Opinion
No. 28292/11.
2012-06-21
FLASH SECURITY SERVICES,, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules v. The CITY OF NEW YORK, New York City Department of Education, New York City School Construction Authority and office of the Inspector General,, Respondents.
David H. Singer & Associates, LLP, New York, for Plaintiff. Michael A. Cardozo, Corp. Counsel of the City of New York, New York, for Defendant.
David H. Singer & Associates, LLP, New York, for Plaintiff. Michael A. Cardozo, Corp. Counsel of the City of New York, New York, for Defendant.
DAVID SCHMIDT, J.
Upon the foregoing papers, petitioner Flash Security Services moves for a judgment pursuant to Article 78 of the CPLR: 1). vacating the decision of the respondents, dated August 19, 2011, disqualifying the petitioner from performing services for the respondents; 2). vacating the decision of the respondents, dated August 19, 2011, imposing a penalty against the petitioner by termination of the petitioner's eligibility to reapply for prequalification status until November 30, 2015; and 3). compelling the respondents to comply with the requirements of NYCRR 9600.5(a) and the Due Process Clause of the United States Constitution, by affording petitioner an opportunity to challenge and to defend the charges against the petitioner.
Background
Flash Security Services (Flash) is a corporation licensed by the New York Department of State to provide both armed and unarmed security services. Flash maintains a central office at 43 Westchester Square in the Bronx. Respondent, the School Construction Authority (SCA) contracted with Flash to provide security services at various SCA sites. SCA is responsible for constructing and renovating schools in New York City. To this end, the SCA pre-qualifies potential bidders, administers the solicitations to bid and the award of contracts to responsible contractors. The SCA has established guidelines for the qualification and evaluation of potential contractors and vendors seeking to be placed on a prequalification list must complete a prequalification application. This process is designed to ensure that a contractor doing business with the SCA has the requisite business integrity to perform public work and has the technical and financial capability to perform the work.
Flash, which is owned by Jesurobo Adeghe, was providing security services at an SCA site at Public School 188 located at 544 7th Avenue in Brooklyn. Mr. Adeghe, in an affidavit in support of this petition, states that he personally provides a summary of the SCA rules to his employees and instructs them to become fully familiar with the site they guard, to always carry identification, and to maintain hourly progress reports. On October 15, 2010, a Flash security guard failed to present his security guard identification card to an SCA representative, claiming that he did not have it on his person. Mr. Adeghe states that he received a phone call from Jeffrey Igbinigun at that time informing him that he did have his security identification card. Adeghe states hat he directed Mr. Igbinigun to come to his office right away and dispatched a replacement security guard to the site. Mr. Adeghe further states that Mr. Igbinigun did not come to his office, but rather, called him and stated that he no longer wished to work for Flash
In a letter dated November 29, 2010, the SCA notified petitioner that it was reviewing Flash's continuing ability to participate in SCA projects The letter stated “[s]pecifically, we would like to discuss with you Flash's participation in a project at PS 188 in Brooklyn where it is working as a subcontractor to Summit Corporation.” The letter requested petitioner to contact SCA to set up a meeting to discuss the matter and stated that Flash should “bring to the meeting any materials you believe would help address our concerns. You may be accompanied by counsel to any such meeting if you so desire.” A meeting took place on December 15, 2010 with SCA representatives Lynn Farrell, Deputy Counsel, Susan Petraglia, Assistant Inspector General and William Magnuson, investigator. Mr. Magnuson was the individual at the PS 188 site on October 15, 2010 that had requested the security guard to produce his identification card, which he failed to do. The SCA representatives informed Mr. Adeghe that they had interviewed Mr. Igbinigun. Mr. Adeghe produced a copy of Mr. Igbinigun's security guard license and identification and was then requested by SCA to submit sign-in sheets and cancelled payroll checks with respect to all employees assigned to PS 188. He claims he forwarded all of this information to SCA promptly.
Mr. Adeghe received a letter from SCA, dated August 19, 2011 which stated in pertinent part:
“The SCA has determined that Flash Security Services International (“Flash”) submitted false and misleading documents to the Authority concerning the identity of one of the security guards it assigned to SCA job sites.
Therefore, in accordance with Section 9600.3(d) of the SCA's “Guidelines for Qualification and Evaluation of Contractors, Subcontractors, Consultants, Vendors and Suppliers,” Flash shall be disqualified from working for the SCA and that it shall not be eligible to reapply for prequalification status until November 30, 2015.”
The Instant Article 78 Proceeding
Petitioner, through the instant Article 78 proceeding, seeks to vacate the SCA determination disqualifying it from performing services for SCA and terminating its' eligibility to reapply for pre-qualification status until November 30, 2015. Petitioner argues that the SCA's decision was arbitrary and capricious because there was no evidence that Flash submitted false and misleading information to the SCA. Additionally, petitioner contends that the SCA failed to follow the appropriate investigation procedure thereby depriving Flash of due process of law. Finally, petitioner maintains that the penalty imposed against Flash was excessive and should be overturned.
In opposition, respondents argue that the SCA's determination to suspend Flash's prequalification status was, in all respects, rational, reasonable and not arbitrary or capricious and that Flash was not deprived of due process. Additionally, respondents argue that the proceeding should be transferred to Queens County as it is the proper venue pursuant to CPLR 506(b). Respondents point out that petitioner commenced this proceeding in Kings County where PS 188 is located but contend that Queens was the proper venue as that is where the SCA's office is located, and is the location where the SCA made the determination which petitioner seeks to have vacated.
CPLR 7804(b) provides that “a [p]roceeding under this article shall be brought in the supreme court in the county specified in subdivision (b) of section 506 except as that subdivision otherwise provides.” CPLR 506(b) states that
“[a] proceeding against a body or officer shall be commenced in any county within the judicial district where the respondent made the determination complained of or refused to perform the duty specifically enjoined upon him by law, or where the proceedings were brought or taken in the course of which the matter sought to be restrained originated, or where the material events otherwise took place, or where the principal office of the respondent is located ...”
Respondents argue that the determination complained of, and the material events, took place at the SCA's principal office in Queens County. Thus, they maintain the proper county for venue of this action is in Queens County. In support of this position, they submit two cases KMB Warehouse Distributiors Inc., v. Jones, et al., Index No. 7041/94 slip op. at 2–3 (Sup.Ct. Bronx Co. Mar 15, 1995 (Wilkins, J.) and Staten Island Council on the Arts v. Department of Cultural Affairs of the City of New York, etc., Index NO SP8327/91 (Sup.Ct. Richmond Co.). Initially, the court notes that the Staten Island Council for the Arts decision states that the contract entered into between the parties in that case specified New York County as the venue for any proceeding under or relating to the contract, and, is thus, distinguishable from the facts of the instant case. As far as the KMB case, the court will discuss below why the holding in this case is not binding on this court.
The interpretation of CPLR 506(b) was discussed in great detail in a recent case In the Matter of Riccelli Enters., Inc. v. State of New York Workers' Comp. Bd., (2012 N.Y. Misc. LEXIS 2241, 28–31 (N.Y. Sup.Ct. Apr. 30, 2012)). This case involved a determination made by the New York State Workers' Compensation Board. In Riccelli, the court held that
“The Board's interpretation of CPLR § 506(b), asserting that the county where the “material events” occurred is necessarily the “county where the Board's decision-making process” occurred effectively eliminates the “material events” assessment in a venue motion. The legislature has separately provided the venue “where the Board's decision-making process” occurred by specifying in CPLR § 506(b) that venue is also proper in the county where “the determination complained of” was made. Reading § 506(b) as the Board does-equating the location of the “material events” with the location of the “determination complained of”—renders one of the alternative prongs of assessment for venue under CPLR § 506(b) superfluous and unnecessary, thereby violating the canon of statutory construction that every word of the statute is to be given effect ( seeMcKinney's Cons Laws of NY, Book 1, Statutes, § 231; see also Matter of OnBank & Trust Co, 90 N.Y.2d 725, 731 [1997] (“We decline to read the [statute] in such a way as to render some of its terms superfluous.”).”
The Riccelli court discussed several decisions involving the interpretation of CPLR 506(b) which bear noting. Specifically, the court discussed Matter of Daley v. Board of Estimate, (258 AD 165, 166 [1939 ] ) which involved an Article 78 proceeding challenging a New York City Board of Estimate determination denying an application for death benefits. In Daley, the decedent had been employed in, and the accident upon which the claim was based, occurred in Queens County. The Daley court held that although the “official act” of the Board of Estimate had taken place in New York County, the material events—or the underlying events giving rise to the official act complained of—took place in Queens County, and thus, the respondent was “entitled to institute” the proceeding in Queens County ( see Matter of Daley, 258 AD at 166).
Similarly the Riccelli court discussed the holding in Hecht v. New York State Teachers Retirement System, (138 Misc.2d 198[Sup Ct, Suffolk County 1987)), which involved the denial of a death benefit claim by the New York State Teachers' Retirement System, which had contended that the proper venue for the action was Albany County because the determination complained of was made there and the act sought to be compelled (payment of a death benefits claim) could only be done in Albany County because the respondent's principal and only office was located there. The Hecht court, however, found that the material events that were subject of the dispute were the decedent's employment, which occurred in Nassau County, and his retirement, which occurred in Suffolk County, and denied the change of venue from Suffolk County to Albany County because the material events, at least in part, had occurred there. (Id. at 201–202). The Hecht court citing Weinstein–Korn–Miller, held that the general basis for venue of “ ‘where the material events took place has raised several problems of interpretation’ and it is clear that § 506(b):
“does not limit venue to the place where acts by the official whose conduct is challenged occurred. Such a limited interpretation would make the “material events” basis of venue superfluous, since the place where the challenged action occurred is already a proper venue under the first alternative of CPLR 506(b).”
The Riccelli court went on to state that
“[n]ot only is the county where the “material events otherwise took place” an equally proper venue, New York courts that have considered the issue have concluded that the location of the material events is the preferred venue ( see Lacqua v. O'Connell, 280 AD 31, 32 [1952] (“[I]t is the view of the Justices of the Appellate Divisions of both the First and Second Departments that such a proceeding can best be heard and determined where the material facts took place ...”); Ronco Communications & Electronics v. Valentine, 70 A.D.2d 773, 773, [1979] ) (“Each is proper but ‘where the events took place’ usually will and should govern.”), citing 8 Weinstein–Korn–Miller, N.Y. Civ Prac, ¶ 7804–04 .”
In Bros. of Mercy Nursing & Rehab. Ctr. v. Debuono, (237 A.D.2d 907, 907–908 [1997] ) a case involving a challenge to the Medicaid reimbursement rate formula the court held that “[t]he location of the material events “usually will and should govern” venue ( citing Ronco, 70 A.D.2d at 773 citing 8 Weinstein–Korn–Miller, N.Y. Civ Prac P 7804.04). The court noted that “[t]he location of the material events is “the county wherein occurred the underlying events which gave rise to the official action complained of” ( citing Matter of Daley, 258 App.Div. at 166).
Based upon the foregoing, the court finds that either Kings or Queens County would have been a proper venue under the provisions of CPLR 506(b) and, thus, finds no merit to respondents' argument that the proceeding should be transferred to Queens County. Interestingly, the court notes that in support of its opposition, respondents submit two decisions involving Article 78 proceedings seeking to reverse SCA determinations denying pre-qualification status to vendors; Cyan Contracting Corp., v. Klein, 2008 N.Y. Slip Op 30202U and Churchgate Corporation v. New York City School Construction Authority, 2008 N.Y. Slip Op 31685U, both of which were decided in New York County despite the fact that the SCA had made its determination in Queens County.
Turning to the merits of the petition, petitioner argues that the SCA's decision was arbitrary and capricious because there was no evidence that Flash submitted false and misleading information to the SCA. In an Article 78 proceeding, the function of the court is to determine whether the action of an administrative agency was supported by a rational basis or was arbitrary and capricious ( see Matter of Pell v. Board of Educ., 34 N.Y.2d 222, 230–231 [1974] ). “Arbitrary action is without sound basis in reason and is generally taken without regard to the fact” (Pell, 34 N.Y.2d at 231). A rational basis exists where the determination is supported “by proof sufficient to satisfy a reasonable [person] of all the facts necessary to be proved in order to authorize the determination” (Ador Realty, LLC v. Division of Housing and Community Renewal, 25 AD3d 128, 139–140 [2005],quoting Pell, 34 N.Y.2d at 231] ). A reviewing court will not substitute its judgment for that of the agency unless the agency's determination is arbitrary, capricious or contrary to law ( see Matter of Brockport Cent. School Dist. v. New York State and Local Employees' Retirement Sys., 270 A.D.2d 706, 707–708 [2000] ). Further, in an Article 78 review of administrative sanctions, “the sanction must be upheld unless it shocks the judicial conscience and, therefore, constitutes an abuse of discretion as a matter of law” (Featherstone v. Franco, 95 N.Y.2d 550, 554 [2001] )
The SCA has promulgated guidelines related to the qualification of its vendors and has broad authority to evaluate the integrity and ethical business practices of its contractors and to take action such as the revocation of prequalification status if a vendor submits false or misleading information. 21 NYCRR § 9600.3 provides in pertinent part that:
“failure to meet the integrity and ethics standard will be deemed to have occurred in the event the applicant, its affiliates or any current or past owners or principals ... (iii) made material false statements or answers in response to questions arising out of the prequalification process ... (4) In the event that the applicant knowingly and wilfully submits false information for the purpose of obtaining prequalification status, the authority may disqualify the applicant permanently. (5) If the applicant's lack of integrity and ethics arises from circumstances other than the ones noted above, the authority will evaluate the facts and circumstances on a case-by-case basis.”
In support of its opposition, the SCA submits the affidavit of Walter Magnuson, the SCA investigator that investigated this matter on SCA's behalf. Mr. Magnuson affirms that when he went to PS 188 on October 18, 2010, the security guard was unable to provide his New York State Guard Registration Card but only had a laminated identification card from Flash identifying him as “Jeffrey Igbinigun.” Magnuson states that on November 23, 2010, he interviewed an individual who stated that his name was “Jeffrey Igbinigun” but who Magnuson states was clearly not the same individual that was at PS 188 on October 18th. He gave his date of birth as October 25, 1970, not March 5, 1968 which is the date that the Flash security guard interviewed at PS 188 on October 18th had given. Mr. Igbinigun was asked to sign his name on a sheet of paper, which Magnuson affirms was clearly different from the signature in the “Sign–In” book at PS 188 for October 18, 2010.
Due to theses discrepancies, the SCA contacted Flash to inform it that it was reviewing its eligibility to continue to participate in SCA projects. Flash was told it could bring counsel to the meeting and any materials to address SCA's concerns. The SCA held a meeting on December 10, 2010 which was attended by Mr. Adeghe. Subsequently, Adeghe submitted daily Sign–Out logs covering various periods between August and October 2010, which the SCA reviewed and found contained various signatures purporting to be that of Jeffrey Igbinigun which contained misspellings of his first name and differed from the signature specimen that the SCA investigator obtained form Mr. Igbinigun. The SCA maintains that Mr. Adeghe signed and certified the Daily Sign–Out Logs as “complete and correct” and filed them with the SCA, despite the aforementioned spelling and signature style discrepancies. Moreover, Mr. Adeghe had claimed that he had dismissed Igbinigun from the job at 7 PM on October 18, 2010, yet the log book for that dates indicates that Igbinigun was making hourly logbook entries until midnight. Additionally, the SCA found that Mr. Adeghe falsely signed and dated the Daily Sign–Out logs for October 25, 2010 through November 9, 2010, when he was, in fact, in Nigeria during that period.
Based upon these submissions, as well as the statements that Mr. Adeghe made to the SCA representatives, the SCA determined that Flash lacked the business integrity to qualify as an SCA vendor due to the false and misleading statements and records submitted by Mr. Adeghe.
The court finds that the SCA's determination was rational and was based upon the record before it as discussed above and was neither arbitrary nor capricious.
Additionally, petitioner contends that the SCA failed to follow the appropriate investigation procedure thereby depriving Flash of due process of law. Petitioner maintains that the letter sent by the SCA failed to inform Flash that it might be facing revocation of its status as a vendor and was vague. However, the court notes that the letter specifically states that the SCA was
“reviewing Flash's continuing eligibility to participate in Authority Projects. In the course of that review we have developed concerns that require further discussion. Specifically, we would like to discuss with you Flash's participation in a project at PS 188 in Brooklyn....Please feel free to bring to the meeting any materials you believe would help address our concerns. You may be accompanied by counsel to any such meeting if you so desire.”
The court finds that the notice that Flash received from the SCA quite clearly indicated that the SCA was conducting a review of Flash's eligibility to continue as a service provider for the SCA. Moreover, Flash was afforded the opportunity to bring counsel and any and all documents to support its continued status as an SCA approved vendor.
Moreover, the court finds that Flash was not deprived of its due process rights inasmuch as it was given the opportunity to appear at a meeting to discuss the SCA's concerns, was allowed to bring counsel to such meeting and any other evidence it felt would alleviate the SCA's concerns regarding Flash's ability to remain as a vendor. “The availability of an article 78 proceeding at the conclusion of the administrative process also satisfies any due process hearing requirements” (Tully Constr. Co. v. Hevesi, 214 A.D.2d 465, 466 [995];see Katz v. Klehammer, 902 F.2d 204, 207[990];Campo v. New York City Employees' Retirement Sys., 843 F.2d 96, 101 [1998],cert denied488 U.S. 889 [1998] ).
Additionally it has been held that “where the petitioner was afforded a meaningful opportunity to be heard and where it had recourse to a CPLR article 78 proceeding at the conclusion of the administrative process, a full evidentiary pre-deprivation hearing was not required” (Action Elec. Contr. Co. v. Riverso, 287 A.D.2d 560, 561 [2001];see Mathews v. Eldridge, 424 U.S. 319 [1976];Interboro Inst. v. Foley, 985 F.2d 90, 93 [1993];Oberlander v. Perales, 740 F.2d 116, 120–121 [1984];see also, Gil Constr. v. Riverso, 99 F Supp 2d 345 [2000], affd 2001 WL 363509 [2d Cir. Apr. 12, 2001] ).
Finally, petitioner maintains that the penalty imposed against Flash was excessive and should be overturned. 21 NYCRR § 9602.3 provides in pertinent part that
“[c]ompanies seeking to do business with the authority must have a reputation for and a record of law-abiding conduct and ethical business practices. Failure to meet this standard will result in the applicant's disqualification for a period of up to five years ... (1) A failure to meet the integrity and ethics standard will be deemed to have occurred in the event the applicant, its affiliates or any current or past owners or principals: ... (iii) made material false statements or answers in response to questions arising out of the prequalification process.”
Here, the penalty imposed by the SCA, the disqualification of Flash for a period of four years and two months, falls within the maximum set forth in the guidelines for the submission of false statements and, thus, the court finds that it is not excessive ( see In re application of Melwood Construction Corp. v. Supp, 256 A.D.2d 124 [1998] [court upheld permanent disqualification of vendor who failed to disclose ties to organized crime; Matter of Churchgate Corporation v. New York City School Construction Authority, 2008 N.Y. Slip Op 31685U, 9–10 (N.Y. Sup.Ct. June 12, 2008) [holding that the determination to bar a vendor from bidding on or receiving any further work for SCA projects for a period of five (5) years was rationally based and is neither arbitrary nor capricious]; Shahid Enterprises, Inc. v. Riverso, N.Y.L.J., Nov. 1, 2001, at 23, col. 6 (Sup.Ct. Queens Co.2001[holding that disqualification of a contractor for five years was reasonable and did not shock the conscience of the court).
Based upon the foregoing, the petition is denied in its entirety.
The foregoing constitutes the decision and order of the court.