Garrison v Lapine

[*1] Garrison v Lapine 2009 NY Slip Op 50325(U) [22 Misc 3d 1128(A)] Decided on March 3, 2009 Supreme Court, Ulster County Platkin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 3, 2009
Supreme Court, Ulster County

Diane Garrison and GLEN GARRISON, Plaintiffs,

against

Stephen Lapine and RICKY LAPINE, Defendants.



268-05



APPEARANCES:

Rusk, Wadlin, Heppner & Martuscello, LLP

Attorneys for Plaintiffs

(John A. Rusk and Dana D. Blackmon, of counsel)

255 Fair Street

PO Box 3356

Kingston, New York 12402

Ahmuty, Demers & McManus

Attorneys for Defendants

(Carmine Carolei and Brendan T. Fiztpatrick, of counsel)

1531 Route 82

Hopewell Junction, New York 12533

Richard M. Platkin, J.

In a jury verdict rendered on December 22, 2008, plaintiffs in this personal injury action were awarded $2.9 million, consisting of: $500,000 in past pain and suffering for plaintiff Diane Garrison; $2,000,000 in future pain and suffering for Diane Garrison; and $400,000 to plaintiff Glen Garrison for loss of his wife's consortium.

By notice of settlement returnable on February 19, 2009, plaintiffs seek entry of a proposed judgment. On February 13, 2009, defendants moved by Order to Show Cause seeking to stay consideration of plaintiffs' proposed judgment pending the Court's determination of defendants' post-trial motions to set aside the verdict and/or reduce the amount of the award. In the alternative, defendants submit a proposed counter-judgment.

MOTION TO STAY ENTRY OF JUDGMENT [*2]

Upon the consent of the parties, the Court previously directed that defendants shall have until March 6, 2009 to file post-trial motions. At a conference with the Court held on February 26, 2009, the parties stipulated that plaintiffs' opposition papers shall be filed by March 27, 2009 and that defendants shall have until April 3, 2009 to file reply papers.

In seeking to stay settlement of a judgment pending the Court's determination of the post-trial motions, defendants contend that plaintiffs' application is premature. Defendants assert that their post-trial motions may result in the Court setting aside the jury's verdict in its entirety or reducing the amount of the award. Given this potential for modification or vacatur, defendants rely upon the interests of judicial economy and efficiency in seeking a stay. Defendants further rely upon Firmes v. Chase Manhattan Auto. Finance Corp. (50 AD3d 18, 31-32 [2d Dept 2008]), as authority for the position that the Court should not enter judgment during the pendency of post-trial motions.

The Court concludes that defendants have failed to provide a persuasive basis for staying entry of judgment in this action. In providing that a court may "set aside a verdict or any judgment entered thereon," CPLR 4404 (a) clearly contemplates that a court may enter judgment prior to determination of post-trial motions. Further, defendants' reliance on Firmes is misplaced. That case holds only that a structured judgment required by CPLR article 50-b cannot be entered before determination of collateral source offsets, since these offsets are used in formulating the structured judgment (Firmes, supra, at 32).

Moreover, the only difference between the proposed judgments submitted by the parties concerns the "discount rate in effect at the time of the award" (CPLR 5041 [e]). Even if post-trial motions were to result in a reduction in the damages awarded to plaintiffs, determination of an appropriate discount rate still will be necessary so long as the Court does not reduce Diane Garrison's future damages by $1,750,000 or more. And, of course, regardless of this Court's resolution of the post-trial motions, the magnitude of the jury award makes appellate review likely in any event, thereby creating a similar potential for vacatur or modification of any judgment entered by the Court.

In view of the foregoing and in the absence of demonstrable prejudice to defendants, the Court denies defendants' application for a stay in its entirety.

PROPOSED JUDGMENT

As noted above, the judgments proposed by the parties differ in only one substantive respect: determination of the discount rate required by CPLR 5041 (e).[FN1]

Diane Garrison was awarded the sum of $2,000,000 for future pain and suffering. Under CPLR 5041 (e), $1,750,000 of this amount is payable over a ten year period, in accordance with the prescribed statutory formula. In entering judgment thereon, the Court must determine "the amount of the present value of an annuity contract" that will provide the future stream of payments required under the statute. "The present value of such contract shall be determined in [*3]accordance with generally accepted actuarial practices by applying the discount rate in effect at the time of the award to the full amount of the remaining future damages . . ." (id.).

CPLR 5041 (e) "does not mandate the use of any particular discount rate" (Tassone v. Mid-Valley Oil Co., 5 AD3d 931, 933 [3d Dept 2004]; see Bermeo v. Atakent, 276 AD2d 361, 362 [1st Dept 2000]). However, it is well established that "long-term treasury bond rates are an appropriate basis for calculating discount rates" (Tassone, supra; see Altmajer v. Morley, 274 AD2d 364, 366 [2d Dept 2000]), though a court has discretion to look to other measures (see Bermeo, supra [annuity contract prices]).

Plaintiffs propose the use of a discount rate of 2.16 percent, representing the yield on ten-year Treasury bonds on the date of the jury's verdict. Plaintiffs rely on the opinion of Dr. James Lambrinos, Ph.D., a professor of economics, in support of their proposed discount rate. According to Dr. Lambrinos, this "yield was chosen since it matches the number of years the pain and suffering component of the jury verdict must be discounted over." Based on the cited legal authorities, it is clear that the Court would be well within its discretion to adopt the 2.16 percent discount rate proposed by plaintiffs.

In opposition to plaintiffs' proposed judgment and in support of their counter-judgment, defendants rely upon the opinion of their economist, Laura Bonanomi, Ph.D., who avers as follows:

5. In computing the present value of the $1,750,000, plaintiffs' economist applies the statutory inflation rate of 4% and a discount rate of 2.16%. Dr. Lambrinos based his figures upon the discount rate consistent with the yield on a 10-year Treasury Bond on the date of the verdict . . . . Applying this discount rate, Dr. Lambrinos arrives at the present value of the jury's future award at $1,874,360 roughly $174,000 more than what the jury actually awarded.

6. Dr. Lambrinos' assumptions lead to the economically unsound conclusion that the present value of plaintiffs' future loss of pain and suffering is higher than the future value itself. This runs counter to the economics and finance principle that, all other things being equal, investors prefer to receive a payment of a fixed amount today rather than some time in the value; i.e., that money has a time value.

***

8. If Dr. Lambrinos had selected a discount rate based upon the historical total return on intermediate-term Treasury securities (securities that mature between one and 10 years), . . . the total return on the securities has been approximately 6%. When using a 6% discount rate, . . . the present value of $1,750,000 becomes $1,546,920.

9. Even if Dr. Lambrinos had selected a discount rate on the historical yield of 10-year Treasury securities, he would have arrived at. . . approximately 4.9%. When using a 4.9% discount rate, . . . the present value of $1,750,000 becomes $1,632,407.

Upon close review of Dr. Bonanomi's affidavit, it is apparent that defendants' complaints of "economic unsoundness" are based not on the discount rate proposed by plaintiffs, but rather [*4]upon the CPLR article 50-b statutory scheme itself. Under the statute, $1.75 million of Diane Garrison's future pain and suffering award must be paid to her over a period of ten years. But her recovery over the full ten-year period will be well in excess of that amount, since CPLR 5041 provides for an annual four percent inflation factor. This is in addition to any inflationary increases included within the damage award and is mandatory even where actual inflation rates are less than four percent (see Desiderio v. Ochs, 100 NY2d 159, 170-172 [2003]). In this case, the actual amount required to be paid to plaintiff over ten years totals more than $2.1 million. It is this inflation-adjusted stream not the $1.75 million jury award for which an annuity must be valued.

Thus, in economic conditions where the escalation worked by the four percent annual inflation adjustment exceeds the reduction achieved by discounting the future stream to present value, the value of a future award computed pursuant according to CPLR 5041 (e) may exceed the value of the actual jury award itself. Indeed, defendants' contention that the result produced under the statute runs counter to the basic economic principle that "money has a time value" is similar to the argument rejected by the Court of Appeals in Desiderio.

Defendants' further contention that this result runs counter to the Legislature's purpose in adopting CPLR article 50-b tort reform also is foreclosed by Desiderio, wherein the Court of Appeals explains that "the structured judgment provisions, along with the other reforms passed in 1985, represent a weighing and balancing of many interests—including those of doctors, patients, malpractice victims, consumers, liability carriers and taxpayers" (100 NY2d at 182). Thus, while a lump sum payment of the full jury award (or an annuity purchased for some lesser sum) would impose a lesser burden on defendants and arguably produce a more economically sound outcome, it simply is not the result the Legislature commanded in enacting CPLR article 50-b.

Moreover, while this Court has discretion to determine an appropriate discount rate, it would be an improvident exercise of that discretion to adjust the discount rate for the sole purpose of avoiding an economically unsound result. While CPLR 5041 (e) does speak to the use of "generally accepted actuarial practices", that language refers to the manner of determining the present value of annuity contract that will provide for the future payment stream required under the statue. It does not, however, give a court license to rewrite "a structured judgment to conform to economic doctrines" (Desiderio, supra, at 182). Rather, any effort to address the economic anomalies identified by defendants must, of course, come from the State Legislature, which remains free to amend article 50-b.

With respect to the specific discount rates proposed by defendants, Dr. Bonanomi relies on the use of historical rates: the average discount rates in effect over the last decade or so. Apart from producing a result that she deems consistent with fundamental economic principles regarding the time value of money, Dr. Bonanomi provides no analytical basis for preferring the use of an historical average. Thus, even if the Court were to find that the use of an historical average complied with the statutory direction to use "the discount rate in effect at the time of the award" (emphasis added), defendants have not provided a sufficient basis for the Court to exercise its discretion in favor of such an approach. Further, given that the purpose of the methodology set forth in CPLR 5041 (e) is to value an annuity that would provide the future stream of payments called for in the statute, there are good reasons for using a discount rate that reflects actual [*5]market conditions.[FN2]

Given that defendants' written submissions have neither called into question the validity of the discount rate proposed by plaintiffs' economist nor provided an analytical basis for applying an alternative discount rate, the Court sees no basis for conducting an evidentiary hearing.

Based on the foregoing, the Court determines that the discount rate to be applied to the structured judgment in this case shall be 2.16 percent, as requested by plaintiffs. Further, since the proposed judgments differ only with respect to the discount rate, the Court will sign the judgment proposed by plaintiffs.

CONCLUSION

Accordingly, it is

ORDERED that defendants' application for a stay is denied in all respects.

This constitutes the Decision and Order of the Court. All papers, including this Decision and Order are returned to counsel for plaintiffs. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.

Dated: Albany, New York

March 3, 2009

RICHARD M. PLATKIN

A.J.S.C. Footnotes

Footnote 1: Defendants' moving papers in support of a stay raise an issue with respect to the manner in which the jury's verdict to plaintiff Glen Garrison for loss of consortium should be paid, but defendants' proposed judgment is identical to plaintiffs' in that regard. Accordingly, any such objection is waived.

Footnote 2: This is not to say that a historically based discount rate might not be appropriate in certain economic conditions, but defendants do not make that argument.