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Menorah Home and Hospital For the Aged and Infirm v. Fireman's Fund Insurance Company

December 16, 2011

MENORAH HOME AND HOSPITAL FOR THE AGED AND INFIRM, PLAINTIFF,
v.
FIREMAN'S FUND INSURANCE COMPANY DEFENDANT.
MENORAH HOME AND HOSPITAL FOR THE AGED AND INFIRM,
THIRD-PARTY PLAINTIFF,
v.
THE TRANE COMPANY THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Block, Senior District Judge:

MEMORANDUM AND ORDER

Third-party plaintiff, Menorah Home and Hospital for the Aged and Infirm ("Menorah"), obtained a jury verdict against third-party defendant, The Trane Company ("Trane"), for $1,008,040.64 in damages. Pursuant to Federal Rule of Civil Procedure 50(b), Trane now renews its motion for judgment as a matter of law,*fn1 asserting that the Court erred in admitting certain documents and that the verdict was not supported by legally sufficient evidence. For the reasons stated below, the motion is denied.

I

The following facts are drawn from trial testimony except as otherwise noted. Menorah engaged general contractor JA Jones for a construction and renovation project at Menorah's health care facility in Brooklyn. Fireman's Fund Insurance Company ("Fireman's Fund") issued a surety bond under which it agreed to undertake completion of the project if JA Jones failed to do so. After JA Jones filed for bankruptcy in 2003, Fireman's Fund engaged Clark Surety Services ("Clark") to complete the project.

Prior to bankruptcy, JA Jones, through its subcontractors, installed a boiler-chiller manufactured by Trane. In January 2003, Menorah and Trane entered into a service agreement under which Trane would regularly inspect the machine and assess and fix any problems. In January 2004, Trane determined that the machine was inoperable and shut it down.

In July 2004, Menorah filed a breach of contract action against Fireman's Fund alleging that Clark's work was defective and not completed in a timely manner. Fireman's Fund counterclaimed that Menorah was liable for approximately $900,000 that Fireman's Fund had spent repairing the boiler-chiller and providing temporary temperature control. As a result, Menorah filed a third-party complaint against Trane, alleging that Trane had breached its obligations under the service contract and demanding indemnification for any recovery by Fireman's Fund.

Menorah and Fireman's Fund reached a settlement in May 2006. Under the settlement agreement, Menorah admitted liability on the boiler-chiller counterclaim. The parties agreed to liquidate Menorah's liability in the amount Menorah recovered from Trane and permit Menorah to retain the amount it recovered. See Letter to Magistrate Judge Pollak, May 4, 2006; Oct. 2006 Motion for Summary Judgment, Ex. F. (Settlement Agreement).

Before trial on the third-party claim, Trane filed a motion in limine to preclude Menorah's proffered evidence of damages as insufficiently certain, arguing that Menorah had produced no evidence of what Fireman's Fund actually paid. Trane also objected to various trial exhibits, including Clark's vendor invoices -- which it argued were inadmissible hearsay -- and a spreadsheet based on those invoices. The Court discussed these issues with counsel off the record and denied Trane's motion.

Trial commenced on May 24, 2011. With respect to damages, Richard Kowalcyzk, Fireman Fund's Senior Director of Surety, testified that Clark billed the insurer for all of its costs and that Fireman's Fund paid "every cent." He explained that Clark would pay invoices it received from vendors and request compensation from Fireman's Fund, which would review the expenditure before approving release of funds.

The only evidence regarding the amount paid was introduced through the testimony of James Donegan, a consultant retained by Clark to oversee the Menorah project who monitored construction and cost issues. During his testimony, Menorah sought to introduce into evidence Exhibit 29, a spreadsheet identifying expenses stemming from the chiller-boiler repair. Trane objected that the exhibit's admission was "contingent upon certain testimony." In response, Donegan explained that he created Exhibit 29 based on his review of a broader spreadsheet made by the construction project's staff, which in turn was based on invoices Clark had received. These invoices were offered as Exhibit 30, which Donegan described as a collection of "bills that Clark incurred based upon the failure of the boiler." The Court asked Donegan if he could "identify them," had "gone over them," and could "recognize them," and he responded affirmatively. Donegan explained that, in contemplation of litigation, he had gathered invoices corresponding to estimated damages from Clark's files. "In some cases," rather than pulling the invoice from Clark's voluminous files, Donegan asked the vendor to send him a copy of the original invoice. Donegan confirmed that Exhibit 29 was based on the invoices contained in Exhibit 30 and both were accepted into evidence. They identified expenses totaling $1,033,065.54, including the initial investigation and rebuilding costs.

Donegan stated that, as project executive, his job responsibilities including ensuring that all of the venders' bills were paid. Many -- but not all -- of the invoices had stamps facially indicating that Clark paid them. To the best of Donegan's knowledge, "[e]very single invoice that [Clark] sent to Fireman's Fund was paid" -- he never heard otherwise and believed that Clark would not have continued working if it was not reimbursed.

Trane moved for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(a) at the close of Menorah's case and again at the at the conclusion of its own case, asserting that the only evidence of damages was "hearsay stacks of invoices" and that there was no evidence of payment. The Court reserved decision. On May 27, 2011, the jury returned its verdict that Trane had breached the service agreement, proximately causing Menorah to suffer general damages in the form of $1,008,040.64 paid by Fireman's Fund.

II

As a threshold matter, contrary to Menorah's assertion, Trane's motion is timely. Rule 50(b) provides that "[i]f the court does not grant a motion for judgment as a matter of law made under Rule 50(a) . . . [n]o later than 28 days after the entry of judgment . . . the movant may file a renewed motion for judgment as a matter of ...


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