No Collateral Estoppel From Prior Default Judgments Against Assignors

NO-FAULT – STAGED EVENT DEFENSE – PRIVITY – COLLATERAL ESTOPPEL – ADMISSIBILITY & USE OF ASSIGNOR EUO TRANSCRIPTS
Rizz Mgt. Inc. a/a/o Jose Fernandez v. State Farm Mut. Auto. Ins. Co.
(Dist. Ct., Nassau Co., decided 6/17/2008)

Just under 9¢ per word. That's the amount of potential recovery the court's carefully reasoned denial of summary judgment to State Farm in this case preserved for the plaintiff.

Rizz sued for $200 in unpaid bills related to services rendered to assignor Fernandez for injuries he allegedly sustained in a January 11, 2002 accident. State Farm moved for summary judgment, arguing: (1) that plaintiff was collaterally estopped from contesting that the January 11, 2002 incident was a staged event based on default judgments State Farm had obtained against assignor Fernandez and others in two prior Supreme Court special proceedings; and (2) that it had submitted sufficient evidence on its motion for the court itself to determine, as a matter of law, that the alleged accident of January 11, 2002 was no accident at all, but a staged event.

In rejecting State Farm's collateral estoppel argument, Nassau County District Court Judge Andrew Engel held that although there was identity of issue -- i.e., whether the alleged accident of January 11, 2002 was a staged event -- that issue was not previously decided against either the plaintiff or one then in privity with the plaintiff, and was not "necessarily decided" in the prior proceedings that concluded with default judgments.

On the privity issue, Judge Engel explained:

"In the assignor-assignee relationship, privity must have arisen after the event out of which the estoppel arises. Hence, an assignee is deemed to be in privity with the assignor where the action against the assignor is commenced before there has been an assignment." (citations omitted). Given the fact that it is the Defendant's burden to demonstrate "that the decisive issue was necessarily decided in the prior action against a party, or one in privity with a party[,]" (citations omitted) before collateral estoppel will apply, it is incumbent upon the Defendant to provide proof of when the assignment herein took place. The Defendant, however, has not done so. Moreover, it would appear from the dates of treatment, February 1, 2002 and April 18, 2002, that if there was in fact an assignment of benefits, it occurred prior to the commencement of the special proceedings upon which the Defendant relies, the petitions for which are dated December 2, 2002.

On the question of whether the staged event issue had been "necessarily decided" in the prior special proceedings, the court ruled:

Even more problematic for the Defendant is the fact that the two determinations upon which it relies were rendered on the default of the respondents therein. Before collateral estoppel will apply, the issue in dispute must have been "actually litigated and determined" in the prior action. (citations omitted). As the Court of Appeals has decisively stated in Kaufman v. Eli Lilly and Company, 65 NY2d 449, 492 NYS2d 584 (1985), "If the issue has not been litigated, there is no identity of issues between the present action and the prior determination. An issue is not actually litigated if, ... there has been a default..." (citations omitted).

The Defendant having failed to demonstrate that the Plaintiff herein was in privity with its assignor in the prior proceedings upon which the Defendant relies, and the prior proceedings having resulted in orders entered on default, they shall not be given preclusive effect in the matter presently before this court.

Turning next to State Farm's evidentiary submissions in support of its motion for summary judgment, the court found numerous deficiencies in State Farm's papers, including: the affidavit of State Farm's investigator "ma[de] it clear" that she lacked personal knowledge and was based on inadmissible hearsay statements and documents for which no proper foundation for admission had been laid; the EUO transcripts of plaintiff's assignor and other occupants of the vehicle in which he was a passenger were "of extremely poor quality and largely illegible"; the EUO transcripts were neither signed nor verified; State Farm had not demonstrated any formal requirements for the taking of the individuals' alleged testimony sufficient to assure their accuracy; and "[n]otably absent" from the EUO transcripts were certifications as to the transcripts' accuracy, executed by the notary public who purportedly took the testimony.

Although Judge Engel found that State Farm's "attempt to submit the transcripts of these examinations is not barred by the hearsay rule, because the Defendant is not offering the statements contained therein for their truth... but for the exact opposite reason, to show their falsity and fraud", he nonetheless seemingly ruled them to be inadmissible because:

it has been recognized that while the transcripts of [assignor] examinations under oath may be admissible to defeat a summary judgment motion, they "are nonetheless hearsay. As such, such statements are inadmissible at trial unless, for example, they are used for impeachment purposes upon cross-examination in the event such declarant/assignor testifies." CPT Medical Service, P.C. v. Utica Mutual Insurance, 12 Misc 3d 237, 811 NYS2d 909 (Civ.Ct. Queens Co. 2006).

In the end, even if the court had found State Farm's papers to be in admissible form, Judge Engel ruled that they "raise[d] a number of factual issues which are subject to the inferences to be drawn from the evidence presented, many of which involve an assessment of credibility, and all of which must be reserved for the trier of facts[.]"