New York Law Review

Tag: election of remedies

  • Najjar Industries, Inc. v. City of New York, 74 N.Y.2d 943 (1989): Consequences of Choosing a Rescission Theory

    Najjar Industries, Inc. v. City of New York, 74 N.Y.2d 943 (1989)

    A party that elects to pursue a claim for rescission and quantum meruit damages in a contract dispute, and secures a jury verdict on that basis, cannot later argue on appeal that it should have been allowed to pursue a breach of contract claim for compensatory damages.

    Summary

    Najjar Industries contracted with New York City to construct an air pollution device. Disputes arose, and Najjar eventually sued the city. Critically, Najjar chose to present its case to the jury as a claim for rescission of the contract, seeking damages under a quantum meruit theory (reasonable value of services). The jury found the city breached the contract and that Najjar properly rescinded. After an initial damages award was overturned, a second trial limited to damages resulted in a much smaller award. On appeal, Najjar argued it should have been allowed to pursue a traditional breach of contract claim. The Court of Appeals held that Najjar was bound by its initial choice of legal theory.

    Facts

    Najjar Industries contracted with the City of New York to build an air pollution device for a fixed price of $5,119,000. The contract stipulated work would begin January 5, 1973, and finish by July 8, 1975. Delays occurred, and Najjar stopped working around November 1976, with the job unfinished. By then, Najjar had received $4,176,553 from the city.

    Procedural History

    Najjar sued the City, including a breach of contract claim. At trial, Najjar pursued a rescission theory, seeking quantum meruit damages. The jury found for Najjar, awarding $2,088,795.26. The Appellate Division affirmed the jury’s findings on breach and rescission, but ordered a new trial on damages. On retrial, Najjar received a much smaller judgment of $121,745.44, which the Appellate Division affirmed. Leave to appeal to the Court of Appeals was denied. This appeal was taken as of right from the first Appellate Division order.

    Issue(s)

    Whether, in an action to recover for the defendant-owner’s material breach of a construction contract, after a remand for a trial solely on damages, the Appellate Division properly restricted the plaintiff to proving damages on a quantum meruit basis, or whether it should have permitted proof and recovery of compensatory (contract) damages.

    Holding

    No, because Najjar chose to try the case to the jury on a theory of rescission entitling it to quantum meruit damages, with the jury charge and verdict premised on this theory. Najjar could not later argue that it should have been permitted to pursue an alternate theory alleged in the complaint.

    Court’s Reasoning

    The Court of Appeals emphasized that Najjar made a deliberate choice to present its case as a rescission claim entitling it to quantum meruit damages. The jury was instructed on this basis, and Najjar did not object. The court relied on the principle that a party cannot pursue one legal theory at trial and then argue on appeal that a different theory should have been applied. The Court stated, “Having itself deliberately chosen to try its case to the jury on a theory of rescission entitling it to quantum meruit damages, with the charge and verdict premised on this theory, plaintiff cannot now be heard to complain that it should be permitted to pursue the alternate theory alleged in the complaint.” This highlights the importance of making strategic choices at trial and adhering to those choices on appeal. The court cited Martin v. City of Cohoes, 37 N.Y.2d 162, further reinforcing the principle that parties are bound by the legal theories they advance at trial.

  • Roggio v. Nationwide Mutual Insurance Co., 66 N.Y.2d 260 (1985): Election of Remedies in No-Fault Insurance

    Roggio v. Nationwide Mutual Insurance Co., 66 N.Y.2d 260 (1985)

    Under New York’s No-Fault Law, a claimant who elects to arbitrate a dispute with an insurer regarding first-party benefits is bound by that election and cannot subsequently litigate in court similar claims arising from the same accident.

    Summary

    Frances Roggio was involved in a car accident and sought first-party benefits from Nationwide, her insurer. After Nationwide denied certain claims, Roggio opted for arbitration, which resulted in a limited award. Subsequently, Roggio filed a court action seeking reimbursement for a later medical bill related to the same accident, which Nationwide also denied. The New York Court of Appeals held that Roggio, having chosen arbitration, was precluded from litigating further claims arising from the same accident. This decision reinforces the legislative intent of the No-Fault Law to provide a swift and efficient mechanism for resolving disputes, preventing claimants from serially pursuing both arbitration and litigation.

    Facts

    On February 3, 1981, Frances Roggio was involved in a car accident while insured by Nationwide. Nationwide initially paid first-party benefits but stopped payments on October 22, 1981, after an independent medical examination suggested no further physical therapy was necessary. Roggio submitted claims for orthopedic physical therapy and dental work, which Nationwide denied.

    Procedural History

    In early 1982, Roggio arbitrated Nationwide’s denial. The Health Service Arbitration (H.S.A.) panel awarded only payment for an X-ray and a dental bill, finding most services unnecessary. Roggio appealed to a Master Arbitrator, who affirmed the panel’s decision on July 22, 1982. Roggio then commenced a CPLR article 75 proceeding to vacate the arbitration award, which was denied. An appeal to the Appellate Division was withdrawn. Subsequently, Roggio submitted another claim, which was denied, and she initiated a second arbitration, suspended pending the outcome of the court action. Roggio then sued in Supreme Court, Albany County, to recover $92.04 for a bill from Dr. Kite. Special Term denied Nationwide’s motion to compel arbitration or dismiss the action. The Appellate Division reversed and dismissed the complaint, leading to this appeal to the New York Court of Appeals.

    Issue(s)

    Whether a claimant who elects to arbitrate a dispute regarding first-party benefits under New York’s No-Fault Law is precluded from subsequently litigating in court further disputes over medical bills arising from the same accident.

    Holding

    Yes, because the option to arbitrate provided by Insurance Law § 5106(b) should be read as written, and a claimant cannot pursue arbitration for some medical expenses and then, upon denial of subsequent claims from the same accident, turn to the courts.

    Court’s Reasoning

    The Court of Appeals reasoned that allowing claimants to alternate between arbitration and litigation would create an “intolerable drain on our resources for dispute resolution, senselessly prolonging controversies and inviting inconsistent adjudications.” The court cited De Sapio v. Kohlmeyer, 35 NY2d 402, 406, stating, “The courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a party to create his own unique structure combining litigation and arbitration.” The court emphasized the legislative intent behind the No-Fault Law, which was to reduce the burden of automobile personal injury litigation on the courts by providing a swift and economical mechanism for resolving disputes. The court noted that “the clear thrust of section 5106 is to provide no-fault claimants with an opportunity for immediate redress, and by arbitration to offer a mechanism where disputes over reimbursable expenses can be resolved more swiftly and economically than is generally possible in plenary suits.” The court also highlighted that the regulations contemplate multiple disputes arising from the same accident can be consolidated in arbitration for efficient disposition. Allowing litigation after arbitration would disserve the purpose of providing an efficient, informal mechanism for recovery of benefits.

  • Sherrill v. Grayco Builders, Inc., 64 N.Y.2d 261 (1985): Loss of Right to Arbitration by Litigating the Dispute

    Sherrill v. Grayco Builders, Inc., 64 N.Y.2d 261 (1985)

    A party waives its right to arbitration when it actively participates in litigation involving the same claims, manifesting a preference for a judicial forum over arbitration.

    Summary

    This case addresses whether a party’s right to arbitrate a dispute can be lost through extensive participation in litigation. The Court of Appeals held that Gray, by actively litigating claims that were subject to arbitration, demonstrated a clear preference for litigation, thus waiving the right to compel arbitration. The court emphasized that a party cannot use the court system as a “vestibule to the arbitration hall” by pursuing litigation and then later attempting to switch to arbitration.

    Facts

    The dispute arose from a 1972 limited partnership agreement (RPC Agreement) for a housing project. The agreement included an arbitration clause for disputes between partners. A second agreement in 1975 had a similar clause. In 1976, a series of informal documents were created, allegedly modifying the partnership, which led to disputes regarding Sherrill’s withdrawal from the partnership. Sherrill initiated a lawsuit in 1978, and for nearly three years, the litigation proceeded without any mention of arbitration. Gray actively participated in the lawsuit, including discovery and depositions, before demanding arbitration in 1981. He simultaneously pursued the litigation and sought arbitration.

    Procedural History

    Sherrill initially sued to rescind an agreement. Gray answered and actively litigated the case for three years. Gray then served arbitration demands while continuing the litigation. Sherrill commenced a second action. The lower court consolidated the suits and stayed arbitration, concluding the parties had chosen the courtroom for resolution. The Appellate Division affirmed. This appeal followed, addressing the stay of arbitration.

    Issue(s)

    Whether Gray, by actively participating in litigation involving the same claims that were subject to arbitration, waived his right to compel arbitration.

    Holding

    Yes, because Gray’s litigation activity manifested a preference clearly inconsistent with a later claim that the parties were obligated to settle their differences by arbitration. His actions constituted an election to litigate rather than arbitrate.

    Court’s Reasoning

    The Court of Appeals reasoned that the right to arbitration, like other contract rights, can be modified, waived, or abandoned. Gray’s extensive participation in litigation, including discovery and motion practice, demonstrated a clear intent to resolve the dispute in court, thus waiving his right to arbitration. The court emphasized that the pivotal issue in both the litigation and the proposed arbitration was the modification of the underlying agreements by Sherrill’s attempted withdrawal from the partnership, an issue arising directly from the agreements subject to arbitration.

    The court distinguished cases where litigation was necessary to preserve the status quo or involved entirely separate claims. Here, the core issue was the same in both the litigation and the arbitration demands. The court quoted De Sapio v. Kohlmeyer, stating, “The courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a party to create his own unique structure combining litigation and arbitration.” The court stated that measures taken to assert a right to arbitrate must occur before the right is forfeited, stating, “Once the right to arbitrate a particular dispute has been lost by an election to litigate it cannot be recaptured.”

  • Werner v. State, 53 N.Y.2d 346 (1981): Workers’ Compensation as Exclusive Remedy

    53 N.Y.2d 346 (1981)

    Acceptance of workers’ compensation benefits bars a claimant from pursuing a separate wrongful death action against the employer for intentional assault, due to the exclusive remedy provision of the Workers’ Compensation Law.

    Summary

    Juanita Werner, widow of a deceased Attica prison guard, Ronald Werner, filed for and accepted workers’ compensation benefits following his death during the Attica uprising. Subsequently, she filed a claim against the State for wrongful death, alleging intentional assault. The New York Court of Appeals held that because Werner accepted workers’ compensation benefits, she was barred from pursuing a separate action against the State for intentional assault. The court reasoned that the Workers’ Compensation Law provides an exclusive remedy, and accepting benefits constitutes an election of that remedy, precluding a separate tort action.

    Facts

    Ronald Werner, a guard at Attica Correctional Facility, was killed during the 1971 Attica uprising. His widow, Juanita Werner, filed a claim for workers’ compensation benefits on behalf of herself and her children. She received and accepted these benefits until she remarried. Subsequently, Werner filed a claim against the State, alleging negligence and intentional assault, claiming her husband’s death was caused by a State Police Officer. She alleged the officer “willfully and intentionally assaulted and battered the Claimant’s decedent by firing several shots of a gun at Claimant’s decedent…thereby causing his death.”

    Procedural History

    The State moved to dismiss the claim. The Court of Claims dismissed the negligence claim but denied the motion regarding the intentional assault claim. The State’s appeal of this decision was not perfected. The State then moved for summary judgment based on Werner’s receipt of compensation benefits. The Court of Claims denied this motion, but the Appellate Division reversed, granting summary judgment to the State, distinguishing Jones v. State of New York because in Jones, the claimant had not applied for or accepted compensation benefits. Werner appealed to the Court of Appeals.

    Issue(s)

    Whether acceptance of workers’ compensation benefits forecloses a wrongful death action against the State for intentional assault.

    Holding

    Yes, because the Workers’ Compensation Law provides an exclusive remedy, and accepting benefits constitutes an election of that remedy, precluding a separate tort action.

    Court’s Reasoning

    The court relied on the exclusivity provisions of the Workers’ Compensation Law, particularly sections 11, 23, and 29. Section 11 states that the employer’s liability under the law is exclusive. Section 23 states that the Workers’ Compensation Board’s decisions are final and conclusive. Section 29(6) provides that compensation benefits are the exclusive remedy when an employee is injured or killed by the wrong of another in the same employ. The court stated, “The combination of those provisions requires affirmance of the Appellate Division’s order.” It emphasized that because Werner accepted compensation benefits, she was bound by the Board’s finding that her husband’s death was accidental and occurred in the course of his employment. This finding is binding due to section 23 of the Workers’ Compensation Law and principles of res judicata, which apply to administrative determinations. The court reasoned that permitting a separate action for intentional assault would allow for duplicative recoveries, which the Workers’ Compensation Law aims to prevent. The court cited Legault v. Brown, 283 App. Div. 303, which held that an employee who avails themselves of workers’ compensation benefits loses the right to a common-law action. The court acknowledged that Werner might have been misled into filing for compensation but indicated her recourse was to petition the Board to rescind its prior decision under section 123, but until such action, the award bars her action for assault.

  • Plant City Steel Corp. v. National Mach. Exch., Inc., 23 N.Y.2d 472 (1969): Timing of Election of Remedies After Breach of Executory Accord

    Plant City Steel Corp. v. National Mach. Exch., Inc., 23 N.Y.2d 472 (1969)

    A party may assert claims for both breach of an underlying contract and breach of an executory accord in the same action; the election of remedies need not be made before trial but only after the court determines whether the accord was breached.

    Summary

    Plant City Steel sued National Machinery for breach of contract, alleging a machine sold by National did not meet warranted specifications. The parties then entered into a settlement agreement (executory accord) where National would pay Plant City $13,000 upon return of the machine in the same condition. National refused to accept the returned machine, claiming it was damaged. Plant City then filed a supplemental complaint adding a claim for breach of the settlement agreement. The trial court allowed Plant City to wait until after the presentation of all evidence to elect its remedy. The New York Court of Appeals held that Plant City did not have to elect its remedy (between the original breach of contract claim and the breach of the executory accord) until after the court determined whether National had breached the executory accord.

    Facts

    Plant City Steel purchased a machine from National Machinery Exchange based on an advertisement warranting its capacity. After installation, Plant City discovered the machine could not perform as specified. Plant City notified National of the breach and demanded repayment. National refused, leading Plant City to sue. The parties then entered into a written stipulation of settlement (executory accord): National agreed to pay Plant City $13,000 upon the return of the machine in the same condition. Plant City returned the machine, but National refused acceptance, claiming it was not in the same condition as when delivered.

    Procedural History

    Plant City moved to serve a supplemental complaint in the original action, adding a cause of action for breach of the written settlement agreement (executory accord). The motion was granted without opposition from National. The trial court allowed Plant City to defer electing its remedy until after both parties presented evidence. The Appellate Division affirmed, finding National waived its right to compel an earlier election. The Court of Appeals granted review.

    Issue(s)

    Whether a plaintiff, in an action involving both a claim for breach of an underlying contract and a claim for breach of an executory accord settling that contract claim, must elect which remedy to pursue before trial.

    Holding

    No, because CPLR 3014 explicitly allows for pleading alternatively and hypothetically and because the plaintiff’s success on the contract claim depends on the defendant breaching the accord. The plaintiff can make his election after the court determines if the accord was breached.

    Court’s Reasoning

    The Court of Appeals rejected the rule established in Elliott v. Prockter Prods., which required election before trial. The court reasoned that such a rule is needlessly wasteful of judicial time and contrary to modern, liberal pleading rules. CPLR 3014 allows for alternative and hypothetical pleading. Requiring election before trial could force a plaintiff to bring two separate actions if their initial choice of remedy proves incorrect. The court stated that “[t]he spirit of the pleading provisions contained in the CPLR clearly indicates that procedural niceties are not ends in themselves, but only means to substantive justice.” Since Plant City’s success on the breach of contract claim depended on National breaching the accord, the court should determine the accord issue first, allowing Plant City to elect its remedy after that determination. Here, both lower courts found National breached the accord, so Plant City was free to pursue either the original claim or the accord.