries and
affiliates".
NAME CITY STATE COUNTRY
TlSI Pipeline., Inc. SUgeriand TX UnKed Stele.
TQ Acquisition, In<:. Sugerland TX U_s.. ...
QuesllnlegrHy G,Otlp, LLC Kilnt WA UnIted Stlla.
Quest InlegrHy CAN Ltd. Calgary I'B Cana