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The New York Court of Appeals Tuesday established two important principles of labor law: that the window washer provision of New York Labor Law � 202 does not impose strict liability, and that it can coexist with a strict liability claim under � 240 of the same law. Tuesday’s ruling in Bauer v. The Female Academy of the Sacred Heart, 21, clarifies issues that had divided the Appellate Division, 3rd Department. It establishes for the first time that � 202, which was clearly a strict liability statute when it was enacted in 1930, is now subject to comparative negligence standards. Equally important, though, is the finding that a plaintiff can assert claims under both � 202 and � 240 in the same case and need not choose one or the other. That finding resolves a conflict that had split the Appellate Divisions. Also Tuesday, the court reversed the Appellate Division, 1st Department, in a complicated commercial case, Bluebird Partners LP v. First Fidelity Bank, 29. The decision reinstates a lawsuit by Bluebird alleging breach of fiduciary duty by the trustees for a bond issue by Continental Airlines. It held, contrary to the Appellate Division, that General Obligations Law � 13-107 does not require the purchaser of a bond to establish that it suffered an independent injury before it can pursue a claim transferred from the seller. The labor law case arises out of an accident in 1992, when Keith Bauer fell three stories while washing windows at a private school in Albany, N.Y. Bauer demanded damages under � 240, which imposes strict liability for elevation-related risks, as well as � 202, which specifically applies to window washers. After the 3rd Department dismissed the � 240 claim in a 3-2 decision, the case went to trial on the � 202 claim, resulting in a $3.3 million verdict for the plaintiff. The 3rd Department reversed in a 3-2 holding that � 202 had become a comparative negligence standard and, in 1970, ceased to be a strict liability statute. At retrial, the jury found that the accident was caused by Bauer’s own negligence, and absolved the defendants of liability. Tuesday, the Court of Appeals said the 3rd Department was half right: labor law � 202 is indeed a comparative negligence statute, but it can co-exist with a � 240 claim. In a 6-0 opinion, the court remitted the case for further proceedings. Judge Carmen Beauchamp Ciparick, writing for the court, said that a 1970 amendment that gave the Industrial Board of Appeals the power to impose safety standards effectively transformed � 202 from a strict liability to a comparative negligence statute. However, the court disagreed with the 3rd Department’s conclusion that allowing a � 240 claim in a window washing case would render � 202 “superfluous.” It said the two statutes “serve different goals, apply to different defendants and have been interpreted differently.” That there is overlap, the court said, “is not a sound reason to imply exclusivity.” “The Legislature has not expressed an intention that these statutes be mutually exclusive and we see no need to imply such an intention,” Judge Ciparick wrote. “We would be ill-advised to hold that — simply because an injured window cleaner’s claim appears cognizable under both [labor law provisions] — one cause of action must be chosen to the exclusion of the other.” Judge Victoria A. Graffeo, who previously served on the 3rd Department bench, took no part. Appearing were: Cornelius D. Murray of the Albany firm of O’Connell and Aronowitz for Bauer; Lynn M. Blake of Friedman, Hirschin, Miller & Compito in Schenectady, N.Y., for the school; and Michael J. Hutter of Thuillez Ford Gold & Johnson in Albany for Bauer’s employer, Environmental Service Systems Inc. DISTRESSED DEBT MARKET Bluebird has enormous implications for the multibillion-dollar secondary distressed debt market. It stems from the 1987 issue by Continental Airlines of $350 million in bonds, secured by aircraft parts valued at approximately $450 million. When Continental filed for Chapter 11 bankruptcy protection in 1990, the outstanding obligation on the bonds was over $180 million. A predecessor to Bluebird in late 1991 began accumulating Continental’s first series certificates and, due to the company’s financial distress, was able to purchase $70 million worth of debt for about $26 million. Later, when Bluebird was formed, second-series certificates worth $301 million were purchased for $644,625. But when the bankruptcy case was over, the collateral was worth only about $50 million. Bluebird initiated an action against the trustees, accusing them of negligently failing to move for adequate protection of the collateral. The suit was brought under General Obligations Law � 13-107, which extends to the buyer or transferee of a resold bond the right to pursue any claims of the original bond holder. The 1st Department dismissed the suit, holding that � 13-107 does not alleviate the need for Bluebird to demonstrate that it was injured and that it exercised due caution. Tuesday, the Court of Appeals reversed in a unanimous decision by Judge Albert M. Rosenblatt. “The wording of [General Obligations Law � 13-107] makes it eminently clear that the buyer of a bond receives exactly the same ‘claims or demands’ as the seller held before the transfer,” Rosenblatt wrote. “Had the Legislature sought to impose on the buyer any precondition to suit … it well could have done so.” Rosenblatt observed that � 13-107 was enacted to bring New York into line with federal courts and other jurisdictions that recognize the automatic transfer of rights. However, he said, federal courts no longer adhere to that assignment rule. “Thus,” Rosenblatt said, “New York’s attempt to bring its rule into conformity with other jurisdictions has ironically achieved the opposite result. Whether New York wants to make another attempt at conforming its rule to other jurisdictions or retain it in its present form is a decision for the Legislature.” David M. Friedman of Kasowitz Benson Torres & Friedman in Manhattan argued for Bluebird. Marc Wolinsky of Wachtell, Lipton, Rosen & Katz in Manhattan appeared for the banks.

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