Opinion
No. 2024-24245 Index No. 904159-20
04-12-2024
In re Schoharie Limousine Crash of October 6, 2018
Abdella & Sise, LLP Robert E. Abdella, Esq. Attorney for Estates of Axel and Richard Steenburg. Premo Law Firm PLLC Brian D. Premo, Esq. Attorney for Estate of Michael C. Ukaj. O'Connor, O'Connor Bresee & First, PC Terence P. O'connor, Esq. Attorney for Hussain Defendants.
Abdella & Sise, LLP Robert E. Abdella, Esq. Attorney for Estates of Axel and Richard Steenburg.
Premo Law Firm PLLC Brian D. Premo, Esq. Attorney for Estate of Michael C. Ukaj.
O'Connor, O'Connor Bresee & First, PC Terence P. O'connor, Esq. Attorney for Hussain Defendants.
Denise A. Hartman, J.
Hon. Denise A. Hartman Acting Justice.
In July 2021, interpleader plaintiff and neutral stakeholder, Global Liberty Insurance Company of New York (Global Liberty), which provided an insurance policy for the d/b/a defendant Prestige Limousine and Chauffeur, obtained an order pursuant to CPLR 1006 from this Court: (1) permitting Global Liberty to deposit with the Court $500,000, its policy limit of liability for bodily injury arising from the accident, without waiver of any previously asserted right or defense under the policy; (2) discharging Global Liberty from any liability for damages or indemnification arising from the accident upon its payment into the Court; and (3) approving recovery of its costs and disbursements, including reasonable attorneys' fees, from the amount deposited in the amount of $18,243.50. Pursuant to the Court's Judgment of March 17, 2022, Global Liberty tendered the amount of $481,756.50 to the Albany Clerk of the Court and, upon payment, was discharged from liability for damages or indemnification arising under its policy as a result of the limousine crash on.
The Global Liberty funds are being held in an interest-bearing account under the domain of the Albany County Department of Finance.
The Estates of Axel Steenburg and Richard Steenburg now seek equitable distribution of the $481,756.50 of the deposited Global Liberty proceeds, either equally or pro-rata based on a formula devised by the Court, to the Estates of Devonne Bursese, Rachel Cavosie, Matthew Coons, Patrick Cushing, Mary King Dyson, Robert Dyson, Amanda Halse, Brian Hough, Alicia King, Abby King, Adam Jackson, Scott Lisinicchia, Shane McGowan, Erin Vertucci McGowan, Amanda Rivenburg, James Schnurr, Amy L. Steenburg, Axel J. Steenburg, Richard Steenburg, and Michael C. Ukaj (collectively, "claimants").
The Estate of Ukaj opposes the motion, contending that the funds cannot be distributed until there are final judgements in the wrongful death actions against defendants Shahad Hussain, d/b/a Prestige Limousine and Chauffeur and Nauman Hussain (the "Hussain defendants"). The Hussain defendants take no position on whether the Global Liberty interpleader funds should be distributed equally amongst the claimants or pursuant to a pro rata formula. But, they contend, regardless of how the interpleader monies are distributed, the Hussain defendants are entitled to a written release and stipulation of discontinuance from any plaintiff who accepts a portion of the interpleader funds.
The Estate of Lisinicchia (the deceased driver of the limousine) takes no position on the motion and declines to seek any portion of the Global Liberty interpleader funds.
Analysis
Under CPLR 1006 (a), a stakeholder exposed to multiple liability may commence an interpleader action against claimants, as Global Liberty did in this case. Once the Court issued an order of interpleader, "the distribution proceedings bec[a]me equitable in nature" (Agricultural Ins. Co. v Matthews, 301 A.D.2d 257, 260 [1st Dept 2002]; see Manufacturer's & Traders Trust Co. v Reliance Ins. Co., 8 N.Y.3d 583, 588 [2007]). The Court may "exercise its equitable power to prorate insurance proceeds among claimants" (Boris v Flaherty, 242 A.D.2d 9, 13 [4th Dept 1998]). In exercising its discretionary equitable distribution powers, the Court can try to minimize the disparity which might otherwise result in multi-claimant cases, where, for example the insurer could otherwise pay out and deplete the proceeds on a first-come first-serve basis, rendering them unavailable to subsequent claimants (see Boris, 242 A.D.2d at 14 [recognizing valid policy reasons for proportional distribution of such funds]).
Boris is instructive on how the courts may exercise the power of equitable distribution. There, one of several claimants in a case involving a multi-party accident argued that its property damage claim, which had already been reduced to judgment, was entitled to priority over the personal injury claims of other interpleader claimants under the rule of "first in time, first in right" (Boris, 242 A.D.2d at 13). The Fourth Department acknowledged that "[n]ormally, that is the rule" (id., citing Gerdes v Travelers Ins. Co., 109 Misc.2d 816, 819 [Sup Ct, Suffolk Co 1981]). But it held that the rule does not take precedence over an interpleader distribution pursuant to CPLR 1006 (id.). It further held that, in light of the "equitable power granted it by statute in an interpleader action, Supreme Court had the authority to stay any execution under [the claimant's] judgment before deciding how to distribute the insurance monies equitably" among the other claimants (id.). And it approved the allocation of the interpleader funds among all four claimants proportional to the judgment or value ascribed to the claims after arbitration (see id. at 14).
This motion presents two further questions not at issue in Boris. First, does the Court have the discretion to distribute the Global Liberty interpleader funds to one or more claimants before judgment or final resolution of all pending claims against the Hussain defendants? The Estate of Ukaj argues that it does not. And second, does the Court have the discretion to distribute the Global Liberty interpleader funds to claimants who decline to accept their ratable share of the funds in full satisfaction of their claims against the Hussain defendants, accompanied by a signed release and stipulation of discontinuance with prejudice? The Hussain defendants argue that it does not.
As to the first question, counsel have pointed to no definitive caselaw addressing whether, pursuant to CPLR 1006, the Court can distribute the interpleader funds before all pending claims are resolved. The Estate of Ukaj relies heavily on Gerdes (109 Misc.2d 816), David v Bauman (24 Misc.2d 67 [Sup Ct, Nassau Co 1960]), and Pisciotta v Preston (170 Misc. 376 [Sup Ct, NY Co 1938]). But interpleader fund distributions were not at issue in Gerdes, and accordingly were not addressed in that decision. Indeed, the Fourth Department in Boris cited Gerdes when it held that CPLR 1006 nevertheless provides an exception to the "first in time, first in right" rule adopted in Gerdes (242 A.D.2d at 13, citing Gerdes, 109 Misc.2d at 819). And interpleader principles were neither at play nor discussed in David and Pisciotta.
Given its equitable authority under CPLR 1006, the Court finds no absolute bar to distributing interpleader funds before judgement or other final resolution of all claims in cases where, as here, the interpleader action is brought in the context of multiple independent claims. There may conceivably be some circumstance where equitable principles auger in favor of distributing interpleader funds before all claimants have obtained final judgment or other final resolution of the value of their claims (see XL Specialty Ins. Co. v Hallac, 2018 WL 3407704, *5, 2018 U.S. Dist. LEXIS 114575, *14-15 [SD NY, June 22, 2018, Rakoff, J.]; Frank v Hartford Acc. & Indem. Co., 136 Misc. 186, 192-193 [Sup Ct, NY County 1930], affd 231 AD 707 [1st Dept 1930]).
The conclusion is different where the competing claims are not independent and the claimants are adverse to each other; in those circumstances, distribution of interpleader funds must await trial or final resolution of conflicting claims (see Geddes v Rosen, 22 A.D.2d 394, 397-399 [1st Dept 1965]; John A. Johnson & Sons v National City Bank of NY, 6 A.D.2d 1055, 1055 [2d Dept 1958]).
The Estate of Ukaj argues, however, that Vehicle and Traffic Law § 370 (1), not CPLR 1006, controls, and that provision does not permit distribution until after all claims are resolved. Section 370 (1), like CPLR 1006, provides for another exception to the "first in time, first in right" rule (Gerdes, 109 Misc.2d at 818). Under section 370, entities in the business of carrying or transporting passengers in vehicles for hire must obtain a surety bond or policy of insurance in the form and with minimum liability coverage prescribed by the New York State Superintendent of Financial Services. And section 370 expressly provides that the insurance proceeds of a policy for vehicles for hire shall "be apportioned ratably among the judgment creditors according to the amount of their respective judgments for damage or injury caused by the operation, maintenance, use or the defective construction of such motor vehicle" arising from any one accident (Vehicle & Traffic Law § 370 [1] [emphasis added]). By its terms, the Estate of Ukaj argues, the Court ordinarily cannot make ratability and distribution determinations until the amount of liability is fixed for each claimant by judgment or otherwise.
The Court of Appeals in Bleimeyer v Public Serv. Mut. Cas. Ins. Corp. (250 NY 264 [1929]), provides some support for the Estate of Ukaj's argument. Applying Vehicle and Traffic Law § 370's predecessor statute, Highway Law § 282-b (L 1925, ch 25), the Court gave instruction on the proper approach to ratable distribution of funds from a surety bond for multiple claims arising from an accident involving a vehicle ("a motor omnibus") for hire, where the wrongdoer was insolvent, and where some claims had gone to judgment and others had not. The Court held that the trial court should have placed the surety bond on hold for a "reasonable allowance of time" of time to allow potential creditors to reach final judgment (Bleimeyer, 250 NY at 269). And "[w]hen that allotted time shall have elapsed, final judgment may be rendered for the division of the fund among the judgment creditors entitled" (id.).
Vehicle and Traffic Law § 370 is the more specific statute, and "'[a]s a general matter, the language of general statutes are to yield to the language of specific ones'" (HSBC Bank USA, N.A. v Rubin, 210 A.D.3d 73, 81-82 [2d Dept 2022], quoting Matter of B.Z. Chiropractic, P.C. v Allstate Ins. Co., 197 A.D.3d 144, 155 [2d Dept 2021]; see AP Propane v Sperbeck, 157 A.D.2d 27, 30 [3d Dept 1990]; McKinney's Cons Laws of NY, Book 1, Statutes § 238). If Vehicle and Traffic Law § 370 indeed supersedes and displaces the more general interpleader principles under CPLR 1006, it is clear from both the statutory text and Bleimeyer that distribution of the insurance proceeds should await final judgments or their equivalent. And the Court may set a reasonable amount of time to allow the claims to proceed to final resolution before ordering ratable distribution.
Here, however, plaintiffs/claimants interposed no objection to Global Liberty's interpleader motion on the ground that relief under CPLR 1006 was unavailable by virtue of Vehicle and Traffic Law § 370. So, arguably, any objection to treating the Global Liberty insurance proceeds as interpleader funds subject to distribution pursuant to equitable interpleader principles under CPLR 1006, not Vehicle and Traffic Law § 370, has been waived.
Plaintiffs/claimants objected only on the grounds of prematurity, arguing that Global Liberty had failed to establish the absence of any other excess liability or other insurance policy. Plaintiffs also objected to reduction of the policy amount for costs, disbursements, and attorneys' fees.
In any event, the Court is persuaded by the Hussain defendants' argument that, either as a matter of law or equitable discretion, any claimant's receipt of a court-ordered distribution of interpleader funds must be conditioned on a general release and stipulation of discontinuance against the insured Hussain defendants (see CPLR 5003-a [a]; General Obligations Law § 15-108 ). Claimants had previously suggested at court conferences that they may have been interested in immediate distribution of funds so that they could end their involvement in this litigation. In the Court's view, such circumstance would weigh heavily as an equitable factor for immediate distribution so that those families who had settled with the Mavis defendants could move beyond this litigation. But now, claimants ask the Court to order a distribution without requiring them to settle with the Hussain defendants and to stipulate to discontinuance as conditions of distribution. So, the immediate distribution of Global Liberty funds would not have the effect of bringing closure to most of these coordinated lawsuits arising from the horrific crash on.
CPLR 5003-a (a) provides: "When an action to recover damages has been settled, any settling defendant, except those defendants to whom subdivisions (b) and (c) of this section apply, shall pay all sums due to any settling plaintiff within twenty-one days of tender, by the settling plaintiff to the settling defendant, of a duly executed release and a stipulation discontinuing action executed on behalf of the settling plaintiff."
General Obligations Law § 15-108, entitled "Release or covenant not to sue," applies to contribution claims when a release is provided to fewer than all defendants in a multi-defendant lawsuit. Subdivision (a) provides that where such a release is given, it does not discharge any of the other defendants, but reduces the claim of the releasor against the remaining defendants. Subdivision (b) provides that a defendant who has been given such a release is relieved from liability to any other person for contribution. "The purpose of the statute is to encourage settlement, although the statute is also concerned with ensuring equity. Plaintiffs should be fairly compensated, but non-settling defendants should not bear more than their fair share of a plaintiff's loss" (Whalen v Kawasaki Motors Corp., U.S.A., 92 N.Y.2d 288, 292 [1998]).
Further complicating the prospect of immediate distribution without requiring finality of the claims against the Hussain defendants is the Court's ability to ascertain the basis for ratability. Counsel suggests basing the ratability assessment on the amounts received by each of the 18 plaintiffs through settlement with the Mavis defendants as a proxy for their ratable share of damages against the Hussain defendants. The Court finds this problematic, not only because of the mismatch of defendants, but also because two plaintiffs have not settled with the Mavis defendants and are continuing their litigation against them. The alternative suggested-dividing the Global Liberty funds equally among each of the 19 plaintiff's estates (except the Estate of Lissinichia)-is simpler, though not proportional to the settlement proceeds received by each claimant. True, such equal distribution is unlikely to be objectionable in view of the fact that each share amounts to approximately $25,000, a relatively small number when compared to the amounts resulting from Mavis settlements. But any such distribution would not reflect a judicial finding or stipulation of liability against the Hussain defendants. Without a judicial finding of liability or settlement, the distribution would merely presume (though not unreasonably) the Hussain defendants' liability.
Nauman Hussain was convicted after a jury trial of 20 counts of second-degree manslaughter (Penal Law § 125.15 [1]) in connection with the crash, and sentenced to concurrent terms of incarceration of 5 to 15 years (see Certificate of Disposition, Schoharie Co. Dkt No. IND-70024-19/001; 2019-33, dated May 30, 2023; Uniform Sentence & Commitment, Schoharie Co. Dkt No. IND-70024-19/001; 2019-33, dated May 31, 2023). Nauman Hussain's appeal of his criminal convictions is pending (see Notice of Appeal, People v Hussain, Schoharie Co. Dkt No. IND-70024-19/001; 2019-33, dated May 31, 2023).
The Fourth Department in Boris discussed policy considerations underlying interpleader practice used in similar circumstances:
Interpleader actions... are to be encouraged as part of the duty of good faith of an insurer in defending and settling claims over which it exercises exclusive control on behalf of its insured.... We commend New York Central for its effort to distribute its insurance coverage in an equitable manner, rather than simply paying judgment creditors in the order that the judgments are entered until coverage is exhausted. All claimants are treated fairly in the interpleader action and the rights of the insured are fully protected....(Boris, 242 A.D.2d at 14 [internal citation omitted]). Further, in approving a stay of execution of an earlier-in-time judgment until the trial court could determine an equitable allocation of limited insurance funds, the Court balanced the interests of claimants who brought their cases to resolution first and those who still had not done so, as well as the interests of the insured defendant.
The Court has considered the purposes of the interpleader statute. Distribution of the Global Liberty funds at this juncture, without settlement and stipulations of discontinuance against the insured Hussain defendants, would not materially further the public policy interests underlying interpleader.
Accordingly, it is
Ordered that the motion for distribution for the Global Liberty interpleader funds is denied, without prejudice to a future application when appropriate.
This constitutes the decision and order of the Court. The original decision and order is being uploaded to NYSCEF for electronic entry by the Albany County Clerk.
Papers Considered
1. Affirmation of Attorney Robert E. Abdella in Support of Order to Show Cause, dated November 20, 2023 (NYSCEF Doc No. 930);
2. Order to Show Cause, dated November 20, 2023 (NYSCEF Doc No. 931);
3. Affirmation in Opposition of Attorney Brian D. Premo, Dated December 14, 2023 (NYSCEF Doc No. 933);
4. Memorandum of Law of Attorney Brian D. Premo in Opposition, Dated December 14, 2023 (NYSCEF Doc No. 934);
5. Reply Affirmation of Attorney Robert E. Abdella, dated December 29, 2023 (NYSCEF Doc No. 936);
6. Affirmation of Attorney Terrance O'Connor, dated February 22, 2024 (NYSCEF Doc No. 945);
7. Reply Affirmation of Attorney Brian D. Premo, dated February 27, 2024 (NYSCEF Doc No. 946).