Opinion
EF2020-267291
02-02-2021
In the Matter of the Application of CITY OF RENSSELAER, New York, Petitioner, For an Order Staying Arbitration Pursuant to Article 75 of the Civil Practice Law and Rules v. RELENTLESS AWARENESS, LLC, Respondent.
Girvin & Ferlazzo, P.C., Attorneys for Petitioner, Christopher P. Langlois, Esq., of counsel, 20 Corporate Woods Boulevard, Albany, New York 12211 Harris Beach PLLC, Attorneys for Respondent, Daniel R. LeCours, Esq, of counsel, Meaghan T. Feenan, Esq., of counsel, 677 Broadway, Albany, New York 12207
Girvin & Ferlazzo, P.C., Attorneys for Petitioner, Christopher P. Langlois, Esq., of counsel, 20 Corporate Woods Boulevard, Albany, New York 12211
Harris Beach PLLC, Attorneys for Respondent, Daniel R. LeCours, Esq, of counsel, Meaghan T. Feenan, Esq., of counsel, 677 Broadway, Albany, New York 12207
Henry F. Zwack, J. The petitioner, City of Rensselaer ("City"), has moved for an order pursuant to CPLR 7503 (b) staying arbitration as demanded in the Demand for Arbitration dated October 1, 2020 and filed on behalf of respondent Relentless Awareness, LLC ("Relentless"). Relentless opposes.
According to the Petition, Relentless filed a Demand for Arbitration ("Demand") with the American Arbitration Association, relating to a June 1, 2019 Client Service Agreement ("CSA") it claims was entered into between Relentless and the City. The CSA recites that Relentless would perform "public relations, advertising, and communication services" for the City for the period from June 1, 2019 through May 31, 2020, and that the City was required to pay $4,000 per month, plus additional monthly fees for media and production services not to exceed $20,000 (with the additional fees being subject to prior approval by the City). The CSA also provides that the monthly retainer was due on receipt, and the additional fees due within fifteen days. According to the Demand, Relentless sent the City invoices for monthly retainer fees and other charges due for November, 2019 through May, 2020, which the City has refused to pay. In the Demand, Relentless seeks an award of $25,013.68, together with interest of $28,053.32, for a total award against the City of $53,067.
According to the City, the CSA is invalid because, although it was signed by the City's former Mayor, it was never awarded or approved by the City's Common Council as required by the City's Charter. The City also asserts that the CSA lacks the certification by its Corporation Counsel, also required by the City's Charter. Specifically, Section 75 of the City Charter provides that any contract involving more than $5,000 may only be awarded by the City's Common Council, and Section of 268 of the City's Charter provides that any contract involving more than $1,000 must be endorsed by the City's Corporation Counsel to the effect that it was executed on behalf of the City and by a person with "authority and power to make such contract." In sum, the City asserts that the CSA was not approved by the City Council and also lacks the required certification by its Corporation Counsel.
In opposition, Relentless argues that the petition to stay arbitration is untimely, that the CSA was entered into in compliance with the City's Charter, and that the City ratified the CSA by its conduct — including the payment of six invoices (for July 2019 through November 2019) Relentless submitted to the City, and the City's acceptance of services provided by Relentless under the CSA. In support, Relentless offers the Affidavit of its managing partner and social media director, Joe Bonilla ("Bonilla"), who tells the Court that it first entered into a contract with the City of Rensselaer Industrial Development Agency ("IDA") in May 2018, that Relentless performed that contract, and at the City's suggestion in Spring 2019 it entered into a new contract (the CSA) with the City in May 2019 — with the CSA to be paid from funds allocated to the Mayor's budget line in the annual budget, and therefore the CSA was essentially pre-approved by the Common Council during the annual budget process. Bonilla opines that other contracts (including contracts for legal services, communications, outreach support and other small contracts) were similarly approved by the City and without a specific approval or award by the City Council, and upon submission of these invoices the Common Council would vote approving payment — a practice he asserts continued until the election of the City's current Mayor and the appointment of the new Corporation Counsel, and the City's ensuing February 18, 2021 cancellation of the CSA. Also in support, Relentless offers copies of the City's 2019-2020 Budget and adopting Resolution, copies of the City's Common Council minutes (and Resolutions) for the period of June 2019 through October 2019, and copies of the six paid Relentless invoices, asserting the CSA was adopted and ratified by the Common Council's adoption of the City's Budget and the approval of payment for its six invoices. In Reply, the City offers the Affirmation by its Corporation Counsel, Philip J. Danaher, Esq. ("Danaher"), who tells the Court that the City did not pay Relentless's invoices dated September 30, 2019, November 1, 2019, and December 2, 2019 — well before the current Mayor and Corporation Counsel each took office — and that after January 2020 the Mayor and Corporation Counsel learned that the former Mayor signed the CSA. Further, that the City was unable to determine what, if any, services Relentless was actually providing under the CSA, and it was then determined that the CSA was never approved or adopted, as required by the City Charter, by the Common Council or certified by the Corporation Counsel. Danaher specifically denies Bonilla's claim that the CSA — because it was being paid from a Mayor's budget line in the annual budget — was "essentially pre-approved" by the Common Council in the budget process, or that the City has such a "standard practice". Lastly, Danaher reiterates that he reviewed City's records and was unable to locate any certificate by the Corporation Counsel certifying the former Mayor's authority to sign the CSA and no such certificate was ever issued.
A separate not-for-profit public benefit agency established pursuant to General Municipal Law Section 903[c].
For the reasons that follow the Court grants the Petition in its entirety and permanently stays arbitration.
On a motion to stay arbitration, the Court is mindful of its limited role — "to determine whether the dispute is arbitrable, which requires a showing that (1) it is lawful to arbitrate the dispute and (2) the parties have agreed to arbitrate such dispute" ( Matter of Board of Educ. of the Hudson City Sch. Dist. (Civil Serv. Empls. Assn., Local 1000, AFSCME, Columbia County, Local 811, Hudson City Sch. Dist. Aides Unit), 174 A.D.3d 1112, 1113, 105 N.Y.S.3d 594 [3d Dept. 2019], citations omitted). This said, the Court turns first to whether the City's petition to stay is timely. CPLR 7503[c] provides that an application to stay arbitration must be made within 20 days after the formal demand, which in this case was made on October 1, 2020, or it is deemed waived. The City's Petition filed October 20, 2020 is timely.
Even accepting respondent's claim of an earlier date for the arbitration demand (July 22, 2020) the Petition would still be timely, given the Governor's Executive Order 202.67 which extended "any specific time limit for the commencement, filing or service of any legal action, notice, motion, or other process ... for any civil case" through November 2, 2020.
The Court is also mindful that a petition to stay arbitration may be granted where there are no substantial issues raised as to whether a valid agreement calling for arbitration was made ( Board of Educ. Of City of New York v. Local 891, Intern. Union of Operating Engineers , 270 A.D.2d 7, 705 N.Y.S.2d 29 [1st Dept. 2000] ). Here, the City has raised such a substantial issue — that the former Mayor lacked authority and the CSA is invalid. "[W]here there is lack of authority on the part of agents of a municipal corporation to create a liability, except by compliance with well established regulations, no liability can result unless the prescribed procedures is complied with and followed. Consequently, those dealing with municipal agents must ascertain the extent of the agent's authority, or else proceed at their own risk" ( Casa Wales Hous. Dev. Fund Corp. v. City of New York, 129 A.D.3d 451, 452, 11 N.Y.S.3d 31 [1st Dept. 2015], internal quotation and citations omitted). As noted, the City denies that the CSA is valid and asserts that it signed by its former Mayor in derogation of the City Charter — that the CSA was neither approved by the Common Council or certified by the Corporation Counsel — and therefore may not be enforced as against the City. The Court has reviewed the copies of the Common Council Minutes (and adopted Resolutions) for the period of June through October 2019 and cannot find any mention of the CSA, or its approval or adoption by the Common Council, or any mention whatsoever of the CSA, or a monthly invoice from Relentless, or the Common Council's approval of such an invoice. This said, together with the Verified Petition and supporting Affidavits by Danaher, the City has prima facie established its entitlement to an Order staying arbitration.
However viewed, there is simply no merit to Relentless’ claim that the CSA was entered into in compliance with the City's Charter. The record clearly shows that the Common Council never adopted a resolution awarding the contract. Further, and particularly significant, the CSA lacks the required certification by the Corporation Counsel that the Mayor had authority to sign it. The lack of certification strips away credibility to Relentless's claim that the CSA is valid, because it "was informed by several current and former officials that this contract execution was in accordance with the City's standard practice ... (and) was essentially pre-approved by the Common Council in the budget process ... (and) upon submission of invoices ... (it) would vote concerning whether to pay them ..." The City's Charter could not be more clear on this issue, and as confirmed by the City's Corporation Counsel this is not the practice followed by the City. In any event, Relentless was not entitled to presume that the former Mayor was acting within his authority. Given that his authority (and the contract process) is clearly stated in the City's Charter, there is a conclusive presumption that Relentless knew the extent of his authority when dealing with him ( City of Zanesville, Ohio v. Mohawk Data Sciences Corp., 97 A.D.2d 64, 66, 468 N.Y.S.2d 271 [4th Dept. 1983] ).
The Court turns next to Relentless's argument that the City ratified the CSA by conduct, "including the payment of invoices and acceptance of services thereunder ..."
In the Court's view, given that the CSA is invalid because of the former Mayor's failure to comply with the City's established procedures, and because he lacked the requisite authority, it may now only be enforced if the record establishes that the Common Council had knowledge of the material facts concerning the CSA — in sum that the Council "were well aware of and acquiesced" to the CSA ( Della Rocco v. City of Schenectady, 278 A.D.2d 628, 631, 717 N.Y.S.2d 704 [3d Dept. 2000] ). "The act of ratification, whether express or implied, must be performed with full knowledge of the material facts relating to the transaction, and the assent must be clearly established and may not be inferred from doubtful or equivocal acts or language" ( Utopia Home Care, Inc. v. Revival Home Health Care, Inc., 176 A.D.3d 900, 902, 109 N.Y.S.3d 467 [2d Dept. 2019], quotations and citations omitted). Where, as here, it is claimed that the ratifying acts are payments made pursuant to the agreement ( Elia v. Highland Cent. School Dist., 78 A.D.3d 1265, 1269-1270, 909 N.Y.S.2d 836 [3d Dept. 2010], quotations and citations omitted), the record must also establish that the payments were made "with knowledge of the material facts" ( CIT Tech. Fin. Servs., Inc. v. Franklin First Financial, Ltd., 132 A.D.3d 715, 715-716, 18 N.Y.S.3d 112 [2d Dept. 2015], citations omitted), and were for services actually provided pursuant to the terms of the CSA ( Matter of New York State Med. Transporters Assn. v. Perales, 77 N.Y.2d 126, 131, 564 N.Y.S.2d 1007, 566 N.E.2d 134 [1990] ).
The City's Corporation Counsel tells the Court that the City "was unable to determine what services, if any, Relentless actually provided" pursuant to the CSA. Relentless, beyond the bald claim that it "performed under the Contract and the City accepted Relentless's services" provided no proof that it provided any of the required services under the CSA — including "managing all of the City's social media accounts ... coordinating announcements and communications to the public ... regarding the City; attending and facilitating a weekly meeting with City officials ... working with the City's Planning Department ..." The invoices provided by Relentless, beyond billing for "consulting" make no mention that the billings were pursuant to the CSA, or what services were provided pursuant to it (see CIT, 132 A.D.3d at 716, 18 N.Y.S.3d 112 ). All said, the record simply fails to establish that the Common Council had full (or any) knowledge of the CSA, or that the City received any services pursuant to the CSA, or that the monthly payments clearly related to the CSA. Stated differently, on the issue of ratification the burden of proof was on Relentless. Thus, at a minimum, it was incumbent that it provide some proof in admissible form that it provided the City any of the eight specific services set out in the CSA and that the invoices were for services pursuant the CSA — which it simply failed to do.
In sum, the CSA as a contract is invalid and creates no obligation or liability for the City. Relentless, beyond conjecture and argument, failed to establish that the City's Common Council ever ratified the CSA, or that it ever received a copy of the CSA, or were aware of any of its terms, or that Relentless provided any services pursuant to the CSA, or that any monthly payment for "consulting" was for services pursuant to the CSA.
Accordingly, it is
ORDERED , that the City of Rensselaer Petition to permanently stay arbitration is granted; and it is further
ORDERED, that arbitration as demanded in the October 1, 2020 Relentless, Awareness LLC Demand for Arbitration is permanently stayed.
This constitutes the Decision and Order of the Court.