Doctor Fred L. Pasternack v. Laboratory Corporation of America Holdings

This opinion is uncorrected and subject to revision before

publication in the New York Reports.

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No. 112

Doctor Fred L. Pasternack,

Appellant,

v.

Laboratory Corporation of America

Holdings, &c., et al.,

Respondents.

Cynthia S. Arato, for appellant.

Frederick T. Smith, for respondent LexisNexis

Occupational Health Solutions Inc. formerly known as ChoicePoint,

Inc.

Robert I. Steiner, for respondent Laboratory

Corporation of America Holdings.

ABDUS-SALAAM, J.:

In this action sounding in, among other things,

negligence and fraud, plaintiff Fred Pasternack seeks to recover

damages from defendants Laboratory Corporation of America

(LabCorp) and ChoicePoint, Inc., arising from defendants' alleged

misconduct in performing and evaluating a random drug test that

he was required to take as an airline pilot. We have accepted

two certified questions from the United States Court of Appeals

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for the Second Circuit, asking us to determine (1) whether drug

testing regulations and guidelines promulgated by the Federal

Aviation Administration (FAA) and the Department of

Transportation (DOT) create a duty of care for drug testing

laboratories and program administrators under New York negligence

law, and (2) whether a plaintiff may establish the reliance

element of a fraud claim under New York law by showing that a

third party relied on a defendant's false statements

resulting in injury to the plaintiff. We answer both

questions in accordance with this opinion.

I.

The underlying facts and procedural history are

summarized as follows:

Plaintiff is a physician and part-time Northeastern

Aviation Corporation airline pilot. He was required to submit to

random drug testing pursuant to FAA regulations as part of its

mandate to ensure "safety in air commerce and national security"

(49 USC § 44701(a)(5)[procedures for transportation workplace

drug and alcohol testing programs]; see also 49 CFR pt 40]).

ChoicePoint entered into a contract with Northeastern where it

agreed to help administer Northeastern's drug program, including

performing the services of a Medical Review Officer (MRO).

LabCorp, which provides specimen collection and drug testing

services for private entities, entered into a contract with

ChoicePoint to perform those services for Northeastern.

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When performing their duties under these contracts, both

ChoicePoint and LabCorp were required to comply with the DOT

Regulations and the DOT's Urine Specimen Collection Guidelines

(collectively, the DOT Regulations and Guidelines). The stated

purpose of the DOT Regulations "is to establish a program

designed to help prevent accidents and injuries resulting from

the use of prohibited drugs or the misuse of alcohol by employees

who perform safety-sensitive functions in aviation" (14 CFR §

120.3).

On June 1, 2007, plaintiff was notified by

Northeastern that he had been selected for random drug testing.

On June 5, 2007, at about 1:10 PM, he appeared for drug testing

at a LabCorp site located in Manhattan. The urine sample

plaintiff first produced at the test site was an insufficient

quantity for testing. This is referred to under the DOT

Regulations as a "shy bladder" situation. The DOT Regulations

and Guidelines set forth procedures to be followed in such a

situation, which include urging the employee to drink up to 40

ounces of fluid distributed reasonably through a three hour

period, or until the employee has provided a sufficient urine

specimen (40 CFR § 40.193; Department of Transportation, Urine

Specimen Collection Guidelines [December 2006]). At the time

that plaintiff was tested, the DOT Guidelines provided that

"[t]he collector must specifically tell the employee that he or

she is not permitted to leave the collection site and if they do

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so, that it will be considered a refusal to test."1

According to the complaint, Theresa Montalvo, a Patient

Services Technician for LabCorp, told plaintiff that he would

need to produce another urine sample, but did not explain the shy

bladder procedure to him or urge him to drink additional fluids,

and instead told him to return to the waiting room. Plaintiff

did return to the waiting room, but believed it was unlikely that

he could produce a sufficient urine sample before needing to

depart the collection site for a scheduled aviation medical

examination he was performing. He told Montalvo that he needed

to leave, but would return to complete the test. Montalvo did

not inform him that leaving the collection site would be

considered a "refusal to test." She did tell him that she was

required to notify Northeastern that he was leaving and asked

when he would return. Plaintiff told her she was free to contact

Northeastern and that he would return the next day. He returned

to the LabCorp facility around 4:00 p.m. that same day, and

Montalvo called Northeastern and obtained permission to take a

second urine sample from plaintiff. She noted on the chain-of-

1

The DOT Guidelines have since been revised to state that

"there is no requirement for the collector to inform the employee

in a shy bladder situation that failure to remain at the

collection site or otherwise fails to cooperate with the testing

process constitutes a refusal. It is best practice for the

collector to inform the employee that such behavior could lead an

employer to determine that a refusal occurred" (DOT, Urine

Specimen Collection Guidelines [July 2014] at 21,

https://www.fta.dot.gov/documents/Urine_Specimen_Collection_Guide

lines_July3_2014_A.pdf).

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custody form (CCF), which Northeastern had given plaintiff

pursuant to the DOT Regulations, that he had left and returned

and that Northeastern had approved the second collection. Upon

his return, plaintiff produced an adequate sample, which tested

negative for prohibited drugs.

Plaintiff's CCF was later reviewed by a Medical Review

Officer (MRO) at ChoicePoint, who determined that because

plaintiff had left the collection site before the test was

completed, there had been a "refusal to test" under the DOT

Regulations. ChoicePoint reported this determination to the FAA,

which prompted the FAA to interview Montalvo regarding the

circumstances surrounding the urine specimen collection. As

alleged by plaintiff, during the interview and in her subsequent

signed statement, Montalvo did not tell the FAA investigators

that plaintiff had told her during the initial collection that he

planned to return to complete his collection. In November 2007,

by Emergency Order, the FAA revoked all of plaintiff's airman

certificates, finding that he had engaged in a refusal to test.

It subsequently terminated plaintiff's designation as an Aviation

Medical Examiner (AME) for the FAA, which gave him the authority

to conduct FAA-mandated examinations for pilots. Thus, he was

unable to pilot any flights or function as an AME.

Plaintiff appealed the termination of his AME

designation to the FAA and that appeal was denied. He also

appealed the revocation of his airman certificates to the FAA. A

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hearing was held before an Administrative Law Judge (ALJ) at

which both plaintiff and Montalvo testified. Plaintiff claimed

that he left the collection site with Montalvo's acquiescence,

while she testified that he rushed out of the facility before she

could explain the shy bladder procedures to him. As previously

noted, it was undisputed that Montalvo did not advise plaintiff

that he would be deemed a "refusal to test" if he left the

facility. The ALJ upheld the revocation, as did the National

Transportation Safety Board (NTSB). Plaintiff appealed the

NTSB's decision to the D.C. Circuit Court of Appeals, which

vacated the decision and remanded the matter to the NTSB, holding

that the NTSB's finding that Montalvo had been precluded from

explaining the shy bladder procedure to plaintiff was not

supported by substantial evidence (see Pasternack v Nat'l Transp.

Safety Bd, 596 F3d 836 [2010]). In September 2010, the NTSB

remanded the case to the ALJ, directing that the ALJ make the

necessary credibility findings concerning the interaction between

plaintiff and Montalvo. On remand, the ALJ again concluded that

plaintiff had refused to test. The NTSB again affirmed.

Plaintiff appealed to the D.C. Circuit, which ruled in his favor

once more, holding that "substantial evidence does not support

the NTSB's determination that the collector did not impliedly

give [plaintiff] permission to leave" and reversing the NTSB

(Pasternack v Huerta, 513 Fed Appx 1, 2 [2013]). Subsequently,

the FAA reinstated plaintiff's airman certificates and AME

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designation and expunged the refusal to test from his record.

In June 2010, while his administrative appeal was still

pending, plaintiff commenced this lawsuit to recover damages from

LabCorp and ChoicePoint for the loss of his AME certification and

airman certificates. The lawsuit alleged negligence and fraud in

administering the test.

On August 1, 2011, the district court granted

ChoicePoint's motion to dismiss (see Pasternack v Lab. Corp. of

Am., US Dist Ct, SD NY, 10 Civ 4426, Gardephe, J., 2011]),

concluding that plaintiff had not alleged any facts that

supported a finding that ChoicePoint owed a duty of care to

plaintiff. On September 6, 2012, the district court granted

plaintiff's motion for leave to file a proposed second amended

complaint as to LabCorp, but denied plaintiff's motion for leave

to amend his complaint as to ChoicePoint, concluding that it

would be futile (see Pasternack v Lab. Corp. of Am., 892 F Supp

2d 540 [2012]). Plaintiff filed a second amended complaint as to

LabCorp, asserting claims for negligence, gross negligence,

negligent misrepresentation, fraud, and injurious falsehood.

Subsequently, the district court granted LabCorp's motion to

dismiss (Pasternack v Lab. Corp. of Am., US Dist Ct, SD NY, 10

Civ 4426, Gardephe, J., 2014]), holding that with respect to the

negligence claims, under New York law, LabCorp had no duty of

care to properly apply federal drug testing regulations and

guidelines, and regarding the fraud claims, that under New York

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law, a fraud claim cannot be based on a false representation made

to and relied upon by a third party whose reliance causes injury

to the plaintiff. On appeal to the Second Circuit, that Court

certified the aforementioned questions of New York law to this

Court (807 F3d 14 [2015]) and we accepted the certification of

the questions (26 NY3d 1074 [2015]).

II.

The Negligence Claims

Plaintiff alleges that ChoicePoint was negligent in

mishandling the review and evaluation of his laboratory results

in violation of the DOT Regulations. Although he asserts that

ChoicePoint violated numerous DOT Regulations, he cites two

regulations in particular: 49 CFR § 40.123(3), which provides

that the MRO "must act to investigate and correct problems where

possible and notify appropriate parties . . . where assistance is

needed . . .;" and 49 CFR § 40.355(i), which provides that,

except where the employee has refused to test on the basis of

adulteration or substitution, the MRO "must not make a

determination that an employee has refused a drug or alcohol

test" and that the ability to make such a determination "is a

nondelegable duty of the actual employer." Plaintiff argues that

ChoicePoint failed to investigate the facts of his urine specimen

collection and that it wrongfully designated him as a "refusal to

test," despite the regulation's provision that the MRO is not to

make such a determination. Plaintiff asserts that this

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designation was the sole reason for the FAA's revocation of his

airman certificates and his AME designation.

With respect to LabCorp, plaintiff alleges that LabCorp

failed to explain the "shy bladder" procedures and failed to

inform him that leaving the collection site would or even could

constitute a refusal to test, in contravention of CFR § 40.193(b)

and the DOT Guidelines.

In order to prevail on a negligence claim, "a plaintiff

must demonstrate (1) a duty owed by the defendant to the

plaintiff, (2) a breach thereof, and (3) injury proximately

resulting therefrom"(Solomon v New York, 66 NY2d 1026, 1027

[1985]). In the absence of a duty, as a matter of law, there can

be no liability (id. at 1028; see also Lauer v City of New York,

95 NY2d 95, 100 [2000]["(w)ithout a duty running directly to the

injured person there can be no liability in damages, however

careless the conduct or foreseeable the harm"]). The definition

and scope of an alleged tortfeasor's duty owed to a plaintiff is

a question of law (see Palka v Servicemaster Mgmt. Corp., 83 NY2d

579, 585 [1994]). As this Court observed in 532 Madison Avenue

Gourmet Foods, Inc., v Finlandia Center (96 NY2d 280 [2001]),

courts "fix the duty point by balancing factors, including the

reasonable expectations of the parties and society generally, the

proliferation of claims, the likelihood of unlimited or insurer-

like liability, disproportionate risk and reparation allocation,

and public policies affecting the expansion or limitation of new

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channels of liability" (96 NY2d at 288 [internal quotations and

citations omitted]).

The FAA does not provide a private right of action for

violations of FAA drug-testing regulations (see Drake v

Laboratory Corp. of America, 458 F3d 48, 64 [2d Cir 2006]).

Thus, any duty to plaintiff for violations of the DOT Regulations

and Guidelines must be based on a New York state common law

negligence theory of liability.

We have recently addressed duty of care in the drug

testing context in Landon v Kroll Lab. Specialists,Inc.(22 NY3d

1 [2013]). In Landon, a drug testing laboratory allegedly

performed a toxicology test in violation of industry-wide

standards and failed to confirm the test, resulting in an

erroneous report of drug use for a probationer. We held that the

probationer had sufficiently alleged a negligence cause of action

against the laboratory for failing to exercise reasonable care in

the testing of his biological sample, concluding that the

laboratory had a duty of care to perform the probationer's drug

test "in keeping with professional standards" (id. at 6-7).

Thus, in Landon we held that a drug testing laboratory

can be liable to a test subject under the common law for

negligent testing of a biological sample. We decline to extend

Landon's reasoning to impose a duty upon a laboratory to test

subjects that requires the laboratory to adhere to aspects of the

federal regulations and guidelines that do not implicate the

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scientific integrity of the testing process. We made clear in

Landon that our holding regarding a duty of care owed by the

laboratory to the plaintiff was limited to "th[o]se

circumstances" -- namely, a drug laboratory's failure to adhere

to professionally accepted scientific testing standards in the

testing of the biological sample. It would be an unwarranted

extension of Landon to recognize a duty to test subjects based

upon the violation of ministerial federal regulations and

guidelines unrelated to scientific integrity, especially when

such regulations and guidelines are created to protect the

public, not test subjects.2 Landon's limited ruling regarding

the duty of care owed by laboratories to ensure accurate testing

procedures does not encompass every step of the testing process,

whether that process is governed by federal regulations and

guidelines, or otherwise (see e.g. In re New York City Asbestos

Litig., 5 NY3d 486, 493 [2005][A specific duty is required

because otherwise, a defendant would be subjected 'to limitless

liability to an indeterminate class of persons conceivably

injured' by its negligent acts"]; see also Braverman v Bendiner &

Schlesinger, Inc., 121 AD3d 353 [2d Dept 2014], lv denied 24 NY3d

913 [2015][plaintiff drug treatment program participant who

2

The Sixth Circuit has observed that "[t]his regulatory

scheme does not evince a concern for the protection of

[employees] who believe that they have been aggrieved through the

drug testing process"(Perry v Mohawk Motors of Michigan, Inc.,

236 F2d 299, 309 [6th Cir 2000]).

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alleged that laboratory was negligent in reporting positive

results to the drug courts without labeling the results to

indicate for 'clinical purposes only' sought an "unwarranted

expansion of the duty set forth in Landon"]). Recognizing a duty

of care for any violation of federal regulations and guidelines

unrelated to the actual performance of scientific testing of the

biological sample would result in an unacceptable "proliferation

of claims, [and] the likelihood of unlimited or insurer-like

liability" (see Madison Ave, 96 NY2d at 288).3

In sum, the regulations and guidelines that are

ministerial in nature and do not implicate the scientific

integrity of the testing process do not create a duty of care for

drug testing laboratories and program administrators under New

York negligence law.

III.

The Fraud Claims

The second certified question requires us to decide

whether third-party reliance can establish the reliance element

of a fraud claim. Plaintiff alleges fraud against LabCorp,

contending that Montalvo, LabCorp's employee, made false

statements to the FAA investigators, which they relied on to

plaintiff's detriment. Specifically, plaintiff points to

3

Accordingly, plaintiff's proposed reformulation of the

certified question to ask whether the common law duty of care

that this Court recognized in Landon applies to FAA mandated drug

tests, provides plaintiff no succor.

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Montalvo's statement to the FAA investigators that plaintiff was

on his cell phone and uncooperative during the test, making it

impossible to warn him of the consequence of leaving the testing

site without giving a sample, which statement the FAA relied on

in revoking plaintiff's airman certificates. We hold that under

New York law, such third-party reliance does not satisfy the

reliance element of a a fraud claim.

The elements of a fraud cause of action consist of "'a

misrepresentation or a material omission of fact which was false

and known to be false by [the] defendant, made for the purpose of

inducing the other party to rely upon it, justifiable reliance of

the other party on the misrepresentation or material omission,

and injury'"(Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173,

178 [2011], quoting Lama Holding Co. v Smith Barney, 88 NY2d 413,

412 [1996]; see Eurycleia Partners, LP v Seward & Kissel, LLP, 12

NY3d 553, 559 [2009]). Federal courts applying New York law and

the Appellate Division Departments have come to varying

conclusions as to whether a plaintiff may state a fraud claim,

despite the absence of reliance by the plaintiff on the alleged

misrepresentations, where a non-plaintiff third-party is alleged

to have relied on the misrepresentations in a manner that caused

injury to the plaintiff. The Second Circuit has held that

"allegations of third-party reliance . . . are insufficient to

make out a common law fraud claim under New York law" (City of

New York v Smokes-Spirits.com, Inc., 541 F3d 425, 454 [2d Cir

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2008], certified question answered 12 NY3d 616 [2009], revd and

remanded on other grounds 559 US 1 [2010]; see Cement and

Concrete Workers Dist. Council Welfare Fund, Pension Fund, Legal

Services Fund and Annuity Fund v Lollo, 148 F3d 194, 196 [2d Cir

1998]; Shaw v Rolex Watch, U.S.A., Inc., 673 F Supp 674, 682 [SD

NY 1987]). Some district courts have applied the Second

Circuit's rule (see Mid Atl. Framing, LLC v Varish Const., Inc.,

117 F Supp 3d 145, 153 [ND NY 2015]; Ahluwalia v St. George's

Univ., LLC, 63 F Supp 3d 251, 270 [ED NY 2014], affd 626 Fed

Appx 297 [2d Cir 2015]), while others have held that, under New

York law, third-party reliance can support a fraud claim (see

Prestige Bldr. & Mgt. LLC v Safeco Ins. Co. of Am., 896 F Supp 2d

198, 205 [ED NY 2012]; Chevron Corp. v Donziger, 871 F Supp 2d

229, 257 [SD NY 2012]).

Similarly inconsistent is the Appellate Division case

law, with the majority of cases declining to recognize third-

party reliance and a few outliers adopting the opposite view

(compare Bynum v Keber, 135 AD3d 1066, 1068 [3d Dept 2016];

Wildenstein v 5H & Co, Inc., 97 AD3d 488, 490 [1st Dept 2012];

Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13

AD3d 296, 297 [1st Dept 2004], lv denied 4 NY3d 707 [2005];

Warren v Forest Lawn Cemetery and Mausoleum, 222 AD3d 1059, 1059

[4th Dept 1995][holding that a plaintiff cannot claim fraud based

on third-party reliance], with Ruffing v Union Carbide Corp., 308

AD2d 526, 528 [2d Dept 2003] and Buxton Mfg. Co., Inc. v Valiant

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Moving & Stor., Inc., 239 AD2d 452, 454 [2d Dept 1997][fraud may

exist where a false representation is made to a third party,

resulting in injury to the plaintiff]).

The cases that recognize third-party reliance cite

favorably to Eaton Cole & Burnham Co. v Avery (83 NY 31, 35

[1880]). However, as noted by the District Court and Second

Circuit here, Eaton is distinguishable from this case because in

Eaton the third party acted as a conduit to relay the false

statement to plaintiff, who then relied on the misrepresentation

to his detriment (see also Bruff v Mali, 36 NY 200, 206 [1867]).

Eaton and its progeny stand for the proposition that indirect

communication can establish a fraud claim, so long as the

statement was made with the intent that it be communicated to the

plaintiff and that the plaintiff rely on it. Eaton does not

support plaintiff's claim here, because Montalvo's statements

were not relayed to plaintiff, and he did not rely on them.

Plaintiff, in arguing that third-party reliance is sufficient to

state a fraud claim under New York law, cites this Court's 1876

decision in Rice v Manley (66 NY 82 [1876]). There, the

plaintiff contracted to purchase a quantity of cheese, and the

defendant, aware of the plaintiff's contract, fraudulently

induced the cheese vendor to deliver the cheese to him rather

than the plaintiff. The defendant falsely told the vendor that

the plaintiff no longer desired the cheese. We upheld a

referee's determination that the defendant was liable to the

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plaintiff for damages as a result of the fraud, observing that

"it matters not whether the false representations be made to the

party injured or to a third party, whose conduct is thus

influenced to produce the injury" (id. at 87). Notably, as

recognized by the District Court here, in Rice v Manley, we

stated that only two elements were required to sustain a fraud

cause of action: fraud and damage (see id. at 84). In more

recent history, however, this Court has made clear that a fraud

claim requires, in addition to damage, a material

misrepresentation or omission, inducement, and reliance (see

Mandarin Trading Ltd., 16 NY3d at 178; Eurycleia, 12 NY3d at 559;

Lama Holding Co., 88 NY2d at 412; see also PJI Comment 3:20; 2d

Ed., p. 184 ["Generally, a plaintiff cannot claim reliance on

misrepresentation that defendant made to third parties" unless

the representation was intended to be communicated to plaintiff

and for plaintiff to rely on it]). Thus, the holding in Rice

rests upon antiquated elements of a fraud claim, and cannot be

read to permit third-party reliance under the contemporary

elements of the claim which clearly require reliance on the part

of the party claiming to be fraudulently induced.

Indeed, this Court has stated on a number of occasions

that a fraud claim requires the plaintiff to have relied upon a

misrepresentation by a defendant to his or her detriment. This

view is both consistent with other rules governing fraud claims

(see e.g. First Nat. State Bank of New Jersey v Irving Trust Co.,

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91 AD2d 543, 544 [1st Dept 1982]["(T)here can be no liability in

fraud where the complaining party is, in advance, fully

knowledgeable and apprised of those matters as to which the

representations are alleged to have deceived"], affd 59 NY2d 991

[1983]), and logical insofar as the tort of fraud is intended to

protect a party from being induced to act or refrain from acting

based on false representations -- a situation which does not

occur where, as here, the misrepresentations were not

communicated to, or relied on, by plaintiff. We, therefore,

decline to extend the reliance element of fraud to include a

claim based on the reliance of a third party, rather than the

plaintiff.

Accordingly, the certified questions should be answered

in accordance with this opinion.

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Pasternack v Laboratory Corporation of America Holdings, Inc.,

et al.

No. 112

STEIN, J.(dissenting in part):

I agree with, and join in, the majority opinion insofar

as the majority responds to the second certified question

regarding third party reliance in fraud claims. However, I join

Judge Fahey's dissent, for the reasons stated therein, with

respect to the first certified question concerning the scope of

the duty under Landon v Kroll Lab. Specialists, Inc. (22 NY3d 1

[2013]).

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Pasternack v Laboratory Corp. of Am. Holdings

No. 112

FAHEY, J.(dissenting):

I respectfully dissent. I would reformulate the first

certified question and answer it to say that, under New York

common law, both a laboratory and a medical review officer (MRO)

owe a duty of care to the subject of a drug test to conduct that

procedure in keeping with professional standards. I would also

reformulate the second certified question and answer it to say

that, under New York common law, a plaintiff may establish the

reliance element of a cause of action for fraud by showing that a

third party justifiably relied on false statements or omissions

of a defendant that were intended to influence the plaintiff.

The First Certified Question

A.

The first certified question asks “whether drug testing

regulations and guidelines promulgated by the [Federal Aviation

Administration (FAA)] and [Department of Transportation (DOT)]

create a duty of care for drug testing laboratories and program

administrators under New York negligence law” (Pasternack v

Laboratory Corp. of Am. Holdings, 807 F3d 14, 24 [2d Cir 2015]).

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Before posing that question, in Drake v Laboratory Corp. of Am.

Holdings (458 F3d 48 [2d Cir 2006]) the Second Circuit observed

that through the Federal Aviation Act (FAAct) “Congress granted

the FAA broad authority over aviation safety, including the power

to adopt regulations that it ‘finds necessary for safety in air

commerce and national security’” (Drake, 458 F3d at 56, quoting

49 USC § 44701 [a] [5]). In accordance with that directive, “in

1988, the FAA promulgated regulations mandating that all

aviation-industry employees who perform safety-sensitive

functions be subjected to random drug-testing” (Drake, 458 F3d at

56). Plaintiff is required to submit to mandatory drug testing

pursuant to those regulations, which “incorporate by reference

DOT regulations that set out . . . . [e]laborate rules for

conducting drug tests” (id. at 56-57). As the majority notes

(see majority op, at 8-9), those rules underlie this case.

Although its observations are instructive as to the

regulatory backdrop to this matter, Drake is more important to my

analysis for this conclusion that it drew: “the FAAct does not

provide a private right of action for violations of FAA drug-

testing regulations” (Drake, 458 F3d at 64). Based on that

conclusion, I cannot agree with the majority that the Second

Circuit now asks whether the common law of this state imposes

upon those responsible for conducting FAA-mandated drug testing a

duty to adhere to the regulations that establish the rules for

performing such tests (see majority op, at 11). In my view that

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question was basically answered through Drake’s determination

that there is no private right of action for the breach of an FAA

drug testing regulation.

Rather, the essence of the Second Circuit’s query is

whether the common law of this state imposes upon those

responsible for performing FAA-mandated drug testing a duty to

handle such testing with reasonable care. Consequently, to

provide appropriate guidance to the parties (see generally Beck

Chevrolet Co., Inc. v General Motors, LLC, ___ NY3d ___, 2016 NY

Slip Op 03412, at *5), I would reformulate the first certified

question to ask:

Whether, under New York common law, entities

that either perform an FAA-mandated drug test

or review the results of such a test owe a

duty of care to the subject of the test to

conduct the test or to review the results of

the test in keeping with relevant

professional standards.1

1

The recast first certified question omits reference to

“drug testing regulations and guidelines promulgated by the FAA

and DOT” (Pasternack, 807 F3d at 24) by design. The threshold

question of duty -- or responsibility -- in this instance is one

for the courts and turns on an analysis of law (see Davis v South

Nassau Communities Hosp., 26 NY3d 563, 572 [2015]; Purdy v Public

Adm'r of County of Westchester, 72 NY2d 1, 8 [1988], rearg denied

72 NY2d 953 [1988]), not of regulations and guidelines. Once it

is determined that a duty exists, the secondary question whether

that responsibility has been breached may be answered by, among

other things, evidence of the violation of pertinent rules or

regulations (see generally Bauer v Female Academy of Sacred

Heart, 97 NY2d 445, 454 [2002]; Elliott v City of New York, 95

NY2d 730, 734 [2001]; Landry v General Motors Corp., Cent.

Foundry Div., 210 AD2d 898, 898 [4th Dept 1994]). To that end,

in the context of this case the question of compliance with the

FAA and DOT regulations and guidelines becomes relevant only if

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B.

As reformulated, I would answer the first certified

question in the affirmative.

In Landon v Kroll Lab. Specialists, Inc. (22 NY3d 1

[2013]) we considered the question whether the plaintiff, who was

subject to drug testing conducted by the defendant laboratory on

behalf of a county as part of his probation, had stated a cause

of action against the laboratory for the alleged negligent

testing of his biological sample (see id. at 3). In furtherance

of such testing, the plaintiff provided the laboratory with an

oral sample, and he obtained an independent blood test as well to

protect himself against a false positive. The blood sample “came

back negative for illicit and controlled substances,” but the

laboratory “detected the presence of cannabinoids in the oral

sample” that exceeded a cutoff level of one nanogram (ng) per

millileter (ml) (id. at 4). Consequently, the laboratory

generated a written report reflecting that the plaintiff had

tested positive for marihuana, which, in turn, caused the county

probation department to commence a violation proceeding against

the plaintiff based on his alleged breach of the conditions of

his probation precluding his use of that drug (see id.).

The violation proceeding eventually was terminated in

the plaintiff’s favor, and he subsequently commenced an action

it is determined that defendants owed a duty to plaintiff to

properly conduct the drug test.

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against the laboratory based, in relevant part, on the theory

that the laboratory negligently issued the report reflecting the

positive test result. As alleged in the complaint, the cutoff

level recommended by the manufacturer of the device by which the

oral fluid was taken from the plaintiff was 3.0 ng/ml, whereas

the standards of the United States Department of Health and Human

Services Substance Abuse and Mental Health Services

Administration (SAMHSA) recommended a cutoff level of 4.0 ng/ml.

That is, pursuant to those standards, more than the 1.0 ng/ml of

cannabinoids found by the laboratory was required to establish a

positive result for that substance. The complaint further

alleged that the laboratory ignored New York State Department of

Health Laboratory and SAMHSA standards designed to guard against

a false positive test result, and that the erroneous test results

were the product of the laboratory’s systemic negligence in its

substance abuse testing practices (see id. at 4-5).

The laboratory moved to dismiss the complaint pursuant

to CPLR 3211 (a) (7) for failure to state a cause of action. We

concluded that the complaint was sufficient to withstand the

motion (see Landon, 22 NY3d at 3) inasmuch as the plaintiff had

alleged that the laboratory “did not exercise reasonable care in

the testing of [the] plaintiff’s biological sample when [the

laboratory] failed to adhere to professionally accepted testing

standards [before] releas[ing] a report finding that [he] had

tested positive for THC,” a psychoactive compound in marihuana

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(id. at 6). We subsequently clarified that the laboratory “had a

duty to the [plaintiff] to perform his drug test in keeping with

relevant professional standards” (id. at 6-7), which,

importantly, was based upon our recognition of the “profound

. . . consequences” of “the release of a false positive report”

(id. at 6).

Said simply, Landon articulated a duty to act with

reasonable care to prevent a false positive drug test result.

There the duty applied to the laboratory responsible for the

testing of the plaintiff’s biological samples inasmuch as the

laboratory was “in the best position to prevent false positive

results” (id.; see Davis, 26 NY3d at 572 [“A critical

consideration in determining whether a duty exists is whether the

defendant's relationship with either the tortfeasor or the

plaintiff places the defendant in the best position to protect

against the risk of harm”] [internal quotation marks omitted]).

Here the entities best positioned to prevent what

plaintiff claims was essentially a false positive result are

defendants, which, respectively, administered plaintiff’s drug

test (defendant Laboratory Corporation of America Holdings

[LabCorp]) and employed the MRO who certified the results of that

examination (defendant ChoicePoint, Inc.). To conclude that

defendants owed a duty to plaintiff to prevent the erroneous test

result here is not to extend Landon (cf. majority op, at 11), but

merely to apply to this case its core teaching that those

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situated similarly to the laboratory there in question have a

duty to act with reasonable care to prevent a false positive drug

test result.

Defendants contend that this case is distinguishable

from Landon in that the actions challenged here resulted in the

allegedly negligent reporting of a refusal to test, as opposed to

a false positive result in the strictest sense. This is not a

rational basis for distinguishing Landon which, in my view, did

not restrict the duty of care to “scientific” errors but, rather,

more broadly imposed a standard of reasonable care with regard to

the testing process and administration. Indeed, a negligent and

erroneous determination that a subject refused to test causes the

same harm as a false positive. This is clearly evidenced by the

circumstances here, in which plaintiff was stripped of his

qualifications and, as a result, allegedly lost significant

employment.

Consequently, I would answer the first certified

question, as reformulated, in the affirmative so as to say that a

laboratory and an MRO owe a duty to the subject of a drug test to

conduct that test in keeping with relevant professional standards

which, in the FAA context, are defined by the regulations

governing the drug testing process (see Drake, 458 F3d at 65 [a

subject "may seek state-law remedies for violations of the

federal regulations, (but) state law cannot enlarg(e) or

enhanc(e) the regulations to impose burdens more onerous than

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those of the federal requirements”] [internal quotation marks

omitted]). Contrary to the majority's assertion, recognition

that plaintiff's claims here fall within the scope of the duty

under Landon would not likely result in a proliferation of

claims. First, the potential pool of plaintiffs is clearly and

easily delineated and identified -- namely, the duty runs to the

individual test subject, the most obvious third party to be

harmed by this type of alleged negligence.2 Second, to the

extent the majority expresses concern that maintaining the Landon

duty for violations of regulations other than those governing the

“scientific integrity” of the test would open the floodgates

(majority op, at 11), such concern is also misplaced. To be

sure, the regulations governing the testing process and

administration are numerous. However, recognition of a duty to

complete FAA drug testing with reasonable care, as informed by

the regulations, would not relieve a plaintiff of his or her

burden to demonstrate that the regulations were actually breached

and that the violation of the regulations was causally related to

his or her injuries.3 To that end, true “ministerial”

2

While the majority is correct that the primary aim of

the drug testing procedures is to ensure the safety of the

public, the MRO process is structured, at least in part, to

provide safeguards to protect the employee test subject from the

consequences of an erroneous result or determination (see Spiker

v Sanjivan PLLC, 2013 WL 5200209, at *15 [D Ariz, Sept. 16, 2013,

No. CV-13-00334-PHX-GMS]).

3

I express no opinion as to whether the complaint or

evidence is sufficient with respect to these elements.

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regulations are unlikely to be sufficient to sustain a successful

cause of action for negligence.

For the foregoing reasons, I disagree with the

majority's answer to the first certified question.

The Second Certified Question

The second question asks “whether a plaintiff may

establish the reliance element of a fraud claim under New York

law by showing that a third party relied on a defendant's false

statements resulting in injury to the plaintiff” (Pasternack, 807

F3d at 24). I agree with the majority that, at its core, that

question asks “whether third-party reliance can support the

reliance element of a fraud claim” (majority op, at 12). To

provide appropriate guidance to the parties, I would reformulate

the second certified question to ask:

Whether a plaintiff may establish the

reliance element of a cause of action for

fraud under New York law by showing that a

third party relied on a defendant's false

statements resulting in injury to the

plaintiff where the statements were made with

the intent of influencing the plaintiff and

causing injury.

As reformulated, I would answer the second certified

question in the affirmative. That is, unlike the majority (cf.

majority op, at 13, 16-17), I would conclude that the reliance

element of a cause of action for fraud may be established through

evidence that a third party relied on the alleged

misrepresentation if the misrepresentation was made with the

intent of influencing the plaintiff and causing injury.

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“The elements of a cause of action for fraud require

[1] a material misrepresentation of a fact, [2] knowledge of its

falsity, [3] an intent to induce reliance, [4] justifiable

reliance by the plaintiff and [5] damages” (Eurycleia Partners,

LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]). At issue is

the reliance element, which speaks to the rule that “[t]he

reliance must be justifiable in the sense that the party claiming

to have been defrauded was justified both in believing the

representation and in acting upon it” (2A NY PJI 3:20 at 192

[2016]). Inasmuch as “‘there can be no liability in fraud where

the complaining party is, in advance, fully knowledgeable and

apprised of those matters as to which the representations are

alleged to have deceived’” (First Natl. State Bank of N.J. v

Irving Trust Co., 91 AD2d 543, 544 [1st Dept 1982], affd on

opinion below 59 NY2d 991 [1983], quoting 200 E. End Ave. Corp. v

General Elec. Co., 5 AD2d 415, 418 [1st Dept 1958], affd 6 NY2d

731 [1959]), “[t]he [relevant] question . . . is whether the

person claiming to have been deceived ‘knew or had reason to

know’ the facts” (2A NY PJI 3:20 at 194 [2016], citing Angerosa v

White Co., 248 App Div 425 [4th Dept 1936], affd 275 NY 524

[1937]).

There is another key component to the reliance element

of a cause of action for fraud. At times we have suggested that

the plaintiff, that is, the party claiming to have been

defrauded, must have justifiably relied on the material

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misrepresentation of fact (see e.g. Mandarin Trading Ltd. v

Wildenstein, 16 NY3d 173, 178 [2011], quoting Lama Holding Co. v

Smith Barney, 88 NY2d 413, 421 [1996]) for the proposition that,

“[g]enerally, in a claim for fraudulent misrepresentation, a

plaintiff must allege[, inter alia,] ‘a misrepresentation or a

material omission of fact . . . made for the purpose of inducing

the other party to rely upon it, [and] justifiable reliance of

the other party on the misrepresentation or material omission’”

[emphasis added]; Eurycleia Partners, LP, 12 NY3d at 559 [“The

elements of a cause of action for fraud require . . . justifiable

reliance by the plaintiff”] [emphasis added]). At other times,

however, our approach has been vague with respect to the reliance

element inasmuch as we have declined to specifically say that it

is the plaintiff that must have justifiably relied on the alleged

misrepresentation (see e.g. Vermeer Owners v Guterman, 78 NY2d

1114, 1116 [1991]). The issue thus becomes whether a plaintiff

may establish the reliance element of a cause of action for fraud

where a third party is the recipient of the misstatement or

omission. In my view, the reliance element of a cause of action

for fraud may be established by showing the reliance of a third

party on false statements made by a defendant if it is

established that the defendant intended4 for those statements to

4

Fraud, of course, is an intentional tort (see

generally Simcuski v Saeli, 44 NY2d 442, 451 [1978]; 2A NY PJI

3:20 at 166 [2016]) and, as noted, one of its elements is “intent

to induce reliance” (Eurycleia Partners, LP, 12 NY3d at 559). It

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influence the plaintiff.

That conclusion -- that third party reliance may

support a cause of action for fraud where there is an intent on

the part of the defendant that the misrepresentation or omission

influence the plaintiff through the proxy of the third party --

is compatible with existing case law. It is true that the

Appellate Division, First Department, has ruled that a plaintiff

“[g]enerally . . . cannot claim reliance on misrepresentations a

defendant made to third parties” to establish a cause of action

for fraud (Wildenstein v 5H&Co, Inc., 97 AD3d 488, 490 [1st Dept

2012]), and the Fourth Department has taken a similar approach

(see Warren v Forest Lawn Cemetery & Mausoleum, 222 AD2d 1059,

1059 [4th Dept 1995] [“Plaintiff is not a proper party to allege

fraud because no misrepresentation was made to him, nor did he

allege that he relied on any misrepresentation”]). The Second

Department has at times taken the same approach (see Garelick v

Carmel, 141 AD2d 501, 502 [2d Dept 1988] [“to plead a valid cause

of action sounding in fraud, the complaint must set forth all of

the elements of fraud including the making of material

representations by the defendant to the plaintiff”]), but its

jurisprudence also provides that a defendant may be liable for

follows that, where a plaintiff alleges that a third party, not

the plaintiff, justifiably relied on a material misrepresentation

or omission, the plaintiff should be required to establish that

the defendant intended for the misrepresentation or omission to

influence the plaintiff.

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fraud based on false statements made to a governmental agency

that result in harm to a third party (see Buxton Mfg. Co. v

Valiant Moving & Stor., 239 AD2d 452, 453-454 [2d Dept 1997]

[holding that the defendant could be liable for fraud for false

statements made to and relied on by Department of Agriculture

(DOA), resulting in injury to plaintiff; the statements at issue

caused the DOA to disburse funds that, absent the disputed

statements, would have been used to pay the plaintiff’s

outstanding claims]; see also Ruffing v Union Carbide Corp., 308

AD2d 526, 528 [2d Dept 2003] [citing Buxton with approval]).

Although the Second Department’s decision in Buxton

does not specifically say that the defendant’s false

representation to a third party was made with the intent to

influence the plaintiff, the “exception” to the normal reliance

rule in that case is natural. Buxton’s conclusion that “[f]raud

. . . may . . . exist where a false representation is made to a

third party, resulting in injury to the plaintiff” (Buxton, 239

AD2d at 454) is based in part on this Court’s decision in Eaton,

Cole & Burnham Co. v Avery (83 NY 31 [1880]). In Eaton, an

action for deceit was supported by allegations of false

representations “made [to a mercantile agency] with the intent

that they should be communicated to and believed by [the

plaintiff, who was] interested in ascertaining the pecuniary

responsibility of” another business for the purpose of

determining whether to deliver goods to that business (id. at

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33).

Eaton was also cited by the First Department in Desser

v Schatz (182 AD2d 478 [1st Dept 1992]) for the proposition that

the fact “that the false representation was not made directly to

[the] plaintiff” was “of no moment” with respect to the allegedly

fraudulent representation there at issue (id. at 479-480). So

too was Eaton referenced by the Third Department in Bynum v Keber

(135 AD3d 1066, 1068 [3d Dept 2016]), where that court recognized

the third-party reliance doctrine and suggested that a

misrepresentation made for the purpose of being communicated to

the plaintiff or with the intent of reaching and influencing the

plaintiff may support a cause of action for fraud. Moreover,

Eaton is consistent with Bruff v Mali (36 NY 200, 206 [1867]),

where this Court ruled that “defendants[,] having issued the

false certificates of stock authenticated by them as genuine, and

cast them upon the market with fraudulent intent, are liable to

every holder to whose hands they may come by fair purchase,” and

compatible with Rice v Manley (66 NY 82, 87 [1876]), where we

said that “[t]he mere forms adopted for the perpetration of

frauds are of little importance; it matters not whether the false

representations be made to the party injured or to a third party,

whose conduct is thus influenced to produce the injury, or

whether it be direct or indirect in its consequences.”5

5

I take no position with respect to the majority’s

belief that “Eaton does not support plaintiff’s claim here”

(majority op, at 15). In my view, our present task is not to

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Perhaps Prosser said it best:

“while [a] defendant is not required to

investigate or otherwise guard against the

possibility that his [or her] statements may

come into the hands of strangers and affect

their conduct, his [or her] responsibility

[for those statements] should at least extend

to those who might reasonably be expected to

assume from appearances that the

representation was intended to reach them”

(Prosser & Keeton, Torts, § 107 at 745 [5th

ed 1984] [emphases added]).

In practice, to reject the third-party reliance

doctrine is to facilitate the commission of fraud by straw man

and to ease the practice of deceit. Consequently, I respectfully

disagree with the majority that a plaintiff cannot meet the

reliance element of a cause of action for fraud through a third-

party’s reliance on a misrepresentation (see majority op, at 17).

I would reformulate the second certified question and answer it

to say that a plaintiff may establish the reliance element of a

cause of action for fraud through evidence that a third party

relied on the defendant’s alleged misrepresentation if that

misrepresentation was made with the intent of influencing the

plaintiff and causing injury.

determine whether the law supports plaintiff’s case, but “to

provide certainty to and settlement of [this state] law issue[]”

(Bocre Leasing Corp. v General Motors Copr. [Allison Gas Turbine

Div.], 84 NY2d 685, 691 [1995]).

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* * * * * * * * * * * * * * * * *

Following certification of questions by the United States Court

of Appeals for the Second Circuit and acceptance of the questions

by this Court pursuant to section 500.27 of this Court's Rules of

Practice, and after hearing argument by counsel for the parties

and consideration of the briefs and the record submitted,

certified questions answered in accordance with the opinion

herein. Opinion by Judge Abdus-Salaam. Chief Judge DiFiore and

Judges Pigott and Garcia concur. Judge Stein dissents in part in

an opinion. Judge Fahey dissents in an opinion in which Judge

Rivera concurs.

Decided June 30, 2016

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