Opinion
No. 12 Civ. 6039 (CM)
06-13-2013
RANDALL'S ISLAND AQUATIC LEISURE, LLC, AQUATIC DEVELOPMENT GROUP, INC., and RECREATION DEVELOPMENT, INC., Plaintiffs, v. THE CITY OF NEW YORK, Defendant.
DECISION AND ORDER DISMISSING PLAINTIFFS' COMPLAINT
:
This case is about a waterpark on Randall's Island that never got built, brought by a very unhappy waterpark developer. It is not the first action arising out of this aborted transaction; Plaintiffs originally brought suit against the City of New York (the "City") in the New York State Supreme Court. That case was dismissed, and the dismissal was affirmed. Now the putative developer wants a second trip down the waterslide - suing in this court about the same transaction, but under legal theories (42 U.S.C. § 1983 ("Section 1983") and common law fraud) that were not asserted in the State Court proceeding.
Unfortunately for Plaintiffs, however, the courts are no waterpark; you only get one trip down the slide.
The City moves to dismiss Plaintiffs' complaint, pursuant to Rule 12(b)(6), on the grounds of res judicata. That motion is granted.
In the alternative, the Court dismisses Plaintiffs' complaint sua sponte on the grounds that Plaintiffs' Section 1983 claim is time-barred, and the Court has no intention of exercising supplemental jurisdiction over their common law fraud claim.
BACKGROUND
I. Facts
Because I need not reach the merits of Plaintiffs' claims to dismiss them, I will only briefly sketch the relevant facts of this case. The reader is referred to Plaintiffs' federal complaint for a more thorough description of what allegedly transpired in this case.
In 1999, the City began seeking proposals for the development of portions of Randall's Island, which is located in the East River and is probably most notable as the hub of the Robert F. Kennedy Bridge (formerly known as the Triborough), connecting Manhattan, Queens, and the Bronx. Plaintiff Recreation Development, Inc. ("RDI") submitted a proposal for an extremely large indoor-outdoor waterpark and sports facility (the "Waterpark"). In February 2001, the City named Plaintiff Aquatic Development Group, Inc. ("ADG"), an entity affiliated with RDI, as the conditional designated developer for the Waterpark.
In January 2006, the City's Franchise and Concession Review Committee ("FCRC") authorized the Department of Parks and Recreation ("Parks") to negotiate a concession agreement with Plaintiffs. On June 14, 2006, the City entered into such an agreement (the "Concession Agreement") with Plaintiff Randall's Island Aquatic Leisure, LLC ("RIAL"), a special purpose entity established for the Waterpark project.
Pursuant to the Concession Agreement, Plaintiffs had to have a certain amount of financing for the project in place by a certain time. This deadline was pushed back a number of times. The final deadline - the one that Plaintiffs blew - was September 19, 2007. On September 21, 2007, the City terminated the Concession Agreement, citing Plaintiffs' failure to secure the required financing.
II. Procedural History
On July 29, 2009, Plaintiffs filed an action against the City, Parks, the New York City Economic Development Corporation, and the Randall's Island Sports Foundation (collectively, the "State Action Defendants") in the New York State Supreme Court for New York County. Plaintiffs' complaint alleged six causes of action against the State Action Defendants: three counts of breach of contract (counts 1, 2, and 3); one count of breach of the implied duty of good faith, cooperation, and fair dealing (count 4); and two counts of promissory estoppel (counts 5 and 6). (See Shapiro Decl. Vol. 1, Ex. D.)
On July 20, 2010, Justice Karen S. Smith of the New York County Supreme Court dismissed Plaintiffs' complaint pursuant to CPLR 3211 (discussed in more detail below). See Randall's Island Aquatic Leisure, LLC v. The City of New York, 2010 N.Y. Misc. LEXIS 3952 (Sup. Ct. N.Y. Co. July 20, 2010) (hereinafter "RIAL I"). The New York State Appellate Division, First Department, unanimously affirmed Justice Smith's decision on February 7, 2012. See Randall's Island Aquatic Leisure, LLC v. The City of New York, 938 N.Y.S.2d 62 (1st Dept 2012). On May 31, 2012, The New York State Court of Appeals declined to hear Plaintiffs' appeal. See Randall's Island Aquatic Leisure, LLC v. The City of New York, 19 N.Y.3d 804 (2012). This action followed on August 7, 2012.
The reader is referred to RIAL I for a more thorough description of Plaintiffs' claims in the state action.
Plaintiffs bring two causes of action against the City: Section 1983 (Count 1) and common law fraud (Count 2). Both of these claims stem from the City's "actions with regard to the negotiation, performance and termination of" the Concession Agreement. (Compl. ¶ 10.)
On November 11, 2012, the City moved to dismiss Plaintiffs' complaint, pursuant to Rule 12(b)(6), on the grounds of res judicata.
DISCUSSION
I. Plaintiffs' Claims are Barred by the Doctrine of Res Judicata
The Full Faith and Credit Act ("FFCA"), codified at 28 U.S.C. § 1738, "requires federal courts to give the same preclusive effect to state court judgments that those judgments would be given in the courts of the State from which the judgments emerged." Kremer v. Chem. Const. Corp., 456 U.S. 461, 466 (1982). The FFCA applies with no less force in federal civil rights cases brought pursuant to Section 1983. See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 84 (1984); Allen v. McCurry, 449 U.S. 90, 96-99 (1980).
A federal court looks to the law of preclusion of the state in which the judgment was rendered to determine whether a subsequent federal action is barred by the doctrine of res judicata. Migra, 465 U.S. at 81; see also Cloverleaf Realty of New York, Inc. v. Town of Wawayanda, 572 F.3d 93, 95 (2d Cir. 2009). Here, judgment was entered by the New York State Supreme Court for New York County. Therefore, New York law applies.
"The doctrine of res judicata, or claim preclusion, generally dictates that a valid final determination on the merits bars a future action between the same parties on the same cause of action. Under the doctrine, a new claim constitutes the same cause of action as the formerly litigated claim if they both arise out of the same transaction or occurrence or series of transactions or occurrences, even if the new claim is based upon a different legal theory or seeks a different remedy." Troy v. Goord, 752 N.Y.S.2d 460, 461 (4th Dep't 2002) (emphasis added) (internal citation omitted); see also O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357 (1981); L-Tec Electronics Corp. v. Cougar Elec. Org., Inc., 198 F.3d 85, 87-88 (2d Cir. 1999). Indeed, "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred," O'Brien, 54 N.Y.2d at 357 (emphasis added), including "causes of action . . . that . . . could have been litigated in the earlier action." Morelli & Gold, LLP v. Altman, 897 N.Y.S.2d 671, at *13 (Sup. Ct. N.Y. Co. 2009). This bar applies to Section 1983 claims, as well. Such claims may be asserted in either state or federal courts; Congress did not confer exclusive jurisdiction over them on the federal courts. Because the Supreme Courts of New York State are courts of general jurisdiction, they may hear such claims. N.Y. Judiciary Law § 140-b; see also McKinney v. City of New York, 433 N.Y.S.2d 193, 193 (2d Dep't 1980).
"Under New York law, a dismissal pursuant to N.Y. C.P.L.R. 3211(a)(7), for failure to state a cause of action, is presumptively not on a case's merits and lacks res judicata effect; indeed a Rule 3211(a)(7) dismissal is only on a case's merits if the rendering court explicitly says so." DDR Const. Servs., Inc. v. Siemens Indus., Inc., 770 F. Supp. 2d 627, 647 (S.D.N.Y. 2011) reconsideration denied, 2012 WL 4711677 (S.D.N.Y. Sept. 26, 2012). By contrast, dismissals "based on Rule 3211(a)(1) and supporting documentary evidence are on the case's merits," and thus have preclusive effect. Id. While CPLR 5013 provides in pertinent part that "A judgment dismissing a cause of action before the close of the proponent's evidence is not a dismissal on the merits unless it specifies otherwise," it "does not require that the prior judgment contain the precise words 'on the merits' in order to be given res judicata effect; it suffices that it appears from the judgment that the dismissal was on the merits." Strange v. Montefiore Hosp. & Med. Ctr., 59 N.Y.2d 737, 738 (1983).
Plaintiffs' Section 1983 and common law fraud claims against the City "aris[e] out of the same transaction or series of transactions" upon which Plaintiffs' state action against the City was premised. O'Brien, 54 N.Y.2d at 357. Both actions, and all of Plaintiffs' various causes of actions, stem from the City's "actions with regard to the negotiation, performance and termination of the Concession Agreement. (Compl. ¶ 10.) Plaintiffs do not argue otherwise. Accordingly, Plaintiffs' Section 1983 and common law fraud claims are barred under the doctrine of res judicata if Plaintiffs' state action against the City was dismissed on the merits. It was.
The State Action Defendants moved to dismiss Plaintiffs' complaint pursuant to CPLR 3211(a)(1) and (7). While it would have made things a little easier if Justice Smith had specified whether she was dismissing Plaintiffs' claims pursuant to CPLR 3211(a)(1), (7), or both, she need not have done so; the particular subsection(s) she invoked are easily gleaned from the context. See Feigen v. Advance Capital Mgmt. Corp., 536 N.Y.S.2d 786, 787-88 (1st Dep't 1989).
In dismissing counts 1, 2, and 3 (breach of contract), and count 4 (breach of the implied duty of good faith, cooperation, and fair dealing), Justice Smith resorted exclusively to the Concession Agreement, finding that its plain terms contradicted Plaintiffs' claims. See RIAL I, 2010 N.Y. Misc. Lexis 3952, at *8-14. Similarly, Justice Smith dismissed count 6 (promissory estoppel) on the grounds that an April 25, 2007 letter sent to Plaintiffs by an employee of Parks' Revenue Division did not constitute a clear and unambiguous promise on the part of the State Action Defendants not to terminate the Concession Agreement in the event of a default. Id. at *17-19. Accordingly, an "examination of Justice [Smith's] ruling clearly demonstrates that dismissal of counts 1, 2, 3, 4, and 6 was based on the documentary evidence submitted to the court, and "not merely because of technical pleading defects." Feigen, 536 N.Y.S.2d at 788. Indeed, Justice Smith in no way impugned Plaintiffs' pleading in dismissing these causes of action. Thus, Justice Smith dismissed counts 1, 2, 3, 4, and 6 on the merits pursuant to CPLR 3211(a)(1).
As to count 5 (promissory estoppel), Justice Smith's initial grounds for dismissing that claim was that Plaintiffs' "complaint [did] not allege that [the State Action Defendants] made a 'clear or unambiguous' promise to grant an additional extension to the deadline to secure financing. Instead, [Plaintiffs] essentially allege[d] that, given all the circumstances, their assumption that an extension would be granted was reasonable." RIAL I, 2010 N.Y. Misc. Lexis 3952, at *18 (emphasis added). So it is plain that Justice Smith dismissed count 5, in part, pursuant to CPLR 3211(a)(7) for failure to state a claim. However, just a few sentences later, Justice Smith made clear that she was also dismissing count 5 on the basis of the documentary evidence - i.e., pursuant to CPLR 3211(a)(1):
Moreover, subsequent to [the April 25, 2007 letter (see above)], Parks sent a letter in regard to the final deadline extension which explicitly stated that Parks may terminate the contract if [Plaintiffs] failed to meet the deadline. As such, [Plaintiffs'] fifth and sixth causes of action, for promissory estoppel, must be dismissed.Id. at 19. A dismissal pursuant to both CPLR 3211(a)(1) and (7) is no less on the merits than a dismissal pursuant to CPLR 3211(a)(1) alone. See DDR Const. Servs., 770 F. Supp. 2d at 647-48; see also Feigen, 536 N.Y.S.2d. at 787-88. Accordingly, I find that count 5 was also dismissed on the merits pursuant to CPLR 3211(a)(1).
Plaintiffs argue that their federal claims are not precluded because Justice Smith failed to convert the City's motion to dismiss to a motion for summary judgment and thus Plaintiffs did not get to put on their full case (see Pls.' Opp'n at 7 n.2, 12). The argument lacks merit. Justice Smith found that all of Plaintiffs' state claims ran afoul of the documentary evidence in the record, and in particular the terms of the Concession Agreement, which was the most important document before her. The outcome would have been no different after discovery.
In sum, Justice Smith dismissed every claim on the merits, and her decision was affirmed. Since Plaintiffs' federal complaint is premised on the exact same series of transactions as their state complaint, and Plaintiffs' claims could have been brought in the New York State Supreme Court, Plaintiffs' Section 1983 (Count 1) and common law fraud (Count 2) claims are barred under the doctrine of res judicata. See O'Brien, 54 N.Y.2d at 357; Troy,752 N.Y.S.2d at 461; L-Tec Electronics Corp., 198 F.3d at 87-88.
II. Plaintiffs' Section 1983 Claim is Time-Barred, and the Court Will Not Exercise Supplemental Jurisdiction Over Any Common Law Claims
Assuming arguendo that Plaintiffs' case were not precluded under the doctrine of res judicata, Plaintiffs' Section 1983 claim would have to be dismissed on the alternative ground that it was not brought within the applicable statute of limitations. Because it is apparent from the record that this claim must be dismissed on these grounds, the Court does so sua sponte.
The statute of limitations for a Section 1983 claim that accrued in New York is three years. Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 331 (2d Cir. 1997). The complaint alleges that the City committed a federal constitutional tort in connection with the "negotiation, performance and termination" of the Concession Agreement. (Compl. ¶ 10.) The facts alleged in the complaint establish that the Concession Agreement was negotiated in or about 2006 and that it was terminated on September 21, 2007; any "performance" necessarily occurred between those dates. This lawsuit was commenced on August 7, 2012 - almost five years after the contract was terminated, and six or more years after it was negotiated. Plainly, any Section 1983 claim predicated on the negotiation, performance, or termination of the contract is time-barred.
Perhaps as a hedge against a dismissal on limitations grounds, Plaintiffs allege in their complaint that "During the course of [the state action, they] discovered facts indicating that [the City's] employees and agents had knowingly and intentionally made statements to Plaintiffs' principal during the course of the contract negotiations with the intent to deprive Plaintiffs of their property and liberty interests." (Compl. ¶ 2.)
Were this true, plaintiffs should have moved immediately to amend their state court complaint.
But Plaintiffs cannot possibly be alleging that they were unaware of statements made by City employees during contract negotiations in or around 2006; after all, those statements were made to Plaintiffs' principal.
If Plaintiffs are alleging that they only became aware of some nefarious intent on the part of the City after they filed their state action on July 29, 2009, they are out of luck; that would not toll the statute of limitations.
"A Section 1983 claim ordinarily accrues when the plaintiff knows or has reason to know of the harm." Shomo v. City of New York, 579 F.3d 176, 181 (2d Cir. 2009) (internal quotations marks omitted). The gist of Plaintiffs' Section 1983 claim is twofold.
First, Plaintiffs allege that the City failed to make required payments to Plaintiffs after terminating the Concession Agreement pursuant to the agreement's "termination at will" provision; Plaintiffs allege that this was a deprivation of a constitutionally protected property interest. (See Compl. ¶¶ 69-71.) Plaintiffs were aware that they were not receiving termination payments from and after the date the contract was terminated; nothing that happened in the three years prior to the filing of this lawsuit caused Plaintiffs to "discover" that they were not being paid.
The Court notes that Justice Smith found that the City did not terminate the Concession Agreement pursuant to the termination at will provision and thus Plaintiffs were not entitled to payments under that provision. See RIAL I, N.Y. Misc. Lexis 3952, at *10-11.
Second, Plaintiffs allege that the City made a series of false statements to the media on September 14, 2007 concerning Plaintiffs' ability to meet their obligations under the Concession Agreement; Plaintiffs allege that this was a deprivation of their constitutionally protected liberty interest in their integrity and reputation for professional competence in the industry. (See id. ¶¶ 72-76.) Plaintiffs would have been aware of the harm they had suffered as soon as the allegedly disparaging statements were made to the media - i.e., on September 14, 2007.
In other words, Plaintiffs were aware of the operative facts underlying their Section 1983 claim almost five years before filing this action.
Plaintiffs filed the state action - which was based on essentially the exact same conduct alleged in this action - in 2009. At that time, a Section 1983 claim against the City arising out of the "negotiation, performance and termination" of the Concession Agreement (Compl. ¶ 10) would have been timely. And, as already noted, the New York County Supreme Court was perfectly capable of entertaining Plaintiffs' Section 1983 claim. See McKinney, 433 N.Y.S.2d at 193. Plaintiffs' apparent doubts as to the City's mens rea (see Compl. ¶ 2), was no excuse for not filing a Section 1983 claim concurrently with their other claims, because they need only have pleaded the City's intent generally. See Fed. R. Civ. P. 9(b); N.Y. C.P.L.R. 3013, 3016(b); cf. Flemming v. Goord, No. 11 Civ. 1026, 2013 WL 317059, at *3 (N.D.N.Y. Jan. 28, 2013) ("Since Plaintiff knew of and brought a retaliatory transfer cause of action shortly after it accrued in 2005 . . . , any suggestion that the discovery of 'new evidence' to support the alleged merits of that claim would toll or reset the statute of limitations is wholly unfounded.")
Plaintiffs also cannot argue that the pendency of the state court action suspended the running of the statute of limitations for their Section 1983 claim. It did not. Branch v. Guilderland Cent. Sch. Dist., 239 F. Supp. 2d 242, 252 n. 7 (N.D.N.Y. 2003) (citing Williams v. Walsh, 558 F.2d 667 (2d Cir. 1977); Meyer v. Frank, 550 F.2d 726 (2d Cir. 1977)); see also Cancel v. Mazzuca, No. 01 Civ. 3129, 2003 WL 1702011, at *3 (S.D.N.Y. Mar. 28, 2003).
Finally, to the extent that Plaintiffs plead that their Section 1983 claim is timely pursuant to CPLR 205 (see Compl. ¶¶ 2, 65), they misapprehend that section of the CPLR. CPLR 205 only applies to a new action filed after the original action is terminated on grounds other than "a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits." Here, Plaintiffs did not bring a Section 1983 claim in the New York State Supreme Court, so none was dismissed by that court on any ground, and CPLR 205 is inapposite.
This is not a diversity case; all of the parties are New York corporations. The Court has subject-matter jurisdiction over this action only by virtue of Plaintiffs' assertion of a claim under Section 1983 (Count 1). The Court has no inclination to exercise supplemental jurisdiction over Plaintiffs' fraud claim and so it too is dismissed. See U.S.C. § 1367(c)(3).
Plaintiffs can file their fraud claim in New York State Supreme Court - where, under either the doctrine of splitting causes of action, see Emery Roth & Sons v. Nat'l Kinney Corp., 44 N.Y.2d 912, 914 (1978), or the doctrine of res judicata, it will likely suffer the same fate as all of Plaintiffs' other claims.
CONCLUSION
For the reasons set forth above, the City's motion to dismiss Plaintiffs' complaint on the grounds of res judicata is granted. In the alternative, the Court dismisses Plaintiffs' complaint sua sponte on the grounds articulated above.
The Clerk of the Court is directed to remove the motion at Docket No. 8 from the Court's list of pending motions and to close this case. Dated: June 13, 2013
/s/_________
U.S.D.J. BY ECF TO ALL COUNSEL