Certain Underwriters at Lloyd’s, London v. Occidental Gems, Inc., 11 N.Y.3d 843 (2008)

Appellate divisions retain discretion to substitute their judgment for that of the trial court in discovery matters, even absent a clear abuse of discretion by the trial court.

Summary

This case concerns a dispute over a fidelity loss claim. The plaintiffs, insurance underwriters, refused to pay Occidental Gems’ claim and sought a declaratory judgment. A special referee recommended that Occidental be compelled to produce a witness for deposition and provide documents related to a Belgian arbitration. The Supreme Court denied the motion to confirm the referee’s report, which the Appellate Division affirmed. The Court of Appeals affirmed, holding that the Appellate Division has the discretion to substitute its own judgment for that of the trial court in supervising disclosure, even without a finding of abuse of discretion.

Facts

Occidental Gems, Inc. filed a fidelity loss claim with the plaintiffs, insurance underwriters, seeking to recover approximately $10.5 million in losses.
The plaintiffs refused to pay the claim, leading to a declaratory judgment action in the Supreme Court.
The Supreme Court appointed a special referee to oversee discovery pursuant to CPLR 3104.

Procedural History

Plaintiffs moved for an order of preclusion, which was referred to the special referee.
The special referee recommended that Occidental be required to produce a witness for deposition and provide documents relating to a Belgian arbitration.
The plaintiffs moved to confirm the referee’s report; Occidental cross-moved to vacate it.
The Supreme Court denied the plaintiffs’ motion and granted Occidental’s cross-motion.
The Appellate Division affirmed the Supreme Court’s decision.
The Court of Appeals granted leave to appeal.

Issue(s)

1. Whether a trial court can disaffirm a special referee’s findings of fact when there is support in the record for those findings.
2. Whether a trial court waives its discretion and limits its review when it appoints a special referee.

Holding

1. No, because the Appellate Division has the power to substitute its own discretion for that of the trial court.
2. No, because the Appellate Division retains the discretion to review the trial court’s decisions regarding discovery matters.

Court’s Reasoning

The Court of Appeals affirmed the Appellate Division’s decision, emphasizing the broad discretion afforded to trial courts in supervising disclosure, but highlighting that the Appellate Division retains its own discretion to substitute its judgment.
The court cited Di Mascio v General Elec. Co., 307 AD2d 600, 601, stating that while deference is given to the trial court regarding disclosure and the confirmation of a referee’s report when the report is supported by the record, the Appellate Division retains the power to substitute its own discretion.
The Court also cited Andon v 302-304 Mott St. Assoc., 94 NY2d 740, 745, emphasizing the Appellate Division’s authority to substitute its discretion even absent an abuse of discretion by the trial court.
The Court reasoned that the Appellate Division properly exercised its discretion in finding that the Supreme Court correctly determined the evidence did not support the special referee’s recommendation.
The court explicitly rejected the argument that appointing a special referee limits the trial court’s discretion. Instead, the court affirmed the well-established principle that appellate courts maintain the authority to review and, if necessary, revise discretionary decisions made at the trial level, especially in matters related to discovery. This case clarifies that the Appellate Division’s supervisory role extends to discovery disputes, and they are not bound by the same standard of review as when assessing other trial court decisions. This holding emphasizes the appellate court’s power to ensure fairness and efficiency in the discovery process.