Opinion
Index EFCV-2018-0154434
04-22-2020
NEW YORK MUNICIPAL POWER AGENCY, Plaintiff, v. TOWN OF MASSENA, MASSENA ELECTRIC UTILITY BOARD, MASSENA ELECTRIC DEPARTMENT, JAMES SHAW, RENE HART, RICHARD MAGINN, JOHN BOGOSIAN, CHARLES RAITI, and ANDREW J. MCMAHON, Defendants. IAS #44-1-2019-0003
Appearances: Costello, Cooney & Fearon, PLLC (Kevin P. Ryan, Esq., of counsel), attorneys for Plaintiffs; Hancock Estabrook, LLC (Matthew W. O'Neil, Esq., of counsel) attorneys for Defendants. DANIEL B. BERMAN, ESQ. HANCOCK ESTABROOK, PLLC Attorneys for Defendants, TOWN OF MASSENA, MASSENA ELECTRIC UTILITY BOARD, MASSENA ELECTRIC DEPARTMENT and ANDREW J. McMAHON
Unpublished Opinion
Appearances: Costello, Cooney & Fearon, PLLC (Kevin P. Ryan, Esq., of counsel), attorneys for Plaintiffs;
Hancock Estabrook, LLC (Matthew W. O'Neil, Esq., of counsel) attorneys for Defendants.
DANIEL B. BERMAN, ESQ.
HANCOCK ESTABROOK, PLLC Attorneys for Defendants,
TOWN OF MASSENA, MASSENA ELECTRIC UTILITY BOARD, MASSENA ELECTRIC DEPARTMENT and ANDREW J. McMAHON
DECISION & ORDER
MARY M. FARLEY, J.S.C.
By Decision and Order dated February 7, 2019 ("Decision and Order") (Doc. 73), this Court denied the motion of Plaintiff New York Municipal Power Agency {'Agency" or "NYMPA") seeking a preliminary injunction enjoining Defendants Town of Massena, Massena Electric Department, and Massena Electric Utility Board (collectively, "Massena") from withdrawing from the Agency. In finding that NYMPA failed to show likelihood of success on the merits, the Decision and Order noted the "very real possibility the record, when fully developed, will show: (1) that [an April 7, 1996 Agreement made pursuant to General Municipal Law ("GML") § 119-0 ("Agreement") (Docs. 6, 90) and the Agency's Constitution and By-Laws ("By-Laws") (Docs. 2, 86)] are not fully capable of being reconciled; (2) the By-Law [relied upon by NYMPA] does not have the force of the Agreement; and (3) the Agreement alone governs [ ]." Decision and Order at 16. This Court further recognized that the signatories to the Agreement and By-Laws "have the greatest experience with the complex terms and operation of both the Agreement and By-Laws, which they may well be able to elucidate for the Court on a more fully developed record." Id.
Thereafter, Massena moved to dismiss NYMPA's Amended Complaint (Doc. 84), and NYMPA cross-moved for leave to file a Second Amended Complaint ("Second Amended Complaint") (Doc. 99). By Order dated August 1, 2019, with stenographic minutes attached ("Order") (Doc. 96), the Court: (1) denied Massena's motion to dismiss; and, (2) granted leave to NYMPA to file the Second Amended Complaint. In those attached stenographic minutes, the Court stated: (1) "the fact that there was not one document in which everyone decided contained the same understanding of all the parties [ ] requires [the Court] to deny [Massena's] Motion to Dismiss [ ] on a documentary basis"; and (2) the parties "need some discovery." Minutes at pg. 19. NYMPA then filed and served its Second Amended Complaint, to which Massena interposed its Answer to Second Amended Complaint ("Answer") (Doc. 108), including seven (7) affirmative defenses and four (4) counterclaims.
NYMPA now moves to dismiss both the third and fourth counterclaims on two grounds: (1) documentary evidence (N.Y. C.P.L.R. 3211 [(a] [1]); and, (2) failure to state causes of action [C.P.L.R. 3211 [a] [7]). More specifically, NYMPA argues that General Municipal Law ("GML") Article 5G, and, more specifically GML § 119-o - upon which the third counterclaim (Answer at ¶¶ 74-78) is premised - do not require the Agreement and/or By-Laws direct NYMPA to distribute a member's pro rata share of cash and other assets at the time of withdrawal, and, in any event, do not support a private cause of action. See Docs. 112 (Smith aff.) at ¶¶ 8-25 & 114 (NYMPA Memorandum of Law) at pp. 6-11. As a result, NYMPA argues the third counterclaim must be dismissed. NYMPA argues that the fourth counterclaim (Answer at ¶¶ 79-81) --unjust enrichment -- must be dismissed because the Agreement and/or By-Laws govern the subject matter concerning distribution of a member's cash and other assets, thereby precluding any unjust enrichment cause of action. See Smith aff. at ¶¶ 26-34 & NNYMPA Memorandum at pp. 11-12. After reviewing the extensive written submissions of the parties and hearing oral argument (transcribed on the stenographic record) of counsel on December 6, 2019, the Court now renders its Decision. For the reasons which follow, the Court: (1) grants NYMPA's motion in part, dismissing the third counterclaim; and, (2) denies NYMPA's motion in part, declining to dismiss the fourth counterclaim.
SUMMARY OF FACTS AND ALLEGATIONS
NYMPA is a joint action agency, formed in 1996 pursuant to GML § 119-0 to supply electric power to its thirty-six (36) members, all of which are municipal electric power utilities. Decision and Order at 2; Second Amended Complaint at ¶ 2; Answer at ¶ 2. Massena is a signatory to the Agreement, which both NYMPA and Massena acknowledge "constitutes a valid and binding contract by and between the parties." Second Amended Complaint at ¶¶ 3, 18-19; Answer at ¶¶ 3, 18-19. On November 26, 2018, Massena notified NYMPA it was withdrawing from the Agency. Decision and Order at 1, 3; Second Amended Complaint at U 10; Answer at U 10. The Agency commenced this action on December 21, 2018.
NYMPA's Second Amended Complaint asserts a single cause of action: NYMPA's "purported withdrawal" from the Agency prior to December 31, 2020, constituted a breach of contract. Second Amended Complaint at ¶ 12. As a result, NYMPA claims the following items of money damages: (1) loss of monthly membership fees totaling $ 12, 000.00; (2) "$ 96, 211.00 in general and administrative costs applied to the energy it has arranged to procure"; (3) "$ 838, 821.00 on the energy that [NYMPA] had agreed to purchase for [Massena's] use through December 2020"; and, (4) future amounts "in an amount that cannot [now] be determined." Id. ¶¶ 29, 32. The Second Amended Complaint further avers that Massena has "demanded a payment of $ 2, 977, 777.00 from [NYMPA] as a distribution of Agency assets." Id. at ¶ 26. In its Answer, both Massena's third and fourth counterclaims aver: (1) "at the time of its withdrawal [from NYMPA], Massena's pro-rata share of [NYMPA's] assets consisting of cash and other assets was $ 2, 977, 779.00"; (2) GML § 119-o "requires that the Agreement equitably allocate [NYMPA's] revenues and financing for its capital and operating costs"; and, (3), as a result, Massena is entitled to judgment for $ 2, 977, 779.00. Answer at ¶¶ 76-78, 81.
Massena asserts the Agreement allows a member to withdraw from membership when:
(i) the Member or its Representative shall have filed with the [Agency] Board of Directors a certified copy of a resolution by the Member's local governing body expressing its intention to withdraw; and (ii) the withdrawing Member shall have paid, or made arrangements satisfactory to the [Agency] Board of Directors to pay, to the Agency its pro rata portion of any outstanding financial obligations of the Agency at the time of the Member's withdrawal, including any financial obligation of the Agency pursuant to any and all power and energy supply contracts, related transmission arrangements and any and all other agreements entered into by the Agency. Answer at U 58 (quoting Agreement Art. Ill. § 4); see NYMPA Memorandum at 2.Citing Article X, 1 of the Agreement, Massena argues that a member is relieved from liability for a proposed assessment when it votes against the annual operating budget, providing the member withdraws within "'sixty (60) days of the adoption of the annual operating budget."' Answer at H 60 (quoting Agreement). Massena posits: (1) its withdrawal was "effective December 23, 2018" (Id. at ¶¶ 62, 68); (2) it "did not owe any monies for any portion of [NYMPA's] outstanding financial obligations" (id_, at ¶ 64); and, (3) at the time of withdrawal, its "pro-rata share of [NYMPA's] accrued assets, including cash, was in excess of $ 2.9 million" (Id. at ¶ 65).
In seeking dismissal of Massena's third and fourth counterclaims, NYMPA challenges Massena's assertion that it had no outstanding financial obligations to NYMPA at the time of its purported withdrawal, averring Massena owed certain fees and payments to the Agency. NYMPA Memorandum at pp. 2-4 (quoting Agreement and By Laws). NYMPA asserts the only provision in the Agreement which addresses distribution of assets to Members appears in Article XIII, titled "Termination", which provides:
This Agreement may be terminated by the vote of two-thirds of the [Members] at a regular meeting or a meeting specifically called for that purpose, but not until after all debts of the Agency have been paid [ ]. Thereafter, the [NYMPA] Board of Directors shall liquidate the business of the Agency as expeditiously as possible, and distribute the net proceeds to the Members in the ratio that the total assessment, rate or charge made against each of them bears the sum of the total assessment made against all of them. Agreement at pg. 18; see NYMPA Memorandum at pg. 2.
Because the only provision of either the Agreement or By-Laws which mentions "distribution" appears in the section of the Agreement (Article XIII) concerning NYMPA's "termination", and NYMPA itself was not "terminated" when Massena withdrew (or thereafter), NYMPA argues Massena is not now entitled to any distribution. Significantly, Massena does not dispute that Article XIII is the sole provision in either the Agreement or By-Laws which expressly addresses distribution of net proceeds to NYMPA's members.
DISCUSSION
NYMPA'S motion does not address Massena's first or second counterclaims. See Answer at ¶¶ 56-68 (first counterclaim -declaratory judgment) & ¶¶ 69-73 (second counterclaim - tortious interference with prospective business relationships). Instead, its motion concerns the third and fourth counterclaims, asserting both must be dismissed because of documentary evidence (C.P.L.R. 3211 [a] [1]); and, (2) failure to state a claim ([C.P.L.R. 3211 [a] [7]). The Court first sets forth the standard for each such ground, and then addresses, in turn, the two counterclaims at issue.
As an initial matter, Massena does not argue either the Agreement or By-Laws expressly requires its pro rata share of NYMPA's assets be paid to it at the time of withdrawal. Rather, Massena's third counterclaim alleges that GML § 119-o requires the Agreement contain such a provision and, as a result, the failure to include such language violates this statute. As to its fourth counterclaim, Massena argues that the Agreement's failure to address this specific subject matter - distribution of assets at the time of withdrawal - gives rise to a valid claim for unjust enrichment. Notably, the underlying premise of both the third and fourth counterclaims is that neither the Agreement nor By-Laws addresses the precise situation here - repayment of Massena's assets at the time of its withdrawal, rather than at some future time when the Authority may be terminated.
NYMPA alleges Massena withdrew on May 1, 2019. Second Amended Complaint at ¶¶ 16, 31. Massena avers that it "withdrew from membership in [NYMPA] effective December 23, 2018." Answer at ¶ 62. The Court need not - and does not - address whether Massena's withdrawal was effective or, if so, the effective date.
A. Dismissal on the Ground of Documentary Evidence
Dismissal pursuant to C.P.L.R. 3211 (a) (1) based on documentary evidence "will be granted only if the documentary evidence resolves all factual issues as a matter of law, and conclusively disposes of the plaintiffs claim." Carry. Wegmans Food Markets. Inc.. _ A.D.3d _, 2020 Westlaw 1558047 (3d Dep't Apr 3, 2020) (internal quotation marks and citation omitted); accord: Leader v. Steinway, Inc.. 180 A.D.3d 886, 887 (2d Dep't 2020); Lots 4 Less Stores. Inc. v. Integrated Props.. Inc.. 152A.D.3d 1181, 1182 (4thDep't 2017). As stated by the Third Department:
"On a motion pursuant to CPLR 3211(a) (1), it is well settled that dismissal is warranted only if the documentary evidence [1] conclusively establishes a defense and [2] resolves every factual issue as a matter of law... If a relevant ambiguity is found, then it cannot be said that the documentary evidence conclusively establishes a defense as a matter of law and a motion to dismiss on the basis of such evidence cannot be granted." Weston v. Cornell Univ.. 56 A.D.3d 1074, 1075 (3d Dep't 2008) (emphases added). "
The [movant] bears the burden of proving that the proffered documentary evidence conclusively refutes the plaintiffs factual allegations." Calhoun v. Midrox Ins. Co., 165 A.D.3d 1450, 1450 (3d Dep't 2018) (emphasis added); accord: Adamkiewicz v. Lansing, 288 A.D.2d 531, 532 (3d Dep't 2001); Matter of Palmore v. Board of Educ. of Hempstead Union Free Sch. Dist, 145 A.D.3d 1072, 1073 (2d Dep't 2016) Iv denied, 30 N.Y.3d 905 (2017); Robinson v. Robinson. 303 A.D.2d 234, 235 (1st Dep't 2003).
"When the motion to dismiss [pursuant to C.P.L.R. 3211 (a) (1)] is premised upon documentary evidence, 'such motion may be appropriately granted only where the documentary evidence utterly refutes plaintiff's allegations, conclusively establishing a defense as a matter of law.'" Crepin v. Fogarty, 59 A.D.3d 837, 838 (3d Dep't 2009) (emphases added; citation omitted); accord: MLB Constr. Servs., LLC v. Lake Ave. Plaza. LLC. 156 A.D.3d 983, 985 (3d Dep't 2017). "To succeed on a motion under CPLR 3211 (a) (1), a defendant must show that the documentary evidence upon which the motion is predicated resolves all factual issues as a matter of law and definitively disposes of the plaintiffs claim." New York State Workers' Compensation Bd. v. Program Risk Mgt., Inc.. 155 A.D.3d 1484, 1485 (3d Dep't 2017) (emphasis added; internal quotation marks and citations omitted); accord: Angelino v. Michael Freedus. D.D.S.. P.C.. 69 A.D.3d 1203, 1205 (3d Dep't 2010); Cerand v. Burstein, 72 A.D.3d 1262, 1264 (3d Dep't 2010).
"In the context of a [CPLR 3211(a) (1)] motion to dismiss, if the contract's language is ambiguous, then the motion must be denied to permit the parties to discover and present extrinsic evidence of the parties' intent." Vectron Intl., Inc. v. Corning Oak Holding, Inc.. 106 A.D.3d 1164, 1165 (3d Dep't 2013). "If documentary evidence contains a relevant ambiguity, such evidence cannot justify the dismissal of a cause of action." Slezak v. Stewart's Shops Corp., 133 A.D.3d 1179, 1180 (3d Dep't 2015) (denying motion to dismiss pursuant to CPLR 3211 [a] [1]). "A contract is unambiguous if the language it uses has 'a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion."' Greenfield v. Philles Records. Inc., 98 N.Y.2d 562, 569-70 (2002) (citation omitted). Conversely, "An '[a]mbiguity exists if the language used lacks a definite and precise meaning, and there is a reasonable basis for a difference of opinion."' Adamo v. City of Albany, 156A.D.3d 1017, 1018 (3d Dep't 2017), appeal dismissed, 31 N.Y.3d 1041 (2018); accord: Pozament Corp. v. AES Westover, LLC. 27 A.D.3d 1000, 1001 (3d Dep't 2006). "Whether a contract is ambiguous is a question of law to be resolved by the court." Williams v. Village of Endicott. 91 A.D.3d 1160, 1162 (3d Dep't 2012).
B. Dismissal for Failure to State a Claim.
In addressing a motion to dismiss for failure to state a claim under C.P.L.R. 3211 (a) (7), "the Court must afford the pleadings a liberal construction, take the allegations in the complaint as true and provide the plaintiff the benefit of every possible inference." EBC 1. Inc. v. Goldman, Sachs & Co.. 5 N.Y.3d 11, 19 (2005); Radiation Oncology Servs. of Cent. N.Y., P.C. v. Our Lady of Lourdes Mem. Hosp., Inc., 148 A.D.3d 1418, 1419 (3d Dep't 2017) (citing EBC I, Inc.). "[I]f 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 [alleging failure to state a claim] will fail." Guggenheimer v. Ginzburg, 43 N.Y.2d 268. 275 (1977); accord: Scheffield v. Vestal Parkway Plaza, LLC, 102 A.D.3d 992, 993 (3d Dep't 2013). "If [a court] find[s] that the plaintiff is entitled to a recovery upon any reasonable view of the stated facts, [the] judicial inquiry is complete and [the court] must declare the [pleading] to be legally sufficient." 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506, 509 (1979) (citations omitted); Knight v. Kirker. 203 A.D.2d 784, 786 (3d Dep't 1994)) (citing 219 Broadway Corp.); Alden Global Value Recovery Master Fund, L.P. v. Key Bank N.A., 159 A.D.3d 618, 622 (1st Dep't 2018) (citing 219 Broadway Corp.).
C. Massena's Third Counterclaim - General Municipal Law § 119-o
Massena's third counterclaim alleges the following: (1) "cash and other assets" held by NYMPA were acquired using funds raised by assessments on its members; (2) upon withdrawal, its pro-rata share of these assets was $ 2, 977, 779.00; and (3) GML § 119-0 "requires that the Agreement equitably allocate [NYMPA's] revenues and financing for its capital and operating costs." Answer at ¶¶ 75-77 (emphasis added). From this, Massena asserts it is now "entitled to judgment in the amount of its pro-rata share of [NYMPA's] cash and other assets, with interest under the terms of the Agreement." Id., at ¶ 78. This counterclaim does not rely upon the language from either the Agreement or By-Laws, and does not allege that either the Agreement or By-Laws addresses this subject matter. Stated differently, the third counterclaim does not allege any breach of contract. Rather, it asserts the absence of a contractual term -- addressing the subject matter of distribution of assets at the time a member withdraws -violates GML § 119-0, giving rise to a statutory cause of action.
Massena expressly premises its third counterclaim upon GML § 119-0, titled "Performance of municipal cooperative activities; alternative powers; alternative assignment of responsibilities." In this regard, GML § 119-0 (2) lists thirteen (13) subject matters as to which joint service agreements "may contain provisions." As directly pertinent here, GML § 119-0 (2) (a) provides:
2. An agreement may contain provisions relating to:
a. A method or formula for equitably providing for and allocating revenues and for equitably allocating and financing the capital and operating costs, including payment to reserve funds authorized by law and payments of principal and interest on obligations. Such method or formula shall be established by the participating corporations or districts on a ratio of full valuations of real property, or on the basis of the amount of services rendered or to be rendered, or benefits received or conferred or to be received or conferred, or on the increase in taxable assessed value attributable to the function, facility, service, activity or project which is the subject of an agreement, or on any other equitable basis, including the levying of taxes or assessments to pay such costs on the entire area of the corporation or district, or on a part thereof, which is benefited or which receives the service. Id. (emphases added).See NYMPA Memorandum at pg. 7 (quoting statute); Massena Memorandum of Law ("Massena Memorandum") (Doc 115) at pg. 2. Although not cited by the parties, the Court notes that GML § 119-0 (2) (I) provides that the parties may agree as to "[o]ther matters as are reasonably necessary and proper to effectuate and progress the joint service [ ]."
In its motion, NYMPA advances three arguments. First, it asserts that both the purpose and express language of GML § 119-0 (2) is permissive, granting broad latitude to participating municipalities to formulate their business relationships and draft their agreements. Stated differently, while the statute permits parties to expressly agree to distribution of cash or other assets at the time a member withdraws, it does require such a term. Second, and as a result, NYMPA argues the omission of such a provision from the Agreement and By-Laws fully complies with the statute. Third, NYMPA argues that even if GML § 119-o (2) requires the parties' Agreement and By-Laws to specify the manner of distribution of assets when a member withdraws, no private right of action exists under the statute. The Court addresses these arguments in turn.
"It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intent of the Legislature." Majewski v. Broadalbin-Perth Cent. School Dist. 91 N.Y.2d 577, 583 (1998) (internal quotation marks and citations omitted); Matter of Dex Media, Inc. v. Tax Appeals Trib. of the Dept. of Taxation & Fin, of the State of NY., 180 A.D.3d 1281, 1283 (3d Dep't 2020) (quoting Majewski). "The primary consideration of the courts in the construction of statutes is to ascertain and give effect to the intention of the Legislature." Statutes § 92. "[A] primary command to the judiciary in the interpretation of statutes is to ascertain and effectuate the purpose of the Legislature." Rankin v. Shanker, 23 N.Y.2d 111, 114 (1968) (citing Statutes § 92).
"The legislative intent is to be ascertained from the words and language used, and the statutory language is generally construed according to its natural and most obvious sense, without resorting to an artificial or forced construction." Statutes § 94. "[T]he text of a [statutory] provision is the clearest indicator of legislative intent and courts should construe unambiguous language to give effect to its plain meaning." Ronkese v. Tilcon N.Y., Inc.. 153 A.D.3d 259, 262 (3d Dep't 2017) (internal quotation marks and citations omitted). "[W]here the language of a statute is clear and unambiguous, courts must give effect to its plain meaning." Matter of American Food & Vending Corp. v. New York State Tax Appeals, 144 AD.3d 1227, 1228 (3d Dep't 2016) (internal quotation marks and citations omitted).
The parties have cited no reported case addressing the issue before it --whether an agreement under GML Article 5-G, and, more specifically, pursuant to GML § 119-o (2), must contain a provision specifying the equitable distribution of assets -- and the Court has found none. Nonetheless, both the legislative intent and plain language of GML § 119-0 (2) make clear that it imposes no such requirement. On its face, GML § 119-0 (2) is both broad and permissive: it lists those provisions which an agreement may contain, but does not specify any provisions which it must contain. That the Legislature intended contracting parties to have wide latitude in fashioning their relationships and agreements is made clear by GML § 119-0 (2) (k), which expressly allows agreement as to "[o]ther matters as are reasonably necessary and proper to effectuate and progress the joint service []." Thus, the Court concludes that GML § 119-0 (2) does not require the agreement address distribution of assets when a member withdraws.
In arguing that the use of the word "equitably" in GML § 119-0 (a) (2) requires the parties' agreement specify an "equitable" means of distributing a member's assets when it withdraws, Massena relies upon opinions of the New York State Comptroller from 1988, 1989, and 1996. Massena Memorandum at pp. 2-3. These opinions - not binding on this Court in any event - do not support Massena's position. The 1988 opinion states only that a cooperation agreement "may contain provisions setting forth a method or formula for equitably providing for and allocating revenues and for equitably allocating capital and operation costs." 1988 Ops St Comp No. 88-12, 1988 Westlaw 169009 at * 1 (emphasis added). Similarly, the 1989 opinion indicates only what an agreement may contain. 1989 Ops St Comp No. 89-28, 1989 Westlaw 162281 at * 2 ("Section 119-0 (2) sets forth certain items which may be included in an agreement"). In 1996, the Comptroller opined that the parties to a cooperation agreement "may provide for apportioning the costs on the basis of full valuation of real property or, if they determine it to be equitable, population or some other method." 1996 Ops St Comp No. 96-7, 1996 Westlaw 498083 at * 2 (emphases added). Far from supporting Massena's argument that GML § 119-o (2) (a) mandates what a cooperative services agreement must contain, these Comptroller opinions emphasize the statutory latitude regarding what such an agree may permissibly include.
Applying the rules of statutory construction that (1) the Court give effect to legislative intent (Majewski, Matter of Dex Media): and, (2) the clearest indicator of that intent is a statute's plain language (Ronkese, Matter of American Food & Vending Corp.), the Court concludes that the absence of a provision in the Agreement and/or By-Laws regarding distribution of assets when a member withdraws does not run afoul of GML § 119-0 (a) (2). The Court thus rejects Massena's argument regarding statutory interpretation. Further, and in any event, even if the Court were to determine both: (1) that GML § 119-0 (a) (2) requires a cooperation agreement specify how assets must be distributed when a member withdraws; and (2) the Agreement and By-Laws violate the statute by failing to include such language, this does not require the Court rule in Massena's favor as to the third counterclaim. To avoid dismissal for failure to state a claim, Massena's third counterclaim must also support a cause of action for damages. The Court concludes that it does not.
Massena does not argue that GML § 119-0, on its face, provides for an award of damages if it is violated. The Court concludes it does not grant an express private right of action. The question, then, is whether GML § 119-0 gives rise to an implied private right of action. E.g., Sheeny v. Big Flats Community Day, 73 N.Y.2d 629, 633 (1989). '"Unless a cause of action is expressly provided for by the statute [at issue], no cause of action can exist unless it could be fairly implied from the statute or its legislative history.'" Matter of Newton v. Town of Middletown, 31 A.D.3d 1004, 1006 (3d Dep't 2006) (emphasis added) (quoting McDonald v. Cook, 252 A.D.2d 302, 304 [3d Dep't 1998], Iv denied, 93 N.Y.2d 812 [1999]).
The party claiming an implied private right of action "must demonstrate that [it] arises by implication from the statutory scheme," Hudes v. Vytra Health Plans Long Is., 295 A.D.2d 788, 789 (3d Dep't 2002) (citing Sheehy), Iv denied, 99 N.Y.2d 505 (2003). In determining whether a private right of action may be implied, "the essential factors to be considered are: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme." Sheehy, 73 N.Y.2d at 633. A private right of action "may be fairly implied [only] when (1) the [injured party] is one of the class for whose particular benefit the statute was enacted; (2) recognition of a private right of action would promote the legislative purpose of the governing statute; and (3) to do so would be consistent with the legislative scheme." T.T. v. State of New York, 151 A.D.3d 1345, 1347 (3d Dep't 2017); accord: Jones v. State of New York. 171 A.D.3d 1362, 1364 (3d Dep't 2019), appeal dismissed, 33 N.Y.3d 1056 (2019). "[W]here, as here, a statute is silent as to the availability of a private cause of action, each part of a three-pronged analysis must first be satisfied in order to find that such private right of action may be fairly implied." HANYS Servs. v. Empire Blue Cross & Blue Shield, 292 A.D.2d 61, 64 (3d Dep't 2002) (internal quotation marks and citation omitted), Iv denied, 98 N.Y.2d 612 (2002).
Massena is a municipal corporation for whose benefit GML Article 5-G was enacted. Accordingly, the first Sheehy factor is satisfied. As noted above, however, the legislative intent underlying § 119-0 (2) - as expressed in its plain language - was to grant contracting parties flexibility and wide latitude in fashioning their relationships and agreements. For this reason, GML § 119-0 (2) sets forth thirteen (13) subject matters as to which joint service agreements "may contain provisions"; it does not specify terms which such agreements "must" include. GML § 119-o (a) (2) (I) expressly provides that the parties may agree as to "[o]ther matters as are reasonably necessary and proper to effectuate and progress the joint service []." Accordingly, Massena fails to satisfy both the second and third Sheehy factors. Indeed, to imply a right of action here would both: (1) frustrate the legislative purpose; and (2) be inconsistent with the legislative scheme. As a result, GML Article 5-G and, more specifically, GML § 119-0, does not support an implied right of action.
The Court concludes that Massena's third counterclaim does not state a claim upon which relief may be granted. Accordingly, Massena's third counterclaim is dismissed pursuant to C.P.L.R. 3211 (a) (7).
D. Massena's Fourth Counterclaim - Unjust Enrichment
Like its third counterclaim, Massena's fourth counterclaim is not based on the language of either the Agreement or By-Laws. Instead, the fourth counterclaim asserts that the Agreement's and By-Laws' silence regarding the distribution of Massena's pro-rata share of NYMPA's assets after its withdrawal, gives rise to a cause of action for unjust enrichment. Thus, counsel for Massena acknowledges "it is clear that the [Agreement is silent with respect to a withdrawing Member's share of the Agency's assets [ ]." Berman aff. at ¶ 8.
The fourth counterclaim alleges: (1) NYMPA's retention of Massena's cash and other assets upon its withdrawal from membership "enhch[ed NYMPA] at Massena's expense such that it would be inequitable to permit [NYMPA] to retain Massena's pro-rata share of [NYMPA's] cash and other assets;" and, (2) as a result, Massena is entitled to judgment "in the amount of its pro-rata share [$ 2, 977, 779.00] of [NYMPA's] cash and other assets, with interest." Answer at 76, 80, 81. Massena argues that because the Agreement is "silent" [Massena Memorandum at pg. 5] and "does not cover dispute at issue" [id. at pg. 6], the fourth counterclaim sufficiently alleges an unjust enrichment cause of action. The Court agrees.
The essential inquiry in any action for unjust enrichment... is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered." Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415, 421 (1972) (citations omitted); accord: Beaman v. Awave Realty Mgt. LLC. 176 A.D.3d 1025, 1025 (2d Dep't 2019) (quoting Paramount Film Distrib. Corp.); Malta Props.1, LLC v. Town of Malta. 143A.D.3d 1142, 1143 (3d Dep't 2016) (same). "The elements of an unjust enrichment claim are that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered." Delaware County v. Leatherstocking Healthcare, LLC, 110 A.D.3d 1211, 1213 (3d Dep't 2014) (internal quotation marks and citations omitted). Thus, a claim for unjust enrichment requires proof: "(1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered.". Mandarin Trading Ltd. v. Wildenstein. 16 N.Y.3d 173, 182 (2011) (internal quotation marks and citations omitted.
New York law is clear -- and Massena acknowledges (Massena Memorandum at pg. 5) -- that that the "existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery [for unjust enrichment] arising out of the same subject matter." Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 388 (1987); accord: Davis v. CEC. Inc.. 135 A.D.3d 1049, 1050-51 (3d Dep't 2016) (quoting Clark-Fitzpatrick. Inc.), Iv denied. 27 N.Y.3d 904 (2016); Segal v. Cooper, 95 A.D.3d 545 (1st Dep't 2012) (same). "[A] party may not recover in [ ] unjust enrichment where the parties have entered into a contract that governs the subject matter." Catlyn & Derzee, Inc. v. Amedore Land Devs., LLC, 166 A.D.3d 1137, 1139 (3d Dep't 2018) (internal quotation marks and citations omitted). If the parties' written agreements "govern the subject matter at issue, plaintiffs cannot recover under a theory of unjust enrichment." Belair Care Ctr., Inc. v. Cool Insuring Agency, Inc., 168A.D.3d 1162, 1165 (3d Dep't 2019).
Where, however, the contract does not cover the subject matter of the matter in dispute, a claim for unjust enrichment may be asserted. Clark-Fitzpatrick, Inc., 70 N.Y.2d at 388. "[W]here the contract does not cover the dispute in issue, [a] plaintiff may proceed upon a theory of quantum meruit." Joseph Sternberg, Inc. v. Walber 36th St. Assoc, 187 A.D.2d 225, 228 (1st Dep't 1983). Further, "where there is a bona fide dispute as to [ ] the application of a contract in the dispute in issue", a party may proceed on an unjust enrichment claim. Kraemer v. Greene, 142 A.D.3d 438, 441-442 (1st Dep't 2016) (emphasis added). "Where [ ] there is a bona fide dispute as to whether the contract covers the controversy in issue, "a plaintiff may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his remedies.'" Fisher v. A.W. Miller Tech. Sales. 306 A.D.2d 829, 831-32 (4th Dep't 2003) (citations omitted); accord: Elbroii v. 22 E. 54th St. Rest. Corp.. 67 A.D.3d 957, 958 (2d Dep't 2009).
The First Department's decision in HG Capital LLC v. Archipelago, LLC, 36 A.D.3d 401 (1st Dep't 2007), relied upon by Massena (see Massena Memorandum at pg. 5), is instructive. Two contracts were at issue in that case, and the plaintiffs right to recover depended on both. 36 A.D.3d at 404. Finding an "ambiguity" as to whether one of the two contracts - a factoring agreement - "cover[ed] the dispute at issue" (id. at 405-06), the court in IIG Capital LLC concluded that there was a "bona fide dispute" as to whether the parties' agreements addressed the subject matter of the parties' dispute (Id at 405). For this reason, the First Department: (1) reversed the lower court's dismissal of plaintiffs quantum meruit and unjust enrichment causes of action; and, (2) reinstated those claims. Id. at 401.
Similarly, in Sergeants Benev. Ass'n Annuity Fund v. Renck, 19 A.D.3d 107 (1st Dep't 2005), also relied upon by Massena (see Massena Memorandum at pg. 5-6), the First Department reversed dismissal of an unjust enrichment claim involving two parties subject to a "valid and enforceable written contract." 19 A.D.3d at 108. In so ruling, the court noted the unjust enrichment claim was predicated on conduct not covered by the contract. Id. at 112. See also Joseph Sternberg. Inc. 187 AD.2d at 228 (reversing dismissal of unjust enrichment cause of action where brokerage agreement between the parties was "silent as to [ ] entitlement to a commission" if sale occurred for a lesser price); Kreiss v. McCown DeLeeuw & Co.. 37 F.Supp.2d 294, 302 (S.D.N.Y. 1999) (denying motion to dismiss unjust enrichment cause of action where stockholders' agreement "does not cover the specific subject of whether or in what amount Plaintiffs were to receive [ ] stock options and equity") (applying New York law).
The cases cited by NYMPA are readily distinguished. In Pappas v. Tzolis, 20 N.Y.3d 228 (2012) (cited in NYMPA's Memorandum at pg. 11), the parties did not dispute that the specific issue between the parties - sale of interests in a limited liability company - was "controlled by contracts." 20 N.Y.3d at 234. In Catlyn & Derzee, Inc., supra (cited in NYMPA's Memorandum at pg. 11), the Third Department affirmed dismissal of plaintiffs unjust enrichment case, concluding that the parties' dispute was "controlled by the express terms of [their] contract." 166 A.D.3d at 1140. In reaching this conclusion, however, the Third Department expressly relied on its prior decision in involving the same parties and contract at issue. Id. at 1138 (citing Catlyn & Derzee, Inc. v. Amedore Land Developers. LLC, 132 A.D.3d 1202 [3d Dep't 2015]). "As we determined on the prior appeal, [plaintiffs claims] are matters controlled by the express terms the contract." 166 A.D.3d at 1140. Thus, in both Pappas and Catlyn & Derzee, Inc., that the parties' specific disputes were expressly governed by their contract was either undisputed (Pappas) or had been previously determined by the court (Catlyn & Derzee, Inc.). Such is not the case as to the dispute between NYMPA and Massena.
NYMPA also cites the dissenting opinion in Wilson v. Dantas, 29 N.Y.3d 1051 (2017). See NYMPA Memorandum at pg. 11; NYMPA Reply Memorandum of Law (Doc. 118) at pg. 7. However, the majority opinion in Wilson does not mention unjust enrichment or address the sufficiency of plaintiffs complaint. The Third Department's cursory review in Northeast Wine Dev., LLC v Service-Universal Distribs., Inc., 23 A.D.3d 890, 893 (3d Dep't 2005), affd, 7 N.Y.3d 871 (2006) (cited in Massena Memorandum at pg. 11), does not assist this Court's analysis here.
In the end, the central issue before the Court concerns what, precisely, is the "subject matter" of the parties' dispute, and whether the Agreement and By-Laws should be interpreted broadly or narrowly to either include or exclude that subject matter. Under the broad interpretation asserted by NYMPA, the "subject matter" is the entire relationship between the parties, including distribution of net proceeds. NYMPA argues that, because Article XIII of the Agreement, titled "Termination", includes the phrase "distribution of net proceeds", the parties' agreement governs the subject matter of the specific dispute, and the unjust enrichment counterclaim fails. Conversely, Massena advances a narrow interpretation, arguing that because neither the Agreement nor By-Laws addresses the precise issues raised by Massena - distribution of assets and net proceeds at the time of a party's withdrawal -- the parties' agreement does not touch or the "subject matter" of the parties' dispute. As a result, Massena argues the fourth counterclaim pleads a sufficient cause of action for unjust enrichment.
In addressing this issue, the Court is mindful of the procedural posture of this case. The motion now before it is one for dismissal, not for summary judgment. "Unlike on a motion for summary judgment where the court 'searches the record and assesses the sufficiency of the parties' evidence,' on a motion to dismiss the court 'merely examines the adequacy of the pleadings.'" Davis v. Boeheim, 24 N.Y.3d 262, 268 (2014) (citations omitted). "On a CPLR 3211 motion, a court should not resolve the merits of a claim by making factual determinations." T. Lemme Mech.. Inc. v. Schatmont Cent. School Dist., 52 A.D.3d 1006, 1008 (3d Dep't 2008). "Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss." EBC I Inc., 5 N.Y.3d at 19. Where, given the pleading at issue, "there is a reasonable chance, even if some think it small, that [counterclaim plaintiff] will ultimately prevail on the merits" (Rovello v. Orofino Realty Co.. Inc., 40 N.Y.2d 633, 634 [1976] [cited in Lemme Mech, Inc.), a motion to dismiss for failure to state a claim should be denied.
The Court has already determined that the Agreement and By-Laws may be subject to multiple interpretations. Where contractual language is ambiguous, a motion to dismiss on the grounds of documentary evidence "must be denied to permit the parties to discover and present extrinsic evidence of the parties' intent." Vectron Intl., Inc., 106 A.D.3d at 1165; see Slezak, 133 A.D.3d at 1180 (motion to dismiss must be denied "[i]f documentary evidence contains a relevant ambiguity"). From this, it follows that whether the Agreement and By-Laws govern the subject matter of distribution of net proceeds to a withdrawing member at the time of withdrawal is likewise not capable of being resolved on a motion to dismiss. At a minimum, "there is a reasonable chance, even if some think it small" (Rovello), that Massena may ultimately prevail on its fourth counterclaim. If, following full development of the record, the proof shows that the parties' agreement govern the subject matter at issue, the unjust enrichment claim may fail. This, however, is a question for another day. The Court denies so much of NYMPA's motion as seeks to dismiss Massena's fourth counterclaim pursuant to C.P.L.R. 3211 (a) (1) and C.P.L.R. 3211 (a) (7).
CONCLUSION
For the forgoing reasons, the Court grants so much of NYMPA's motion as seeks dismissal of Massena's third counterclaim, and denies so much of its motion as seeks dismissal of the fourth counterclaim.
SO ORDERED.
NOTICE OF ENTRY
PLEASE TAKE NOTICE, that the within is a true copy of a Decision and Order duly entered in the office of the Clerk of the within named Court on April 22, 2020.