author: Simons, J.

text:
    [624 NE2d 151, 604 NYS2d 23]
    Joan M. Olivo, Appellant, v Edubijes Olivo, Sr., Respondent. Albert Tanchick, Respondent, v Linda C. Tanchick, Appellant.
    Argued and submitted October 5, 1993;
    decided November 11, 1993

      POINTS OF COUNSEL

      Kaman, Berlove, Marafioti, Jacobstein & Goldman, Rochester (Joyce F. Petronio of counsel), for appellant in the first above-entitled action.
    I. Respondent’s enhanced Kodak Retirement Income Plan benefits represent a form of deferred compensation related to his length of employment. (Majauskas v Majauskas, 61 NY2d 481; Szulgit v Szulgit, 92 AD2d 712; Dolan v Dolan, 78 NY2d 463; Damiano v Damiano, 94 AD2d 132.) II. Biddlecom v Biddlecom (113 AD2d 66) is not dispositive of the issues before this Court. (Richmond v Richmond, 144 AD2d 549.) III. Respondent’s enhanced benefits are marital property subject to equitable distribution. (Majauskas v Majauskas, 61 NY2d 481; Dolan v Dolan, 78 NY2d 463; O’Brien v O’Brien, 66 NY2d 576; Price v Price, 69 NY2d 8.) IV. Appellant is entitled to share in respondent’s enhanced pension benefits under the plain language of the parties’ separatian agreement and stipulated Qualified Domestic Relations Order. (Mitchell v Mitchell, 82 AD2d 849; Barzin v Barzin, 158 AD2d 769; Raines v Raines, 80 AD2d 721; Pelkey v Pelkey, 79 AD2d 835, 53 NY2d 601; Murphy v Murphy, 84 AD2d 873.) V. The lower court lacked the authority to set aside the parties’ stipulated Qualified Domestic Relations Order or to reallocate the distribution of assets under the parties’ separation agreement. (Christian v Christian, 42 NY2d 63; Ives v Ives, 96 AD2d 643; Jackson v Jackson, 142 Misc 2d 73, 157 AD2d 559; Martino v Martino, 103 AD2d 842; Chirls v Chirls, 170 AD2d 641, 78 NY2d 853; Laura v Laura, 77 AD2d 523, 89 AD2d 544.)

      Davidson, Fink, Cook & Gates, Rochester (Michael T. Allen of counsel), for respondent in the first above-entitled action.
    I. All of respondent’s benefits under the Resource Redeployment and Retirement Program are separate property. (Majauskas v Majauskas, 61 NY2d 481; Szulgit v Szulgit, 92 AD2d 712; Damiano v Damiano, 94 AD2d 132; Zelnik v Zelnik, 169 AD2d 317; Dolan v Dolan, 78 NY2d 463; Biddlecom v Biddlecom, 113 AD2d 66; Mylett v Mylett, 163 AD2d 463; Poggi v City of New York, 109 AD2d 265.) II. Nothing in the separation agreement between the parties entitles appellant to share in respondent’s early retirement incentives.

      Kaman, Berlove, Marafioti, Jacobstein & Goldman, Rochester (Joel J. Goldman of counsel), for appellant in the second above-entitled action.
    I. All of defendant’s enhanced pension benefits are marital property representing a form of deferred compensation. (Majauskas v Majauskas, 61 NY2d 481; Damiano v Damiano, 94 AD2d 132; Szulgit v Szulgit, 92 AD2d 712; Biddlecom v Biddlecom, 113 AD2d 66; Dolan v Dolan, 78 NY2d 463; Richmond v Richmond, 144 AD2d 549; Price v Price, 69 NY2d 8; O’Brien v O’Brien, 66 NY2d 576; Anglin v Anglin, 80 NY2d 553.) II. Defendant is entitled to reasonable counsel fees in accord with section 237 of the Domestic Relations Law. (O’Brien v O’Brien, 66 NY2d 576.)

      Lacy, Katzen, Ryen & Mittleman, Rochester (Richard Glen Curtis of counsel), for respondent in the second above-entitled action.
    I. The Social Security Bridge Payment and special separation allowance payable to plaintiff under the Eastman Kodak Resource Redeployment and Retirement Plan are not a form of deferred compensation. (Majauskas v Majauskas, 61 NY2d 481; Cohen v Hallmark Cards, 45 NY2d 493; Dolan v

      Dolan, 78 NY2d 463; Biddlecom v Biddlecom, 113 AD2d 66; Poggi v City of New York, 109 AD2d 265.) II. Defendant is not entitled to attorneys’ fees in connection with plaintiff’s application for modification of the Qualified Domestic Relations Order. (DeCabrera v DeCabrera-Rosete, 70 NY2d 879; Anonymous v Anonymous, 120 AD2d 983.)
   OPINION OF THE COURT

Simons, J.

In these two actions, we are asked to decide whether a woman who is entitled to share in her former husband’s pension is also entitled to share in benefits from an early retirement incentive package accepted by the former husband after divorce. We hold that such postdivorce incentive packages are not marital property, and therefore not subject to equitable distribution, except for the portion of the package that enhances pension benefits payable to the employee. We therefore affirm the order of the Appellate Division in Tan-chick v Tanchick and modify the order in Olivo v Olivo.

I

Respondents were among the longtime employees of the Eastman Kodak Company who accepted an early retirement plan offered by the company in August 1991. The plan, designed to encourage a voluntary reduction in Kodak’s workforce, provided three incentives: (1) an Enhanced Retirement Income Benefit providing 100% of an employee’s pension benefit even though the employee was not yet eligible for full pension; (2) a Social Security Bridge Payment providing the employee with a payment equal to Social Security from the date of retirement until the time the employee became eligible for Social Security; and (3) a separation payment. Kodak financed the plan through excess funds available in the Kodak Retirement Income Plan (KRIP), an account from which retirement income benefits are paid. The early retirement plan was offered to employees who met the so-called "Rule of 75”— those whose total years at Kodak, added to the employee’s age, equaled 75 or more.

Both respondents had divorced prior to their acceptance of the Kodak offer. Under the terms of their respective divorces, their former wives, appellants in these two appeals, were entitled to pro rata shares of their pension benefits from KRIP, with the shares calculated on the basis of the number of years they were married and working at Kodak as a fraction of their total years at Kodak (see, Majauskas v Majauskas, 61 NY2d 481). Under the Tanchicks’ Qualified Domestic Relations Order (QDRO), Mrs. Tanchick was to receive her share from the "specified marital portion of whatever KRIP benefit is attributed” to Mr. Tanchick. In the Olivos’ case, a Stipulated QDRO provided that Mrs. Olivo would share in KRIP benefits, including cost-of-living increases and "any other post-retirement benefit increase”.

Following their acceptance of the Kodak early retirement plan, the parties sought judicial determination of their rights to the three-part Kodak package. In a proceeding brought to amend the QDRO, respondent Tanchick conceded that his former wife was entitled to share in the enhanced retirement income benefit, but argued that the other two portions of the package were his separate property acquired after dissolution of the marriage. In a similar proceeding, respondent Olivo contended that all three parts of the package were separate postdivorce property to which his former wife had no rights.

Supreme Court accepted Mr. Tanchick’s argument and amended the QDRO to show that Mrs. Tanchick had no rights in either the Social Security Bridge Payment or the separation allowance. The Appellate Division affirmed.

Mr. Olivo made no such concession on the enhanced retirement income benefit, however. Supreme Court accepted his argument and amended the Olivos’ QDRO to reflect that Mrs. Olivo enjoyed no rights in any part of the package. Because Mrs. Olivo was manifestly entitled to a portion of Mr. Olivo’s pension benefits, Supreme Court examined the particular structure of the enhanced pension component of the early retirement plan to determine her appropriate share. In essence, the Kodak plan eliminated the early retirement "penalty” — i.e., the smaller benefit that is paid to those who retire early. Those accepting the early retirement package were treated as though they had met the requirements for a full pension. Supreme Court’s decision construes the accelerated right to a full pension as the property Mr. Olivo obtained postdivorce. Thus, it determined that Mrs. Olivo was entitled to share only in the pension that would have been paid had the standard retirement plan been operative and the penalty for early retirement applied. Using that fictional calculation, the court determined the present value of her share. The Appellate Division affirmed.

II

The appeals require us to revisit our decisions concerning the rights of spouses to pension benefits earned during marriage but paid after divorce. New York law requires that marital property be distributed equitably between the parties (Domestic Relations Law § 236 [B] [5] [c]). As defined statutorily, marital property is "all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action” (Domestic Relations Law § 236 [B] [1] [c]). In applying that statutory scheme, we have held that pension rights earned during a marriage, prior to a separation agreement or matrimonial action, are properly considered marital property subject to equitable distribution (see, Majauskas v Majauskas, 61 NY2d 481, supra). Our decision in Majauskas was premised on the idea that a pension is a form of deferred compensation (at 491-492). Even though workers are unable to gain access to the money until retirement, their right to it accrues incrementally during the years of employment. Thus, that portion of a pension based on years of employment during the marriage is marital property. Using this rationale, we have concluded that certain disability payments were subject to equitable distribution when those payments were calculated according to the number of years of employment and were therefore partially earned during the years the recipient was both employed and married (see, Dolan v Dolan, 78 NY2d 463).

It follows from Majauskas and Dolan that if the rights to the three forms of compensation at issue here were earned, in part, during the marital years, the former spouses should share in the compensation pro rata. The crux of the position advanced by Mr. Olivo (and by Mr. Tanchick, as it applies to the second and third parts of the retirement package) is that an early retirement incentive is not deferred compensation but rather compensation given by the company in exchange for the employee’s agreement to leave the work force (see, Biddlecom v Biddlecom, 113 AD2d 66, supra). No right to early retirement incentives existed during the marital years (compare, Hughes v Hughes, 601 NE2d 381 [Ind App]). Nor, according to respondents, was the compensation given by Kodak in exchange for any marital property. In their view, an employee’s right to the package came into existence only at the moment Kodak offered the plan in 1991, well after both divorces.

Appellants respond by asserting that an employee’s right to participate in the early retirement program was determined by length of employment and therefore the incentives come within the rule of Majauskas (see, Ryan v Ryan, 261 NJ Super 689, 619 A2d 692). Only by counting the marital years during which they were also employed at Kodak did Mr. Tanchick and Mr. Olivo become eligible to accept the early retirement deal. Appellants rely specifically on language in Dolan v Dolan, in which we stated, "It is clear from the length of service requirement for the ordinary disability pension at issue * * * that plaintiff is being compensated for his length of service” (78 NY2d, at 468, supra).

Neither Dolan nor Majauskas, however, can be read as establishing a "length of service” test for marital property. To do so would lead to absurd results. A salary or wage increase, for instance, given years after a divorce but based on a worker’s seniority would be marital property subject to equitable distribution. Instead, the test of Dolan and Majauskas is whether the compensation in question is a form of deferred compensation. A length of service requirement may be some evidence of that, but it is not conclusive.

We conclude the Appellate Division was correct in holding that the Social Security Bridge Payment and separation payment — the second and third parts of the Kodak package — were not forms of deferred compensation and thus not marital property. Respondents had no right to these payments during the time they were married. Had they retired the day before the Kodak plan became effective, they would have been entitled to neither payment. Rather than being compensation deferred until some point after the divorce like the traditional pension in Majauskas, the two payments here were compensation created after the divorce. In that way, these portions of the Kodak package are distinguishable from the pension in Majauskas and the disability payment in Dolan.

That Kodak chose to fund the payments from KRIP does not require a different result, either as a matter of law or under the terms of the particular QDROs here. Kodak’s decision to rely on excess KRIP funds was a matter of corporate financial discretion. The company was free to use other funds to finance early retirement or, conversely, to use the KRIP excess for other purposes. None of the workers participating in the early retirement program had any entitlement to those particular funds. It is clear as well that references to KRIP in the QDROs here were understood by the parties to mean the pensions to which the employed spouses would become entitled upon retirement, not other payments for other purposes that Kodak might decide to make.

Thus, the Social Security Bridge Payments and separation payments made to Mr. Tanchick and Mr. Olivo were assets obtained after divorce and not marital property.

We reach a different result with respect to the enhanced retirement income, which is contested only in the Olivo action. In determining Mrs. Olivo’s share of the pension, the courts below employed the fiction that her former husband had retired early under the terms of the standard Kodak retirement plan, which would have given him only a partial pension. By doing so, the courts allowed Mr. Olivo alone to enjoy the additional amount he received as part of the full pension he became entitled to under the early retirement package.

Such a bifurcation of the pension to diminish Mrs. Olivo’s entitlement is unwarranted. By its very nature, a pension right jointly owned as marital property is subject to modification by future actions of the employee. Should the employed spouse retire early, both parties receive a smaller benefit than they would have otherwise. The employee is, of course, free to do so, even though it incidentally and adversely affects the other party’s rights, and the nonemployee spouse would have no grounds for recovery of the "loss”. On the other hand, an employee who engages in extended employment at progressively higher wages is not entitled to keep the "excess” earned beyond what would have accrued at the time of expected retirement.

Similarly, both parties’ rights are generally subject to changes in the terms of a retirement plan, as well as to circumstances largely beyond their control, such as the salary level finally achieved by the employee and used to calculate the pension benefit. What the nonemployee spouse possesses, in short, is the right to share in the pension as it is ultimately determined. When Mr. Olivo accepted an early retirement package that enhanced his pension, it perforce enhanced Mrs. Olivo’s share in that pension as well. Unlike the other two components of the package, the enhancement was a modification of an asset not the creation of a new one. The Olivos’ agreement upon terminating the marriage gave Mrs. Olivo an entitlement to share in her former husband’s pension, not an entitlement to a fixed sum or even to a particular methodology of calculating the pension benefit. In keeping with that agreement and our .holdings in Majauskas and Dolan, her pro rata share should have been calculated against the pension actually obtained by Mr. Olivo.

Accordingly, in Tanchick v Tanchick the order of the Appellate Division should be affirmed, with costs; in Olivo v Olivo the order of the Appellate Division should be modified, without costs, in accordance with this opinion and, as so modified, affirmed.

Chief Judge Kaye and Judges Titone, Hancock, Jr., Bellacosa, Smith and Levine concur.

In Olivo v Olivo: On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order modified, without costs, in accordance with the opinion herein and, as so modified, affirmed.

In Tanchick v Tanchick: Order affirmed, with costs.

       The parties acknowledge that, although the employees were made eligible for a full pension, the benefits are reduced actuarially to reflect the longer anticipated period of retirement. Consequently, Mr. Olivo is receiving smaller payments than he would have received upon later retirement. Mrs. Olivo argues that this actuarial reduction diminished her rights (compare, Biddlecom v Biddlecom, 113 AD2d 66). For the reasons we discuss later in this opinion, an actuarial reduction, without more, would not be grounds for relief.


source: Caselaw Access Project

author: Chief Judge Kaye.

license: Public Domain

text:
    [624 NE2d 156, 604 NYS2d 28]
    In the Matter of Robert R. Diaz, Appellant, v Leslie Lukash, as Chief Medical Examiner of Nassau County, Respondent.
    Argued October 12, 1993;
    decided November 16, 1993

      POINTS OF COUNSEL

      Remcho, Johansen & Purcell (Robin B. Johansen of counsel, of the California Bar, admitted pro hac vice) and Gibson, Dunn & Crutcher, New York City (Robert D. Sack, Robin L. Baker and Meredith C. Braxton of counsel), for appellant.
    The court below erred as a matter of law and abused its discretion in concluding that Mr. Diaz did not have a substantial interest in the Medical Examiner’s records and therefore declining to order that Mr. Diaz’s counsel be given access to them. (Matter of Central Gen. Hosp. v Lukash, 140 AD2d 113, 74 NY2d 619; Herald Co. v Murray, 136 AD2d 954; Patrolmen’s Benevolent Assn. v City of New York, 41 NY2d 205; Barasch v Micucci, 49 NY2d 594.)

      Robert W. Schmidt, County Attorney of Nassau County, Mineóla (Lawrence J. Brennan and Ernest G. D’Angelo of counsel), for respondent.
    The court below correctly determined that Mr. Diaz did not have a substantial interest in the records of the Nassau County Medical Examiner and therefore should not be allowed access to the confidential information contained therein. (Matter of Central Gen. Hosp. v Lukash, 140 AD2d 113, 74 NY2d 619; Herald Co. v Murray, 136 AD2d 954.)
   OPINION OF THE COURT

Chief Judge Kaye.

On this appeal, we must decide whether petitioner, an inmate on California’s death row, has a "substantial interest” in certain records of the Nassau County Medical Examiner, so that he may inspect them. We conclude that the Appellate Division applied an erroneous legal standard and that in the circumstances presented, petitioner does have a substantial interest, as a matter of law, in at least some of the requested records. Accordingly, we reverse the dismissal of the petition and remit for further proceedings.

I.

In March 1981, Robert Rubane Diaz, a registered nurse, began work on the night shift in the intensive care unit (ICU) of a community hospital in California. In the next 3 Vi weeks, at least 13 patients on the night shift suffered violent seizures, which were generally followed by cardiac and respiratory arrest. Nine of these patients died. Following closure of the ICU at that hospital, Diaz began work at a different hospital and within three days, while he was on duty, another patient, displaying the same symptoms, died. Diaz was thereafter arrested and charged with killing a total of 12 patients by injecting them with massive doses of lidocaine, a drug commonly used to control rhythm disturbances in the heart (People v Diaz, 3 Cal 4th 495, 517, 834 P2d 1171, 1176 [1992], cert denied — US —, 113 S Ct 2356 [1993]). Diaz waived a jury trial, and after a bench trial was convicted and sentenced to death.

At trial, experts testifying for the prosecution relied largely on three types of evidence to conclude that each of the 12 patients — at least 11 of whom received therapeutic doses of lidocaine — died of a massive overdose: first, the concentration of lidocaine in their body tissue upon autopsy; second, the evidence of seizures; and third, electrocardiograph (EKG) readings (3 Cal 4th, at 530-534, 834 P2d, at 1185-1187). On appeal to the California Supreme Court, Diaz attacked the sufficiency of this evidence. Although concluding that there was sufficient evidence to support the trial court’s finding that someone had administered large overdoses of lidocaine to the patients (3 Cal 4th, at 535, 834 P2d, at 1188), the court’s opinion suggests that the evidence was not beyond dispute.

As the court noted, for example: "Although recorded cases involving massive overdoses of lidocaine are rare, prosecution experts, after reading the scanty literature on the subject, concluded that these [seizure] symptoms * * * would be the most likely response to a massive overdose of lidocaine.” (3 Cal 4th, at 531, 834 P2d, at 1186.) And responding to Diaz’s argument that the EKG readings were inconclusive: "although the possibility of other causes may reduce the weight to be attached to the evidence that the patients had broad QRS complexes [on their EKGs], this evidence was one link in the circumstantial chain of evidence that the patients died from overdoses of lidocaine, and was properly relied upon by the prosecution experts.” (3 Cal 4th, at 534, 834 P2d, at 1187.)

The lidocaine concentration in the patients’ body tissues was thus important evidence of causation, but the significance of that evidence, too, "was hotly contested at trial” (3 Cal 4th, at 534, 834 P2d, at 1187).

Following Diaz’s conviction, his appellate counsel learned of an unpublished doctoral dissertation titled "Lidocaine Toxicity,” authored in 1981 by W. Christopher Long, a graduate student at St. John’s University. Long was at the time a toxicologist with the Nassau County Medical Examiner’s office, and based his dissertation on measurements of lidocaine found in brain tissue of more than 140 decedents autopsied between 1976 and 1981. Twenty-four had brain tissue concentrations of 20 micrograms/gram or greater — an amount (according to the petition) the prosecution had claimed at trial was indicative of a lethal dose. Thus, Diaz argues, either these 24 were also victims of lethal doses of lidocaine or the prosecution expert testimony was seriously flawed.

Because the Long dissertation identified patients not by name but only by Nassau County Medical Examiner case number, in the present petition Diaz seeks access to the Medical Examiner’s records to help establish his factual innocence. After reviewing the records to determine the identity and hospital of each decedent, Diaz’s representatives will then attempt to obtain the decedents’ hospital records to learn the exact dose of lidocaine administered and other variables such as the patient’s clinical condition and weight. After his experts (including Long) synthesize the information in the dissertation, autopsy reports and hospital records, Diaz intends to seek postconviction relief on the ground that "newly-discovered evidence” establishes no murders occurred.

The petition before us, brought under County Law § 677 (3) (b) and CPLR article 4, involves only the Medical Examiner’s records. (We express no view on the availability of hospital records.) In this litigation Diaz has disavowed any interest in the decedents’ names, expressing willingness to accept redacted records and suggesting that disclosure can be coordinated with the hospitals in such a way that he will never learn the patients’ identities. Moreover, apparently recognizing the substantial administrative burden his request entails, Diaz has also offered to pay for the costs associated with searching for, redacting and copying the records.

Supreme Court dismissed the petition, concluding that Diaz had "not demonstrated that his interest in the records is sufficiently substantial to overcome the general need to maintain the confidentiality of the records of the Medical Examiner.” The Appellate Division affirmed, noting that Diaz had "no direct and personal interest with respect to the individuals whose records he seeks” and that disclosure would undermine "the legislative concern for confidentiality, as reflected in the statute.” (194 AD2d 723, 724.) We granted Diaz’s motion for leave to appeal, and now reverse.

II.

With reference to autopsy reports, County Law § 677 (3) (b) provides:

"Such records shall be open to inspection by the district attorney of the county. Upon application of the personal representative, spouse or next of kin of the deceased to the coroner or the medical examiner, a copy of the autopsy report, as described in subdivision two of this section shall be furnished to such applicant. Upon proper application of any person who is or may be affected in a civil or criminal action by the contents of the record of any investigation, or upon application of any person having a substantial interest therein, an order may be made by a court of record, or by a justice of the supreme court, that the record of that investigation be made available for his inspection, or that a transcript thereof be furnished to him, or both” (emphasis added).

The statute thus identifies four categories of persons who may obtain access to autopsy reports. The District Attorney and close relatives of the decedent may obtain records as of right, while persons who “may be affected in a civil or criminal action” or anyone else with a “substantial interest” in the records, must make judicial application. Diaz seeks release of the records as someone with a "substantial interest” in them.

The legal question before us is whether an applicant under that provision must have a “direct and personal interest” in the autopsy reports, as suggested by the Appellate Division, and if not, whether the circumstances presented establish a substantial interest as a matter of law.

By creating a residual category of persons who may receive autopsy reports — anyone who can demonstrate a "substantial interest” in the records — it is plain that the Legislature did not intend to limit access only to the three enumerated classes of persons, or to persons who have a direct and personal interest in the records. Instead, the Legislature left open the possibility that a broader range of persons might obtain records, so long as a judicial officer is satisfied that the applicant’s interest in the records is “substantial” — itself a flexible term. Thus, we agree with Diaz that the Appellate Division applied an erroneous legal standard.

In determining whether a substantial interest has been shown, a court should consider, among other things, the reason the records are sought, the importance of that reason, and the availability of the information from other sources. Assuming the applicant’s interest in the records is substantial, the court may then consider other factors — for example, confidentiality concerns — as part of its discretionary power under the statute.

This two-step analytical framework is reflected in Matter of Central Gen. Hosp. v Lukash (140 AD2d 113, affd for reasons stated 74 NY2d 619), the only case in which this Court considered the “substantial interest” requirement. There, a hospital sought autopsy reports for 17 deceased patients who were transferred to the Medical Examiner for autopsy. Because the attending physician in each case could not determine the cause of death, the hospital sought the autopsy reports to further the education of its staff. The Appellate Division, and this Court on appeal, agreed that this was a "substantial interest” within the statute:

"The educational value of autopsy findings is well recognized in the field of medicine. The results of an autopsy can confirm or disprove the diagnosis of the attending physician and place that physician in a better position to treat patients with the same or similar illnesses in the future. Indeed, it would not be overly dramatic to surmise that the information obtained could save the life of another patient. It is, therefore, logical and reasonable to hold that the hospital’s concern for furthering the education of its staff is a 'substantial interest’ within the meaning of County Law § 677 (3) (b)” (140 AD2d, at 116).

After determining that a substantial interest was established, the court then considered whether there were "any countervailing concerns militating against granting the petitioner’s application” (140 AD2d, at 117), and determined that privacy was not implicated because the hospital was required to keep all information confidential except in certain circumstances.

In the present case, Diaz argues that the records will help him establish that no murders in fact occurred. There is a serious question whether Long’s dissertation and the follow-up information sought constitutes the type of "newly discovered evidence” that will be considered on Diaz’s applications for postconviction relief. Manifestly, if the "evidence” is unusable in vacating the death sentence, Diaz would have no interest in the records within the meaning of the statute.

While we might be justified in denying the petition on that ground, or remitting for briefing and consideration of the question, in this unusual case we decline to do so. It is unwise to embroil the Nassau County Medical Examiner and the courts of this State in collateral litigation of an issue that may be central in the California State and Federal courts. Moreover, the willingness of the California courts to consider the evidence may turn on what is in fact uncovered.

Consequently, in the unique circumstances of this case it is our view that Diaz has established the requisite substantial interest in the Medical Examiner’s records. These records may enable Diaz to show that he was convicted and sentenced to death for murders that did not occur. This asserted interest is at least on a par with the "staff education” identified in Central Gen. (supra). Moreover, the Long study appears to be the only instance where lidocaine concentrations in human tissue were studied on such a large scale, and thus the potentially valuable information is unavailable elsewhere.

It is unclear, however, whether Diaz has a substantial interest in all of the cases considered by Long. Indeed, many of the decedents in Long’s report had minimal levels of lidocaine. On remittal, Supreme Court may consider this question. The court may also, in the exercise of discretion, fashion an appropriate order to balance any privacy concerns and Diaz’s interest in the records, and may wish to consider Diaz’s offer to defray redaction and production expenses.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the case remitted to Supreme Court, Nassau County, for further proceedings in accordance with this opinion.

Judges Simons, Titone, Hancock, Jr., Bellacosa, Smith and Levine concur.

Order reversed, etc.


author: Bellacosa, J.

text:
    [624 NE2d 160, 604 NYS2d 32]
    Lindner Fund, Inc., Appellant, v Waldbaum, Inc., et al., Respondents.
    Argued October 14, 1993;
    decided November 16, 1993

      POINTS OF COUNSEL

      Bader and Bader, White Plains (I. Walton Bader and Benedict Bader of counsel), for appellant.
    I. The Court below erred in holding that defendants-respondents did not violate their fiduciary duties owed to plaintiff-appellant by failing to disclose the existence of an "agreement in principle” (set forth in the complaint as a "done deal”) which provided for the payment to defendants-respondents Ira Waldbaum and Aaron Malinsky of their controlling stock in Waldbaum, Inc. at a price of approximately double the public market value of their stock with a further agreement to make a "tender offer” to the public stockholders of Waldbaum, Inc. at the same price. (Kavanaugh v Kavanaugh Knitting Co., 226 NY 185; Alpert v 28 Williams St. Corp., 63 NY2d 557; Matter of Kemp & Beatley [Gardstein], 64 NY2d 63; Matter of Cohen v Cocoline Prods., 309 NY 119; Schwartz v Marien, 37 NY2d 487; Giblin v Murphy, 73 NY2d 769; Bender v Ferro, 86 AD2d 12; Quasha v American Natural Beverage Corp., 171 AD2d 537; Goldberg v Goldberg, 139 AD2d 695; Demas v 325 W. End Ave. Corp., 127 AD2d 476.) II. The Court below further erred in holding that no violation of State fiduciary law principles occurred, and no violation of Federal securities law principles occurred, by reason of the failure of defendants-respondents to disclose the prior existence of an "agreement in principle”. (Staffin v Greenberg, 672 F2d 1196; Kronfeld v Trans World Airlines, 832 F2d 726; Greenfield v Heublein, Inc., 742 F2d 751; Fry v Trump, 681 F Supp 252; Basic Inc. v Levinson, 485 US 224; Roeder v Alpha Indus., 814 F2d 22; Glazer v Formica Corp., 964 F2d 149.) III. Where there is a statutory duty to file a document with the United States Department of Justice and with the Federal Trade Commission 30 days prior to the date of consummation of any acquisition of defendant corporation by defendant third party, but where the contents of such document are confidential under the applicable law there is, nevertheless, a requirement to notify present stockholders of the acquired corporation of the fact of the filing of such a notice even though the contents of the notice itself are confidential to the general public and, where such notice was not in fact filed, the court can determine the issues as if the notice was in fact filed. (Bean v Walker, 95 AD2d 70; Matter of

      Parkview Holding Corp. v Joy, 58 AD2d 865; Sweedler v Oboler, 65 Misc 2d 789, 37 AD2d 1049.) IV. The Great Atlantic and Pacific Tea Company, who normally would have no fiduciary duty to plaintiff-appellant, becomes liable to plaintiff-appellant on fiduciary duty principles when it participates in a plan and scheme with those parties having fiduciary duties to plaintiff-appellant to violate such fiduciary duties. (Wechsler v Bowman, 285 NY 284; Laub v Genway Corp., 60 FRD 462; A. S. Rampell, Inc. v Hyster Co., 3 NY2d 369; Green v Davies, 182 NY 499.) VI. The former decisional law of the State of New York, holding that there is no direct fiduciary duty by a corporation to its stockholders, is believed to be presently outmoded and should be overruled, or, alternatively, Waldbaum, Inc. should be held liable under "respondeat superior” theories or under the theory set forth in point IV herein-above as applied to defendant Great Atlantic & Pacific Tea Company. (Jordan v Global Natural Resources, 564 F Supp 59.) VI. The actual formal agreements transferring control of defendant corporation and providing for a "tender offer” to the public stockholders of defendant corporation were signed early in the day involved, but were not publicly disclosed until the stock market closed for the day, so that plaintiff-appellant who sold a substantial quantity of Waldbaum stock after the formal agreements were signed would not have done so had the information been promptly disclosed. This fact alone is sufficient to bottom liability on defendant. VII. In the event that an amplification of the allegations of the complaint is required to make the complaint sufficient, leave to amend the complaint should be granted by the court. (O’Henry’s Film Works v Nabisco, Inc., 112 AD2d 825; De Pan v First Natl. Bank, 98 AD2d 885; Collison Plan Unlimited v Bankers Trust Co., 63 NY2d 827; Brylgrove Ltd. v Tompkins, PLC, 172 AD2d 452; Krouner v Koplovitz, 175 AD2d 531; Blitman Constr. Corp. v Kent Vil. Hous. Co., 91 AD2d 173.)

      Skadden, Arps, Slate, Meagher & Flom, New York City (Peter S. Julian and Stephen M. Axinn of counsel), for respondents.
    I. New York State fiduciary duty law does not impose a duty of immediate public disclosure. (Penzell v Ekblom, 283 App Div 243, 308 NY 987; Zetlin v Hanson Holdings, 48 NY2d 684; Wellman v Dickinson, 682 F2d 355, cert denied sub nom. Dickinson v Securities Exch. Commn., 460 US 1069; Securities Exch. Commn. v Texas Gulf Sulphur Co., 401 F2d 833, cert denied sub nom. Kline v Securities Exch. Commn., 394 US 976.) II. The Federal securities laws do not impose a duty of public disclosure in the absence of three prerequisite conditions, none of which was alleged below. (Taylor v First Union Corp., 857 F2d 240, 489 US 1080; Basic Inc. v Levinson, 485 US 224; Staffin v Greenberg, 672 F2d 1196; Glazer v Formica Corp., 964 F2d 149; Boeder v Alpha Indus., 814 F2d 22; Securities Exch. Commn. v Rogers, 790 F2d 1450; Levine v NL Indus., 717 F Supp 252; Jackvony v RIHT Fin. Corp., 873 F2d 411; Laventhall v General Dynamics Corp., 704 F2d 407, 464 US 846.) III. The existence of an "agreement in principle”, by itself, does not impose a duty of public disclosure. (Staffin v Greenberg, 672 F2d 1196; Kronfeld Trans World Airlines, 832 F2d 726, 485 US 1007; Greenfield v Heublein, Inc., 742 F2d 751, 469 US 1215; Fry v Trump, 681 F Supp 252; Basic Inc. v Levinson, 485 US 224.) IV. The Hart-Scott-Rodino Act does not impose a duty of public disclosure. V. The law of conspiracy, by itself, does not impose a duty of public disclosure. VI. The doctrine of respondeat superior, by itself, does not impose a duty of public disclosure. (Matthews v New York Racing Assn., 193 F Supp 293.) VII. The common law does not impose a duty of public disclosure. (Jordon v Global Natural Resources, 564 F Supp 59.) VIII. This Court should deny Lindner’s request for leave to amend its complaint. (Bardere v Zafir, 63 NY2d 850; Hickey v National League of Professional Baseball Clubs, 169 AD2d 685.)
   OPINION OF THE COURT

Bellacosa, J.

The issue on this appeal by leave of this Court is whether a publicly traded corporation has a fiduciary duty to immediately disclose to its shareholders an agreement in principle for a corporate takeover by stock tender offer. The Appellate Division, reversing an order of Supreme Court which denied a motion to dismiss pursuant to CPLR 3211 (a) (7), dismissed the complaint for failure to state a cause of action. We now affirm.

Between November 14, 1986 and November 26, 1986, Lindner, a public mutual fund, sold 49,500 shares of Waldbaum, Inc., a New York Stock Exchange publicly traded company, at a price that ranged between $24 and $26 per share. After the close of the market on November 26, 1986, the Great Atlantic & Pacific Tea Company, Inc. announced a plan to acquire Waldbaum’s outstanding shares at a tender price offer of $50 per share.

Lindner’s complaint and theory of the case is that the defendants owed Lindner and other Waldbaum shareholders a duty of public disclosure once an agreement in principle on the acquisition had been reached. Lindner alleges that the failure to disclose the agreement before the market closed on November 26, 1986 caused it to lose $1,248,625 in potential profits on the sale of its Waldbaum shares at the tender offer price compared to the much lower market price at which it sold the shares prior to the public announcement.

New York and Federal authorities do not support plaintiff-appellant Lindner’s assertion of an unqualified duty to disclose. On the contrary, it is well settled that a duty to disclose arises in only a limited set of circumstances and this case does not fit any of those situations.

Certainly, corporate officers and directors have a fiduciary relationship with the shareholders of their corporation (Giblin v Murphy, 73 NY2d 769). Thus, there are specific instances where a duty to disclose a major transaction of the kind involved in this case will spring into being. Three principal categories for such a disclosure duty have been recognized: (1) insider trading, (2) a statute or regulation requiring disclosure, or (3) inaccurate, incomplete, or misleading prior disclosures (Roeder v Alpha Indus., 814 F2d 22 [1st Cir]; Glazer v Formica Corp., 964 F2d 149 [2d Cir]; see also, Penzell v Ekblom, 283 App Div 243, affd no opn 308 NY 987).

This prudently circumscribed approach to disclosure is put in useful context by the observation that merger negotiations

" 'are inherently fluid and the eventual outcome is shrouded in uncertainty. Disclosure may in fact be more misleading than secrecy so far as investment decisions are concerned. * * * [Merger negotiations involve] complex bargaining between two (and often more) parties which may fail as well as succeed, or may succeed on terms which vary greatly from those under consideration at the suggested time of disclosure’ ” (Kronfeld v Trans World Airlines, 832 F2d 726, 734 [2d Cir 1987], cert denied 485 US 1007, quoting Reiss v Pan Am. World Airways, 711 F2d 11, 14 [2d Cir 1983]).

To be sure, the Second Circuit was examining materiality, not "a pure question of a duty to disclose” (id., at 732), when it noted the authorities holding that "preliminary merger negotiations [are] immaterial as a matter of law” (Kronfeld v Trans World Airlines, 832 F2d, at 732-734, supra). The Kronfeld analysis and rationale, however, provide insights for addressing the situation at hand where an agreement in principle was reached but not effectuated or actuated into a formally binding agreement as of the time appellant would require disclosure.

Lindner acknowledges that none of the recognized qualifying circumstances for disclosure are present in the instant case and that it has no special circumstances of its own to offer. Instead, it urges that we adopt a new, across-the-board duty of disclosure triggered at that magic moment when the parties reach an "agreement in principle.” We are satisfied that Lindner’s generalized disclosure approach finds no support in Federal principles or New York substantive law, is not prudent and is likely to lead to uncertainty and inappropriate market risks and losses. Since the extant authorities also support the more limited view, the Appellate Division was correct to dismiss the complaint for failure to state a cause of action (CPLR 3211 [a] [7]).

Moreover, New York’s business judgment rule (Business Corporation Law § 715 [h]; § 717 [a]) adds some weight to our analysis and conclusion. That rule requires corporate officers to perform their duties "in good faith and with that degree of care which an ordinarily prudent person in a like position would use under similar circumstances.” It provides a measure of protection to a corporation’s officers and directors when they act in the over-all best interests of all the shareholders and maintain the confidentiality of merger negotiations to avoid speculative or premature market fluctuations. The cautious approach also avoids uneven notice to sophisticated minute-by-minute market tape watchers, as compared to ordinary nonprofessional shareholders who may read their stock quotes in the following day’s newspapers, if at all. Thus, Atlantic & Pacific’s and Waldbaum’s decision to wait until the close of markets on November 26, 1986, when their negotiations were complete and the agreement was final, to publicly announce that a major new deal had been struck, falls within the business judgment rule, absent allegations or a showing of some countervailing misconduct or manipulation. There is none of that in the complaint at issue.

Finally, the alleged failure of Waldbaum to file a "premerger notification” with the Federal Trade Commission (15 USC § 18a) is irrelevant to the issue before us. That regulatory filing is a confidential, nonpublic communication to a Federal securities watchdog entity. It should in no way be converted into a general fiduciary duty of public disclosure — a contradiction in terms. Moreover, the violation of that statutory confidentiality could, in itself, constitute a breach of a fiduciary obligation because disclosure in such circumstances may be susceptible to and generate the kind of manipulation or speculation that the confidentiality rules and business judgment principles are designed to preclude or at least retard.

Accordingly, plaintiffs complaint and theory were rightly rejected by the Appellate Division, and the order of that Court reversing and dismissing the complaint should be affirmed, with costs.

Chief Judge Kaye and Judges Simons, Titone, Hancock, Jr., Smith and Levine concur.

Order affirmed, with costs.


author: Levine, J. Hancock, Jr., J.

text:
    [624 NE2d 162, 604 NYS2d 34]
    The People of the State of New York, Respondent, v Lamonte Dawkins, Appellant.
    Argued October 12, 1993;
    decided November 16, 1993

      POINTS OF COUNSEL

      David Loftis, New York City, and Philip L. Weinstein for appellant.
    The trial court possessed neither statutory nor inherent authority to vacate a perfected mistrial order and to accept the verdict, or, at the very least, abused its discretion in so doing where, in granting the mistrial in the first place, it had necessarily recognized the significant danger that any subsequent verdict would be the product of coercion. (People v Catten, 69 NY2d 547; People v Baptiste, 72 NY2d 356; United States v Perez, 9 Wheat [22 US] 579; Matter of Campbell v Pesce, 60 NY2d 165; People v Douglass, 60 NY2d 194; People v Moquin, 77 NY2d 449; People v Carter, 63 NY2d 530; People v Minaya, 54 NY2d 360; Matter of Lockett v Juviler, 65 NY2d 182; Matter of Lyons v Goldstein, 290 NY 19.)

      Charles J. Hynes, District Attorney of Kings County, Brooklyn (Sholom J. Twersky and Roseann B. Mackechnie of counsel), for respondent.
    Defendant’s claim that the trial court lacked either the statutory or inherent authority to revoke its prior declaration of a mistrial is beyond the scope of this Court’s review. In any event, the trial court’s revocation of its prior mistrial order was within its power and was not an abuse of discretion. (People v Dekle, 56 NY2d 835; People v Thomas, 50 NY2d 467; People v Patterson, 39 NY2d 288;
      People v Michael, 48 NY2d 1; People v Samuels, 49 NY2d 218; People v Udzinski, 146 AD2d 245, 74 NY2d 853; People v Catten, 69 NY2d 547; People v Ahmed, 66 NY2d 307; People ex rel. Battista v Christian, 249 NY 314; Wainwright v Sykes, 433 US 72.)
   OPINION OF THE COURT

Levine, J.

Defendant was tried on counts of attempted murder in the second degree, assault in the first degree and criminal possession of a weapon in the second degree, arising out of the alleged shooting of the victim on a subway train in Kings County. After one day of deliberation, the jury returned a verdict finding defendant guilty of attempted murder and not guilty on the remaining counts. At defendant’s request, the court had the jury polled individually. The first three jurors affirmed their agreement with the verdict as announced. At that point, there was an outburst by the defendant protesting his innocence, whereupon juror number 4, after a brief hesitation, expressed her disagreement with the verdict. The trial court then directed the jury to retire to continue its deliberations.

Approximately three hours after the jury had resumed its deliberations, it sent a note to the court that "[t]he jury cannot reach a verdict. Please instruct”. Defense counsel opposed the prosecution’s request that the court give the jury an Allen charge (Allen v United States, 164 US 492) and moved for a mistrial on the ground that an Allen charge would put undue pressure on the single juror who had disagreed with the guilty verdict previously announced. The court agreed, making the following ruling on the minutes:

"While I have never accepted this kind of a note from the jury the first time and have in the past always given an Allen charge on the first note, I just find that the circumstances in this case do warrant the granting of a mistrial at the request of defense counsel. And, defense counsel in this case has requested that I declare this a hung jury and grant a mistrial and I’m going to do it, under the circumstances that we have in this case.”

After an off-the-record discussion, an agreement was reached on scheduling defendant’s retrial. Shortly thereafter, however — approximately 40 minutes after the jury’s previous communication and without the jury ever being recalled, instructed to cease deliberations and discharged — the jury sent a note to the court that it had reached a verdict. The court determined to set aside the previous mistrial determination and accept the verdict over defendant’s objection "of the prejudice that it gives the jury”. The jury foreperson then again announced a verdict convicting defendant of the attempted murder count of the indictment and acquitting him on the remaining counts. Upon individual polling, all of the members of the jury agreed.

The Appellate Division affirmed, concluding that it was an appropriate exercise of the trial court’s discretion to set aside its previous mistrial ruling when the jury, without further instructions, communicated that it had reached a verdict (186 AD2d 751). A Judge of this Court granted defendant leave to appeal, and we now affirm.

Defendant’s principal argument on appeal is that, under CPL 280.10 and this Court’s decision in People v Catten (69 NY2d 547), the trial of defendant on the indictment had terminated when the trial court "perfect[ed]” (id., at 555) its grant of a motion for a mistrial by a declaration of a mistrial and an order for defendant’s new trial (see, CPL 280.10, first unnumbered para). The trial having thereby been terminated, defendant further argues, the trial court was divested of any further power to rescind its declaration of a mistrial.

We are unpersuaded by defendant’s argument that the trial was terminated when the trial court declared a mistrial and fixed a date for retrial. First, CPL 280.10, the provisions of which are the cornerstone of defendant’s argument that a mistrial was perfected thereby terminating defendant’s trial, is entirely inapposite to the undeniable procedural context in which the mistrial was declared in this case, i.e., one based upon jury deadlock. As previously quoted, the Trial Judge in declaring the mistrial stated "defense counsel in this case has requested that I declare this a hung jury and grant a mistrial and I’m going to do it” (emphasis supplied). The authority of the trial court to grant a mistrial pursuant to CPL 280.10 is expressly limited to the following circumstances: "[u]pan motion of the defendant, when there occurs during the trial an error or legal defect in the proceedings, or conduct inside or outside the courtroom, which is prejudicial to the defendant and deprives him of a fair trial” (CPL 280.10 [1]); "[u]pan motion of the people, when there occurs during the trial, either inside or outside the courtroom, gross misconduct by the defendant or some person acting on his behalf, or by a juror, resulting in substantial and irreparable prejudice to the people’s case” (CPL 280.10 [2]); and "[u]pan motion of either party or upon the court’s own motion, when it is physically impossible to proceed with the trial in conformity with law” (CPL 280.10 [3]). None of the foregoing circumstances forms the basis for the trial court’s declaration of a mistrial here, the sole expressed reason for which was the jury’s deadlock.

For the termination of a trial based upon jury deadlock the Criminal Procedure Law clearly provides that the operative judicial action is the actual discharge of the jury after "[t]he jury has deliberated for an extensive period of time without agreeing upon a verdict * * * and the court is satisfied that any such agreement is unlikely within a reasonable time” (CPL 310.60 [1] [a]).

As a respected commentator on the Criminal Procedure Law has pointed out, discharge of the jury under CPL 310.60 is the exclusive method to terminate a criminal trial for jury deadlock. "This section [CPL 310.60] is designed to govern mistrials based primarily upon the inability of the jury to reach a verdict — i.e., deadlock. For sections dealing with mistrials under other circumstances, see CPL §§ 270.35, 280.10” (Preiser, Practice Commentaries, McKinney’s Cons Laws of NY, Book 11 A, CPL 310.60, at 764; emphasis supplied). This view is confirmed by the staff comments of the State of New York Temporary Commission on Revision of the Penal Law and Criminal Code in referring to the provision (section 145.10) that became CPL 280.10: "[t]his motion is primarily applicable to discharge of a jury prior to its retirement for deliberation; discharge during deliberation is largely controlled by [present CPL 310.60]” (Staff Comment, NY Temp Commn on Revision of Penal Law and Crim Code, reprinted in proposed NY Criminal Procedure Law § 145.10, at 216 [1967]).

It follows from the foregoing that any declaration of a mistrial for, in the Trial Judge’s own words, a "hung jury”, was inchoate and thus, subject to recision by the court until it took the next step that was statutorily required under CPL 310.60 to effectuate the termination of the trial because of jury deadlock, i.e., discharge of the jury after the court determined that the jury could not reach a verdict within a reasonable time (see, Matter of Lionel F., 76 NY2d 747, 749). Indeed, in Matter of Lionel F, we held that the unterminated, still pending status of the entire juvenile delinquency proceeding permitted the Family Court to revoke its granting of dismissal, at the end of the petitioner’s case, of several counts of the delinquency petition and reinstate some of those counts, over a double jeopardy objection (see, id,.). Here, the statutory framework even more clearly shows that the trial had not terminated before the court revoked its mistrial decision.

Our holding in People v Catten (69 NY2d 547, supra) is not inconsistent with the foregoing conclusion. In Catten the mistrial was granted on the defendant’s motion because of misleading discrepancies in the testimony concerning the identification of the defendant by the undercover officer who allegedly purchased drugs from him (id., at 551). Clearly, this was a motion granted for “an error * * * in the proceedings * * * which [was] prejudicial to the defendant and deprive[d] him of a fair trial” (CPL 280.10 [1]). Our holding in Catten, that the grant of the mistrial motion was perfected under CPL 280.10 when the mistrial was declared and a new trial was ordered, does not apply to a mistrial necessitated by jury deadlock which, as we have concluded, is exclusively accomplished by discharge of the jury pursuant to CPL 310.60 (1) (a).

In any event, contrary to defendant’s contention, People v Catten (supra) does not stand for the proposition that perfection of the grant of a defendant’s mistrial motion under CPL 280.10 terminates a criminal trial, thereby divesting the trial court of any authority to rescind the grant of a mistrial. As we pointed out in Catten, before there was a final termination of the trial “the statutory scheme contemplates a two-step process: declaration of a mistrial, at which time the motion has been granted, followed by discharge of the jury” (id., at 555). In Catten, the defense request for withdrawal of its mistrial motion came after the mistrial had been perfected, but before the jury was discharged. Accordingly, we held in Catten that the trial court retained discretion to allow the defendant to withdraw his mistrial application (id.).

Finally, we reject defendant’s alternative contention that it was an abuse of discretion as a matter of law for the Trial Judge to have rescinded its declaration of a mistrial and accepted the jury verdict. The record reflects that the court’s primary concern, when it granted the mistrial upon receiving the jury’s note that it was unable to reach a verdict, was that any additional instruction urging the jury to make a further attempt to reach unanimity would put undue pressure on juror number 4, the juror who had dissented from the jury’s prior announcement of a guilty verdict. When, very shortly thereafter, the jury indicated that it had reached a verdict without any such additional instruction, the court’s sensitive concern regarding any potential coercion of that juror was obviated. The court again polled the jury to insure that in fact the verdict was the free decision of each juror and, at sentencing, noted that it did not observe any reluctance on the part of juror number 4 or any other juror when each of them was individually polled. The trial court was in the best position to assess all the circumstances pertinent to whether a fair verdict could be rendered by the jury, including observing the demeanors of the individual jurors (see, Matter of Plummer v Rothwax, 63 NY2d 243, 250). We find no basis to upset the trial court’s exercise of discretion here.

Accordingly, the order of the Appellate Division should be affirmed.

Hancock, Jr., J.

(dissenting). I would reverse and grant a new trial. This Court’s decision is founded squarely on a mistaken assumption: that the grant of the mistrial was based "upon jury deadlock” (majority opn, at 229). The majority reasons — seizing solely on the trial court’s use of the term "hung jury” — that the mistrial could not have been granted under any subdivision in CPL 280.10. The trial court, the majority concludes, must have granted it under CPL 310.60 (1) (a) upon the ground that the jury could not agree and the court was satisfied "that any such agreement [was] unlikely within a reasonable time” (id.).

But a fair reading of the record — far from confirming the fact that the trial was aborted because the jury couldn’t agree —shows plainly that the mistrial motion was made and granted because of the prejudicial effect that continued jury deliberations would have on defendant in view of the additional coercion and stress such deliberations would produce on juror No. 4. Thus, the mistrial was declared — clearly, in my view — not under CPL 310.60, but under CPL 280.10 (1) because of a legal defect in the proceedings "which [was] prejudicial to the defendant and deprive[d] him of a fair trial” (id.). That being so, the trial court, as defendant properly argues, was without power to undo the mistrial. Once the mistrial had been granted because of prejudice to defendant, the court could not simply continue the aborted trial as if nothing had happened by proclaiming that the prejudice which it had discerned a half hour before had suddenly vanished. A review of the relevant portions of the record follows.

I

Defendant’s First Mistrial Motion

The foreperson reported the jury’s verdict in the early afternoon of the second day of deliberations. After some discussion concerning the possible repugnancy of the verdict, the court decided to accept it and, on request of defense counsel, directed that the jurors be polled. At approximately 1:35 p.m., during the polling, the following occurred with respect to juror No. 4:

"the clerk: Is that your verdict, Juror 4? (Pause.) Is that your verdict, Juror 4?
"the defendant: Please don’t send me away. I didn’t do this, man, this is — this is a mistake.
"the court: I do not want to hear you make any statement. Do you understand that?
"Instruct your client that he’s not to make any statements in this courtroom at this time.
"mr. lester: Your Honor, I did.
"the clerk: Juror 4, would you please respond to the question of whether the verdict as announced by the foreperson and as announced and as recorded is the same verdict as your own personal verdict in this case. (Pause.)
"mr. lester: Judge, may we approach?
"the court: No. I would like a response from Juror Number 4.
"juror no. 4: No.
"the court: No? At this time I’m going to direct the jury go back into the jury room and continue your deliberations.
"mr. lester: Judge, before you send them back, may I make a motion not in the presence of the jury?
"the court: The jury will first step out at this time as instructed. (Jury excused.)
"the court: I’ll hear you now.
"mr. lester: Judge, the pressure on this juror is so obvious. I would request this Court at this time to declare this a mistrial. The pressure on her is going to be incredible on her back in the jury room. It’s obvious in all good conscience she cannot go along with this verdict, and to put that kind of pressure on her is unfair, and it will end up ultimately being unfair to my client. ftI would request the Court to declare this a mistrial.
"the court: Motion denied” (emphasis added).

After the court’s denial of the motion, defense counsel noted on the record that juror No. 4 had taken "at a minimum, 20 seconds — closer to more like a minute — before she did say, in a low voice, 'no’ ” and that she "was crying during the time when she gave her negative response”.

Defendant’s Second Mistrial Motion

At 4:20 p.m., the court was handed a note that the jury wanted five or six additional note sheets. Shortly thereafter, it received another note stating, "the jury cannot reach a verdict. Please instruct.”

The prosecutor requested that the court give an Allen charge, but defense counsel "strongly objected] to issuing an Allen charge * * * in light of the fact that this is not the classical hung jury” (emphasis added). Defense counsel stated:

"mr. lester: * * * j believe right now the pressure on her must be incredible. I believe an Allen charge would only add to that which would allow a defective verdict to be rendered, in light of the fact that Juror 4 possibly would not agree with the verdict. There’s no way for the Court to soften the language or make the language of an Allen charge appear less stringent. * * * This is not the classic Allen charge situation, where a jury just sends out a note saying that they’re deadlocked. Now, the Court and all of us are aware of at least one individual who is in fact deadlocking the jury. I request the Court at this time declare a mistrial and — that’s defense’s request” (emphasis added).

Denial of the Allen Charge and Grant of Defendant’s Motion

The communication to the effect that the jury could not agree, it must be emphasized, was the first indication from the jury that it could not reach a verdict. In deciding to deny the prosecutor’s request for an Allen charge and grant defendant’s motion, the court stated:

"The jury did have a request for instructions on the law which was rather brief. Aside from that, we did receive a notice that a verdict was reached at 1:35 and now, approximately three hours later after I had to send the jury back because of the fact that at least one juror disagreed that the jury reached a verdict, the jury has now indicated that they cannot reach a verdict.
"While I have never accepted this kind of a note from the jury the first time and have in the past always given an Allen charge on the first note, I just find that the circumstances in this case do warrant the granting of a mistrial at the request of defense counsel. And, defense counsel in this case has requested that I declare this a hung jury and grant a mistrial and I’m going to do it, under the circumstances that we have in this case. Are both sides ready to proceed with trial tomorrow?” (Emphasis added.)

II

The record, I submit, unmistakably shows that: (1) defendant’s mistrial motions were based on the prejudice that would result from the additional stress and coercion on juror No. 4 which would be entailed in further deliberations; (2) the court did not consider the situation to be a deadlocked jury warranting a mistrial under CPL 310.60 and, for that reason, did not follow its usual course of giving an Allen charge in response to the jury’s first indication that it could not agree; and (3) instead, the court granted defendant’s second mistrial motion because "the circumstances in this case [did] warrant the granting of a mistrial at the request of defense counsel”.

It is unquestioned that once this mistrial had been declared under CPL 280.10 and a new trial was ordered (see, majority opn, at 229), the granting of the mistrial was complete (see, People v Catten, 69 NY2d 547, 555). Had this been the typical grant of a mistrial because the court was "satisfied that [an agreement on a verdict was] unlikely within a reasonable time” (CPL 310.60 [1] [a]) (which, I submit, the record shows it was not), the court could arguably have come to a different conclusion and retracted its earlier order when it later developed that the jurors had resolved their differences and reached a verdict. In such a hypothetical situation, there would have been no indication of pressure or stress on a particular juror and no resulting danger of a coerced verdict from further deliberations. But, that is not this case.

Here, the court unquestionably recognized from what had transpired in open court — i.e., juror No. 4’s initial failure to answer, her delay in finally responding "No”, her manifestation of emotional distress and the fact that she was crying— that there was a danger of a coerced verdict from compelling juror No. 4 to undergo more pressure from the other jurors and that continued deliberations would be "prejudicial to the defendant and deprive[ ] him of a fair trial” (CPL 280.10 [1]). Where, as here, the court concludes that continuing deliberations will deprive defendant of a fair trial because of the likelihood of coercion on a juror, it is difficult to see how the very action that produces the danger of coercion — i.e., continued deliberation — can obviate the danger. Yet, this seems to be the majority’s reasoning in equating the case with the usual hung jury mistrial and assuming that, during the half hour that elapsed after the court granted the motion, the pressure on juror No. 4 had been alleviated and that the jury was able to reach a fair verdict free from coercion. Manifestly, it is equally likely, perhaps more so, that what defense counsel and the court feared might happen did in fact happen— that juror No. 4 succumbed to the continued pressure and rendered a verdict that did not represent her considered judgment based on the evidence and the law.

What took place in the jury room after the court granted the mistrial and ordered a new trial will never be known. What is clear is that the court had concluded from its assessment of the circumstances that the danger of a coerced verdict so seriously jeopardized defendant’s fair trial rights as to warrant a mistrial. In my view, a retraction of that order— when there was reason to believe that continued deliberations would increase the pressure on juror No. 4 and the chances of a coerced verdict — constituted a serious deprivation of defendant’s State and Federal constitutional rights to a fair trial (NY Const, art I, § 6; US Const 6th Amend; see, Matter of Plummer v Rothwax, 63 NY2d 243, 253; People v Carter, 40 NY2d 933, 934; People v Faber, 199 NY 256, 259; Arizona v Washington, 434 US 497, 509). I, therefore, dissent.

Chief Judge Kaye and Judges Simons, Bellacosa and Smith concur with Judge Levine; Judge Hancock, Jr., dissents and votes to reverse in a separate opinion in which Judge Titone concurs.

Order affirmed.


text:
    [624 NE2d 168, 604 NYS2d 40]
    In the Matter of Philip M. and Others, Children Alleged to be Abused. Lorene P. et al., Appellants; Commissioner of Social Services of the City of New York, Respondent.
    Argued October 13, 1993;
    decided November 16, 1993

      POINTS OF COUNSEL

      Martin Guggenheim, Madeleine Kurtz, New York City, Daniel Greenberg, of the Massachusetts Bar, admitted pro hac vice, and Robert G. Schwartz, of the Pennsylvania Bar, admitted pro hac vice, for appellants.
    I. Under the Family Court Act only parents who "commit” or "allow to be committed” abuse to their children may be adjudicated as child abusers. (Matter of Zariyasta S., 158 AD2d 45.) II. The courts below properly invoked the statutory presumption of parental responsibility but misconstrued the legal significance of the presumption. (Matter of Tania J., 147 AD2d 252; Matter of Young, 50 Misc 2d 271; Matter of S, 46 Misc 2d 161; Matter of Tashyne L., 53 AD2d 629; Matter of William W., 125 AD2d 976; Matter of Erin QQ., 180 AD2d 944; Matter of Sharnetta N., 120 AD2d 276; Matter of Sheikara G., 163 AD2d 69; Matter of Scott G., 124 AD2d 928.) III. Fidelity to child protection laws ultimately serves the best interests of children and their families even when it results in dismissal of charges.

      O. Peter Sherwood, Corporation Counsel of New York City (Margaret G. King and Barry P. Schwartz of counsel), for respondent.
    The allegations of sexual abuse were proven by a preponderance of the evidence. Appellants failed to rebut petitioner’s conceded prima facie case of abuse, having presented no reasonable explanation for the symptoms of sexual abuse manifested by two of the five children in their household. (Matter of Jesse S., 152 AD2d 581; Matter of William W., 125 AD2d 976; Matter of Erin QQ., 180 AD2d 944; Matter of Dutchess County Dept. of Social Servs. [Dawn B.J, 185 AD2d 340; Matter of Justina S., 180 AD2d 642; Matter of James P., 150 AD2d 240; Matter of James P., 137 AD2d 461; Matter of

      Sharnetta N., 120 AD2d 276; Matter of Marcellina F., 117 AD2d 803; Matter of Tania J., 147 AD2d 252.)

      Lenore Gittis, Law Guardian, New York City (Kenneth Rabb and Amy Serlin of counsel), on behalf of the children.
    I. Because there are affirmed findings of fact that the explanations offered by appellants for their children’s conditions were insufficient to rebut the prima facie case, the adequacy of these explanations is beyond the review of this Court. (Eiseman v State of New York, 70 NY2d 175; Scheemaker v State of New York, 70 NY2d 985.) II. As the Family Court and the Court below correctly found, appellants failed to rebut the prima facie case of sexual abuse. (Matter of S., 46 Misc 2d 161; Matter of Frances, 49 Misc 2d 372; Matter of Young, 50 Misc 2d 271; Matter of Christina F., 74 NY2d 532; Matter of Nicole V., 71 NY2d 112; Matter of Roman, 94 Misc 2d 796; Matter of Valerie Leonice T., 107 AD2d 327; Matter of Shawniece E., 110 AD2d 900; Matter of Erin QQ., 180 AD2d 944.) III. Appellants have not demonstrated that there is systemic bias against respondent parents in article 10 proceedings or that such bias was manifested in the proceedings in the Family Court and the Court below in this case.
   OPINION OF THE COURT

Simons, J.

Family Court has found respondent parents responsible for the sexual abuse of two of the five children living in their home. Accordingly, it ordered all five children placed under the supervision of the Child Welfare Administration (CWA) of the petitioner Department of the Social Services for a period of 12 months. Petitioner established its case by presenting evidence that respondents "allowed” two of the children, while under their care, to contract chlamydia, a sexually transmitted disease. The issue presented is whether respondents satisfactorily rebutted petitioner’s prima facie case that they were legally answerable for the children’s condition.

I.

Respondents are the parents of four children, Philip, Jacob, Brandon, and Belit, 15, 12, 8, and 5 years of age respectively. The children lived with respondents in a three-bedroom home which the parents have maintained for the last several years. Angel, age 9, a nephew of the mother, also lived with them. In 1989, at the request of petitioner, respondents took Angel’s sister and brothers, Cathy, Wilfredo and Alfredo, into their home.

During April or May of 1990, Belit’s mother observed Alfredo, then six years old, lying on top of Belit. Both were naked below the waist. As a result she insisted that petitioner remove Alfredo, Wilfredo and Cathy. Seven months later she observed a discharge from Belit’s vagina and sought medical treatment for her and advice from a consultation center. As a result, the incident was reported to petitioner and in April 1991, following an investigation, petitioner instituted this proceeding charging respondents with sexual abuse. Petitioner alleged that while in the sole care of respondents Belit had been vaginally penetrated and her hymen broken and that Philip, Brandon and Belit had tested positive for chlamydia.

At a fact-finding hearing before Family Court, petitioner presented two witnesses, Mr. Mendez, a social worker employed by the CWA, and Ms. Harrison, a pediatric nurse practitioner at Montefiore Medical Center. Mr. Mendez testified that he could learn little about how the disease was contracted during his investigation of the family. Respondents denied any knowledge of sexual abuse and although Belit eventually told him that she had been touched in the vagina by a "little kid” in a park near her home, the children gave him no explanation of how the abuse had occurred. The CWA requested respondents to have all the children tested for sexually transmitted disease. Belit was tested by Ms. Harrison at Montefiore Medical Center in December 1990 and the four boys were tested several weeks later. Ms. Harrison also made appointments to test Alfredo, Wilfredo and Cathy. They were living with their grandmother at the time, however, and respondents did not produce them for testing.

Ms. Harrison testified that the initial physical examination of Belit revealed that Belit’s hymen was irregular and bled when touched. Tests done that day showed that Belit was infected with chlamydia in her vagina. Ms. Harrison testified that Belit told her she had been "bad touched”, but would not identify the incident or the person who touched her. Respondents were provided with a prescription for Belit, and at a February 15, 1991 follow-up examination, she tested negative for chlamydia.

Ms. Harrison also examined the four boys. Brandon and Philip both tested positive for chlamydia in their rectal area but neither offered any explanation for the source of their infections. The test results for Jacob and Angel were negative. Ms. Harrison concluded that Belit and Brandon had been the victims of sexual abuse, but made no determination about Philip. He may have been a victim she said but, because of his age, he also could have acquired the disease through consensual sexual activity.

Both parents testified. They admitted that they alone were responsible for the care of the children but, other than conjecture, offered no explanation for how Belit had been injured or how the children had become infected. They also testified that they did not believe the positive test results for Brandon and Philip. Indeed, because they did not believe them, they had not given either Brandon or Philip the medication Ms. Harrison prescribed for the boys. Nor did they take either boy to a scheduled follow-up examination at Montefiore Medical Center. Instead, in March 1991, some two months after the initial examination, respondents had Philip and Brandon retested for chlamydia at another hospital. On the second examination the boys tested negative. Respondents offered no explanation for not believing the earlier positive test results or the possible source of the disease. They simply maintained that the earlier test results were incorrect. Respondents did not have themselves tested for chlamydia until March and April of 1991.

The record contains some evidence of a possible source for Belit’s injury. There were the accounts of Belit and her mother of the incident in the park in which, as Belit said, an unidentified boy touched her vagina or, as her mother testified at the hearing, touched Belit outside her clothing. There was also evidence of Belit’s contact with Alfredo after he came to live with respondent in October 1989. Alfredo’s sister, Cathy, told Mr. Mendez that during the time they lived with respondents she saw Alfredo touching Belit on two occasions, once in the living room and once in the bedroom. One of these was the incident Belit’s mother observed in April of 1990, when she saw Alfredo lying on top of Belit. Alfredo admitted to Mr. Mendez that he had touched Belit’s vagina with his hand once when Cathy was present and Mr. Mendez confirmed that Department records indicated that Alfredo had been sexually abused while in a foster home and that while living with respondents he apparently had asked both Belit and Cathy to have sex with him.

The children’s mother testified that she had Wilfredo, Alfredo and Cathy moved to their grandmother’s home immediately after witnessing the incident between Belit and Alfredo. Some seven months later, respondents noticed a vaginal discharge from Belit, which ultimately proved to be a symptom of chlamydia, and led to this proceeding.

Family Court found that petitioner had established injury to the children while under respondents’ care and it had, therefore, established a prima facie case of child abuse under article 10 of the Family Court Act. It also found that respondents’ explanation for the source of injuries failed to rebut petitioner’s prima facie case. Accordingly, the court ordered the children released to respondents under CWA supervision for 12 months, during which time the parents were to seek counseling with their children. The Appellate Division confirmed the factual findings of Family Court and affirmed its order. We agree with the result reached by the Appellate Division but not with its view that once a prima facie case of child abuse had been established under the statute, the "burden of proof’ shifted to respondents, who were then required to provide a " 'reasonable and adequate explanation of how the injuries were sustained’ ” (Matter of Philip M., 186 AD2d 462, 463).

II.

Historically, it has been difficult to prove acts of sexual abuse involving young children because such acts "are predominantly nonviolent and usually occur in secret” making it difficult to acquire evidence fixing blame (Matter of Nicole V., 71 NY2d 112, 117). Article 10 was enacted to alleviate these difficulties (Matter of Christina F. [Gary F.J 74 NY2d 532, 535). It defines an "abused child” as a child under the age of 18 whose parent or other person legally responsible for the child’s care "commits, or allows to be committed, a sex offense against such child” (Family Ct Act § 1012 [e] [iii]). Section 1046 (a) (ii) provides that a prima facie case of child abuse or neglect may be established by evidence of (1) an injury to a child which would ordinarily not occur absent an act or omission of respondents, and (2) that respondents were the caretakers of the child at the time the injury occurred. Unexplained sexually transmitted disease in a child is evidence of sexual abuse (see, Matter of Tania J., 147 AD2d 252, 259).

The statute is fault based. There must be evidence of child abuse and petitioner must establish it by "a preponderance of the evidence” (Family Ct Act § 1046 [b] [i]; and see, Matter of Tammie Z., 66 NY2d 1). The application of the statute, however, permits a finding of abuse or neglect based upon evidence of an injury to a child which would ordinarily not occur absent acts or omissions of the responsible caretaker. It authorizes a method of proof which is closely analogous to the negligence rule of res ipso loquitur (see, Dermatossian v New York City Tr. Auth., 67 NY2d 219, 226; Plumb v Richmond Light & R. R. Co., 233 NY 285; see also, 2 McCormick, Evidence § 342, at 451 [Practitioner’s 4th ed 1992]). Indeed, the statute is modeled on the res ipso loquitur doctrine (see, Matter of S, 46 Misc 2d 161, 162; Matter of Roman, 94 Misc 2d 796, 801-802).

As in negligence cases tried on the theory of res ipso loquitur, once a petitioner in a child abuse case has established a prima facie case, the burden of going forward shifts to respondents to rebut the evidence of parental culpability. But contrary to the statement of the Appellate Division, the burden of proving child abuse always rests with petitioner; "[s]hifting the burden of explanation or of going on with the case does not shift the burden of proof’ (Plumb v Richmond Light & R. R. Co., 233 NY, at 288). It is sometimes said that once a prima facie case is established a "presumption” of parental responsibility for child sexual abuse arises but this refers to a presumption which is "evidentiary and rebuttable, whether by [respondent’s] own testimony or by any other evidence in the case” (People v Leyva, 38 NY2d 160, 167; see also, Dermatossian, supra, at 226). While the fact finder may find respondents accountable for sexually abusing a child or allowing sexual abuse to occur after a prima facie case is established, it is never required to do so (cf., Dermatossian, supra, at 226).

Once a prima facie case has been established, respondents may simply rest without attempting to rebut the presumption and permit the court to decide the case on the strength of petitioner’s evidence or, alternatively, they may present evidence which challenges the establishment of the prima facie case. Their evidence may, for example, (1) establish that during the time period when the child was injured, the child was not in respondent’s care (see, e.g., Matter of Vincent M., 193 AD2d 398, 403); (2) demonstrate that the injury or condition could reasonably have occurred accidentally, without the acts or omissions of respondent (see, e.g., Matter of Eric G., 99 AD2d 835); or (3) counter the evidence that the child had the condition which was the basis for the finding of injury (see, e.g., Matter of Smith, 128 AD2d 784, 785-786).

III.

In this case, respondents conceded that they were responsible for the children’s care and they did not challenge the finding that Belit had been abused and had contracted chlamydia. To defeat petitioner’s prima facie case, they relied principally on evidence that Belit’s injury had another source.

Family Court found respondents’ explanations "insufficient” to overcome petitioner’s prima facie case. Insofar as the incident in the park was concerned, the boy was not identified and there was no reason to presume he was infected with chlamydia or that he transmitted the disease to Belit during the encounter. Moreover, the versions of Belit and her mother differed on whether the boy had touched Belit over her clothing or not. Family Court accepted the mother’s version and since chlamydia could not be communicated in this way, it rejected the park incident as the source of Belit’s injury.

The incident with Alfredo presented a closer question. Alfredo’s contacts with Belit were witnessed by Cathy and Belit’s mother and confirmed by Alfredo. Moreover, Alfredo apparently had a history of emotional and sexual abuse when he came to live with them, although respondents were unaware of it at the time and had no reason to take precautions to prevent Belit’s injury. The evidence is not persuasive, however, that he caused Belit’s infection. Considering that Alfredo was never tested for chlamydia to determine if he was the source, that Belit’s symptoms of chlamydia did not manifest themselves until seven months after Alfredo was removed from respondents’ home and that no evidence before the court showed Alfredo penetrated Belit, the court cannot be faulted for rejecting Alfredo as a source of injury. Indeed, respondents did not advance the theory that Alfredo had infected Belit when the injury to her hymen was discovered or when the chlamydia was diagnosed. It was not until these proceedings were initiated that they suggested those possibilities.

Furthermore, respondents failed to present any evidence to rebut Brandon’s injury or to explain why some of their children were infected with the disease but not others. Though they did not accept the positive test results from Montefiore Medical Center, they produced no evidence that the first test was flawed or that the second test, in which Brandon and Philip tested negative, was more reliable. Their simple refusal to believe the results of a medical test did little to counter petitioner’s prima facie case, particularly when they accepted the Montefiore test results for Belit, Jacob and Angel without challenging the test’s accuracy or reliability.

IV.

Respondents fault this assessment of their defense, claiming that the trial court’s insistence that they present evidence to support their explanations changed the burden of proof. They assert that such a procedure places reasonable, prudent, and caring parents lacking knowledge of how their child has become injured, in an impossible position because, by application of the statute, they may become the subject of coercive intrusion into their family life by the Department of Social Services.

Section 1046 (a) (ii) of the Family Court Act attempts to strike a fair and reasonable balance between a parent’s right to care for a child and the child’s right to be free from harm. The establishment of a prima facie case does not require the court to find that the parents were culpable; it merely establishes a rebuttable presumption of parental culpability which the court may or may not accept based upon all the evidence in the record. Before relying upon its provisions, the court should consider such factors as the strength of the prima facie case and the credibility of the witnesses testifying in support of it, the nature of the injury, the age of the child, relevant medical or scientific evidence and the reasonableness of the caretaker’s explanation in light of all the circumstances. In weighing the caretaker’s explanation, the court may consider the inferences reasonably drawn from his or her actions upon learning of the injury. Certainly, the caretaker’s failure to offer any explanation for the child’s injuries, to treat the child, or to show how future injury could be prevented are factors to be considered by the court, for they reflect not only upon the caretaker’s fault and competence but also the strength of the caretaker’s rebuttal evidence.

In this case, respondents appear to have acted responsibly concerning Belit’s treatment, but they failed for reasons not sufficiently explained, to take steps which could assist in fixing the cause of the injuries or to insure that they were not repeated. For example, they waited three months after Belit, Brandon and Philip had tested positive for chlamydia, before they had themselves tested for chlamydia and, apparently believing Alfredo to be the source of the infection, they nevertheless failed to have him tested. Moreover, they failed to give Philip and Brandon the medicine provided by nurse Harrison and they waited some two months before having them retested for chlamydia. Even if respondents doubted the accuracy of the tests performed by Ms. Harrison, they needlessly exposed their own children to harm by allowing two months to go by without taking any action to treat or retest Philip and Brandon. While no one of these facts is dispositive, once a prima facie case had been established, Family Court was entitled to consider all of them when determining respondents allowed the children to be abused.

Accordingly, the Appellate Division order in this case should be affirmed, without costs.

Chief Judge Kaye and Judges Titone,. Hancock, Jr., Bellacosa, Smith and Levine concur.

Order affirmed, without costs.


text:
    [624 NE2d 629, 604 NYS2d 492]
    Mercantile & General Reinsurance Co., plc, Appellant, v Colonial Assurance Company et al., Defendants, and Spanno Corporation, Respondent.
    Argued October 7, 1993;
    decided November 18, 1993

      POINTS OF COUNSEL

      Mound, Cotton & Wollan, New York City (Stuart Cotton, Andrew Maneval, Guy P. Dauerty, Diane P. Simon and Marilu Cain of counsel), for appellant.
    I. The trial court’s granting of rescission was proper in all respects and fully within its province; the judgment entered in the Supreme Court on the basis of such ruling should not have been disturbed. (Tober v Schenectady Sav. Bank, 54 AD2d 1049; Pomirchy v Levitin, 144 AD2d 655, 73 NY2d 708, 493 US 824; Phoenix Mut. Life Ins. Co. v Conway, 11 NY2d 367; Jamaica Sav. Bank v M. S. Investing Co., 274 NY 215; Motor Vehicle Mfrs. Assn. v State of New York, 75 NY2d 175; Tull v United States, 481 US 412; Mackellar v Rogers, 109 NY 468; Manhattan Life Ins. Co. v Hammerstein Opera Co., 184 App Div 440; Lynch v Metropolitan El. Ry. Co., 129 NY 274; Jackson v North Atl. Life Ins. Co., 163 AD2d 275.) II. Spanno had no valid direct claim against Mercantile & General Reinsurance Co. (Turner v National Sur. Co., 176 App Div 219; Squibb-Mathieson Intl. Corp. v St. Paul Mercury Ins. Co., 44 Misc 2d 835; National

      Ins. & Guar. Corp. v Vander Veer, 66 Misc 2d 862; Greenman v General Reins. Corp., 237 App Div 648, 262 NY 701; Stainless, Inc. v Employers’ Ins. Co., 69 AD2d 27, 49 NY2d 924; Dwight v Germania Life Ins. Co., 103 NY 341; Skandia Am. Reins. Corp. v Schenck, 441 F Supp 715; Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169; State of New York v Home Indem. Co., 66 NY2d 669; People ex rel. Sea Ins. Co. v Graves, 274 NY 312.) III. Spanno would not be entitled to recover consequential damages from Mercantile & General Reinsurance Co., even if it had a valid cause of action. (Samovar of Russia Jewelry Antique Corp. v Generali, Gen. Ins. Co., 102 AD2d 279; Pope v New York Prop. Ins. Underwriting Assn., 112 AD2d 984, 66 NY2d 857; Halpin v Prudential Ins. Co., 48 NY2d 906; Marvex Processing & Finishing Corp. v Allendale Mut. Ins. Co., 91 Misc 2d 683, 60 AD2d 800.)

      Stein, Garr & Rosenfeld, New York City (Ira E. Garr and Steven E. Rosenfeld of counsel), Hall, O’Brien & Sack (Andrew C. Hall of counsel, of the Florida Bar, admitted pro hac vice) and Cooper & Wolfe (Marc Cooper and Maureen E. Lefebvre of counsel, of the Florida Bar, admitted pro hac vice), for respondent.
    I. The Court below properly ordered judgment to be entered for Spanno on the jury verdict which found that Spanno made no material misrepresentations to Mercantile & General Reinsurance Co. (Gupta v University of Rochester, 57 AD2d 731; Bauman Assocs. v H & M Intl. Transp., 171 AD2d 479; Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183; United Euram Corp. v Occidental Petroleum Corp., 123 Misc 2d 574; Azoulay v Cassin, 103 AD2d 836; Burnstine v Geist, 257 App Div 792; Dairy Queen v Wood, 369 US 469; Beacon Theatres v Westover, 359 US 500; Parklane Hosiery Co. v Shore, 439 US 322; Skinner v Total Petroleum, 859 F2d 1439.) II. The Court below properly reinstated the jury verdict which found that Spanno was an intended third-party beneficiary of Mercantile & General’s reinsurance contracts. (China Union Lines v American Mar. Underwriters, 755 F2d 26; Bruckner-Mitchell, Inc. v Sun Indem. Co., 82 F2d 434; Greenman v General Reins. Corp., 237 App Div 648; Squibb-Mathieson Intl. Corp. v St. Paul Mercury Ins. Co., 44 Misc 2d 835; Government Empls. Ins. Co. v Kligler, 42 NY2d 863; Malican v Blue Shield, 52 AD2d 190; Hellert v Travelers Ins. Co., 52 AD2d 751; National Ins. & Guar. Corp. v Vander Veer, 66 Misc 2d 862; State of New York v Home Indem. Co., 66 NY2d 669.) III. The jury verdict on Spanno’s tortious interference claim was supported by the evidence. (Cohen v Hallmark Cards, 45 NY2d 493; Nicastro v Park, 113 AD2d 129; Salazar v Fisher, 147 AD2d 470; United Euram Corp. v Occidental Petroleum Corp., 123 Misc 2d 574; Mahoney v Temporary Commn. of Investigation, 165 AD2d 233; Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183; Sharma v Skaarup Ship Mgt. Corp., 699 F Supp 440; Robbins v Ogden Corp., 490 F Supp 801.) IV. Spanno is entitled to the damages awarded by the jury. (Brown v Lockwood, 76 AD2d 721; Banker’s Trust Co. v Steenburn, 95 Misc 2d 967.)
   OPINION OF THE COURT

Simons, J.

This appeal presents a question on the role of the jury, and the conclusiveness of its findings, in actions in which both legal and equitable claims are advanced by the parties.

The defendant Spanno Corporation was in the business of guaranteeing prospective purchasers of capital equipment that the equipment would have a stated residual value at a given future date. Since Spanno had to assure its customers that it would be able to make good on its guarantees, it obtained insurance for that purpose from the defendants Colonial Assurance Company and Union International Insurance Company. They, in turn, reinsured the risks with plaintiff.

Plaintiff instituted this action seeking to rescind the contracts of reinsurance with the insurers, claiming that Spanno had made material misrepresentations which had induced it to enter into the contracts. Rescission claims, of course, are equitable in nature and, thus, are to be tried by the court (Motor Vehicle Mfrs. Assn. v State of New York, 75 NY2d 175, 182-183). Spanno, named as a defendant, asserted a legal counterclaim alleging that it was a third-party beneficiary to the reinsurance contracts with Colonial and Union, which were then in liquidation. It claimed that it had been injured because of nonpayments to its customers and its inability to obtain new customers and demanded damages for plaintiff’s breach of the reinsurance contracts and its tortious interference with the insurance contracts with Colonial and Union.

At trial Supreme Court treated plaintiff’s claim of material misrepresentation as an equitable defense and counterclaim to Spanno’s contract action and ruled that the jury’s verdict on equitable issues would be advisory (see, CPLR 4101, 4212; see also, Phoenix Mut. Life Ins. Co. v Conway, 11 NY2d 367). It asked the jury to answer six interrogatories which addressed both the legal and equitable causes of action. In response, the jury concluded that Spanno was entitled to recover on the contract and that it made no material misrepresentations warranting rescission by plaintiff. It awarded damages of $14,708,779 on the breach of contract and tortious interference claims. Supreme Court set aside the verdict on Spanno’s legal counterclaims. It treated the verdict on rescission as advisory and, contrary to the jury’s determination, held that Spanno had made material misrepresentations entitling plaintiff to rescission of the reinsurance contract. On appeal, the Appellate Division reversed, holding that the Judge erred in setting aside the jury’s verdict because there was a reasonable view of the evidence that could support it (see, Cohen v Hallmark Cards, 45 NY2d 493). It expressly held that the jury’s finding of misrepresentation should have been treated as dispositive, not advisory (184 AD2d 177, 181).

The principal question presented is the legal effect of the jury’s misrepresentation finding on the trial court’s power to make a contrary factual finding. Defendant Spanno asserts that the jury’s determination that there had been no material misrepresentations was a necessary part of its determination on the breach of contract action and not merely an advisory verdict on plaintiff’s action for rescission. It concludes, therefore, that the jury’s misrepresentation finding operated as a "type of collateral estoppel” and precluded the Judge from adjudicating the issue anew as part of plaintiff’s action for rescission.

Spanno’s argument fails because its original premise — that a determination on misrepresentation was necessary to resolve the breach of contract claim — is erroneous.

As the case was presented, plaintiff’s action for rescission constituted an equitable defense and counterclaim to Spanno’s breach of contract claim (see, Tober v Schenectady Sav. Bank, 54 AD2d 1049, 1050). Under the plain terms of CPLR 4101, when a legal claim is met with an equitable defense or counterclaim, "the issues of fact shall be tried by a jury * * * except that equitable defenses and equitable counterclaims shall be tried by the court” (see also, NY Const, art I, § 2). Following that direction, the jury could and did fully decide the disputed issues of fact necessary to the claim of contractual breach: the existence of a facially valid contract, breach and damages. At that point, the sole unresolved issue was whether the contract should be declared void from its inception because of material misrepresentation. All issues pertaining to that equitable defense and counterclaim, whether matters of fact or of law, were to be determined by the court under CPLR 4101 (see, Grant v Guidotti, 67 AD2d 736, 737). To find material misrepresentation, the court did not need to contradict any of the factual findings the jury made in deciding the factual issues pertinent to the legal claim for breach of contract because a finding of material misrepresentation is not inconsistent with a finding that the parties entered into a contract. To the contrary, the very essence of a rescission action is to set aside a contract that is otherwise valid and binding. The factual issues in the legal and equitable claims intersected only to the extent that the jury’s finding of a facially valid contract necessitated that the court proceed to the rescission issue. That, however, is not the same as having a factual issue in common and, under CPLR 4101, the trial court was free to decide the rescission claim de nova (cf., Skinner v Total Petroleum, 859 F2d 1439, 1444; see also, 4 Weinstein-Korn-Miller, NY Civ Prac j[ 4101.34, at 41-52; Siegel, NY Prac § 209, at 304 [2d ed]; Beacon Theatres v Westover, 359 US 500, 516 [Stewart, J., dissenting]).

Because the jury verdict on misrepresentation was merely advisory, the trial court was not bound by it. It could disregard the advisory verdict, even if there was evidence to support it (see, McClave v Gibb, 157 NY 413; Ruder v Lincoln Rochester Trust Co., 18 AD2d 763). The Judge’s finding was the dispositive determination on that issue and, absent a contrary factual finding by the Appellate Division, is binding on this Court if there is evidence in the record to support it. The evidence here satisfies that standard and therefore the trial court’s decision granting rescission of the contract should be sustained.

In view of this conclusion, the remaining issues raised on appeal need not be addressed.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the judgment of Supreme Court reinstated.

Chief Judge Kaye and Judges Titone, Hancock, Jr., Bellacosa, Smith and Levine concur.

Order reversed, etc.