author: Jones, J.

text:
    [911 NE2d 817, 883 NYS2d 755]
    In the Matter of Allstate Insurance Company, Respondent, v Nydia Rivera et al., Appellants. In the Matter of Clarendon National Insurance Company, Respondent, v Francisco Nunez, Sr., et al., Appellants.
    Argued April 30, 2009;
    decided June 4, 2009

      POINTS OF COUNSEL

      Shayne, Dachs, Corker, Sauer & Dachs, Mineola (Jonathan A. Dachs of counsel), and Tinari, O’Connell, Osborn & Kaufman, LLP, Central Islip, for appellants in the first above-entitled proceeding.
    The order of the Appellate Division should be reversed because it was and is egregiously erroneous and in direct contravention of well-settled law, alters well-established principles of insurance law and practice, appears to invalidate certain regulatory and policy provisions, directly conflicts with prior decisional law, including decisions of this Court, and unnecessarily and improperly injects uncertainty and indefiniteness into a previously settled and well-understood area of the law. (Matter of National Assn. of Ind. Insurers v Curiale, 190 AD2d 597, 81 NY2d 711; Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376; Matter of Nationwide Mut. Ins. Co. v

      Riccadulli, 183 AD2d 111; Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487; Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196; Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854; Matter of Nicholas v Kahn, 47 NY2d 24; Matter of General Elec. Capital Corp. v New York State Div. of Tax Appeals, Tax Appeals Trib., 2 NY3d 249; Ostrer v Schenck, 41 NY2d 782; State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313.)

      Sweetbaum & Sweetbaum, Lake Success (Marshall D. Sweetbaum of counsel), and Law Office of Robert P. Tusa, Hauppauge, for respondent in the first above-entitled proceeding.
    I. The order of the Appellate Division is appropriate, sound, logical and correct in all respects and should therefore be affirmed. (Oden v Chemung County Indus. Dev. Agency, 87 NY2d 81; Goncalves v Regent Intl. Hotels, 58 NY2d 206; Bingham v Ryder Truck Rental, 110 AD2d 867; Lichtman v Nadler, 74 AD2d 66; Matter of Medical Socy. of State of N.Y.v Serio, 100 NY2d 854; Boreali v Axelrod, 71 NY2d 1; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Telaro v Telaro, 25 NY2d 433.) II. The offset issue decided by the Appellate Division was correct in all respects. (Matter of National Assn. of Ind. Insurers v Curiale, 190 AD2d 597, 81 NY2d 711; Matter of Valente v Prudential Prop. & Cas. Ins. Co., 77 NY2d 894; Moshiko, Inc. v Seiger & Smith, 137 AD2d 170, 72 NY2d 945; Matter of Graphic Arts Mut. Ins. Co. [Dunham], 303 AD2d 1038; Butler v New York Cent. Mut. Fire Ins. Co., 274 AD2d 924.)

      Pollack, Pollack, Isaac & De Cicco, New York City (Brian J. Isaac of counsel), for New York State Trial Lawyers Association, amicus curiae in the first above-entitled proceeding.
    The Appellate Division decision improperly analyzes the pertinent regulations and case law and should be reversed. (Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376; Breed v Insurance Co. of N. Am., 46 NY2d 351; Liverpool & London & Globe Ins. Co. v Kearney, 180 US 132; Matthews v American Cent. Ins. Co., 154 NY 449; Matter of Government Empls. Ins. Co. v Young, 39 AD3d 751; Matter of New York Cent. Mut. Fire Ins. Co. v White, 262 AD2d 415; Matter of Clarendon Natl. Ins. Co. v Nunez, 48 AD3d 460.)

      Rivkin Radler LLP, Uniondale (Evan H. Krinick and Harris J. Zakarin of counsel), for New York Insurance Association, amicus curiae in the first above-entitled proceeding.
    Adopting the position of respondents-appellants would give the insured greater coverage than that available to a third party injured by the insured. (Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196; Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487; Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681; Pommells v Perez, 4 NY3d 566.)

      Shayne, Dachs, Corker, Sauer & Dachs, Mineola (Jonathan A. Dachs of counsel), and Allen D. Springer, PLLC, Brooklyn, for appellants in the second above-entitled proceeding.
    The order of the Appellate Division should be reversed because it was and is egregiously erroneous and in direct contravention of well-settled law, alters well-established principles of insurance law and practice, appears to invalidate certain regulatory and policy provisions, directly conflicts with prior decisional law, including decisions of this Court, and unnecessarily and improperly injects uncertainty and indefiniteness into a previously settled and well-understood area of the law. (Martin v City of Cohoes, 37 NY2d 162; Stevenson v News Syndicate Co., 302 NY 81; Walrath v Hanover Fire Ins. Co., 216 NY 220; Burger v Fifth Ave. Coach Co., 249 NY 583; Fuchs v Brody, 282 NY 627; Orlich v Helm Bros., 160 AD2d 135; Matter of Carroll v Gammerman, 193 AD2d 202; Matter of National Assn. of Ind. Insurers v Curiale, 190 AD2d 597, 81 NY2d 711; Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376; Matter of Nationwide Mut. Ins. Co. v Riccadulli, 183 AD2d 111.)

      Hiscock & Barclay, LLP, Rochester (John R. Casey, Joseph A. Wilson and Mark T. Whitford of counsel), for respondent in the second above-entitled proceeding.
    I. The tortfeasor’s vehicle does not qualify as an “uninsured motor vehicle.” (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681; Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487; Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196; Matter of Allstate Ins. Co. [Stolarz—New Jersey Mfrs. Ins. Co.], 81 NY2d 219; Matter of Allstate Ins. Co. v Rivera, 50 AD3d 680, 11 NY3d 709; Matter of Government Empls. Ins. Co. v Young, 39 AD3d 751; Wilson v Hartford Acc. & Indem. Co., 246 AD2d 593; Matter of State Farm Mut. Auto. Ins. Co. v Hollis, 228 AD2d 685; Matter of New York Cent. Mut. Fire Ins. Co. v White, 262 AD2d 415; Matter of Professional Staff Congress-City Univ. of N.Y. v New York State Pub. Empl. Relations Bd., 7 NY3d 458.) II. Clarendon National Insurance Company is entitled to an offset for payments received from the tortfeasor’s insurer. (Feigelson v Allstate Ins. Co., 31 NY2d 913; Rentways, Inc. v O’Neill Milk & Cream Co., 308 NY 342; Weber v Jacobs, 289 AD2d 226;
      Gorenstein v Debralaurie Realty Co., 280 AD2d 642; Ciesinski v Town of Aurora, 202 AD2d 984; Matter of Silverman [Benmor Coats], 61 NY2d 299; Carmo v Verizon, 13 AD3d 329; Sprain Brook Manor Nursing Home v Glazer, 6 AD3d 522; Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681; Matter of Allstate Ins. Co. [Stolarz—New Jersey Mfrs. Ins. Co.], 81 NY2d 219.)

      Pollack, Pollack, Isaac & De Cicco, New York City (Brian J. Isaac of counsel), for New York State Trial Lawyers Association, amicus curiae in the second above-entitled proceeding.
    The Appellate Division decision incorrectly analyzes the pertinent regulations, contracts and legal precedent on point, removing intended protections for motor vehicle accident victims, and should be reversed. (Matter of Allstate Ins. Co. v Rivera, 50 AD3d 680.)
   OPINION OF THE COURT

Jones, J.

At issue in both of these appeals is whether supplementary uninsured/underinsured motorists (SUM) coverage was triggered. In both appeals, we conclude that it was not.

In the first appeal, Allstate Insurance Company issued an automobile insurance policy to Petra Mercado that provided bodily injury liability and SUM coverage of $25,000 per person/ $50,000 per accident. In July 2005, while the policy was in effect, Mercado and five passengers in her car were injured when they were struck by a vehicle driven by Nilza Rodriguez and insured by GMAC Insurance Company, which provided the same bodily injury liability coverage as the Allstate policy. GMAC tendered its coverage limit of $50,000, paying $25,000 to Mercado and $5,000 to each of her five passengers. Subsequently, the five passengers sought SUM benefits under the Allstate policy. By letter dated February 20, 2007, Allstate denied SUM coverage, stating that “[sjince the $50,000 liability policy of Nilza Rodriguez is an offset to our Uninsured Motorist coverage, we will not be able to honor any claims for Uninsured Motorist Coverage under [the Allstate] policy.”

In the second appeal, Clarendon National Insurance Company issued an automobile policy to Francisco Nunez with bodily injury liability and SUM coverage of $25,000 per person/$50,000 per accident. In June 2001, while the policy was in effect, Nunez, his wife, and their two children were injured when they were struck by a vehicle insured by Progressive Northwestern Insurance Company, which provided the same liability coverage as the Clarendon policy. Progressive tendered its policy limit of $50,000, paying $15,000 each to three of the family members and $5,000 to the fourth family member. The Nunez family then sought SUM benefits under the Clarendon policy. By letter dated October 7, 2005, Clarendon denied SUM coverage, stating that “[s]ince the amount the four claimants will receive from Progressive ($50,000) is equal to the SUM limits of the Clarendon policy ($50,000) [,] the four claimants are not entitled to receive any SUM benefits.”

The SUM claimants under the Allstate and Clarendon policies demanded arbitration. Allstate and Clarendon (petitioner insurers) each commenced a CPLR article 75 proceeding for a permanent stay of arbitration. In both cases, the SUM claimants (respondents) argued that SUM coverage was triggered under Insurance Department Regulations (11 NYCRR) § 60-2.3 (f).

The Appellate Division ruled for petitioner insurers and permanently stayed arbitration in both cases (50 AD3d 680 [2008]; 48 AD3d 460 [2008]). We granted the SUM claimants in Matter of Allstate and Matter of Clarendon leave to appeal (11 NY3d 708 [2008]) and now affirm in both cases.

Insurance Law § 3420 provides, in pertinent part:

“Any [automobile insurance] policy shall, at the option of the insured, also provide supplementary uninsured/underinsured motorists [SUM] insurance for bodily injury, in an amount up to the bodily injury liability insurance limits of coverage provided under such policy . . . [SUM] insurance shall provide coverage ... if the limits of liability under all . . . insurance policies of another motor vehicle liable for damages are in a lesser amount than the bodily injury liability insurance limits of coverage provided by such policy. . . . As a condition precedent to the obligation of the insurer to pay under the [SUM] insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements” (Insurance Law § 3420 [f] [2] [A] [emphasis added]).

The plain language of Insurance Law § 3420, therefore, provides that SUM coverage is only triggered where the bodily injury liability insurance limits of the policy covering the tortfeasor’s vehicle are less than the third-party liability limits of the policy under which a party is seeking SUM benefits.

This statute “calls for a facial comparison of the policy limits without reduction from the judgment of other claims arising from the accident” (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 686 [1994] [held that “underinsured motorist coverage is triggered when the limit of the insured’s bodily injury liability coverage is greater than the same coverage in the tortfeasor’s policy” (id. at 684)]). Further, section 3420 (f) (2) “was enacted to allow policyholders to acquire the same level of protection for themselves and their passengers as they purchased to protect themselves against liability to others” (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 492 [1999], citing Mem of State Exec Dept, 1977 McKinney’s Session Laws of NY, at 2445, 2446; see also Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 203-204 [2007]; Szeli, 83 NY2d at 685-686).

The Legislature may authorize an administrative agency “to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 865 [2003], quoting Matter of Nicholas v Kahn, 47 NY2d 24, 31 [1979]). “In so doing, an agency can adopt regulations that go beyond the text of that legislation, provided they are not inconsistent with the statutory language or its underlying purposes” (Matter of General Elec. Capital Corp. v New York State Div. of Tax Appeals, Tax Appeals Trib., 2 NY3d 249, 254 [2004]). “A duly promulgated regulation that meets these criteria has the force of law” (Raffellini, 9 NY3d at 201). However, “if [a] regulation runs counter to the clear wording of a statutory provision, it should not be accorded any weight” (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459 [1980] [citation omitted]). As relevant here, the Legislature has vested the Superintendent of Insurance with “broad power to interpret, clarify, and implement the legislative policy” by promulgating regulations (Medical Socy., 100 NY2d at 863-864, quoting Ostrer v Schenck, 41 NY2d 782, 785 [1977]).

In 1992, the Superintendent of Insurance promulgated Insurance Department Regulation 35-D, codified at 11 NYCRR subpart 60-2, which requires that “[e]very SUM endorsement issued shall be the [SUM] Endorsement prescribed by subdivision (f) of this section” (11 NYCRR 60-2.3 [c]). Under Regulation 35-D, the term “insured” means:

“(1) you, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse;
“(2) any other person while occupying:
“(i) a motor vehicle insured for SUM under this policy; or
“(ii) any other motor vehicle while being operated by you or your spouse; and
“(3) any person, with respect to damages such person is entitled to recover, because of bodily injury to which this coverage applies sustained by an insured under paragraph (1) or (2) above” (11 NYCRR 60-2.3 [f] [INSURING AGREEMENTS] [I] [a]).

Further, Regulation 35-D defines an “uninsured motor vehicle” as

“a motor vehicle that, through its ownership, maintenance or use, results in bodily injury to an insured, and for which . . .
“(3) there is a bodily injury liability insurance coverage or bond applicable to such motor vehicle at the time of the accident, but; . . .
“(ii) the amount of such insurance coverage or bond has been reduced, by payments to other persons injured in the accident, to an amount less than the third-party bodily injury liability limit of this policy” (11 NYCRR 60-2.3 [f] [INSURING AGREEMENTS] [I] [c] [3] [ii]).

Each co-occupant in the covered vehicles contends that he or she should be allowed to deduct the payments made to other co-occupants, thereby reducing the tortfeasor’s bodily injury liability coverage to an amount less than the coverage limits on their vehicle, triggering SUM coverage. The SUM claimants therefore argue that co-occupants constitute “other persons” under the endorsement, even though co-occupants are insureds under the policy. We are unpersuaded.

The “payments to other persons” that may be deducted from the tortfeasor’s coverage limits for purposes of rendering the tortfeasor “uninsured” under a SUM endorsement do not encompass payments made to anyone who is an insured under the endorsement. It is important to note that the phrase “other persons” is used elsewhere in the endorsement to denote persons other than those insured under the policy. The notice and proof of claim condition directs that “the insured or other person making claim” shall give written notice of claim “under this SUM coverage” (11 NYCRR 60-2.3 [f] [CONDITIONS] [2]). It is evident that, in the phrase “the insured or other person,” the reference to “other person” means someone who is not “the insured.” As each claimant here falls within the endorsement’s definition of an “insured,” which encompasses all passengers in the covered vehicle, claimants are not “other person[s].” Insureds are therefore able to reduce the coverage limits of the tortfeasor’s policy only when payments made under the tortfeasor’s policy are to individuals—such as occupants of the tortfeasor’s vehicle, injured pedestrians or those operating a third vehicle—not covered under the SUM endorsement. This guarantees that those who have purchased SUM coverage will receive the same recovery they have made available to third parties they injure—but no more.

The position of the SUM claimants and the dissent notwithstanding, this is the only construction that is consistent with the plain language of Insurance Law § 3420, the enabling legislation that Regulation 35-D must conform to, and the core principle underlying SUM coverage—that insureds can never use a SUM endorsement to obtain a greater recovery for themselves than is provided under the policy to third parties injured by the insureds (see Raffellini, 9 NY3d at 203-204; Mancuso, 93 NY2d at 492; Szeli, 83 NY2d at 687). To demonstrate this principle, we need only look at what would occur in Matter of Clarendon were we to adopt the claimants’ position. The four members of the Nunez family received $50,000 under the tortfeasor’s policy and, by each claimant characterizing the other three family members as “other person[s],” the family now seeks to obtain an additional $50,000 under the SUM coverage provided in their own policy, for a total recovery of $100,000. Yet, if the Nunez vehicle was operated negligently, causing an accident that injured four pedestrians, the total recovery those injured parties could obtain under the Clarendon policy would be $50,000, the per accident limit.

Therefore, reading Insurance Law § 3420 (f) (2), our well-settled interpretation of this statute and Regulation 35-D together, we hold that SUM coverage is not available (that is, SUM coverage cannot be triggered) because (1) the bodily injury liability insurance coverage limits provided under the respective tortfeasors’ policies were equal to the third-party bodily injury liability limits of the Allstate and Clarendon policies, (2) the payments made to the SUM claimants did not reduce the amount of the bodily injury insurance coverage provided under the tortfeasors’ policies to “an amount less than the third-party bodily injury liability limit of [the Allstate and Clarendon policies]” (11 NYCRR 60-2.3 [f] [INSURING AGREEMENTS] [I] [c] [3] [ii]) and (3) allowing such additional coverage would provide an insured/policyholder with more coverage than that provided to an injured third party under his or her policy.

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

Ciparick, J. (dissenting). Because the majority improperly forecloses the availability of supplementary uninsured/ underinsured motorists (SUM) benefits to claimants, passengers injured in a car accident, by defining them as outside the purview of Insurance Department Regulation 35-D (see 11 NYCRR 60-2.3 [f] [INSURING AGREEMENTS] [I] [c] [3] [ii]) and labeling them as something other than “other persons injured in the accident,” I respectfully dissent and would hold that Regulation 35-D’s plain language, history and the basic purpose of the SUM coverage provision triggers benefits for claimants.

In Matter of Allstate, six claimants were occupants of a vehicle injured in a car accident. The driver of the nonoffending vehicle had an insurance policy issued by Allstate. The offending vehicle was insured by nonparty GMAC Insurance. The GMAC policy provided a coverage amount of $50,000 per accident and $25,000 per person. GMAC paid $25,000 to the driver of the struck vehicle and $5,000 to each of the five other claimants, thereby totaling the $50,000 maximum coverage amount per accident.

Similarly, in Matter of Clarendon, four claimants were riding in a vehicle struck by an offending vehicle insured by nonparty Progressive Northwestern Insurance Company. After accepting liability for the accident, Progressive paid out of its $50,000 per accident coverage $15,000 each to three of the claimants and $5,000 to the fourth claimant, thereby totaling its $50,000 cap per accident. In both cases, the owners of the nonoffending vehicles in which claimants rode had contracted and paid for an insurance plan providing for SUM coverage. Claimants, in both cases, sought SUM coverage for the inadequately recompensed injured persons, but Allstate and Clarendon, respectively, denied their claims.

Today, in denying claimants SUM benefits, the majority reads Regulation 35-D as not having contemplated SUM benefits for claimants, even though they were “other persons injured in the accident.” In interpreting the meaning of a regulation, courts must defer to the Superintendent of Insurance’s interpretation of his statutorily-vested authority and to his special expertise, unless such interpretation of the statute or regulation is wholly irrational or contrary to its clear meaning (see Matter of Medical Malpractice Ins. Assn. v Superintendent of Ins. of State of N.Y., 72 NY2d 753, 761-762 [1988]). Courts must give effect to the plain words of a regulation and presume that it was crafted carefully to mean what it states in plain and ordinary language.

Regulation 35-D states that a vehicle is underinsured for purposes of triggering SUM coverage where

“a motor vehicle . . . results in bodily injury to an insured, and for which . . . there is bodily injury liability insurance coverage . . . applicable to such motor vehicle at the time of the accident, but . . . the amount of such insurance coverage . . . has been reduced, by payments to other persons injured in the accident, to an amount less than the third-party bodily injury liability limit of this policy” (see 11 NYCRR 60-2.3 [f] [INSURING AGREEMENTS] [I] [c] [3] [ii]).

The majority concludes that vehicle co-occupants are not “other persons injured in the accident” by reading into the regulation a meaning excluding co-claimants as “other persons” and classifying them as “insureds.” Co-claimants, however, meet all of the criteria required by the plain language of the regulation to trigger SUM coverage: they are indeed injured parties in a car accident; the drivers/owners of the vehicles had bodily injury liability coverage; and claimants’ coverage was reduced by payments made to co-claimants—“other persons.” Put simply, when a tortfeasor’s coverage is reduced by payments to others—either co-claimants or strangers—less coverage is available under that policy to compensate them. Accordingly, under Regulation 35-D, claimants must be considered “other persons injured in the accident.”

Significantly, Regulation 35-D is silent as to any exception, limitation or other qualification to the phrase “other persons.” Nowhere does the regulation exclude as “other persons” a co-passenger or family relative of an insured. If the regulation was meant to exclude a co-passenger, it would have been a simple matter for the drafters to so state, and the regulation’s lack of any such exception is powerful evidence that no such limiting gloss was meant to be read into it (see McKinney’s Cons Laws of NY, Book 1, Statutes § 74). Rather, the regulation’s words were intended to mean what they say in ordinary and everyday terms. The majority’s rendering of an artificial and strained distinction between vehicle co-occupants and strangers to the insured vehicle in the definition of “other persons injured in the accident” is unwarranted and inconsistent with the plain language of the regulation as incorporated into these insurance policies.

In my view, the language of the SUM provisions is clearly, straightforwardly and unambiguously in favor of triggering SUM coverage for claimants, but to the extent that it can be read as having any ambiguity, the legal consequences of any such lack of clarity in the substance of these insurance contracts should not militate against claimants (see e.g. Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 325-327 [1996]; Sperling v Great Am. Indem. Co., 7 NY2d 442, 447-449 [1960]; Mutual Life Ins. Co. of N. Y. v Hurni Packing Co., 263 US 167, 176 [1923]). In this regard, insurers have not challenged the regulatory language at issue here at any point as improper, unfair or unauthorized, even when other portions of Regulation 35-D were challenged.

Words of an insurance policy, furthermore, must be viewed from the position of an average person applying common speech (see Buckner v Motor Veh. Acc. Indem. Corp., 66 NY2d 211, 213-214 [1985]; Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398 [1983]). “The language employed in [a] contract of insurance must be given its ordinary meaning, such as the average policyholder of ordinary intelligence, as well as the insurer, would attach to it” (City of Albany v Standard Acc. Ins. Co., 7 NY2d 422, 430 [1960] [emphasis omitted]; see also Album Realty Corp. v American Home Assur. Co., 80 NY2d 1008, 1010 [1992]). Here, claimants would not have reasonably expected the language “other persons injured in the accident” to refer to any persons other than those—like themselves—who were injured in a motor vehicle accident. Nor were the owners of the policies in a position to have their form contracts amended, if they so chose, or to otherwise alter the text of Regulation 35-D.

The majority, citing Insurance Law § 3420 (f) (2) (A), argues that SUM coverage is available only where the policy limits of a tortfeasor’s vehicle are less than the third-party limits of the policy providing for SUM benefits (see majority op at 607-608), but the Superintendent of Insurance has been vested with the authority to promulgate rules and regulations that may expand upon such definitions (see Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 863-864 [2003]; Ostrer v Schenck, 41 NY2d 782, 785 [1977]). In promulgating Regulation 35-D, which the majority does not here challenge, the Superintendent was well within his authority to broaden the definition of an uninsured motor vehicle (see e.g. Matter of American Mfrs. Mut. Ins. Co. v Morgan, 296 AD2d 491 [2d Dept 2002]; Matter of New York Cent. Mut. Fire Ins. Co. v White, 262 AD2d 415 [2d Dept 1999]), as well as that of an underinsured motor vehicle (see Matter of Allstate Ins. Co. v Sung Sun Ju, 56 AD3d 551 [2d Dept 2008]).

In addition, the majority looks for support in the notice and proof of claim provision (see 11 NYCRR 60-2.3 [f] [CONDITIONS] [2]), where there is a distinction between “the insured or other person making claim,” and injects that distinction into the plain language of the regulation at issue (see majority op at 610). There is no evidence, however, that the language found in the notice and proof of claim provision can be interpreted to rule out the possibility that claimants in the SUM coverage provision, who the majority claims fall within the endorsement’s definition of an “insured,” cannot be deemed “other persons.” On the contrary, the fact that when the drafters intended to make such a distinction between the insured and other persons they did so in clear and unambiguous language is telling that no such distinction here was intended.

Moreover, providing SUM coverage to claimants is not, as the majority states, contrary to the purpose and history of SUM coverage. New York’s uninsured and underinsured motorist protection statutes were enacted to protect innocent victims of motor vehicle accidents caused by motorists who, for whatever reason, could not be counted on to make their victims whole (see Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376, 381 [1966]).

With that purpose in mind, SUM coverage “is designed to increase the level of protection afforded to policyholders injured by negligent drivers who lack adequate liability insurance” (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 492 [1999]). It was devised to mitigate the liability coverage deficit caused by an inadequately insured vehicle— underinsured vehicles. It was not meant to be restricted to uninsured motorists. Here, where there appears to be a parity between the policies, in a motor vehicle accident involving numerous passengers, the tortfeasor’s liability will be dramatically less than the per person coverage under the claimant’s policy. SUM coverage was meant to alleviate this liability gap.

In conclusion, I believe that the majority has read into Regulation 35-D an unwarranted and unreasonable limitation to exclude claimants from SUM coverage. Clearly, claimants meet the expressly written criteria for SUM coverage. Most notably, they are “other persons injured in the accident,” and thus should receive SUM benefits. Accordingly, I respectfully dissent and would reverse the orders of the Appellate Division.

Judges Graffeo, Read, Smith and Pigott concur with Judge Jones; Judge Ciparick dissents and votes to reverse in a separate opinion in which Chief Judge Lippman concurs.

In each case: Order affirmed, with costs.

       As Insurance Law § 3420 (f) (2) and Regulation 35-D are in derogation of the common law, they must be narrowly construed.


source: Caselaw Access Project

author: ClPARICK, J.

license: Public Domain

text:
    [911 NE2d 834, 883 NYS2d 772]
    City of New York, Appellant, v Smokes-Spirits.Com, Inc., et al., Respondents, et al., Defendants. (And Other Actions.)
    Argued May 5, 2009;
    decided June 9, 2009

      POINTS OF COUNSEL

      Michael A. Cardozo, Corporation Counsel, New York City (Elizabeth S. Natrella, Leonard Koerner and Eric Proshansky of counsel), for appellant.
    I. The City of New York has standing under General Business Law § 349 to bring the instant claims. (Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc., 3 NY3d 200 [certified question answered], sub nom. Empire Healthchoice, Inc. v Philip Morris USA, Inc., 393 F3d 312; Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20; Karlin v IVF Am., 93 NY2d 282; Matter of People v Applied Card Sys., Inc., 11 NY3d 105; Gaidon v Guardian Life Ins. Co. of Am., 94 NY2d 330; Teller v Bill Hayes, Ltd., 213 AD2d 141, 87 NY2d 937; Blue Cross & Blue Shield of N.J, Inc. v Philip Morris, Inc., 178 F Supp 2d 198, 344 F3d 211; Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20; Maurizio v Goldsmith, 230 F3d 518; New York Univ. v

      Continental Ins. Co., 87 NY2d 308.) II. Public Health Law § 1399-ll does not preempt common-law public nuisance claims. (New York Trap Rock Corp. v Town of Clarkstown, 299 NY 77; N.A.A.C.R v AcuSport, Inc., 271 F Supp 2d 435; Copart Indus. v Consolidated Edison Co. of N.Y., 41 NY2d 564; Lawton v Steele, 119 NY 226, 152 US 133; City of New York v Laing, 236 AD2d 504; Matter of Berncolors-Poughkeepsie, Inc. v City of Poughkeepsie, 96 AD2d 595, 60 NY2d 701; Hoover v Durkee, 212 AD2d 839; Briggs v City of N. Tonawanda, 213 App Div 781; Boomer v Atlantic Cement Co., 55 Misc 2d 1023, 30 AD2d 480, 26 NY2d 219; State of New York v Fermenta ASC Corp., 238 AD2d 400, 90 NY2d 810.)

      Luebben Johnson & Barnhouse LLP (Randolph Barnhouse, of the New Mexico bar, admitted pro hac vice, of counsel), and Girvin & Ferlazzo, P.C., Albany (Salvatore D. Ferlazzo of counsel), for Hemi Group, LLC and another, respondent.
    I. The City of New York does not have standing to assert its claim under General Business Law § 349. (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20; Morales v County of Nassau, 94 NY2d 218; People v Santi, 3 NY3d 234; Thoreson v Penthouse Intl., 80 NY2d 490, Friedman v Connecticut Gen. Life Ins. Co., 9 NY3d 105; Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314; A. M. Knitwear Corp. v All Am. Export-Import Corp., 41 NY2d 14; Butler v Beer Across Am., 83 F Supp 2d 1261; Securitron Magnalock Corp. v Schnabolk, 65 F3d 256; Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc., 3 NY3d 200.) II. The City of New York may not assert a common-law public nuisance claim that is predicated on Public Health Law § 1399-ZZ. (Saratoga County Chamber of Commerce v Pataki, 100 NY2d 801; Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc., 3 NY3d 200.)
   OPINION OF THE COURT

ClPARICK, J.

These consolidated actions arise out of plaintiff City of New York’s claims that defendants’ allegedly illegal marketing and shipment of cigarettes into this state have deprived it of tax revenues. To resolve plaintiff’s state law claims, the United States Court of Appeals for the Second Circuit has certified two questions to us. First, “[d]oes the City have standing to assert its claims under General Business Law § 349?” (541 F3d 425, 457 [2008].) Second, “[m]ay the City assert a common law public nuisance claim that is predicated on N.Y. Public Health Law § 1399-ZZ?” (Id. at 458.) We answer both questions in the negative.

I.

Collectively, New York State and City impose some of the highest cigarette excise taxes in the nation (see Tax Law §§ 471, 471-a; McKinney’s Uncons Laws of NY § 9436 [1] [L 1952, ch 235, § 1 (1), as amended]; Administrative Code of City of NY § 11-1302 [a] [l]-[2]). At the time these actions were commenced, owing to the divergence in cigarette taxes throughout the nation, a carton of premium brand cigarettes purchased in Virginia or Kentucky cost approximately $30, while the same carton cost $70 in New York City. This price differential is based almost entirely on the variance between cigarette excise taxes.

New York City’s smokers cannot evade responsibility for city and state taxes simply by purchasing shipments of cigarettes from out-of-state sellers—like defendants—who operate in jurisdictions that impose minimal cigarette taxes. That is because, subject to exceptions not relevant here, the Tax Law and the Administrative Code of the City of New York require consumers to pay a tax on all cigarettes possessed for use in the city (see Tax Law § 471 [2]; § 471-a; Administrative Code of City of NY § 11-1302 [a] [3]). Thus, although out-of-state cigarette retailers are not required to collect state and city taxes at the time of sale, those taxes are still due and owing by a purchaser who possesses the cigarettes for use in New York.

Moreover, a federal law—the Jenkins Act—requires out-of-state cigarette sellers to file monthly reports with New York State’s tobacco tax administrator (see 15 USC § 376 [a] [2]) and subjects violators to criminal penalties for failure to do so (see 15 USC § 377). Such reports—which must identify the name and address of persons to whom cigarette shipments were made along with the quantity and brand of cigarettes purchased— assist New York State taxing authorities in their efforts to collect cigarette use taxes (see 15 USC § 376 [a] [2]). The reports also further the collection efforts of the City because, by agreement, the State’s Department of Taxation and Finance is obligated to share such reports with the City’s Department of Finance.

According to the City’s complaints, defendants are out-of-state entities and persons engaged in the business of selling cigarettes over the Internet. They are located in states with negligible cigarette taxes and they have marketed and shipped cigarettes to New York City residents. As relevant here, certain defendants’ Web sites have allegedly misrepresented that their Internet cigarette sales are “tax free,” that their customers did not have to pay cigarette taxes, and/or that they are not required to file Jenkins Act reports. Due to these “materially deceptive and misleading” statements, the City alleges that some New York consumers were duped into purchasing cigarettes over the Internet in reliance on an entirely illusory tax savings. Consumers’ apparent savings would disappear if the defendants filed Jenkins Act reports thereby allowing the City to locate cigarette purchasers and collect excise taxes owed for cigarette use. The City claims that defendants’ deceptive statements, along with their failure to file Jenkins Act reports, have injured it in an undetermined amount of unpaid cigarette taxes. For this injury, the City seeks redress under General Business Law § 349 (h).

In two of its actions, the City also brought a common-law public nuisance claim. Its basis lies in the legislative findings that accompanied Public Health Law § 1399-ZZ, which stated, in part, that “[t]he legislature finds and declares that the shipment of cigarettes sold via the internet or by telephone or by mail order to residents of this state poses a serious threat to public health, safety, and welfare” (see Legislative findings, L 2000, ch 262, § 1, reprinted in McKinney’s Cons Laws of NY, Book 44, Public Health Law § 1399-ZZ, Historical and Statutory Notes, at 238). After outlining investigatory efforts that established that certain defendants had made shipments into its jurisdiction in violation of section 1399-ZZ, the City alleged that defendants’ illicit shipments contributed to a public nuisance that “unreasonably and substantially interfer[ed] with rights common to the general public, with commerce and the quality of daily life and endanger[ed] the property, health and safety of large numbers of residents of New York City.” Accordingly, plaintiff sought an injunction to prevent additional illegal shipments and reimbursement of its costs for abating the claimed public nuisance.

The federal district court dismissed the City’s General Business Law § 349 and public nuisance claims (2006 WL 647716, 2006 US Dist LEXIS 10295 [SD NY 2006]). On appeal, the circuit court recognized that while standing under General Business Law § 349 (h) had been extended to consumers and competitors, the statute had not yet been interpreted to grant a right of action to parties not suing in either of those capacities. The court also questioned the propriety of the City bringing a public nuisance claim predicated upon Public Health Law § 1399-ll. Accordingly, the court certified two legal questions to us. We now answer both in the negative.

II.

General Business Law § 349 (a) declares unlawful “[deceptive acts or practices in the conduct of any business.” As amended in 1980, the statute provides a private right of action to “any person who has been injured by reason of" such illegal conduct (see General Business Law § 349 [h]). The purpose of this amendment was to expand enforcement authority beyond the Attorney General and thereby ensure more optimal protection of the public (see Karlin v IVF Am., 93 NY2d 282, 291 [1999] , citing Mem of Assemblyman Strelzin in Support of L 1980, ch 346, 1980 NY Legis Ann, at 146; Givens, Practice Commentaries, McKinney’s Cons Laws of NY, Book 19, General Business Law § 349, at 566 [1988 ed], quoting Governor’s Approval Mem, 1980 McKinney’s Session Laws of NY, at 1867 [“(T)he purpose of the private right( ) of action was to permit private enforcement against injuries resulting from consumer fraud” (internal quotation marks omitted)]).

To successfully assert a section 349 (h) claim, a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice (see Stutman v Chemical Bank, 95 NY2d 24, 29 [2000] ). Here, the City insists that it is part of the broad class of “person[s]” granted standing to pursue a section 349 claim (see General Construction Law § 37; Joseph Thomas Moldovan, Note, New York Creates a Private Right of Action to Combat Consumer Fraud: Caveat Venditor, 48 Brook L Rev 509, 526-527 [1982]). In a proper case, the City may be able to avail itself of a remedy pursuant to subdivision (h). But it has failed to establish standing here because its claimed injury, in the form of lost tax revenue, is entirely derivative of injuries that it alleges were suffered by misled consumers who purchased defendants’ cigarettes over the Internet.

In Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc. (3 NY3d 200 [2004]), we held that “derivative actions are barred” under section 349 (h) (id. at 207). “An injury is indirect or derivative when the loss arises solely as a result of injuries sustained by another party” (id.). Thus, we concluded that the plaintiff insurance plan could not recover medical payments made on behalf of subscribers who suffered from smoking-related illnesses even though the defendants’ misrepresentations as to the negative health effects of smoking allegedly caused those injuries. Although the plan had incurred costs due to the alleged deception, its injury was still “indirect”—and thus not compensable under section 349 (h)—“because the losses it experienced arose wholly as a result of smoking related illnesses suffered by [its] subscribers” (id.). In rendering this decision, we noted the lack of any clear indication from the Legislature that derivative injuries were actionable under section 349 (h) (see id. at 206-207), our concern with expanding section 349 to permit “ ‘a tidal wave of litigation against businesses that was not intended by the Legislature’ ” (see id. at 207, quoting Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 26 [1995]), and that our holding was “in accord with several other courts that recognize a remoteness bar to recovery under their state consumer protection statutes” (see id. at 208 n 3 [citing cases]).

The City’s claimed injury here is just as indirect as the insurer’s was in Blue Cross. Quite simply, had the allegedly deceived consumers not been improperly induced to purchase defendants’ cigarettes then the City would have no claim to lost tax revenue (see Blue Cross, 3 NY3d at 207 [“Although (the insurer) actually paid the costs incurred by its subscribers, its claims are nonetheless indirect because the losses it experienced arose wholly as a result of smoking related illnesses suffered by those subscribers”]; see also Laborers Local 17 Health & Benefit Fund v Philip Morris, Inc., 191 F3d 229, 239 [2d Cir 1999] [“Being purely contingent on harm to third parties, these injuries are indirect”]). Although in some sense the City’s injuries are “caused” by defendants’ alleged conduct, this Court has required more than an allegation of “but for” cause to state a claim for relief under section 349 (h) (see Blue Cross, 3 NY3d at 208; Stutman, 95 NY2d at 30 [“(P)laintiffs allege that because of defendant’s deceptive act, they were forced to pay a $275 fee that they had been led to believe was not required . . . This allegation satisfies the causation requirement”]; see also Ganim v Smith & Wesson Corp., 258 Conn 313, 373, 780 A2d 98, 134 [2001] [“ ‘but for’ cause” allegation insufficient under state unfair trade practices act]).

We reject the City’s assertion that it may state a cognizable section 349 (h) claim “simply” by alleging “consumer injury or harm to the public interest.” If a plaintiff could avoid the derivative injury bar by merely alleging that its suit would somehow benefit the public, then the very “tidal wave of litigation” that we have guarded against since Oswego would loom ominously on the horizon (see 85 NY2d at 26; Blue Cross, 3 NY3d at 207). Certainly, “as a threshold matter, plaintiffs claiming the benefit of section 349 . . . must charge conduct of the defendant that is consumer-oriented” (see Oswego, 85 NY2d at 25). But such plaintiffs must also plead that they have suffered actual injury caused by a materially misleading or deceptive act or practice (see id. at 26; accord Blue Cross, 3 NY3d at 205-206; see also Stutman, 95 NY2d at 29 [“The plaintiff . . . must show that the defendant’s ‘material deceptive act’ caused the injury”]). Since Blue Cross, it has been clear that allegations of indirect or derivative injuries will not suffice (see 3 NY3d at 207).

Nothing in Securitron Magnalock Corp. v Schnabolk (65 F3d 256 [2d Cir 1995]) purports to confer standing upon derivatively injured parties such as the City. There, the Second Circuit characterized the “gravamen” of a section 349 claim as “consumer injury or harm to the public interest” (id. at 264, quoting Azby Brokerage, Inc. v Allstate Ins. Co., 681 F Supp 1084, 1089 n 6 [SD NY 1988]). We, too, have emphasized that section 349 is “directed at wrongs against the consuming public” and that plaintiffs must demonstrate that the complained-of acts or practices “have a broader impact on consumers at large” (see Oswego, 85 NY2d at 24, 25; see also Gaidon v Guardian Life Ins. Co. of Am., 94 NY2d 330, 344 [1999]).

But those statements relate to just one element of a section 349 claim—consumer-oriented conduct (see Gaidon, 94 NY2d at 344). The Securitron court did not discuss the remaining two elements—materially misleading or deceptive act or practice and actual injury—presumably because the defendants there argued that “ ‘there is absolutely nothing in this record showing that this private commercial dispute between the plaintiff and the defendant was aimed at the public’ ” (see 65 F3d at 264). This argument derives from the rule, recognized in Oswego, that certain disputes, such as “[pjrivate contract disputes, unique to the parties . . . would not fall within the ambit of [section 349]” (see Oswego, 85 NY2d at 25, citing Genesco Entertainment, a Div. of Lymutt Indus., Inc. v Koch, 593 F Supp 743, 752 [SD NY 1984]). Thus, in concluding that defendants’ purely-private-dispute argument was meritless in the case before it, the Securitron court did not expand the class of section 349 (h) plaintiffs to those persons who, like the City, can link a derivative injury to some public harm.

Accordingly, we hold that plaintiff lacks standing to bring its section 349 (h) claim for lost cigarette tax revenue.

III.

Turning to the public nuisance claim, the City admits that the conduct it complains of—the “mailing of cigarettes”— “is not illegal or even traditionally deemed offensive.” But it says that the legislative findings accompanying Public Health Law § 1399-ll changed that and that those findings permit it to bring an action to abate this “newly characterized” public nuisance since nothing in section 1399-ll or its legislative history purports to preempt such a claim. We agree that the Legislature had in mind a concern for the public health—specifically, the detrimental effects of smoking on minors—when it passed section 1399-ll. We do not view this case, however, as one involving preemption. Instead, the question here is one of pure statutory interpretation. Based on its text and legislative history, we conclude that the Legislature did not contemplate that section 1399-ll would be used as the predicate for public nuisance actions in cases—like the present— that primarily involve alleged tax evasion.

Public Health Law § 1399-ll is found under article 13-F of the Public Health Law, which is entitled “Regulation of Tobacco Products and Herbal Cigarettes; Distribution to Minors.” By its provisions, it is “unlawful for any person engaged in the business of selling cigarettes to ship or cause to be shipped any cigarettes to any person in this state” who is not a person licensed as a cigarette tax agent, wholesale dealer, or a registered retail dealer; an export warehouse proprietor or an operator of a customs bonded warehouse; or a person who is a government agent or employee, acting in an official capacity (see Public Health Law § 1399-ll [1]). Likewise, “common or contract carrier [s]” are forbidden from knowingly transporting cigarettes to any person not within the class of exempted persons (see § 1399-ll [2]). The same prohibition applies to “any other person,” except that such individuals are permitted to transport “not more than eight hundred cigarettes at any one time to any person in this state” (see id.). The statute provides that authorized shipments sent by cigarette sellers must be “plainly and visibly marked with the word ‘cigarettes’,” unless shipped “in the cigarette manufacturer’s original container or wrapping” (see § 1399-ll [3]).

Unauthorized shipments are subject to seizure and forfeiture (see Public Health Law § 1399-ll [4]) and expose the violator to criminal and civil penalties. Thus, a shipment in violation of subdivision (1) or (2) constitutes a class A misdemeanor, which is increased to a class E felony upon a “second or subsequent violation” (see § 1399-ll [5]). In addition, section 1399-ll (5) authorizes the imposition of up to a $5,000 civil fine for each violation of subdivision (1) or (2) and a similar fine for violation of subdivision (3), when committed by a cigarette seller (see id,.).

A concern with public health as well as the public fisc is evident in section 1399-ZZ’s legislative findings. These state that

“[t]he legislature finds and declares that the shipment of cigarettes sold via the internet or by telephone or by mail order to residents of this state poses a serious threat to public health, safety, and welfare, to the funding of health care pursuant to the health care reform act of 2000, and to the economy of the state. The legislature also finds that when cigarettes are shipped directly to a consumer, adequate proof that the purchaser is of legal age cannot be obtained by the vendor, which enables minors to avoid the provisions of article 13-F of the public health law. It is also the legislature’s finding that by preventing shipment of cigarettes directly to consumers, the State will be better able to measure and monitor cigarette consumption and to better determine the public health and fiscal consequences of smoking. The legislature further finds that existing penalties for cigarette bootlegging are inadequate. Therefore, the bill enhances existing penalties for possession of unstamped or unlawfully stamped cigarettes” (see Legislative findings, L 2000, ch 262, § 1, reprinted in McKinney’s Cons Laws of NY, Book 44, Public Health Law § 1399-ll, Historical and Statutory Notes, at 238).

It is well settled that a governmental entity, such as the City, may bring an action to abate a public nuisance or the

“conduct or omissions which offend, interfere with or cause damage to the public in the exercise of rights common to all, in a manner such as to offend public morals, interfere with use by the public of a public place or endanger or injure the property, health, safety or comfort of a considerable number of persons” (see Copart Indus. v Consolidated Edison Co. of N.Y., 41 NY2d 564, 568 [1977] [citations omitted]; New York Trap Rock Corp. v Town of Clarkstown, 299 NY 77, 83 [1949] [Trap Rock I] [“(A) municipal corporation . . . has the capacity and is a proper party to bring an action to restrain a public nuisance which allegedly has injured the health of its citizens”]).

Equally clear is the Legislature’s authority to enact laws deeming certain activities public nuisances (see Trap Rock I, 299 NY at 84-85; People v New York Trap Rock Corp., 57 NY2d 371, 377 [1982]; see also Lawton v Steele, 152 US 133, 140 [1894]; Restatement [Second] of Torts § 821B, Comment c [“(A) 11 of the states have numerous special statutes declaring certain conduct or conditions to be public nuisances”]).

But we think that the task of discerning whether a set of legislative findings purports to recognize a particular type of conduct as a public nuisance is one of statutory construction, requiring us to “look beyond the language of the statute ... to search for and effectuate the Legislature’s purpose” (cf. Fumarelli v Marsam Dev., 92 NY2d 298, 303 [1998]; Uhr v East Greenbush Cent. School Dist, 94 NY2d 32, 38 [1999] [“A statutory command . . . does not necessarily carry with it a right of private enforcement by means of tort litigation”]). In this regard, the maxim that an “affirmative statute,” such as section 1399-ll, should not be read to cancel the City’s common-law right to abate public nuisances (see McKinney’s Cons Laws of NY, Book 1, Statutes § 34, Comment, at 76-77) is unhelpful since the City essentially concedes that the right to abate the nuisance caused by the shipment of cigarettes did not exist prior to the enactment of section 1399-ll. In any event, we need not resort to canons of construction “because the legislative intent is otherwise more readily and reliably manifest” (see Fumarelli, 92 NY2d at 307).

Properly framed, we believe that the second certified question requires an inquiry similar to that undertaken in cases concerning implied private rights of action (see Sheehy v Big Flats Community Day, 73 NY2d 629, 633 [1989]; Uhr, 94 NY2d at 38; Hammer v American Kennel Club, 1 NY3d 294, 299 [2003]; McLean v City of New York, 12 NY3d 194, 200 [2009]). In such cases we consider “ ‘(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme” (see Hammer, 1 NY3d at 299, quoting Carrier v Salvation Army, 88 NY2d 298, 302 [1996]).

With respect to the public health, the Legislature’s passage of section 1399-ll was predominantly intended to “prevent young people in New York from becoming addicted to cigarettes” (see Senate Introducer Mem in Support, Bill Jacket, L 2000, ch 262, at 6 [2000 McKinney’s Session Laws of NY, at 1707]; see also id. at 3 [2000 Session Laws at 1704] [“These amendments will prevent underage youths from obtaining cigarettes, and in effect, require that all purchases be made face-to-face in retail stores where proof of age can be ascertained”]; Mem of State of NY Dept of Public Health, Bill Jacket, L 2000, ch 262, at 17; Sting’s smoking gun, New York Daily News, July 14, 2000, Bill Jacket, L 2000, ch 262, at 51 [describing Department of Consumer Affairs investigation in which “a 7-year-old boy bought cigarettes over the Internet three times”]). Although our State has stringent proof-of-age requirements intended to prevent persons under the age of 18 from purchasing cigarettes (see Public Health Law § 1399-cc), by 2000, it had become apparent that certain minors were circumventing those measures by making purchases from mail order or Internet cigarette retailers (see Senate Introducer Mem in Support, Bill Jacket at 6 [2000 Session Laws at 1707]). As explained in section 1399-ll’s Bill Jacket:

“[P]ersons under 18 often receive cigarettes by mail-order or Internet purchases from out-of-state vendors or unlicensed in-state vendors.
“Recognizing this problem and the proliferation of Internet sales, this bill would make it unlawful for persons who sell cigarettes to ship or cause cigarettes to be shipped to any person in the State [who does not fall within the three exceptions codified in section 1399-ll (1)]. Further, the bill would make it unlawful for a common or contract carrier to knowingly transport cigarettes to ... a person in this State reasonably believed by such carrier to be a person other than a person authorized to receive cigarettes. With few exceptions, cigarette consumers will thus have to purchase their cigarettes at a registered retail dealer’s place of business. As a result, these amendments would ensure that the Public Health Law’s proof of age requirements would not be evaded by underage purchasers. Further, the State’s Cigarette Marketing Standards Act (CMSA) in Article 20-A of the Tax Law, which provides minimum prices for sales of cigarettes in the State in conjunction with the State’s tax on cigarettes, would not be avoided, thereby further discouraging smoking among persons under 18” (id. [emphasis added]).

Even assuming that the City may be included within the class of persons whom the Legislature had in mind when enacting section 1399-ll and that a public nuisance action may in some cases further the legislative purpose, permitting the present public nuisance actions to proceed would not be consistent with the legislative scheme. To be sure, the penalties authorized by section 1399-ll take aim at tax evasion, albeit primarily to deter underage smoking (see Senate Introducer Mem in Support, Bill Jacket at 6 [2000 Session Laws at 1707]). But enforcement of those penalties has been entrusted to local district attorneys and the Commissioner of Health (see § 1399-ll [5]). When it enacted the criminal and civil penalties contained in section 1399-ll (5), the Legislature also codified a series of amendments intended to “strenghten[ ] existing civil and criminal penalties” that already punished cigarette tax evasion, or “bootlegging” (see Senate Introducer Mem in Support, Bill Jacket at 6-7 [2000 Session Laws at 1707]; see also Budget Report on Bills, Bill Jacket, L 2000, ch 262, at 13-14 [listing amendments to previously enacted laws]). Thus, the City’s alleged injury—lost tax revenue—is a harm that is subject to thorough regulation, both by section 1399-ll as well as other laws not implicated here.

When considering similarly comprehensive enforcement schemes, we have declined to imply a private right of action (see Hammer, 1 NY3d at 300; McLean, 12 NY3d at 200-201; Uhr, 94 NY2d at 40). The presence of such a scheme here, when coupled with the Legislature’s clear expressions that the public health thrust of section 1399-ZZ was related to the prevention of underage smoking, persuades us that the Legislature did not intend its findings to authorize a public nuisance claim based primarily upon alleged tax evasion (cf. Fumarelli, 92 NY2d at 307 [“The history, timing, wording, and breadth of the statutory enactment all indicate that the Legislature did not intend an overlapping dual track that would engender confusion, indefiniteness, and lawsuits”]).

Accordingly, the certified questions should be answered in the negative.

Chief Judge Lippman and Judges Graffeo, Read, Smith, Pigott and Jones concur.

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 the Rules of Practice of the New York State Court of Appeals (22 NYCRR 500.27), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in the negative.

      . At the inception of these lawsuits, New York City residents paid $3 in combined city and state excise taxes and another 33 cents in combined sales taxes for each pack of cigarettes purchased. While the City’s excise tax remains $1.50, the Legislature recently amended Tax Law § 471 to increase the State’s excise tax to $2.75, bringing the combined excise taxes payable in New York City up to $4.25 (see Tax Law § 471 [1]; Administrative Code of City of NY § 11-1302 [a] [3]).

      . On May 4, 2009, the United States Supreme Court granted two defendants’ petition for a writ of certiorari, which sought review of the Second Circuit’s ruling regarding claims brought by the City under the federal Racketeer Influenced and Corrupt Organizations Act (see Hemi Group, LLC v City of New York, — US —, 129 S Ct 2159 [2009]). As the resolution of those federal claims does not affect our consideration of the City’s relevant pendent state claims—which invoked the federal district court’s diversity jurisdiction (see 28 USC § 1332)—we proceed to answer the questions certified to us by the Second Circuit.

      . We have cited Securitron for the proposition that the class of persons accorded standing under 349 (h) is not necessarily limited to “consumers” (see Blue Cross, 3 NY3d at 207). The present case offers no occasion for us to opine upon the classes of potential plaintiffs who may or may not have standing to sue under section 349 (h). We note, however—as we have in the past— that there is some legislative history supporting the position that business competitors have standing under the statute (see Blue Cross, 3 NY3d at 207, citing May 21, 1980 Mem of Atty Gen, Bill Jacket, L 1980, ch 346; Special Comm on Consumer Affairs of Assn of Bar of City of NY, “Private Right of Action” Proposals, Bill Jacket, L 1980, ch 346 [“permitting suits by either consumers or competitors . . . would help to police the marketplace against misrepresentations which constitute deception against the consumer and unfair competition with firms not engaging in such practices”]; see also Givens, Practice Commentaries, McKinney’s Cons Laws of NY, Book 19, General Business Law § 349, at 565 [1988 ed] [“In addition to consumers, . . . competitors . . . are given the right to sue by (General Business Law) §§ 349 (h) and 350-d as an additional enforcement measure”]).

      . The City’s public nuisance claims were brought against certain defendants who have elected not to appear before us for oral argument or to submit a brief for our review. We do not consider these claims moot since we have no indication that they are not presently the subject of a live controversy (see Saratoga County Chamber of Commerce v Pataki, 100 NY2d 801, 812 [2003] [“Where, as here, a judicial determination carries immediate, practical consequences for the parties, the controversy is not moot”]). Similarly, because our decision will have an effect on the City’s public nuisance claims, the second certified question is not academic (compare Blue Cross, 3 NY3d at 209). Moreover, while it is unfortunate that the relevant defendants did not appear, in this case their arguments can be sufficiently assessed based on the briefs filed in the Second Circuit, which are part of the record before us (see 541 F3d 425, 458 [2d Cir 2008]; 22 NYCRR 500.27 [c]).

      . We acknowledge that a different result might be reached if the City’s complaint alleged that defendants had made unauthorized shipments to minors (cf. City of New York v Milhelm Attea & Bros., Inc., 550 F Supp 2d 332, 349 [ED NY 2008] [finding public nuisance claim viable in action against cigarette wholesalers where City alleged “that sellers of unstamped cigarettes are ‘major suppliers’ to underage smokers, and these sellers fail to comply with N.Y. Public Health Law § 1399-cc (3), which requires proof of age”]). But no such allegations appear in the complaints here.


author: Smith, J.

text:
    [911 NE2d 847, 883 NYS2d 785]
    Lewis J. Bazakos, Respondent, v Philip Lewis, Appellant, et al., Defendants.
    Argued and submitted June 3, 2009;
    decided June 24, 2009

      POINTS OF COUNSEL

      Kopff, Nardelli & Dopf LLP, New York City (Peter C. Kopff and Martin B. Adams of counsel), for appellant.
    I. This action is time-barred by the 2½-year time period applicable to medical malpractice actions, as the claims implicate medical skills and medical judgment, and the independent medical examination was substantially similar to the rendition of medical diagnostic services. (Scott v Uljanov, 74 NY2d 673; Miller v Albany Med. Ctr. Hosp., 95 AD2d 977; Smith v Pasquarella, 201 AD2d 782; Twitchell v MacKay, 78 AD2d 125; Evangelista v Zolan, 247 AD2d 508; Savarese v Allstate Ins. Co., 287 AD2d 492.) II. The expectation of the parties to an independent medical examination is that a limited physician-patient relationship exists. (Violandi v City of New York, 184 AD2d 364; Smith v Pasquarella, 201 AD2d 782; Twitchell v MacKay, 78 AD2d 125; Sosnoff v Jackman, 45 AD3d 568; Payette v Rockefeller Univ., 220 AD2d 69; People v Sliney, 137 NY 570; Cubito v Kreisberg, 69 AD2d 738, 51 NY2d 900.) III. Public policy supports a finding that the statute of limitations applicable to a medical malpractice action applies to a claim of injuries sustained during the course of an independent medical examination.

      Ralph A. Hummel, Woodbury, for respondent.
    Without a physician-patient relationship, there can be no medical malpractice. (Cubito v Kreisberg, 69 AD2d 738, 51 NY2d 900; Savarese v Allstate Ins. Co., 287 AD2d 492; People v Sliney, 137 NY 570.)
   OPINION OF THE COURT

Smith, J.

We hold that a claim against a doctor for his alleged negligence in performing an independent medical examination (IME) is a claim for malpractice, governed by CPLR 214-a’s two-year-and-six-month statute of limitations.

I

Lewis Bazakos, plaintiff in this case, was also the plaintiff in a previously-brought action arising out of an automobile accident. In that action, Bazakos was required, pursuant to CPLR 3121, to undergo an examination, commonly called an IME, by a doctor designated by the adverse party. The person Bazakos sued designated Dr. Philip Lewis, and Lewis examined Bazakos on November 27, 2001.

On October 15, 2004, approximately 2 years and 11 months later, Bazakos commenced this action against Lewis. The complaint alleges that Lewis injured Bazakos during the IME when he “took plaintiff’s head in his hands and forcefully rotated it while simultaneously pulling.”

Lewis moved to dismiss the case as barred by the statute of limitations. Supreme Court granted the motion (2006 NY Slip Op 30401[U]), relying on the Appellate Division, Second Department’s decision in Evangelista v Zolan (247 AD2d 508 [2d Dept 1998]). On Bazakos’s appeal, the Appellate Division, with two Justices dissenting, overruled Evangelista and reversed Supreme Court, holding the action to be timely (Bazakos v Lewis, 56 AD3d 15 [2d Dept 2008]). The Appellate Division majority concluded that, because the doctor performing an IME and the person undergoing it do not have a physician-patient relationship, the action was not “for medical . . . malpractice” (CPLR 214-a) and was therefore governed by the three-year statute applicable to personal injury actions generally (CPLR 214 [5]). The dissenting Justices, relying on Evangelista and Twitchell v MacKay (78 AD2d 125 [4th Dept 1980]), argued that a “limited” physician-patient relationship exists between the examining doctor at an IME and the person examined, and that the action should therefore be considered one for malpractice (56 AD3d at 24).

The Appellate Division granted Lewis leave to appeal, certifying the question of whether its order was properly made. We answer the question in the negative and reverse.

II

Bazakos’s argument, which the Appellate Division accepted, is a simple one: He says that medical malpractice is a breach of a doctor’s duty to provide his or her patient with medical care meeting a certain standard; that Lewis was not Bazakos’s doctor, and Bazakos was not Lewis’s patient; and that therefore the negligence of which Lewis is accused cannot be medical malpractice. He points out that the relationship between the doctor and the person the doctor examines at an IME is essentially adversarial; the person examined is required by law to submit to a procedure performed for the benefit of a party seeking to defeat that person’s legal claim. The Appellate Division majority quoted the observation in Payette v Rockefeller Univ. (220 AD2d 69, 72 [1st Dept 1996]) that “the existence of a physician-patient relationship” is “essential to a cause of action in malpractice” (56 AD3d at 19).

There is some logic to Bazakos’s position, but the result he seeks would be an arbitrary one. Bazakos, like any medical malpractice plaintiff, claims he was injured because a doctor failed to perform competently a procedure requiring the doctor’s specialized skill; Lewis, like any medical malpractice defendant, is called upon to defend his performance of professional duties. This case is not like Payette, in which a volunteer participant in a diet study at Rockefeller University complained of the University’s “alleged negligent creation and implementation of its diet research program” (220 AD2d at 72). The act on which Bazakos’s lawsuit is based—Lewis’s manipulation of a body part of a person who came to his office for a physical examination—constitutes “medical treatment by a licensed physician,” and the negligent performance of that act is not ordinary negligence, but a prototypical act of medical malpractice (Weiner v Lenox Hill Hosp., 88 NY2d 784, 788 [1996], quoting Bleiler v Bodnar, 65 NY2d 65, 72 [1985]). We see no good reason why the statute of limitations should be longer than it would be if Lewis were accused of making exactly the same error on a patient who came to him for consultation or care.

CPLR 214-a, creating a statute of limitations for certain forms of professional malpractice that is six months shorter than the ordinary personal injury statute, was part of a package of legislation passed in 1975 in response “to a crisis in the medical profession posed by the withdrawal and threatened withdrawal of insurance companies from the malpractice insurance market” (Bleiler, 65 NY2d at 68). The purpose of the legislative package was to enable “health care providers to get malpractice insurance at reasonable rates” (id., quoting Mem of State Exec Dept, 1975 McKinney’s Session Laws of NY, at 1601-1602). It is unlikely, in our judgment, that the Legislature would have found less reason to make insurance available to doctors performing IMEs than to those practicing medicine in more traditional contexts, or that it intended any distinction between the two.

We agree with the dissenting Justices at the Appellate Division that the relationship between a doctor performing an IME and the person he is examining may fairly be called a “limited physician-patient relationship”—indeed, this language is used in an American Medical Association opinion describing the ethical responsibilities of a doctor performing an IME (AMA Council on Ethical and Judicial Affairs, Code of Medical Ethics, Ops on Patient-Physician Privilege E-10.03). As the Michigan Supreme Court has explained, this relationship:

“is not the traditional one. It is a limited relationship. It does not involve the full panoply of the physician’s typical responsibilities to diagnose and treat the examinee for medical conditions. The IME physician, acting at the behest of a third party, is not liable to the examinee for damages resulting from the conclusions the physician reaches or reports. The limited relationship that we recognize imposes a duty on the IME physician to perform the examination in a manner not to cause physical harm to the examinee.” (Dyer v Trachtman, 470 Mich 45, 49-50, 679 NW2d 311, 314-315 [2004].)

Bazakos’s claim here is that Lewis breached his duty “to perform the examination in a manner not to cause physical harm to the examinee.” That is a claim for medical malpractice, and it is governed by the two-year-and-six-month statute of limitations. Therefore, Bazakos’s lawsuit was not timely.

Accordingly, the order of the Appellate Division should be reversed, with costs, the order of Supreme Court reinstated and the certified question answered in the negative.

Chief Judge Lippman (dissenting). During a physical exam compelled by the court upon the application of plaintiffs adversary in separate personal injury litigation (see CPLR 3102 [a]; 22 NYCRR 202.17), defendant Dr. Lewis, the examiner designated by plaintiffs adversary to perform the exam, is alleged to have “[taken] plaintiffs head in his hands and forcefully rotated it while simultaneously pulling.” Some 2 years and 11 months later, plaintiff commenced this action alleging that Lewis’s manipulation of his head caused him injury. The complaint purports to sound in ordinary negligence. Defendant, however, contends that what is alleged is not simple negligence but medical malpractice. The distinction relied on by defendant, although not marked by a “rigid analytical line”—medical malpractice being but a form of negligence (Scott v Uljanov, 74 NY2d 673, 674 [1989]; see Weiner v Lenox Hill Hosp., 88 NY2d 784, 787-788 [1996])—is here of pivotal import since plaintiffs claim would be timely as one for simple negligence (see CPLR 214), but would be barred under the shorter limitations period applicable to claims for medical malpractice (see CPLR 214-a).

Contrary to the impression that might be produced by the majority writing, the issue of whether allegedly tortious conduct is for statute of limitations purposes to be deemed medical malpractice or ordinary negligence is not new to this Court. Nor is it one whose disposition is ungoverned by settled principles. We have held clearly and repeatedly that “[c]onduct may be deemed malpractice, rather than negligence, when it ‘constitutes medical treatment or bears a substantial relationship to the rendition of medical treatment by a licensed physician’ ” (Scott, 74 NY2d at 674-675, quoting Bleiler v Bodnar, 65 NY2d 65, 72 [1985] [emphasis added]; accord Weiner, 88 NY2d at 787-788). Here, although Lewis may have employed medical techniques in examining plaintiff, it is plain that no medical treatment was intended or in fact provided. The exam was conducted simply as a disclosure device in litigation and, indeed, one whose benefit inured not to the examinee but to the examinee’s adversary. Bereft of any medical treatment rationale or application, Lewis’s conduct during his examination of plaintiff is not amenable to description as medical malpractice within the meaning of CPLR 214-a.

This conclusion, of course, is entirely consistent with the purpose of CPLR 214-a’s abbreviated limitations period, which was not to afford those providing litigation support services a measure of protection against liability, but to address the threat to the health and welfare of New Yorkers posed by the “inability of health care providers to get malpractice insurance at reasonable rates” and to help assure that “the adequate delivery of health care services” would not be impaired (Mem of State Exec Dept in Support of L 1975, ch 109, 1975 McKinney’s Session Laws of NY, at 1601-1602 [emphasis added]).

While the majority supposes it unlikely that the Legislature “would have found less reason” (majority op at 635) to extend similar protection to doctors not engaged in the provision of medical treatment, the basis for the supposition is far from evident. Indeed, there would appear to be ample reason to treat the two groups of practitioners quite differently. The risks facing a medical clinician diagnosing and treating a patient are of an entirely different order of magnitude than those ordinarily encountered by a medical examiner in a nontreatment context. The situation at bar is illustrative of this disparity. It is conceded that Dr. Lewis’s duty towards his examinee was no more extensive than that of refraining from harming him during the exam; he had no medical duty competently to diagnose, inform or, indeed, to treat the subject of his exam. Such an extraordinarily limited scope of professional responsibility stands in sharp contrast to the enormous risks and obligations routinely encountered by physicians providing actual patient care and treatment. While a shortened limitations period may, at the time of CPLR 214-a’s enactment, reasonably have been thought necessary to the continued insurability of the latter group of medical practitioners on economically feasible terms, there exists no plausible argument that parity of protection was ever thought necessary to the insurability of practitioners not engaged in the provision of medical treatment.

The majority’s embrace of the novel and highly problematic notion that there may be medical malpractice in the absence of medical treatment evidently proceeds from the conviction that the same conduct by a doctor should not be deemed malpractice in one context and negligence in another. Yet, in postulating that a medical examiner, such as defendant, undertakes a limited duty to the examinee not involving “ ‘the full panoply of the physician’s typical responsibilities to diagnose and treat’ ” (majority op at 635, quoting Dyer v Trachtman, 470 Mich 45, 50, 679 NW2d 311, 314 [2004]), the majority must accept what it purports to reject, namely, that what will be malpractice in the context of ongoing medical treatment may not, no matter how glaring the breach, be malpractice in the context of an exam understood by the parties thereto to have no medical treatment objective. Indeed, most of what would be malpractice in the former context is not even actionable in the latter.

Context cannot be consigned to irrelevance, even in the case of what would be “prototypical malpractice.” We have held as much. In Weiner, where the defendant hospital, intent on having its negligence deemed malpractice so as to avail itself of the medical malpractice limitations period, urged that the failure of its physician properly to supervise blood collection could not be viewed except as a breach of his obligations as a physician, we replied,

“although the Hospital correctly points out that a physician must supervise the process of blood collection (see, e.g., 10 NYCRR 58-2.1 [s]; 58-2.2 [a]), this requirement does not resolve the question of whether the challenged conduct ‘bears a substantial relationship to the rendition of medical treatment’ to a particular patient, which remains the determinative question on appeal” Weiner, 88 NY2d at 788, quoting Bleiler v Bodnar, 65 NY2d at 72).

Here, of course, there was actual contact between plaintiff and physician, but that factual distinction between this case and Weiner is one that should possess no dispositive significance. Propinquity, particularly in what is essentially an adversarial situation between an examiner and his or her subject, is not to be confounded with medical treatment. Here, as in Weiner, there was no treatment, and that should be “determinative.”

While I agree that Lewis in undertaking to examine plaintiff assumed a duty not to harm him in the process, the breach of such a duty would not sound in medical malpractice. The very limited duty arising in this situation bears not the slightest resemblance to the very much more comprehensive set of responsibilities devolving upon a practitioner engaged in treatment—the defining set of responsibilities contemplated by the Hippocratic injunction to do no harm. The duty here implicated does not arise from what is reasonably susceptible of characterization as a doctor-patient relationship, i.e. a treatment relationship; it is simply an instance of the general obligation, frequently enforceable in tort, to refrain from causing foreseeable harm. That is ordinary negligence. It is today denominated “medical malpractice” only by dint of an exercise in judicial artifice untethered to any law or to the actual nature of the transaction known euphemistically as an “independent” medical examination. These exams, far from being independent in any ordinary sense of the word, are paid for and frequently controlled in their scope and conduct by legal adversaries of the ex-aminee. They are emphatically not occasions for treatment, but are most often utilized to contest the examinee’s claimed injury and to dispute the need for any treatment at all. Indeed, according to the Guidelines of Conduct of the American Board of Independent Medical Examiners, the examiner at the exam should “advise the examinee that no treating physician-patient relationship will be established” (http://abime.org/node/21, accessed June 19, 2009). The majority’s bare assertion that medical treatment is compatible with this context is merely a form of words. Describing the sliver of a duty that an examiner has during an exam not to harm the examinee as arising from a “limited physician-patient relationship” will be recognized, given the reality it purports to describe, as no more than a device to avail a litigant of a statutory bar.

The cause of action the majority now recognizes for medical malpractice is not only stillborn in this action, but, I will venture, will never possess viability as an actual claim for relief. I am confident that the majority has not the slightest intention to open the vistas of malpractice so wide as to actually permit such claims in the absence of anything cognizable as treatment. What is involved then is simply the arbitrary creation of an exception for a group of practitioners who, as a group, neither seek nor are entitled to the protection properly afforded and reserved to those engaged in the delivery of medical care and treatment.

The well considered decision of the Appellate Division should be affirmed.

Judges Ciparick, Graffeo and Read concur with Judge Smith; Chief Judge Lippman dissents and votes to affirm in a separate opinion in which Judges Pigott and Jones concur.

Order reversed, etc.


author: Graffeo, J.

text:
    [912 NE2d 43, 884 NYS2d 211]
    MHR Capital Partners LP et al., Appellants, v Presstek, Inc., Respondent, et al., Defendant.
    Argued June 3, 2009;
    decided June 24, 2009

      POINTS OF COUNSEL

      Kasowitz, Benson, Torres & Friedman LLP, New York City (Michael M. Fay, David S. Rosner, Michael P. Bowen and Kim Conroy of counsel), for appellants.
    I. The Appellate Division majority erred in ruling that Key Corporate Capital, Inc.’s failure to sign the ambiguous and contradictory consent entitles Presstek, Inc. to summary judgment. (ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484; Kooleraire Serv. & Installation Corp. v Board of Educ. of City of N.Y., 28 NY2d 101; Young v Hunter, 6 NY 203; Roberts v Gin Realty Corp., 185 AD2d 209; Cauff, Lippman & Co. v Apogee Fin. Group, Inc., 807 F Supp 1007; Rachmani Corp. v 9 E. 96th St. Apt. Corp., 211 AD2d 262; Bank of Tokyo-Mitsubishi, Ltd., N.Y. Branch v Kvaerner a.s., 243 AD2d 1; Muzak Corp. v Hotel Taft Corp., 1 NY2d 42; Leberman v John Blair & Co., 880 F2d 1555; SOS Oil Corp. v Norstar Bank of Long Is., 76 NY2d 561.) II. Presstek, Inc.’s other grounds for summary judgment are also meritless. (Schuylkill Fuel Corp. v Nieberg Realty Corp., 250 NY 304; Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343; Nationwide Mech. Contrs. Corp. v Hokkaido Takushoku Bank, 188 AD2d 871; Newin Corp. v Hartford Acc. & Indem. Co., 37 NY2d 211; Matter of Halyalkar v Board of Regents of State of N.Y., 72 NY2d 261; 2018 Seventh Ave. v Nach-Haus Leasing Corp., 289 NY 490; Ross v Medical Liab. Mut. Ins. Co., 75 NY2d 825; In re Abbotts Dairies of Pa., Inc., 788 F2d 143; Staatsburg Water Co. v Staatsburg Fire Dist., 72 NY2d 147; Matter of Reilly v Reid, 45 NY2d 24.)

      Hartman & Craven LLP, New York City (Victor M. Metsch and Colleen D. Dalton of counsel), for respondent.
    I. MHR Capital Partners LR MHR Institutional Partners LR MHRM LP and MHR Fund Management LLC’s purported claims were barred by the doctrines of res judicata and collateral estoppel. (O’Brien v City of Syracuse, 54 NY2d 353; Sosa v JP Morgan Chase Bank, 33 AD3d 609; Matter of Reilly v Reid, 45 NY2d 24; Fifty CPW Tenants Corp. v Epstein, 16 AD3d 292; Matter of Hunter, 4 NY3d 260; Castellano v City of New York, 251 AD2d 194; Baldo v Marine Midland Bank, 219 AD2d 807; Brown v Suggs, 39 AD3d 395; Board of Mgrs. of Bedford Mews Condominium v Nasr, 37 AD3d 506; Ebanks v 547 W. 147th St. Hous. Dev. Fund Corp., 37 AD3d 290.) II. MHR Capital Partners LR MHR Institutional Partners LR MHRM LP and MHR Fund Management LLC (MHR) lacked standing to sue, and, in any event, MHR failed to join necessary and indispensable parties. (Matter of New York State Assn. of Plumbing-Heating-Cooling Contrs. v Egan, 86 AD2d 100; Schulz v State of New York, 160 Misc 2d 741; Matter of Martin v Ronan, 47 NY2d 486; Migliore v Manzo, 28 AD3d 620.) III. MHR Capital Partners LR MHR Institutional Partners LR MHRM LP and MHR Fund Management LLC did not have a legally cognizable claim against Presstek, Inc. (Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685; Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106; DBT GmbH v J.L. Min. Co., 544 F Supp 2d 364; Roan/Meyers Assoc., L.P. v CT Holdings, Inc., 26 AD3d 295; Azimut-Benetti S.p.A. v Magnum Mar. Corp., 55 AD3d 483; Jim Ball Chrysler LLC v Marong Chrysler-Plymouth, Inc., 17 AD3d 1113; ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484; Marcantonio v Rousso, 257 AD2d 650; Matter of Bangor Punta Operations v Carnaby Knitting Corp., 29 NY2d 858; WWW Assoc. v Giancontieri, 77 NY2d 157.)
   OPINION OF THE COURT

Graffeo, J.

In this breach of contract action, we conclude that defendant’s obligation to perform under a stock purchase agreement did not arise because an express condition precedent was not fulfilled. We therefore affirm the order of the Appellate Division so holding.

In 2003, defendant Presstek, Inc. and its wholly owned subsidiary, defendant Silver Acquisitions Corp., entered into discussions to purchase A.B. Dick Company (ABD)—a financially distressed graphic arts and printing supplier—from its parent corporation, Paragon Corporate Holdings, Inc. The negotiations culminated in a June 2004 stock purchase agreement, which provided that Paragon would receive $24 million in cash and approximately $20 million worth of Presstek’s stock in exchange for ABD’s stock. Under an ancillary agreement incorporated into the stock purchase agreement, plaintiffs MHR Capital Partners LP and its affiliates (collectively, MHR)—major creditors of ABD—agreed to the terms of the stock purchase arrangement and waived their rights in return for the payment of over $10 million in cash and stock from Presstek.

On June 16, 2004, Presstek, Silver, ABD, Paragon and MHR executed a separate escrow agreement that required the stock purchase agreement and related documents to be placed in escrow and released upon the occurrence of certain conditions. Specifically, the escrowed materials were not to be released “unless and until” Key Corporate Capital, Inc. (Key Bank), ABD’s lender, consented to the stock purchase transaction “on the terms and conditions contained herein.” Further, the escrow agreement obligated Paragon to obtain Key Bank’s approval before “the close of business on June 22, 2004,” together with the bank’s execution of a consent form annexed to the escrow agreement. The escrow agreement stated that Presstek was to destroy or return the escrowed documents deemed “null and void” if Key Bank did not sign the consent form by June 22.

In the consent document, Presstek agreed to satisfy ABD’s outstanding indebtedness with a combination of cash and Presstek stock (rather than cash only) and Key Bank was required both to continue funding ABD “by increasing its total aggregate lending commitment to [Paragon] as necessary to ensure adequate funding for [ABD] through the closing” and forbear from declaring any default under its loan agreement with ABD until the deal closed. Key Bank, however, refused to execute the consent form. Instead, on June 22, 2004, Key Bank faxed a one-page letter to Presstek that “consent[ed]” to the transaction, but included terms that differed from some of the requirements in the consent form. In particular, Key Bank did not consent to fund ABD “as necessary,” nor did it agree not to declare a default. Presstek terminated the stock purchase transaction later that day.

The following month, Presstek and Silver entered into a more lucrative asset purchase agreement with ABD and Paragon. The new agreement contained no provision for Presstek’s satisfaction of ABD’s outstanding indebtedness to MHR. As required by this new agreement, ABD filed for bankruptcy in Delaware. Paragon applied to the United States Bankruptcy Court for the District of Delaware for an order authorizing the sale of ABD’s assets to Presstek pursuant to an auction process that would allow third parties to offer higher bids. MHR filed objections to the auction sale of ABD’s assets on the basis that Presstek and Silver were not “good faith” purchasers within the meaning of 11 USC § 363 (m).

After an evidentiary hearing, the Bankruptcy Court overruled MHR’s objections and approved the sale. The United States District Court for the District of Delaware dismissed MHR’s appeal as moot because MHR had failed to seek a stay. The District Court also noted that, in any event, Presstek’s pre-bankruptcy proceeding behavior had no bearing on whether it was a good faith purchaser under the Bankruptcy Code.

In February 2005, MHR commenced this action for breach of contract against Presstek and Silver, alleging that they improperly terminated the stock purchase agreement. The complaint seeks $14 million in damages. Following discovery, Presstek moved for summary judgment dismissing the complaint.

Supreme Court granted the motion and dismissed the complaint, concluding that the Bankruptcy Court’s approval of the sale of ABD’s assets over MHR’s objections precluded this breach of contract action under principles of res judicata and collateral estoppel (see 2007 NY Slip Op 32322[U]). The Appellate Division, with two Justices dissenting, affirmed, albeit on a different ground (55 AD3d 12 [1st Dept 2008]). The majority held that Key Bank’s failure to sign the consent form by June 22, 2004, which it characterized as a condition precedent, relieved Presstek of any obligation to close under the stock purchase agreement. The dissent would have reinstated the complaint, finding an issue of fact as to whether Presstek had improperly prevented Key Bank from executing the consent form. MHR appeals as of right based on the two-Justice dissent pursuant to CPLR 5601 (a).

MHR urges three grounds for reversal and reinstatement of its breach of contract claim. First, MHR contends that the escrow agreement is ambiguous and that Key Bank’s approval was not a condition precedent. In a related vein, MHR argues that Key Bank’s June 22 fax was an adequate approval and that any differences in terms between the consent form and fax are immaterial. Second, MHR submits that the consent form improperly added conditions not contemplated by the stock purchase agreement. Third, MHR asserts that, even if Key Bank’s approval of the transaction was a condition precedent, a question of fact exists as to whether Presstek actively interfered with Key Bank’s execution of the consent form.

It is well settled that a contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself. Consequently, “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” (Greenfield v Philles Records, 98 NY2d 562, 569 [2002]). Furthermore, a condition precedent is “an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises” (Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 [1995] [internal quotation marks and citations omitted]). We have recognized that the use of terms such as “if,” “unless” and “until” constitutes “unmistakable language of condition” (id. at 691). Express conditions must be literally performed; substantial performance will not suffice.

Here, pursuant to the escrow agreement, the contract documents were not to be released “unless and until” Key Bank consented to the deal “on the terms and conditions” outlined in the agreement. Among those terms and conditions was the requirement that Key Bank manifest its approval through its execution of the accompanying consent form by June 22, 2004. Upon the failure of Key Bank to accept the terms of the consent form by that date, Presstek was authorized to destroy or return the stock purchase agreement and annexed documents, all of which then became “null and void.” Based on this clear and unambiguous language, we conclude that Key Bank’s approval of the stock purchase transaction by the fixed date—through its execution of the consent form—was an express condition precedent.

It is uncontested that Key Bank did not sign the consent form. Moreover, Key Bank’s June 22 fax, presenting a more limited acceptance, did not fulfill the explicit requirement that Key Bank execute and agree to all of the terms contained in the consent form, as required by the escrow agreement. Hence, Key Bank did not perform the express condition.

To the extent MHR complains that the consent form imposed additional burdens on Key Bank not originally contemplated by the stock purchase agreement, we concur with the Appellate Division majority’s view that MHR’s time to voice its displeasure with the wording and requirements of the documents expired when it accepted and signed the escrow agreement. Each of the parties to the escrow agreement, including MHR, was a sophisticated business entity represented by counsel, and the agreement, negotiated at arm’s length, incorporated the annexed consent form and plainly required Key Bank to sign it (see generally Innophos, Inc. v Rhodia, S.A., 10 NY3d 25, 29 [2008]). That the consent form obligated Key Bank to refrain from declaring a default and increase its lending commitment to Paragon “as necessary to ensure adequate funding”—requirements viewed in hindsight as overly burdensome by MHR—is therefore irrelevant.

Finally, MHR correctly observes that a “party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition” (ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484, 490 [2006] [internal quotation marks and citation omitted]). But MHR failed to raise a question of fact in this regard. Critically, the escrow agreement placed the burden on Paragon— not Presstek—to obtain Key Bank’s consent by June 22. Nevertheless, Presstek met with Key Bank’s representative before that date and at that time Key Bank had the consent form in its possession, but refused to sign it on the basis that it considered its terms too onerous. The fact that Presstek entered into a more favorable arrangement to buy ABD’s assets shortly after the stock purchase transaction fell apart does not, by itself, raise an issue of fact as to whether it prevented Key Bank from signing the consent form.

Because we agree with the Appellate Division majority that Presstek had no duty to proceed with the stock purchase agreement due to the nonperformance of an express condition, namely, Key Bank’s failure to execute the consent form, we do not reach Presstek’s alternative grounds for affirmance.

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

Chief Judge Lippman and Judges Ciparick, Read, Smith, Pigott and Jones concur.

Order affirmed, with costs.

      . According to MHR, it received only $175,000 for its ABD notes as a result of the bankruptcy proceeding.

      . Supreme Court dismissed the complaint as against Silver for lack of personal jurisdiction.