Opinion
651143/10.
Decided July 7, 2011.
Goldberg Connolly, Rockville Centre, NY, William J. Tinsley, Jr., Esq., For the Plaintiff.
The City of New York Law Department, New York, NY, Terri Feinstein Sasanow, Esq., For the Defendant.
By this motion, Defendants, City of New York ("City") and New York City Department of Transportation ("DOT"), seek to dismiss Plaintiff's Complaint in its entirety pursuant to CPLR 3211(a)(5) (7). Defendants argue that Plaintiff's claims are barred by (i) collateral estoppel, and (ii) failure to file a proper notice of claim in accordance with § 7-201(a) of the Administrative Code of the City of New York ("Code").
The events giving rise to this lawsuit are as follows. On or about May 2, 2008, Plaintiff, Bowne Management Systems, Inc. ("Bowne"), entered into a contract (the "SIMS Contract") with Defendant DOT, in which Plaintiff was to create and implement a Sign Information Management System ("SIMS") that would allow DOT to inventory, identify, and manage approximately 1.3 million traffic control devices located throughout the five boroughs of the City of New York (the "Project"). (Compl. ¶ 4.) Plaintiff was selected by Defendant DOT via a written contract Plaintiff had entered into with the New York State Office of General Services ("OGS"). (Compl. ¶ 5.) Pursuant to Article 1 of the Project Definition, which was part of the SIMS Contract, the scope of services to be provided by Plaintiff included the designing, building, and implementing of SIMS, as well as training of DOT users in SIMS functionality and training DOT staff to support and upgrade SIMS. (Compl. ¶ 7.) Pursuant to Article II, the Project was to terminate eighteen (18) months after the date the Notice to Proceed was issued, which was on or about June 30, 2008. (Compl. ¶ 9.) Pursuant to Article III, DOT agreed to pay Plaintiff an amount not to exceed $10,024,226.00 for the completion of the SIMS Contract. (Compl. ¶ 8.)
According to Bowne, Plaintiff clashed with Defendants from the outset and both Defendants made unreasonable demands and disrupted and prevented Plaintiff's performance of the SIMS Contract. (Compl. ¶ 20.) Defendant DOT, through its Project consultant, Gartner, required Plaintiff to undertake and comply with excessive reporting requirements that were not required by the SIMS Contract specifications and which interfered with Plaintiff's performance. (Compl. ¶ 26.) In addition, Gartner required Plaintiff to submit a "Stoplight Report," which required significantly more information and onerous reporting than the OGS-required weekly status report. (Compl. ¶ 28.)
On or about January 23, 2009, Defendant DOT issued a Notice to Cure letter to Plaintiff based upon Plaintiff's alleged failure to satisfy its obligations to perform its work in accordance with the SIMS Contract. (Compl. ¶ 12.) On April 13, 2009, Plaintiff appeared at an "Opportunity to be Heard" meeting. Pursuant to Article III.13(a) of the SIMS Contract, Defendant DOT terminated the Contract for cause on June 11, 2009. (Compl. ¶ 16.)
On June 18, 2009, Plaintiff commenced an Article 78 proceeding in Supreme Court, Nassau County, seeking vacatur of DOT's default determination, and containing plenary claims for damages under breach of contract, account stated and quantum meruit theories, as well as separate claims for declaratory and injunctive relief ("Plenary Claims") (Ex. B.) Plaintiff's equitable claims sought, among other things, reinstatement of the Contract, and payment of outstanding invoices. (Ex. B.)
No notice of claim was filed prior to the commencement of the Article 78 proceeding as required by Code § 7-201(a). Plaintiff's notice of claim was filed with the Office of the Comptroller for the City of New York on or about August 6, 2009, "seeking damages for, among other things, DOT's unjustifiable breach of the SIMS Contract by DOT's active interference with and prevention of Bowne's performance of the SIMS Contract, as well as DOT's failure to remit payment on all of Bowne's properly submitted invoices." (Compl. ¶ 17.)
On August 31, 2009, Defendants answered the petition and moved to dismiss Plaintiff's Plenary Claims because inter alia of Plaintiff's failure to submit its Notice of Claim prior to the interposition of its Plenary Claims for damages. The petition and Defendants' motion to dismiss were submitted on September 25, 2009 after oral argument. Defendants' motion for a change of venue dated June 29, 2009 was also submitted on September 25, 2009.
In a decision and order dated October 2, 2009, Justice Timothy D. Driscoll granted Defendants' venue motion, but declined to rule on the petition and Defendants' motion to dismiss.
After the transfer of the proceeding from Nassau County to New York County, the petition and Defendants' motion to dismiss were re-calendared, and Plaintiff cross-moved for partial summary judgment on its account stated claim, and to strike the answer. Oral argument on all motions was held before Justice Judith J. Gische on February 11, 2010.
In a decision, order, and judgment dated March 16, 2010, Justice Gische dismissed the petition in its entirety, granted Defendants' motion to dismiss, and denied Plaintiff's cross-motion for partial summary judgment and to strike the answer. Bowne Management Systems, Inc. v. New York City Department of Transportation, 2010 NY Slip Op 30563U (Sup. Ct. NY Co. March 16, 2010). Justice Gische's decision stated that all of Plaintiff's claims were dismissed with prejudice, except for its breach of contract and declaratory judgment claims, which were dismissed without prejudice. Id. at 24. In regard to the breach of contract claim, the court noted that "[w]here the parties' dispute is primarily focused on whether the damages allegedly sustained by the petitioner arise from a breach of the contract, those claims must be resolved in a plenary action, not an Article 78 proceeding." Id. at 22. Despite this language in the decision, the judgment merely stated that the petition was "denied in all respects." Id. at 24.
As a result of this inconsistency between the decision and the judgment, Plaintiff moved to resettle the judgment to modify the form of dismissal of its breach of contract and declaratory judgment claims from "with prejudice" to "without prejudice." In a decision and order dated October 15, 2010, Justice Gische granted Plaintiff's motion only to the extent of correcting the mistaken reference in her decision to Bowne's quantum meruit claim, and denied Defendants' cross-motion. The court stated that it was not inconsistent to have upheld Defendants' default determination while at the same time allowing Plaintiff to pursue certain plenary claims in a subsequent action because denial of the petition did not "distinguish Bowne's claims for damages."
The March 16, 2010 decision mistakenly referenced Bowne's quantum meruit claim as the second cause of action rather than the fourth cause of action.
On July 30, 2010, Plaintiff commenced this plenary action alleging two breach of contract claims against the City and DOT. Plaintiff's first cause of action alleged that DOT materially breached the Contract by interfering with and preventing Plaintiff's performance of the SIMS Contract, and sought damages in the amount of $3,911,183.67. (Compl. ¶ 20, 51, 53.) Plaintiff's second cause of action alleged that DOT materially breached the Contract by failing to pay the outstanding balance on Plaintiff's invoices submitted in July 2008 through June 2009 in the aggregate amount of $2,957,424,25. (Compl. ¶ 62, 63.)
The amount of the damage claim is based on the amount Plaintiff claimed it expended in performing the Contract, less the amounts it was paid by DOT.
The amount of the claim is based on the amount Plaintiff claimed it expended in performing the Contract, less the amounts it was paid by DOT.
On April 25, 2010, Defendants filed a Motion to Dismiss the complaint pursuant to CPLR Rule 3211(a)(5) (7), alleging that Plaintiff's claims were barred by collateral estoppel and its failure to file a proper notice of claim in accordance with Code § 7-201(a).
For purposes of this motion, it must be presumed that the allegations of the Complaint to be true and accord them "every favorable inference," except insofar as they "consist of bare legal conclusions" or are "inherently incredible or flatly contradicted by documentary evidence." Beattie v. Brown Wood, 243 AD2d 395, 395 (1st Dep't 1997).
Defendants' argue that the complaint should be dismissed because Plaintiff's claims are barred by collateral estoppel. Defendants' assert that the complaint raises identical issues necessarily decided in the prior action and Plaintiff had a full and fair opportunity to litigate its claims in the Article 78 proceeding.
Plaintiff responds that collateral estoppel does not bar its breach of contract claims because Justice Gische did not address the claims in the Article 78 proceeding. Plaintiff further argues that Justice Gische's decision evidences her decision not to convert the Article 78 proceeding into a plenary action, and instead to dismiss the contract claims without prejudice to permit Bowne to bring those claims in a subsequent, plenary action.
The doctrine of collateral estoppel, or issue preclusion, "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party whether or not the tribunals or causes of action are the same." Ryan v. New York Telephone Co., 62 NY2d 494, 500 (1984). The doctrine applies "if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action." Parker v. Blauvelt Volunteer Fire Co., Inc., 93 NY2d 343, 349 (1999); see also Ryan, 62 NY2d at 501. The proponent of collateral estoppel has the burden of demonstrating the identicality and decisiveness of the issue, while the opposing party must establish the absence of a full and fair opportunity to litigate the issue in the prior action or proceeding. Parker, 93 NY2d at 349.
It is clear that Defendants have not met their burden of demonstrating the elements of collateral estoppel. Although the breach of contract issue raised in the current proceeding is similar to those raised in the Article 78 proceeding, they were severed and dismissed without prejudice by Justice Gische. As such, the breach of contract issue was not necessarily decided in the first proceeding and Bowne did not have a full and fair opportunity to litigate.
Despite the court's decision in the Article 78 proceeding that Defendant DOT had a rational basis for Bowne's termination, the court did not address whether Bowne could be entitled to breach of contract damages. Instead, Justice Gische severed the claims from the Article 78 proceeding and dismissed them without prejudice. The March 16, 2010 opinion noted that,
[w]here the parties' dispute is primarily focused on whether the damages allegedly sustained by the petitioner arise from a breach of the contract, those claims must be resolved in a plenary action, not an Article 78 proceeding. Here, Bowne is not precluded from commencing a plenary action for breach of contract.
Bowne, 2010 NY Slip Op 30563U at 22.
Similarly, in her October 15, 2010 decision, she wrote that under CPLR 103, where a claim is improperly brought in an Article 78 proceeding, the court can convert it to a plenary action should it choose to do so. She chose not to: "This Court, in its discretion, however, found that Bowne's contract claims would be best addressed in a newly commenced plenary action, rather than having the court cull out issues from a petition which included many other claims that the court had dismissed." (Ex. X at 5.)
The determination that DOT had a rational basis for termination did not treat the issue whether DOT could be liable to Bowne for breach of contract damages; therefore, it was not necessarily decided in the Article 78 proceeding. Justice Gische wrote, "[i]t remains to be seen, however, whether (as claimed by Bowne) the respondents' decision to terminate the contract was a breach of, or a default under, that contract and, if so, whether Bowne is entitled to monetary damages from the defendants." Id. at 4. She noted that "[t]he importance of these deadlines is a discretionary [* matter for DOT and not an objective, qualitative basis for review by the court." Bowne, 2010 NY Misc. LEXIS 2611 at 20. Therefore, the prior decision did not necessarily decide the issue concerning DOT's interference and prevention of Bowne's performance and failure to pay Bowne. Despite Defendants' argument, Justice Gische's language that "[i]t remains to be seen" clearly establishes that she did not consider or determine the breach of contract claim in the Article 78 proceeding.
Several cases have held that an action could be found rational in an Article 78 proceeding, but could still be found wrongful in a plenary action for breach of contract. See, e.g., Goodstein Constr. Corp. v. Gliedman, 117 AD2d 170 (1st Dep't 1986); Latino Officers Ass'n v. City of New York, 253 F.Supp.2d 771 (S.D.NY 2003) (holding that a governmental official's conduct could be held rational in an Article 78 proceeding, but that determination does not preclude the possibility that it may be found wrongful in a plenary action). Clearly, Justice Gische's holding that DOT had a rational basis for Bowne's termination did not necessarily result in any decision concerning Bowne's breach of contract claims before this Court.
Parker, which Defendants rely on, is distinguishable. In Parker, the Court of Appeals held that Plaintiff was collaterally estopped from litigating his claims of deprivation of his constitutional rights since they were identical to the allegations of constitutional violations asserted in the Article 78 proceeding. 93 NY2d at 350. Those prior claims were held to be "without merit" and dismissed by the Appellate Division. Parker v. Blauvelt Volunteer Fire Co., Inc., 222 AD2d 437, lv. denied 87 NY2d 812. Contrary to Parker, Justice Gische did not address Plaintiff's breach of contract cause of action, let alone dismiss it for being "without merit," when she concluded that the termination was rational. In fact, she held that it remains to be seen whether Bowne is entitled to a remedy. Therefore, Plaintiff's breach of contract causes of action can be pursued in this claim and are not barred by collateral estoppel.
Additionally, the breach of contract claim was not material or essential to the Article 78 proceeding. Whether or not Defendants breached the contract was not material to the question of Bowne's performance of the contract, which was at issue in the Article 78 proceeding.
Lastly, Plaintiff was not provided a full and fair opportunity to litigate its contract claims in the Article 78 proceeding, as they were dismissed without prejudice to bringing the breach of contract claim in a plenary action. In O'Donnell v. Ferguson, the Fourth Department concluded that "the court in the prior proceeding expressly abstained from deciding [the federal constitutional causes of action and the cause of action under Labor Law § 201-d] and, in so doing, deprived plaintiff of a full and fair opportunity to litigate those issues to conclusion." 23 AD3d 1005, 1007 (4d Dep't 2005). Similarly, here since Justice Gische clearly held that Bowne was not precluded from commencing a plenary action, there was no full and fair opportunity to litigate the contract claim.
Since Plaintiff's current breach of contract claim was not necessarily decided or material in the Article 78 proceeding, nor did Bowne have a full and fair opportunity to litigate the issue in the earlier action. This claim is not barred by collateral estoppel.
Defendants also move to dismiss the complaint for Plaintiff's failure to file a proper Notice of Claim under Code § 7-201(a). Defendants contend that the two breach of contract causes of action set forth in the complaint are not referred to in Plaintiff's Notice of Claim and the demand for damages made in the complaint is completely different from the demand set forth in the Notice of Claim. Plaintiff argues that its Notice of Claim to the Comptroller adequately notified the City of the claims set forth in the complaint.
Certainly, compliance with § 7-201(a) is a prerequisite to the right to sue the City for damages. Raven Elevator Corp. v. City of New York, 291 AD2d 355, 356 (1st Dep't 2002). However, Defendants were put on sufficient notice through Plaintiff's Notice of Claim, which clearly alerted Defendants to Plaintiff's breach of contract claims. Thus, there has been compliance with § 7-201(a).
Accordingly, this motion is denied.