author: Smith, J. Abdus-Salaam, J. (dissenting in part).

text:
    [999 NE2d 520, 977 NYS2d 157]
    Georgitsi Realty, LLC, Appellant, v Penn-Star Insurance Company, Respondent.
    Argued September 10, 2013;
    decided October 17, 2013

      POINTS OF COUNSEL

      The Dweck Law Firm LLP, New York City (Jack S. Dweck and Christopher Fraser of counsel), for appellant.
    I. The vandalism provision encompasses damage to the covered property based upon the intentional conduct by the adjacent owner and its excavator, even though the damage inflicted by the perpetrators was not directly to the insured’s property. (Raymond Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 5 NY3d 157; Bretton v Mutual of Omaha Ins. Co., 110 AD2d 46; Long Is. Light. Co. v Hartford Acc. & Indem. Co., 76 Misc 2d 832; Caporino v Travelers Ins. Co., 62 NY2d 234; Layzer v Leavitt, 770 F Supp 2d 579; Cordiano v Metacon Gun Club, Inc., 575 F3d 199; Louisville & Jefferson County Metro. Sewer Dist. v Travelers Ins. Co., 753 F2d 533; Breed v Insurance Co. of N. Am., 46 NY2d 351; Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663; Federal Ins. Co. v International Bus. Machs. Corp., 18 NY3d 642.) II. The finding of willfulness from intentional illegal conduct constitutes malice. (Louisville & Jefferson County Metro. Sewer Dist. v Travelers Ins. Co., 753 F2d 533; Romanych v Liverpool & London & Globe Ins. Co., 8 Misc 2d 269; Cresthill Indus. v Providence Washington Ins. Co., 53 AD2d 488; Lamb v Cheney & Son, 227 NY 418; Cragg v Allstate Indem. Corp., 17 NY3d 118; Maurice Goldman & Sons v Hanover Ins. Co., 80 NY2d 986; Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co., 51 AD3d 649; MBIA Inc. v Federal Ins. Co., 652 F3d 152; Village of Sylvan Beach, N.Y. v Travelers Indem. Co., 55 F3d 114; Casavecchia v Mizrahi, 57 AD3d 702.)

      Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola (Steven Verveniotis of counsel), for respondent.
    The first certified question should be answered in the negative, and the second certified question should be answered with a ruling that property damage caused by construction and excavation at the adjacent property does not constitute vandalism covered by the policy. (Government Empls. Ins. Co. v Kligler, 42 NY2d 863; Stoney Run Co. v Prudential-LMI Commercial Ins. Co., 47 F3d 34; Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390; Matter of Matco-Norca, Inc., 22 AD3d 495; Harrigan v Liberty Mut. Fire Ins. Co., 170 AD2d 930; Moshiko, Inc. v Seiger & Smith, 137 AD2d 170, 72 NY2d 945; Romanych v Liverpool & London & Globe Ins. Co., 8 Misc 2d 269; Benson Holding Corp. v New York Prop. Ins. Underwriting Assn., 124 Misc 2d 955; Roselli v Royal Ins. Co. of Am., 142 Misc 2d 857; Fanberg Realty Corp. v Travelers Cos., 117 AD2d 582.)
   OPINION OF THE COURT

Smith, J.

The United States Court of Appeals for the Second Circuit has asked us two questions relating to a property insurance policy covering acts of “vandalism.” We answer that: (1) malicious damage within the coverage of such a policy may be found to result from acts not directed specifically at the covered property; and (2) to obtain coverage under such a policy, the insured must show malice, defined as such a conscious and deliberate disregard of the interests of others that the conduct in question may be called willful or wanton.

I

Plaintiff is the owner of a four-story apartment building in Park Slope, Brooklyn. It obtained from defendant a “named perils” policy of property insurance, covering “direct physical loss ... or damage . . . caused by or resulting from” any of 14 kinds of events. The only peril relevant here is described in the policy as: “Vandalism, meaning willful and malicious damage to, or destruction of, the described property.”

Armory Plaza, Inc., the owner of the lot next to plaintiffs building, decided to build a new building that would include an underground parking garage. It hired contractors to do the excavation. According to plaintiff, the excavation caused cracks in the walls and foundations of plaintiffs building; the cracks became more pronounced, the building began to settle, and plaintiff feared the building would collapse. Plaintiff complained to the New York City Department of Buildings, which issued a series of violations and “stop work” orders. Plaintiff alleges that the violations resulted in guilty pleas or defaults and fines totaling more than $36,000, but that the stop work orders were ignored and the contractors kept working. Plaintiff obtained a temporary restraining order from Supreme Court, directing Armory and its contractors “to cease all construction and/or excavation work.” This order too, plaintiff says, was ignored.

Plaintiff made a claim under its policy which defendant rejected, and plaintiff brought suit in Supreme Court. The case was removed to the United States District Court for the Eastern District of New York, which granted summary judgment for defendant, holding that the alleged conduct of Armory and its contractors was not “vandalism” within the meaning of the policy (Georgitsi Realty, LLC v Penn-Star Ins. Co., 2011 WL 4804873, 2011 US Dist LEXIS 116854 [ED NY, Aug. 30, 2011, No. 08-CV-4462 (DLI)(RML)] [Report and Recommendation of Magistrate Judge]; Georgitsi Realty, LLC v Penn-Star Ins. Co., 2011 WL 4889251, 2011 US Dist LEXIS 114800 [ED NY, Sept. 30, 2011, No. 08-CV-4462 (DLI)(RML)] [adopting Report and Recommendation]). Plaintiff appealed to the Second Circuit Court of Appeals, which certified to us the following two questions:

“For purposes of construing a property insurance policy covering acts of vandalism, may malicious damage be found to result from an act not directed specifically at the covered property?”
“If so, what state of mind is required?” (Georgitsi Realty, LLC v Penn-Star Ins. Co., 702 F3d 152, 159 [2d Cir 2012]).

We answer the first question yes, and answer the second by saying that the state of mind is the same that would be required to award punitive damages against the alleged vandal: such a conscious and deliberate disregard of the interests of others that the conduct in question may be called willful or wanton.

II

On the question of whether an act may be called “vandalism” when it was not directed specifically at the damaged property, the authorities, though sparse, support an affirmative answer, and our own analysis of the question leads us to the same conclusion.

Our Court has not, apparently, ever addressed the meaning of “vandalism” in an insurance policy. The most relevant New York case is an Appellate Division decision, Cresthill Indus. v Providence Washington Ins. Co. (53 AD2d 488 [2d Dept 1976]). The plaintiff in that case had leased part of the ground floor of a warehouse and stored its property there. “[P]ersons described ... as ‘perpetrators’ apparently broke into the unoccupied third floor of the warehouse, uncoupled the pipes carrying water to the bathroom fixture, carried away the fixtures and left the water running from the severed connections” (id. at 490). The water flowed down to the first floor and damaged plaintiffs property. The damage was held to be covered by an insurance policy applicable to “[v]andalism and malicious mischief, meaning only willful and malicious damage to or destruction of the property covered hereunder” (id.), even though the “perpetrators” did not direct their acts at the plaintiffs property, and presumably never knew that the plaintiff or its property existed.

A case closer to this one on its facts is the decision of the United States Court of Appeals for the Sixth Circuit in Louisville & Jefferson County Metro. Sewer Dist. v Travelers Ins. Co. (753 F2d 533 [6th Cir 1985]). There, the alleged vandal was one Distler, the owner of a recycling firm that had a contract to store toxic waste. Distler decided to save money by “storing” the waste in a public sewer. The sewer itself was not property covered under the plaintiff’s insurance policy, but the waste flowed to a sewage treatment plant that was covered. The plaintiff was allowed to recover the damage to the plant under a policy insuring against “vandalism and malicious mischief, meaning only direct loss by willful and malicious damage to or destruction of property” (id. at 534). Distler obviously was not directing his activities at the sewage treatment plant, but that did not prevent recovery. (See also Cole v Country Mut. Ins. Co., 5 Ill App 3d 335, 282 NE2d 216 [1972].)

Cresthill and Louisville, insofar as they relate to the Second Circuit’s first question, seem to us indistinguishable from the present case. Defendant relies on Fanberg Realty Corp. v Travelers Cos. (117 AD2d 582 [2d Dept 1986]), but the brief opinion in that case gives it little help. Fanberg did involve vandalism coverage, and damage caused by contractors working on an adjacent building, but it contains no explanation of why the damage was not covered. It may be that the court found the activity of the alleged vandals not to be “malicious.”

We agree with the holdings of the Cresthill and Louisville courts. We see no reason why the term “vandalism” should be limited to acts “directed specifically at the covered property.” Vandalism, as the term is ordinarily understood, need not imply a specific intent to accomplish any particular result; vandals may act simply out of a love of excitement, or an unfocused desire to do harm, or (as in Cresthill, Louisville, and in the present case) out of a desire to enrich oneself without caring about the consequences to others. Nor does it seem relevant that the alleged act of vandalism here—as in Cresthill and Louisville— did not bring the alleged vandals in direct contact with the covered property. Where damage naturally and foreseeably results from an act of vandalism, a vandalism clause in an insurance policy should cover it.

It is true that, in some cases of alleged vandalism not directed at particular property, the term does not intuitively seem to fit. Thus, while the acts of the “perpetrators” in Cresthill seem like prototypical acts of vandalism, those in Louisville and the present case do not. The word vandalism, which derives from the sack of Rome by the original Vandals in 455 AD (see IV Edward Gibbon, The History of the Decline and Fall of the Roman Empire at 246-248 [Folio Society 1986]), more readily brings to mind people who smash and loot than business owners who seek their own profit in disregard of the injury they do to the property of others. We conclude, however, that there is no principled distinction between the two. An excavator who is paid to dig a hole, and does so in conscious disregard of likely damage to the building next door, is, for these purposes, not essentially different from an irresponsible youth who might dig a hole on the same property, with the same effect, whether in search of buried treasure or just for fun.

We answer yes to the Second Circuit’s first question.

III

In common speech, and by the express terms of the policy in suit, vandalism is “malicious” damage to property. The Second Circuit’s second question asks, in essence, what state of mind amounts to “malice” for these purposes. We answer by adopting, insofar as it relates to property damage, the formulation we have used in reviewing awards of punitive damages. Conduct is “malicious” for these purposes when it reflects “such a conscious and deliberate disregard of the interests of others that [it] may be called wilful or wanton” (Marinaccio v Town of Clarence, 20 NY3d 506, 511 [2013], quoting Dupree v Giugliano, 20 NY3d 921, 924 [2012]; see also Prozeralik v Capital Cities Communications, 82 NY2d 466, 479 [1993]; Carvel Corp. v Noonan, 350 F3d 6, 24 [2d Cir 2003]; Prosser & Keeton, Torts § 2 at 9 [5th ed 1984]). This familiar test, we believe, will serve to distinguish between acts that may fairly be called vandalism and ordinary tortious conduct. Insurance against vandalism should not be converted into something approaching general coverage for property damage. Insureds who want broader coverage should obtain it and pay an appropriate premium.

Accordingly, the certified questions should be answered as stated in this opinion.

Abdus-Salaam, J. (dissenting in part).

“[Yjandalism is defined as the destruction of property generally, and the same must be willful and malicious” (11 Steven Plitt et al., Couch on Insurance 3d § 155:92). With this definition in mind, I agree with the majority that an act may constitute “vandalism” within the meaning of an insurance policy even though the act was not directed specifically at the covered property; thus, the first certified question should be answered in the affirmative.

Malice is an essential ingredient of vandalism, as the majority recognizes, but its definition of the necessary “malicious” state of mind omits a critical component: intent to damage property. Willful and malicious damage to property is the very essence of vandalism, and a vandal’s malicious state of mind cannot be separated from his or her intent to damage or destroy property. Put differently, a perpetrator who acts maliciously but without the intent to damage property does not commit an act of vandalism, as that term is traditionally understood (see id.; Merriam-Webster’s Collegiate Dictionary 1383 [11th ed 2008]; see also Black’s Law Dictionary [9th ed 2009], vandalism). In those circumstances, the perpetrator engages in some other malicious act, perhaps one where malice may be proved by showing that the perpetrator evinced “such a conscious and deliberate disregard of the interests of others that [his or her conduct] may be called wilful or wanton” (majority op at 611 [internal quotations marks omitted]). In the context of insurance coverage for vandalism, however, such a showing should not suffice without evidence that the vandal intended to damage or destroy property, be it the covered property or otherwise.

Accordingly, I would hold that, to recover under a policy insuring against a loss caused by vandalism, the insured must prove that the damage was caused by a malicious act intended to damage property, even if not the insured’s specific property. Such an evidentiary requirement would better confine vandalism coverage to the bounds contracted for by the parties to an insurance contract, and prevent coverage from extending to willful and malicious acts not properly categorized as vandalism because property damage was not the actor’s primary intent.

Chief Judge Lippmajnt and Judges Graffeo, Read, Pigott and Rivera concur; Judge Abdus-Salaam dissents in part in an opinion.

Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of this Court’s Rules of Practice, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in accordance with the opinion herein.


source: Caselaw Access Project

author: Pigott, J. Abdus-Salaam, J. (dissenting).

license: Public Domain

text:
    [999 NE2d 1137, 977 NYS2d 692]
    The People of the State of New York, Respondent, v John G. Glynn, Appellant.
    Argued September 9, 2013;
    decided October 17, 2013

      POINTS OF COUNSEL

      Sugarman Law Firm, LLP, Syracuse (Paul V. Mullin and Jenna W. Klucsik of counsel), for appellant.
    I. Judge Hafner’s refusal to disqualify himself denied John M. Glynn of his right to a fair trial. (Matter of Murphy, 82 NY2d 491; People v Warren, 100 AD3d 1399; People v Moreno, 70 NY2d 403; People v Horton, 18 NY2d 355; People v Casey, 61 AD3d 1011; People v Lerario, 43 AD3d 492; People v Jones, 143 AD2d 465; People v Tartaglia, 35 NY2d 918; People v Curkendall, 12 AD3d 710; People v Corelli, 41 AD2d 939.) II. Mr. Glynn was denied effective assistance of counsel. (People v Baldi, 54 NY2d 137; O’Sullivan v Boerckel, 526 US 838; Strickland v Washington, 466 US 668; People v Benevento, 91 NY2d 708; People v Ortiz, 76 NY2d 652; People v Lawrence, 27 AD3d 1091; People v Caccavale, 305 AD2d 695; People v Coleman, 294 AD2d 843; People v Wise, 64 AD2d 272; People v Hawkins, 11 NY3d 484.) III. Taken together, the circumstances deprived Mr. Glynn of a fair trial. (People v Tartaglia, 35 NY2d 918.)

      Gregory S. Oakes, District Attorney, Oswego (Mark Moody of counsel), for respondent.
    I. The trial court was not biased or prejudiced against defendant, and, therefore, defendant was not denied a fair trial. (People v Moreno, 70 NY2d 403; People v Baker, 64 NY2d 1027; People v Muhammad, 17 NY3d 532; People v Horton, 18 NY2d 355; Matter of Murphy, 82 NY2d 491; People v Smith, 63 NY2d 41, 469 US 1227; People v Tartaglia, 35 NY2d 918; People ex rel. Stickle v Fay, 14 NY2d 683; People v Bennett, 14 NY2d 851; People v Jones, 143 AD2d 465.) II. Defendant received effective assistance of counsel during the entire case. (People v Baldi, 54 NY2d 137; People v Henry, 95 NY2d 563, 547 US 1040; People v Taylor, 1 NY3d 174; People v Lawrence, 27 AD3d 1091; People v Caccavale, 305 AD2d 695; People v Contes, 60 NY2d 620; People v McDaniel, 13 NY3d 751; People v Danielson, 9 NY3d 342.) III. Defendant was not deprived of a fair trial because no errors occurred. (People v Tartaglia, 35 NY2d 918.)
   OPINION OF THE COURT

Pigott, J.

The central issue in this case is whether the County Court Judge’s failure to recuse himself from the case deprived defendant of his right to a fair trial. We conclude that it did not.

Defendant was indicted for various drug offenses arising from an undercover operation involving the sale of marihuana. At a Huntley hearing, the County Court Judge informed the parties that he may have either represented or prosecuted defendant in the past. Neither party objected to his continuing to preside over the matter.

At a later hearing, however, defendant requested that the judge recuse himself, basing his request solely on the judge’s prior representation of him on unrelated criminal matters. Not recalling anything about those representations, the judge commented that defendant had been arrested 39 times and that he assumed that defendant “had a large majority of the defense bar at some point representing [him].” The judge ultimately found no reason to disqualify himself and denied the motion.

The judge proceeded to a discussion of the appropriate sentence if defendant were to accept a negotiated plea. He reviewed the presentence investigation and noted that the report showed defendant had never had a job “on the books,” had smoked marihuana daily for 32 years, and had an extensive criminal history. Additionally, the judge noted that, according to the presentence investigation report, defendant owed substantial sums in back child support for his 10 children. The judge continued by remarking that because the youngest child was only seven years old defendant was “going to owe well over a million dollars in child support.” In light of the report, the judge indicated that he would sentence defendant to four years’ incarceration.

The discussion then returned to the recusal request, and defendant argued this time that the judge was biased and prejudiced against him. The court noted that it had suppressed certain evidence, thus pointing out that it was not showing any bias against defendant. Defendant responded that the judge “didn’t do [him] any favors” because the judge had to follow the law. At that point, defense counsel attempted to stop defendant from engaging in a colloquy with the court, stating:

“Your Honor[,] [defendant] has not been cooperating with me when I ask him to do something he doesn’t do it, he never shows up to my office except for once. Judge and for the record your Honor on that [Huntley] hearing you suppressed two major statements, however one was, is going to be permitted. So I guess you were abundantly fair you know and I think you are. The offer is very, very reasonable Judge. For the record. And I’m hoping that my client takes this based upon the facts and circumstances surrounding his case.”

At a later hearing, defendant asked the court for a new attorney based on the statements made by defense counsel. The court ultimately relieved defense counsel and assigned new counsel of defendant’s choosing.

After a jury trial, defendant was convicted of criminal possession of marihuana in the second degree (Penal Law § 221.25), criminal sale of marihuana in the second degree (Penal Law § 221.50), criminal possession of marihuana in the fourth degree (Penal Law § 221.15) and criminal sale of marihuana in the fourth degree (Penal Law § 221.40).

Defendant appealed arguing, among other things, that the County Court Judge should have removed himself from the matter and that he was denied the effective assistance of counsel. The Appellate Division affirmed the judgment (93 AD3d 1341 [4th Dept 2012]), holding that the judge’s recusal was not warranted on any basis and that defendant received meaningful representation.

A Judge of this Court granted defendant leave to appeal (19 NY3d 973 [2012]).

I.

Unless disqualification is required under Judiciary Law § 14, a judge’s decision on a recusal motion is one of discretion (see People v Moreno, 70 NY2d 403, 405 [1987]). “This discretionary decision is within the personal conscience of the court when the alleged appearance of impropriety arises from inappropriate awareness of nonjuridical data” (id. [internal quotation marks omitted]). We have held that for any alleged bias and prejudice to be disqualifying it “must stem from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case” (id. at 407, quoting United States v Grinnell Corp., 384 US 563, 583 [1966]; see also Berger v United States, 255 US 22, 31 [1921] [“bias or prejudice which can be urged against a judge must be based upon something other than rulings in the case”]). This Court’s review in this respect is limited to whether the judge abused his discretion as a matter of law (see Moreno, 70 NY2d at 407).

Defendant does not allege any statutory grounds for disqualification under the Judiciary Law and concedes that the judge was not required to recuse himself simply because he had previously defended or prosecuted defendant (see People v Lerario, 43 AD3d 492, 492 [3d Dept 2007]; see generally People v Tartaglia, 35 NY2d 918, 919-920 [1974]). Rather, defendant argues that the judge was biased and prejudiced against him, as demonstrated by his “inappropriate” comments about his character. Under these circumstances, defendant argues, recusal was warranted. We disagree.

The judge’s comments were not indicative of bias or prejudice. Rather, the comments were based on the information contained in the presentence investigation report and made during the course of the judge’s execution of his responsibilities in presiding over the matter. Further, there was no other record evidence that actual bias or prejudice existed. Indeed, the judge sua sponte raised the issue of his prior relation with defendant and could not recall any particulars of the past criminal matters. Thus, the court’s refusal to recuse itself was not an improvident exercise of discretion.

II.

Defendant next contends that both his original and later appointed defense counsel engaged in egregious and prejudicial conduct that demonstrated they were not devoted to his best interests. As it pertains to his first attorney, he points to two facts. The attorney did not take the opportunity, which the judge gave him, to request that the judge disqualify himself. He also told the judge that defendant was not cooperating with him and stated for the record that the judge was “abundantly fair” to defendant. Defendant argues that his first attorney thus became a witness against him, taking a position adverse to his interest.

As it pertains to his second attorney, defendant argues that the attorney had multiple inappropriate and contentious exchanges with the judge that undermined defendant’s case. He points to instances where the attorney accused the judge of being “sarcastic,” “down right mean” and “cruel.” Many of the comments were personal attacks on the judge and did not serve any purpose or strategy.

Although the first attorney took it upon himself, unnecessarily, to alert the court that defendant had not been cooperating with him and expressed his opinion on defendant’s recusal motion, he was replaced upon defendant’s request. Thus, the assignment of the new attorney remedied any harm (see generally People v Mitchell, 21 NY3d 964 [2013]).

Further, while we do not condone the second attorney’s alleged egregious comments and behavior, they were made outside the presence of the jury, and he otherwise provided meaningful representation to defendant. Among other things, he adequately attacked the credibility of the witnesses and effectively brought out on cross-examination deficiencies in the evidence. Thus, under our case law, defendant was not denied effective assistance of counsel (see People v Benevento, 91 NY2d 708, 712-713 [1998]).

III.

Defendant’s remaining contention, that the entirety of the circumstances of the case deprived him of a fair trial, is without merit.

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

Abdus-Salaam, J. (dissenting).

I agree with the majority that the trial judge did not abuse his discretion as a matter of law in refusing to recuse himself and that the conduct of defendant’s first attorney did not rise to the level of ineffective assistance of counsel. Nonetheless, I cannot concur in the majority’s view that defendant’s second attorney provided him with meaningful representation. The hallmark of meaningful representation is the provision of reasonably competent legal advocacy by “an attorney devoted to the client’s best interests” (People v Ortiz, 76 NY2d 652, 656 [1990]). At critical junctures in the proceedings in this case, however, defendant’s second attorney abandoned his client’s interests to settle a long-standing personal dispute with the judge, and otherwise undermined his client’s defense. Thus, defendant was denied the effective assistance of counsel, and his conviction should be reversed. Because the majority concludes otherwise, I must respectfully dissent.

Under the State and Federal Constitutions, a defendant has a right to the effective assistance of counsel (see US Const 6th Amend; NY Const, art I, § 6; People v Baldi, 54 NY2d 137, 146 [1981]). Under the New York State Constitution, that guarantee entitles the defendant to “meaningful representation” (People v Oliveras, 21 NY3d 339, 346 [2013]; Baldi, 54 NY2d at 146). A defense attorney fails to provide meaningful representation when counsel’s performance falls below an objective standard of reasonableness and deprives the defendant of a fair trial (see People v Turner, 5 NY3d 476, 485 [2005]; People v Hobot, 84 NY2d 1021, 1022 [1995]). Upon reviewing a claim of ineffective assistance of counsel, this Court must reverse the defendant’s conviction if “the cumulative effect of [defense] counsel’s actions deprived defendant of meaningful representation,” even though each error, taken individually, might not warrant reversal (People v Oathout, 21 NY3d 127, 132 [2013] [internal quotation marks and citation omitted]). In addition, while this Court “would, indeed, be skeptical of an ineffective assistance of counsel claim absent any showing of prejudice,” the existence of specific prejudice caused by counsel’s errors is “not [an] indispensable element in assessing meaningful representation” (People v Stultz, 2 NY3d 277, 283-284 [2004]; see People v Ennis, 11 NY3d 403, 412 [2008]). In the instant case, defendant’s second attorney committed a series of errors that, viewed in totality and in context, warrant reversal of defendant’s conviction.

By the time defendant’s second attorney, Salvatore Lanza, Esq., entered the case, defendant faced a tense situation. At that point, there appeared to be considerable friction between defendant and the trial judge, which resulted from the judge’s negative comments about defendant’s background during plea negotiations and defendant’s motion to remove the judge from the case. Indeed, upon counsel Lanza’s arrival in court, the judge continued to take a dim view of defendant; in response to counsel’s request for a more lenient plea bargain on the ground that “most people don’t like to go to jail,” the judge snapped back, “Most people don’t sell pounds and pounds of marijuana, allegedly, okay?” Clearly, then, the situation called for tact and caution to ensure that the court would not be dismissive of defendant’s evidentiary arguments at trial or, in the event of a conviction, any requests for leniency at sentencing.

However, far from tactfully representing his client’s best interests, counsel went out of his way to antagonize the court for reasons that had nothing to do with this case or defendant’s interests. Specifically, during a police witness’s testimony at trial, counsel objected to the witness’s description of certain photographs on defendant’s cellular telephone, and the court held a sidebar conference. Counsel elaborated on his objection at the sidebar, and the judge noted that counsel was taking a “sarcastic” tone with him. Counsel retorted:

“No, Judge, you are on some agenda. You are on an agenda. You have been since People versus Alan Jones. I am not going to put up with it at my age. I am going to make a record of your conduct against me. I am going to make a record and I am not going to stop making a record. . . . You are the boss, Judge. You are the boss of this court. You do what you want to do. I don’t like it when you are being sarcastic to me, and you are just down right mean. I am fifty-one years old and I have known you for twenty-four years, and I am not going to trash the law that way. It is not right. Proceed. I will make a record every time you are so cruel to a fellow attorney and Officer of this Court. You have been doing it since Alan Jones. I am not putting up with it.
I told you that. If we have to go to [the supervising judge], I am going to go. You made a sarcastic remark to an attorney practicing twenty-four years.
You are trying to belittle me and embarrass me in front of my colleagues. It is wrong. I have known you a long time. It is wrong what you are doing.
Stay quiet.”

By impugning the court’s fairness and civility, counsel completely failed to advance any strategic interest of his client or otherwise aid the defense. To the contrary, counsel’s outrageous comments made it more likely that the court would discount any future objections from counsel as baseless complaints by someone bearing a personal grudge against the court.

Counsel continued this misconduct at sentencing, thereby diminishing defendant’s chances of receiving a more lenient sentence. After asking the court to impose a lenient sentence in light of alleged weaknesses in the trial evidence, counsel said:

“You have been writing, and you are not listening to this. ... I think you know what I think, Judge. I think you ought to be upset. You ought to be upset when you heard that testimony [at trial], and it was all over the place, and then the officer said, ‘Oh, I made a mistake. Oh, gee, that is an incorrect number.’ He made a mistake. How many mistakes were made, and they never even contacted you. They never even told you. You should have been upset, but, you know, you don’t care. You don’t care. All right, the police made a mistake. You don’t care about it. . . . [T]hat doesn’t concern you, and we are here. . . . You have to look at the papers, and it’s obvious to me that all the months he was on this case and other counsel, you never even looked at the file. Why do I say that? The photographs said one day earlier. Why didn’t you catch that? Why didn’t you catch the different numbers on the weight and all their inconsistencies, and they never even decided to tell you and everything is fine and dandy and you are going to accept it. You were a defense counsel once. You even represented [defendant]. You represented him and you represented him a number of times. We have no problem with that.
You are a fair man, a fair judge. . . . You have alternatives here. But, you know, like it’s comfortable. You are going to do the comfortable thing. You don’t like a lot of waves. . . . You don’t want to be on TV You have got bigger plans, and I know that. Instead of doing what is the right thing to do and sentence him alternatively, you are going to do what you are going to do, take the safe route, and that is how I have known you. . . . We are ready for sentence, Judge. We know what you are going to do.
You always do the same thing.”

Apparently not content to simply accuse the judge of choosing convenience over “the right thing,” counsel later told the judge:

“So why don’t you just get on with sentencing just because I know what you are going to do. You are going to play it safe, just how you always do it instead of dismissing these charges from the get-go when they should have been dismissed at the close of the People’s case. You took the safe way out and you said, ‘Oh, let the jury decide.’ Why are you a judge? Why are you sitting there?”

Of course, counsel’s claims that the judge was apathetic, ignored principle in favor of expediency and had failed to do his duty could not have helped defendant or endeared him to the court. In fact, immediately after counsel’s rant, the court sentenced defendant to an aggregate prison term of six years, consisting of a four-year prison term, a consecutive two-year prison term and two concurrent one-year definite jail terms, whereas the court could have sentenced defendant to an aggregate concurrent prison term of IV2 years (see Penal Law §§ 70.25, 70.70 [3] [b] [iii]). Notably, before trial—and before counsel’s egregious behavior—the court had offered defendant a determinate four-year prison term in exchange for his plea of guilty to criminal possession of marihuana in the second degree, in full satisfaction of the indictment. In short, confronted with an already difficult situation, counsel decided to repeatedly antagonize the judge and make matters worse for his client without any strategic reason for doing so, thus failing to meet reasonable professional standards of competence.

In addition to those inexplicable outbursts, counsel improperly gave the jury the impression that defendant had no viable defense and was worthy of derision. At one point, counsel prefaced his question to a witness by stating, “I can only do what I can do,” thus possibly indicating that there was little he could do to defend his client. Later, counsel mocked defendant’s mannerisms, asking another witness whether defendant had said, “Dude,” and adding, “he talks like that, doesn’t he?”

Beyond those inappropriate remarks, counsel suggested that, rather than simply holding the People to their burden of proof, the jury should decide the case based on whether it believed the officers’ testimony or the defense theory of the case. When questioning a police witness about whether he had any photographic proof that one of the charged marijuana sales had occurred, counsel asked, “It is just your word [against] my client’s word, right?” In summation, counsel told the jury that he was “not going to put [defendant] on the stand so [the prosecutor] can cross-examine him until the cows come home.” By first urging the jurors to weigh defendant’s “word” against that of the People’s witnesses and then telling them that they did not hear defendant’s “word” because counsel feared subjecting it to cross-examination, counsel invited the jury to speculate that defendant did not take the stand because he was a dishonest person who could neither deliver testimony that would withstand cross-examination nor offer any credible rebuttal to the People’s proof.

Accordingly, although the individual impact of each of counsel’s missteps outlined above might not warrant reversal of defendant’s conviction, I believe that the cumulative effect of counsel’s incendiary statements to the court and prejudicial comments to the jury deprived defendant of a fair trial and sentencing proceeding (see Oathout, 21 NY3d at 132; cf. People v Flores, 84 NY2d 184, 188-189 [1994]).

The majority does not dispute that counsel’s vituperative remarks about the judge “did not serve any purpose or strategy” (majority op at 619), but it insists that counsel provided meaningful representation on the whole because he effectively cross-examined the People’s witnesses and refrained from criticizing the judge in the jury’s presence (see id. at 619-620).

However, defendant’s right to an effective attorney “mean[t] more than just having a person with a law degree nominally represent him upon a trial and ask questions” (People v Bennett, 29 NY2d 462, 466 [1972]). Furthermore, counsel effectively eliminated any progress he had made in discrediting the People’s witnesses by arguing in summation that defendant did not have the credibility to stand up to the same kind of cross-examination to which he had subjected those witnesses. In addition, although counsel did not denigrate the judge in front of the jury, counsel’s intemperate remarks also risked distracting the judge from seriously entertaining defendant’s legal objections at trial. And, counsel’s misbehavior may have influenced the judge’s decision to sentence defendant to consecutive prison terms in response to counsel’s provocation.

In sum, several times during the proceedings in County Court, defendant’s lawyer essentially left him to fend for himself while counsel engaged in a series of personal spats with the trial judge. Moreover, counsel led the jury to believe that defendant had no credibility, little dignity and no real defense. Standing trial with years of his life on the line, defendant sat in court and looked on as his lawyer fought with the judge, insinuated that defendant was a liar and caricatured him as a buffoon. No one in that situation would seriously believe that he or she was receiving the fair trial guaranteed by the State Constitution. I certainly would not, and therefore I dissent and vote to reverse the order of the Appellate Division.

Chief Judge Lippman and Judges Graffeo, Read and Smith concur with Judge Pigott; Judge Abdus-Salaam dissents and votes to reverse in an opinion in which Judge Rivera concurs.

Order affirmed.

        People v Huntley, 15 NY2d 72 (1965); CPL 60.45.


author: Rivera, J.

text:
    [999 NE2d 1130, 977 NYS2d 685]
    In the Matter of Samuel Belzberg, Appellant, et al., Petitioners, v Verus Investments Holdings Inc., Respondent.
    Argued September 4, 2013;
    decided October 17, 2013

      POINTS OF COUNSEL

      Kaye Scholer LLP, New York City (H. Peter Haveles, Jr., and. Stacey A. Lara of counsel), for appellant.
    I. The Appellate Division erroneously ignored the clear limits on the application of the direct benefits estoppel doctrine. (Steelworkers v Warrior & Gulf Nav. Co., 363 US 574; AT&T Technologies, Inc. v Communications Workers, 475 US 643; John Hancock Life Ins. Co. v Wilson, 254 F3d 48; McMahan Sec. Co. L.P. v Aviator Master Fund, Ltd., 20 Misc 3d 386; Merrill Lynch Inv. Mgrs. v Optibase, Ltd., 337 F3d 125; Bridas S.A.P.I.C. v Government of Turkmenistan, 345 F3d 347; Thomson-CSF, S.A. v American Arbitration Assn., 64 F3d 773; Denney v BDO Seidman, L.L.P., 412 F3d 58; TNS Holdings v MKI Sec. Corp., 92 NY2d 335; MAG Portfolio Consultant, GmbH v Merlin Biomed Group LLC, 268 F3d 58.) II. The trial court correctly held that Winton Capital Holding’s liability cannot be imputed to Samuel Belzberg. (Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135.)

      Wolf Haldenstein Adler Freeman & Herz LLP, New York City (Charles J. Hecht and Daniel Tepper of counsel), for respondent.
    I. This appeal should be dismissed because it presents no issue of New York state law. (N.J.R. Assoc. v Tausend, 19 NY3d 597; Matter of Diamond Waterproofing Sys., Inc. v 55 Liberty Owners Corp., 4 NY3d 247; Southland Corp. v Keating, 465 US 1.) II. The First Department correctly held that Samuel Belzberg must arbitrate this dispute under the doctrine of direct benefits estoppel. (Smith/Enron Cogeneration Ltd. Partnership, Inc. v Smith

      Cogeneration Intl., Inc., 198 F3d 88; American Bur. of Shipping v Tencara Shipyard S.p.A., 170 F3d 349; Deloitte Noraudit A/S v Deloitte Haskins & Sells, U.S., 9 F3d 1060; Shearson/American Express Inc. v McMahon, 482 US 220; Legacy Wireless Servs., Inc. v Human Capital, L.L.C., 314 F Supp 2d 1045; Sherman v Town of Rhinebeck, 133 AD2d 77; Wood v PennTex Resources, L.P., 458 F Supp 2d 355.)
   OPINION OF THE COURT

Rivera, J.

In this CPLR article 75 proceeding, petitioner Samuel Belzberg (Belzberg) appeals an order of the Appellate Division that, inter alia, denied his application for a permanent stay of third-party arbitration claims (see 95 AD3d 713 [1st Dept 2012]). For the reasons that follow, we reverse.

In October 2008, Belzberg contacted a longtime business associate, Ajmal Khan, the principal of respondent Verus Investments Holdings Inc. (Verus), about an investment opportunity involving the purchase of securities in Fording Canadian Coal Trust to arbitrage a merger between Fording and another Canadian company (the Fording Trade). After several discussions about potential tax consequences, Belzberg and Khan decided to proceed with the Fording Trade. To complete the securities purchase Belzberg required an American brokerage account, and therefore agreed with Khan to use Verus’ account at Jefferies & Co., Inc. (Jefferies). Belzberg’s source for the investment money would be Winton Capital Holding (Winton), a British Virgin Islands corporation owned by a trust established by Belzberg and naming Belzberg’s children as the sole beneficiaries, and for which Belzberg served as an unpaid financial advisor. Belzberg directed that $5 million be sent from Winton to the Jefferies account for the purchase, and Verus wired an additional $1 million of its own funds.

After the merger, Jefferies wired to Verus both the original $5 million investment and $223,655.25 in profits attributable to the Winton funds. Verus thereafter wired the $5 million to Win-ton and upon instructions from Gibralt Capital, a Canadian holding company that Belzberg used to facilitate the Fording Trade, wired the profits to Doris Lindbergh (Lindbergh), a friend of Belzberg. This money apparently was intended for Lindbergh to purchase a summer home.

The Canadian tax authorities thereafter informed Jefferies that it owed a $928,053.45 withholding tax on the Fording Trade. Pursuant to the arbitration clause in the agreement between Jefferies and Verus (Jefferies-Verus agreement), Jefferies commenced an arbitration against Verus for the unpaid taxes before the Financial Industry Regulatory Authority. Verus answered and asserted third-party arbitration claims against Belzberg, Lindbergh, Winton, and Gibralt for their share of the taxes.

Belzberg, Lindbergh, Winton, and Gibralt filed an article 75 petition to stay arbitration of the third-party claims, and Verus cross-moved to compel arbitration. Supreme Court permanently stayed the arbitration as against Gibralt, granted the motion to compel Winton to arbitrate, and held the proceeding against the remaining parties in abeyance, pending a hearing on the petition and cross motion as to Belzberg and Lindbergh.

At the hearing, Lindbergh testified as to the money Belzberg had forwarded her. Among other things, she claimed that Belzberg had told her to pay him back when she could. The court considered Belzberg’s out-of-state deposition, in which Belzberg claimed that he had no ownership interest in Winton. Supreme Court determined that nonsignatories Belzberg and Lindbergh could not be compelled to arbitrate. The court concluded that the doctrine of arbitration by estoppel, which requires that a nonsignatory to an arbitration agreement receive a “direct benefit” from the agreement in order to be compelled to arbitrate a claim, did not apply, because Belzberg did not receive a benefit which flowed directly from the Jefferies-Verus agreement, and Lindbergh did not knowingly exploit that agreement.

On appeal, the Appellate Division reversed. The court determined that Belzberg should be estopped from avoiding arbitration because he knowingly exploited and received direct benefits from the agreement between Jefferies and Verus. It concluded that Belzberg diverted the profits from the trade to Lindbergh, and thus he directly benefitted from the agreement which made possible the trade that resulted in the profits. This Court granted Belzberg’s motion for leave to appeal (19 NY3d 812 [2012]).

Belzberg now argues that the Appellate Division erroneously applied the direct benefits estoppel doctrine because he did not receive a direct benefit from the underlying agreement between Verus and Jefferies. Verus asserts that the Appellate Division properly concluded that Belzberg derived a direct benefit from the Jefferies-Verus agreement because he directed the profits to his friend Lindbergh. We conclude that Belzberg did not receive a direct benefit from the arbitration agreement, and cannot be compelled to arbitrate.

Arbitration is a matter of contract (see Thomson-CSF, S.A. v American Arbitration Assn., 64 F3d 773, 776 [2d Cir 1995]), “grounded in agreement of the parties” (County of Sullivan v Edward L. Nezelek, Inc., 42 NY2d 123, 128 [1977]). As a consequence, notwithstanding the public policy favoring arbitration (see TNS Holdings v MKI Sec. Corp., 92 NY2d 335, 339 [1998]), nonsignatories are generally not subject to arbitration agreements (see Steelworkers v Warrior & Gulf Nav. Co., 363 US 574, 582 [1960] [“a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit”]; see also Thomson-CSF, 64 F3d at 776 [arbitration agreements “must not be so broadly construed as to encompass claims and parties that were not intended by the original contract”]). However, under limited circumstances nonsignatories may be compelled to arbitrate (see TNS Holdings, 92 NY2d at 339 [recognizing “in certain limited circumstances the need to impute the intent to arbitrate to a nonsignatory”]).

Some New York courts have relied on the direct benefits estoppel theory, derived from federal case law, to abrogate the general rule against binding nonsignatories (see Matter of SSL Intl., PLC v Zook, 44 AD3d 429 [1st Dept 2007]; HRH Constr. LLC v Metropolitan Transp. Auth., 33 AD3d 568 [1st Dept 2006]; see also Oxbow Calcining USA Inc. v American Indus. Partners, 96 AD3d 646 [1st Dept 2012]). On this appeal, we must consider whether by application of this theory Belzberg may be estopped from avoiding arbitration.

Under the direct benefits theory of estoppel, a nonsignatory may be compelled to arbitrate where the nonsignatory “knowingly exploits” the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement (see MAG Portfolio Consultant, GmbH v Merlin Biomed Group LLC, 268 F3d 58, 61 [2d Cir 2001] [“Under the estoppel theory, a company ‘knowingly exploiting (an) agreement (with an arbitration clause can be) estopped from avoiding arbitration despite having never signed the agreement’ ”]; see also Deloitte Noraudit A/S v Deloitte Haskins & Sells, U.S., 9 F3d 1060, 1064 [2d Cir 1993] [“Noraudit knowingly accepted the benefits of the Agreement through its continuing use of the name ‘Deloitte’ ”]; Reid v Doe Run Resources Corp., 701 F3d 840, 846 [8th Cir 2012] [“Direct benefits estoppel applies when a nonsignatory knowingly exploits the agreement containing the arbitration clause”], quoting Bridas S.A.P.I.C. v Government of Turkmenistan, 345 F3d 347, 361-362 [5th Cir 2003]).

Where the benefits are merely “indirect,” a nonsignatory cannot be compelled to arbitrate a claim. A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself (see MAG Portfolio, 268 F3d at 61 [“The benefits must be direct—which is to say, flowing directly from the agreement. ... By contrast, the benefit derived from an agreement is indirect where the nonsignatory exploits the contractual relation of parties to an agreement, but does not exploit (and thereby assume) the agreement itself’], citing Thomson-CSF, 64 F3d at 778-779).

Federal courts have grappled with this dichotomous approach to imposing arbitration on nonsignatories. The analysis in several cases provides useful guidance on how to apply the theory. For example, in Deloitte, the Second Circuit found that there is a direct benefit where the contract at issue is the direct source of the benefit. Deloitte Haskins & Sells (Deloitte) and its affiliates formed, via a memorandum agreement, an international association called Deloitte Haskins & Sells International (DHSI). Noraudit was the Norwegian affiliate of DHSI. DHSI decided to merge with Touche Ross International, another accounting firm. DHSI settled several merger-related issues with its affiliates by signing a settlement agreement giving them limited use of the name “Deloitte.” Noraudit apparently approved the settlement agreement without signing it, continued to use the name “Deloitte,” and sued DHSI to obtain a declaration that it had the right to use the “Deloitte” name in Norway. DHSI sought to compel arbitration on the basis of the arbitration clause contained in the settlement agreement. Noraudit asserted that its claim was governed by the memorandum agreement giving rise to DHSI, and that it was not a signatory to the settlement agreement. The Second Circuit held that Noraudit “failed to object to the Agreement when it received it and offers no persuasive reason for its inaction” and “knowingly accepted the benefits of the Agreement through its continuing use of the name ‘Deloitte.’ ” As a result, Noraudit was estopped from denying its obligation to arbitrate under the second agreement (see Deloitte, 9 F3d at 1064).

In contrast, in Thomson-CSF, the Second Circuit concluded that the nonsignatory did not derive any direct benefit where it merely purchased a company that had entered an exclusive contract with a competitor of the nonsignatory, thus eliminating the competitor’s ability to compete in the market. Thomson, a flight simulation equipment builder, acquired Rediffusion, a British company also engaged in the business of building flight simulators. Rediffusion previously entered into a “Working Agreement” with E & S, whereby Rediffusion agreed to purchase certain computer-generated imaging equipment exclusively from E & S, in exchange for E & S agreeing to supply its imaging equipment solely to Rediffusion. The Working Agreement contained an arbitration clause. At some point, E & S informed Thomson that it intended to bind Thomson to the Working Agreement. Thomson subsequently asked E & S to waive those provisions of the Working Agreement that E & S believed were binding upon Thomson. The parties were unable to resolve the dispute, and E & S sought to compel arbitration against Thomson, claiming that Thomson had received a direct benefit from the Working Agreement in the form of increased market share. According to E & S, Thomson purchased Rediffusion, a competitor in the flight simulation industry, so that it could keep Rediffusion from selling its flight simulators. Since Thomson was able to eliminate all simulators utilizing E & S imaging equipment from the market, and E & S was contractually bound to supply Rediffusion, the company claimed that Thomson benefitted from the Working Agreement. The Second Circuit rejected that claim, holding that “[t]he benefit which E & S asserts . . . derives directly from Thomson’s purchase of Rediffusion, and not from the Working Agreement itself; Thomson received no benefit at all from the Working Agreement (as opposed to the acquisition)” (Thomson-CSF, 64 F3d at 779).

In Lang v First Am. Tit. Ins. Co. (2012 WL 5221605, 2012 US Dist LEXIS 151579 [WD NY, Oct. 22, 2012, No. 12 CV 266S]), the court concluded that the nonsignatory was not subject to arbitration because the benefit derived from a business relationship independent of the contract containing the arbitration provision. The court held that a plaintiff’s ability to secure a refinanced mortgage from a lender was not a “direct benefit” compelling arbitration of a claim for excessive premiums against the defendant title insurer, because the purported benefit came from a “contractual relationship” between the lender and the defendant title insurer (2012 WL 5221605, *4, 2012 US Dist LEXIS 151579, *11-12).

In Carvant Fin. LLC v Autoguard Advantage Corp. (— F Supp 2d —, 2013 WL 3991471, 2013 US Dist LEXIS 109524 [ED NY, Aug. 5, 2013, No. 13 CV 00872 (ADS) (AKT)]), the court considered whether the agreement affects some independent contractual relationship of the nonsignatory. In Carvant, the court concluded that the plaintiff, a used car financing company, was required to arbitrate a breach of contract claim concerning service contracts between an automobile servicer and an insurance company. The court concluded that plaintiff received a “direct benefit” from the agreements in the form of liens on the used cars (— F Supp 2d at —, 2013 WL 3991471, *5-6, 2013 US Dist LEXIS 109524, *16-17 [“Indeed, in exchange for financing the Service Contracts between its customers and the Defendants, the Plaintiff enjoyed a lien on each motor vehicle and thus received a ‘direct benefit’ from the agreements”]).

As the cases illustrate, given the various nuances of contractual arrangements and that nonparties may derive some value from others’ agreements, it can be difficult to distinguish between direct and indirect benefits. The guiding principle is whether the benefit gained by the nonsignatory is one that can be traced directly to the agreement containing the arbitration clause. The mere existence of an agreement with attendant circumstances that prove advantageous to the nonsignatory would not constitute the type of direct benefits justifying compelling arbitration by a nonparty to the underlying contract. Also, absent the nonsignatory’s reliance on the agreement itself for the derived benefit, the theory would extend beyond those who gain something of value as a direct consequence of the agreement.

Verus asserts that this estoppel theory applies to compel Belzberg to arbitrate because he derived a direct benefit from the Jefferies-Verus agreement—namely the profits attributable to the $5 million Winton investment in the Fording Trade. Belzberg denies any such direct benefit and asserts that the funds from the Fording Trade belong to Winton. We agree that Belzberg did not receive the type of direct benefit from the Jefferies-Verus agreement encompassed by this estoppel theory.

We are not persuaded by Verus’ argument that Belzberg’s diversion to his friend of the profits attributable to Winton’s investment in the Fording Trade constitutes a direct benefit from the underlying Jefferies-Verus agreement. The profits belong to Winton, not Belzberg. Belzberg’s access to, and appropriations of, the profits is based not on any agreement involving Jefferies and Verus, but rather on his relationship with Win-ton. It is in his position as financial advisor that Belzberg gained access to the profits attributed to Winton’s $5 million investment. Belzberg’s ability to divert those profits flows directly from his status vis-a-vis Winton, not as a result of any relationship with Verus or Jefferies, and certainly not based on the underlying agreement between those parties.

Of course, but for the Fording Trade, and Verus and Belzberg’s use of the Jefferies account, there would be no profits for Belzberg to divert to his friend for her personal use. However, a connection based on mere extended causality is beyond the intended scope of the direct benefits estoppel theory. Belzberg is several steps removed from the formation of the arbitration agreement between Jefferies and Verus. In order to compel Belzberg to arbitrate the direct benefits theory of estoppel would have to recognize that the benefit flows initially from Belzberg’s relationship with Winton, allowing him the ready access to investment funds and trade profits, then from the use of the Jefferies-Verus agreement to accomplish the financial investment that resulted in the profits, followed by the final event in which Belzberg takes the profits for his own use, i.e., to give his friend the money to purchase a summer home. This is simply too attenuated a connection to justify application of the direct benefits estoppel theory, a theory intended as justification for an exception to the usual rule that nonsignatories cannot be compelled to arbitrate.

Belzberg’s use of the profits attributed to Winton’s original investment may breach his duty or some role assumed on behalf of Winton, or otherwise constitute an opportunistic self-serving exercise of his position with Winton, but the use of such monies does not flow from the Jefferies-Verus agreement.

The Appellate Division order should be reversed, with costs, petition by Samuel Belzberg to permanently stay the arbitration as to him granted and cross petition to compel him to arbitrate denied.

Chief Judge Lippman and Judges Graffeo, Read, Smith and Pigott concur; Judge Abdus-Salaam taking no part.

Order reversed, with costs, petition to permanently stay the arbitration as to petitioner Samuel Belzberg granted and cross petition to compel Belzberg to arbitrate denied.

      . The parties do not dispute Belzberg’s status as a financial advisor, and therefore for purposes of this appeal we assume this to be his position at Win-ton.

      . The parties contest whether this was a loan or a gift, and whether the source was Belzberg or Winton. However, it is undisputed that there is no written document setting forth the terms and understandings related to this money, including whether or when it would be repaid.

      . In addition to estoppel, federal courts have relied on other theories as a basis by which to bind nonsignatories to an arbitration agreement: incorporation by reference, assumption, agency, and veil-piercing/alter ego (see Thomson-CSF, 64 F3d at 776). Verus unsuccessfully asserted a claim under the pierced corporate veil theory. This theory of individual liability “is typically employed by a third party seeking to go behind the corporate existence in order to circumvent the limited liability of the owners and to hold them liable for some underlying corporate obligation” (Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 140-141 [1993]). Verus has not challenged Supreme Court’s rejection of this theory of liability, and therefore it is not before us on appeal.

        (n. cont’d)


author: Read, J. Pigott, J. (concurring).

text:
    [998 NE2d 377, 975 NYS2d 714]
    In the Matter of the Claim of Gaudenzia Hroncich, Respondent, v Con Edison et al., Appellants, and Special Disability Fund, Respondent. Workers’ Compensation Board, Respondent.
    Argued and submitted September 9, 2013;
    decided October 15, 2013

      POINTS OF COUNSEL

      Cherry, Edson & Kelly, LLP, Carle Place (David W. Faber of counsel), and Steven M. Scotti, New York City, for appellants.
    I. The plain language in Workers’ Compensation Law § 15 (7) expressly permits apportionment in death benefit claims. (Matter of Belmonte v Snashall, 2 NY3d 560; Matter of De Mayo v Rensselaer Polytech Inst., 74 NY2d 459; Matter of Krausa v Totales Debevoise Corp., 84 AD3d 1545; Montclair v Ramsdell, 107 US 147; United States v Menasche, 348 US 528; Williams v Taylor, 529 US 362; Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205; Matter of Bliss v Bliss, 66 NY2d 382; Matter of Schwab v Emporium Forestry Co., 167 App Div 614; Matter of State Indus. Commn. v Newman, 222 NY 363.) II. The apportionment test requires that the prior condition, whether work-related or not, constitute a “disability in a compensation sense.” (Matter of Krebs v Town of Ithaca, 293 AD2d 883, 100 NY2d 501; Matter of Carbonaro v Chinatown Sea Food, 55 AD2d 756; Matter of Altobelli v Allinger Temporary Servs., Inc., 70 AD3d 1083; Matter of Moore v St. Peter’s Hosp., 18 AD3d 1001; Matter of Bruno v Kelly Temp Serv., 301 AD2d 730; Matter of Ricci v Riegel & Sons, 278 AD2d 673; Matter of Brown v Harden Furniture, 34 AD3d 1028; Matter of Bremner v New Venture Gear, 31 AD3d 848; Matter of Webb v Cooper Crouse Hinds Co., 62 AD3d 57.) III. The Appellate Division’s reliance on Matter of Webb v Cooper Crouse Hinds Co. (62 AD3d 57 [2009]) fails to recognize and explain that it had applied the apportionment test in death benefit claims in prior cases. (Matter of Ricci v Riegel & Sons, 278 AD2d 673; Matter of Brown v Harden Furniture, 34 AD3d 1028.) IV The Webb decision is erroneous as a matter of law because all three grounds provided to deny apportionment are specious and insufficient to extinguish the statutory authority of Workers’ Compensation Law § 15 (7). (Matter of Webb v Cooper Crouse Hinds Co., 62 AD3d 57; Matter of Reagin v Collins, 52 AD2d 1010; Matter of Salerno v Board of Educ., Utica City School Dist., 35 AD2d 764; Matter of Zechmann v Canisteo Volunteer Fire Dept., 85 NY2d 747; Commissioners of State Ins. Fund v Hallmark Operating, Inc., 61 AD3d 1212; Matter of Sidaris v Brookhaven Mem. Hosp., 271 AD2d 884; Matter of Kuczkowski v Bethlehem Steel Corp., 90 AD2d 612; Matter of Tober v Crescent Niagara Corp., 64 AD2d 741; Sanders v Winship, 57 NY2d 391; People v Mobil Oil Corp., 48 NY2d 192.) V Apportionment is a fundamental principle expressed in the statute to ensure that compensation is awarded in proportion to causation. (Matter of Engle v Niagara Mohawk Power Corp., 6 AD2d 631, 6 NY2d 449; Matter of Post v Burger & Gohlke, 216 NY 544; Matter of Stoehrer v Lampert, 285 App Div 85; Matter of Barlog v Board of Water Commrs., City of Dunkirk, N.Y., 239 App Div 225; Matter of Ricci v Riegel & Sons, 278 AD2d 673; Matter of Brown v Harden Furniture, 34 AD3d 1028.)

      Steven M. Licht, Special Funds Conservation Committee, Albany (Jill B. Singer of counsel), for Special Disability Fund, respondent.
    I. The Workers’ Compensation Law provides for apportionment in death and disability claims. (Matter of Engle v Niagara Mohawk Power Corp., 6 NY2d 449; Matter of Putnam v Harrison Radiator Div. Gen. Motors Corp., 12 AD2d 543; Tompkins v Hunter, 149 NY 117; Matter of Rosenblum v New York State Workers’ Compensation Bd., 309 AD2d 120; People v Caponigri, 169 Misc 9.) II. This Appellate Division’s decision limiting apportionment of death benefits is inconsistent with statute and precedent. (Matter of Bruno v Kelly Temp Serv., 301 AD2d 730; Matter of Hogan v Hilltop Manor of Niskayuna, 303 AD2d 822; Matter of Webb v Cooper Crouse Hinds Co., 62 AD3d 57; Matter of Ricci v Riegel & Sons, 278 AD2d 673; Matter of Brown v Harden Furniture, 34 AD3d 1028; Matter of Rados v Woodlawn Water Supply Dist., 31 AD2d 879; Matter of Johnson v Feinberg-Smith Assoc., 305 AD2d 826; Matter of Krausa v Totales Debevoise Corp., 84 AD3d 1545; Matter of Barlog v Board of Water Commrs., City of Dunkirk, N.Y., 239 App Div 225.)

      Eric T. Schneiderman, Attorney General, Albany (Laura Etlinger, Barbara D. Underwood and Andrea Oser of counsel), for Workers’ Compensation Board, respondent.
    I. The Workers’ Compensation Law contains no language authorizing a reduction in death benefits on account of non-work-related contributing causes of death. (Matter of Zechmann v Canisteo Volunteer

      Fire Dept., 85 NY2d 747; Matter of Imbriani v Berkar Knitting Mills, 277 AD2d 727; Matter of Webb v Cooper Crouse Hinds Co., 62 AD3d 57; Matter of Droogan v Raymark Indus., Inc., 59 AD3d 803; Matter of Altes v Petrocelli Elec. Co., 270 AD2d 767; Matter of Meszaros v Goldman, 307 NY 296; Matter of Reagin v Collins, 52 AD2d 1010; Matter of Salerno v Board of Educ., Utica City School Dist., 35 AD2d 764; Matter of Horton v McArdle & Casazza, 53 NY2d 808.) II. The fact that Workers’ Compensation Law § 15 has been read to require apportionment in the calculation of compensation benefits does not change the analysis. (Matter of Engle v Niagara Mohawk Power Corp., 6 AD2d 631, 6 NY2d 449; Matter of Morin v Town of Lake Luzerne, 100 AD3d 1197; Matter of Carbonaro v Chinatown Sea Food, 55 AD2d 756; Matter of Scatty v Ravena Coeymans Selkirk Cent. School Dist., 31 AD3d 836; Matter of McCloskey v Marriott Corp., 290 AD2d 671; Matter of Rooney v Barker’s Dept. Store, 97 AD2d 587; Matter of Glickman v Ace Equip. Co., 18 AD2d 946; Matter of Cool v TP Brake & Muffler, 305 AD2d 886; Billy v Consolidated Mach. Tool Corp., 51 NY2d 152; Matter of Landgrebe v County of Westchester, 57 NY2d 1.) III. Prior decisions of the Workers’ Compensation Board suggesting otherwise were based on dictum from the Appellate Division and do not demonstrate lack of clarity in the governing statutes. (Matter of Rados v Woodlawn Water Supply Dist., 31 AD2d 879; Matter of Engle v Niagara Mohawk Power Corp., 6 NY2d 449; Matter of Brown v Harden Furniture, 34 AD3d 1028; Matter of Ricci v Riegel & Sons, 278 AD2d 673; Matter of Webb v Cooper Crouse Hinds Co., 62 AD3d 57.)

      Michael A. Cardozo, Corporation Counsel, Brooklyn (John Sweeney of counsel), for City of New York, amicus curiae.
    The Appellate Division’s interpretation of Workers’ Compensation Law § 15 (7) ignores the express language of the statute concerning apportionment in death claims. (Matter of Krebs v Town of Ithaca, 293 AD2d 883.)
   OPINION OF THE COURT

Read, J.

Section 16 of the Workers’ Compensation Law authorizes death benefits when a work-related injury or disease “causes death,” which the Appellate Division has interpreted to mean “contributes to death” (see Matter of Imbriani v Berkar Knitting Mitts, 277 AD2d 727, 730 [3d Dept 2000]). At issue on this appeal is whether the Workers’ Compensation Law requires apportionment of death benefits between work-related and non-work-related causes—i.e., mandates the Workers’ Compensation Board (the Board) to factor out non-work-related causes of death when making the award. We hold that the statute does not contemplate such apportionment.

I.

In 1993, Antonio Hroncich (Hroncich) was diagnosed with asbestosis and asbestos-related pleural disease resulting from his employment as a plumber’s helper and mechanic at the Consolidated Edison Company of N.Y., Inc. (Con Ed), where he worked from January 6, 1958 until his retirement on February 28, 1993 at the age of 61. The Board subsequently classified Hroncich as permanently partially disabled as of June 4, 1993. Hroncich’s average weekly wages for the prior year were $900, and he was found to have suffered a loss in earning capacity of 37%, or $333 per week. In view of the nature of Hroncich’s disability (a non-schedule permanent partial disability), his compensation benefits were calculated as two thirds of his reduced earning capacity, or $222 per week (see Workers’ Compensation Law § 15 [3] [w]).

In 1999 Hroncich was diagnosed with thyroid cancer, unrelated to his work at Con Ed. The thyroid cancer eventually progressed to Hroncich’s lungs, and he was admitted to the hospital on an emergency basis on August 1, 2007. He died on September 2, 2007. On October 30, 2007, Hroncich’s widow, Gaudenzia (claimant), filed a claim with the Board for death benefits from Con Ed, which is a self-insured employer. Con Ed’s third-party administrator, Sedgwick Claims Management Services, Inc., controverted the claim, questioning causation and noting the absence of prima facie medical evidence.

In deposition testimony subsequently submitted to the Workers’ Compensation Law Judge (WCLJ), claimant’s expert, a physician certified as an internist and a specialist in pulmonary medicine, testified that Hroncich died of respiratory failure, and “if he didn’t have the asbestosis[,] he would have eventually died of the . . . thyroid [cancer,] but he would have lived probably a little bit longer.” When asked to opine as to the cause of Hroncich’s death within a reasonable degree of medical certainty, the expert attributed 20% to the work-related pulmonary disease and 80% to thyroid cancer. He called this “an estimate” that was, in his view, “a valid one,” although he acknowledged, on cross-examination, that “[i]t could be 75/25” or, when pressed, even “85/15 or 90/10.” In essence, then, what the expert said is that Hroncich’s thyroid cancer, once it invaded his lungs, triggered inevitable death that likely occurred earlier than it would have otherwise because his lungs were compromised by preexisting occupational lung diseases.

Con Ed did not submit any medical evidence to the WCLJ. But Con Ed argued that Hroncich’s asbestosis and asbestos-related pleural disease played no role in his death because when he was diagnosed with these maladies in 1993 and 1994, his pulmonary function was normal; no subsequent pulmonary function testing was performed, and so the record lacked evidence of weakened lungs; and claimant’s expert “could not state that [Hroncich] would have lived even one minute longer had he not been diagnosed with the work-related [diseases].” In the event causation was nonetheless found, Con Ed took the position that the award should recognize the overwhelming role of the non-work-related cause of Hroncich’s death; namely, thyroid cancer. Conceding that the law regarding apportionment in this context was “unsettled,” Con Ed nonetheless urged that a reduced award was “warranted” by the minimal and speculative contribution of work-related pulmonary diseases to Hroncich’s demise.

In a decision filed May 6, 2009, the WCLJ found that Hroncich’s death was “causally related to his established occupational lung disease,” crediting claimant’s expert. And citing Matter of Webb v Cooper Crouse Hinds Co. (62 AD3d 57 [3d Dept 2009]), the WCLJ rejected apportionment. In Webb, which was handed down only a few months before the WCLJ’s decision, the Appellate Division endorsed the Board’s view, expressed in its decision in Buffalo Forge Co. (2005 WL 1794390, *2-5, 2005 NY Wrk Comp LEXIS 6235, *4-14 [WCB No. 8020 5320, July 25, 2005]), that “apportionment is not available between work-related and non-work-related causes of death” when determining death benefits (62 AD3d at 60).

Although Hroncich’s average weekly wages at the time of the compensable injury in 1993 were $900, the statutory maximum for a death occurring after July 1, 2007 is $750 (see Workers’ Compensation Law § 16 [5]). The percentage used to calculate death benefits depends upon the identity and number of survivors entitled to payment, as well as date of death. Here, the award was calculated at two thirds of the maximum weekly wages, or $500.25, because Hroncich was survived by his spouse and no dependent children, and he died after January 1, 1978 (see Workers’ Compensation Law § 16 [1-c]). The award was then reduced by $90.69 to reflect the required offset for claimant’s survivors insurance benefits under Social Security (see id.). Accordingly, by notice of decision filed January 26, 2010, the WCLJ made a continuing award to claimant in the amount of $409.31 per week.

In a decision filed December 18, 2009, the Board affirmed the WCLJ’s decision. In particular, the Board approved the WCLJ’s reliance on Webb, remarking that “[t]here is no apportionment of causation in a consequential death claim so long as the underlying compensable condition is a cause of death.” Con Ed sought review in the Appellate Division, Third Department, which is vested with exclusive jurisdiction to review Board decisions (see Workers’ Compensation Law § 23).

By decision dated January 19, 2012, the Appellate Division affirmed, ruling that “inasmuch as the record concededly contains substantial evidence supporting the Board’s determination that decedent’s occupational illness contributed to his death,[] claimant is entitled to death benefits without apportionment” (91 AD3d 1134, 1134 [3d Dept 2012]). The court observed that in Webb it had “explicitly [held] that apportionment is not available between work-related and non-work-related causes of death” (id. [internal quotation marks and citation omitted]). Moreover, the Appellate Division was “not persuaded by . . . arguments urging [it] to re-examine and overrule Webb,” cautioning, as it also had in Webb, “that to the extent prior cases may contain language that could be read to suggest that apportionment may be appropriate under certain circumstances, those cases should not be followed” (id.). On September 6, 2012, we granted Con Ed leave to appeal (19 NY3d 810 [2012]). We now affirm.

II.

Con Ed relies on Workers’ Compensation Law § 15 (7), and, secondarily, Workers’ Compensation Law § 10 to argue for apportionment of death benefits between work-related and non-work-related causes. Without apportionment, Con Ed maintains, a deceased employee’s survivors receive a “windfall” at the employer’s expense, which is contrary to the “plain language and legislative intent expressed in Section 15 (7) [and] the fundamental principle embedded in the [statute], expressed [also] in Section 10, that liability be apportioned in proportion to causation.”

Section 15, captioned “Schedule in case of disability,” governs compensation benefits for employees disabled in the course of employment. Section 15 (7), in turn, applies to a particular category of injured employees—i.e., previously disabled employees who suffer a subsequent work-related injury. This provision states as follows:

“Previous disability.[] The fact that an employee has suffered previous disability or received compensation therefor shall not preclude him from compensation for a later injury nor preclude compensation for death resulting therefrom; but in determining compensation for the later injury or death his average weekly wages shall be such sum as will reasonably represent his earning capacity at the time of the later injury, provided, however, that an employee who is suffering from a previous disability shall not receive compensation for a later injury in excess of the compensation allowed for such injury when considered by itself and not in conjunction with the previous disability except as hereinafter provided in [Workers’ Compensation Law § 15 (8); i.e., the Special Fund]” (Workers’ Compensation Law § 15 [7]).

Thus, the three clauses in section 15 (7) specify that (1) a previous disability does not disqualify an employee from receiving compensation benefits for a later work-related injury, or disqualify his survivors from receiving a death benefit where the later injury results in the employee’s demise; (2) the measure of compensation or death benefits in this situation is the employee’s earning capacity at the time of the later work-related injury, which would necessarily reflect any diminished earning capacity due to the previous disability; and (3) generally, the employee shall not receive compensation benefits in excess of those allowed for the later work-related injury considered by itself, which insures that the award is based solely on the diminished earning capacity attributable to the later injury rather than from all disabilities.

In short, the only death benefits that section 15 (7) mentions are keyed to the situation where death results from a later work-related injury to an employee suffering at the time from a previous disability. But this is not the case here: Hroncich did not suffer from a previous disability at the time of his only work-related injury, the disablement on June 4, 1993. And in any event, section 15 (7) says nothing about apportionment of death benefits between work-related and non-work-related causes of death. Con Ed hangs its hat on the second clause in section 15 (7), which states that earning capacity at the time of a later work-related injury resulting in death constitutes the average weekly wages. But this requirement cannot apply to this case because, again, Hroncich did not suffer a later work-related injury. Section 15 (7) is simply not implicated where, as here, an employee does not suffer a disability in a compensation sense prior to a work-related injury or disablement.

Con Ed also looks to Workers’ Compensation Law § 10, captioned “Liability for compensation,” for support; specifically, that statute’s direction that “[e]very employer subject to [the Workers’ Compensation Law] shall . . . secure compensation to his employees and pay or provide compensation for their disability or death from injury arising out of and in the course of the employment without regard to fault as a cause of the injury” (Workers’ Compensation Law § 10 [1]). Con Ed’s point, as we understand it, is that by stating that employers must compensate employees for employment-related disability or death, this provision implicitly endorses apportionment by suggesting that non-work-related causes should be factored out of any award. This reads quite a bit into what appears to be simply a general statement of the principle underlying workers’ compensation— i.e., every employer is responsible for insuring its employees against losses from injuries or death occurring in the course and scope of employment.

Workers’ Compensation Law § 16, which governs eligibility for and the amount of death benefits, provides that “[i]f the injury causes death, the compensation shall be known as a death benefit and shall be payable in the amount and to or for the benefit of” certain listed survivors (Workers’ Compensation Law § 16). Concomitantly, Workers’ Compensation Law § 39, which authorizes death benefits for employees suffering from an occupational disease, the type of injury for which Hroncich received compensation benefits, states that “[i]f an employee . . . dies and his . . . death is caused by one of the diseases mentioned in [Workers’ Compensation Law § 3 (2)], ... his dependents shall be entitled to compensation . . . for his death in accordance with the provisions of articles two [Compensation] and three [Occupational Diseases] of this chapter.” And a claim for death benefits by an employee’s survivors is entirely separate from the employee’s claim for compensation benefits (see Matter of Zechmann v Canisteo Volunteer Fire Dept., 85 NY2d 747, 753 [1995]).

Importantly, there is no language in section 16 to suggest that the Board should apportion death benefits to work-related and non-work-related causes when fashioning an award. Presumably, if the legislature had wanted this to be the case, it would have said so. Instead, however, the legislature made employers joint-and-several insurers of their injured employees’ lives, subject to a prescribed schedule of payments. The death benefit is not about replacing lost wages, but rather compensates for a life lost at least partly because of work-related injury or disease (see e.g. Bill Jacket, L 1990, ch 296 [authorizing $50,000 in death benefits to non-dependent survivors]).

Of course, it is also true that when the legislature first enacted the operative language of section 16 in the early twentieth century, it essentially intended to ameliorate the condition of survivors of workers killed in industrial accidents, something that unfortunately happened with some frequency at the time. These lawmakers may not have had in mind a situation where death benefits become payable for a death caused, in every practical sense, by a non-work-related disease manifest many years beyond the usual retirement age, as happened here. And Con Ed argues that it is unreasonable for an employer to be responsible for paying the entire award under these circumstances. But the fact that section 15 incorporates certain apportionment principles for determining compensation (wage replacement) benefits, which, by their nature, are linked to loss of earning capacity, does not provide a basis for us to interpret section 16 to require apportionment of death benefits in the absence of any language in that provision even arguably commanding this result. As the Board points out, to the extent section 16 is thereby unduly harsh on employers, Con Ed’s plea for redress is properly made to the legislature, not the courts.

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

Pigott, J. (concurring).

I agree with my colleagues that the Workers’ Compensation Law statute, by its plain terms, does not provide for an apportionment of death benefits between work-related and non-worked-related causes. And while I also agree that Con Ed’s challenge to the finding of causation was not preserved for our review (see majority op at 643 n 6), had that issue been preserved, I would find that the statute also does not permit an apportionment to support the claim that the death was causally related to the work-related injury. Thus, in my view, the claimant is not entitled to death benefits.

Workers’ Compensation Law § 16 provides for an award of compensation for death benefits if the work-related injury “causes death” (emphasis added). The term “death” is defined by statute as follows: “ ‘Death’ when mentioned as a basis for the right to compensation means only death resulting from such injury” (Workers’ Compensation Law § 2 [8] [emphasis added]). Appellate courts have concluded that this means the decedent’s work-related injury “need not be the sole or even the most direct cause of death, provided that the claimant demonstrates that the compensable illness [or injury] was a contributing factor in the decedent’s demise” (Matter of Imbriani v Berkar Knitting Mills, 277 AD2d 727, 730 [3d Dept 2000] [emphasis added]; see also Matter of Brown v Clifton Recycling, 1 AD3d 735 [3d Dept 2003]). This Court has yet to consider whether the appellate courts’ interpretation of the statute is correct and if so, how far it should be taken, i.e. whether a work-related injury that is only a minor “contributing factor” to the decedent’s death is compensable.

A review of the case law, including this one, puts that question into serious doubt. Under a broad reading of the appellate courts’ precedent, any tangential work-related injury or disease that contributes in any way to the death may result in a death benefit. This leads to two problems. First, it lends itself to arbitrary determinations as to whether a particular death has a “causally related” antecedent. Second, there is no statutory basis for allowing “apportionment” in Workers’ Compensation Law § 16 with respect to the cause of death, and at the same time denying apportionment when fashioning an award.

Here, there is no dispute that the direct and primary cause of the decedent’s death was thyroid cancer, a condition totally “unrelated to his work at Con Ed” (majority op at 640). The work-related injury may have hastened the decedent’s death, but that’s all. The statute doesn’t provide for an award in such a case. No apportionment should mean just that—as to both the cause and, as the Workers’ Compensation Board argues here, the award of benefits. The legislature didn’t write the statute that way; why should the courts rewrite it?

Judges Graffeo, Smith, Pigott, Rivera and Abdus-Salaam concur with Judge Read; Judge Pigott in a separate concurring opinion in which Judge Smith concurs; Chief Judge Lippman taking no part.

Order affirmed, with costs.

      . Hroncich received $222 per week in workers’ compensation until the date of his death because permanent partial disability wage replacement benefits were lifetime benefits at the time of his disablement. As amended in 2007, however, section 15 (3) (w) of the Workers’ Compensation Law now limits these benefits, with duration depending upon the injury’s severity; for example, compensation payable for a permanent partial disability may not exceed 275 weeks in cases, like Hroncich’s, where the loss of wage-earning capacity is greater than 30 but not more than 40 percent (see L 2007, ch 6, §4).

      . Hereafter, Con Ed and its third-party administrator are referred to collectively as “Con Ed.”

      . The claimant in Webb was found to have a permanent partial disability, apportioned 75% to an occupational lung disease and 25% to noncompensable causes. The Board determined that the claimant’s subsequent death was causally related to the lung disease, and the Appellate Division held that substantial evidence supported this finding. The court then went on to reject the employer’s argument that the claimant’s death benefits should be apportioned in the same manner as his lifetime benefits—i.e., 75% to his occupational disease and 25% to unrelated causes. In so ruling, the Appellate Division relied on the inherent difference between compensation and death benefits, and the absence of any indication in Workers’ Compensation Law § 16 that death benefits were to be apportioned in the same manner as compensation benefits.
      The court further acknowledged in Webb that certain dictum in Matter of Rados v Woodlawn Water Supply Dist. (31 AD2d 879, 880 [3d Dept 1969] [i.e., “the fact that the first and last (heart) attacks were the only compensable accidents would not automatically prevent apportionment also against the nonoccupational injuries”]), was susceptible to being read “to suggest that. . . apportionment [between work-related and non-work-related causes of death] may be appropriate under certain circumstances,” and added that “[t]o the extent that [Radios] sets forth a rule that is contrary to our decision herein, it should no longer be followed” (Webb, 62 AD3d at 60 n). The Board itself explained in Buffalo Forge that it had approved apportionment between compensable and noncompensable causes of death a few times in reliance on the Rados dictum, but ultimately concluded there was no statutory or case law authority to support this practice.

      . For purposes of the Workers’ Compensation Law, “injury” and “personal injury” mean “only accidental injuries arising out of and in the course of employment and such disease or infection as may naturally and unavoidably result therefrom” (Workers’ Compensation Law § 2 [7]). Workers’ Compensation Law § 2 (15) defines an “occupational disease” as “a disease resulting from the nature of employment and contracted therein,” and section 3 (2) (l)-(30) lists occupational diseases. Both asbestosis and asbestos-related pleural disease are considered occupational diseases where they arise from the distinctive nature of the occupation. Disablement from an occupational disease is treated as the happening of an accident within the meaning of the Workers’ Compensation Law (see Workers’ Compensation Law § 38; see also id. § 39).

      . In addition to weekly death benefits, Workers’ Compensation Law § 16 provides for funeral expenses (see Workers’ Compensation Law § 16 [1]). In this case, the WCLJ, by notice of decision filed April 19, 2010, awarded claimant funeral expenses in the amount of $6,000.

      . Con Ed did not challenge the WCLJ’s finding of causation, affirmed by the Board, in the Appellate Division, and has not appealed causation to us either.

      . Respondent Special Disability Fund, Special Funds Conservation Committee (the Special Fund) and amicus City of New York (the City) likewise argue that Workers’ Compensation Law § 15 (7) explicitly provides for apportionment of death benefits. The City is the largest self insurer of workers’ compensation benefits in the State of New York. The Special Fund is liable for reimbursement of Con Ed for death benefits paid to claimant exceeding the statutory retention period, or 104 weeks in view of Hroncich’s date of disablement of June 4, 1993 (see Workers’ Compensation Law § 15 [8] [ee]). The 2007 reforms to the Workers’ Compensation Law phase out the Special Fund, closing it down to claims for an injury or illness with a date of accident or disablement on or after July 1, 2007, and disallowing written or evidentiary submissions made after July 1, 2010 in support of pending reimbursement claims (see L 2007, ch 6, § 76, amending Workers’ Compensation Law § 15 [8] [h]).

      . The Workers’ Compensation Law does not define “previous disability,” but the Appellate Division has long held that, as a general rule, “ [apportionment does not apply in cases in which the prior condition was not a disability in a compensation sense”; i.e., did not result in a diminution in earning capacity (Matter of Carbonaro v Chinatown Sea Food, 55 AD2d 756, 757 [3d Dept 1976], citing 2 Larson’s Workmen’s Compensation Law § 59.20 et seq.). “Stated another way, apportionment is not appropriate where the claimant’s prior condition was not the result of a compensable injury and such claimant was fully employed and able to effectively perform his or her duties despite the noncompensable preexisting condition” (Matter of Bruno v Kelly Temp Serv., 301 AD2d 730, 731 [3d Dept 2003]; see also e.g. Matter of Altobelli v Allinger Temporary Seros., Inc., 70 AD3d 1083 [3d Dept 2010] [in a case where the claimant suffered a non-work-related back injury in 1989 and compensable back injuries in 2001 and 2004, the Board properly concluded that apportionment to the 1989 injury was precluded as a matter of law because this prior non-work-related injury did not render the claimant disabled in the compensation sense; specifically, the record revealed that between 1989 and 2001 the claimant was fully employed and able to effectively perform his duties despite the noncompensable preexisting condition]; cf. Matter of Scally v Ravena Coeymans Selkirk Cent. School Dist., 31 AD3d 836 [3d Dept 2006] [deferring to the Board’s determination that, as a narrow exception to the general rule, disability exists in a compensation sense and therefore apportionment is proper where a prior non-work-related injury would have resulted in a schedule loss of use award if it had occurred in the workplace since these awards are intended to compensate for diminution in future earning capacity]).

        (n. cont’d)