Opinion
L43–12
04-02-2018
STATE of New York, Plaintiff, v. JEDA CAPITAL–LENOX, LLC, Defendant.
(Jorge A. Rodriguez, of counsel), Eric T. Schneiderman, Attorney General, The Capitol, Albany, New York 12224–0341, Attorney for Plaintiff (Justin T. Huffman, of counsel), Camardo Law Firm, P.C., 127 Genesee Street, Auburn, New York 13021, Attorneys for Defendant
(Jorge A. Rodriguez, of counsel), Eric T. Schneiderman, Attorney General, The Capitol, Albany, New York 12224–0341, Attorney for Plaintiff
(Justin T. Huffman, of counsel), Camardo Law Firm, P.C., 127 Genesee Street, Auburn, New York 13021, Attorneys for Defendant
Richard M. Platkin, J.
This is an action brought by the State of New York ("State") seeking to recover damages arising from the alleged failure of defendant JEDA Capital–Lenox, LLC ("JEDA") to comply with the terms and conditions of highway work permits issued by the New York State Department of Transportation ("DOT"). The State now moves for summary judgment on its complaint and for the dismissal of JEDA's affirmative defenses. JEDA opposes the motion and cross-moves for the dismissal of the State's complaint.
BACKGROUND
In or about October 2006, JEDA applied for and was issued three highway work permits by DOT (Nos. 02–06–0724, 02–06–0725 and 02–06–0726 ["Permits"] ). The Permits allowed JEDA to perform certain modifications to State Route 365A in connection with the construction of a Lowe's Home Center in the City of Oneida, Madison County (see Andela Aff., ¶¶ 5–8; Exs. A–C; Highway Law § 52 ). As a condition of issuance of the Permits and in consideration therefor, JEDA executed an Inspection and/or Supervision Payment Agreement ("Inspection Agreement") by which it agreed to reimburse DOT "for inspection and/or supervision of the permit work by [DOT] employees which exceeds one work hour" (Andela Aff., ¶ 9; Ex. D).
At the direction of DOT, JEDA obtained from National Grange Mutual Insurance Company ("Surety") a performance bond in the penal sum of $250,000 to guarantee the timely and workmanlike completion of the permitted work ("Performance Bond") (see Id. , ¶ 10; Ex. E). JEDA subsequently purchased a rider to the Performance Bond that increased the principal sum to $450,000 (see id. , ¶¶ 13–14; Exs. F–G).
The permitted work to State Route 365A did not progress in accordance with the schedule established by DOT, despite the agency's repeated grant of extensions, and DOT notified JEDA on June 11, 2008 that it would accord JEDA "one last opportunity to complete the work" before "complet[ing] the work using [its own] contractor and proceed[ing] against [JEDA] and [its] surety to recover all ... costs" (Id. , Ex. K; see id. , ¶¶ 12–20; Exs. F–J, L). Once it became clear that JEDA could not complete the work prior to the expiration of this deadline, DOT issued a notice of default on August 19, 2008 and engaged another contractor to complete the work on an emergency basis (see Id. , ¶¶ 20–23; Exs. M–N).
By letter dated September 24, 2009, DOT advised JEDA that: its contractor had completed the permitted work at a cost of $558,137.58; the agency had demanded payment of the full penal sum of the Performance Bond from the Surety; and DOT had requested that the Office of the Attorney General commence a cost-recovery action against JEDA (see id. , ¶ 23; Ex. N). On November 1, 2011, DOT then invoiced JEDA for $87,689 in inspection and supervision costs (Id. , ¶¶ 24–25; Ex. O), bringing the State's total claim to $645,826.60 (see id. , ¶ 25).
At the State's demand, the Surety paid over the full $450,000 penal sum of the Performance Bond, leaving an outstanding balance of $195,826.60 (see id. , ¶¶ 26–27; Ex. P). DOT subsequently granted defendant a credit of $87,369.98 for work that incorrectly had been billed to the Permits, which reduced JEDA's unpaid balance to $108,456.62 (see id. , ¶ 28; Ex. N). JEDA has refused to pay this balance, despite the State's due demands (see id. , ¶ 29; Rodriguez Aff., ¶¶ 6–7; Ex. 1).
Plaintiff commenced this action on May 25, 2012, seeking to recover the outstanding balance of $108,456.62, together with a collection fee of up to 22% pursuant to State Finance Law § 18 (see Rodriguez Aff., Ex. 2 ["Complaint"] ). Defendant answered and asserted numerous affirmative defenses (see id. , Ex. 4), and the parties than engaged in some discovery in the five years between the commencement of this action and the filing of the instant motions.
The Request for Judicial Intervention was not filed until October 11, 2017.
ANALYSIS
Summary judgment is a drastic remedy and should only be granted if there are no material issues of disputed fact (see Sillman v. Twentieth Century–Fox Film Corp. , 3 NY2d 395, 404 [1957] ). In evaluating a motion for summary judgment, a court should simply determine whether, viewing the evidence in the light most favorable to the nonmoving party, material issues of disputed fact preclude the grant of judgment as a matter of law (see Branham v. Loews Orpheum Cinemas, Inc. , 8 NY3d 931, 932 [2007] ; S.J. Capelin Assoc. v. Globe Mfg. Corp. , 34 NY2d 338, 341 [1974] ). The movant has the initial burden of coming forward with admissible evidence to demonstrate the absence of any material issues of fact, and the "[f]ailure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" ( Alvarez v. Prospect Hosp. , 68 NY2d 320, 324 [1986] ). If the initial showing has been made, the burden then shifts to the party opposing the motion to demonstrate, by admissible evidence, the existence of any factual issue requiring a trial of the action (see Zuckerman v. City of New York , 49 NY2d 557, 562 [1980] ). "[M]ere conclusions, expressions of hope or unsubstantiated allegations are insufficient" to defeat a summary judgment motion (Id. ).
A. The State's Prima Facie Case
In its Complaint, the State's cost-recovery claim is predicated on a contractual theory of recovery. Specifically, the Complaint alleges that, "[p]er the terms of the [Permits], [JEDA] was obligated to render certain performance: to wit, completion of the [work]," and JEDA "breached its obligations under the [Permits and Inspection Agreement] by failing to render the required performance" (Complaint, ¶¶ 20–28). In its moving papers, however, the State advances two additional theories of recovery: (1) liability under Highway Law § 52 and attendant DOT regulations; and (2) common-law indemnity.
The Court begins with the State's statutory/regulatory theory, which is the principal argument made in its moving papers. Highway Law § 52 provides, in pertinent part:
[N]o person, firm [or] corporation ... shall construct or improve, within the state highway right of way an entrance or connection to such highway, or construct within the state highway right of way any works, structure or obstruction, ... except in accordance with the terms and conditions of a work permit issued by [DOT] .... The statute further directs DOT to "establish regulations governing the issuance of highway work permits, including ... a system of deposits of money or bonds guaranteeing the performance of the work" (Id. ).
The implementing regulations adopted by DOT provide, in relevant part, that "[c]osts incurred by [DOT] in correcting failures to comply with the terms and conditions of a permit, failures to obtain a permit, or defective workmanship or materials shall be borne by the permittee or person undertaking the activity " ( 17 NYCRR 125.2 [c] [emphasis added] ). DOT regulations also require, "[a]s a condition to the issuance of any permits to perform work or other operations upon state right-of-way," that the permittee "furnish proof of financial responsibility sufficient to protect the People of the State of New York and/or [DOT]" ( 17 NYCRR 127.1 ). The permittee must also tender "sufficient security to assure the completion of all [permitted] work, the restoration of the state property ... and the recovery of reasonable state expenses" ( 17 NYCRR 127.6 ; see White v. Westage Dev. Group , 191 AD2d 687, 689 [2d Dept 1993], lv dismissed 82 NY2d 706 [1993] ).
In opposing this branch of the State's motion and in cross-moving for the dismissal of the Complaint pursuant to CPLR 3211 (a) (7), JEDA does not challenge the authority of the State to maintain a cost-recovery action pursuant to Highway Law § 52 and attendant regulations. Rather, JEDA's sole argument for dismissal "is that [p]laintiff is making these allegations for the first time on summary judgment" (JEDA's Brief, p. 3). According to JEDA, the Complaint "only asserts two separate causes of action for breach of contract based upon the ... Permits, and a third cause of action to recover collection fees on the alleged outstanding debt" (Id. ).
Insofar as defendant's arguments for dismissal are aimed at the legal sufficiency of the pleading, the Court will treat the cross motion "as a narrowly framed post-answer CPLR 3211 (a) (7) ground asserted in a summary judgment motion" (Chenango Contr., Inc. v. Hughes Assoc. , 128 AD3d 1150, 1151 [3d Dept 2015] ). The remaining aspects of the cross motion will be treated as an ordinary summary judgment motion under CPLR 3212, inasmuch as issue has been joined and the parties have " ‘laid bare’ their proof by, inter alia , submitting affidavits and other documentary proof" (Kavoukian v. Kaletta , 294 AD2d 646, 647 [3d Dept 2002] ).
The Court is unpersuaded by JEDA's objections to the State's invocation of a statutory/regulatory theory of recovery. Liberally construed, the allegations of the Complaint suffice to give JEDA "notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved" ( CPLR 3013 ), and the Complaint sufficiently alleges the material elements of the State's statutory/regulatory claim, including: (a) DOT's issuance of the Permits with prescribed terms and conditions; (b) JEDA's failure to comply with the terms and conditions of the Permits; and (c) the costs and expenses incurred by DOT as a result of JEDA's non-compliance (see Complaint, ¶¶ 4–5, 8–10, 12–13, 16–17, 21–23). Thus, the branch of JEDA's cross-motion seeking the dismissal of the Complaint under CPLR 3211 (a) (7) must be denied (see Polonetsky v. Better Homes Depot , 97 NY2d 46, 54 [2001] ["if from (the complaint's) four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail"]; Leon v. Martinez , 84 NY2d 83, 88 [1994] ).
The Court further concludes that JEDA has failed to demonstrate that it was misled, unfairly surprised or otherwise prejudiced by the State's reliance on the statutory/regulatory theory of recovery in its motion for summary judgment. "It is well settled that summary judgment may be awarded on an unpleaded cause of action if the proof supports such cause [of action] and if the opposing party has not been misled to its prejudice" ( Rubenstein v. Rosenthal , 140 AD2d 156, 158 [1st Dept 1988] [citations omitted]; see Boyle v. Marsh & McLennan Cos., Inc. , 50 AD3d 1587, 1588 [4th Dept 2008], lv denied 11 NY3d 705 [2008] ; Stiber v. Cotrone , 153 AD2d 1006, 1007 [3d Dept 1989], lv denied 75 NY2d 703 [1990] ).
While styled as a claim for breach of contract, the Complaint clearly is premised on JEDA's failure to comply with the terms and conditions of the Permits. Further, JEDA cannot credibly claim surprise at the shift away from a contractual theory, given the State's defense of the related breach-of-contract case brought by JEDA in the Court of Claims (see Jeda Capital–Lenox, LLC v. State of New York , Ct Cl, Oct. 7, 2015, Collins, J., claim No. 125470, UID No. 2015–015–057, affd 149 AD3d 1390 [3d Dept 2017], lv denied 30 NY3d 903 [2017] ["Court of Claims Action"] ). As JEDA itself emphasizes, the State argued on appeal that "[t]here [w]as [n]o [c]ontract [b]etween [JEDA] and the State" (Huffman Aff., ¶ 7; Ex. 3, p. 9).
Indeed, the issue of whether a highway work permit constitutes an enforceable contract, so as to give rise to an action for the breach of the terms and conditions thereof, remains an unsettled question under New York law (see Brothers v. New York State Elec. & Gas Corp. , 11 NY3d 251, 260 [2008] ["whether or not the permit constitutes a contract is ultimately beside the point, and not something that we need to decide"]; Jeda Capital–Lenox , 149 AD3d at 1392 [dismissing action, "even assuming without deciding that there was an agreement between (JEDA) and (the State)"]; cf. Allen v. Telergy Network Servs., Inc. , 52 AD3d 1094, 1097 [3d Dept 2008] ["this Court has held that a highway work permit does not constitute a contract"]; Matter of Pyramid Co. of Onondaga v. New York State Dept. of Labor (223 AD2d 285, 287–288 [3d Dept 1996] [highway work permits "do not create any contractual rights between the State and petitioner"] ). Against this backdrop, the factual allegations of the Complaint were sufficient to put JEDA on notice of a possible claim by the State pursuant to the statute and regulations under which the Permits were issued.
It bears noting that neither Brothers , Allen nor Pyramid involved an effort by DOT to enforce the terms and conditions of a highway work permit. Rather, these cases concerned the application of statutes governing the wages of employees and duties to maintain a safe workplace (see Brothers , 11 NY3d at 256–257 ; Allen , 52 AD3d at 1097 ; Pyramid , 223 AD3d at 287–288).
Finally, the Court is satisfied that JEDA has had a full and fair opportunity to address the merits of the State's statutory/regulatory claim in its opposition and cross motion. In this connection, the Court concludes that JEDA has failed to substantiate its contention that the State's motion for summary judgment should be denied as premature pending the taking of additional discovery (see JEDA's Brief, p. 6). In particular, JEDA has failed to demonstrate through the submission of admissible proof how further discovery might reveal evidence within the exclusive knowledge of the State that would warrant denial of the motion (see CPLR 3212 [f]; Green v. Covington , 299 AD2d 636, 637 [3d Dept 2002] ; Landes v. Sullivan , 235 AD2d 657, 658 [3d Dept 1997] ; Halsey v. County of Madison , 215 AD2d 824, 824–825 [3d Dept 1995] ).
Moreover, issue was joined in this action on or about September 7, 2012 (see Rodriguez Aff., Exs. 2 & 4), and more than five years had passed before the State moved for summary judgment. During this period, the State issued written discovery demands and deposed JEDA's principal. JEDA, however, failed to serve any demands for written discovery, notices of deposition or subpoenas (see Rodriguez Aff., ¶ 15; Rodriguez Reply Aff., ¶¶ 7–8). "Summary judgment may not be defeated on the ground that more discovery is needed, where, as here, the side advancing such an argument has failed to ascertain the facts due to its own inaction" ( Meath v. Mishrick , 68 NY2d 992, 994 [1986] ).
Turning to the merits of the statutory/regulatory claim, the Court is satisfied that the moving affidavit of Kenneth Andela, P.E., a design team leader for DOT who served as a regional permit coordinator for the agency at relevant times, and the documentation annexed thereto suffice to establish, prima facie , that JEDA failed to complete the work to State Route 365A in accordance with the terms and conditions established in the Permits, and that the State incurred costs and expenses of $108,456.62 to monitor, inspect and complete the permitted work (see Andela Aff., ¶¶ 11–29; Exs. F–P; Highway Law § 52 ; 17 NYCRR 125.2 [c] ).
Having concluded that the State has established a prima facie right to recover under Highway Law § 52 and attendant regulations, the Court need not to consider the merits of the contractual and implied-indemnity theories of recovery tendered by the State.
B. JEDA's Defenses & Cross Motion
The State further moves for the dismissal of JEDA's affirmative defenses. As a movant for summary judgment on its complaint, the State has the initial burden of negating the affirmative defenses asserted in JEDA's answer (see CPLR 3212 [b]; Morley Maples, Inc. v. Dryden Mut. Ins. Co. , 130 AD3d 1413, 1414 [3d Dept 2015] ; Hoffman v. Wyckoff Hgts. Med. Ctr. , 129 AD3d 526, 527 [1st Dept 2015] ; Stone v. Continental Ins. Co. , 234 AD2d 282, 284 [2d Dept 1996] ). Further, "[a] party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit" ( CPLR 3211 [b] ).
In its verified answer (see Rodriguez Aff., Ex. 4 ["Answer"] ), JEDA interposes 13 affirmative defenses. For the reasons that follow, the Court concludes that each such defense has been proven to lack merit as a matter of law, and JEDA has failed to raise a triable issue of fact as to the State's claim under Highway Law § 52 and attendant regulations.
1. Failure to State a Claim
As its first affirmative defense, JEDA alleges that the Complaint fails to state a cause of action upon which relief may be granted (see Id. , ¶ 7). For the reasons stated above, the Court rejects this defense and concludes that the State adequately has alleged (and proven) its cause of action under the Highway Law and attendant regulations.
2. Standing
JEDA next alleges that "[p]laintiff lacks standing to bring some, or all of the claims asserted" (Id. , ¶ 8). The Court disagrees. The State has standing to pursue its rights and remedies under the Highway Law and attendant regulations to ensure that the "[c]osts incurred by [DOT] in correcting [JEDA's] failures to comply with the terms and conditions of [the P]ermit[s] ... shall be borne by [JEDA]" ( 17 NYCRR 125.2 [c] ). The pecuniary injury claimed by the State is distinct from the public at large and falls precisely within the zone of interest established by the statue and implementing regulations (see Matter of Transactive Corp. v. New York State Dept. of Social Servs. , 92 NY2d 579, 587 [1998] ; Matter of Diederich v. St. Lawrence , 78 AD3d 1290, 1291 [3d Dept 2010], lv dismissed and denied 17 NY3d 782 [2011] ).
3. The State's "Own Acts of Illegality"
JEDA further alleges that "[p]laintiff's claims are barred in whole or in part, by [p]laintiff's own acts of illegality," a defense that appears again as part of the thirteenth affirmative defense (Answer, ¶¶ 9, 19). To succeed on this defense, JEDA bears the ultimate burden of demonstrating that the obligation sued upon is usurious, ultra vires or otherwise illegal (see Jones v. Bluestone , 10 NY2d 940, 940 [1961] ; 5A Carmody–Wait 2d § 30:61 ).
As stated above, the Court need not and does not address the merits of the State's contractual theory. Moreover, there is nothing in JEDA's opposition or cross motion demonstrating any illegality or violation of public policy with respect to the Permits or DOT's administration thereof (see Rodriguez Aff., Ex 6, ¶ 3 [JEDA's Bill of Particulars ("BOP") ]; see generally O'Neill Aff.). Further, JEDA's complaints about the State proceeding against its Performance Bond and/or the Surety's payment of the principal sum to the State (see JEDA's Brief, p. 6–7; O'Neill Aff., ¶¶ 3–4; BOP, ¶¶ 8–9) do not constitute a defense to this action. In fact, the $450,000 collected from the Performance Bond provides a substantial offset to JEDA's liability in this action (see Andela Aff., ¶¶ 25–27). For all these reasons, the third affirmative defense of illegality is dismissed.
Insofar as defendant's illegality claim is predicated on the improper billing of $87,369.98 (see BOP, ¶ 3), the State has acknowledged this error and credited JEDA accordingly (see Andela Aff., ¶ 28).
4. Unclean Hands
JEDA's fourth affirmative defense alleges that "[p]laintiff's claims are barred by the doctrine of unclean hands" (Answer, ¶ 10). In its bill of particulars, JEDA states that "DOT wrongfully invoiced JEDA, never submitted any backup indicating the scope of work ... and engaged in misrepresentation and fraud" (BOP, ¶ 4). The defense of unclean hands, however, has no applicability to the arm's length transaction between JEDA and the State, which plainly is not fiduciary in nature (see Rooney v. Slomowitz , 11 AD3d 864, 867–868 [3d Dept 2004] ; Ross v. Moyer , 286 AD2d 610, 611 [1st Dept 2001] ; Cohen v. Katz , 242 AD2d 448, 448 [1st Dept 1997] ). Further, as an equitable defense, the doctrine of unclean hands "is unavailable in an action exclusively for damages" ( Manshion Joho Ctr. Co., Ltd. v. Manshion Joho Ctr., Inc. , 24 AD3d 189, 190 [1st Dept 2005] ; see also Ross , 286 AD2d at 611 ). Given that this is an action at law for money damages that arose outside the context of a fiduciary relationship, the defense of unclean hands is dismissed (see Hasbro Bradley v. Coopers & Lybrand , 128 AD2d 218, 220 [1st Dept 1987], lv dismissed 70 NY2d 927 [1987] ).
5. Waiver/Estoppel
In its fifth affirmative defense, JEDA alleges that "[p]laintiff's claims are barred by the principles of waiver and/or estoppel" (Answer, ¶ 11). Waiver is an intentional relinquishment of a known right (see Alsens Am. Portland Cement Works v. Degnon Contr. Co. , 222 NY 34, 37 [1917] ; Stassa v. Stassa , 123 AD3d 804, 805 [2d Dept 2014], lv dismissed 25 NY3d 960 [2015] ). The proof adduced by the State demonstrates that it preserved all of its rights and remedies against JEDA, and JEDA has failed to substantiate its allegation of an intentional relinquishment of rights (see BOP, ¶ 5).
Nor can JEDA establish a defense predicated upon equitable estoppel, a doctrine that rarely is available against a governmental agency acting in the discharge of its official duties (see Pless v. Town of Royalton , 81 NY2d 1047, 1049 [1993] ; Matter of Hamptons Hosp. & Med. Ctr. v. Moore , 52 NY2d 88, 93–94 [1981] ). DOT's issuance of the Permits and subsequent intervention to ensure that the permitted work was completed in a timely and safe manner (see Andela Aff., ¶¶ 5–29) was undertaken pursuant to DOT's governmental duty to supervise, maintain and improve the State's highway system (see Highway Law §§ 10 et seq. ; see Id. § 52 ). Moreover, JEDA's highly conclusory and unsupported allegations of misrepresentations and/or concealments by DOT are insufficient to overcome the general inapplicability of the estoppel doctrine against the State (see Pless , 81 NY2d at 1049 ) or to establish the essential elements of the defense (see Gad v. Almod Diamonds Ltd. , 2016 WL 223611, *9 [Sup Ct, NY County 2016], affd 147 AD3d 417 [1st Dept 2017] ).
6. Cardinal Change
JEDA's sixth affirmative defense alleges that the State substantially changed the timing and scope of the required work, "representing cardinal change" (Answer, ¶ 12). This defense has no relevance to the State's claim under Highway Law § 52 and attendant regulations. DOT had broad discretion to impose terms and conditions on the Permits, and this action is not a proper (or timely) vehicle to challenge the State's administrative determinations with respect thereto.
The Permits obliged JEDA to comply with "the plans submitted by [JEDA] in its permit application, as well as the DOT's Manual of Uniform Traffic Control Devices and directions of the DOT's Resident Engineer or the Engineer-in-charge" (Andela Reply Aff., ¶ 5; see Andela Aff, Exs. A–C
In addition, DOT was authorized to direct "additional" changes "should they be necessary for public safety" (17 NYCRR 125.5 ; see Andela Reply Aff., ¶ 6 [providing safety justification for changes] ).
7. False Representation of Breach
The seventh affirmative defense alleges that the State falsely represented to others that JEDA had breached its obligation to its subcontractor, thereby affecting JEDA's ability to complete the permitted work (see Answer, ¶ 13). The Court concludes that this allegation does not constitute a legally-cognizable defense to the State's cost-recovery claim.
8. Accord/Satisfaction
JEDA's eighth affirmative defense alleges "accord and satisfaction" (Id. , ¶ 14). To prevail on this defense, JEDA " ‘must establish that there was a disputed or unliquidated claim between the parties which they mutually resolved through a new contract discharging all or part of their obligations under the original contract’ " ( Huimin Sun v. Cai , 146 AD3d 760, 762 [2d Dept 2017], quoting Profex, Inc. v. Town of Fishkill , 65 AD3d 678, 678 [2d Dept 2009] ). Here, JEDA does not allege or submit any proof that the dispute at issue in this action has been resolved through a new contract that discharged JEDA's pre-existing obligations to the State. Thus, this defense must fail.
9. Payment/Recovery From Surety
The ninth affirmative defense alleges that the State received payment from the Surety and that any recovery that plaintiff seeks in this action is duplicative (see Answer, ¶ 15; BOP, ¶ 17). Inasmuch as the State's claim exceeds its recovery from the Surety, even after crediting JEDA for incorrectly billed work, this defense is without merit. Nor has JEDA otherwise demonstrated that payment in full of its obligation was made and accepted by the State.
10. Excessive/Improper Charges
JEDA's tenth affirmative defense alleges that the State is seeking to recover for excessive and improper charges (see Answer, ¶ 16). The only specific overcharges cited by JEDA, however, concern the inspection and supervision costs billed by DOT. In its moving papers, the State submits invoices setting forth the specifics costs for which it seeks reimbursement pursuant to the Inspection Agreement (see Andela Aff., ¶ 24; Ex. O). Further, in response to JEDA's complaints that the inspection and supervision costs billed by DOT exceeded the agency's initial estimates (see BOP, ¶ 13), the State relies on the text of the Inspection Agreement, which states that the initial estimates were "not intended to be final and [JEDA] agree[d] to pay reimbursement for all reasonable expenses incurred by [DOT] in necessary inspection and/or supervision of work performed pursuant to [the Permits]. [DOT] shall be the sole judge of whether such inspection and/or supervision is necessary" (Andela Aff., Ex. D; see Andela Reply Aff., ¶ 7).
Inasmuch as DOT's initial estimate was not intended to be final and the estimate did not contemplate JEDA's delays, and given JEDA's failure to complete the permitted work and the need for DOT to engage a completion contractor on an emergency basis, there is no merit to JEDA's argument that the inspection and supervision costs should be capped at $16,280 based on the initial, non-binding estimate provided in the Inspection Agreement.
JEDA's remaining allegations of excessive or improper charges are unsupported by the record.
11. Incomplete Documents
The eleventh affirmative defense alleges that the documents annexed to the State's Complaint are unsigned or incomplete (see Answer, ¶ 17). This does not constitute a defense to summary judgment, inasmuch as the pertinent documents are all properly before the Court.
12. Lack of Good Faith
The Court rejects JEDA's twelfth affirmative defense alleging that the State's claims are "wholly insubstantial, frivolous, and not advanced in good faith" (Id. , ¶ 18). In fact, this is an apt characterization of JEDA's twelfth affirmative defense.
13. Remaining Defenses
The thirteenth affirmative defense alleges that the State's claims may be subject to certain other affirmative defenses, including "assumption of risk, duress, failure of consideration, fraud, illegality, improper service, payment, release, res judicata, statute of frauds, acquiescence, running of the statute of limitations, and any other matter constituting an avoidance or affirmative defense" (Id. , ¶ 19). To begin with, many of these defenses are wholly conclusory and unsubstantiated (see Fireman's Fund Ins. Co. v. Farrell , 57 AD3d 721, 723 [2d Dept 2008] ), and, in any event, already have been rejected by the Court.
As for the remaining defenses, the doctrine of assumption of risk has no applicability to this non-tort action (see Ballow v. Lincoln Fin. Corp. , 139 AD3d 988, 989 [2d Dept 2016] ).
The defense of economic duress requires a showing of "a wrongful threat which precludes the exercise of [the party's] free will" ( Finserv Computer Corp. v. Bibliographic Retrieval Servs. , 125 AD2d 765, 766 [3d Dept 1986] ), and JEDA has not provided any factual support for its allegation (see BOP, ¶ 12).
Defendant likewise cannot prevail on its affirmative defense of lack of consideration given the State's reliance on a statutory/regulatory theory of recovery. In any event, JEDA's contention that its execution of the Inspection Agreement was unsupported by consideration is belied by the plain text of the agreement, which recites that JEDA executed the agreement in consideration for issuance of the Permits (see Andela Aff., ¶ 9; Ex. D).
The thirteenth affirmative defense also alleges fraud. To establish a defense based upon fraud, the answer must allege "misrepresentation or concealment of a material fact, falsity, scienter on the part of the wrongdoer, justifiable reliance, and resulting injury" ( IKB Intl. S.A. v. Morgan Stanley , 142 AD3d 447, 448 [1st Dept 2016] ; see DeAngelis v. Timberpeg E., Inc. , 51 AD3d 1175, 1178 [3d Dept 2008] ). "In addition, each of these essential elements must be supported by factual allegations sufficient to satisfy the requirement of CPLR 3016 (b) that the circumstances surrounding the fraud be pleaded in detail" ( Bramex Assoc. v. CBI Agencies , 149 AD2d 383, 384 [1st Dept 1989] ; see also Suffolk County Fed. Sav. & Loan Assn. v. Geiger , 57 Misc 2d 184, 186 [Sup Ct, Suffolk County 1968] ). JEDA's answer fails to plead the defense of fraud in compliance with CPLR 3016 (b), and its conclusory and unsupported submissions in opposition to the State's motion fail to raise a triable issue of fact concerning this defense.
JEDA waived the affirmative defense of improper service of process by failing to move for the dismissal of the Complaint within 60 days from service of its verified answer (see CPLR 3211 [e]; JP Morgan Chase Bank, N.A. v. Venture , 148 AD3d 1269, 1271 [3d Dept 2017] ).
With respect to the affirmative defenses of res judicata and/or collateral estoppel, JEDA argues that the State's claims are barred by the prior determination in the Court of Claims Action that there is no contract between the parties. The Court of Claims dismissed JEDA's claim based upon the failure to plead the existence of an enforceable contract, but the Appellate Division affirmed the dismissal solely on jurisdictional grounds (see 149 AD3d at 1391–1392 ).
As to res judicata , neither the dismissal of the claim for pleading insufficiency nor the dismissal for lack of subject matter jurisdiction was a dismissal on the merits so as to give rise to claim preclusion (see Canzona v. Atanasio , 118 AD3d 837, 841 [2d Dept 2014] ). JEDA's invocation of collateral estoppel fails inasmuch as the Appellate Division merely decided that JEDA's claim was untimely (see 149 AD3d at 1392 ). Moreover, the issue of whether the Permits constitute an enforceable contract is not material to the determination of the State's claim under the Highway Law and attendant regulations.
In any event, there is no proof from JEDA that the State did raise (or could have raised) a counterclaim for the relief sought herein. In this connection, the Court notes that New York has not adopted a compulsory counterclaim rule (see CPLR 3019 [a]; Batavia Kill Watershed Dist. in County of Greene v. Charles O. Desch, Inc. , 83 AD2d 97, 100 [3d Dept 1981], affd 57 NY2d 796 [1982] ).
Insofar as JEDA's contentions are premised on the argument made by the State in the Court of Claims Action (see Huffman Aff., Ex. 3, pp. 9–13), the contentions are more appropriately viewed as asserting the defense of judicial estoppel. However, as previously discussed, the State did not obtain any relief from the Appellate Division on the basis of its argument that the Permits are not a contract (see Rothstein & Hoffman Elec. Serv., Inc. v. Gong Park Realty Corp. , 37 AD3d 206, 207 [1st Dept 2007], lv denied 8 NY3d 812 [2007] ).
JEDA's statute of limitations defense also lacks merit. JEDA's bill of particulars does not disclose any basis for invocation of the statute of limitations (see BOP, ¶ 22), and the proof submitted by the State in support of its motion shows that this action was commenced within three years of DOT's initial September 24, 2009 demand for payment, which is the shortest limitations period potentially applicable to the State's claims (compare CPLR 214 [2 ] with 213 [1], [2] ). In its opposition and cross motion, JEDA has neither alleged nor established that the State did not timely commence this action (see generally Texeria v. BAB Nuclear Radiology, P.C. , 43 AD3d 403, 405 [2d Dept 2007] ). In fact, JEDA's opposition does not identify any particular limitations period and/or accrual date that is said to bar the State's claim.
Finally, the statute of frauds defense is inapplicable to the State's claims under the Highway Law and attendant regulations (see generally General Obligations Law § 5–701 ), and, in any event, there is a sufficient writing that satisfies the statute. Further, JEDA's bill of particulars is silent as to the statute of frauds (see BOP, ¶ 20), and JEDA submits no proof to substantiate this defense.
C. Collection Fee
The State seeks recovery of a 22% collection fee pursuant to State Finance Law ("SFL") § 18. Under the cited statute,
[A] debtor that fails to make payment of a debt ... within [90] days of receipt by the debtor of the first billing invoice or notice may be assessed an additional collection fee charge to cover the cost of processing, handling and collecting such debt, not to exceed [22%] of the outstanding debt, which collection fee shall be added to and payable in the same manner as the outstanding debt. The assessed collection fee charge may not exceed the agency's estimated cost of processing, handling and collecting such debt ( SFL § 18 [5 ] ).
The State submits the affirmation of Assistant Attorney General Jorge A. Rodriguez, who avers that when a case is referred by a state agency to the Office of the Attorney General ("OAG") for collection, OAG collects a fee from the referring agency in the amount of 22% of the outstanding debt (see Rodriguez Aff., ¶ 5). Plaintiff also submits proof that OAG gave JEDA notice of its intention to pursue a collection fee in this action if payment in full was not made by May 9, 2012 (see Id. , ¶ 6; Ex. 1). Inasmuch as the State has established that JEDA failed to pay the amount owed to DOT after due demand, the State has demonstrated its prima facie entitlement to the requested 22% collection fee.
The State also has established its entitlement to prejudgment interest from April 10, 2012, the presumed date of JEDA's receipt of plaintiff's demand (see SFL § 18 [2 ] ).
In opposition, JEDA argues that the collection fee should be denied because the State is requesting the maximum collection fee of 22% "without identifying the agency's costs of processing, handling, and collecting the alleged debt" (Defendant's Brief, pp. 5–6). However, the proof submitted by the State shows that OAG estimates its actual cost of processing, handling and collecting debts at 22% of the total recovery (see Rodriguez Aff., ¶¶ 5–6). In fact, OAG's collection fee has been set at 22% since April 1989 (see Plaintiff's Reply Brief, Ex. A), which preceded the 1992 enactment of SFL § 18 (5) (Id. , Ex. B [Copy of the 1992 Session Laws Executive Department Memorandum, at p. 2528] ).
For the reasons stated above, the Court rejects JEDA's alternative argument that "[p]laintiff has not established any entitlement to the[ ] monies allegedly owed" (Id. ).
Under the circumstances, the Court is satisfied that the State is entitled to a 22% collection fee.
Given DOT's representation by OAG, this case is unlike those in which courts have required agencies/entities represented by outside counsel to submit evidence of an estimate of their costs of collection (see e.g. Commissioners of State Ins. Fund v. Kassas , 5 Misc 3d 1012[A], 2004 NY Slip Op 51337[U], *4–5 [Civ Ct, NY County 2004]; Commissioners of State Ins. Fund v. Brooklyn Barber Beauty Equip. Co. , 191 Misc 2d 1, 12 [Civ Ct, NY County 2001], clarified on denial of reconsideration 2002 NY Slip Op 50709[U] [Civ Ct, NY County 2002], appeal dismissed 2 Misc 3d 14 [App Term, 1st Dept 2003] ).
CONCLUSION
Based on the foregoing, the State has demonstrated its entitlement to summary judgment and to judgment on its Complaint in the principal amount of $108,456.62, together with statutory prejudgment interest from April 10, 2012, a 22% collection fee pursuant to SFL § 18, and the costs and disbursements of this action. Accordingly, it is
The parties' remaining contentions, to the extent not specifically addressed, have been considered and found to be either lacking in merit and/or unnecessary to reach given the disposition rendered herein.
ORDERED that plaintiff's motion for summary judgment is granted, in accordance with the foregoing; and it is further
ORDERED that defendant's affirmative defenses are dismissed; and it is further
ORDERED that defendant's cross motion is denied in all respects; and finally it is
ORDERED that, within twenty (20) days from the date of this Decision & Order, plaintiff shall submit a proposed order and judgment to the Court on notice to defendant incorporating the relief granted herein and setting forth the specific amounts due and owing to plaintiff. Defendant shall then have ten (10) days from the service of such submission to be heard as to the form of the order and judgment.
This constitutes the Decision & Order of the Court, the original of which is being transmitted to plaintiff's counsel for filing and service; all other papers are being sent to the Albany County Clerk. The signing of this Decision & Order shall not constitute entry or filing under CPLR 2220, and counsel is not relieved from the applicable provisions of that section respecting filing, entry and Notice of Entry.
Papers Considered:
1. Notice of Motion for Summary Judgment, dated October 5, 2017; Affirmation of Jorge A. Rodriguez, Esq. in Support of Motion for Summary Judgment, dated October 5, 2017, with attached exhibits 1–6; Affidavit of Kenneth Andela, P.E., sworn to September 22, 2017, with attached exhibits A–P; Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment, dated October 5, 2017;
2. Notice of Cross–Motion to Dismiss, dated December 14, 2017; Affirmation of Justin T. Huffman, Esq., dated December 14, 2017, with attached exhibits 1–5; Affidavit of Michael D. O'Neill, sworn to December 14, 2017; Memorandum of Law, dated December 14, 2017;
3. Reply Affirmation of Jorge A. Rodriguez, Esq. in Further Support of Motion for Summary Judgment and in Opposition to Defendant's Cross–Motion to Dismiss, dated January 12, 2018; Reply Affidavit of Kenneth Andela, P.E., sworn to January 8, 2018; Memorandum of Law in Further Support of Plaintiff's Motion for Summary Judgment and in Opposition to Defendant's Cross–Motion to Dismiss, dated January 12, 2018, with attached exhibits A–B; and
4. Letter of Justin T. Huffman, Esq., dated January 24, 2018.