SCHIFELBINE v. FOSTER WHEELER CORPORATION

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Supreme Court, Allegany County, New York.

Wayne C. SCHIFELBINE, Plaintiff, v. FOSTER WHEELER CORPORATION and Foster Wheeler Energy Corporation, Defendants.

Foster Wheeler Corporation and Foster Wheeler Energy Corporation, Third-Party Plaintiffs, v. K.C. Swann & Son Roofing Company, Inc., Third-Party Defendant.

Decided: November 19, 2002

Dwyer, Black & Lyle, P.C., by Jeffrey A. Black and Joseph C. Dwyer, for Plaintiff. Bartlett, McDonough, Bartone, and Monaghan, LLP by E. Gordon Haesloop, for Defendant and Third-Party Plaintiff. Davidson & O'Mara, P.C., by Weeden A. Wetmore, for the Third-Party Defendant, K.C. Swann and Son Roofing Company, Inc.

The issue before the Court is the calculation of damages at a CPLR Article 50-b hearing.   Plaintiff received catastrophic injuries in a fall through Foster Wheeler's roof on July 27, 1999, rendering him a quadriplegic.   Summary Judgment was granted under Labor Law § 240(1) and entered on December 13, 2000, and the Appellate Division, Fourth Department, unanimously affirmed.   The liability trial on May 9, 2002, found Mr. Schifelbine's employer K.C. Swann and Son Roofing Company, Inc., 100% liable.

A second jury awarded damages on May 31, 2002, of $22,193,435 at trial in addition to $1,174, 774 in past medical damages which were stipulated during trial:

On August 23, 2002, this Court rejected all motions by Foster Wheeler and Swann to vacate the jury's verdict finding;  this Court found that the jury verdict was not against the weight of the evidence;  that a new trial was not required;  that the awards did not deviate from what would be reasonable compensation under CPLR § 5501(c).

 CPLR Article 50-b requires the structuring of the awards for future earnings, future pain and suffering and future medicals.   The awards for past lost earnings, past pain and suffering and past medicals are not structured, but paid at the time of judgment.   Plaintiff's social security disability is treated as a collateral source against his past and future earnings.

 The submissions and testimony of the parties differ with respect to their methodology as well as the choice in discount rates and the date on which they are applied to arrive at present value.

The methodology of plaintiff follows that used by Justice Gammerman in Ursini v. Sussman, 143 Misc.2d 727, 541 N.Y.S.2d 916 and in Petrides v. Goodgold, 170 Misc.2d 770, 655 N.Y.S.2d 702.   It was followed in Peterson v. Zuercher, 152 Misc.2d 684, 584 N.Y.S.2d 968 and by the Fourth Department and Court of Appeals in Rohring v. City of Niagara Falls, 84 N.Y.2d 60, 614 N.Y.S.2d 714, 638 N.E.2d 62 and more recently in Bryant v. New York City Health and Hospitals, 93 N.Y.2d 592, 695 N.Y.S.2d 39, 716 N.E.2d 1084.   The Court of Appeals observed that Article 50-b has generated a good deal of frustration and litigation.   The same is true here as defendant urges that plaintiff's methodology increases its liability and overcompensates plaintiff.   Defendant submits that the court should follow Professor Goldman's method of taking each amount awarded by the jury for future damages and make a reasonable assumption as to the starting cost of each particular loss, and the applicable growth rate over the number of years stated by the jury so as to arrive at the total sum awarded.   However, this court intends to follow the “ Gammerman method” in accord with the above cited decisions and the statutory scheme.

 The numerical discount rate as well as the date it is to be applied is not expressly found in the statute.  CPLR § 5041 provides that the Court should apply the discount rate in effect at the time of the award to the full amount of the remaining future damages.   Given the amount of the future damages here a small change in the discount rate makes a significant difference in the size of the attorney's fees.

The Court has reviewed the discount rates opposing economists and counsel have argued and elects to apply the rates that reflect the average yield of government securities maturing over the life of the three periodic payments as proposed by plaintiff's economist.

 Plaintiff contends the Caruso v. LeFrois Builders, Inc., 217 A.D.2d 256, 635 N.Y.S.2d 367, requires the Court to select the discount rate as of the date of Judgment.   Defendant urges the Court to set the date of the jury damage verdict as the date of award.   The Fourth Department in Caruso cites Karagiannis v. New York State Thruway Authority, 209 A.D.2d 993, 619 N.Y.S.2d 906, which states that the date used to determine the appropriate discount rate is the date of the original award or the date that judgment was entered.   In Karagiannis, the 50-b hearing was held two years after the initial awards.   In Young v. Tops Markets, Inc., 283 A.D.2d 923, 725 N.Y.S.2d 489, the Court stated that the trial Court did not abuse its discretion by applying a discount rate in effect at the time of the verdict.   The Judgment was entered one year and four months after the jury verdict on damages.   The court reads CPLR 5041 and the above case law to give it discretion in the selection of the “time of the award”.

CPLR Article 50-b is a technical administrative scheme which was intended to regulate a structured payment.   It should not be used to increase the underlying liability owed by defendant, (see, Rohring v. City of Niagara Falls, 84 N.Y.2d 60, 614 N.Y.S.2d 714, 638 N.E.2d 62).  Setting the jury damage verdict date of May 31, 2002, as the time of award and using the methodology of Plaintiff would result in counsel fees on future damages in the sum of $5,490,760.   Setting the time of award on September 23, 2002, the date of the judgment would increase counsel fees on future damages to $6,342,448.   Plaintiff will receive the same monthly annuities regardless of the fee discount rate and payment date set by the Court.

The Court sets the discount rate in effect at the time of the jury verdict on damages to avoid increasing the underlying liability of defendants by nearly a million dollars over a four month period due to declining interest rates.   These discount rates are assigned as follows as at May 31, 2002:  4.74% for future earnings;  4.36% for future pain and suffering at 5.73% for future medicals.   The Court sets a separate discount rate for each of the annuities as their terms are significantly different, (see, Hancock v. 350 Hull Realty Corp., NYLJ, February 28, 1995).

 The Court applies the presumptively fair and reasonable statutory rate of 9% interest pursuant to CPLR § 5002 and § 5003, (see, Rodriguez v. New York City Housing Authority, 91 N.Y.2d 76, 666 N.Y.S.2d 1009, 689 N.E.2d 903).  The rate of interest payable shall be 9% for the period from the date of entry of summary judgment (December 13, 2000) to the date of entry of final judgment herein and 9% for the period from the date entry of final judgment to the date of payment or delivery of the annuity contracts, (see, Sassoonian v. City of New York, 261 A.D.2d 319, 692 N.Y.S.2d 12).

Table 1 1 shows the categories of the three future damages;  the adjusted gross awards before discounting;  a reduction for its pro rata reduction for the initial $250,000 lump sum payment required by CPLR 5014(b);  the remainder after deduction;  the period of time payable and the annual periodic award (non-discounted) remainder divided by the number of years payable, (see, Bryant v. New York City Health and Hospitals Corp., 93 N.Y.2d 592, 695 N.Y.S.2d 39, 716 N.E.2d 1084).  (Future lost earnings of $300,000 is reduced by the collateral source social security disability benefits of $137,587, pursuant to CPLR 4545(c) because it is clear to the Court that Mr. Schifelbine will continue to be eligible for such payments for his work life expectancy, (see, Caruso v. LeFrois Builders, Inc., 217 A.D.2d 256, 635 N.Y.S.2d 367).)

 To determine the present value of future damages each annual periodic award is increased by 4% per annum over the time frame and it is payable discounted back to the date of liability finding, (see, Pay v. State of New York, 87 N.Y.2d 1011, 643 N.Y.S.2d 467, 666 N.E.2d 172).  The discount rate is 4.74% for future earnings;  4.36% for future pain and suffering;  and 5.73% for future medicals.   Plaintiff's attorneys are entitled to $5,490,760, one-third of the total present value, which is then deducted on a pro rata basis from each category of future damages.   The last column of Table 2 reflects the net present value for each category of future damages after reduction for attorney's fees.

Table 3 sets forth the lump sum amounts owing for past pain and suffering, past earnings, past medical expenses, attorneys fees on future damages and the first $250,000 of future damages.   Past damages and the first $250,000 of future damages are subject to attorney's fees.

Table 4 relates back to the annual periodic awards of Table 1, divides those amounts by 12 to arrive at a monthly figure, and multiplies by 2/3 to reflect the reduction for attorney's fees.

In accord with the above figures, future damages required to be paid periodically pursuant to CPLR § 5041 shall be paid (see Table 1) from the date of the jury verdict on damages as follows 3 :

Future Pain & Suffering:  $5,434,614, with an initial monthly annuity of $30,192 beginning May 31, 2002, increasing at 4% on each May 31st thereafter, for a term of 10 years or life, whichever is less.

Future Medical Expenses:  $15,183,846, with an initial monthly annuity of $22,140 beginning May 31, 2002, increasing at 4% on each May 31st thereafter for a term of 38.1 years or life, whichever is less.

Future Loss Earnings:  $160,482, with an initial monthly payment of $405.00 beginning May 31, 2002, increasing at 4% on each May 31st thereafter, for a term of 22 years or life, whichever is less.

Judgment shall be entered in favor of Wayne C. Schifelbine for $10,981,518, the net present value of three annuity contracts (see Table 2) that will provide for the payment of future damages in periodic installments according to the above schedule, and requiring defendant to offer and guarantee the purchase and payment of such contracts.

The Judgment to be entered shall also provide for payment in a lump sum of prejudgment interest at the rate of 9% on the net present value of the annuity contracts, $10,981,518 from the date of entry of summary judgment to the date the annuity contracts are delivered (see, Gordon v. City of New York, 188 Misc.2d 246, 727 N.Y.S.2d 287).

Finally, Judgment shall be entered for $7,930,404 in favor of Wayne C. Schifelbine representing the items set forth in Table 3 together with interest at the rate of 9% from the date of entry of summary judgment.

FOOTNOTES

1.   Tables used in this decision adapted from Judge John P. Lane's methodology, Fisher v. State of New York, unpublished Claim no. 93606, filed March 26, 2001, affirmed at 292 A.D.2d 882, 739 N.Y.S.2d 659.C1-6TABLE 1S14 S13 S12ReductionS12 S6 S9 S14S13S12for LumpS12S6S9AnnualS14S13AdjustedS12Sum FutureS12S6TimeS9PeriodicS14CategoryS13Gross AwardS12DamagesS12RemainderS6FrameS9AwardS14 S13 S12S12S6S9S14Future Pain & SufferingS13$ 5,500,000S12$ 65,386S12$ 5,434,614S610S9$543,461S14Future MedicalsS13$15,366,529S12$182,683S12$15,183,846S638.1S9$398,526S14Future Lost EarningsS13$   162,413S12$  1,931S12$   160,482S622S9$  7,295S14TotalS13$21,028,942S12$250,000S12$20,778,942S6S9

FN2. No litigation expenses were submitted, pursuant to CPLR Section 5041(c)..  FN2. No litigation expenses were submitted, pursuant to CPLR Section 5041(c).

3.   Payment date of jury verdict on damages requested by plaintiff by letter application of November 8, 2002, was objected to by third party defendant by letter dated November 13, 2002, and by defendants by letter dated November 12, 2002, (see, Rohring v. City of Niagara Falls, 84 N.Y.2d 60, 70, 614 N.Y.S.2d 714, 638 N.E.2d 62;  Young v. Tops Markets, 283 A.D.2d 923, 925, 725 N.Y.S.2d 489;  Brown v. City of New York, 297 A.D.2d 771, 749 N.Y.S.2d 34).

JAMES E. EUKEN, J.