New York Preserves Subrogation Rights
September 06, 2023 —
Lian Skaf - The Subrogation StrategistThe insurer’s right of subrogation is equitable in nature, even if not based in contract. However, since the insurer steps into the shoes of its insured and is limited to the rights of its insured, an integral part of the investigation process is determining what rights the insured has. Whether or not the insured can settle with the tortfeasor and that whether the settlement would also apply to the subrogated carrier is a question the Supreme Court of New York, a trial court, recently addressed.
In Utica First Ins. Co. v. Homeport I LLC, et al., No. 150448/2022, 2023 N.Y. Misc. LEXIS 3087 (N.Y. Sup. Ct.), the plaintiff insurance carrier’s insured, SI Waterfront Management Inc. (SI Waterfront), owned and operated a restaurant called Wynwood at 24 Navy Pier Court in Staten Island, New York. The owner of the property was Homeport I LLC (Homeport). Significant construction work pertaining to plumbing and draining lines at the property was done by Ironstate Holdings, LLC (Ironstate), the plumbing portion of which was conducted by subcontractor Claire Construction Corp. (Claire). As a result of the construction work, on June 8, 2021, SI Waterfront allegedly sustained property damage from flooding.
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Lian Skaf, White and Williams LLPMr. Skaf may be contacted at
skafl@whiteandwilliams.com
Beware: Hyper-Technical Labor Code Violations May Expose Employers to Significant Claims for Penalties under the Labor Code California Private Attorneys General Act of 2004 (PAGA)
May 10, 2017 —
Angela Reston-Nunez – Newmeyer & Dillion LLPMost employers know that companywide policies or practices that do not strictly comply with applicable state or federal employment laws can expose employers to class action lawsuits by large numbers of employees seeking recovery of massive sums in damages, attorneys’ fees and costs. Unfortunately, traditional class action lawsuits are not the only representative actions employers should be concerned with. Recent litigation trends have shown that California’s lesser known Labor Code Private Attorneys General Act of 2004 (“PAGA”) can be equally, if not more harmful to employers than class actions due to steep penalties for minor violations.
WHAT IS PAGA?
Under PAGA, “aggrieved employees” can sue employers for alleged Labor Code violations. Like class actions, a PAGA plaintiff sues on a representative basis on behalf of themselves and other workers. However, unlike class action plaintiffs, PAGA plaintiffs do not seek damages; rather, they seek civil and statutory penalties formerly recoverable solely by state agencies in enforcement actions.
The distinction between recovery of damages in class actions and recovery of penalties in PAGA actions reflects the often-insidious nature of PAGA claims. While workers have long alleged “derivative” PAGA claims for penalties in connection with more substantive underlying Labor Code violations (meal or rest break violations, for example), we have seen a recent spike in PAGA suits alleging hyper-technical Labor Code violations with no underlying substantive violation, and where the “aggrieved employees” have suffered no actual harm.
WHAT'S AT STAKE?
Equally troubling for employers is the method by which significant penalties are aggregated. With a few significant exceptions, penalties generally range from $50 to $250 per violation. At first blush, this may not seem like much, however total penalties rise rapidly when considering that calculations are made on a per-employee and a per-pay period basis.
AN EXAMPLE ON HOW PAGA WORKS
Consider the following example based on one recent case:
Issue: An employee brought a PAGA-only lawsuit on behalf of himself and 400 other “aggrieved employees” against his employer for alleged Labor Code violations.
Claim: The employee claimed the employer’s 30-year practice of paying employees 9 days after the close of the applicable payroll period violated Labor Code Section 204(d), which requires payment to be made within 7 days of the close of the payroll period. The employee claimed that, under PAGA, the employer was liable for a minimum penalty of $100 per employee, per pay period, going back at least one year (the statutory limitations period for PAGA claims).
Exposure: With 400 employees, 24 pay periods per year, and $100 per violation, the plaintiff sought a minimum of $960,000 in penalties (not including substantial attorneys’ fees, costs and interest also available under PAGA), despite offering no evidence of harm suffered by the employees or prior notice of the issue.
OTHER IMPORTANT CONSIDERATIONS
In addition to a draconian penalties scheme, there are a myriad of additional aggravating factors for employers involved in PAGA litigation, such as:
- PAGA plaintiffs are not required to meet the rigorous class certification standards required of class action plaintiffs, meaning plaintiffs’ attorneys may be more likely to bring meritless “strike suits” aimed at obtaining quick settlements based on significant alleged penalties exposure.
- 75% of PAGA penalties recovered by way of settlement or judgment are directed to the state of California, while the "aggrieved employees” only keep 25%, reinforcing the notion that PAGA claims are frequently attorneys’-fee-driven, rather than for protecting employees.
STEPS FOR EMPLOYERS TO PROTECT THEMSELVES
Fortunately, there are a number of measures employers can take prior to and during wage and hour litigation which can dramatically reduce, or even eliminate, exposure to substantial penalties and damages. This includes:
- Regular reviews. Prior to litigation, we recommend regular detailed reviews of company policies and practices in order to identify areas of possible concern and ensure compliance with California’s ever-changing labor laws.
- Take action. On receipt of a new PAGA claim, taking immediate action to remedy an alleged violation within the Labor Code’s 33-day “safe harbor” time-period may help limit an employer’s exposure, and could bar a plaintiff from filing suit at all.
- Be aggressive. Once a PAGA or class action claim is in litigation, a proactive, aggressive approach to claim evaluation, investigation and litigation is critical.
For these reasons and more, it’s in an employers’ best interest to monitor these issues closely and seek input when appropriate.
Angela Reston-Nunez is a labor and employment attorney in Newmeyer & Dillion’s Walnut Creek office. For questions regarding PAGA, class action or individual wage and hour issues, or other employment law matters, please feel free to contact Angela Reston-Nunez at (925) 988-3249 or angela.reston-nunez@ndlf.com.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit www.ndlf.com.
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TOLLING AGREEMENTS: Construction Defect Lawyers use them to preserve Association Warranty Claims during Construction Defect Negotiations with Developers
March 07, 2014 —
Nicholas D. Cowie – Maryland Condo Construction Defect Law BlogIf properly drafted, a tolling agreement stops, or “tolls,” the running of the statue of limitations and other time periods aplicable to an association’s legal claims while it attempts to negotiate the repair of and/or monetary compensation for construction deficiencies with the developer and other responsible parties. In short, it is a “time -out” that allows and association to preserve its legal claim so it can focus on settling its claims rather than pursing them in court.
Too often, condominium associations and homeowner associations (“HOA”) unknowingly allow their legal claims for construction defects to expire during lengthy negotiations with developers and builders. If negotiations fail, the association may turn to a construction defect attorney for legal representation only to find their construction defect legal claims are time barred because the statute of limitations or other legal time period has expired.
This article explains how condominium associations and HOAs can avoid this scenario by the use of tolling agreements to preserve their legal claims while engaged in potentially lengthy negotiations with developers to correct construction defects.
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Nicholas D. Cowie, Maryland Condo Construction Defect Law BlogMr. Cowie may be contacted at
ndc@cowiemott.com
Outcry Over Peru’s Vast Graft Probe Prompts Top Lawyer to Quit
January 15, 2019 —
John Quigley - BloombergPeru’s Attorney General Pedro Chavarry quit his post amid allegations he sought to sabotage a plea deal with a major construction company and derail the country’s biggest corruption probe.
The board of supreme prosecutors accepted his resignation Tuesday and appointed Zoraida Avalos as his replacement, according to a post on the account of the attorney general’s office. Chavarry will continue to sit on the five-member board.
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John Quigley, Bloomberg
Texas Shortens Cut-Off Date for Suits Against Homebuilders Who Provide a 6-Year Written Warranty
June 26, 2023 —
Kim Altsuler - Peckar & Abramson, P.C.Summary of the new law as it pertains to builders of new homes:
The existing 10-year statute of repose for builders of new homes (the ultimate cut-off date for filing suit) has been shortened to 6 years if the builder provides a 1-2-6 written warranty (1-year workmanship and materials; 2-year plumbing, electrical and HVAC; 6-year structural).
Extended time to bring suit if written claim presented during the period of repose:
If a written claim for damages, contribution, or indemnity is presented to the builder during the applicable limitations period and the 6-year statute of repose applies, the time to sue is extended one year from the date the claim is presented. In practical effect, this means that if a written claim is presented and the statute of repose expires before suit is filed, suit may still be filed provided it is within one year of the date the written claim was made.
When the new law goes into effect:
The new law is effective as of June 9, 2023 and applies to suits commenced on or after that date. However, if the contract under which the claim is brought was entered into before June 9, 2023, the former 10-year version of the statute of repose applies. In other words, the statute applies to contracts entered into on or after June 9, 2023, if the contract has at least a 1-2-6 warranty.
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Kim Altsuler - Peckar & Abramson, P.C.Ms. Altsuler may be contacted at
kaltsuler@pecklaw.com
Burden Supporting Termination for Default
January 11, 2021 —
David Adelstein - Florida Construction Legal UpdatesTerminating a contractor for default is a “‘drastic sanction’ and ‘should be imposed (or sustained) only for good grounds and on solid evidence.’” Cherokee General Corp. v. U.S., 150 Fed.Cl. 270, 278 (Fed.Cl. 2020) (citation omitted). This is true with any termination for default because terminating a contract for default is the harshest recourse that can be taken under a contract. It is a caused-based termination. For this reason, the party terminating a contract for default needs to be in a position to carry its burden supporting the evidentiary basis in exercising the default-based (or caused-based) termination. Stated differently, the party terminating a contract for default needs to justify the reasonableness in terminating the contract for default.
A party looking to terminate a contract for default should smartly work with counsel to best position its justification in exercising the termination for default. Likewise, a contractor terminated for default should immediately work with counsel to best position the unreasonableness or the lack of justification for the default-based termination.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Property Damage Caused By Construction Next Door Covered as Ensuing Loss
July 16, 2014 —
Tred R. Eyerly – Insurance Law HawaiiDamage to the insureds' property caused by construction undertaken on the adjacent lot was covered under the insureds' property policy. Chubb Indem. Ins Co. v. 21 E. Cedar, 2014 U.S. Dist. LEXIS 79906 (N.D. Ill. June 12, 2014).
The insureds' home sustained damage contemporaneous with demolition, excavation, and construction taking place on a adjacent lot. Chubb paid benefits to the insureds for their loss, and then sought to recover as subrogee from the defendants who performed the construction.
The defendants argued there was no coverage under Chubb's policy. Faulty planning, construction or maintenance were excluded. An exception to the exclusion stated, however, "we do insure ensuing covered loss unless another exclusion applies." Defendants argued characterizing the damages as ensuing losses was purely semantic and self-serving, designed to involve the ensuing loss provision in order to protect Chubb's coverage determination. Chubb contended the exclusion applied only to the specific property being insured and not to a neighbor's property where work is being performed. Therefore, the faulty construction exclusion did not apply and the ensuing loss provision was triggered.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
JPMorgan Blamed for ‘Zombie’ Properties in Miami Lawsuit
June 18, 2014 —
Christie Smythe – BloombergJPMorgan Chase & Co. (JPM) engaged in a “pattern of discriminatory” lending that led to foreclosures, the city of Miami said in a lawsuit filed last week in federal court, the latest in a series of similar claims against the nation’s largest banks.
Last month, Banco Santander SA’s (SAN) U.S. unit was sued by the city of Providence, Rhode Island, over claims it stopped issuing mortgages in minority neighborhoods after the housing bubble burst. Santander Bank, previously named Sovereign Bank, pulled out of the neighborhoods and focused on white communities after being acquired by the Madrid-based lender in 2009, the city alleged.
Miami and Los Angeles are among cities to have filed similar lawsuits against Bank of America Corp., Citigroup Inc. (C) and Wells Fargo & Co. (WFC) for allegedly “red-lining” black and Hispanic areas as no-loan zones, and then “reverse red-lining,” flooding the areas with predatory mortgages even when minorities qualified for better terms.
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Christie Smythe, BloombergMs. Smythe may be contacted at
csmythe1@bloomberg.net
