Angelo G. Faraci and Stephen G. Schwarz are among the 50 attorneys who received the highest point totals during the New York Super Lawyers-Upstate nomination, research and review process.

Faraci, of Rochester, is listed in the New York Super Lawyers in personal injury plaintiff: medical malpractice. He has been listed in New York Super Lawyers since 2007. Schwarz, of Fairport, is listed in personal injury plaintiff: medical malpractice. He has been named to New York Super Lawyers since 2007.

Tweet

The attorneys recognized are:

• Matthew F. Belanger, in the practice area of personal injury plaintiff: general. The Brighton resident is listed for the second time.
• David L. Cook, in the practice area of business litigation. Cook, of Pittsford, has been named to New York Super Lawyers in three previous years from 2007 – 2009.
• John A. Falk, in personal injury plaintiff: general. A Brighton resident, Falk is listed for the second time.
• Angelo G. Faraci, in personal injury plaintiff: medical malpractice. Faraci, who resides in Rochester, has been listed in New York Super Lawyers since 2007.
• Paul K. Lange, in personal injury plaintiff: general. First named to New York Super Lawyers in 2007, Lange resides in Rochester.
• Joseph A. Regan, of Rochester, in personal injury plaintiff: medical malpractice. Regan has been named to New York Super Lawyers since 2008.
• Stephen G. Schwarz, of Fairport, in personal injury plaintiff: medical malpractice. He was first named to New York Super Lawyers in 2007.
• Brian M. Zorn, in personal injury plaintiff:  medical malpractice. Zorn, of Victor, has been named to New York Super Lawyers since 2007.

Only five percent of the attorneys in Upstate New York are named to the Super Lawyers list. Super Lawyers selects attorneys using a multi-phase process combining peer nominations and evaluations with third-party research. Candidates are evaluated based on peer recognition and professional achievement. The publication aims to provide a credible, comprehensive and diverse listing of outstanding attorneys that can be used as a resource for attorneys and consumers searching for legal counsel.

Tweet

Faraci Lange associate attorney and recipient of the 2011 Up & Coming Attorneys Award from The Daily Record, Hadley L. Matarazzo, poses with (from left) her father Staffan Lundback, Faraci Lange managing partner Stephen G. Schwarz, and her husband Todd Matarazzo.  This year’s event was held at the Hyatt Regency Rochester.

Tweet

Town of Aurelius residents’ lawsuit against General Electric Co. for drinking-water-well contamination from its former Powerex facility will move forward, following an Appellate Court decision.

Their case originally was filed in June 2001 alleging negligence due to their well water being contaminated with trichloroethylene (TCE) — associated with kidney, liver and non-Hodgkin’s lymphoma, and other cancers — and vinyl chloride, a cause of liver cancer.

A punitive damages claim was based on documents showing that GE decided against conducting a survey of nearby drinking water wells once the contamination at the Powerex plant was first discovered in the late 1980s, in an attempt to avoid adverse publicity. Residents claimed that this caused them needless exposure for an additional 10 to 12 years and showed reckless disregard for their health and safety.

On July 8, 2011, the New York State Appellate Division, Fourth Department in Rochester affirmed Cayuga County Supreme Court Judge Thomas G. Leone’s earlier ruling denying GE’s motion to dismiss the case. The Appellate Court’s decision means that Baity, et al., v. General Electric Company will proceed as scheduled before Judge Leone in January 2012.

“We are gratified by the Appellate Court’s decision, and the residents are looking forward to finally getting their day in court,” said Stephen G. Schwarz, managing partner at the Rochester law firm of Faraci Lange LLP and the residents’ lead attorney. “It has been a long, hard fight over many years by a group of determined citizens against one of the biggest, most powerful corporations in the world. This ruling paves the way for us to prove that GE owes compensation for the damages caused by the company’s careless and reckless practices.”

GE Powerex Facility

General Electric’s Powerex facility, located in the town of Aurelius, manufactured silicone semi-conductors, radar equipment and printed circuit boards. From 1951 through approximately 1967, GE disposed of millions of gallons of solvent wastes by dumping them into unlined evaporation pits on the property and allowing the liquid chemical waste to seep into the ground. In 1985, GE began to investigate possible contamination under its plant, and within two years it was discovered that high concentrations of various solvents and other chemicals were contaminating the aquifer beneath the plant. The concentration levels were so high that the chemicals were actually still in pure form at the bottom of the aquifer.

Nearly 15 years after the contamination below the Powerex site was first suspected, the drinking water wells in close proximity to the site were finally tested. Testing was conducted as a result of contamination discovered in the village of Union Springs’ public water supply wells near Cayuga Lake — nearly seven miles southwest of the Powerex site. As early as 1988, trace amounts of TCE and dichloroethylene (DCE), a chemical created from TCE degradation, were detected in these wells. Investigations near Union Springs conducted in the late 1980s and early 1990s failed to identify a likely source or sources for these contaminants.

As contamination levels in Union Springs’ wells continued to rise, the state Department of Environmental Conservation initiated a broader investigation in September 2000, at which point 28 private wells northeast of the Union Springs wells tested positive for the same chemicals. Additional testing determined that more private drinking water wells contained dangerous levels of TCE, DCE and vinyl chloride. The string of contaminated wells made a direct line from Union Springs to the Powerex plant, where contamination with the same chemicals was discovered fifteen years earlier. Approximately 800 people were determined to be at risk by the federal government’s Agency for Toxic Substance and Disease Registry.

Appellate Court Ruling

The residents’ case alleges negligence, nuisance and trespass causes of action and requests damages for property devaluation, annoyance and inconvenience and medical monitoring damages for the testing and evaluation necessary to diagnose one of the cancers associated with TCE and vinyl chloride at an early stage enhancing the chances of more effective treatment and survival. After many years of pre-trial discovery, GE made a motion for summary judgment in early 2009 dismissing the negligence and other claims on the grounds that the company was only following industry custom and practice at the time it was dumping the chemicals into the ground and could therefore not be found negligent. In the alternative, GE asked Judge Leone to dismiss the medical monitoring claim, arguing that the residents could not show any sign of illness or that the chemicals were still in their bodies. Experts for both the residents and GE stated in affidavits that when these chemicals are ingested, inhaled or absorbed into the body, they are quickly metabolized and excreted. However, at times they can cause genetic damage which can manifest as cancer years later.

In October 2010 Judge Leone ruled in favor of the residents and denied GE’s motion. He also denied the resident’s motion for a ruling that GE was definitively the cause of the contamination. Both sides appealed.

The Appellate Court’s July 8, 2011 ruling affirmed all of Judge Leone’s rulings, including:

•     GE’s argument that it could not be found negligent because it was following industry practice was rejected, also finding that there was significant evidence GE knew of the dangers of the dumping while it was occurring.

•     The residents set forth a valid claim for medical monitoring damages by showing exposure to toxic chemicals that raised their risk of developing disease in the future and that there were tests and evaluations that could help with early diagnosis and treatment.

•     The residents’ argument for punitive damages based upon GE’s failure to test the drinking water wells in the plant area in the late 1980s should be decided at trial.

•     There was some question as to whether GE was the only contributor to the contamination and this issue must be presented at trial.

Schwarz noted that this case has helped to clarify the legal requirements for a valid claim for medical monitoring damages. “The Appellate Division, Fourth Department was the first to recognize the right of people wrongfully exposed to toxic substances to sue for medical monitoring costs,” Schwarz said. “Courts across the country followed that decision, but other New York courts confused the claim for future medical testing expenses with a claim for emotional distress caused by a fear of cancer. It is fitting that the Fourth Department has clarified the standard and paved the way for people with elevated cancer risks due to the carelessness or recklessness of others to obtain the medical evaluation and testing they need for early diagnosis and treatment.”

Tweet

The award, bestowed upon Faraci Lange for demonstrating outstanding support to The Advocacy Center, was presented June 4, 2011 during a ceremony at the organization’s annual fundraising event at the George Eastman House. Faraci Lange was selected by The Advocacy Center’s board of directors for providing high-level sponsorships of the organization’s annual fundraiser over the last five years.

Faraci Lange’s support of The Advocacy Center also includes the volunteer service of Stephen G. Schwarz, managing partner. Schwarz currently is board vice president and has served as a board member since 2006.

“Our firm is delighted to be recognized with The Advocacy Center’s Corporate Support Award,” said Stephen Schwarz. “The Advocacy Center is the organization that deserves all the recognition and praise, however, for the tremendous work it does to help people with disabilities in Rochester and across New York state.”

Thus began a saga that took the Goldsteins through negotiations with their builder, litigation and eventually a jury trial in June of 2010. In the process they learned that the corporation that they contracted with to build their home, Brookwood Building Corporation, did not have any employees and was merely a shell corporation. They also learned that Spall Homes, the entity named on the website where the development was advertised, was no longer an active corporation either and that the mastermind behind this empire, Ted Spall, had created multiple shell corporations in attempt to shield him from any accountability for building defects caused by faulty construction of any of these homes. Eventually, Spall Realty Corp., the entity that hired the contractors and supervised the construction was added to the lawsuit, but just as quickly, a new corporation named Spall Management Corporation took on all of the employees who had worked for Spall Realty leaving that corporation only a shell as well.

At the trial, the Goldsteins, represented by Faraci Lange, proved that the mold was caused by improper construction, which resulted in excessive water and moisture in the basement. Dr. and Mrs. Goldstein were forced to take out a second mortgage to cover the costs of fixing these construction defects and remediating the mold so that it was once again safe to inhabit their home. These costs when added to the value of property that had to be destroyed due to mold infestation exceeded $100,000. The jury awarded the Goldsteins a total of $189,000 to cover both their economic losses caused by their mold as well as pain and suffering related to illnesses caused by the mold and loss of the use of their home during the remediation.

In spite of that verdict in June of 2010 in Monroe County Supreme Court, their wait for justice was not over. For the next 8 months Faraci Lange pursued the defendants for payment of the judgment. Ted Spall, through his attorneys, claimed that neither of the corporations found responsible for the Goldstein’s damages had any money left and could not pay the judgment. It was only after Spall himself was subpoenaed to testify under oath about the pathway of money out of the corporations and the amounts that he pocketed that payment in full was finally made for the entire judgment plus interest from the date of the verdict. A satisfaction of judgment was filed last week.

“We are happy that this ordeal is finally over and we can pay off what we borrowed to fix and clean up our house and move forward” said Patti Goldstein. “It has been an incredibly stressful and frustrating five years but it is nice to see that the system can work”. Added Dr. Neil Goldstein “there were times when I was so made I could hardly speak and we both found it hard to sleep worrying about whether we were going to come down with some illness all because of slip shod construction. I learned a lot about how houses are supposed to be built that I did not know before and simply assumed that my builder of a high end home did. I also learned about how people can play the corporate system to try and escape all accountability. Fortunately for us, he did not get away with it.”

Stephen Schwarz, managing partner at Faraci Lange, who tried the case summed it up this way: “there were many times that I thought my clients would just decide to throw in the towel and say it is not worth it, but I admire Neil and Patti so much for their perseverance. They insisted that we not compromise in pursuing the entire amount owed and in the end, justice was served.”

The statute makes clear that “[h]ealth insurers (other than Medicare and Medicaid) shall be the primary payers of qualifying health care costs of qualified plaintiffs”. It also deprives health insurers of any right of subrogation against the fund to recover these costs. Presumably Medicare and Medicaid will also defer to the Fund for payment of medical expenses on behalf of qualified plaintiffs, although the chance of a qualified plaintiff being Medicare eligible seems a bit remote. Since most settlements of birth injury cases result in the formation of a supplemental needs trust which permits the child to continue to receive Medicaid benefits, there will be a significant shift in the burden of paying these expenses away from Medicaid and to the Fund.

Attorneys’ Fees

The statute provides that the attorneys’ fee shall be paid entirely by the defendant and its insurer including any amount apportioned to future medical expenses in the judgment or settlement. It also provides that “… the portion of the attorney fee that is allocated to the non-fund elements of damages shall be deducted from the non-fund portion of the award in a proportional manner.”  This presumably means that the defendant or insurer must pay all of the damages awarded or provided for in the settlement which are not for future medical expenses and must also pay an attorney’s fee for the portion of the award or settlement that is attributable to future medical expenses. The mathematics involved in applying the sliding scale Judiciary Law fee schedule with the structured judgment provisions of CPLR Art. 50-A and then backing out the portion attributable to the future medical expenses will be frightening for most attorneys who went into law because they were not good at math.

Practice Implications

As stated at the outset, the overall implications of this legislation are difficult to predict. What is certain is that settlement agreements will now have to specifically break out future medical expenses into yearly or monthly payments similar to a structured judgment. The broader question of whether the creation of the Fund will increase or decrease the probability of settling these cases is a much harder call. On the one hand, with the probable elimination of the obligation of payment of the largest component of most awards in birth injury cases insurers may be more willing to go to verdict and take their chances. On the other, the requirement that the insurers pay the attorneys’ fee on the entire award and the possibility that the Fund may suspend enrollment making the defendant or insurer responsible for payment of the future medical expenses, going to trial will retain significant risks for defendants. As stated at the outset, overall the legislation is much less punitive to injured infants and their families than had been feared and plaintiff’s attorneys doing malpractice work of this type may have once again dodged a bullet.

During the lead up to the budget deadline, the general thinking was that if enacted the neurological birth-injury bill would replace existing tort remedies in this area. However, if that was the initial desire of the health care industry that had lobbied for this legislation, this is not what came out of the negotiations. The final product provides for payment of healthcare costs for qualifying plaintiffs whether they won a judgment or agreed to a settlement. This apparently means that the fund would pay for costs “actually incurred” by the qualified plaintiff in future years. If the fund will pay for the amounts “actually incurred” then it would not pay the judgment or settlement amount. Thus, the relevance of the amount awarded by the jury or apportioned in the settlement for these expenses appears to be only as to the calculation of the attorneys’ fee or when Fund enrollment is suspended (see below).

Modification of Judgments and Settlement Agreements

Settlement agreements rarely if ever apportion the proceeds of a settlement between the various items of damages alleged. This practice will now have to change for birth-related neurological injury cases. To qualify for the fund all settlement agreements must expressly state this expectation and the statute requires judges considering the approval of a proposed settlement to “direct the modification of the agreement to include such term as a condition of court approval” where it is not contained in the original agreement. Where a plaintiff obtains a court decision or jury verdict that includes an award for future medical expenses, the judgment must contain a provision which indicates that the award for these expenses is to be paid out of the Fund.

Since the fund will pay for only expenses “actually incurred” then the amount set forth in the settlement agreement or judgment should have no impact on the ultimate amount received by the qualified plaintiff for such expenses. However, the amount is important to the calculation of the attorneys’ fees and in the event Fund enrollment is suspended.

Suspension of Enrollment in the Fund

The statute provides that whenever the total estimate of current liabilities equals or exceeds 80% of the fund’s assets, further enrollment of qualified plaintiffs is suspended until a new deposit has been made into the fund, which would most likely be in the next budget cycle. Moreover, the statute provides that “[j]udgments and settlements for plaintiffs or claimants for whom applications are denied … or who are not eligible for enrollment due to suspension [of enrollment due to lack of sufficient funds] … shall be satisfied as if this title had not been enacted.”  Thus, in the event that either the plaintiff in the case is not accepted as a “qualified plaintiff” by the nature of his injury, or if enrollment is suspended due to lack of funds, the amount set forth in the agreement or judgment must be satisfied by the defendant. Under the structured judgment provisions of CPLR Art. 50-A, the amount awarded for future medical expenses is stated as a yearly payment in the first year increasing at 4% per year thereafter. Presumably, settlement agreements will now need to set forth yearly amounts for these expenses as well in the event that fund enrollment is suspended when the settlement is reached. After additional funds are added and suspension is lifted, the applicants are to be considered in the order in which they applied. Thus, depending on the backlog, there is some chance that a waiting list of over a year could develop meaning that multiple yearly payments may be required by the defendants.

Basic Provisions of the New Legislation

In its simplest terms, the new legislation is designed to provide a secondary source of payment for future medical expenses incurred by a narrowly defined group of injured infants. This source is available (1) only if the strict definitions of the statute are met regarding the nature of the injury; (2) only if there has been a judgment entered or settlement consummated where it is stated that the injury was alleged to be caused by malpractice and (3) if the fund administrator determines that there is enough money in the fund to accept new “qualified plaintiffs”.

The legislation states as its purpose to create a fund “… to provide a funding source for future health care costs associated with birth related neurological injuries, in order to reduce premium costs for medical malpractice insurance coverage”. The statute defines “Birth-related neurological injury” as “…an injury to the brain or spinal cord of a live infant caused by a deprivation of oxygen or mechanical injury occurring in the course of labor, delivery or resuscitation or by other medical services provided or not provided during a delivery admission that rendered the infant with a permanent and substantial motor impairment or with a developmental disability” as that term is defined in the Mental Hygiene law. Thus, the legislation applies only to hypoxic or mechanical brain or spinal birth injuries resulting in permanent motor or developmental deficits.

“Qualifying health care costs” is broadly defined to include virtually all conceivable future medical expenses that would be incurred by a brain damaged infant.

A “qualified plaintiff” is defined as a plaintiff or claimant who has been found by a jury or court to have sustained a birth-related neurological injury as a result of medical malpractice or has settled a lawsuit or claim alleging the same.