Kevin M. Hogan and Sean C. McPhee Co-Author Article Published in The Daily Record

This article originally appeared in The Bulletin, the official publication of the Bar Association of Erie County. It is reprinted here with permission.

Western District Case Notes

Diversity jurisdiction

In Coffin et al. v. Dr. Peppersnapple Group, Inc., No. 16-CV-6761-FPG (Oct. 26, 2017), plaintiff commenced a lawsuit in State Court alleging that defendant’s negligence caused his personal injuries. When defendant removed the lawsuit to Federal Court, the Court ordered defendant to show cause why the case should not be remanded, questioning whether there was diversity jurisdiction under 28 U.S.C. § 1332.

In response, defendant detailed plaintiffs’ injuries and produced evidence that plaintiff’s Workers’ Compensation insurance company maintained liens against any future judgment for more than $50,000 in medical payments and $45,000 in lost wages. The Court thus found that defendant had shown to a reasonable probability that the amount in controversy exceeded the jurisdictional threshold of $75,000 and, therefore, the Court had subject matter jurisdiction.

Motions to stay and opt out of ADR

In Perkins et al. v. U.S., No. 16-CV-495-LJV-HBS (Nov. 9, 2017), plaintiffs, who reside on Native American territory, simultaneously commenced separate actions contesting taxes owed to the United States: first in the U.S. Tax Court with respect to two tax years and then in the U.S. District Court with respect to a third tax year. The United States moved to stay the proceeding in the District Court pending the outcome of the proceedings in the Tax Court and also to opt out of the Court’s alternative dispute resolution (ADR) process.

The Court refused to stay the lawsuit before it, but agreed to forego the ADR mediation. With regard to the stay, the Court determined that discovery conducted here could be used in the Tax Court as well, given that the issues involved in both venues are largely identical. That discovery was on track to be completed in this case in the very near term, and plaintiffs also had an inherent right to litigate their claim in the forum of their choice. Moreover, both the parties and the public had an interest in seeing the case reach a final judgment expeditiously because it potentially addresses a gap in the case law concerning the taxability of income earned from materials extracted from lands within a sovereign territory. Collectively, then, the relevant factors weighed against staying the lawsuit.

The intersection of two Indian treaties and the Internal Revenue Code, however, weighed against proceeding with ADR. When the Court also considered the all or nothing nature of plaintiffs’ claims that two treaties exempted their income from taxation, making settlement of the case for an amount less than what plaintiffs paid theoretically possible but unlikely, the Court decided to grant defendant’s request to opt-out of ADR.

No fault insurance

In Government Employees Insurance Co. v. Strutsovskiy et al., No. 12-CV-330-LJV (Oct. 26, 2017), plaintiff alleged that defendants engaged in a fraudulent billing scheme for insurance claims submitted under New York’s no-fault insurance program, and asserted causes of action under the Racketeer Influenced and Corrupt Organizations Act (RICO) and common law fraud. Defendants move for summary judgment, based in part on their success in collecting money from plaintiff in underlying no-fault arbitrations.

In response, plaintiff moved for a preliminary injunction to stay further arbitration proceedings pending resolution of the District Court proceeding. The Court denied defendants’ summary judgment motion, holding first that plaintiff had not waived its claim for fraud either by paying the earlier claims or by failing to deny the claims during the 30-day period set under the no-fault statute. The Court also found that, in the case of the federal RICO statute, any conflict with the no-fault statute must result in the state law yielding to the federal law, not the other way around.

In addition, defendants’ arguments that plaintiff had an obligation to investigate if it suspected any wrongdoing and thus could not justifiably rely on any false representation by defendants, or that defendants’ success in the no fault arbitrations precluded any finding of fraudulent intent, both raised issues of fact that could not be resolved as a matter of law on a motion for summary judgment. The Court then granted plaintiffs’ motion to stay further no fault arbitrations of unpaid claims, holding that plaintiff had demonstrated irreparable harm, raised sufficiently serious questions going to the merits, and shown that the balance of hardship tipped decidedly in its favor.

Notice of defect

In Zilgme v. U.S., No. 15-CV-130-RJA-HBS (Oct. 23, 2017), plaintiff commenced an action under the Federal Tort Claims Act for personal injuries he suffered after tripping on a loose bolt on a loading dock at a Postal Service facility. Defendant moved for summary judgment and the Magistrate Judge recommended granting the motion. After reviewing plaintiff’s objections to the report and recommendation, the District Judge agreed that plaintiff had failed to “marshal legally-sufficient evidence” establishing that defendant had actual or constructive notice of the loose bolt. And, without actual or constructive knowledge, defendant owed no duty of care and could not be found liable for negligence as a matter of law. In reaching this conclusion, the Court observed that, while defendant was aware that vibrations from fork lifts operating on the loading dock could loosen bolts affixed to it, such awareness was only evidence of foreseeability and did not constitute actual or constructive notice of a hazardous condition triggering a duty of care.

Age discrimination

In Cardinali v. County of Monroe, No. 14-CV-6558-FPG-JWF (Oct. 31, 2017), plaintiff claimed that defendant discriminated against him by eliminating his position after he announced his intention to retire. Plaintiff later had a “change of heart,” but defendant would not postpone plaintiff’s retirement because it had already eliminated funding for his position in reliance on his initial announcement. Plaintiff then retired against his wishes and sued defendant under the Age Discrimination in Employment Act, contending defendant’s true motives for defunding his position were not merely budgetary.

In response, defendant moved for summary judgment, arguing that plaintiff failed to present facts showing that plaintiff’s position was eliminated because of his age. The Court agreed, finding “no reasonable fact finder could infer that [p]laintiff’s retirement resulted from age discrimination” because, among other things, plaintiff’s own deposition testimony indicated that age played no role in his termination. Thus, because plaintiff failed to advance his claim beyond the conclusory level, summary judgment was warranted.

Attorneys’ fees

In Testa v. Becker, No. 10-CV-6229-DGL-JWF (Nov. 6, 2017), an action arising under ERISA, plaintiff moved for an award of attorney’s fees after obtaining relief on the merits in connection with a prior Decision and Order being appealed to the Second Circuit. Defendants opposed the motion, claiming it should be denied outright given the pendency of the appeal. In the alternative, defendants argued that the fees sought should be substantially reduced because three of plaintiff’s four claims were dismissed, and because plaintiff’s attorneys’ time records included entries with “block billing.”

The Court first observed that a prevailing plaintiff’s request for attorneys’ fees under ERISA is appropriate as long as the plaintiff has achieved “some degree of success on the merits,” and then noted that it has discretion to rule on plaintiff’s request for fees notwithstanding the appeal of the underlying Decision and Order. Next, the Court rejected defendants’ argument that the fee award should be reduced by 75% simply because three of plaintiff’s four claims were dismissed.

In doing so, the Court held that the extent to which plaintiff is entitled to an award of attorney’s fees “should not be reduced to a simple arithmetical formula.” Rather, the primary question is “whether, on whole, plaintiff achieved substantial success on the merits” and plaintiff had done so here. Finally, the Court noted that, while “block-billing is disfavored,” it is “not prohibited in this Circuit as long as the Court can determine the reasonableness of the work performed.”  Thus, because the time claimed by plaintiff’s attorneys was reasonable overall, there would be no reduction to the award for occasional instances of block billing. As a result, plaintiff was awarded $148,736.00 in attorneys’ fees.