Opinion
Index No. 907447-16
08-07-2024
New York State, Workers' Compensation Board, in its capacity as the governmental agency charged with the administration of the Workers' Compensation Law and attendant regulations, and in its capacity as successor in interest to THE SELECTIVE SAFE WORKERS' COMPENSATION TRUST, Plaintiffs, v. American Bulb Corp, et al., Defendants.
New York State Workers' Compensation Board Litigation Division Scott T. Harms, Esq. Attorneys for Plaintiff Pryor Cashman, LLP John Giardino, Esq. & Kabadayi Gozde, Esq. Attorney for Defendants Triple Crown-Maffucci Storage Corp., The American Household Storage Company of Buffalo NY, Arnoff Moving & Storage of Albany, Inc., Arnoff Moving & Storage, Inc., Arnoff Stewart Liner Transport Co., Inc., Arnoff Stewart Liner Transport Co., Inc. d/b/a Stewart Liner Transportation Co., Arnoff Storage, Inc., Auer's Moving & Rigging Co., Inc. d/b/a Auer's Van & Express Co., Bay Shore Storage Warehouse, Inc., 265 Montera Realty Corp., Bay Shore Moving & Storage, Inc., Data Shredding Service, Inc., Brown's Moving & Storage Company, Inc., Burkins & Foley Trucking and Storage, Inc., Business Relocation Services, Inc., Certified Moving & Storage Co. LLC, Certified Installation Services LLC, Champion Moving & Storage, Inc., Cook Moving Systems, Inc., Delaney Moving & Storage, Inc., Dimon & Bacorn Inc., Dimon and Sons Transportation Corporation, Eagle Transfer Co., Eagle Express Courier Ltd., Felice Trucking Service, Inc., Greater Syracuse Moving & Storage Co., Inc. JAD Corporation of America, Liberty Moving & Storage Co. Inc., Liedkie Moving & Storage, Inc., Ricky Ramsey d/b/a Metro Moving & Storage, Metro Movers, Inc., M & L Properties LLC, Pettis Moving Co., Inc. d/b/a Dimon & Bacorn of Binghamton, Pioneer Warehousing & Distribution, Inc., Pioneer Warehousing & Distribution LLC, Thomas M. Belge, Universe Moving Co., Inc., American Bulb Corporation, Abbott Metro Movers, Inc., and V. Santini, Inc. Trivella & Forte, LLP Arthur J. Muller, III, Esq. Attorney for Defendant Sanitation Salvage Corp.
Unpublished Opinion
New York State Workers' Compensation Board Litigation Division Scott T. Harms, Esq. Attorneys for Plaintiff
Pryor Cashman, LLP John Giardino, Esq. & Kabadayi Gozde, Esq. Attorney for Defendants Triple Crown-Maffucci Storage Corp., The American Household Storage Company of Buffalo NY, Arnoff Moving & Storage of Albany, Inc., Arnoff Moving & Storage, Inc., Arnoff Stewart Liner Transport Co., Inc., Arnoff Stewart Liner Transport Co., Inc. d/b/a Stewart Liner Transportation Co., Arnoff Storage, Inc., Auer's Moving & Rigging Co., Inc. d/b/a Auer's Van & Express Co., Bay Shore Storage Warehouse, Inc., 265 Montera Realty Corp., Bay Shore Moving & Storage, Inc., Data Shredding Service, Inc., Brown's Moving & Storage Company, Inc., Burkins & Foley Trucking and Storage, Inc., Business Relocation Services, Inc., Certified Moving & Storage Co. LLC, Certified Installation Services LLC, Champion Moving & Storage, Inc., Cook Moving Systems, Inc., Delaney Moving & Storage, Inc., Dimon & Bacorn Inc., Dimon and Sons Transportation Corporation, Eagle Transfer Co., Eagle Express Courier Ltd., Felice Trucking Service, Inc., Greater Syracuse Moving & Storage Co., Inc. JAD Corporation of America, Liberty Moving & Storage Co. Inc., Liedkie Moving & Storage, Inc., Ricky Ramsey d/b/a Metro Moving & Storage, Metro Movers, Inc., M & L Properties LLC, Pettis Moving Co., Inc. d/b/a Dimon & Bacorn of Binghamton, Pioneer Warehousing & Distribution, Inc., Pioneer Warehousing & Distribution LLC, Thomas M. Belge, Universe Moving Co., Inc., American Bulb Corporation, Abbott Metro Movers, Inc., and V. Santini, Inc.
Trivella & Forte, LLP Arthur J. Muller, III, Esq. Attorney for Defendant Sanitation Salvage Corp.
Denise A. Hartman, J.
In these consolidated actions, the New York State Workers' Compensation Board (Board) seeks to recover payments from members of the Selective Safety Workers' Compensation Trust (Trust) for their pro rata share of the Trust's cumulative liabilities. The Trust ceased coverage of new workers' compensation claims in 2008. The Board assumed administration of the Trust in 2011, and after conducting a forensic audit, commenced these actions in 2017. The Board and defendants have wended their way through discovery. Many of the 118 former Trust members have settled; only 55 former Trust members remain as defendants.
The Court so-ordered a stipulation to amend the caption and consolidate the two actions on October 20, 2020.
The Board now moves for an order (1) granting partial summary judgment pursuant to CPLR 3212 (e) on the issue of liability and holding the remaining active litigating members liable jointly and severally for the portion of the Trust's outstanding cumulative debt which is attributable to them based on their respective period of membership in the Trust, as listed in Exhibit A ; and (2) discontinuing the action pursuant to CPLR 3217 (b) against eight defendants who have settled their trust liability with the Board, as listed in Exhibit B. Fifty-three of the remaining defendants (Collective Defendants), represented by common counsel, have opposed the motion. Individual defendant Sanitation Salvage Corp. (Sanitation Salvage), represented by its own counsel, has separately opposed the motion.
As the Board notes, only 54 of the remaining 55 defendants are the subject of the motion. The Court, by Decision and Order dated April 4, 2023, struck the Answer of Defendant Schaap Moving Systems, Inc., granted the Board's request for a default judgment on the issue of its liability, and ordered an inquest.
Background
The Workers' Compensation Board administers New York's program that provides compensation benefits to injured workers and employees under the State's Workers' Compensation Law. Pursuant to Workers' Compensation Law (WCL) § 10 and § 50, nearly all employers are required to provide workers' compensation coverage for their employees, either by acquiring a workers' compensation policy from the State Insurance Fund; by acquiring a policy from a commercial insurance carrier; or by self-insuring either as an individual or as a member of a Group Self-Insurance Trust (GSIT). The Board monitors each GSIT and must approve each employer's application to participate in a GSIT. Each employer member enters into an agreement with the GSIT, and each pays contributions to the GSIT, which are used to pay workers' compensation claims of members' employees.
The Board reviews independently audited financial statements and actuarial reports submitted by each GSIT annually (see WCL § 50 [3-a] [2] [b]). If the annual statements show that the GSIT's liabilities substantially exceed its assets, the GSIT is deemed underfunded and becomes subject to remediation procedures (see 12 NYCRR § 317.9 [b]). If the GSIT cannot be restored to financial stability, the Board may order termination and dissolution of the GSIT (see 12 NYCRR § 317.9 [c]). If the GSIT fails to administer its outstanding liabilities, the Board may assume the administration of the GSIT (see 12 NYCRR § 317.20 [d]), and use the GSIT's assets to pay its liabilities, and, upon default, may levy an interim assessment on trust members (see WCL § 50 [3-a] [7] [b]; 12 NYCRR § 317.9 [c]). If the GSIT's obligations exceed its assets, the Board must pay the GSIT's liabilities from its own administrative funds (see WCL §§ 50 [5] [f], [g], [3-a] [7] [b]; § 151; § 50-a). The Board will then conduct a forensic accounting to apportion the deficit to each operating year of the GSIT and calculate each member's share of the GSIT deficit pro rata and on the basis of joint and several liability (see WCL § 50 [3-a] [7] [b]). To the extent that members cannot pay and do not enter into a settlement agreement to pay pursuant to a payment plan, the Board will commence a lawsuit to try to collect the GSIT's remaining debt (see WCL § 50 [5] [g]; 12 NYCRR §§ 317.9 [b] [7]; 317.20).
The GSIT here, Selective Safety Workers' Compensation Trust, originally named The Mover's Workers' Compensation Trust, was organized in 1995. It operated under the original trust agreement until 2001, when it incorporated its name change, expanded its membership, and effectuated a revised trust agreement. The Trust continued to operate under the revised trust agreement until 2008. On November 5, 2008, the Trust members approved cessation of Trust coverage for new workers' compensation claims, effective December 31, 2008, and the Board terminated the Trust as an active GSIT.
On April 11, 2011, the Board assumed administration of the Trust and then issued interim deficit assessments for all former Trust members. The Board also retained a forensic accounting firm, Lumsden & McCormick, to conduct an accounting of the Trust, to include a calculation of the Trust's cumulative deficit, apportionment of the deficit to each operating year, and allocation to each individual trust member on a pro rata and joint and several liability bases. The accounting firm ultimately determined that the Trust had a cumulative deficit of $9.06 million as of December 31, 2015.
Based on the accountant's findings, the Board issued a final assessment to each former member of the Trust. Many former Trust members settled. The Board subsequently commenced two separate actions against non-settling former Trust members: New York State Workers' Compensation Board v 158 King Street Associates LLC, et al (Index No 05933-16 [Supreme Court, Albany County) on October 7, 2016; and New York State Workers' Compensation Board v American Bulb Corp., et al (Index No. 07447-16 [Supreme Court, Albany County]) on December 6, 2016. On May 29, 2018, this Court issued an order and judgment in the first action discontinuing against settling defendants and granting a default judgement against others. On August 18, 2018, the Court issued an order and default judgment against some defendants in the second action, but subsequently vacated the default judgment after counsel appeared. The two actions were consolidated by so-ordered stipulation on October 22, 2020. More settlements ensued. Only 55 Trust members now remain as defendants in the consolidated actions.
After engaging in discovery, the Board served a Notice to Admit. In lieu of responding to the Board's Notice to Admit, the Collective Defendants stipulated with the Board as to their respective dates of participation in the Trust and waived any affirmative defense concerning their execution of Trust documents. Defendant Sanitation Salvage filed a formal response to the Notice to Admit neither admitting nor denying the Board's assertions. The Board filed a Note of Issue on May 9, 2023. The Board then filed this motion for partial summary judgment on the issue of liability. The Collective Defendants opposed, as did Sanitation Salvage.
Analysis
"[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; see Aretakis v Cole's Collision, 165 A.D.3d 1458, 1459 [3d Dept 2018]). "Failure to make such prima facie showing requires denial of the motion, regardless of the sufficiency of opposing papers" (id.). If the movant makes such a prima facie showing, the burden shifts to the opposing party to establish, by admissible proof, the existence of a triable issue of fact or a legal defense to the action (see id.; Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]). On a motion for summary judgment, all evidence must be viewed in the light most favorable to the opposing party (see Bazdaric v Almah Partners LLC, 41 N.Y.3d 310, 316 [2024]; Branham v Loews Orpheum Cinemas, Inc., 8 N.Y.3d 931, 932 [2007]).
The Board has established prima facie entitlement to partial summary judgment as to the former Trust members' pro rata and joint and several liability for the Trust's liabilities. As to pro rata liability, the Board supported its motion with copies of the Mover's Workers' Compensation Trust Agreement dated July 31, 1995, and the revised Selective Safety Workers' Compensation Trust Agreement dated September 26, 2001 (Porter Aff, Exhs C and D [NYSCEF Doc Nos. 136, 137); certified copies of each member's application for participation in the Trust (Porter Aff, Exh W [NYSCEF Doc No. 156]); certified copies of the notice of termination of each member's participation in the Trust (Porter Aff, Exh X [NYSCEF Doc No. 157]); and certified copies of the indemnity/participation agreement each member executed to become a member of the Trust (Porter Aff, Exh Y [NYSCEF Doc No. 158]). In addition, each of the Collective Defendants, referred to in the stipulation as "Giardino Defendants," stipulated to their relevant dates of Trust membership (Porter Aff, Exh S [NYSCEF Doc No. 152]) :
The dates of Trust participation are listed in Exhibit A to the Harms affirmation in support of this motion (see NYSCEF Doc No. 132).
1. That each and every one of the Giardino Defendants, respectively, was a member of the Selective Safety Workers' Compensation Trust ("Selective" or "Trust"), formerly known as The Mover's Workers' Compensation Trust for the period of Trust membership identified for each Giardino Defendant, respectively, on Exhibit A annexed hereto.
2. That each and every one of the Giardino Defendants agrees to waive any affirmative defense concerning the valid execution of Trust documents by an authorized individual, including, but not limited to, an "Application for Participation in Group Self-Insurance Plan", "Group Self Insurance Participation Agreement" and/or "Indemnity Agreement of the Mover's Workers' Compensation Trust."Sanitation Salvage did not stipulate to its participation period, but the Board submitted exhibits establishing that Sanitation Salvage participated as a member of the Trust from September 26, 2000, until July 6, 2008. This evidence suffices to prove prima facie pro rata liability for the Trust's liabilities.
As to joint and several liability, the original trust agreement provided that "[a]ll members participant in this Trust are deemed to be jointly and severally liable for all obligations incurred by the Trust" (NYSCEF Doc No. 136 at 10); the revised trust agreement similarly provided that "[a]ll members participating in this Trust are deemed to be jointly and severally liable for all workers' compensation obligations incurred by the Trust" (NYSCEF Doc No. 137 at 6). Each of the indemnity/participation agreements, provided as Exhibit Y to the Porter Affidavit, contains language expressly agreeing to joint and several liability:
In particular, the Employer understands, acknowledges, and agrees that as a member of the Group Self Insured Trust, the Employer is jointly and severally liable for all obligations under the Workers' Compensation Law, of all Trust members, during the Employer's period of membership.
Or:
Although recourse for any and all payments of workers' compensation and employers liability benefits covered by the Trust's certificate of coverage to a member shall first be made to the Trust's assets..., the Member understands, acknowledges, and agrees that the Member is jointly and severally for the workers' compensation and employers' liability obligation of the Trust and its members which were incurred during the Member's membership in the Trust, irrespective of the subsequent termination of such Member's membership in the Trust, or of other facts or circumstances. This Section 5 shall survive termination of this Agreement and any termination of this Agreement and any termination of the Member's membership in the Trust.(NYSCEF Doc No. 158).
The Trust's 1996 By-laws also required its members to agree to joint and several liability: "[E]ach Member is jointly and severally liable for the workers compensation and employers liability obligations of the Group and its Members which were incurred during the Member's period of membership in the Group, irrespective of the subsequent termination of the Member's membership in the Group..." (NYSCEF Doc No. 186 at 10). In 2010, the Trust's Bylaws were amended to provide, in relevant part, that "the Participating Members understand, acknowledge and agree that, under the Workers' Compensation Law, each member is jointly and severally liable for the workers' compensation and employers' liability obligations, and all related costs, losses, claims, liabilities and expenses (whether claims adjustment or operating expenses of the Trust), of the Trust and its Participating Members which were incurred during the Participating Member's period of Membership in the Trust, irrespective of the subsequent termination of the Participating Member's membership in the Trust."
In addition to the members' contractual agreements to joint and several liability, the Workers' Compensation Law and attendant regulations impose joint and several liability on the members for the Trust's obligations. Members' assent to joint and several liability as a condition of membership is codified in WCL § 50 (3-a) (2) (g) (2), which requires proof of a "properly executed prescribed participation agreement" for each new member "wherein the member acknowledges their joint and several obligations for their period of membership." And WCL § 50 (3-a) (3) expressly provides for the joint and several liability of GSIT members:
A member's participation in a [GSIT] shall not relieve it of its liability for compensation prescribed by this chapter except by the payment thereof by the [ GSIT] or by itself. Each member shall be responsible, jointly and severally, for all liabilities of the [GSIT] provided for by this chapter occurring during its respective period of membership... (emphasis added).
Although the emphasized language was not added to WCL § 50 (3-a) (3) until 2008, the courts have long-acknowledged the inherent requirement for joint and several liability of GSIT members (see New York State Workers' Compensation Bd. v Any-Time Home Care Inc., 156 A.D.3d 1043, 1045-1046 [3d Dept 2017]; New York State Workers' Compensation Bd. v Marsh U.S.A., Inc., 126 A.D.3d 1085, 1087 n 5 [3d Dept 2015]; Murray Bresky Consultants, Ltd v New York Compensation Manager's Inc., 106 A.D.3d 1255, 1259 [3d Dept 2013]; Matter of Aides At Home, Inc. v State of NY Workers' Compensation Bd., 76 A.D.3d 727, 728 [3d Dept 2010]; New York State Workers' Compensation Bd. v 21st Century Constr. Corp., 58 Misc.3d 1211 [A], 2018 NY Slip Op 50050[U], *3 [Sup Ct, Albany County 2018, Platkin, J.]), see also WCL § 50 former [3-a] [2], [3], added by L 1966, ch 896, § 2; Senate Introducer's Mem in Support, Bill Jacket, L 2008, ch 139 at 7 [new language merely "restates the proposition that exists in present law that members of (GSITs) are jointly and severally liable for the liabilities of (the GSITs)"]). The Board's regulations reiterate the requirement of joint and several liability (see 12 NYCRR § 317.2 [i] [defining a GSIT as "an association of employers... that contractually agree... to assume the workers' compensation liabilities of each associated member."]).
Thus, both under the trust agreements and the Workers' Compensation Law, the Board has established prima facie its entitlement to partial summary judgment on the issue of each former member's pro rata and joint and several liability for the Trust's obligations.
The Collective Defendants' Opposition
The Collective Defendants "do not dispute that both the provisions of the WCB statute and terms of the Trust Agreement recite and impose joint and several liability on members of the Trust." Instead, they argue (1) that the Board should not be able to enforce joint and several liability against former Trust members because the Board did not comply with its "contractual conditions precedent" to enforcement of the joint and several liability against the former Trust members; and (2) that the former Trust members assumed joint and several liability only for unpaid workers' compensation claims, not the other categories of obligations set forth in the Trust's 2011 by-laws, which, according to the Collective Defendants, the Board unilaterally amended in 2011 to expand liabilities for which it seeks to hold the former members jointly and severally liable.
The Court rejects the Collective Defendants' argument that they should be relieved of all workers' compensation liabilities because the Board allowed the Trust to operate in violation of the statute and regulations as an insolvent entity, and approved applications of the members knowing that the Trust was insolvent. The Collective Defendants submit as exhibits the Board's "Level I" reports for the years 2001 through 2008 in support of their assertion that the Trust was underfunded each year. At the same time, defendants argue, the Board published annual financial reports that the Trust had "no funding issues." Several representatives of Trust members submitted affidavits stating that they would not have joined the Trust and assented to joint and several liability if the Trust had provided accurate information about the Trust's financial status. The Collective Defendants contend that their liability is grounded in contract principles, and that the Board breached its obligations under the contract, thereby "excusing" their joint and several liability for the Trusts' obligations.
The Board counters that the Trust was not insolvent during the years 2001 through 2008, that it complied with its fiscal monitoring and reporting responsibilities under the Workers' Compensation Law and attendant regulations, and that the Collective Defendants' argument that the Board breached some contractual "condition precedent" to enforcing joint and several liability is untenable as the Board has no contractual relationship with the former members of the Trust.
The Court rejects as a matter of law the Collective Defendants' argument that they should be relieved of joint and several liability because the Board breached its quasi-contractual responsibilities with the Trust members to monitor the Trust and report accurate financial information about the Trust's fiscal woes to prospective members. At bottom, the Collective Defendants' argument is that the Board, due to alleged regulatory failures, should be estopped from recovering public funds through joint and several liability. But, with rare exceptions under circumstances not present here, estoppel is not available as a remedy to prevent a governmental agency from discharging its statutory duties (see West Midtown Mgt. Group, Inc. v State of NY, Dept. of Health, Off. of the Medicaid Inspector Gen., 31 N.Y.3d 533, 541-542 [2018]; Matter of Daleview Nursing Home v Axelrod, 62 N.Y.2d 30, 33-34 [1984]). Here, the Board exercised its governmental obligation established by statute-and in the public interest when it assumed administration of the Trust and brought these actions to recover payment from the former members of the now dissolved and insolvent Trust (see WCL § 50; 12 NYCRR 317.9 [b] [7]; State of New York Workers' Compensation Board v Wang, 147 A.D.3d 104, 108 [3d Dept 2017]; 21st Century Constr. Corp., 2018 NY Slip Op 50050[U], *9). So the equitable doctrine of estoppel does not lie.
The Collective Defendants' reliance on New York State Workers' Compensation Bd. v Any-Time Home Care Inc. (156 A.D.3d 1043 [3d Dept 2017]) is misplaced. At issue in that case was whether the Board's action asserting joint and several liability of former GSIT members was governed by the three-year statute of limitations for statutory causes of action (CPLR 214 [2]), or by the six-year statute of limitations for contracts (CPLR 213 [2]). The Appellate Division held that the six-year statute of limitations governed because the members' essential obligation was based on their trust agreements, regardless of the statutory requirement (see Any-Time Home Care Inc., 156 A.D.3d at 1045-1046). But the appellate court did not hold that the Board's relationship with an operational GSIT was solely based in contract. To the contrary, the Appellate Division has repeatedly held that joint and several liability of GSIT members is imposed "both by statute and the terms of the Trust Agreement" (Marsh U.S.A., Inc., 126 A.D.3d at 1087 n 5; see Murray Bresky Consultants,, 106 A.D.3d at 1259). Indeed, the Appellate Division in Any-Time Home Care itself held that former trust members could not interpose the related equitable doctrine of laches because the Board was "acting in a governmental capacity to enforce a public right or protect a public interest" (156 A.D.3d at 1047).
Finally, as the Board's counsel explains in his reply affirmation, the statute and regulations differentiate between "underfunded" and "insolvent," contemporaneous reports indicated that the Trust, while "underfunded," was not "insolvent." When, beginning in 2005, such reports began to show that the Trust was underfunded, the Board took action pursuant to its regulations, and entered into consent agreements with the Trust to try to improve its financial status (see 12 NYCRR §§ 317.6 [a]; 317.9 [b], 317.20). In any event, to the extent the Collective Defendants claim reliance on the Board's representations that the Trust was financially solvent, they submitted affidavits of only three representatives who are affiliated with, at most, eleven defendants, some of whom joined the Trust well before concerns about funding deficits arose in 2005. And Collective Defendants put in no evidence whatsoever of reliance by the other forty-plus defendants.
The Collective Defendants' second argument, that the Collective Defendants are liable, at most, for the workers' compensation claims paid by the Board after depletion of the Trust's assets, fares no better. The Trust's By-laws dated March 12, 1996, provided for the members' joint and several liability for the "workers['] compensation and employers' liability obligations of the Group" (NYSCEF Doc No. 186 at 10). The 2001 revised trust agreement also states that the members are "deemed to be jointly and severally liable for all workers' compensation obligations incurred by the Trust" (NYSCEF Doc No. 137 at 6). The indemnity agreements, they argue, contain similar language. The Collective Defendants interpret the agreements and By-laws to limit joint and several liability to workers' compensation claims as defined in Workers' Compensation Law § 2 (6). And, the Collective Defendants argue, the Board improperly and unilaterally amended the By-laws in 2011 to try to expand the scope of joint and several liability of former Trust members to include "the workers' compensation and employers' liability obligations, and all related costs, losses, claims, liabilities and expenses (whether claims adjustment or operating expenses of the Trust)."
The Court is unpersuaded by the Collective Defendants' arguments. To determine what obligations the Board may recover under members' joint and several liability, the Court looks first to the Workers' Compensation Law and its implementing regulations. Before 2008, the statute did not expressly address joint and several liability, nor did it define the scope of such joint and several liability. When, in 2008, the Worker's Compensation Law was first amended to codify the pre-existing common-law concept, it provided that each trust member shall be responsible jointly and severally "for all liabilities of the [GSIT] provided for by this chapter occurring during its respective period of membership" (WCL former § 50 [3-a] [3]; see L. 2008, ch 139, § 1).
Collective Defendants point out that the former § 50 (3-a) (3) did provide that a participating employer "shall not be relieved from liability for compensation prescribed by this chapter except by payment thereof by the group self-insurer or by himself.... The insolvency or bankruptcy of a participating employer shall not relieve the group self-insurer from the payment of compensation for injuries or death sustained by an employee during the time the employer was a participant in such group self-insurance." But that provision does not on its face address the scope of joint and several liability upon dissolution of the Trust.
But even before 2008, since at least 1987, the Workers Compensation Law provided that "[a]ll the provisions of this chapter relating to self-insurance and the rules and regulations thereunder shall be deemed applicable to group self-insurance. The chair shall implement the provisions of this subdivision by promulgating rules and regulations" (WCL former § 50 [3-a] [6] current [3-a] [8]). And in 2001, pursuant to this statutory authority, the Board promulgated a regulation defining "trust liabilities" more expansively than just unpaid workers' compensation claims themselves (12 NYCRR § 317.2 [o], effective Jan. 31, 2001):
"Trust liabilities" shall mean all claims, accrued Workers' Compensation Board assessments, accrued expenses including administrative costs, costs of excess insurance policies, and other fixed costs, accounts payable, loans, bonds and notes payable, unearned contributions and all other trust obligations.
The Board's counsel argues that, as embodied in the regulation, the Board has always taken the position that the parameters of joint and several liability extend to all liabilities imposed by the Workers Compensation Law and implementing regulations, not just unpaid employees' claims. The Court agrees that under the statute and regulations, trust members are jointly and severally liable for an array of trust obligations imposed by the statute and regulations.
Moreover, although unnecessary to the Court's conclusion, the members' participation agreements, at least those executed since 2001, contain language expressly agreeing to joint and several liability "for all obligations under the Workers' Compensation Law, of all Trust members, during the Employer's period of membership" (NYSCEF Doc No. 158 [emphasis added]). And contrary to the Collective Defendants' counsel's observation, even the pre-2001 indemnity agreements do not unambiguously limit the members' joint and several liability to unpaid employees' claims - rather, they refer to unspecified "workers' compensation and employers' liability obligation[s] of the Trust and its members which were incurred during the Member's membership in the Trust, irrespective of the subsequent termination of such Member's membership in the Trust" (NYSCEF Doc No. 158 [emphasis added]).
Having concluded that the scope of former GSIT members' liability is governed by the Workers' Compensation Law and implementing regulations, the Court need not reach the Collective Defendants' argument that the Trust's by-laws were improperly amended in 2011 in an attempt to broaden the parameters of former members' joint and several liability, and the troubling allegations of Board officials' conduct underlying that argument. At oral argument, the Board's counsel stated unequivocally that the 2011 bylaws "aren't relevant to the imposition of joint and several liability," and "if the parties collectively tossed the bylaws into the trash," it "wouldn't affect the Court's consideration of this motion and the Defendants' joint and several liability." And he reiterated, the Board's position "is not reliant on the bylaws in any manner, way, shape or form." With this issue apparently removed from the case, the Court finds no basis to disqualify the Board's in-house counsel from continuing representation. Thus, the Collective Defendants' cross-motion (Motion # 5) is denied.
In conclusion, the Court grants the Board's motion for partial summary judgment finding the Collective Defendants jointly and severally liable for all trust obligations and liabilities imposed by the Workers Compensation statute and regulations. To the extent that Collective Defendants oppose imposition of joint and liability for any specific item included in the Board's request for recovery, they may raise the issue during the damages trial or further appropriate motion practice.
Sanitation Salvage's Opposition
Defendant Sanitation Salvage Corp. separately opposes the Board's summary judgement motion on the ground that the Board's moving papers fail to address its affirmative defenses; plaintiff's own documentary evidence shows that it "lacks any viable cause of action"; and the complaint is untimely because the Board failed to comply with the 120-day rule of Workers' Compensation Law § 50 (3-a) (7) (b) former ().
The Court turns first to Sanitation Salvage's argument that the Board is not entitled to summary judgment on liability because it did not timely issue deficit assessment on members of the defaulted GSIT within 120 days of the default or the effective date of the 2008 amendment to Workers' Compensation Law § 50 (3-a) (7). The 2008 amendment provided: "The chair shall levy an assessment on the members of a defaulted group self-insurer within one hundred twenty days of such default or of the effective date of the chapter of the laws of [2008] which amended this subdivision, whichever is later, and against the members of any other terminated group self-insurer when necessary..." (WCL § 50 [3-a] [7] [b]; see L.2008, c.139, § 16). But under the overwhelming weight of current authority, that 120-day time prescription is directory, not mandatory.
The provision was subsequently amended to provide: "The chair shall levy an assessment on the members of a defaulted group self-insurer within one hundred twenty days of such default or of the effective date of the chapter of the laws of [2008] which amended this subdivision, whichever is later, and against the members of any other terminated group self-insurer when necessary..." (L. 2008, c. 139, § 1; L. 2008, c. 139, § 16).
Defendant's reliance on Matter of Riccelli Enter., Inc. v State of NY Worker' Compensation Bd. (117 A.D.3d 1438 [4th Dept 2014]), where the appellate court affirmed a preliminary injunction after finding a likelihood of success on the merits of the 120-day timeliness argument, is misplaced. In New York State Workers' Compensation Bd. v Episcopal Church Home & Affiliates, Inc. (218 A.D.3d 1317 [4th Dept 2023]), a case not cited by defendant, the Fourth Department explained that Riccelli did not constitute an adjudication on the merits and addressed the issue anew ( 218 A.D.3d at 1319). After a thorough application of the tools of statutory interpretation, the court concluded that "the 120-day period... was directory, not mandatory, and therefore did not act as a bar to the imposition of subsequent assessments (id. at A.D.3d at 1320). Our coordinate courts in this Department have reached the same conclusion (see 21st Century Constr. Corp., 2018 NY Slip Op 50050[U] *7; New York State Workers' Compensation Board v 10 Ellicott Square Court Corp., Sup Ct, Albany County Jan. 9, 2018, Platkin, J., Index No. 3655-2013 at 16-17]; 21st Century Constr. Corp., 2018 NY Slip Op 50050[U] *7; New York State Workers' Compensation Board v 1 & 3 On Fifth Corp., Sup Ct, Albany County, Mar. 30, 2015, Zwack, J., Index No. 2900-13 at 13]).
In short, Sanitation Salvage cannot defeat the Board's entitlement to summary judgment based on its argument that the Board failed to comply with the 120-day requirement of Workers' Compensation Law § 50 (3-a) (7) (b).
The Board maintains, in any event, that it complied with the 120-day rule inasmuch as Selective was deemed insolvent on March 22, 2011, and it issued its interim assessment within 120 days on June 1, 2011.
Sanitation Salvage's other arguments are unpersuasive and merit little discussion. To the extent that certain affirmative defenses are intertwined with the merits of the liability discussion above, they have been rejected. The same is true for Sanitation Salvage's one-sentence argument that documentary evidence submitted by the Board precludes summary judgment. Also unavailing is its argument that the Board's recovery should be precluded by the doctrine of laches given the Appellate Division's holding establishing the statute of limitations as six years (see Any-Time Home Care, Inc., 156 A.D.3d at 1045). The Board asserts that the cause of action accrued on December 10, 2013; notably, defendant has posited no accrual date upon which to measure any laches or statute of limitations defense. And this action was commenced in 2017. Finally, the Court finds no merit to Sanitation Salvage's vague one-sentence argument that its other affirmative defenses preclude summary judgement.
Accordingly, it is
Ordered that plaintiff's motion for partial summary judgment on liability is granted, and it is determined that the remaining defendants are jointly and severally liability for the deficit of the Selective Safety Workers' Compensation Trust and its obligations imposed by the Workers' Compensation Law and regulations for their respective periods of participation therein; and it is further
Ordered that the action is discontinued pursuant to CPLR 3217 as against 158 King Street Associates, LLC; 202 Coffey Street Associates, LLC; Hyperion Associates, LLC; Time Moving & Storage, Inc., Landonne Corporation; John Kevin Gilgan; Joseph Candella; Silverado Business Systems and Panel Installers, Inc.; and Business Installation & Delivery Service of New York LLC; and it is further
Ordered that the remaining parties to this action shall appear at a conference on August, 2024, atp.m., by Microsoft Teams, to chart a course toward resolution of the remaining claims.
This constitutes the Decision and Order of the Court, the original of which is being uploaded to NYSCEF for electronic entry by the Albany County Clerk. Upon such entry, counsel for plaintiff shall promptly serve notice of entry on all other parties entitled to such notice.