As practitioners, we are often called upon to evaluate how a court might apply the law to a client’s fact patterns. In two tort cases from the past term, the Court of Appeals reminded us that legal principles often require us to analyze the totality of circumstances, rather than apply facile but ill-fitting and rigid tests. In Fasolas v. Bobcat of N.Y., 2019 N.Y. Slip Op. 03657 (May 9, 2019), the Court considered whether the scope of strict liability for a design defect differs if the product at issue reaches its user via rental as opposed to a purchase. In Hinton v. Village of Pulaski, 2019 N.Y. Slip Op. 01261 (Feb. 21, 2019), the Court examined its decision in Woodson v. City of New York, 93 N.Y.2d 936 (1999), to review when a staircase might be considered a sidewalk when interpreting a municipality’s prior written notice statute.

‘Fasolas v. Bobcat of N.Y.’

In Fasolas, Elias Fasolas died while operating a Bobcat S-175 “skid-steer” loader. Although the record was unclear as to the exact manner in which Fasolas was using the loader at the time of the incident, it was undisputed that Fasolas died as a result of being crushed by a 9 ft.-tall tree that entered the loader’s unenclosed operating cab. Fasolas leased the loader from Port Jefferson Rental Center d/b/a Taylor Rental Center (Taylor) pursuant to a two-day rental agreement. Bobcat Company manufactured the loader, which Taylor purchased from distributor Bobcat of Long Island (collectively, Bobcat defendants). Fasolas’s estate (plaintiff) commenced an action against Taylor and Bobcat defendants, asserting claims for strict product liability based on, inter alia, defective design.

A multi-purpose construction machine, the loader can be equipped with up to 150 different attachments that serve various construction functions. Fasolas rented the loader equipped with a toothed bucket attachment (a bucket-equipped loader), which is intended “to dig up and loosen hard-packed earth” and “to level soil and pick up or transport dirt, broken branches and other loose debris.” The loader can also be equipped with a door and a set of windows to enclose the cab and protect the operator from flying debris. The cab enclosure accompanied certain other attachments as a standard feature, including attachments that were available for leveling trees, but the cab enclosure did not come standard with a bucket-equipped loader. Bobcat explained that a bucket-equipped loader “was not intended to be used to knock down rooted trees” and that the enclosure was not recommended for a bucket-equipped loader “since debris would not be expected to fly into the cab if the bucket was used as intended—to dig or move soil and other loose debris.”

At trial, plaintiff’s expert testified that the bucket-equipped loader contained a design defect because the cab enclosure was not a standard safety feature. Plaintiff’s expert admitted that the failure to provide a cab enclosure did not render the bucket-equipped loader defective under all circumstances. Nevertheless, he opined that the failure to provide the enclosure as a standard feature when the bucket-equipped loader was “destined for the rental market” constituted a design defect because it “created the potential for an untrained end-user to use the product in a manner for which the optional [safety enclosure] would be recommended.”

Bobcat defendants asserted, inter alia, that they should be relieved of liability under the Scarangella exception to the general rule of strict products liability for design defects. More particularly, Bobcat defendants argued that they met each element of the three-part Scarangella test because: (1) Taylor, the purchaser of the bucket-equipped loader, was “thoroughly knowledgeable regarding the product and its use” and was aware that the safety feature, the cab enclosure, was available for purchase as an attachment; (2) the bucket-equipped loader could be used under “normal circumstances” (e.g., to move soil) in the absence of the cab enclosure without rendering the product “unreasonably dangerous”; and (3) Taylor stood in a better position than Bobcat for purposes of weighing the risks and benefits of foregoing the purchase of the cab enclosure in light of “the product’s contemplated use by its clientele, including Fasolas.”

The trial court, however, rejected Bobcat defendants’ motion at the end of plaintiff’s case that sought dismissal under the Scarangella exception and refused to instruct the jury to consider whether that exception applied. The trial court explained that Bobcat defendants owed a distinct duty for each of the “two streams of commerce into which the [bucket-equipped loader]” was introduced (i.e., the purchase by a rental company and the later rental by a user) and that Bobcat defendants could not avail themselves of the Scarangella exception because the duty implicated in this case was to the “non-professional occasional renter.” Furthermore, the trial court deviated from the Pattern Jury Instruction by incorporating the “rental market” theory advanced by plaintiff’s expert into the jury charge, instructing the jury to assess whether the bucket-equipped loader was defective “for the purposes of being rented.” Finding Bobcat defendants and Taylor liable for defective design and Fasolas without fault, the jury returned a verdict in favor of plaintiff for $1 million.

On appeal, the Appellate Division, Second Department, affirmed the trial court’s order, holding that the Scarangella exception is unavailable when a rental company purchases the product and then rents it to the end user. The Second Department explained that Bobcat defendants were aware that Taylor would rent the bucket-equipped loader to parties who might be inexperienced and “over whom Taylor had no control.” The Second Department further sought to distinguish Taylor from the purchaser in Scarangella—an employer which controlled “the worksite where its employees would be mainly at risk”—reasoning that Taylor’s incentive to conduct a risk-benefit analysis was compromised because its purchasing agent did not risk personal harm “through use of the loader without the optional safety device.”

After granting leave to appeal, the Court of Appeals reversed the Second Department’s order and remitted the case for a new trial against Bobcat defendants on the design defect claim. The Court rejected the lower courts’ application of Scarangella, holding that both misconstrued the third prong of the Scarangella test, the focus of which is “the purchaser’s ability … to assess the risks and benefits of purchasing the safety device” in light of the product’s anticipated use. Writing for the majority, Chief Judge Janet DiFiore reasoned that, in addressing the third prong, the anticipated “use” of the product “was not ‘rental’ or ‘placement in the rental market.’” Rather, rental was merely “the process by which the product came into the hands of the end user.” Rejecting an interpretation of the Scarangella test that created a presumption that the third prong could not be satisfied if the product reached the end user through the rental market, the Court concluded that the lower courts had erroneously “shift[ed] the focus away from the purchaser’s knowledge … and toward the nature of the marketplace through which the product passed.”

Whether the purchaser is an employer or a lessor is not dispositive of whether the Scarangella exception is available, the Court held. Instead, the purchaser’s relationship to the end user is but one factor to be weighed in assessing whether the purchaser is properly positioned to conduct a risk-benefit analysis regarding the optional safety equipment. In concluding that “[a] lessor may be able to appropriately mitigate risk by carefully controlling to whom it rents its products and for what use,” the Court noted that Taylor’s customers included “businesses, contractors, schools and other community institutions, such as the fire department,” which “may have possessed training and expertise in the use of loaders and other construction equipment.”

The Court further rejected the Second Department’s assertion that the Scarangella exception could not be invoked because Taylor’s purchasing agent did not risk personal harm in the absence of the cab enclosure, observing that a “risk of personal harm” is not a prerequisite under Scarangella. Moreover, the Court reasoned that Taylor arguably had a greater incentive to protect its customers against the dangers of its rental products because, unlike the employer in Scarangella, Taylor could not invoke the Worker’s Compensation Law to bar claims asserted by its customers, who were not within its employ. Thus, the Court refused to hold, as a matter of law, that a purchaser in Taylor’s position lacked a sufficient interest in protecting its customers.

The Court also held that the trial court’s misplaced focus on the perceived dichotomy between a sale and a rental prejudicially tainted the jury instruction. The Pattern Jury Instructions call for the jury to consider whether a product “is not reasonably safe” in light of “its intended or reasonably foreseeable purpose.” By incorporating the “rental market” theory throughout the charge, the trial court erroneously conveyed to the jury that a manufacturer is subject to “some higher, undefined duty” when the end user is a lessee and that Bobcat defendants were required to make the bucket-equipped loader “reasonably safe for ‘whatever use’ a renter might make of it.” This impermissibly grafted onto New York’s standard for determining whether a product is “reasonably safe” an additional consideration of whether the product reached the end user via the rental market, which “is not part of the calculus.” Noting that plaintiff’s own expert admitted that the rental market theory “would effectively require a manufacturer to include every optional safety device as a standard feature for every piece of equipment it knows is destined for the rental market,” the Court reasoned that such a theory, if adopted, would drastically increase the product’s cost and potentially price it out of the market for occasional users who “had neither the means nor the desire to purchase a loader.”

Judge Jenny Rivera, in dissent, contended that the Scarangella exception should be unavailable as a matter of law where “the renting company has information about the product and the optional safety equipment that has not been provided to the renter.” According to Judge Rivera’s view, the majority’s decision was at odds with both “the instrumentalist rationale of Scarangella” and “products liability public policy goals.”

Judge Rivera asserted that the majority misinterpreted Scarangella because New York’s product liability law provides an exception to a manufacturer’s strict liability only if the evidence establishes that the end user—or a third party “with control over the use environment”—is better equipped than the manufacturer to conduct a risk-benefit analysis. Where the product is distributed through the rental market, the rental company is neither an end user nor a party, as was the employer in Scarangella, with control over the environment in which the product is used. The dissent reasoned that, because the lessee—not the lessor—is in the best position to balance the risks and benefits under these circumstances, the rationale underlying Scarangella is “inapt” and cannot be applied to the rental market.

The dissent further expressed concern that applying Scarangella in the rental market context would undermine the public policies aims of New York’s products liability regime. Viewing the issue from the standpoint of the rental company, as opposed to that of the manufacturer, Judge Rivera reasoned that rental companies, which do not exercise control over the product’s use, cannot effectively limit their risk of liability under the majority’s interpretation unless they “purchase all the optional safety equipment” or decline to “rent the machinery at all.” To impose this Hobson’s choice upon rental companies would yield undesirable outcomes very similar to those about which the majority expressed concern: either rendering “the optional device standard for rental purposes” or removing the product from the market even though there are circumstances of use under which it is “not unreasonably unsafe without the safety device.” As Judge Rivera explained, “[n]either outcome furthers the public policy goals of risk control, allocative efficiency, and consumer autonomy that justify our state’s products liability rules.”

Judge Rivera also criticized the majority’s decision because it allows a manufacturer to delegate its responsibility to the rental company by invoking Scarangella without reasonable grounds for believing that the end user is sufficiently knowledgeable to conduct the requisite cost-benefit analysis relating to the available optional safety equipment. Judge Rivera explained that, here, Bobcat defendants knew that Taylor purchased the product without the safety enclosure and rented it to customers who were inexperienced. Consequently, the majority’s decision failed to effectuate the products liability goal of “reduc[ing] injury … by incentivizing manufacturers to design and produce products reasonably safe for their intended use.”

‘Hinton v. Village of Pulaski’

In Hinton v. Village of Pulaski, 2019 N.Y. Slip Op. 01261 (Feb. 21, 2019), plaintiff Randall Hinton brought an action against defendant Village of Pulaski (the Village) for personal injuries he suffered when he fell down an outdoor stairway. The Village moved for summary judgment on the ground that plaintiff failed to plead and prove compliance with §122-14 of the Village of Pulaski Code, a local law which requires that the Village have prior written notice of a defective condition located on, inter alia, any “sidewalk” as a condition precedent to maintaining a personal injury action against the Village. In opposition to the motion, plaintiff argued that the stairway on which he fell did not constitute a “sidewalk” for purposes of the Village’s prior written notice statute.

The stairway at issue was constructed by the Village and connected a parking lot to a public roadway, which was adjacent to a riverbank frequented by fishermen. The stairway, which consisted of compacted soil, recycled railway ties, and wooden railings, had steps that were “steep” and “irregularly spaced.”

The lower court applied the “functional equivalence” test established by the Court of Appeals in Woodson v. City of New York, 93 N.Y.2d 936 (1999). In Woodson, the Court of Appeals addressed whether a stairway constituted a “sidewalk” within the meaning of New York City’s prior written notice statute, General Municipal Law §50e(4), the terms of which are analogous to the Village’s statute. The plaintiff in Woodson commenced an action against the City after he fell on a set of concrete stairs, which connected a concrete sidewalk to a paved pathway in a New York City park. There, the plaintiff argued that prior written notice of a defect was not needed because stairways were not included among the six types of locations identified in GML §50e(4) and could not be considered a “sidewalk” for purpose of the statute.

In rejecting the plaintiff’s argument, the Woodson Court first explained that the City’s Administrative Code, which defined the term “sidewalk,” contemplated that sidewalks could encompass stairs to the extent they were “integrated with, or serve[d] as part of, a connected standard sidewalk.” The Court further distinguished its decision in Walker v. Town of Hempstead, 84 N.Y.2d 360 (1994), in which it construed a town’s prior written notice statute restrictively and held that a paddleball court did not fall within the ambit of “the six, specific locations” enumerated in that statute for which prior written notice would be required. The Court held that, unlike the paddleboard court in Walker, the stairway at issue in Woodson could be characterized as a sidewalk because the stairway “functionally fulfill[ed] the same purpose that a standard sidewalk would serve.” Since Woodson, courts have employed this “functional equivalence” test to determine whether stairways and other infrastructure not explicitly identified in a prior written notice statute nevertheless fall within the meaning of the identified locations.

Against this backdrop, the trial court in Hinton determined that the stairway was a sidewalk for purposes of the prior written notice statute and granted the Village’s motion for summary judgment. The Appellate Division, Fourth Department, affirmed.

A majority of the Court concluded in a memorandum decision that the lower courts properly applied the functional equivalence test and correctly determined that plaintiff failed to raise a triable issue as to whether prior notice was provided. In rejecting plaintiff’s arguments, the Court explained that whether the stairway fell within the meaning of “sidewalk” under the Village’s prior written notice statute was not a matter of statutory interpretation. Although the legislature was “fully capable of corrective action” during the 20 years since the Court’s decision in Woodson, it had not taken any steps to communicate its dissatisfaction with the functional equivalence test. Therefore, resolution of the case simply turned on the “application of settled precedent,” and summary judgment was properly awarded to the Village.

Judge Rowan Wilson, however, authored a vigorous and lengthy dissent, in which Judge Eugene Fahey concurred. The dissent argued that the majority’s interpretation in Hinton of the Court’s holding in Woodson denoted a profound departure from both the Court’s historic reliance on well-established canons of statutory construction and “centuries of … common law jurisprudence.” Citing the Court’s decision in Walker, in which the Court applied its traditionally narrow approach to statutory construction, Judge Wilson asserted that the majority failed to effectuate the intent of the Village’s legislature because, like the statute at issue in Walker, the Village’s statute explicitly lists six locations to which it applies. Therefore, in the absence of ambiguity, the statute could only be “interpreted as evincing an intent to exclude” any unidentified location.

Judge Wilson further asserted that the Court misinterpreted the breadth of the Court’s holding in Woodson for purposes of stare decisis and that its approach fails to effectuate the “underlying purpose” that prior written notice statutes are intended to serve. Judge Wilson first posited that the scope of Woodson, viewed “in light of its peculiar facts,” was limited to stairs that were “integrated with, or a part of, a connected standard sidewalk.” Because the stairs on which plaintiff fell in Hinton were not connected to a sidewalk, Woodson is not controlling.

Moreover, Judge Wilson contended that, in order to reconcile conflicting precedent and to effectuate the underlying purpose of prior written notice statutes, courts applying the functional equivalence test should consider the magnitude of danger a defective condition is likely to pose at a given location. In the dissent’s view, prior written notice statutes are intended to curb a governmental entity’s “duty to detect flaws in their infrastructure” by excluding from that duty defective conditions that merely constitute a “modest danger.” Consequently, such statutes often are designed to apply only to specifically identified infrastructure—such as sidewalks—because defects at such locations are unlikely to cause significant injury. In this regard, Judge Wilson asserted that the functional equivalence test, under its current formulation, fails to incorporate the factor legislatures deemed paramount in selecting locations to which their statutes would apply, i.e., whether defective conditions at a given location have a “functional potential to injure” comparable to those that ordinarily develop on sidewalks.

Viewed through the lens of statutory purpose, Judge Wilson reasoned that the basis for the Court’s holding in Woodson was not merely that the sidewalk and stairway served the same general function for purposes of pedestrian travel. Rather, the principal justification for concluding that the statute encompassed the stairs at issue in Woodson was that the “relatively short, shallow, and perfunctory” stairway presented no greater likelihood of injury than the sidewalk to which it was connected. In contrast, the irregular stairway in Hinton possessed certain characteristics—including a “lack of vertical uniformity of the steps” and “rickety handrails”—which presented risks more grave than those presented by a traditional sidewalk. Therefore, Judge Wilson concluded that summary judgment in favor of the Village was improper.

Jeffrey S. Lichtman is a partner at O’Hare Parnagian. Thomas Cummings assisted with the preparation of this article.