Opinion
No. 2013–0858.
02-10-2017
PLATTSBURGH HOUSING AUTHORITY, Plaintiff, v. Lori CANTWELL, Defendant.
Barclay Damon, Albany (Colm P. Ryan of counsel), for plaintiff. Hinman Straub, Albany (James T. Potter of counsel), for defendant.
Barclay Damon, Albany (Colm P. Ryan of counsel), for plaintiff.
Hinman Straub, Albany (James T. Potter of counsel), for defendant.
ROBERT J. MULLER, J.
The issues of this action having duly come on for a hearing before me as one of the Justices of this Court, on June 20, 2016, June 21, 2016, June 22, 2016, June 30, 2016, and August 29, 2016 and having heard the allegations and proofs of the respective parties, and having carefully reviewed plaintiff's exhibits 1–3, 7, 9–11, 13–15, 17, 19, 20, 22–29, 35, 36, 39, 40, 43, 46, 49, 50, 66, 85–87, 96, 100, 101, and 104 and defendant's exhibits 38, 41, 44, 45, 47, 51, 52, 55, 59, 60, 63, 65, 67, 69, 70, 72, 73, 75, 77, 78, 84, 102, and 103, all of which were received into evidence, and the Court also having had an opportunity to observe the demeanor of the witnesses called to testify and having made determinations on issues of credibility with respect to these witnesses and due deliberation having been had thereon,
NOW, after reviewing the submissions, and the plaintiff having appeared by and through its attorney, Barclay Damon, Albany (Colm P. Ryan of counsel), and the defendant having appeared in person and by and through her attorney, Hinman Straub, Albany (James T. Potter of counsel) I do hereby make the following findings of essential facts which I deem established by the evidence and reach the following conclusions of law.
PLATTSBURGH HOUSING AUTHORITY
BACKGROUND
1. Plaintiff Plattsburgh Housing Authority (hereinafter the PHA) provides housing to approximately eleven hundred people in Plattsburgh, N.Y. and provides vouchers for housing to another several hundred people (Trial Tr. 54:15–25).
2. There are approximately thirty employees who work for the PHA and it has an annual budget of $4.5 million to $5 million (Trial Tr. 54:5–8).
3. The PHA is run by a Board that is comprised of seven members, five of whom are appointed by the mayor of the City of Plattsburgh and two of whom are elected by residents living in PHA housing (Trial Tr. 53:11–16).
4. Clayton Morris was appointed to the PHA Board in approximately 2006 and served as the chairperson of the PHA Board from 2007 or 2008 through July 1, 2012 (Trial Tr. 52:3–7, 56:3–9).
5. Shirley O'Connell was appointed to the PHA Board in 2004 and on July 1, 2012, she became the chairperson of the PHA Board and Mr. Morris became the vice-chairperson (Trial Tr. 56:10–12, 758:19–22).
6. Mr. Morris or Ms. O'Connell served as the chairperson of the PHA Board at all times relevant to this action.
7. The Executive Director of the PHA is responsible for day to day operations of the PHA including managing the budget and PHA personnel and communicating with PHA residents (Trial Tr. 58:11–17).
MS. CANTWELL'S RELATIONSHIP WITH PHA AS ATTORNEY
8. The Defendant Lori Cantwell has been an attorney since 1991 (Trial Tr. 418:13–14).
9. In 1997, Ms. Cantwell began performing services as an attorney for the PHA as an independent contractor (Trial Tr. 418:22–23). At that time, the Executive Director of the PHA was Patricia Lucia (Trial Tr. 264:12–13, 799:1–3).
10. As an independent contractor, Ms. Cantwell performed services pursuant to a legal services retainer and handled essentially all of the PHA's legal work (Trial Tr. 412:15–19, 420:14–16).
11. In March of 2003, Ms. Cantwell and the PHA executed a self-renewing 5 year General Counsel Employment Agreement (hereinafter the GC Agreement) providing for Ms. Cantwell to become an employee of the PHA (Trial Tr. 413:8–1 1, Plaintiff's Exhibit 2).
12. As the full time PHA attorney, Ms. Cantwell worked approximately 30–35 hours per week (Trial Tr. 99:7–11, 426:4–5).
13. As the PHA attorney, Ms. Cantwell attended almost all of the PHA Board meetings and provided the Board with information about Housing Urban Development ("HUD"), the PHA's regulatory agency, and advice on how to respond to directives from HUD (Trial Tr. 64:10–14, 65:18–22, 237:3–6).
14. Both Ms. Lucia, as Executive Director of the PHA, and the PHA Board often sought legal advice from Ms. Cantwell (Trial Tr. 65:8–17, 237:7–24).
MS. CANTWELL'S SALARY AS GENERAL COUNSEL
15. Ms. Cantwell's GC Agreement with the PHA stated that her annual salary was $27,960 (Trial Tr. 266:24–25, 267:1–3, Plaintiff's Exhibit 40).
16. This agreement provided that Ms. Cantwell's salary could be increased at the discretion of the Executive Director, but only with the approval of the PHA Board (Plaintiff's Exhibit 2 114(d)).
17. Although the PHA Board never passed a resolution to increase Ms. Cantwell's salary, she received 2.5% to 3% annual raises which were tied to the raises that employees on the PHA salary schedule received (Trial Tr. 341:15–22, 425:1–3).
PHA Management employees received incremental increases in their salary based upon a "salary schedule" that lists a job title and range on the y-axis and a "step" corresponding to the employee's years of service on the x-axis (Defendant's Exhibit 78).
18. In 2009, a new line was placed on the salary schedule for the PHA attorney as "legal" and Ms. Cantwell's salary was placed at the "step one" salary for the attorney position with an initial salary, on the schedule, of $37,062 which corresponded to Ms. Cantwell's salary at that time (Trial Tr. 342:13–25, Plaintiff's Exhibit 40).
19. From 2003 to the time she was placed on the PHA salary schedule in 2009, Ms. Cantwell's annual salary increased approximately $10,000 (Trial Tr. 586:20–23, Plaintiff's Exhibit 40).
CANTWELL LAW FIRM LEASE AGREEMENT
20. The PHA office was initially located on Oak Street in Plattsburgh, but in 2009 or 2010 plans began for a new office building on South Catherine Street for the PHA (Trial Tr. 218:20–25, 219:1–4, 799:19–21).
21. During the design phase of the construction of the new building Ms. Lucia suggested that a portion of the new building be rented as an office and Ms. Cantwell advised that she would be interested in renting that office for the Cantwell Law Firm (Trial Tr. 219:1–5, 800:18–25, 801:1–7).
22. In 2011, the PHA Board approved a lease agreement for the Cantwell Law Firm to occupy two offices within the new PHA Administration Building (Trial Tr. 141: 4–12).
23. When the lease agreement with the Cantwell Law Firm was executed Ms. Cantwell was a member of the Cantwell Law Firm (Trial Tr. 427:16–17).
24. Ms. Cantwell was the only attorney who reviewed the lease agreement between the PHA and the Cantwell Law Firm on the PHA's behalf (Trial Tr. 141:7–9, 219:14–18).
25. Despite representing the PHA and being a member of the entity that was contracting with the PHA, Ms. Cantwell never advised the PHA, either orally or in writing, to have an attorney, other than herself, review the lease agreement (Trial Tr. 141:10–12, 219:22–25, 220:1–2, 428:1–5).
26. Ms. Cantwell never advised the PHA as to who she was representing with respect to the lease agreement, but presented the lease to the PHA "because she was [its] attorney" (Trial Tr. 141:13–17, 768:16–21).
27. Ms. Cantwell never obtained informed consent from the PHA disclosing her role in the negotiation and execution of the lease agreement (Trial Tr. 428:10–16).
28. Significantly, this failure to disclose her conflict of interest would occur again.
MS. CANTWELL BECOMES EXECUTIVE DIRECTOR OF PHA
29. When Clayton Morris, Shirley O'Connell and Paul Grasso were appointed to the PHA Board, Ms. Lucia served as Executive Director (Trial Tr. 57:25, 58:1–3, 207:17–18, 758: 19–23).
30. In the summer of 2011, Ms. Lucia advised the PHA that she would be retiring from her position as Executive Director effective approximately January 2012 (Trial Tr. 58:22–24, 59:3–5, 208:22–25).
31. To find a new Executive Director, the PHA published notices in local newspapers and housing authority trade magazines advising potential candidates of the opportunity to serve as Executive Director of the PHA (Trial Tr. 59:8–14, 209:9–10, 430:20–22).
32. The salary for the new Executive Director was set forth in this as $75,000 to $85,000, commensurate with experience (Trial Tr. 59:15–20, 209:1 1–21, 761:19–23).
33. Ms. Cantwell was one of over a dozen applicants for the position and one of three or four candidates interviewed for the position by members of the PHA Board. (Trial Tr. 59:21–23, 61:6–10).
34. Ms. Cantwell was ultimately hired because she had considerable experience with the PHA and the PHA Board believed that her experience as an attorney would help her navigate the complexities of HUD policies (Trial Tr. 64:22–25, 65:1–5).
35. Another reason the PHA Board supported Ms. Cantwell was that her qualifications as a licensed attorney would reduce the need for the PHA Board to need assistance from another attorney (Trial Tr. 223:7–12, 241:5–8, 242:9–12).
36. During her interview, Ms. Cantwell advocated that hiring her would present a cost savings to the PHA because the PHA would not need to hire another attorney in most instances (Trial Tr. 760:13–23).
37. At a September 20, 2011 Board Meeting, the PHA Board voted to select Ms. Cantwell as its new Executive Director (Trial Tr. 66:5–7).
38. After selecting Ms. Cantwell to serve as Executive Director, the PHA Board delegated authority to Mr. Morris to negotiate Ms. Cantwell's employment agreement as Executive Director (Trial Tr. 69: 19–22).
CANTWELL'S RELATIONSHIP WITH CLAYTON MORRIS
39. At the time Ms. Cantwell was selected for the Executive Director position, she and Mr. Morris were close friends. Their families had socialized together and his daughter had babysat for Ms. Cantwell's children (Trial Tr. 62:8–16, 655:2–10).
40. During this period of acquaintance and while serving on the PHA Board, Mr. Morris was also a full-time self-employed owner and operator of a carpet cleaning business (Trial Tr. 50)
41. Mr. Morris first met Ms. Cantwell during the late 1990s when they attended political fundraisers or similar functions (Trial Tr. 57:10–20).
42. She was an attorney of whom he thought highly (Trial Tr. 63:1821).
43. As an example of the personal trust he had in her, Ms. Cantwell was the first attorney Mr. Morris sought advice from when his daughter had complications giving birth to his grandchild and his family was exploring their potential legal options (Trial Tr. 63:13–21).
MS. CANTWELL AND MR. MORRIS MEET TO DISCUSS ED AGREEMENT
44. After the PHA Board selected Ms. Cantwell as the new Executive Director, Mr. Morris left the September 20, 2011 PHA Board meeting and walked across the hall to Ms. Cantwell's office to inform her that she had been selected as the new Executive Director (Trial Tr. 66:18–24).
45. Mr. Morris informed Ms. Cantwell that he had been delegated to negotiate an Employment Agreement with her and the two briefly discussed potential terms for her employment agreement (Trial Tr. 72:11–18).
46. Mr. Morris viewed the PHA as Ms. Cantwell's client when negotiating her employment agreement and, as he said, he "wanted to have a contract that we were both going to be very happy with so that she would have a long—I thought she was going to do a fantastic job as the director of the Plattsburgh Housing Authority" (Trial Tr. 72: 21–25, 199: 1216).
47. After an initial discussion, Ms. Cantwell offered to draft the contract and Mr. Morris agreed, without hesitation, because she was the attorney for the PHA (Trial Tr. 77:18–2293:23–25, 94:1–9).
48. Mr. Morris trusted that Ms. Cantwell would draft the employment agreement because, in his reasonable view, she was the PHA attorney and he reasonably believed she was serving as General Counsel for the PHA when she negotiated and drafted this agreement (Trial Tr. 77:22–25, 78:1–3, 92: 19 22, 93:12–19).
49. There was nothing adversarial between Mr. Morris and Ms. Cantwell during the entire course of negotiating the Executive Director Employment Agreement (hereinafter the ED Agreement). (Trial Tr. 78:4–8).
50. Mr. Morris "knew that [Ms. Cantwell] and [he] were going to be negotiating in good faith towards a contract that was going to be beneficial to both her and the Plattsburgh Housing Authority" and did not recognize-nor was he advised-that he and Ms. Cantwell had vastly divergent interests in what should be included in the ED Agreement (Trial Tr. 157:20–23).
51. Mr. Morris had no doubt about Ms. Cantwell's judgment, competency or effectiveness as an attorney (Trial Tr. 73: 5–13).
52. There is no credible evidence that Ms. Cantwell ever advised Mr. Morris to seek the advice of another attorney with respect to the ED Agreement, either orally or in writing (Trial Tr. 93:21–25, 94:11–13).
53. Although Ms. Cantwell was obligated to provide written advice to the PHA to seek the advice of another attorney with respect to her ED Agreement, at trial, she contended that she orally advised Mr. Morris, during a meeting in her office, to seek advice from Mike Phillips, an attorney in Plattsburgh (Trial Tr. 452:3–11).
54. Ms. Cantwell's testimony that she provided this advice to Mr. Morris is not credible. She recalled this conversation for the first time 2 to 3 weeks before trial, almost 5 years after she signed the ED agreement and over 3 years after she was asked to resign as the PHA's Executive Director. Ms. Cantwell never shared this conversation during either her 50–h hearing or her initial deposition (Trial Tr. 452:1–17, 458:1–5, 541:17–20, 723:12–19).
55. During her deposition, Ms. Cantwell testified as follows:
Q: In connection with your executive director employment agreement did you ever advise the Plattsburgh Housing Authority to seek independent legal counsel?
A: I provided no advice or opinion or recommendations to the Plattsburgh Housing Authority regarding the executive director agreement that I entered into then (Trial Tr. 458:18–25)
56. There is no dispute that Ms. Cantwell did not provide the PHA, in writing, the advice to have independent legal counsel review her ED Agreement (Trial Tr. 460:21–25, 461:1 5).
57. Ms. Cantwell never provided the PHA with written notice that she would not be representing it with respect to her ED Agreement (Trial Tr. 466:23–25, 467:1–3).
58. The PHA never gave informed consent, in writing or otherwise, that Ms. Cantwell would not be representing its interests with respect to her ED Agreement (Trial Tr. 94:19–24).
59. A few days after Ms. Cantwell and Mr. Morris first discussed her selection, Mr. Morris went to the PHA office and Ms. Cantwell provided him with a draft of her ED Agreement (Trial Tr. 78:23–25).
60. Mr. Morris believed that the draft Ms. Cantwell provided to him was substantially similar to the employment agreement that was in place for Ms. Lucia and consistent with his initial discussions with Ms. Cantwell (Trial Tr. 79:2–5).
61. Mr. Morris was partially right; Ms. Cantwell had used Ms. Lucia's employment agreement in drafting her ED Agreement. She simply took Ms. Lucia's agreement and then "inserted some additional terms that were necessary for me to be willing to take the job" (Trial Tr. 498:1 1–14, 723:4–10).
62. As observed below, many provisions of the ED Agreement were heavily balanced in Ms. Cantwell's favor, inconsistent with what Mr. Morris and Ms. Cantwell had discussed and the PHA was not aware of the full ramifications of the terms of the ED Agreement until well after it was executed. Nonetheless, in Ms. Cantwell's mind the contract she drafted was fair and reasonable to the PHA because it contained the terms she required to take the position:
Q: As you sit here today do you think [the contract] was fair and reasonable to the PHA?
A: Yeah. I think it was a fair and reasonable contract. I mean, those were the terms that were going to be necessary for me to be willing to come on board (Trial Tr. 559: 14–20).
MR. MORRIS AND MS. CANTWELL'S DISCUSSIONS ABOUT EXECUTIVE DIRECTOR SALARY
63. One of the first issues Mr. Morris and Ms. Cantwell addressed was Ms. Cantwell's salary. The PHA Board had given Mr. Morris authority to agree to a salary of no more than $85,000 for Ms. Cantwell, consistent with the high end of the advertisement for the position (Trial Tr. 73:23–25, 74:2–7).
64. Although Ms. Cantwell advised Mr. Morris that she wanted a starting salary of approximately $100,000, he could not agree to a salary in excess of $85,000. Mr. Morris could not offer a salary over $85,000 because that was the maximum salary authorized by the PHA Board for the Executive Director position (Trial Tr. 74: 12–25).
65. Ms. Cantwell agreed to the $85,000 salary which she included in the compensation section of the ED Agreement she drafted (Trial Tr. 473:3–7).
66. Ms. Cantwell's ED Agreement differed from Ms. Lucia's employment agreement with respect to the compensation paragraph in that Ms. Cantwell's specified an exact amount of salary whereas Ms. Lucia's agreement did not:
The items removed from Ms. Cantwell's ED Agreement that were included in Ms. Lucia's agreement are in strikethrough and items added to Ms. Cantwell's ED Agreement are italicized. This formatting is used throughout the Decision and Order when comparing the agreements of Ms. Cantwell and Ms. Lucia.
Compensation. As her compensation for services rendered by Employee as Executive Director under this Agreement, the Authority agrees to pay the Employee a starting salary of $85,000.00 to be placed on the Plattsburgh Housing Authority Basic Salary Schedule as established based on the City of Plattsburgh Basic Salary Schedule Range 14 and acquired Time–in–Step, less all applicable withholdings and deductions and progressing annually as indicated on such chart or other charts that may be adopted from time to time so long as such new charts may never result in a decrease in salary scale. Such salary shall be payable at the same time and in the same manner as all other salaries paid to the employees of the Authority. In addition, she shall receive such increments in salary and benefits which shall be granted to management personnel of the Authority from time to time during the term of this Agreement and any renewals -extensions thereof (Compare Plaintiff's Exhibit 1 v. Exhibit 3).
67. There is no reference whatsoever to any "acquired time in step" in Ms. Cantwell's ED Agreement as there was in Ms. Lucia's employment agreement (Plaintiff's Exhibit 1, Plaintiff's Exhibit 3).
68. Further, there is no reference to Ms. Cantwell's years of service with the PHA in this paragraph or how that would affect her salary (Trial Tr. 516:15–18).
MS. CANTWELL AND MR. MORRIS DISCUSS
THE LENGTH OF THE ED AGREEMENT
69. During an early meeting Ms. Cantwell also advised Mr. Morris that she wanted a contract with 5 year terms. Mr. Morris sought 3 year terms (Trial Tr. 75:10–12).
70. Eventually, Ms. Cantwell agreed to 3 year contract terms, a one year extension over the terms Ms. Lucia had (Trial Tr. 76:18–20).
71. Ms. Cantwell contends that initially she drafted an agreement with 4 terms of 5 years for a total of 20 years but reduced this, as Mr. Morris requested 5 terms of 3 years each for a total of 15 years (Trial Tr. 436:15–25, 437:1–7, 504:15–25, 505:2–14).
72. Ms. Lucia's employment agreement had 2 year terms which were automatically renewed at the end of each term unless either the PHA or Ms. Lucia provided notice to the counterparty of an intention not to renew (Trial Tr. 75:13–23, Plaintiff's Exhibit 3).
73. Mr. Morris believed that, as with Ms. Lucia's employment agreement, the PHA would have the ability to evaluate Ms. Cantwell at the end of the contract term and the ability to renew, or not renew, Ms. Cantwell's contract at the end of her 3 year term (Trial Tr. 76:18–20, 90: 5–10).
74. Ms. Cantwell, however, drafted an agreement providing for 5 terms of 3 years each, with each term automatically renewing unless Ms. Cantwell gave notice, 60 days before the end of a term that she would not renew the contract. Additionally, Ms. Cantwell could give the PHA 60 days notice, at any time, that she did not wish to renew the agreement. There was no reciprocal renewal provision for the PHA not to renew Ms. Cantwell's employment at the end of the 3 year terms (Trial Tr. 437:5–7, Plaintiff's Exhibit 1).
75. In effect, Ms. Cantwell drafted an agreement that provided her a 15 year term as Executive Director that she could terminate, for any reason, on 60 days notice, but that the PHA could only terminate by following rigorous provisions she inserted for her own protection (Plaintiff's Exhibit 1).
76. As Ms. Cantwell acknowledges, there was no meaningful distinction between five terms of 3 years each and one 15 year term. The only logical reason to draft this provision as she did was to avoid Mr. Morris recognizing and rejecting a 15 year guaranteed contract (Trial Tr. 502:16–19).
77. Ms. Cantwell never suggested to Mr. Morris that her ED Agreement would be a 15 year contract (Trial Tr. 90:15–18, Plaintiff's Exhibit 1).
78. Ms. Cantwell's testimony to the contrary is not credible. After Mr. Morris expressed concern about a 5 year term as too long, it is not reasonably believable that he would agree to a 15 year term while knowing the PHA did not have the option to decline to renew her contract at the end of a 3 year term (Trial Tr. 438:21–23).
79. Additionally, it is not credible that the PHA would hire, as its executive director, someone with no prior experience as an executive director of any organization, no prior experience managing a staff of almost thirty people or a budget of almost $5 million, to a 15 year guaranteed contract (Trial Tr. 547:9–25, 548:1–7).
80. During her deposition, in contradiction to her testimony at trial, when asked, "did you advise [Mr. Morris] that the Housing Authority would not be able to provide the same notice at the end of a three-year period that they could have provided Pat Lucia at the end of one of her two-year periods," Ms. Cantwell responded "I provided absolutely no advice to him on this contract" (Trial Tr. 449:3–13).
81. Ms. Cantwell's deposition testimony is consistent with Ms. Cantwell's affidavit submitted in support of her application for pendente lite relief, dated November 21, 2013, that "[i]t is important to make very clear that at no point did I represent the PHA for purposes of the agreements related to my positions. I never gave any advice, guidance or opinion to the board" (Trial Tr. 454:17–21, Plaintiff's Exhibit 101).
82.It also is not credible given the following testimony proffered by Ms. Cantwell during her 50–h hearing, held on October 3, 2013 (5 months to the day she was asked to resign):
A: I had every reason to believe that if I performed the job reasonably, responsibly and nobly that I would be continued and renewed.
Q: Did you ever consider that you wouldn't be renewed for any reason?
A: No.
Q: Did you have any plan in case you didn't get renewed as to what you would do for an occupation?
A: No. The idea that they wouldn't renew it for a high performer, the scoring of the agency has been fantastic, I think performance has been very good and I was amenable to anything the board felt was important (Trial Tr. 439:22–25, 440:113).
83. It was only after her 50–h hearing that Ms. Cantwell retreated from her contention that she expected the PHA to "renew" her contract at the end of 3 year terms and created the narrative that Mr. Morris had knowingly agreed to a 15 year contract without an option for the PHA not to renew the ED Agreement.
84. The "Term" Paragraph of Ms. Lucia's employment agreement was changed in Ms. Cantwell's ED Employment Agreement as follows:
Term. The initial term of this Agreement shall be THREE TWO years beginning on October 1, 2011 December–12, 2000 -and terminating on September 30, 2014 December 31, 2002 . Thereafter it shall continue in full force and effect for successive TWO (2) year segments, unless, not less than Unless Employee elects to terminate this Agreement at the end of the Term or any Renewal Term, by giving the Employer notice of such election at least 60 days prior to the expiration of the then-current Term, this agreement shall be deemed to have been renewed for a consecutive additional three (3) year Term commencing on the day after the expiration of the then-current term and shall be self renewing in this same way for a total of five (5) three (3) year Terms (an initial 3yr Term and 4 three year Renewal Terms) any term set forth herein Employee gives notice to the Authority that the Agreement will not be extended, or not less than one hundred eighty (180) days prior to the expiration of any term set forth herein the Authority gives notice to Employee that the Agreement will not be extended.
Additionally, at any time, Employee may terminate this Agreement by giving sixty (60) days written notice to the Authority of her desire to terminate (Compare Plaintiff's Exhibit 1 v. Plaintiffs Exhibit 3).
85. Had Mr. Morris known that the ED Agreement was actually a 15 year contract this Court finds it highly unlikely he would have signed it (Trial Tr. 103:5–8).
86. Had Mr. Morris known that the ED Agreement did not give the PHA the option to decline to renew Ms. Cantwell's 3 year terms, this Court finds it highly unlikely he would have signed it (Trial Tr. 102:12–16).
87. Additionally, Mr. Morris believed, based upon Ms. Cantwell's misrepresentation, that the PHA Board could terminate Ms. Cantwell on 60 days notice (Trial Tr. 177:21–24). Rather, it was only Ms. Cantwell who, as she claims to have informed Mr. Morris, could terminate the agreement on 60 days notice (Trial Tr. 447:12–17).
MS. CANTWELL ASKS MR. MORRIS TO INCREASE HER YEARS OF SERVICE
88. When she drafted the ED Agreement, Ms. Cantwell inserted a sentence stating as follows: "For purposes of benefits calculations [Ms. Cantwell] shall be considered to have 14 years of service with the [PHA] as of 12/30/11 and shall continue to accrue credit annually while employed" (Trial Tr. 81:19–22, Plaintiff's Exhibit 1).
89. Mr. Morris and Ms. Cantwell discussed this provision and she explained that this 14 years of service provision was important to her because in 6 years, with 20 years of service, she would be entitled to certain valuable benefits upon retirement (Trial Tr. 80:2–6, 83:10–14, 355: 12–20, 487:9–14).
90. Specifically, a PHA employee who retires with 20 years of service is entitled to retain health insurance coverage through the PHA's health plan based upon a percentage of the benefits one receives in retirement (Trial Tr. 382:3–10).
91. This was particularly important to Ms. Cantwell because she planned to retire in 2021, around the time of her 56th birthday (Trial Tr. 519:5–8).
92. If Ms. Cantwell was only credited with 8 years of service in 2011 (based on her employment with the PHA beginning in 2003), she would not have had 20 years of service until 2023, 2 years after she wished to retire (Trial Tr. 522:4–5).
93. Additionally, the 14 years of service impacted the longevity bonus that Ms. Cantwell received, as all management employees did, twice per year (Trial Tr. 355:12 20).
The longevity bonus was paid twice per year based on years of service as a percentage of an employee's salary as follows:
5 years of service = 2% of salary
8 years of service = 4% of salary
10 years of service = 6% of salary
15 years of service = 8% of salary
20 years of service = 10% of salary (Trial Tr. 369:4–12).
94. There was no discussion between Ms. Cantwell and Mr. Morris that this 14 years of service provision would have any impact whatsoever on her salary (Trial Tr. 83:18–20).
95. The "Other Benefits" Paragraph of Ms. Lucia's employment agreement was changed in Ms. Cantwell's ED Agreement as follows:
7) Other Benefits. The Authority shall make available to Employee all employee benefits such as vacations, holidays, hospitalization, medical insurance, medical expenses, sick leave, retirement plans, etc ... which are available to employees of the Authority, in accordance with the Authority's personnel policy and procedures. Employee shall be credited with 5 weeks of vacation on January 1st of each year and be entitled to the same additional benefits as extended to previous Executive Directors. For purposes of benefits calculations the Employee shall be considered to have 14 years of service with the Employer as of 12/30/11 and shall continue to accrue credit annually while employed. Employee shall be eligible in retirement minimally for the same benefits as provided to members of the Collective Bargaining Agreement who retire including health care consistent with that which is provided to the Collective Bargaining Agreement members after/into retirement.
In addition, Employee shall be entitled to five (5) days per year paid administrative leave to compensate for weekend and evening duties performed for the Authority. All such leave excepting vacation may be carried forward from one year to the next. In the event of termination for cause, Employee shall not be entitled to payment for any unused administrative leave.
In addition, the Authority agrees to pay for any professional dues, professional malpractice insurance, subscriptions, courses and training for the of Employee for her continued professional participation, growth and advancement and for the good of the Authority.
The Authority shall not at any time during the term of this Agreement or any extensions thereof, reduce the salary, compensation or other financial benefits of Employee.
MS. CANTWELL INCLUDES A PROVISION FOR HER PROFESSIONAL DUES AS AN ATTORNEY
96. Both Ms. Lucia and Ms. Cantwell's ED Agreements required the PHA to reimburse them for any professional dues. When Ms. Lucia was Executive Director these dues included HUD dues and dues for New York State related to Ms. Lucia's service as Executive Director (Trial Tr. 90: 22–25, 91:2–5).
97. However, as noted in the "Other Benefits" section above, Ms. Cantwell had included an obligation for the PHA to pay for her professional malpractice insurance as an attorney (Plaintiff's Exhibit 1 ¶ 7).
98. When Ms. Cantwell served only as General Counsel to the PHA, the PHA did not pay for her liability and malpractice insurance as an attorney, bar association dues or continuing legal education classes (Trial Tr. 91:24–25, 92:1–12, 532:17–25).
99. There was no discussion with Mr. Morris about paying any additional dues for Ms. Cantwell such as her liability and malpractice insurance as an attorney, bar association dues or continuing legal education classes (Trial Tr. 91: 13–25, 92: 1–12).
100. Although Ms. Cantwell testified at trial that she did discuss these expenses with Mr. Morris, during her deposition she could not recall any discussions with Mr. Morris nor did she include any mention of this discussion when she submitted two affidavits in support of her pendente lite application (Trial Tr. 525:14–21, 530:8–11).
101. Again, her alleged advice that Mr. Morris should speak with Mr. Phillips was advice only recalled in testimony two to three weeks before trial (Trial Tr. 530:2225), and was not found credible.
MS. CANTWELL INCLUDES ONEROUS TERMINATION PROVISIONS IN THE ED AGREEMENT
102. During their discussions about her employment as Executive Director, Ms. Cantwell and Mr. Morris discussed including termination protections for her as a result of her fear of retribution from Donald Kasprzak, the then mayor of the City of Plattsburgh, after his "broken promise" to appoint her husband to the position of City Court Judge (Trial Tr. 735:16–22).
103. The mayor has no oversight of the day to day decisions of the PHA Board and could only possibly influence the PHA Board by appointing new Board members (Trial Tr. 178:19–20).
104. Mr. Kasprzak never influenced Mr. Morris about any decisions he made in terms of hiring an executive director to replace Ms. Lucia and never talked to Mr. Morris about Ms. Cantwell being hired as executive director (Trial Tr. 191:9–15).
105. In fact, Mr. Morris was re-appointed as a member of the PHA Board after Ms. Cantwell was hired as executive director (Trial Tr. 191:7–8).
106. Similarly, Paul Grasso was appointed by Mr. Kasprzak as well, but he never gave Mr. Grasso any recommendations for anybody to become a PHA employee or to take any action with respect to any PHA employees (Trial Tr. 207:4–8).
107. Although Ms. Cantwell claimed that Mr. Grasso came on the Board "to watch over and make difficult [her] time," he was appointed in 2010 before she even applied for the position of executive director (Trial Tr. 512:13–25, 513:1–18).
108. Like Mr. Morris, Mr. Kasprzak never gave Mr. Grasso any direction at all concerning the execution of Mr. Grasso's duties as a PHA Board member (Trial Tr. 207:4–8).
109. Although Ms. Cantwell's concerns were unfounded, Mr. Morris believed that Ms. Cantwell's concerns about the Mayor taking steps to remove her were addressed by the 3 year contract terms (Trial Tr. 178:19–20).
110. Ms. Cantwell and Mr. Morris did discuss the termination provisions in the ED Agreement, but Ms. Cantwell did not point him to sections 10 and 11 of the agreement titled "Termination and Severance" and "Entitlement to Hearing" (Trial Tr. 87:1–5).
111. Mr. Morris believed that the standard that applied to terminating Ms. Cantwell would be the same as the standard that applied to terminating Ms. Lucia (Trial Tr. 89:712).
112. Ms. Cantwell's ED Agreement included substantially greater protections for her benefit than Ms. Lucia's contained (Compare Plaintiff's Exhibit 1 and Plaintiff's Exhibit 3).
113. For the PHA to terminate Ms. Lucia, it had to give her a thirty day period to cure any deficiencies and if the deficiencies were not corrected, the PHA could terminate her. Ms. Lucia had the option to request a public hearing before the PHA Board to discuss her termination (Plaintiff's Exhibit 3 ¶ 10(b)).
114. In contrast, Ms. Cantwell's ED Agreement required the PHA to give her a ninety day cure period followed by arbitration before AAA or PERB if the deficiencies were not corrected (Plaintiff's Exhibit 1 ¶¶ 10,11).
115. There was no discussion with Mr. Morris of a cure period for Ms. Cantwell to discuss any deficiencies in her job performance and there was no discussion of using arbitration to settle disputes between Ms. Cantwell and the PHA (Trial Tr. 95:25, 96:115).
116. The Court finds it highly unlikely that Mr. Morris would have signed the ED Agreement if he was fully advised and understood these termination provisions (Trial Tr. 103:9–13).
MS. CANTWELL'S "LAY ADVICE" TO MR. MORRIS
117. Ms. Cantwell testified that she did not represent the PHA for purposes of negotiating and executing the ED Agreement (Trial Tr. 461:11–13, 687:10–16).
118. However, Ms. Cantwell, as the PHA's attorney, pointed out items in the ED Agreement that Mr. Morris had questions about and he reasonably relied upon her, as the PHA's attorney, to have what the PHA needed in the contract (Trial Tr. 180:17–21).
119. Although Ms. Cantwell claimed during her deposition that she gave "absolutely no advice" to Mr. Morris with respect to her employment agreement, at trial she acknowledged that she provided some "lay advice," explaining at least some of the terms of the agreement to him (Trial Tr. 450:16–20).
120. At trial she claimed that she read the ED Agreement to Mr. Morris, explained the meaning of terms of the contract, and explained her intention for the terms. Further, she explained how the terms would affect the PHA and how they would affect her (Trial Tr. 462:17–25, 463:1–12).
121. For example, with respect to the termination provisions, Ms. Cantwell claimed that she explained the termination "process in detail" to Mr. Morris "because [she] wanted to make sure [they] saw eye to eye on it, that [they] were clear that that was what [she] was asking for" (Trial Tr. 540:1–16).
122. Ms. Cantwell did this because she "wanted [Mr. Morris] to know what the implications were" of all the terms of the ED Agreement and how it would affect the PHA (Trial Tr. 463:23–25, 464:1–4). She explained the terms of the contract in "plain language using alternate descriptors for each term" (Trial Tr. 729:1 1–18).
123. Ms. Cantwell further testified as follows: "I wanted to make sure that we were absolutely sure and absolutely clear on everything that was in [the contract] and that it was understood, and so as part of that process I had the contract in front of me and I went through several provisions with [Mr. Morris], reading them and highlighting essentially what the implications would be" (Trial Tr. 692:12–19).
124. This process was consistent with the legal advice she rendered to Mr. Morris on other matters which provided for the protection of the PHA and the type of legal advice an attorney would ordinarily provide to a client (Trial Tr. 466:11–22).
125. Ms. Cantwell's attempt to distinguish between "legal advice" and "lay advice" is irrelevant. In Mr. Morris' mind, Ms. Cantwell was acting as the PHA's attorney and was offering interpretations, although woefully inadequate interpretations, of the ED Agreement to him (Trial Tr. 752:1–12).
MS. CANTWELL WAS THE ONLY ATTORNEY WHO REVIEWED THE ED AGREEMENT PRIOR TO ITS EXECUTION
126. No attorney other than Ms. Cantwell ever reviewed the ED Agreement before it was executed.
127. Ms. Lucia testified that, because of her concern that Ms. Cantwell would serve in two positions, she contacted Richard Winkle, an attorney who is an executive director of a similar organization in southern New York, to discuss Ms. Cantwell's selection as Executive Director (Trial Tr. 804:18–20).
128. Ms. Lucia never gave a copy of the ED agreement, in any form, to Mr. Winkle to review (Trial Tr. 828: 21–24)
129. Mr. Winkle did not review the PHA salary schedules (Trial Tr. 828:25–829:1–3).
130. There was never any testimony that the PHA retained Mr. Winkle or any other attorney to review and opine on the terms of Ms. Cantwell's ED Agreement. Ms. Cantwell was the only attorney who ever reviewed and explained the terms of the ED Agreement to Mr. Morris.
CANTWELL SERVES AS EXECUTIVE DIRECTOR
131. After the ED Agreement was finalized Ms. Cantwell continued to serve as General Counsel to the PHA. Ms. Cantwell started as Executive Director on October 1, 2011 and was trained by Ms. Lucia during a transition period until Ms. Lucia retired. During this period the PHA Board anticipated that Ms. Cantwell would still serve as General Counsel (Trial Tr. 71:10).
132. After Ms. Lucia retired a personnel change form was submitted to Clinton County on January 25, 2012 setting Ms. Cantwell's salary at $84,831 (Tr. 98:11–15, Plaintiff's Exhibit 39).
133. This form stated that Ms. Cantwell would no longer be occupying the title of "Attorney" and that her new title was "Executive Director" (Plaintiff's Exhibit 39).
134. Nonetheless, Ms. Cantwell continued to serve as General Counsel, receiving a salary for two full time positions.
135. Although the PHA recognized that it would have the need for legal services, part of Ms. Cantwell's presentation to be Executive Director was that she would bring salary savings to the PHA precisely because she was an attorney (Trial Tr. 242:9–12).
136. This savings was never realized because Ms. Cantwell continued to be paid as General Counsel and never requested that the PHA seek the assistance of another attorney for any matters.
A PHA EMPLOYEE'S SALARY IS CHANGED
137. During the spring or summer of 2012 a PHA employee, Gina Durocher, switched from her position at the PHA from Section 8 coordinator (or housing assistant specialist) to that of accountant (Trial Tr. 400:3–17).
138. At the time of the switch Ms. Durocher had been a PHA employee for approximately 18 months (Trial Tr. 70:5–7).
139. After consultation with Jean Etesse, a PHA accountant, and Ms. Cantwell, Ms. Durocher's salary as an accountant was set on the PHA salary schedule in the step for an accountant with 18 months experience with the PHA (Trial Tr. 410:3–14).
140. This resulted in Ms. Durocher receiving a salary as accountant of $54,651 from 6 months of employment up until 18 months of employment and an increase to $56,017 once she reached 18 months. Had she been placed in the accountant range for a new PHA employee she would have received a salary of $53,318. Thus, the adjustment resulted in Ms. Durocher receiving between $1,000 and $2,000 more than if she had been placed on the salary schedule as an accountant with 0 to 6 months of service (Defendant's Exhibit 78).
141. Notably, unlike Ms. Cantwell, Ms. Durocher did not have a contract setting forth her salary (Trial Tr. 402–5, 564:13–16).
MS. CANTWELL ACKNOWLEDGES HER SALARY AS EXECUTIVE DIRECTOR IS $85,000
142. Upon selection to the position of Executive Director, Ms. Cantwell began to receive an annual salary of $85,000 as she and Mr. Morris had agreed upon and as set forth in the PHA salary schedule, approved on January 1, 2012, for an Executive Director with 0 to 6 months of experience (Defendant's Exhibit 78).
143. This amount was consistent with the understanding of the PHA Board, Ms. Etesse, Ms. Lucia and even Ms. Cantwell, at the time Ms. Cantwell was hired as Executive Director. As Ms. Cantwell said, "I don't think there was ever a question that [$85,000] was the starting salary, the base salary" (Trial Tr. 469:24–25, 473:3–7, 727:1 6).
144. Less than two weeks after being selected as Executive Director, Ms. Cantwell and the PHA accountant, Jean Etesse, exchanged e-mails about responding to a request from HUD for the salary of the highest compensated employee and Executive Director (Trial Tr. 344:22–25, 345:1–7, Plaintiff's Exhibit 85).
145. In response, Ms. Cantwell suggested that the PHA exclude her salary as General Counsel and "only report the 85k ED portion of the salary, as the rest is not ED" (Trial Tr. 345:8–10, Plaintiffs Exhibit 85).
146. In a following e-mail the same day Ms. Cantwell wrote to Ms. Etesse that the PHA's response to HUD "would be straightforward, then, and since the board actually reduced the compensation from where it is now, 100kish to the 85kish, we should be fine" (Trial Tr. 345:23–25, 346:1–2)
147. At that time, Ms. Lucia's executive director salary was approximately $103,000 to $105,000 or "100kish" (Trial Tr. 346:10–13).
148. Ms. Cantwell was clearly referencing her own salary as "85kish" indicating that she, like Ms. Lucia, Mr. Morris, Mr. Grasso, Ms. Etesse and all PHA Board members, knew that her Executive Director salary was $85,000.
MS. CANTWELL INCREASES HER SALARY
149. At some point during the summer of 2012, spurred on by the increase to Ms. Durocher's salary, Ms. Cantwell "detected" that there might be an error in the salary she received (Trial Tr. 595:22–23)
150. At the end of July or beginning of August, Ms. Cantwell called Mr. Morris and informed him that she was not being paid correctly (Trial Tr. 1 11:8:16).
151. At the end of August 2012, Ms. Cantwell approached Ms. Etesse and asked Ms. Etesse to join her for a lunch at a restaurant in Plattsburgh (Trial Tr. 348:19–22, 566: 19:21).
152. Although Ms. Etesse did not know why Ms. Cantwell had invited her, she was asked to bring the PHA salary schedules with her. This was the first and only time that Ms. Cantwell had ever invited Ms. Etesse to lunch (Trial Tr. 348:17 1. 352:1 1–16).
153. On Friday, August 31, 2012, Ms. Etesse and Ms. Cantwell met. During the meeting Ms. Cantwell stated she should be on step eleven (14.5 to 18.5 years of service) of the salary schedule based upon her credited years of employment with the PHA for both her General Counsel and Executive Director salary. This was based upon her application of the "Other Benefits" paragraph of her ED Agreement, which stated that "for benefits calculations the Employee shall be considered to have 14 years of service with the Employer as of 12/30/11" (Trial Tr. 353:19–25, 354:1–5, 359:4–25, Plaintiff's Exhibit 7, Plaintiff's Exhibit 1).
154. On the Tuesday morning following their meeting, the first workday after the Labor Day holiday, Ms. Cantwell sent Ms. Etesse an e-mail advising that she would "be discussing a pay adjustment for [you] with [Ms. Gadbois] this week to get you near or at the 70k mark. I would love it if you could get my payroll corrected this week as well" (Trial Tr. 362:21–25, 363:1–4, Plaintiff's Exhibit 7).
155. This was consistent with an offer Ms. Cantwell made during their meeting about increasing Ms. Etesse's salary, which was approximately $66,000 at that time, to $70,000 (Trial Tr. 360:15–22, 361:10–14).
156. Ms. Etesse sent Mr. Morris an e-mail containing a breakdown of how Ms. Cantwell believed her salary should be increased (Trial Tr. 113:2–12, 21–24, 365:22–25, 366:1–11, Plaintiff's Exhibit 24).
157. The e-mail Ms. Etesse sent Mr. Morris included, as attachments, the PHA salary schedules and a spreadsheet of the difference between the salary Ms. Cantwell had received from October 1, 2011 through September 4, 2012 and the upward adjustment that would have to be made for the change in salary as Ms. Cantwell claimed she was entitled (Plaintiff's Exhibit 24).
158. As set forth in Ms. Etesse's e-mail, at the time Ms. Cantwell approached Mr. Morris and Ms. Etesse about a salary increase, she was being paid $42,342 per annum as General Counsel, commensurate with an employee with 2.5 to 3.5 years of service with the PHA according to the PHA salary schedule (Trial Tr. 1 18:8–10, Trial Tr. 356:20–21).
159. Ms. Cantwell's salary as General Counsel with 14 years of service would have been $49,104 and, with 14.5 years of service, $50,332 (Trial Tr. 1 19:6–7, 120:2–5, 357:15–17).
160. At the time Ms. Cantwell approached Mr. Morris and Ms. Etesse about a salary increase she was being paid $87,125 per annum as Executive Director in accordance with the ED Agreement and the PHA salary schedule for an Executive Director with 6 months to 1.5 years of service (Trial Tr. 120:6–9).
161. Ms. Cantwell's salary as Executive Director with 14 years of service would have been $106,153 and, once she reached 14.5 years of service, her salary would have been $108,807 (Trial Tr. 120:10:18, 359:8–12).
162. Moments after Mr. Morris received the e-mail from Ms. Etesse he received an e-mail from Ms. Cantwell advising him that he would be hearing from Ms. Etesse. This e-mail from Ms. Cantwell stated "I am asking [Ms. Etesse] to put me on the proper step for 14 years of service as per contract which will yield a pay increase and retro" (Trial Tr. 122: 11–20, Plaintiff's Exhibit 9).
163. Less than two hours later Ms. Cantwell again e-mailed Mr. Morris advising him that her pay increase "was driven by the organization[']s policies and procedures" and that Ms. Etesse and Ms. Cantwell were in agreement as to the amount of Ms. Cantwell's new salary. Ms. Cantwell discouraged Mr. Morris from investigating the issue further, informing him: "[I]t's written clearly in the contract so it really is simple unless it gets made complicated" (Trial Tr. 123:5–17, Plaintiff's Exhibit 9).
164. Mr. Morris described himself as infuriated because he believed Ms. Cantwell's salary was set at an initial level of $85,000 pursuant to the ED Agreement he negotiated and signed and would only increase incrementally in accordance with the PHA salary schedule. Ms. Cantwell, however, was still the PHA's attorney and she advised him that he was required to increase her salary and he, accordingly, agreed to the increase (Trial Tr. 124:7–18).
165. Ms. Cantwell never advised Mr. Morris to seek the advice of independent legal counsel to review her salary increase and "really wanted to keep it between" Mr. Morris, Ms. Etesse, and herself (Trial Tr. 124:19–23).
166. Ms. Cantwell confirmed her failure to advise the PHA to have an attorney review the change to her salary. Specifically, she stated as follows: "This was the accountant's role.... I don't know what the opinion there would be, but the answer is, no, I didn't recommend they go get a different accountant or see a different professional" (Trial Tr. 609:17–25, 610:1–2).
167. On Wednesday, September 5, 2012, Ms. Cantwell called Ms. Etesse into her office, informed Ms. Etesse that Mr. Morris had approved the pay increase and that Ms. Etesse should go ahead and make the salary adjustment to Ms. Cantwell's salary and to expedite the retroactive payment of over $32,000 (Trial Tr. 375:15–25, 376:1–4, 604:1 1 25, 605:1–4).
168. Following Ms. Cantwell's direction to "keep it simple" and her legal opinion that the PHA was required to increase her salary, Mr. Morris signed another Clinton County Report of Personnel Change Form notifying Clinton County that the PHA had retroactively increased Ms. Cantwell's salary to $50,332 as General Counsel and $108,807 as Executive Director for a combined annual salary of $159,139. With Ms. Cantwell's 6% longevity bonus, her total compensation became $168,687.34 per year (Trial Tr. 127:2–21, Plaintiff's Exhibit 13).
169. This change form was reviewed by Ms. Cantwell before it was transmitted to Clinton County and she did not make any changes to the form before it was submitted (Trial Tr. 612:20–25, 613:1–25)
170. As a result of the pay increase, in 2012, the PHA paid Ms. Cantwell $184,695.29 (Trial Tr. 304:19–21, Plaintiff's Exhibit 35).
171. Ms. Lucia testified that she was surprised to learn that Ms. Cantwell's salary was increased to almost $160,000, stating as follows: "I am surprised.... I mean the salary scale—I don't know how—I don't—I don't know how they came to that" (Trial Tr. 839: 5–8)
172. Apparently even Ms. Cantwell was surprised by her salary increase, demanding that Ms. Gadbois review the W–2 form she received for 2012 because she believed the amount of salary on the form was more than she should have received (Trial Tr: 298:21–25)
THE PHA DID NOT HAVE A POLICY TO MAINTAIN STEP LEVELS WHEN CHANGING POSITIONS
173. Ms. Cantwell advised Mr. Morris that she was entitled to a salary increase not only because her contract allegedly provided for it, but also because it was the policy and procedure of the PHA to do so (Trial Tr. 602:23–25, 603:1–4).
174. This was based, in part, on Ms. Durocher's salary increase that Ms. Cantwell approved (Trial Tr. 411:8–10).
175. However, prior to becoming Executive Director of the PHA, Ms. Lucia served as the Assistant to the Executive Director for 4 years (Trial Tr. 260:19–21).
176. When Ms. Lucia was promoted to Executive Director in 1992, she started as an Executive Director on step one of the PHA salary schedule, for an Executive Director with 0 to 6 months of service rather than an Executive Director with 4 years of service (Trial Tr. 838:1–7).
177. Ms. Lucia was only credited with her 4 years of service for purposes of calculating the longevity bonus that was paid twice per year (Trial Tr. 838:8–10).
178. Ms. Cantwell created a new policy to pay Ms. Durocher an extra $1,000 to $2,000 per year and then used this precedent to increase her own salary over $30,000 per year.
THE PHA PAYS MS. CANTWELL'S BAR ASSOCIATION DUES
179. At a February 28, 2012 PHA Board meeting, Mr. Grasso questioned why the PHA had paid $425 for Ms. Cantwell's New York State Bar Association Dues (Trial Tr. 129: 10–20, 293: 11–17, Plaintiff's Exhibit 66).
180. Ms. Cantwell advised Mr. Grasso, and the entire PHA Board, that the PHA paid her bar association dues per her contract as "professional dues" and that it was the appropriate thing to do (Trial Tr. 130:6–11, 631:22–25).
181. The reason that the question of Ms. Cantwell's dues came up was that she had requested the PHA issue a check directly to the New York State Bar Association in the amount of $425. In other words, she wanted the PHA to issue a check to the New York State Bar Association on her behalf (Trial Tr. 291:18–22, 385:11–13, Plaintiff's Exhibit 17).
182. Subsequent to this February meeting, the PHA never reviewed another request from Ms. Cantwell to pay any expenses related to her legal services directly to the vendor (Plaintiff's Exhibit 17).
183. This is because Ms. Cantwell paid her legal services expenses directly and then submitted a request for reimbursement from the PHA. (Trial Tr. 296:16–18).
184. When PHA employees submitted requests for reimbursement their names would be whited out on the sheet the PHA Board reviewed for payment (Trial Tr. 295:9–15).
185. In this way the PHA Board could not know that they were paying Ms. Cantwell's legal expenses because the PHA would not, by voucher, be asked to write a check to a legal services vendor. They were simply asked to write a check to Ms. Cantwell for reimbursement of expenses she had already incurred (Trial Tr. 295:16–19, 634:11–22).
186. Mr. Morris testified that he did not recall the PHA Board disapproving a payment for Ms. Cantwell's malpractice and liability insurance (Trial Tr. 170:10–12). The reason why he could not recall them disapproving a payment was simple; no such voucher was ever presented to the PHA to pay an insurance company.
CANTWELL AVOIDS HUD INTERVENTION
187. HUD raised issues related to the Cantwell Law Firm's occupancy of the office in the PHA office building and Ms. Cantwell's service as both Executive Director and Attorney to the PHA (Trial Tr. 616:12–18).
188. On June 28, 2012, HUD sent Mr. Morris a letter asking for clarification on Ms. Cantwell's operation of a private business in the PHA's office building (Trial Tr. 131:3–8, Plaintiffs Exhibit 27).
189. On August 17, 2012, HUD sent a second letter to Mr. Morris asking for clarification about the relationship between the "Executive Director, Lori Cantwell and the Cantwell Law Firm" and asked the PHA for "an opinion from the housing authority's counsel stating the facts as they appear to the authority's counsel and provide a legal opinion regarding any conflict of interest issues" (Trial Tr. 133:5–9, Plaintiffs Exhibit 28).
190. Mr. Morris provided a copy of the letters from HUD to Ms. Cantwell and she drafted a response (Trial Tr. 134:7–13).
191. The response Ms. Cantwell drafted stated: "The Plattsburgh Housing Authority utilizes the legal background of its Executive Director to the fullest extent possible as a cost savings measure. As such the Plattsburgh Housing Authority does not have designated counsel to provide you with an opinion of the nature you seek ..." (Plaintiffs Exhibit 11).
192. Ms. Cantwell claims that she misunderstood HUD's request "for an opinion of the housing authority's counsel" as requiring the PHA to solicit an opinion from an attorney that was not an employee of the PHA (Trial Tr. 621:5–25).
MS. CANTWELL'S AUTHORIZES PHA EMPLOYEES TO WORK FOR THE CANTWELL LAW FIRM
193. On October 16, 2012, HUD responded to the PHA's letter and stated that a conflict of interest existed for Ms. Cantwell because of the Cantwell Law Firm's lease agreement with the PHA (Trial. Tr. 136: 21–25, Plaintiffs Exhibit 29).
194. In response it was decided that the Cantwell Law Firm would vacate its offices in the PHA office building (Trial Tr. 140:2–3).
195. In early January 2013 four of five members of the PHA maintenance staff, on PHA time and using PHA vehicles, spent at least half a day moving the Cantwell Law Firm two to three miles from the PHA offices to 178 Broad Street, the new location of the Cantwell Law Firm (Trial Tr. 283:17–25, 284:1–17, 386:21–25).
196. Ms. Cantwell claims this was a courtesy extended to the Cantwell Law Firm, at her direction, based on Ms. Lucia's prior authorization of PHA staff to move the Firm to the PHA office building (Trial Tr. 628:1–5).
197. In addition, shortly after the move, Kevin Ryan, the PHA's IT employee, spent a half a day working at 178 Broad Street, but charged his time to the PHA (Trial Tr. 285:15–25, 286:1–17)
198. Both the time and resources expended by the PHA to have Mr. Ryan and the PHA maintenance staff work at the Cantwell Law Firm office w ere approved of by, and benefitted, Ms. Cantwell.
199. Mr. Ryan began working at the 178 Broad Street offices before the Cantwell Law Firm permanently relocated there.
200. On June 21, 2012 he submitted a time sheet stating that he had worked nine hours in the central office (Trial Tr. 281:25, 282:1–10, Plaintiffs Exhibit 22).
201. In fact, Kevin Ryan had sent an e-mail to Ms. Gadbois confirming that he was working on a project for Ms. Cantwell at 178 Broad Street, the eventual location of the Cantwell Law Firm. There are no PHA offices of any kind at that location (Trial Tr. 280:23–25, 281:1–11).
202. Ms. Cantwell approved Kevin Ryan's time card nonetheless (Trial Tr. 283:2–3, Plaintiff's Exhibit 22).
THE EXECUTIVE DIRECTOR AND ATTORNEY POSITIONS ARE SEPARATED
203. Perhaps feeling pressure that her service in two full-time positions would be discovered by HUD, Ms. Cantwell made a change to the categories on the weekly spreadsheet she used to keep track of the hours spent working for the PHA (Trial Tr. 641:4–6, Plaintiffs Exhibit 14).
204. From October 8, 2011 to February 2, 2013, Ms. Cantwell's time sheets included different column headings for her to list the time she spent doing various activities. Those column headings were (1) CFP, (2) HCV, (3) S & C, (4) Amp 1, (5) Amp 2, (6) Amp 3, (7) Legal, and (8) COCC (Plaintiffs Exhibit 14).
205. For the week beginning February 9, 2013, however, Ms. Cantwell deleted the legal column from the spreadsheet and it no longer appeared on any of her time sheets from that point forward (Trial Tr. 643:13–14, Plaintiffs Exhibit 14).
206. On March 12, 2013, Ms. Cantwell and Ms. Etesse received an e-mail from a consultant for housing authorities. This e-mail stated as follows:
"The language HUD specifically requires related to the multiple responsibilities on budgets is as follows:
‘No employee is serving in a variety of positions which will exceed 100% of his/her time’ " (Trial Tr. 379:19–23, Plaintiff's Exhibit 15).
207. In response to HUD's continuing concerns, after considerable discussion, Mr. Grasso made a motion to separate the position of Executive Director and General Counsel during the March 20, 2013 PHA Board meeting (Trial Tr. 222:11–23, 299:13–18 Plaintiff's Exhibit 26).
208. At that time, Ms. Cantwell was paid via direct deposit, in one lump sum for both her General Counsel and Executive Director salary and not in two separate payments, one for each position (Trial Tr. 656: 6–12).
209. Ms. Cantwell claims that she prepared a document for Mr. Grasso to read from when making the motion during this meeting, but up until the date of trial, Mr. Grasso had never seen a copy of said document despite Ms. Cantwell's testimony that he had read from it (Trial Tr. 224:9–12, Plaintiff's Exhibit 43).
210. Similarly, Ms. Gadbois and Ms. O'Connell did not recall Mr. Grasso reading from any document when he made the motion relating to the Executive Director and General Counsel positions. (Trial Tr. 331:13–15, 769:10–14).
211. Had this document been created prior to the meeting, Ms. Gadbois would have distributed it to all Board members but she has no recollection of doing so (Trial Tr. 330: 18–25).
212. Ms. Cantwell presented this document to Ms. Gadbois after the PHA Board meeting to assist the latter in preparing the meeting minutes afterwards, it having not been distributed to the PHA Board members during the meeting (Trial Tr. 300:4–14).
213. This was the only occasion Ms. Cantwell ever provided Ms. Gadbois with any documents to assist her with the preparation of meeting minutes (Trial Tr. 300:23–25, 301:15).
214. After Ms. Gadbois prepared the March 20, 2013 PHA Board minutes the first regular PHA meeting upon which they were reviewed was May 8, 2013. During this meeting, the minutes were corrected so that they read that the Executive Director and General Counsel positions would be separated, not consolidated as Ms. Cantwell had written in the document she prepared (Trial Tr. 308:12–14, Plaintiff's Exhibits 26 and 46).
MS. CANTWELL'S TERMINATION
215. In the spring of 2013, three PHA employees approached Mr. Grasso about concerns they had with Ms. Cantwell's performance as Executive Director (Trial Tr. 225:21–22).
216. These three employees provided Mr. Grasso with documentation that they believed substantiated their concerns about Ms. Cantwell's job performance (Trial Tr. 227:7–11)
217. The Board then called a special meeting on May 3, 2013 and the PHA employees spoke with the full seven member Board to discuss their concerns (Trial Tr. 228: 21–25).
218. The Board heard that Ms. Cantwell had used PHA employees, on PHA time, to move furniture out of the Cantwell Law Firm office (Trial Tr. 231:14–18, 232:18–23).
219. Additionally, the PHA Board learned that Kevin Ryan was doing work at the Cantwell Law Firm, and with Ms. Cantwell's approval, charging his time to the PHA (Trial Tr. 231:19–24).
220. The Board also learned for the first time—with the exception of Mr. Morris—about Ms. Cantwell's self-directed salary increase and her failure to recognize multiple conflicts of interest as the PHA's attorney (Trial Tr. 237:25, 238:2–3, 774:2225).
221. After hearing the allegations of the PHA employees and reviewing the documents they provided, as well as Ms. Cantwell's ED Agreement, the PHA Board concluded that the relationship with Ms. Cantwell was irrevocably broken and voted to give Ms. Cantwell the option to resign from her position as Executive Director (Trial Tr. 229:18–23, 234:4–10, 773:1–9).
222. After Ms. Cantwell did not resign, the PHA Board voted to terminate her (Trial Tr. 234:20–22).
The Board voted to terminate Ms. Cantwell via e-mail vote. As Mr. Grasso explained, when he had raised issues about conducting votes via e-mail in the past, the PHA's General Counsel, Ms. Cantwell, advised him that it was permissible (Trial Tr. 236: 10–24).
CONCLUSIONS OF LAW
I. LORI CANTWELL BREACHED HER FIDUCIARY DUTY TO THE PLATTSBURGH HOUSING AUTHORITY.
The PHA is entitled to a judgment in its favor on its cause of action for Ms. Cantwell's breach of her fiduciary duties as the PHA's attorney. To succeed on its claim for breach of fiduciary duty, the PHA was required to prove: (1) the existence of a fiduciary relationship between it and Ms. Cantwell; (2) misconduct by Ms. Cantwell; and (3) damages that were directly caused by Ms. Cantwell's misconduct (see East Schodack Fire Co., Inc. v. Milkewicz, 140 A.D.3d 1255, 1256 [2016] ; see also Fitzpatrick House III, LLC v. Neighborhood Youth & Family Servs., 55 A.D.3d 664, 664 [2008] ).
A. A Fiduciary Relationship Existed Between the PHA and Ms. Cantwell.
Attorneys stand in a fiduciary relationship to their clients (see Graubard Mollen Dannett & Horowitz v. Moskovitz 86 N.Y.2d 112, 118 [1995] ). The attorney-client relationship "imposes on the attorney [t]he duty to deal fairly, honestly and with undivided loyalty ... including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients' interests over the lawyer's" (Country Club Partners, LLC v. Goldman, 79 A.D.3d 1389, 1391 [2010], quoting Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d 1, 9 [2008] [internal quotation marks and citations omitted] ). "Any doubts [about the existence of an attorney-client relationship] should readily [be] resolved against the [attorney], absent proof of a clear and forthright statement to his [or her] clients that he [or she] was no longer their attorney and that they should obtain outside counsel before continuing any negotiations" (Howard v. Murray, 43 N.Y.2d 417, 422 [1977] ).
Ms. Cantwell was first retained by the PHA as its attorney in 1997 (Trial Tr. 418:22–23). On March 1, 2003 she became an employee of the PHA and began serving as its General Counsel pursuant to the GC Agreement (Trial Tr. 413:8–11, Plaintiff's Exhibit 2). As the PHA's General Counsel, Ms. Cantwell worked for the PHA full time, attending PHA Board meetings and providing legal advice to both the PHA Board and the Executive Director (Trial Tr. 64:10–14, 65:18–22, 65:8–17, 237:3–24). Ms. Cantwell continued to serve as General Counsel until she was asked to resign on May 3, 2013. Therefore, at all relevant times, Ms. Cantwell had a duty to deal with the PHA fairly, honestly and with undivided loyalty.
B. Cantwell Breached Her Fiduciary Duties to the PHA.
"The duty to deal fairly, honestly and with undivided loyalty superimposes onto the attorney-client relationship a set of special and unique duties, including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients' interests over the lawyer's" (Matter of Cooperman, 83 N.Y.2d 467, 472 [1994] [citation omitted]; see Matter of Kelly, 23 N.Y.2d 365, 375–376 [1968] ). Although an attorney is not prohibited from entering into a contract with a client, "it is not advisable" (Greene v. Greene, 56 N.Y.2d 86, 92 [1982] ).
i. Ms. Cantwell's Breach of Fiduciary Duty with Respect to the Formation of the ED Agreement.
Although Ms. Cantwell was the PHA's General Counsel from 1997 to 2013, she claimed that she was not the PHA's attorney with respect to the formation of the ED Agreement (Trial Tr. 461:1 1–13, 687:10–16). To determine if Ms. Cantwell knew that Mr. Morris was relying upon her, this Court looks to the pre-existing and longstanding attorney-client relationship between Ms. Cantwell and the PHA and, recognizing the existence of this relationship, has analyzed whether Ms. Cantwell made "a clear and forthright statement to [the PHA] that [s]he was no longer [its] attorney and that [it] should obtain outside counsel" (Howard v. Murray, 43 N.Y.2d at 422, 401 N.Y.S.2d 781, 372 N.E.2d 568 ).
Clearly Mr. Morris viewed the PHA as Ms. Cantwell's client during the negotiation of the ED agreement and expected her to draft a contract that would meet the PHA's legal needs (Trial Tr. 72:21–25, 199:12–16). Mr. Morris and Ms. Cantwell had a longstanding friendship and he consulted with her as the PHA's attorney on many occasions. He expected her to draft the ED Agreement because she was the PHA's attorney (Trial Tr. 93:22–25, 94:1–9). After Ms. Cantwell drafted the ED agreement, Mr. Morris asked her questions about certain terms in the ED Agreement and relied upon her, as the PHA's attorney, to express what the PHA needed to have expressed in the contract (Trial Tr. 180:17–21).
Although throughout the course of this litigation Ms. Cantwell has claimed that she did not represent the PHA for purposes of the ED Agreement, at trial she testified that she provided advice to Mr. Morris (Trial Tr. 450:16–20, 461:11–13). She testified that after reading the ED Agreement to Mr. Morris, she explained the meaning of the terms and the intention for her terms so that Mr. Morris would "know what the implications were" of all the terms in the ED Agreement (Trial Tr. 463:23–25, 464:1–4). There is no evidence that Ms. Cantwell ever made a clear and forthright statement to the PHA that she was not representing it with respect to the ED Agreement, and the advice she offered to Mr. Morris was consistent with the attorney-client relationship to which he was entitled to be accustomed (Trial Tr. 466:11–22). As Ms. Cantwell's client, Mr. Morris was ill-suited to perceive that the advice Ms. Cantwell gave him with respect to the ED Agreement was—in her mind—not legal advice. He justifiably believed her advice to be an impartial interpretation of the ED Agreement (Trial Tr. 752:1–12). Further, the PHA employed Ms. Cantwell to "provide counsel and advisement to the Executive Director and the Board of Commissioners on all legal matters" (emphasis added), and there was no exception for the ED Agreement (Plaintiff's Exhibit 2). Ms. Cantwell's actions in failing to unequivocally inform the PHA that she was not representing it with respect to the ED Agreement and, further, in providing legal advice to Mr. Morris, present a clear conflict of interest that Ms. Cantwell neither identified nor remedied.
Additionally, Ms. Lucia's testimony about Richard Winkle did not alter Mr. Morris' belief that Ms. Cantwell was the PHA's attorney. Ms. Lucia contacted Mr. Winkle of her own accord and never gave Mr. Winkle a copy of the ED Agreement or the PHA salary schedules (Trial Tr. 804:18–20, 828:21–25, 829:1–3). Ms. Lucia did not testify that Mr. Winkle was retained by the PHA to be its attorney for purposes of the ED Agreement nor that he told her anything other than it was inappropriate for the same individual to serve as both General Counsel and Executive Director. Ms. Cantwell was the only attorney who ever reviewed the ED Agreement prior to its execution and the only attorney who ever explained the terms of the ED Agreement to Mr. Morris.
ii. Ms. Cantwell Breached Her Fiduciary Duty to the PHA by Violating Rule 1.8 of the Rules of Professional Conduct.
The Rules of Professional Conduct set forth the ethical rules for attorneys to follow in the State of New York. As relevant here, Ms. Cantwell violated rule 1.8 of the Rules of Professional Conduct (22 NYCRR 1200.0 ), which is substantially similar to disciplinary rule 5–104 of the Code of Professional Responsibility, the prior version of the ethical rules for New York attorneys. Rule 1.8 concerns specific conflict of interest rules for attorneys with respect to their current clients. The rule provides, in pertinent part:
The Rules of Professional Conduct became effective on April 1, 2009.
"Current clients: specific conflict of interest rules.
"(a) A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise professional judgment therein for the protection of the client, unless:
"(1) the transaction is fair and reasonable to the client and the terms of the transaction are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
"(2) the client is advised in writing of the desirability of seeking, and is given a reasonable opportunity to seek, the advice of independent legal counsel on the transaction; and
"(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction" (Rules of Professional Conduct [22 NYCRR 1200.0 ] rule1.8 [a] ).
Here, Ms. Cantwell entered into a business transaction with her client, the PHA, when she negotiated, drafted, and executed the ED Agreement. At the time Mr. Morris and Ms. Cantwell discussed the ED Agreement, Mr. Morris had complete trust in her and had no questions or concerns about her judgment, competency or effectiveness as an attorney or as a professional (Trial Tr. 73:5–13). As discussed above, Mr. Morris believed that Ms. Cantwell would exercise her judgment for the benefit of the PHA, draft an ED Agreement beneficial to the PHA and negotiate with him in good faith (Trial Tr. 157:20–23). As was apparent at trial, Ms. Cantwell and the PHA had vastly different interests in the ED Agreement, specifically as it related to the length of Ms. Cantwell's term(s) as Executive Director, the benefits and termination protections she received and her salary. Therefore, this business transaction falls squarely within the ambit of rule 1.8(a), obligating Ms. Cantwell to comply with the directives set forth therein.
a. The ED Agreement Was Not Fair and Reasonable.
Rule 1.8(a)(1) requires that a business transaction between an attorney and his or her client be fair and reasonable to the client and, further, that the terms of the transaction be fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client. Here, the terms of the ED Agreement were not fair and reasonable to the PHA because Ms. Cantwell included provisions in the ED Agreement to her benefit and to the detriment of the PHA.
As discussed herein, the ED Agreement provided Ms. Cantwell with the right to terminate the contract on 60 days notice or at the end of any 3 year term, but did not give the PHA the reciprocal right to terminate the contract at the end of any 3 year term (Plaintiffs Exhibit 1). Ms. Cantwell also informed Mr. Morris that it was important to her to include a provision in the "Other Benefits" section of the ED Agreement that she had 14 years of service with the PHA, which provision she later used to increase her salary by over $30,000 (Trial Tr. 80:2–6, 83:10–14, 355:12 20, 487:9–14). Additionally, the ED Agreement required the PHA to pay Ms. Cantwell's professional malpractice insurance as an attorney even though the PHA had never paid her legal expenses prior to her becoming Executive Director (Plaintiffs Exhibit 1). Finally, the ED Agreement included an onerous 90 day cure period for any deficiencies in Ms. Cantwell's performance followed by arbitration, a process that the PHA never contemplated and never understood when the ED Agreement was signed (Trial Tr. 95:25, 96:1–15). Clearly, the ED Agreement was not fair and reasonable.
b. Ms. Cantwell Did Not Advise the PHA To Retain Independent Legal Counsel.
Rule 1.8(a)(2) requires an attorney entering into a business transaction with a client to advise the client, in writing, of the desirability of seeking the advice of independent legal counsel and to then give the client a reasonable opportunity to seek such advice. There is no dispute that the PHA was not advised, in writing, of the desirability of seeking the advice of independent legal counsel with respect to Ms. Cantwell's ED agreement (Trial Tr. 93:21–25, 460:21–25, 461:1–5). Ms. Cantwell's testimony that she advised Mr. Morris to consult with a specific attorney-Mike Phillips-is not credible given that she only recalled this disputed advice two to three weeks before the trial commenced (Trial Tr. 452:1–17, 458:1–5, 541:17–20, 723:12–19). Further, even if she did tell Mr. Morris to speak with Mr. Phillips, she did not do so in writing as rule 1.8(a)(2) requires.
c. The PHA Never Gave Informed Consent to the Essential Terms of the ED Agreement.
Rule 1.8(a)(3) requires that the client give informed consent to the essential terms of the business transaction and the attorney's role in the transaction before the attorney enters into the transaction with the client. There is no dispute that the PHA never gave informed consent to the essential terms of the transaction (Trial Tr. 94:19–24, 460:21–25, 461:1–5). Further, as discussed above, Mr. Morris' understanding of the essential terms of the ED Agreement was based upon Ms. Cantwell's advice and interpretations of those terms—which interpretations the Court finds to be significantly different from the terms' actual meanings.
iii. Ms. Cantwell Breached Her Fiduciary Duty by Increasing Her Salary.
Ms. Cantwell also breached her fiduciary duty to the PHA by advising the PHA that she was entitled to an increase in her salary of over $30,000. At the time the parties signed the ED Agreement, Ms. Cantwell understood that her base salary as Executive Director was $85,000 per year (Trial Tr. 469:24–25, 473:3–7, 727:1–6). Ms. Cantwell even sent an e-mail to the PHA accountant that her Executive Director salary should be reported to HUD as $85,000 (Trial Tr. 345:8–10, Plaintiff's Exhibit 85).
Nonetheless, less than one year after she became Executive Director, Ms. Cantwell managed to increase her salary as Executive Director by over $30,000. First, Ms. Cantwell invited Ms. Etesse—the PHA accountant—to a meeting and suggested to her that she should be paid as an employee on step 11 of the PHA salary schedule for both her Executive Director and General Counsel salary rather than step two for her Executive Director salary and step four for her General Counsel salary (Trial Tr. 353:19–25, 354:1–5, 359:4–25, Plaintiff's Exhibit 7, Plaintiff's Exhibit 1).
The basis for this increase was the language in the "Other Benefits" section of the ED Agreement, which stated that Ms. Cantwell "should be considered to have 14 years of service with the [PHA] as of 12/30/11" (Plaintiff's Exhibit 1). Ms. Cantwell interpreted this language to mean that she should have started at an Executive Director salary of $98,378 (based upon the 2011 PHA salary schedule and 14 years of service) and that, by the time she met with Ms. Etesse, her salary should have been $108,807 (based upon the 2012 PHA salary schedule and 14.5 to 18.5 years of service)—rather than $87,125 (based upon the 2012 PHA salary schedule and 6 to 18 months of service). Notably, Ms. Cantwell's salary at step eleven (14.5 to 18.5 years of service) of the 2012 PHA salary schedule was higher than what the 2011 PHA Salary Schedule provided for an Executive Director with over 18.5 years of service, the maximum salary that the Executive Director could reach in 2011 (Defendant's Exhibit 78 p. 4). The 2012 PHA Salary Schedule set a higher maximum figure for the Executive Director because it started, in accordance with Ms. Cantwell's ED Agreement, at a beginning salary of $85,000 effective January 1, 2012, approximately the time Ms. Cantwell became sole Executive Director (Defendant's Exhibit 78 p. 5).
With respect to her General Counsel salary, Ms. Cantwell's salary was set forth in the General Counsel Agreement at $27,960 per annum (Plaintiff's Exhibit 2). Nonetheless, from 2003 to 2009 she received incremental 2.5–3% raises as if she was on the salary schedule (Trial Tr. 341:15–22, 425:1–3). In 2009, Ms. Cantwell was placed on the PHA salary schedule in a newly created field for "legal" and the salary she was receiving after six years of increases was placed in the step 1 field of the 2009 PHA salary schedule. Thereafter, Ms. Cantwell received periodic increases in accordance with the salary schedule and by the time she met with Ms. Etesse, she was receiving $42,342 per year as General Counsel in conformance with step four of the PHA salary schedule (Trial Tr. 118:8–10, Trial Tr. 356:20–21, Defendant's Exhibit 78). Although the ED Agreement made no mention of her salary as General Counsel, Ms. Cantwell believed that her General Counsel salary should be increased to $50,332 as if she had 14.5 to 18.5 years of service as General Counsel.
In addition to increasing her own salary by over $30,000 per year, Ms. Cantwell also offered to increase Ms. Etesse's salary—both during their lunch and in a follow up e-mail—by nearly $5,000 per year (Trial Tr. 360:15–22, 361:10–14, 362:21–25, 363:1–4, Plaintiff's Exhibit 7). Ms. Etesse rejected this offer.
In addition to speaking with Ms. Etesse, Ms. Cantwell also spoke with Mr. Morris and informed him that Ms. Etesse agreed that Ms. Cantwell's salary should be increased (Trial Tr. 579:9–12). Ms. Cantwell advised Mr. Morris that the PHA was required to increase her salary "per contract" and that the salary increase "was driven by the organizations policies and procedures" (Trial Tr. 122: 11–20, 123:5–17, 602:23–25, 603:1–4, Plaintiff's Exhibit 9).
However, it was not the PHA's policy and procedure to give an employee switching management positions the same "step" on the PHA salary schedule when they moved into a new position. Rather, the employee only retained their years of service for purposes of the longevity bonus. Ms. Lucia explained that when she became the Executive Director of the PHA, after four years as assistant Executive Director, she started on step one of the PHA salary schedule for an Executive Director with 0 to 6 months of service (Trial Tr. 838:1–7). Ms. Lucia was only credited with her 4 years of service for purposes of calculating the longevity bonus that was paid twice per year (Trial Tr. 838:8–10). Therefore, the only policy and procedure in place was the $1,000 to $2,000 increase to Ms. Durocher's salary, approved of by Ms. Cantwell, that she thereafter used as the precedent to increase her own salary.
Ms. Cantwell advised Mr. Morris that the salary increase should apply not only to her salary as Executive Director, but also to her salary as General Counsel. Ms. Cantwell advised that, based upon her interpretation of the PHA salary schedule, her General Counsel salary should be increased from $42,342 per year to $50,332 per year and her Executive Director salary should be increased from $87,125 per year to $108,807 per year, or from a combined $129,467 per year to $159,139 per year. Additionally, because of the 6% longevity bonus Ms. Cantwell received as a 15–year employee, her total compensation package increased from $137,235.02 per year to $168,687 .34 per year—for a total raise of $31,452.32 per year.
Ms. Cantwell discouraged Mr. Morris from investigating the issue further, informing him that "[i]t's written clearly in the contract so it really is simple unless it gets made complicated." (Trial Tr. 123:5–17, Plaintiff's Exhibit 9). Compelled by the legal advice that Ms. Cantwell provided to him as the PHA's attorney, Mr. Morris authorized the salary increase (Trial Tr. 124:7–18).
Ms. Cantwell never advised Mr. Morris to seek the advice of independent legal counsel to review her salary increase and "really wanted to keep it between" Mr. Morris, Ms. Etesse and herself. (Trial Tr. 124:19–23). Ms. Cantwell confirmed her failure to advise the PHA to have an attorney review the change to her salary, stating as follows: "This was the accountant's role.... I don't know what the opinion there would be, but the answer is, no, I didn't recommend they go get a different accountant or see a different professional" (Trial Tr. 609:17–25, 610:1–2). Mr. Morris increased Ms. Cantwell's salary based upon Ms. Cantwell's interpretation, as the PHA's attorney, of the ED Agreement. She never alleged that she was not representing the PHA or even claimed to have told Mr. Morris that she was not representing the PHA with respect to this increase.
C. The PHA Has Sustained Damages as a Result of Ms. Cantwell's Breach of Her Fiduciary Duties.
Where a claim for damages arises out of a breach of an attorney's fiduciary duties, the plaintiff must prove that the damages would not have arisen "but for" the breach (Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d at 11, 865 N.Y.S.2d 14 ). Here, the PHA has demonstrated that it would not have signed the ED Agreement but for Ms. Cantwell's breach of her fiduciary duties (Trial Tr. 102:12–16, 103:5–8, 103:9–13). The PHA has further demonstrated that it would not have increased Ms. Cantwell's salary but for Ms. Cantwell's legal advice that the PHA was required to do so (Trial Tr. 127:2–21, Plaintiff's Exhibit 13). The Court therefore finds that the PHA has sustained damages as a result of Ms. Cantwell's breach of her fiduciary duties.
With that said, the question now becomes the appropriate amount of damages. "Under what is commonly referred to as the faithless servant doctrine, ‘[o]ne who owes a duty of fidelity to a principal and who is faithless in the performance of his [or her] services is generally disentitled to recover his [or her] compensation, whether commissions or salary’ " (City of Binghamton v. Whalen, 141 AD3d 145, 147 [2016], quoting Feiger v. Iral Jewelry, 41 N.Y.2d 928, 928 [1977] ; see Murray v. Beard, 102 N.Y. 505, 508–509 [1886] ; Matter of Blumenthal [Kingsford], 32 A.D.3d 767, 768 [2006], lv denied 7 N.Y.3d 718 [2006] ; American Map Corp. v. Stone, 264 A.D.2d 492, 492–493 [1999] ). "The Court of Appeals has made clear that forfeiture of compensation is required even when some or all of ‘the services were beneficial to the principal or [when] the principal suffered no provable damage as a result of the breach of fidelity by the agent’ " (City of Binghamton v. Whalen, 141 A.D.3d at 147, 31 N.Y.S.3d 478, quoting Feiger v. Iral Jewelry, Ltd., 41 N.Y.2d at 928–929, 394 N.Y.S.2d 626, 363 N.E.2d 350 ; accord Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184, 200 [2d Cir2003] ).
" ‘This is because the function of [a breach of fiduciary duty] action, unlike an ordinary tort or contract case, is not merely to compensate the plaintiff for wrongs committed by the defendant but ... to prevent them, by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates' " (City of Binghamton v. Whalen, 141 A.D.3d at 148, 31 N.Y.S.3d 478, quoting Diamond v. Oreamuno, 24 N.Y.2d 494, 498 [1969] [internal quotation marks, citations and emphasis omitted] ).
Here, the Court finds that Ms. Cantwell was a disloyal employee of the PHA no later than October 1, 2011, the effective date of her ED Agreement. The PHA is therefore entitled to all compensation it paid to Ms. Cantwell from October 1, 2011 to May 13, 2013, the date upon which she was terminated (see Matter of Marceca, 40 A.D.3d 318, 318 [2007] ; Matter of Blumenthal [Kingsford], 32 A.D.3d at 768, 822 N.Y.S.2d 27 ; Henderson v. Rep Tech, Inc., 162 A.D.2d 1028, 1028 [1990] ). In this regard, the PHA records confirm that Ms. Cantwell was compensated in the aggregate sum of $261,871.97 from October 1, 2011 to May 3, 2013. Specifically, Ms. Cantwell was paid $21,790.20 from October 1, 2011 to December 31, 2011 (Plaintiffs Exhibit 35); $184,695.29 from January 1, 2012 to December 31, 2012 (Trial Tr. 393:17–18, Plaintiffs Exhibit 35); and $55,386.48 from January 1, 2013 to May 3, 2013 (Trial Tr. 395:10–11, Plaintiffs Exhibit 35).
Based upon the foregoing, the PHA is entitled to judgment on its breach of fiduciary duty claim in the amount of $261,871.97, which amount represents Ms. Cantwell's total compensation during her period of disloyalty.
II. THE PHA IS ENTITLED TO RESCISSION OF THE ED AGREEMENT.
Rescission of the ED Agreement between Ms. Cantwell and the PHA is the proper remedy because the PHA does not have an adequate remedy at law and the parties can still be restored to the position they were in before Ms. Cantwell was employed as Executive Director.
When an attorney transacts business with a client, the client's statement that he did not understand the terms of an agreement are sufficient to entitle the client to rescission unless the attorney can "convincingly show that [the client] was fully and fairly informed of the consequences of the agreement and the special advantages it gave to [him or her]" (Greene v. Greene, 56 N.Y.2d 86, 93 [1982] ).
Here, Mr. Morris clearly misunderstood or did not fully appreciate the ramifications of many terms contained within the ED Agreement. Mr. Morris did not know that the ED Agreement would ultimately require the PHA to pay Ms. Cantwell over $20,000 more in Executive Director salary than the $85,000 amount set forth in the ED Agreement. He was only authorized to pay Ms. Cantwell a starting salary of $85,000 (Trial Tr. 73:23–25, 74:2–25). He would not have signed the ED Agreement had he known it provided Ms. Cantwell with a salary well in excess of the $85,000 he was authorized to agree upon and believed he had agreed upon (Trial Tr. 74:1225).
Additionally, Mr. Morris believed that the PHA had the option not to renew Ms. Cantwell's ED Agreement after the expiration of each three year term just as it did at the end of the two year terms Ms. Lucia served (Trial Tr. 76:18–20, 90: 5–10). Mr. Morris was not aware that, after discussing reducing the length of each term from five years to three years with Ms. Cantwell, the ED Agreement did not give the PHA the option not to renew upon the expiration of a three year term. (Trial Tr. 76:18–20 77:2–12, 436:15–25, 437:1–7, 504:15–25, 505:2–14, Plaintiff's Exhibit 2). Similarly, Ms. Cantwell never advised Mr. Morris that the ED Agreement would be a 15–year guaranteed contract that she could terminate on 60 days notice at any time, but that the PHA could only terminate by following an onerous process by which it had to give her notice to cure followed by arbitration (Trial Tr. 90:15–20).
Mr. Morris was also unaware that the 14 years of service credit he agreed to give Ms. Cantwell had anything to do with her salary or anything at all other than the benefit of health insurance in retirement when she reached the 20 years of service threshold (Trial Tr. 80: 2 6, 83:10–14, 355: 12–20, 487:9–14). There was no discussion between Ms. Cantwell and Mr. Morris that this 14 years of service provision would have any impact whatsoever on her salary and its inclusion in the "Other Benefits" section of the ED Agreement would not reasonably lead Mr. Morris to believe that it would ever have anything to do with her salary (Trial Tr. 83:18–20). If Mr. Morris knew that this provision would be used to pay Ms. Cantwell a salary well over $85,000, he would not have signed the ED Agreement (Trial Tr. 73:23–25, 74:2–25).
Finally, Ms. Cantwell expressed concerns to Mr. Morris that the mayor of the City of Plattsburgh might appoint members to the PHA Board who were not favorable to Ms. Cantwell. (Trial Tr. 735:16–22). Although these concerns were unfounded, Mr. Morris believed that giving Ms. Cantwell a 3–year term—one year more than Ms. Lucia—satisfied Ms. Cantwell's concerns (Trial Tr. 178:19–20). Mr. Morris believed that the process for terminating Ms. Cantwell was the same as the process for terminating Ms. Lucia and was unaware of the additional 60–day cure period provided to Ms. Cantwell and her entitlement to an arbitration, rather than a public hearing before the Board (Trial Tr. 89:7–12, 95:25, 96:–15). In fact, Mr. Morris erroneously believed—based upon Ms. Cantwell's advice—that the PHA could terminate Ms. Cantwell on 60 days notice (Trial Tr. 177:21–24). Mr. Morris would not have signed the ED Agreement had he fully understood the termination provisions contained therein (Trial Tr. 103:9–13).
Having established that Mr. Morris was unaware of several material portions of the ED Agreement, Ms. Cantwell was obligated to show that the PHA was fully and fairly informed of the consequences of the ED Agreement. With that said, Ms. Cantwell alleged that she gave "absolutely no advice" to Mr. Morris and did not recommend that the PHA seek independent legal counsel (Trial Tr. 449:3–13, 460:21–25, 461:1–5). Her testimony that she explained certain terms of the ED Agreement to Mr. Morris in a way that he understood them is contradicted by Mr. Morris' clear confusion about the duties and obligations of the PHA pursuant to the ED Agreement (Trial Tr. 450:16–20).
Based upon the foregoing, the Court finds that Ms. Cantwell has failed to meet her burden of showing that either Mr. Morris or the PHA understood the material terms of the ED Agreement. Rescission of the ED Agreement is therefore proper.
The Court must also note that rescission of a business transaction between an attorney and client is the appropriate remedy where the attorney has breached his or her fiduciary duty (Rhodes v. Buechel, 258 A.D.2d 274, 275 [1999], lv denied 93 N.Y.2d 806 [1999] ). The Court thus finds that the PHA's success on its claim for breach of fiduciary duty is another basis for rescission of the ED Agreement, as Ms. Cantwell's misconduct related directly to the material terms contained therein (see Callanan v. Powers, 199 N.Y. 268, 284 [1910] ).
Rescission requires the Court to put the PHA and Ms. Cantwell in the same position they were in prior to the formation of the ED Agreement (Buffalo Bldrs. Supply Co. v. Reeb, 247 N.Y. 170, 176 [1928] ; Hotaling v. Leach & Co., 247 N.Y. 84, 87 [1928] ). The Court therefore awards the PHA $261,871.97, the amount it paid to Ms. Cantwell in salary from October 1, 2011 to May 3, 2013.
III. THE PHA IS NOT ENTITLED TO ATTORNEYS' FEES.
" ‘Under the general rule, attorneys' fees and disbursements are incidents of litigation and the prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties or by statute or court rule’ " (Halstead v. Fournia, 134 A.D.3d 1269, 1271 [2015], quoting Matter of A.G. Ship Maintenance Corp. v. Lezak, 69 N.Y.2d 1, 5 [1986] [citations omitted]; accord Mount Vernon City School Dist. v. Nova Cas. Co., 19 N.Y.3d 28, 39 [2012] ). Here, such an award is not authorized by the ED Agreement—which has been rescinded in any event—nor is it authorized by statute or court rule. The Court therefore finds that the PHA is not entitled to recover the attorneys' fees incurred in this action.
Briefly, the Court is aware that this general rule does not apply where a trustee has breached his or her fiduciary duty to an estate (see Matter of Birnbaum v. Birnbaum, 157 A.D.2d 177, 191 [1990] ). In other words, "a fiduciary is liable for attorney's fees and other expenses incurred by an estate in exposing a trustee's misconduct" (Miltland Raleigh–Durham v. Myers, 807 F.Supp. 1025, 1062 [SDNY 1992] ; see Matter of Birnbaum v. Birnbaum, 157 A.D.2d at 191, 555 N.Y.S.2d 982 ). With that said, however, the courts of this State have repeatedly declined to expand this exception "to cases involving a breach of fiduciary duty in a non-trustee context" ( Schneidman v. Tollman, 261 A.D.2d 289, 290 [1999] ; see Soley v. Wasserman, 639 Fed Appx 670, 678 [2d Cir2016] ; First Nat. Bank of Arizona v. Natl. Lending Corp., 2011 WL 1315998, * 14–15 [EDNY 2011] ). The Court thus finds the exception inapplicable under the circumstances herein.
IV. MS. CANTWELL'S CLAIM FOR BREACH OF THE ED AGREEMENT MUST BE DISMISSED
The faithless servant doctrine, discussed above, bars Ms. Cantwell's breach of contract claim as a matter of law (see Coastal Sheet Metal Corp. v. Vassallo, 75 A.D.3d 422, 423 [2010] ). It provides that an employee who owes a duty of fidelity to her employer and is faithless in the performance of her services cannot recover her compensation (see Feiger v. Iral Jewelry, 41 N.Y.2d at 928, 394 N.Y.S.2d 626, 363 N.E.2d 350 ; Murray v. Beard, 102 N.Y. at 508–509, 7 N.E. 553 ; City of Binghamton v. Whalen, 141 A.D.3d at 147, 31 N.Y.S.3d 478; Matter of Blumenthal [Kingsford], 32 A.D.3d at 768, 822 N.Y.S.2d 27 ; American Map Corp. v. Stone, 264 A.D.2d at 492–493, 694 N.Y.S.2d 704 ). Ms. Cantwell is therefore barred from recovering under the ED Agreement.
Further, rescission of a contract serves as an equitable defense to a claim for breach of contract (see Mercantile & Gen. Reins. Co. v. Colonial Assur. Co., 82 N.Y.2d 248, 252 [1993] ; Tober v. Schenectady Sav. Bank, 54 A.D.2d 1049, 1050 [1976] ; MPEG LA, LLC v. Audiovox Elecs. Corp., 35 Misc.3d 1232 [A], 2012 N.Y. Slip Op 50971[U], *9 [Sup Ct, Suffolk County 2012] ). The PHA's successful claim for rescission of the ED Agreement therefore precludes Ms. Cantwell from succeeding on her breach of contract cause of action.
V. MS. CANTWELL'S CLAIM FOR BREACH OF THE GC AGREEMENT MUST BE DISMISSED.
Ms. Cantwell's claim for breach of the GC Agreement must also be rejected because the PHA was free to terminate her at any time. Where the employment of an attorney by a client is governed by the contract which the parties make, "the client with or without cause may terminate the contract at any time" (Martin v. Camp, 219 N.Y. 170, 174 [1916] ; see Matter of Ginsburg, 144 AD3d 1357, 1360 [2016] ; Doviak v. Lowe's Home Ctrs., Inc., 134 AD3d 1324, 1326 [2015] ). The client's right to terminate the attorney-client relationship has been steadfastly protected by New York courts (see e.g. Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 43 [1990] ; Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 553, 556–557 [1981] ; Matter of Krooks, 257 N.Y. 329, 331 [1931] ).
Here, Ms. Cantwell's GC Agreement with the PHA purports to be for 5 year terms, in contravention of the public policy of allowing a client to terminate the service of its attorney at any time. The PHA terminated the GC Agreement after learning of Ms. Cantwell's breaches of the fiduciary duty she owed the PHA. Requiring the PHA to continue to employ Ms. Cantwell as General Counsel despite her breaches of her paramount legal duties to the PHA would undermine the public policy in favor of allowing a client to change or terminate its attorney at any time.
This is acutely true under the circumstances herein because Ms. Cantwell's termination as General Counsel was precipitated by her own misconduct. Ms. Cantwell's acts of misconduct include but are not limited to (1) increasing her salary as Executive Director in September of 2012; (2) setting term length provisions in the ED Agreement that conflicted with the PHA's undisputed stated desires; (3) including termination provisions in the ED Agreement for her benefit and protection without adequately discussion with the PHA; (4) failing to include reciprocal non-renewal provisions in the ED Agreement; (5) including a provision in the ED Agreement requiring the PHA to pay for her legal expenses such as bar association dues, malpractice insurance and continuing legal education classes; and (6) utilizing PHA resources for Cantwell Law Firm purposes. These acts of misconduct certainly constitute "just cause" for the PHA to terminate Ms. Cantwell as its General Counsel. Ms. Cantwell's claim for breach of the GC Agreement is therefore dismissed.
Finally, the Court observes that the two exceptions to the rule that a client can discharge its attorney at any time are not applicable here. The first exception applies where the attorney has changed his or her position or incurred expense when entering into the contract (see Atkins & O'Brien v. ISS Intl. Serv. Sys., 252 A.D.2d 446, 448 [1998] ). This exception is not alleged here. The second exception applies where the attorney is employed under a general retainer agreement for a fixed period of time to perform legal services in relation to matters that may arise during the period of the contract (see id. ). Ms. Cantwell contends that this exception is applicable under the circumstances herein. The Court, however, is not persuaded.
A general retainer is an "agreement between attorney and client in which the client agrees to pay a fixed sum to the attorney in exchange for the attorney's promise to be available to perform, at an agreed price, any legal service" (Levisohn, Lerner, Berger & Langsam v. Med. Taping Sys., Inc., 20 F.Supp.2d 645, 653 [SDNY 1998] [internal quotation marks and citation omitted] ). "Because the general retainer fee is given in exchange for availability, it is a charge separate from fees incurred for services actually rendered" (id. [internal quotation marks and citation omitted] ). Here, Ms. Cantwell's GC Agreement was an employment agreement and not a general retainer (Plaintiff's Exhibit 2). Indeed, the GC Agreement required Ms. Cantwell to work as the PHA's attorney on a full time basis—which she did (Trial Tr. 99:7–11, 426:4–5). Ms. Cantwell was not being compensated for her availability to the PHA, but rather for the services she actually performed. The Court therefore finds that the second exception is inapplicable. Inasmuch as the GC Agreement was not a general retainer, the PHA had the right to terminate Ms. Cantwell's employment as General Counsel at any time.
For the reasons set forth herein, the Court hereby awards judgment to the PHA on its causes of action for breach of fiduciary and rescission and directs that the $261,871.79 in funds paid by the PHA to Ms. Cantwell from October 1, 2011 to May 13, 2013 be returned by Ms. Cantwell forthwith, together with interest at 3% per annum from October 1, 2011 to the date of this Decision and Order. The Court expressly declines to award attorneys' fees to the PHA.
This interest rate was adopted based upon economic data maintained by the Federal Reserve Bank of St. Louis (see 10–Year Treasury Constant Maturity Minus 2–Year Treasury Constant Maturity, https://fred.stlouisfed.org/series.T10Y2Y [accessed January 18, 2017] )
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Ms. Cantwell's counterclaims for breach of the ED Agreement and breach of the GC Agreement are dismissed in their entirety.
The Court has given consideration to each cause of action alleged in the complaint and, to the extent that they are not specifically addressed, each has been ruled upon in a manner not inconsistent with the findings of fact and conclusions of law herein.
The parties are directed to submit a jointly agreed upon Judgment consistent with the foregoing within fifteen (15) days of the date of service of this Decision and Order with notice of entry thereon.
The original of this Decision and Order has been filed by the Court. Counsel for plaintiff is hereby directed to promptly obtain a filed copy of the Decision and Order for service with notice of entry in accordance with CPLR 5513.