Court Opinion

ID: 3218670
Source: CourtListenerOpinion
Date Created: 2016-06-30 13:06:33.580962+00
Date Added: 2024-06-11T14:30:40.131004
License: Public Domain

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

                              - 1 -
                              - 2 -                          No. 112

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.

                              - 2 -
                               - 3 -                         No. 112

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

                               - 3 -
                                 - 4 -                        No. 112

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).

                                 - 4 -
                                 - 5 -                       No. 112

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

                                 - 5 -
                                 - 6 -                        No. 112

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

                                 - 6 -
                               - 7 -                         No. 112

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

                               - 7 -
                               - 8 -                         No. 112

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

                               - 8 -
                               - 9 -                       No. 112

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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                              - 10 -                          No. 112

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

                              - 10 -
                              - 11 -                         No. 112

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]).

                              - 11 -
                              - 12 -                         No. 112

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.

                              - 12 -
                              - 13 -                          No. 112

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

                              - 13 -
                              - 14 -                        No. 112

2008], certified question answered 12 NY3d 616 [2009], revd and
remanded on other grounds 559 U.S. 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

                              - 14 -
                              - 15 -                         No. 112

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

                              - 15 -
                             - 16 -                          No. 112

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.,

                             - 16 -
                             - 17 -                        No. 112

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.

                             - 17 -
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]).

                                 - 1 -
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]).

                              - 1 -
                               - 2 -                         No. 112

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

                               - 2 -
                              - 3 -                        No. 112

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

                              - 3 -
                               - 4 -                         No. 112

                                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.

                               - 4 -
                               - 5 -                           No. 112

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

                               - 5 -
                               - 6 -                         No. 112

(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

                               - 6 -
                                 - 7 -                       No. 112

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

                                 - 7 -
                               - 8 -                         No. 112

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.

                               - 8 -
                               - 9 -                       No. 112

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.

                               - 9 -
                              - 10 -                         No. 112

           “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

                              - 10 -
                              - 11 -                       No. 112

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

                              - 11 -
                             - 12 -                           No. 112

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.

                             - 12 -
                                - 13 -                       No. 112

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

                                - 13 -
                              - 14 -                         No. 112

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

                              - 14 -
                                - 15 -                        No. 112

          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]).

                                - 15 -
                                - 16 -                           No. 112

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

                                - 16 -