RICCELLI ENTERPRISES, INC. v. STATE OF NEW YORK WORKERS' COMPENSA ( 2014 )


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  •         SUPREME COURT OF THE STATE OF NEW YORK
    Appellate Division, Fourth Judicial Department
    305
    CA 13-00761
    PRESENT: SCUDDER, P.J., CENTRA, FAHEY, PERADOTTO, AND WHALEN, JJ.
    IN THE MATTER OF RICCELLI ENTERPRISES, INC.,
    ET AL., PETITIONERS-PLAINTIFFS-RESPONDENTS,
    V                             MEMORANDUM AND ORDER
    STATE OF NEW YORK WORKERS’ COMPENSATION BOARD
    AND ROBERT E. BELOTEN, AS CHAIRMAN OF THE
    WORKERS’ COMPENSATION BOARD,
    RESPONDENTS-DEFENDANTS-APPELLANTS.
    ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL, ALBANY (JEFFREY W. LANG OF
    COUNSEL), FOR RESPONDENTS-DEFENDANTS-APPELLANTS.
    GILBERTI STINZIANO HEINTZ & SMITH, P.C., SYRACUSE (PATRICIA S.
    NAUGHTON OF COUNSEL), AND COSTELLO COONEY & FEARON, P.L.L.C., FOR
    PETITIONERS-PLAINTIFFS-RESPONDENTS.
    Appeal from an order of the Supreme Court, Onondaga County (John
    C. Cherundolo, A.J.), entered August 14, 2012 in a CPLR article 78
    proceeding and declaratory judgment action. The order, among other
    things, granted the application of petitioners-plaintiffs for a stay.
    It is hereby ORDERED that the order so appealed from is affirmed
    without costs.
    Memorandum: Respondents-defendants (hereafter, Board) appeal
    from that part of an order granting petitioners-plaintiffs’
    application pursuant to CPLR 7805 for a stay of, inter alia, the
    enforcement of the Board’s determination to levy deficit assessments
    against them under the authority of Workers’ Compensation Law § 50 (3-
    a) (7) (b) pending the determination of the instant CPLR article 78
    proceeding/declaratory judgment action (hereafter, proceeding).
    Petitioners-plaintiffs (petitioners) are former members of a group
    self-insured trust (GSIT or Trust), which provided workers’
    compensation benefits to their respective employees. In 2008, the
    Board terminated the Trust and assumed the administration of it for
    the purpose of “final distribution of the [Trust’s] assets and
    liabilities.” Petitioners and the Board agree that the third-party
    administrator of the Trust, Compensation Risk Managers, LLC (CRM),
    acted fraudulently in its management of the Trust, and the Board has
    commenced a separate action against CRM for its alleged mismanagement
    of the Trust and other failed GSITs. The Board levied assessments
    against petitioners totaling more than $140 million for their alleged
    pro rata share of the deficits of the Trust in 2010, prompting
    -2-                           305
    CA 13-00761
    petitioners to commence this proceeding. Petitioners allege, inter
    alia, that the Trust was not validly formed; that the Board’s
    oversight of the Trust amounted to nonfeasance; and that the Board’s
    attempts to impose deficit assessments against them pursuant to
    Workers’ Compensation Law § 50 (3-a) (7) (b) are illegal and violate
    their procedural and due process rights.
    As an initial matter, we note that, although petitioners moved
    for a stay pursuant to CPLR 7805, preventing the Board from, inter
    alia, taking any further action against them to enforce the alleged
    deficit assessments, Supreme Court properly considered their request
    for relief as “a request for preliminary injunction,” and thus
    properly considered the requisite factors for granting such relief,
    i.e., irreparable harm, likelihood of success on the merits, and a
    balancing of the equities (see CPLR 6301; see also Melvin v Union
    Coll., 195 AD2d 447, 447-448). “[W]e note the well-settled
    proposition that ‘[a] motion for a preliminary injunction is addressed
    to the sound discretion of the trial court[,] and the decision of the
    trial court on such a motion will not be disturbed on appeal, unless
    there is a showing of an abuse of discretion’ ” (Marcone APW, LLC v
    Servall Co., 85 AD3d 1693, 1695). We conclude that the court did not
    abuse its discretion in granting petitioners’ request for a
    preliminary injunction pending the outcome of this proceeding (see
    Destiny USA Holdings, LLC v Citigroup Global Mkts. Realty Corp., 69
    AD3d 212, 216; see also Melvin, 195 AD2d at 448-449).
    The Board contends that petitioners have failed to demonstrate
    the imminent risk of irreparable harm because, inter alia, the Board
    is seeking only the payment of judgments against petitioners pursuant
    to Workers’ Compensation Law § 26 for the amounts of the workers’
    compensation benefits paid to their respective employees, and that
    petitioners have not established that they will sustain irreparable
    harm if such judgments are filed. We reject that contention.
    Petitioners established that the Board has the authority to institute
    collection actions against them for the pro rata share of the deficit
    assessment, and to file judgments against them pursuant to section
    26—the viability of which petitioners contest—and, additionally, that
    the Board has the authority to issue stop work orders in the event of
    a petitioner’s failure to pay a section 26 judgment (see § 141-a [4]
    [a]). Because the loss of business, as the result of an action
    seeking the collection of the pro rata share of the deficit assessment
    or as the result of a potential stop work order, is an imminent risk
    that is “ ‘impossible, or very difficult, to quantify,’ ” we conclude
    that the court did not abuse its discretion in determining that
    petitioners established by clear and convincing evidence that there is
    a risk of irreparable harm (Marcone APW, LLC, 85 AD3d at 1696).
    We further conclude that the court did not abuse its discretion
    in determining that petitioners have established the likelihood of
    success on the merits of at least some of their claims. Notably
    petitioners established by clear and convincing evidence that the
    Board failed to provide petitioners with the amount of the deficiency
    assessment “to discharge all liabilities of the group self-insurer”
    within 120 days of the dissolution of the Trust (Workers’ Compensation
    -3-                           305
    CA 13-00761
    Law § 50 (3-a) (7) (b); see generally Destiny USA Holdings, LLC, 69
    AD3d at 216). We further conclude that the court did not abuse its
    discretion in determining that the balancing of the equities favor
    granting the preliminary injunction. The Board’s ability to fulfill
    its obligation to pay the claims of petitioners’ employees that
    accrued during the lifetime of the Trust is not jeopardized by
    granting the preliminary injunction, while, as noted above,
    petitioners could suffer irreparable harm if the Board were permitted
    to proceed with its attempt to recoup not only the amounts subject to
    judgments pursuant to section 26, but also the pro rata shares of the
    deficiency assessment (see generally Marcone APW, LLC, 85 AD3d at
    1697; Destiny USA Holdings, LLC, 69 AD3d at 216).
    All concur except FAHEY, J., who concurs in the result in the
    following Memorandum: I respectfully concur in the result reached by
    the majority. I disagree, however, with the majority’s reliance on
    Destiny USA Holdings, LLC v Citigroup Global Mkts. Realty Corp. (69
    AD3d 212, 216) for the reasons stated in my dissenting opinion in that
    case.
    Entered:   May 2, 2014                          Frances E. Cafarell
    Clerk of the Court
    

Document Info

Docket Number: CA 13-00761

Filed Date: 5/2/2014

Precedential Status: Precedential

Modified Date: 10/7/2016