Opinion
May 6, 1971
Determination of the Waterfront Commission of New York Harbor dated November 12, 1970, denying petitioner's application for a stevedore's license and revoking its temporary permit is annulled on the law, without costs and without disbursements, and the matter remanded to the commission for reconsideration of the application. Petitioner seeks a stevedore's license which pursuant to law is now required for "marine carpentry" contractors. (L. 1953, ch. 882, as amd. by L. 1969, ch. 553, § 1; § 5-a, subd. [1], par. [b].) Petitioner is the successor in interest to Court Carpentry and Marine Contractors Co., Inc., by virtue of a transfer of the assets of the latter to petitioner. It appears that prior to the date of transfer, the sole stockholder of petitioner was Joseph Lacqua. Upon the reorganization of the apparently related corporations, Leo Lacqua (Joseph Lacqua's uncle) who had been the sole stockholder of Court Carpentry received 29 shares of the common stock of petitioner. Joseph Lacqua received 30 shares and became president of petitioner. It is to be noted that Joseph Lacqua had served as president of Court Carpentry for a long period of years prior to the reorganization, Leo having apparently relied on Joseph for the details involved in the management and operation of the business. The respondent has denied a stevedore's license to petitioner upon its conclusion that Joseph Lacqua and Leo Lacqua lack good character and integrity because they have been found guilty of various charges alleged against them. Initially we note that the respondent originally alleged four charges as against petitioner. However, in denying the application for a stevedore's license the respondent stated that its findings with respect to the second charge did not enter into its determination and therefore charge numbered two is not under review in this proceeding. In the first charge it is alleged that the two Lacquas lack good character and integrity because Court Carpentry overbilled its customers in excess of $74,000 (representing 11,757 hours of work) during the period from October 1, 1966 to about September 30, 1967. The entire court is in agreement that there is no substantial evidence to sustain this charge. The respondent's conclusion was based merely upon a comparison of various of the Court Carpentry records showing that total billings during the period involved exceeded the hours for which the employees were paid. (Customers were billed for 279,833 hours; employees were paid for total of 268,076.) It is to be noted that the differential is less than 5% of the total billings. Whatever the reason for the discrepancy in these time records, we can find nothing in the record showing that such discrepancy arose as a result of overbilling and in this respect it is significant to note that it does not appear that any customer of Court Carpentry has made complaint of having been overcharged. We conclude therefore that the respondent's finding as to Charge No. 1 is not supported by substantial evidence. ( Matter of Kopec v. Buffalo Brake Beam-Acme Steel Malleable Iron Works, 304 N.Y. 65.) The third charge (as sustained by the respondent) is based upon an alleged violation of sections 723 and 724 of Labor Law in that the Lacquas, together with Anthony Scotto, a vice president of the International Longshoreman's Association, whose wife Marion is a niece of Leo Lacqua, negotiated a loan for the development of a country club. The loan was negotiated on the behalf of Newbrook Enterprises, Inc., a family real estate holding corporation in which Marion Scotto and the Lacquas are equal stockholders. The loan was guaranteed by the several stockholders (including Marion Scotto), by CC Lumber and Court Carpentry as well as by Anthony Scotto. It is to be noted that even Mary Lacqua, Leo's wife, was required to give her guarantee. It would seem that it was the bank's policy to require spouses of substantial stockholders in a corporation to which it was giving a loan to sign separate personal guarantees. As stated, based upon Anthony Scotto's relationship to this transaction, the respondent has concluded that sections 723 Lab. and 724 Lab. of the Labor Law have been violated by the Lacquas and thus, that they lack the requisite character and integrity for issuance of the subject license. Section 723 Lab. of the Labor Law provides in essence that it shall constitute a violation of his fiduciary obligation for an officer or agent of a labor organization to have "directly or indirectly, any financial interest in the business or transaction of any person who * * * deals with * * * an employer whose employees his labor organization represents" (subd. 1, par. [b]). Of course, it cannot be said that the Lacquas violated this section of the Labor Law since by its terms it is applicable only to the labor leader. However, section 724 Lab. of the Labor Law provides that "No employer * * * shall knowingly participate in or induce any conduct or act which violates any of the obligations of any officer or agent of a labor organization provided in section seven hundred twenty-three." Nevertheless, we believe that charge numbered three cannot be sustained. The entire background of the transaction and relationship of the parties indicate that Anthony Scotto's participation was for the benefit of his wife and that the guarantee he signed was a formal requirement of the bank. We are aware of the fact that there is some indication that in granting the loan the bank noted in its files that the I.L.A. had substantial deposits with the bank. But, close scrutiny of the facts reveals that the bank's notation was made only on its own advice and not pursuant to representation by Anthony Scotto or the Lacquas. And further examination of the record indicates that the loan was granted based upon the applicant's own financial history and dealings with the bank. We do not perceive that this transaction involving relatives was such as is contemplated by sections 723 Lab. and 724 Lab. of the Labor Law. But, even if it could be said that there was a technical violation of the afore-mentioned sections of the Labor Law, in the absence of any showing of an intentional wrongdoing, such would not mandate a finding that because of the transaction the Lacquas lacked the requisite character and integrity. And based on the record showing a history of family businesses and transactions, we find no support for such a finding. The fourth charge is based on the contention that "[Leo] Lacqua committed fraud at a Commission interview on June 2, 1967 in that he testified that Anthony Scotto had never acted on behalf of Newbrook and had nothing to do with Newbrook when in truth and in fact Scotto, during the period from about 1959 through 1966, acted at various times on behalf of Newbrook". An essential element of fraud is scienter and since the record does not show that Leo Lacqua had actual knowledge of the alleged activities of Anthony Scotto the charge cannot be sustained. Indeed, the testimony shows that during much of the period involved it was Joseph Lacqua who handled the various affairs of Court Carpentry and that Leo Lacqua was not intimately aware of the details of the business. We also note that in sustaining the fourth charge respondent particularly referred to the transaction which was the subject of the third charge. Even if Leo Lacqua knew of Scotto's participation in that transaction he might reasonably conclude that Scotto was not acting for Newbrook and that any participation by Scotto was merely for his wife's benefit. There is no contention that the petitioner is not qualified to do marine carpentry work and it would seem that the commission's determination based on the foregoing is unreasonable. The determination should be annulled and the matter remanded for further consideration of the application, consistent with this decision.
The third and fourth charges based on sections 723 and 724 of the New York Labor Law, while technical in view of the family relationships involved, set forth the policy of the State of New York. That policy is to have a financial line of demarcation between labor leaders and employers with whom they deal on behalf of their members. ( Fitzgerald v. Catherwood, 388 F.2d 400 cert. den. 391 U.S. 934. cf. Labor Management Reporting and Disclosure Act of 1959, U.S. Code, tit. 29, § 401 et seq.) The determination by The Waterfront Commission of New York Harbor, on this basis, is neither arbitrary nor unreasonable and, therefore, must be sustained.