Opinion
Index No. 103198/12
07-23-2013
In the Matter of the Application of A.F.C. ENTERPRISES, INC., Petitioner For a Judgment Pursuant to CPLR Article 78 v. NEW YORK CITY TRANSIT AUTHORITY, Respondent.
, J.:
Petitioner, A.F.C. Enterprises, Inc. (AFC or petitioner) moves, pursuant to CPLR Article 78, for a judgment that vacates the March 5, 2012 determination of respondent, New York City Transit Authority's (NYCTA) Chief Engineer as arbitrary and capricious and contrary to the prior judgment of this court and, upon vacatur, granting petitioner judgment in the full amount of its claim with applicable interest.
The facts of this case were discussed in this court's judgment in Matter of A.F.C. Enters., Inc. v New York City Tr. Auth. (2009 WL 2364009, 2009 NY Misc LEXIS 5368, 2009 NY Slip Op 31678 [U] [Sup Ct, NY County July 24, 2009] [Index. No. 117236]) and will not be repeated at length in this decision. Briefly stated, and as relevant to this proceeding, in 2005, NYCTA awarded a contract (the Contract) to AFC for the rehabilitation of hydrant systems at six transit yards. The Contract required AFC to excavate more than 10,000 cubic yards of soil so that new fire hydrant piping could be laid into the ground. Section 12R, paragraph 1.3 [c] of the Contract, as revised, provides that, for bid purposes, a contractor should assume that 95% of the excavated soil is non-contaminated solid waste and that five percent of the excavated soil is petroleum contaminated non-hazardous solid waste. These assumptions were based on the contractors' concerns, when they were bidding on the contract, that disposal prices vary substantially depending on the chemical content of the soil that is being disposed. Section 12R, paragraph 13 (d) of the Contract provides, in part, that all excavated material shall be managed in accordance with, inter alia, 6 NYCRR Part 360 and Part 364 and the New York State Department of Environmental Conservation (NYSDEC) STARS Memo #1, Petroleum contaminated Soil Guidance Policy. The Contract also required a contractor to perform "real time" field testing during the course of the excavation to make sure that the soil was being disposed of properly (id. at 2-3).
The STARS Memo provides that contaminant concentration levels are determined, for purposes of comparison to the guidance values set forth in the memo, "using EPA standard Methods 8021 or 8270," and that those are "the methods recommended and most often used for petroleum-contaminated soils: and the "preferred [methods] for identifying compounds of concern for gasoline and fuel oils (STARS Memo at 3,8,11). Appendix A of the STARS Memo provides hazardous waste determination and Regulatory Levels (guidance values) for levels of contaminants present in soil to determine whether the soil is petroleum contaminated.
Shortly after AFC began the excavation required under the contract, it allegedly discovered that substantially more than 5% of the soil was petroleum contaminated. Pursuant to the Contract, AFC notified NYCTA of the difference in the amount of allegedly petroleum-contaminated soil and, because of the increased cost of disposal, it sought a work order that would provide for additional compensation. By letter dated January 5, 2007, the NYCTA construction manager for the project denied AFC's request for additional compensation (id. at 3).
AFC challenged the construction manager's determination by submitting a dispute notice to NYCTA's Chief Engineer. Article 8.03 of the Contract authorized the Chief Engineer to render a final and binding decision with respect to AFC's claim for additional compensation.
In her determination, the Chief Engineer noted that, for the purpose of characterizing the soil as contaminated, AFC relied upon two documents promulgated by the NYSDEC: Spill Technology and Remediation Series Memorandum #1, Petroleum-Contaminated Soil Guidance Policy (the STARS Memo); and Technical and Administrative Guidance Memorandum #4046, Determination of Soil Cleanup Objectives and Cleanup Levels (TAGM #4046). In addition, she noted that AFC submitted laboratory test reports to NYCTA which indicated that the allegedly contaminated soil contained certain semi-volatile organic compounds (SVOCs) in concentration levels that exceeded the guidance values set forth for those SVOCs in the STARS Memo and the recommended soil cleanup objectives set forth for those SVOCs in TAGM #4046.
In her decision, the chief engineer presumably accepted NYCTA's argument that the STARS Memo criteria were inapplicable in determining whether the soil was petroleum contaminated and she concluded that:
Part 360 of 6 NYCRR defines C&D [construction and demolition] waste as uncontaminated solid waste. [AFC's] own laboratory testing and weigh receipts from the New Jersey facility which accepted the material indicate that the excavated soil was classified as construction and demolition (C&D) waste per 6 NYCRR Part 360 and also as per [NJDEP] N.J.A.C. 7:26-2.13C which governed the facility.(id. at 4)
Therefore there is no possible interpretation of the facts other than
the waste removed from the site conformed to the Contract Definition of non-contaminated solid waste. Accordingly, for all of the aforementioned facts and circumstances and after consideration of the arguments presented to me in writing, I have no choice but to deny this claim.
Thereafter, petitioner commenced a CPLR Article 78 proceeding titled Matter Of A.F.C. Enterprises, Inc. v New York City Transit Authority, index No. 117236/07 challenging the Chief Engineer's decision as arbitrary and capricious. In that petition, AFC asserted that it had excavated 16,029.42 tons of material of which 7,876.64 tons, or 49% of the total amount, was petroleum-contaminated material. AFC alleged that it had incurred an additional $909,866.86 in costs for the transporting, disposal and handling of contaminated material, which was not anticipated by the Contract's assumption that only five per cent of the excavated material would be contaminated (id. at 5).
In a decision entered August 7, 2009, this court recognized that the Chief Engineer based her decision on two grounds - 1) that AFC's laboratory testing indicated that the soil was uncontaminated C&D waste, and 2) that the weigh receipts from the New Jersey facility that accepted the soil classified it as uncontaminated C&D waste. However, based on a review of the evidence that was before the Chief Engineer, this court determined that the Chief Engineer's decision was arbitrary and capricious as: 1) the provisions of section 12R of the Contract demonstrate the parties' intent to make the NYSDEC STARS Memo criteria applicable to the determination of whether the soil was contaminated for the purposes of the assumptions in paragraph 1.3 (c); 2) paragraph 1.3 (d) of section 12R expressly mandates that "[a]ll excavated material, shall be managed in accordance with" the STARS Memo; 3) paragraph 1.2 (c) of section 12R provides that "[s]oils which are being reused shall not be transported prior to the performance of necessary laboratory analyses and receipt of the laboratory reports confirming that the soil has satisfied the appropriate Guidance Values of the STARS Memo . . . ."; 4) the STARS Memo provides that contaminant concentration levels of SVOCs are determined, for purposes of comparison to the guidance values, using the EPA's preferred methods for identifying compounds of concern for gasoline and fuel oil; and 5) the laboratory reports which AFC submitted to NYCTA, and the more condensed report which AFC submitted to the Chief Engineer, evidenced that concentration levels for certain SVOCs in the allegedly contaminated soil exceeded guidance values that were set forth for those compounds in the STARS Memo. The court found that 6 NYCRR part 360 and the STARS Memo criteria were compatible, that both could be applied to determine whether the soil was petroleum contaminated, and that AFC had satisfactorily demonstrated that a petroleum spill had occurred by producing laboratory testing reports indicating that the allegedly contaminated soil contained SVOC levels that exceeded the guidance values in the STAR Memo for petroleum-contaminated soil (id. at 7-10).
This court also determined that the four weigh receipts which NYCTA submitted to the chief engineer represented only a small percentage of the total tonnage of excavated soil that AFC disposed of and that those weigh receipts did not represent a sufficiently substantial portion of the waste material to form a basis for determining whether AFC's claim did or did not have merit (id. at 10).
In conclusion, this court vacated the determination of the Chief Engineer which denied AFC's application for additional payment and remanded the matter "for reconsideration and determination by NYCTA in a manner consistent herewith" (id. at 12).
NYCTA appealed this court's August 7, 2009 judgment and, on December 14, 2010, the First Department unanimously affirmed that decision (A.F.C. Enters., Inc. v New York City Tr. Auth., 79 AD3d 514 [1st Dept 2010]) stating that the determination of the Chief Engineer "was made without sound basis in reason and in disregard of the facts" (id. at 514). The court noted that AFC submitted detailed evidence that the vast majority of the material excavated from the transit yards was contaminated, but that the Chief Engineer relied on NYCTA's submission of only four weigh receipts, and without setting forth all the facts presented on that issue, the chief engineer found that the waste removed from the site conformed to the parties Contractual definition of non-contaminated solid waste. The First Department stated that, "the absence of a full factual analysis by the CE [Chief Engineer] [regarding the composition of all of the allegedly contaminated soil that AFC removed] precluded adequate review by the court in the subsequent CPLR article 78 proceeding" (id. at 515).
The First Department also held that this court did not err in considering AFC's proof of its disposal of contaminated soil at recycling centers because the evidence was before the Chief Engineer when she made her determination (id. at 515).
The matter was thereafter remanded to NYCTA for reconsideration of the determination of the Chief Engineer dated August 31, 2007. In a determination dated March 5, 2012, the newly appointed Chief Engineer, Frederick Smith (Smith or the new CE), considered two procedural arguments that were not presented to the previous Chief Engineer and he found that AFC's claim for additional compensation should be denied as: 1) AFC failed to provide NYCTA with timely notice of its claim as required by section 8.04 of the Contract and that it failed to document its damages in a verifiable manner; 2) AFC failed to prepare an Environmental Anticipatory Boring Program (EABP) prior to the commencement of the work, as required by specification section 12R paragraph 1.3 of the Contract; 3) the NYSDEC STARS Memo testing criteria are not applicable to this case since there was no evidence that there had been a petroleum spill at any of the sites in question; and 4) AFC had not provided a hazardous waste manifest or other documentation to allow verification of its claim (petition, exhibit 1).
CONTENTIONS
In support of the petition to vacate the second determination of the Chief Engineer as arbitrary and capricious, AFC argues that, on remand, Smith was obligated to strictly comply with the scope and direction of this court's remittitur and that, in contravention of this court's direction, Smith refused to apply the Stars Memo criteria and he impermissibly considered and relied on two legal defenses that were not raised in the prior proceeding. In addition, AFC contends that, under the doctrine of collateral estoppel, Smith was barred from rejecting the applicability of the STARS Memo criteria.
Moreover, AFC argues that this court should grant summary judgment on its claim for additional compensation because there is no question of fact that a substantial amount of petroleum-contaminated soil existed at the project.
In opposition to the petition, NYCTA contends that the First Department remanded petitioner's claim for further proceedings, noting that the Chief Engineer had not provided a full factual analysis in the first proceeding; that the Contract specifies that the Chief Engineer is the final arbiter of all technical claims and that the Supreme Court cannot direct or dictate a specific result on remand.
In addition, it is NYCTA's position that Smith's decision was rationally based on a review of the record in its entirety, that the STARS Memo was given appropriate consideration and it was rejected because those criteria are only applicable if there has been an oil spill and there was no evidence that an oil spill had occurred at any of the sites.
It also contends that the Smith's consideration of the new procedural arguments was appropriate under the First Department's decision and that AFC's claim must be rejected as: 1) there was no evidence the EABP required by the Contract had been approved; and 2) AFC's claim was untimely.
DISCUSSION
It is well settled that, where a reviewing court limits the scope of its remand order, "the entire case is not reopened, but rather the reviewing tribunal is only authorized to carry out the . .. court's mandate (5 Am Jur 2d, Administrative Law § 576 [1995]). Thus, in Heartland Regional Med. Ctr. v Leavitt (415 F3d 24, 29 [DC Cir 2005]), where the court found that the Department of Health and Human Services (HHS) had failed to adequately consider alternatives for defining rural and urban areas and remanded the case to HHS for further action consistent with the court's opinion, HHS was not authorized to take any action other than considering alternative definitions as identified by the court.
Whatever a reviewing court has ordered on remittitur must be done (Matter of Ziegler, 265 App Div 956 [2d Dept 1942]). "[A] trial court, upon a remand or remittitur, is without power to do anything except to obey the mandate of the higher court, and render judgment in conformity therewith" (Wiener v Weiner, 10 AD3d 362, 363 [2d Dept 2004] [internal quotation marks and citation omitted]). "Moreover, a party may not submit evidence as to matters that are beyond the scope of the remittitur" (Metropolitan Steel Industries, Inc. v Perini Corp., 2008 WL 8922424 [Sup Ct NY County 2008]; see also Matter of Home Depot USA v Baum, 243 AD2d 476, 478 [2d Dept 1997]) and the agency, on remand, is limited to addressing the issues or questions identified by the court in the remittitur (Eikenberry v Adirondack Spring Water Co., 148 AD2d 664, 665 [2d Dept 1989] [matter remitted for further proceedings in accordance with opinion including calculation of amount due, clearly specified course to be taken which did not include amendment of answer]; see also Matter of Kahn v Pasnik, 273 AD2d 473, 474 [2d Dept 2000]).
In this court's August 7, 2009 judgment, I held that,
"NYCTA's arguments that the STARS Memo criteria were inapplicable is without merit, as the provisions of Section 12R evince the parties' intent to make the STARS Memo criteria applicable to the question of whether soil should be deemed contaminated for purposes of the assumptions contained in paragraph 1.3 (c), without regard to whether the soil was from a site which had been affected or contaminated by a petroleum spill"(A.F.C. Enterprises, Inc., 2009 WL 2364009 at 7).
In finding that the STARS Memo criteria were applicable to determining whether the soil was contaminated waste, I also found that the Chief Engineer's finding that the AFC's laboratory tests indicated that the soil that was removed was uncontaminated C&D waste was irrational and that her determination that the soil was uncontaminated, using the weigh receipts from one New Jersey facility, which receipts represented only a fraction of the total soil removed, was similarly irrational because they "did not represent a sufficiently substantial portion of the waste material which AFC had disposed of to form any basis for determining whether AFC's claim did or did not have merit..." (id. at 10).
Based on my findings that the STARS Memo criteria were applicable for determining whether the soil was petroleum contaminated waste and that the Chief Engineer failed to consider weigh receipts from a substantial portion of the waste material, I vacated and annulled the determination and remanded the matter to NYCTA "for reconsideration and determination by NYCTA in a manner consistent herewith) (id. at 12).
The First Department unanimously affirmed my decision, stating that the Chief Engineer seemingly ignored the detailed evidence presented by AFC that a vast majority of the material excavated from the transit yards was contaminated and instead appeared to rely on weigh receipts submitted by NYCTA from one facility in making her determination that the waste removed from the site was uncontaminated. The First Department found that the Chief Engineer's failure to provide a full factual analysis of the evidence submitted regarding the amount of contaminated soil removed, which would include consideration of both AFC's and NYCTA's submission on this issue, required remand (A.F.C. Enters., Inc., 79 AD3d at 514-515).
Thus, the scope of the remand order required the Chief Engineer to apply the STARS Memo criteria to determine whether the soil that AFC removed from the transit sites was petroleum contaminated waste and, once these criteria were applied, it required the Chief Engineer to consider all of the evidence submitted by AFC and NYCTA to determine what percentage of the soil that AFC removed from the transit sites was petroleum contaminated.
In his reconsideration, Smith misconstrued the First Department's decision as remanding the matter "for a thorough determination on what it found to be the entirety of the dispute record" (verified answer, exhibit 1, at 2). Based on this misinterpretation, Smith impermissibly went beyond the scope of this court's remand order, which had been affirmed on appeal, and he conducted a de novo investigation, ignoring this court's finding that, pursuant to the Contract, the parties intended to make the STARS Memo criteria applicable to the determination of petroleum contamination and, in addition, he improperly considered two procedural arguments that were not raised in the prior proceeding (2 Am Jur 2d Administrative Law § 576 [when a court limits "the scope of the remand to an administrative agency, . . . the entire case is not reopened, but rather the lower tribunal is only authorized to carry out the . . . court's mandate"]; see also Matter of Home Depot, 243 AD2d at 478 ["The intervenors were properly prohibited from presenting evidence at the hearing as to whether the amendments had been properly published, in that such an argument was not raised in the prior proceedings and was beyond the scope of our remittitur").
Indeed, in his reconsideration, Smith determined that the STARS Memo criteria were not applicable, stating:
AFC is simply mistaken in its assertion that the Contract broadly required them to apply the STARS testing criteria. The STARS memo was referenced in the Contract in the event a spill was discovered, which it was not. Neither STARS nor TAGM 4046 have any relevance to this dispute except to(verified answer, exhibit 1 at 6).
confuse the real issues
Because Smith rejected the use of the STARS Memo criteria to evaluate the soil, he concluded that the laboratory results demonstrated that the soil should be classified as non-contaminated.
Article 8.05 of the Contract provides the the Chief Engineer's determination "shall be subject to review . . . in the form of a challenge . . . under Article 78 of the [CPLR] it being understood [that] the review of the Court shall be limited to the question of whether or not the [determination] is arbitrary, capricious or lacks rational basis." '[Arbitrary action is without sound basis in reason and is generally taken without regard to the the facts: (Matter of Vanech v City of New York, 285 AD2d 367, 369 [1st Dept 2001] citing Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale and Mamaroneck, Westchester County, 34 NY2d 222, 231 (1974)]). "Judicial review of the propriety of any administrative determination is limited to the grounds invoked by the agency in making its determination" (Matter of AVJ Realty Corp. v New York State Div. of Hous. & Community Renewal, 8 AD3d 14, 17 [1st Dept 2004] [citations and internal quotation marks omitted]).
In his redetermination, Smith's refusal to apply the STARS Memo criteria to the project's soil sample laboratory test results was arbitrary and capricious as this court had previously determined that the provisions of section 12R of the Contract "evince the parties' intent to make the STARS Memo criteria applicable to the question of whether the soil should be deemed contaminated." Matter of A.F.C. Enters., Inc. v New York City Tr. Auth., 2009 WL 2364009 at 10. Moreover, on remand, Smith was obligated to follow this court's judgment and apply the STARS Memo criteria -- his refusal to do so was arbitrary and capricious.
In addition, NYCTA is mistaken is its assertion that this court directed the outcome of the Chief Engineer's determination on remand. To the contrary, the court merely held that the STARS Memo criteria was applicable in determining whether the soil was contaminated. Based on that holding, the court remanded the matter to allow the Chief Engineer to reevaluate the evidence the parties presented to determine whether the soil that AFC removed fit the definition of petroleum contaminated under the STARS Memo criteria.
Moreover, NYCTA's characterization of the First Department decision as remanding for a de novo determination is without merit. The First Department unanimously affirmed this court's decision and it did not disturb, or discuss, this court's holding that the STARS Memo criteria were applicable. The appellate court did, however, suggest, as did this court, that on remand, the Chief Engineer consider all the evidence submitted by AFC and NYCTA regarding the composition of the soil that had been removed from the transit yards and explain his decision regarding the petroleum contamination of that soil.
Remand of this matter to the agency is required under chapter 8.05 of the Contract, which limits the court's review to a determination of whether the Chief Engineer's determination was arbitrary and capricious or lacked a rational basis and chapter 8.03 (b) (1) of the Contract which empowers the Chief Engineer to make a determination regarding a "technical" dispute related to the subject matter of the Contract.
Accordingly, as I find that the redetermination of the Chief Engineer was arbitrary and capricious and lacked a rational basis and that the redetermination failed to conform to and was beyond the scope of the remand order, it is hereby
ADJUDGED that the petition is granted to the extent that the redetermination of the Chief Engineer of the New York City Transit Authority (NYCTA) dated March 5, 2012, which denied petitioner's application for additional payment under NYCTA's Contract C-34808, is vacated and annulled, and the matter is remanded for reconsideration and determination by NYCTA, in a manner consistent herewith, including application of the STARS Memo Criteria to the determination of whether the soil is petroleum contaminated and consideration of all the evidence presented by NYCTA and A.F.C. Enterprises, Inc. regarding the composition of the excavated soil under the STARS Memo criteria.
ENTER:
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J.S.C.
UNFILED JUDGMFNT
This judgment has not been entered by the County Clerk and notice of entry cannot be served based hereon. To obtain entry, counsel or authorized representative must appear in person at the Judgment Clerk's Desk (Room 141B).