[*1]
Mutual Assn. Adm'rs, Inc. v National Union Fire Ins. Co. of Pittsburgh, Pa
2014 NY Slip Op 51699(U) [45 Misc 3d 1223(A)]
Decided on November 25, 2014
Supreme Court, Suffolk County
Santorelli, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on November 25, 2014
Supreme Court, Suffolk County


Mutual Association Administrators, Inc., Plaintiff,

against

National Union Fire Insurance Company of Pittsburgh, Pa, LEONARD MANDELBAUM, TOM PEREZ, JACK NEIMAN, ADENA SAMOWITZ, Defendants.




33337/2008



KENNETH L. ROBINSON, ESQ.



Attorney for Plaintiff



33 Roosevelt Avenue



Syosset, New York 11791



ALSTON & BIRD LLP



Attorney for Defendant National Union Fire



90 Park Avenue



New York, New York 10016


Joseph A. Santorelli, J.

Upon the following papers numbered 1 to 30 read on this motion to depose expert; Notice of Motion/ Order to Show Cause and supporting papers 1 - 6 ; Notice of Cross Motion and supporting papers; Answering Affidavits and supporting papers 7 - 20 ; Replying Affidavits and supporting papers 21 - 30 ; Other ; (and after hearing counsel in support and opposed to the motion) it is,

In this action to recover damages for breach of contract defendant, National Union Fire Insurance Company of Pittsburgh, PA, hereinafter referred to as "National", moves for an order pursuant to CPLR 3101(d)(1)(iii) allowing National to take the limited deposition of the plaintiff's [*2]designated expert witness, Michael J. Garibaldi. Plaintiff, Mutual Association Administrators, Inc., hereinafter referred to as MAA, opposed this application in all respects and claims that the defendant has not made out the "special circumstances" required to depose its expert.

In this action, the plaintiff seeks consequential and punitive damages allegedly suffered as the result of the corporate defendant's breach of contract. It appears that this action was discontinued against the individual defendants by a stipulation dated November 8, 2008. It is undisputed that the plaintiff is a named insured under a Multi-Employer Plan/Trustees ERISA Liability Policy, hereinafter referred to as "Policy", issued by the defendant National. In its complaint, the plaintiff alleges that National breached its obligations under the Policy by, among other things, refusing to provide a continuing defense to the plaintiff in an underlying action, Elaine L. Chao, Secretary of Labor v Slutsky, U.S. District Court, Eastern District of New York, Case No. 01-7593 (SLT) (ETB), hereinafter referred to as "ERISA action".

In November, 2001, the United States Secretary of Labor, hereinafter referred to as "USSOL", commenced the underlying action against the plaintiff and others alleging, among other things, that the plaintiff had breached its fiduciary duties as the third-party administrator to the FCGA/MEBT Benefit Trust by diverting plan assets. On or about February 21, 2002, National appointed counsel to represent the plaintiff in the ERISA action. In early 2003, the USSOL proposed a settlement of the ERISA action, which National recommended should be accepted by the plaintiff. The plaintiff rejected the offer of settlement on the grounds, among other things, that the USSOL would not agree to withdraw press releases which had been distributed concerning the alleged misfeasance by the plaintiff, and the fact that the settlement would leave open the imposition of civil penalties against the plaintiff, which would not be covered by the Policy. On or about February 11, 2003, National notified the plaintiff that it would not pay for any additional defense costs or expenses based on the plaintiff's refusal to consent to the offer of settlement. Thereafter, the plaintiff continued to litigate the ERISA action. However, it could not directly bear the costs and expense of its attorney's fees, which eventually lead to the withdrawal of its counsel, and the entry of a default judgment against it. National continued to negotiate a settlement of the monetary claims in the ERISA action, and settled the matter on terms favorable to the plaintiff, including the waiver of any civil penalties. The plaintiff alleges that the financial burden placed upon it by National's withdrawal of a defense in the ERISA action caused it to go out of business. On September 2, 2008, the plaintiff commenced this action, seeking to recover damages including its loss of income, the loss of its business, and its attorneys' fees in defending the ERISA action and in prosecuting this action .

In support of the instant application National claims that the special circumstances for an expert witness deposition are present in this case. National claims that plaintiff's expert is "in possession of certain purported facts central to MAA's claim against National Union and is the only source for obtaining such information". National further contends that "Garibaldi is expected to testify as to the valuation of MAA's business- a critical issue in this case- based only on his review of two sources of information: MAA's financial records and tax returns, and discussions with [MAA]'s management.'" National attaches sixteen (16) pages out of the three hundred seven (307) page transcript from the deposition of Sharlene Slutsky, the sole owner of MAA who was deposed in her individual capacity as well as MAA's corporate representative. National alleges that Ms. [*3]Slutsky was "unable to answer questions regarding the company's accounting and finances" and "she disclaimed all knowledge on the subject".

Both parties agree that the records relied upon by Garibaldi are incomplete and were handed over to National in "piecemeal fashion". Plaintiff contends that the records were originally confiscated via search warrants in the ERISA action and "just prior to the present action being commenced, certain documents secured as part of the [Department of Labor]'s investigation were subsequently returned to MAA, but were returned in an extremely disorganized condition". Plaintiff does concede that documents were turned over to National as part of several supplemental discovery responses. Plaintiff states that all documents used by Garibaldi were previously turned over to National. Plaintiff argues that Ms. Slutsky did not disclaim all knowledge on the subject of the company's accounting and finances but rather indicated that MAA's former accountant, Paul Gaynes, would have that information and that he would be the appropriate person to depose in order to get further information about MAA's accounting and finances. Plaintiff argues that the special circumstances to depose its expert do not exist in this case. MAA does request that if this Court should allow further discovery from the expert then National be responsible for those expenses.

Pursuant to CPLR 3101(d)(1)(i), a party must, upon demand, "identify each person whom the party expects to call as an expert witness at trial" and "disclose in reasonable detail the subject matter on which each expert is expected to testify, the substance of the facts and opinions on which each expert is expected to testify, the qualifications of each expert witness and a summary of the grounds for each expert's opinion." "Further disclosure concerning the expected testimony of any expert may be obtained only by court order upon a showing of special circumstances and subject to restrictions as to scope and provisions concerning fees and expenses as the court may deem appropriate." (CPLR 3101(d)(1)(iii)). In Brooklyn Floor Maint. Co. v. Providence Wash. Ins. Co., 296 AD2d 520, 521-22, 745 NYS2d 208, 210 (App. Div. 2d Dep't 2002), the Court held



Special circumstances must be shown to support discovery against a nonparty under CPLR 3101 (a) (4) (see Brady v Ottaway Newspapers, 63 NY2d 1031, 1032; Bostrom v William Penn Life Ins. Co. of NY, 285 AD2d 482). CPLR 3101 (d) (1) (iii) requires a showing of special circumstances to warrant the deposition of a party's expert witness. Although the "special circumstances" requirement of CPLR 3101 (d) (1) (iii) is more than a nominal barrier to discovery (see Rosario v General Motors Corp., 148 AD2d 108), such circumstances exist where physical evidence is "lost or destroyed" or "where some other unique factual situation exists" (Hallahan v Ashland Chem. Co., 237 AD2d 697, 698), such as proof "that the information sought to be discovered cannot be obtained from other sources" (Dioguardi v St. John's Riverside Hosp., 144 AD2d 333, 334). Here, the defendant demonstrated special circumstances justifying limited pretrial discovery of Eisner, as the plaintiff's principal was unable to answer basic inquiries into the plaintiff's bookkeeping practices, or regarding specific entries in the [*4]corporation's financial records, and identified Eisner as the sole person who could respond to those inquiries (see Bostrom v William Penn Life Ins. Co. of NY, supra). The defendant should be permitted to depose Eisner as to the facts concerning the financial records and affairs of the business.



In 232 Broadway Corp. v. NY Prop. Ins. Underwriting Ass'n, 171 AD2d 861, 861, 567 NYS2d 790 (App. Div. 2d Dep't 1991) the Court held that



The Supreme Court erred in determining that special circumstances exist such that the oral deposition of the defendant's expert witnesses are warranted (see, CPLR 3101[d][1][iii]). Contrary to the Supreme Court's decision, the "special circumstances" requirement of CPLR 3101(d)(1)(iii) (dealing with expert witnesses), unlike its counterpart formerly found in CPLR 3101(a)(4) (dealing generally with nonexpert, nonparty witnesses), is more than a "nominal" barrier to discovery (see, Rosario v General Motors Corp., 148 AD2d 108, 113), and a conclusory allegation that such discovery is necessary to fully prepare for litigation is insufficient to establish that requirement. Here, where there has been no showing that the physical evidence inspected by the defendant's experts, which consists of a building owned by and in the possession and control of the plaintiff, was lost, destroyed, or otherwise rendered unavailable to the plaintiff prior to the time that the plaintiff had the incentive to have its own experts inspect the evidence, we find that the deposition of the defendant's experts is unwarranted (cf., Rosario v General Motors Corp., supra).

In the present action National does not allege that Ms. Slutsky indicated that Garibaldi was the only person who would have information about MAA's finances and accounting, instead she specifically stated that the former accountant, Paul Gaynes, would be the person who could testify as to MAA's accounting and finances. Similar to 232 Broadway Corp. v. NY Prop. Ins. Underwriting Ass'n, supra, there are no allegations by National that Garibaldi had a more complete set of financial information than they were given in discovery or that any information was lost or misplaced subsequent to Garibaldi's review of the financial information. Here National simply states that they do not know what financial documentation was relied upon by Garibaldi or whom he spoke with from MAA and therefore they claim to have met the special circumstances threshold required to depose Garibaldi in order to gain that information.

This motion by defendant for an order pursuant to CPLR 3101(d)(1)(iii) allowing National to take the limited deposition of the plaintiff's designated expert witness, Michael J. Garibaldi, in granted only to the extent that Garibaldi is directed to turn over a list of all individuals spoken to and documents used by him, related to MMA's finances and accounting, to render his expert opinion within sixty (60) days from the date of this Order.

The Court finds it appropriate for defendant National to be responsible for all fees and expenses incurred for Mr. Garibaldi to compile to afore ordered list.

Counsel for National is directed to serve a copy of this order upon the plaintiff's attorney, as well as Mr. Garibaldi, by ordinary mail at their last known addresses.

The foregoing constitutes the decision and Order of this Court.



Dated: November 25, 2014_______________________________________

HON. JOSEPH A. SANTORELLI

J.S.C.