Opinion
# 2017-029-097 Claim No. 125024 Motion No. M-91254 Motion No. M-91284
01-02-2018
PRATOW CORPORATION v. THE STATE OF NEW YORK
PESKA & ASSOCIATES, P.C. By: Adam M. Peska, Esq. ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL By: Thomas R. Monjeau, Assistant Attorney General
Synopsis
The claim seeks damages for breach of contract. The court treated defendant's post-note of issue motion to dismiss for lack of subject matter jurisdiction as a motion for summary judgment based on the statutory ground codified at CPLR 3211(a)(2) for pre-answer motions to dismiss. The court found that it lacked subject matter jurisdiction because the claim was untimely under Court of Claims Act § 10(4) and that defendant demonstrated entitlement to summary judgment under the express terms of the Contract, and the evidence established no disputed issue of material fact. Defendant was found not liable for breach of contract.
Case information
| UID: | 2017-029-097 |
| Claimant(s): | PRATOW CORPORATION |
| Claimant short name: | PRATOW |
| Footnote (claimant name) : | |
| Defendant(s): | THE STATE OF NEW YORK |
| Footnote (defendant name) : | |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | 125024 |
| Motion number(s): | M-91254, M-91284 |
| Cross-motion number(s): | |
| Judge: | STEPHEN J. MIGNANO |
| Claimant's attorney: | PESKA & ASSOCIATES, P.C. By: Adam M. Peska, Esq. |
| Defendant's attorney: | ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL By: Thomas R. Monjeau, Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | January 2, 2018 |
| City: | White Plains |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
The verified claim, filed September 24, 2014, alleges that defendant's Division of New York State Police breached its implied duty of good faith and express provisions in its contract with claimant for automotive parts and repair services by diverting work to claimant's competitor without first contacting claimant and effectively terminating the contract without prior notice to claimant. A bifurcated trial on liability is scheduled to begin on March 13, 2018. Claimant filed a motion for summary judgment on October 24, 2017 (M-91254). Defendant filed an opposition to claimant's motion, combined with a motion for summary judgment and dismissal of the claim (M-91284) on October 27, 2017, which claimant opposes.
Defendant's motion is not filed as a cross-motion. By stipulation so-ordered by the court on August 24, 2017, the parties agreed to extend the due date for summary judgment motions to October 27, 2017.
The court will first address defendant's motion for summary judgment and dismissal of the claim for lack of jurisdiction. Defendant bases its motion on the following grounds, all of which were asserted with particularity as defenses in its verified answer filed October 30, 2014: lack of subject matter and personal jurisdiction and failure to state a cause of action (CPLR 3211[a][2], [7] and [8]), based on the failure to file and serve the claim or a notice of intention within six months of the accrual date as mandated by Court of Claims Act § 10(4).
See Verified Answer, Affirmative Defenses numbered 2-4 and 7-9.
Defendant mislabeled its motion to dismiss as a motion brought pursuant to CPLR 3211. CPLR 3211 motions to dismiss must be brought before the answer is filed (see CPLR 3211[e] [motion to dismiss must be brought "at any time before service of the responsive pleading is required"]). However, "[o]nce issue has been joined, a motion for summary judgment may be based on CPLR 3211 (a) grounds which have been asserted in the answer" (Chin Tsun Yang v Sneh Prabha Shukla, 138 AD3d 668, 669 [2d Dept 2016]; see Fischer v RWSP Realty, LLC, 53 AD3d 594, 595 [2d Dept 2008]). The court will disregard defendant's error as there is no argument or evidence that it prejudiced claimant (see Chin Tsun Yang at 669; see also Schultz v Estate of Sloan, 20 AD3d 520 [2d Dept 2005]). Claimant submitted opposition addressing the grounds for dismissal raised by defendant and treated defendant's motion as one for summary judgment.
The standards for summary judgment are well settled. Summary judgment is a drastic remedy which will be granted only when the party seeking summary judgment has established that there are no material triable issues of fact (see CPLR 3212 [b]; Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]). To prevail, the party seeking summary judgment must make a prima facie showing of entitlement to judgment as a matter of law tendering evidentiary proof in admissible form, which may include deposition transcripts and other proof annexed to an attorney's affirmation (see Alvarez, supra; see also Olan v Farrell Lines, 64 NY2d 1092 [1985]; Zuckerman v City of New York, 49 NY2d 557 [1980]). Absent a sufficient showing, the court should deny the motion without regard to the strength of the opposing papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). Once the initial showing has been made, the burden shifts to the party opposing the motion for summary judgment to rebut the prima facie showing by producing evidentiary proof in admissible form sufficient to require a trial of material issues of fact (see Kaufman v Silver, 90 NY2d 204, 208 [1997]).
In support of its motion, defendant submits an affirmation by Assistant Attorney General Thomas R. Monjeau ("Monjeau Aff."), the pleadings, transcripts of depositions, a copy of the contract, an affidavit of claimant's sole owner Stephanie Corritori ("Corritori Aff.") [attached to Exh. H], and other exhibits.
Ms. Corritori is the daughter of Brian Prato. She executed the Contract at issue as Stephanie Prato.
Claimant argues that the motion should be denied because defendant did not provide a "supporting party affidavit" (Peska Reply Aff., ¶ 3). Claimant is incorrect. The verified claim supporting defendant's motion qualifies as the affidavit "by a person having knowledge of the facts" required by CPLR 3212(b) to be submitted in support of a summary judgment motion. CPLR 105(u) provides that "[a] 'verified pleading' may be utilized as an affidavit whenever the latter is required." It was also proper for defendant to use an attorney's affirmation to submit deposition transcripts and other admissible evidence, such as claimant's affidavit (Exh. H) (see Gaeta v New York News, Inc., 62 NY2d 340, 350 [1984]; see also 256 E. 10th St. Assocs. v Consol. Edison Co. of N.Y., 282 AD2d 293, 294 [1st Dept 2001]).
"Peska Reply Aff." refers to the affirmation of Adam M. Peska, claimant's counsel, submitted in opposition to defendant's motion.
Defendant's submissions establish that the parties entered into Contract C001402 ("Contract") "for automotive parts and repairs for vehicles assigned to NY State Police Troop K" (Monjeau Aff, Exh. C). The submitted Contract is the same Contract submitted by claimant as an exhibit to the claim (see Exh. A to Monjeau Aff. [Claim No. 125024]) and identified as the parties' Contract by claimant's representative at her deposition (Exh. D: 45).
Pursuant to the Contract, claimant agreed to provide the designated Division of New York State Police ("State Police") with automotive parts and repair services from April 1, 2011 until March 31, 2016 (Exh. C, ¶¶ 1-2); the State had the right to terminate the Contract early for "(i) unavailability of funds [or] (ii) cause" without giving notice to claimant, or for "(iii) convenience" with prior written notice (Exh. C, ¶ 2). The Contract incorporates and attaches as Appendix A the "Request for Quotation" ("Appendix A"), which provided in part that during the Contract term, the State Police reserved the right to conduct background checks on claimant's employees, and to cancel the Contract if the employee remained in claimant's employ after his/her background is brought to its attention (¶ 1); under the "Use of Contracts Clause," when parts and/or service were required, the State Police would contact the "first ranked Contractor" (claimant), then the second if the first "could not comply with the State Police's requirements" (¶ 6); subcontracting was allowed "only with prior authorization of the State Police" (¶ 10); and parts were required to be new and/or "Original Equipment" aftermarket parts unless otherwise authorized, or the State Police required acceptance of obsolete parts (¶ 12).
Paragraph 16 of Appendix A, captioned "Extraordinary Circumstances," provided,
"As the New York State Police is a law enforcement agency, extraordinary circumstances may arise which preclude the agency from utilizing the contracts in the manner described in the "Use of the Contracts" clause. In these instances, the State Police will determine which course of action is in the best interest of the State, and that decision shall be final."
The Contract was signed in 2010 by Ms. Corritori, then known as Stephanie Prato (Exh. C).
Ms. Corritori testified at a deposition in this claim on August 5, 2016 (Exh. D). She owns and is President of claimant Pratow Corporation ("Pratow"), which is a towing company (Corritori Depo.: 6-9). Pratow was incorporated in 2006. Pratow did no body repair work, but rather subcontracted all body repair work to Prato Auto Body Corp. d/b/a B&B Auto Body Corp. ("B&B"), which is owned by her parents, Brian and Barbara Prato (Corritori Depo.: 6-8, 23-26; Exh. H [7/2/14 Corritori Affidavit annexed]). In 2005, B&B applied for inclusion on the State Police tow list. Corritori discussed it with Troop K representatives, who told her it would be "hard to have [her] father out there towing because he's a convicted felon." She then set up Pratow to handle the towing (Corritori Depo.: 51).
Exhibit H is an affirmation of Adam M. Peska, claimant's counsel, submitted to the New York Supreme Court in a CPLR Article 78 proceeding brought by claimant against the New York State Department of Transportation, et. al., seeking to be placed back on the rotational towing list for I-684. An affidavit by Corritori is annexed to the attorney's affirmation.
Corritori asserted she did so at the suggestion of a Captain [sic] Kopy (Corritori Depo.: 51).
Corritori testified that she did not recall from whom she got authorization for the subcontract, she has nothing in writing, and she recalls getting prior approval from Phil Ilardo of the State Police; in their conversation she spoke to him about repairs, then he spoke to her father about the details (Corritori Depo.: 45-47). Repair estimates and information were kept on the computer system of B&B. Pratow is operated adjacent to B&B, out of a building owned by Brian Prato that he provides to Corritori rent free. Vehicles are kept in the lots for both businesses and moved around (Corritori Depo.: 13, 15, 27-28, 51-54). Before the search warrants were executed, repair work from the State Police was approximately one or two cars a month (Corritori Depo.: 35-36).
On March 7, 2012, while the Special Investigations Unit of the New York State Police executed a search warrant on the premises of B&B in connection with the investigation of Brian Prato and his company for insurance fraud, William Maasz, the lead investigator for the Special Investigations Unit of the New York State Police, observed several State Police vehicles on the premises. Major Michael Kopy, Troop Commander for Troop K, decided that the vehicles should be removed from the premises because it was not in the public interest for State Police vehicles to be repaired by or located on the property of a business where a search warrant was being executed. The vehicles were removed and taken to Reliable Auto Body & Towing ("Reliable") (Corritori Depo.: 20, 22, 29, 36, 42, 55; Kopy Depo. [Exh. F]: 9-14, 16, 20-21; Maasz Depo. [Exh. E]: 55-59). After the search warrants were executed and Brian Prato was arrested, the State Police ceased referring repair work, and Corritori "understood [they] were no longer going to get the repair work" (Corritori Depo.: 55, 60). Corritori did not contact "anyone for a long time." She spoke to Juan Thomas of the State Police about reinstatement to the tow list. The only person with the State Police Corritori remembered speaking with about the repair Contract was Phil Ilardo, and that discussion was about getting paid for completed repairs (Corritori Depo.: 55-56). She drove by Reliable and saw State Police vehicles being repaired on the lot there "every day" (Corritori Depo.: 36). Somewhat surprisingly, Corritori testified at her deposition that she did not learn about the search warrant or her father's arrest for six months (Corritori Depo.: 38-39).
"Kopy Depo." refers to the deposition of Major Michael A. Kopy, an inspector with the Division of the New York State Police.
"Maasz Depo." refers to the deposition of William Maasz, the lead investigator for the Special Investigations Unit of the New York State Police.
Defendant submitted a Decision, Order and Judgment issued by New York Supreme Court Justice Zambelli (Westchester County) denying claimant's CPLR Article 78 petition seeking to be placed back on the "light duty rotational tow list" for the NYSP Post 2 on I-684 (Exh. G). According to Justice Zambelli, the "central facts" were undisputed in the parties' recitation of events (Exh. G: 6). These facts included: Pratow was removed from Troop K's light tow list for Post 2 on I-684 in 2012 after Brian Prato was arrested for insurance fraud; Pratow applied to be reinstated to the tow list in December 2013 without listing Brian Prato as a tow truck driver; after it was added to the list on March 18, 2014, it sought to add him as a driver; Pratow was again removed from the tow list on May 1, 2014; B&B pled guilty to Grand Larceny in the Third Degree, a D felony, and Brian Prato pled guilty to an A misdemeanor, for insurance fraud related to a BMW; felony charges related to the police vehicles were dismissed (Exh. G: 2-3, 8-9).
The verified claim states claimant is the "first ranked contractor" under the Contract; and "in bad faith, the Claimant has not been contacted and/or given any work under the Contract since in or around March of 2012, but has given the work to the second-highest ranked contractor, Reliable Auto Body & Towing Service. Claimant asserts that the foregoing is an intentional breach of the Contract" (Exh. A, ¶ 3). The claim also alleges that the State Police breached the duty of good faith and the Contract by not offering the work to claimant first, by not providing written notice of termination of the Contract to claimant, and by waiting until August 18, 2014, to notify claimant orally of the termination.
In summary, the pleadings and admissible evidence submitted clearly establish the actions of both parties.
It is uncontested that a Contract was signed by claimant to perform automotive repairs for the State Police. It is undisputed that claimant does no actual repair work but subcontracts all such repair work to a related company owned by Brian Prato, who was under investigation, and subsequently convicted for insurance fraud. It is further undisputed that at some point in 2012 the State Police stopped offering repair and automotive service work to claimant prior to sending such work to claimant's competitor. Thus, although the Contract was to have continued until 2016, the State Police ceased complying with the terms without formal notice to claimant. It is further undisputed, from claimant's own deposition testimony, that she was aware that the State Police had ceased referring automotive repair work to her company and, further, she was aware as early as 2012 that such repair work was being sent to her competitor.
Based upon this record, there is no dispute of any material of fact as to the actions or conduct of any party. The decisions to be made at this point are solely legal in nature (i.e. the timeliness of the claim and the construction of the Contract at issue).
Timeliness Issue
Court of Claims Act §10(4) requires that a claim for breach of contract be filed and served or that a notice of intention be served within six months of accrual. "The failure to comply with the filing deadlines of Court of Claims Act § 10 is a jurisdictional defect which compels the dismissal of the claim" (Bennett v State of New York, 106 AD3d 1040, 1041 [2d Dept 2013], quoting Local 851 of Intl. Bhd. of Teamsters v State of New York, 36 AD3d 672, 673 [2d Dept 2007], app denied 8 NY3d 811 [2007]; see Miranda v State of New York, 113 AD3d 943 [3d Dept 2014]). " 'Because suits against the State are allowed only by the State's waiver of sovereign immunity and in derogation of the common law, statutory requirements conditioning suit must be strictly construed' " (Lichtenstein v State of New York, 93 NY2d 911, 913 [1999] [dismissing claim for failure to comply with Court of Claims Act § 10 (2) and (3)], quoting Dreger v New York State Thruway Auth., 81 NY2d 721, 724 [1992], see Alston v State of New York, 97 NY2d 159, 164 [2001] [dismissing claim for failure to file within the time limitation of Court of Claims Act § 10 (4)]).
The date of the claim's accrual is pivotal to the issue of subject matter jurisdiction. Generally, a claim accrues for purposes of the Court of Claims Act when damages are "reasonably ascertainable" (Prisco v State of New York, 62 AD3d 978, 978 [2d Dept 2009], lv denied 13 NY3d 706 [2009]; see Bullard v State of New York, 307 AD2d 676, 677 [3d Dept 2003]). "[A] delay in filing a claim will not be excused if a claimant's damages are reasonably ascertainable, even if the damages 'might be indefinite to some extent' " (Arbor Hill Ptnrs. v New York State Comm'r of Hous. & Community Renewal, 267 AD2d 675, 676 [3d Dept 1999] [affirming dismissal where claim accrued when defendant set rental rates too low, resulting in claimant's inability to make mortgage payments, which was "crux of the problem"], quoting Ton-Da-Lay, Ltd. v State of New York, 70 AD2d 742, 743 [3d Dept 1979], app dismissed 48 NY2d 629 [1979]; see Local 851 of the Int'l Bhd. of Teamsters v State, 7 Misc 3d 1013[A] [Ct Cl 2005] affd 36 AD3d 672 [2d Dept 2007] [affirming dismissal where the claim accrued at the time of the first distribution of forfeited union funds by the Organized Crime Task Force without a court order, which was the "gravamen" of the claim], app denied 8 NY3d 811 [2007]).
Defendant argues that damages were reasonably ascertainable in 2012, citing to the claim's assertion that defendant acted in "bad faith" and intentionally breached the Contract by not giving Pratow work after March 2012 (Exh. A: 2). The court agrees.
It is undisputed that after execution of the search warrants and the arrest of Brian Prato, the State Police ceased complying with the Contract terms to offer repair work to claimant before giving it to Reliable. The court is unpersuaded by claimant's argument, that there was a "continuing breach" of the Contract so the claim did not accrue until claimant received notice of its termination. The "continuous wrong" doctrine " 'is usually employed where there is a series of continuing wrongs and serves to toll the running of a period of limitations to the date of the commission of the last wrongful act' " (Affordable Hous. Assoc., Inc. v Town of Brookhaven, 150 AD3d 800, 802-803 [2d Dept 2017], quoting Selkirk v State of New York, 249 AD2d 818, 819 [3d Dept 1997]). "The doctrine may only be predicated on continuing unlawful acts and not on the continuing effects of earlier unlawful conduct' "(id.; see Thomas v City of Oneonta, 90 AD3d 1135, 1136 [3d Dept 2011] [retaliatory personnel actions each constituted separate wrong]). "Where a plaintiff asserts a single breach - with damages increasing as the breach continued - the continuing wrong theory does not apply" (Henry v Bank of Am., 147 AD3d 599, 601-602 [1st Dept 2017] [no breach of a recurring duty because monthly billings merely represented consequences of single wrongful act of enrolling customer in optional credit card product without consent]).
Here, the claim does not assert separate breaches. Rather, it asserts a single wrong, that defendant breached its duty of good faith, and the Contract, when it stopped giving claimant repair work. At that point, damages resulting from defendant's failure to act in accordance with its contractual obligations were reasonably ascertainable.
Claimant also argues that the claim accrued when defendant orally terminated the Contract in 2014 because until then the Contract remained enforceable. In support, claimant submits an excerpt from the deposition of Lisa O'Dea, the Contract administrator for the State Police, in which Ms. O'Dea testified that she would have known if the Contract with claimant had been terminated, and she had no knowledge of such a termination (Peska Reply Aff., Exh. A).
Assuming, arguendo, that the actions of the State Police did, in fact, constitute a breach, the question of an exact termination date is not material to the issue of the claim accrual date. The claim asserts that in bad faith, defendant stopped complying with its contractual obligations in 2012, not that the Contract was terminated. Whether the Contract remained enforceable until it was terminated in 2014 does not make claimant's damages from the 2012 breach impossible to ascertain, especially given the acknowledgment of Ms. Corritori that she was fully aware of the action and intention of the State Police. As a result, claimant's damages were reasonably ascertainable at some point in 2012 and the claim accrued at that time. Thus, the claim is untimely pursuant to § 10(4) of the Court of Claims Act.
Contract Issue
Turning to the merits of this matter, defendant has also demonstrated entitlement to summary judgment under the express terms of the Contract. The elements of breach of contract under New York law are "(1) the existence of a contract; (2) performance of the contract by the injured party; (3) breach by the other party; and (4) damages" resulting from the breach (Goldman Sachs Lending Partners, LLC v High River Ltd. P'ship, 34 Misc 3d 1209(A) [Sup Ct NY Cnty 2011]). "Contract interpretation is a question of law" and "[s]ummary judgment [. . .] should be granted where [. . .] the terms of the contract are clear and unambiguous" (id.; see also W.W.W. Assocs. v Giancontieri, 77 NY2d 157, 162 [1990] ["[W]hen parties set down their agreement in a clear, complete document, their writing should[,] as a rule[,] be enforced according to its terms"]). "Whether a contract is ambiguous is a question of law, and courts may not resort to extrinsic evidence to aid in interpretation unless the document is ambiguous" (Matter of Banos v Rhea, 25 NY3d 266, 276 [2015]) (citations excluded). "Though all portions of a contract should be read together to determine its meaning [. . .], courts may not distort the meaning of words, under the guise of interpretation, so as to create a new contract" (id. at 278) (citations omitted).
Defendant included in its answer affirmative defenses (twelve and fourteen) based on its rights under the Contract to terminate for cause or, additionally, to take whatever action it deemed in the State's best interest when "extraordinary circumstances" precluded the State Police from giving claimant repair work. The Contract terms are clear and unambiguous. The State Police had the explicit right, but not obligation, to terminate the Contract early without providing notice to Pratow, for "cause" (Exh. C, ¶ 2). However, the controlling provision, even absent formal termination is Clause #16 which entitled the State Police, in their sole and absolute discretion as a law enforcement agency, to "determine which course of action is in the best interest of the State" in the event that "extraordinary circumstances" precluded the agency from "utilizing the contracts in the manner described in the 'Use of the Contracts' clause" (Exh. C, Appendix Clause #16). This clause is also bereft of any requirement of notice to claimant.
While the term "extraordinary circumstances" is not explicitly defined in the Contract, it is clear from the context in which it is used that it was for the State Police to determine whether there were such circumstances, and if so whether they precluded the State Police from giving claimant the repair work. Clause #16 begins with the impetus for the clause, "As the New York State Police is a law enforcement agency," then states, "extraordinary circumstances may arise which preclude the agency from utilizing the contracts in the manner described" (Exh. C). Brian Prato's status as a convicted felon had already prevented his business from being included on the towing list. When the State Police ceased giving claimant repair work in 2012, Prato was still a convicted felon yet his business was doing all the repair work that Pratow was contracted to do for the State Police. He and his business were under investigation then charged with insurance fraud, and they both pleaded guilty to related crimes. These facts clearly constituted "extraordinary circumstances" allowing the State Police to determine to cease giving repair work to claimant and the decision to stop doing so rested in the discretion of the State Police. Clause #16 provides, "In these instances, the State Police will determine which course of action is in the best interest of the State and that decision shall be final."
Claimant's argument that it was not advised of the decision has no merit. Clause #16 does not require notice to claimant. Nor does the contractual provision entitling the State Police to terminate for cause. Because the court finds that defendant has established prima facie its defense based on the "extraordinary circumstances" clause, it is not necessary to determine whether those circumstances amounted to "cause."
Accordingly, the court finds defendant not liable for breach of contract and defendant's motion for summary judgment (M-91284) is granted, and Claim No. 125024 is dismissed. Claimant's motion for summary judgment on liability (M-91254) is denied as moot. The Clerk of the Court shall enter judgment accordingly.
January 2, 2018
White Plains, New York
STEPHEN J. MIGNANO
Judge of the Court of Claims Papers considered: Notice of Motion (M-91254), Affirmation in Support and Exhibits Affirmation in Opposition and Exhibit Notice of Motion (M-91284), Affirmation in Support and Exhibits Reply Affirmation in Support (M-91254) and Opposition (M-91284) Reply Affirmation in Further Support (M-91284)