Opinion
No. 114849.
2011-06-10
CHURCH AVENUE MERCHANTS BLOCK ASSOCIATION, INC., Claimant, v. STATE of New York, Defendant.
Chadbourne & Parke, LLP by Thomas J. Hall, Esq., Robert E. Grossman, Esq., Kimberly N. Zafran, Esq., for Claimant. Eric T. Schneiderman, Attorney General of the State of New York by Ellen S. Mendelson, Assistant Attorney General, for Defendant.
Chadbourne & Parke, LLP by Thomas J. Hall, Esq., Robert E. Grossman, Esq., Kimberly N. Zafran, Esq., for Claimant. Eric T. Schneiderman, Attorney General of the State of New York by Ellen S. Mendelson, Assistant Attorney General, for Defendant.
JAMES H. FERREIRA, J.
Claimant Church Avenue Merchants Block Association, Inc., (hereinafter CAMBA), filed a claim with the Clerk of the Court of Claims on February 19, 2008. The claim arises from a federal grant CAMBA received from the New York State Education Department (hereinafter SED or defendant) to serve as an Even Start Family Literacy Demonstration Site (hereinafter Demonstration Site). CAMBA alleges various legal theories, including breach of contract, quasi-contract and negligence, seeking damages for unreimbursed expenditures related to its operation of the Demonstration Site between September 2003 and August 2004. CAMBA further alleges causes of action in conversion and unjust enrichment relating to training modules developed during that time period.
Issue was joined, discovery ensued and a bifurcated trial on the issue of liability was held on September 14 and 15, 2010. At trial, CAMBA called as witnesses Valerie Barton–Richardson, Thomas Dambakly and DeSylvia Dwyer. Defendant called Ms. Dwyer and Margaret Zollo. Numerous documents were also offered and received into evidence. Requests for extensions to submit post-trial memoranda were granted. Supplemental post-trial memoranda was also requested and received.
This Court previously granted claimant's application for permission to serve and file a late claim in this matter ( see Church Ave. Merchants Block Assoc., Inc., v. State of New York, UID No.2007–039–054, Motion No. M–73307, January 11, 2008 [Ferreira, J.] ).
CAMBA, a not-for-profit organization formed in 1977, provides education, employment and youth services to low income residents in Brooklyn, New York. CAMBA receives funding for its programs from various sources, including state and federal grants. One of the programs CAMBA provides, the Even Start Family Literacy Local Program (hereinafter Local Program), seeks to improve literacy skills in low income families in the Brooklyn community. The Literacy Program is federally funded and has four components: Adult Education, Early Childhood Education, Parent Education and Interactive Literacy Activities (Tr. 263, 207).
References to the trial transcript are delineated herein as (Tr. ––––).
SED awards grant funding to approximately 80 different Even Start Local Programs. The programmatic aspects of these programs are managed by an Even Start Coordinator working in SED's Program Office. The Even Start Coordinator reviews and approves the budgets for Even Start Local Programs to ensure that such programs are operating in compliance with the grant. After programmatic review and approval, the Program Office forwards the budget to SED's Grants Finance Office, which processes and approves both the final budget for Even Start Local Programs and the final expenditure reports submitted by Even Start Local Programs seeking reimbursement. Amendments to a budget may also be submitted to SED's Program Office and, once approved, are sent to Grants Finance for processing and approval. Project cycles ordinarily run from September 1 through August 31 of the following year.
In 2002, SED also solicited a Request for Proposals (RFP) from Even Start Local Programs to serve as statewide Even Start Family Literacy Demonstration Sites (claimant's exhibit 1). The Demonstration Sites, which would be funded by a federal grant, would provide training to the Local Programs and develop a literacy curriculum to be used across the State (Tr. 29, 73, 153, 208, 263–264). Susan Henry, the SED Even Start Coordinator, informed prospective applicants in a January 2002 memorandum that “[s]uccessful applicants will have the requirements set forth in Section 1208(b)(1) of Title 1, Part B of the Elementary and Secondary Education Act waived. A waiver of this section will allow the demonstration sites to be awarded a grant for an eight-year period beginning [in the] 2002 school year” (claimant's exhibit 1, at 5). Selection of the four Demonstration Sites was based on criteria including the Even Start Local Program's experience, the quality of its project services, personnel and management plan.
CAMBA submitted a proposal to serve as a Demonstration Site ( see claimant's exhibit 1). In a letter dated April 8, 2002, Henry informed CAMBA that its proposal had been accepted and that it had been approved to serve as a Demonstration Site until 2011 (Tr. 27–29; claimant's exhibit 2).
CAMBA's selection allowed it “to act as a demonstration and resource center without requiring [it] to apply competitively for continuing funds for the next two cycles (2011)” (claimant's exhibit 2). CAMBA's obligations as a Demonstration Site included submitting to SED budgetary and fiscal information.
The Demonstration Site program was discontinued in the 2007–2008 school year after federal funding of the Even Start Program was reduced (Tr. 246–247).
Valerie Barton–Richardson, CAMBA's Deputy Executive Director since 1993, testified that the CAMBA Demonstration Site focused on early childhood literacy (Tr. 29, 216). Thomas Dambakly, CAMBA's Chief Financial Officer since 1997, and Barton–Richardson were involved in CAMBA's budget submissions to SED for both the Local Program and the Demonstration Site. The budget submission process involves preparing a proposed budget on a fiscal document known as an FS–10 form and listing the various expenses and services to be provided over a 12–month fiscal period running from September 1 through August 31 of the following year (Tr. 74–76).
The FS–10 form is submitted by the agency to the Program Office and, if approved by the Program Office, the FS–10 is signed and sent to Grants Finance for its approval (Tr. 78; claimant's exhibit 32 at 18). SED often edits the FS–10 originally submitted by the agency (Tr. 78, 269). After approval from Grants Finance, a copy of the FS–10 is returned to the grantee (Tr. 214).
The relevant SED fiscal forms are an FS–10, the proposed budget; an FS–10–A, the proposed amendment to the budget; an FS–25, an interim request for funds; and the FS–10–F, the final expenditure report (claimant's exhibit 30–B).
Dambakly stated that in the ordinary course of business, when CAMBA was just operating the Local Program, only the Grants Finance Office at SED received the budget submission. After CAMBA was accepted as a Demonstration Site, CAMBA was directed to submit all correspondence and fiscal forms to Henry, the Even Start Coordinator, who would review CAMBA's submissions, and if she gave them programmatic approval, she would forward them to Grants Finance for processing and approval (Tr. 77–78). Ordinarily, CAMBA would submit budgets in July or August. CAMBA would then be notified of the approvals in late August or early September by mailings or faxes from Grants Finance of the approved budgets and budget amendments (Tr. 78–80, 160, 161).
A grant recipient must also submit an FS–10–F or final expenditure report by November 30, ninety days after August 31, the date the program grant year ends (Tr. 285, 289, 335). DeSylvia Dwyer, the Even Start Coordinator after Henry retired in October 2004, stated that where a grant has been issued, and a budget approved, if the grantee or agency submits an FS–10–F in a timely manner and under budget, SED would reimburse the agency for those expenses (Tr. 215–216). Dwyer stated that she did not have the authority to grant an extension of time to submit an FS–10–F (Tr. 243–244). She stated that if a grantee asked for more time to submit such a report, she would refer the grantee to Grants Finance (Tr. 244–245).
Margaret Zollo, the Grants Finance Office Manager since 1998, testified that her office manages grants (Tr. 265). She stated that after the Program Office approves a budget, an entry is made on a computer system and two copies of the budget are sent to Grants Finance (Tr. 271). The project number is used to ensure that project funding comes from the appropriate funding stream (Tr. 272–274). Zollo stated that a grantee receives written notification of approval from Grants Finance in two ways: a Grant Award Notice and a copy of the last page of the FS–10 form showing the various approvals (Tr. 275–276, 278; see also claimant's exhibit 4 [example of the Grants Award Notice] ). As for notifying a grantee that an FS–10–A had been approved, she stated that once two copies of the FS–10–A are received from the Program Office, records are updated to reflect the new budget amounts and a copy of the amendment is mailed back to the agency (Tr. 282–283). Zollo stated that an agency can also seek reimbursement before the project cycle is complete by submitting FS–25 forms, which are interim requests for reimbursement of expenditures by the agency for categories listed on the FS–10 form (Tr. 279–281, 334). She stated that copies of approved FS–10, FS–10–A and FS–25 forms are returned to the agency in windowed envelopes (Tr. 318, 333–334).
The 90–day deadline for the FS–10–F submission is set forth in SED guidelines, in the Grant Award Notice, and in an annual reminder letter sent to grantees mid-summer (Tr. 289). However, an FS–10–F can be accepted after the 90–day period closes (Tr. 335). In cases where the FS–10–F contains mistakes or inaccuracies, SED guidelines provide that where a project has been audited and closed, a local agency or grantee is allowed “90 days to reopen a project for further review” and that requests “should be submitted in writing” (defendant's exhibit E). SED also reserves the right “to reopen a project after it has been closed to either recover any unallowed costs or reimburse any additional costs that have been disclosed through separate audits or reviews” (defendant's exhibit E; Tr. 290–292, 335).
Zollo stated that “[i]t is possible for an agency to request from Grants Finance an extension” to file an FS–10–F, and that such requests, made by e-mail or letter, are “evaluated on a case-by-case basis” (Tr. 293–294). However, in her deposition testimony, Zollo acknowledged that a request for an extension of time can be granted through a verbal conversation (Tr. 336; claimant's exhibit 33 at 46). She added later that the only persons who can grant extensions verbally were herself and certain Grants Finance employees, including Maria Dos Santos (Tr. 346). Zollo added that Grants Finance notifies an agency that an FS–10–F has been approved by mailing the agency a copy of the FS–10–F showing the approvals, and that Grants Finance also posts such information on an SED computer website and mails quarterly reports to the agency as to the status of their grants (Tr. 314–315). Dambakly disputed those assertions, stating that the quarterly reports were “rarely” sent or appeared on an “ad hoc basis”, and that the website referred to by Zollo was not in place at the time in question (Tr. 162–163, 352–353).
Zollo also acknowledged that an agency cannot submit a final expenditure report unless it has received a copy of its approved budget (Tr. 339–340).
In her December 2009 deposition, Henry corroborated Dambakly's assertion that the status of budget amendment approvals was not available on-line during the 2003–2004 project year: “In the last year or two, you could access that information on-line.... It was a new system” (claimant's exhibit 31, p. 26).
CAMBA's Budget Submission for the Preceding 2002–2003 Project Year
CAMBA submitted its FS–10 seeking $150,490 for the 2002–2003 Local Program budget on July 12, 2002. The Local Program project number was 0024–03–0207 (Tr. 32, 299).
Approvals by Henry from the Programs Office occurred on August 12, 2002 and by the Grants Finance Office on August 20, 2002 (Tr. 81; see claimant's exhibit 3). SED returned the approved FS–10 form to CAMBA.
Each fiscal document submitted by an agency includes a project number, which is an individual number assigned to each budget submission funded by a grant from SED (Tr. 32, 34, 82). The first four numbers relate to the agency, the second two relate to the fiscal year, and the last four numbers relate to the type of program (Tr. 80–81).
In November 2002, based on direction from Henry, CAMBA submitted a separate FS–10 for CAMBA's Demonstration Site budget for the 2002–2003 fiscal year (Tr. 33–34, 82, 83). The proposed budget sought $343,678 and was assigned a different project number 0244–03–0004 (Tr. 34, 82–83; claimant's exhibit 5). Dambakly stated that the delay in submitting this budget request was because SED had not determined whether the Demonstration Site project would be treated as a separate stand alone project or as an amendment to the Local Program budget (Tr. 82–83). Although received by SED on November 19, 2002, CAMBA received retroactive Program Office approval from Henry, who dated the approval September 1, 2002 (Tr. 83–84). Grants Finance received and approved $116,714 of the budget request three months later in February 2003 ( see claimant's exhibit 5). A copy of the FS–10 was returned to CAMBA with cross-outs and edits, including the revised total of $116,714 (Tr. 37).
CAMBA was then instructed to prepare an FS–10–A for the remaining 2002–2003 Demonstration Site expenses (Tr. 37–38, 85–86, 169). CAMBA complied and on March 28, 2003 submitted an FS–10–A for Project Number 0244–03–0004 for the full $343,678 (Tr. 38, 40, 87–88; claimant's exhibit 7).
The FS–10–A was marked received by SED on April 16, 2003 and given retroactive program approval by Henry dated March 18, 2003. Having not heard from Grants Finance as to the status of the FS–10–A, Barton–Richardson sent Henry an e-mail dated May 21, 2003 urging Henry to send her a copy of the approved FS–10–A for the Demonstration Site (Tr. at 40, 89; claimant's exhibit 8). When Barton–Richardson did not receive a reply, Dambakly sent Henry a similar e-mail dated May 28, 2003, seeking confirmation of the approval as CAMBA had expended funds and incurred costs (Tr. 90–92; claimant's exhibit 9). Further e-mails were exchanged between Dambakly and Henry in July 2003 with Dambakly making “an urgent plea” for a copy of the FS–10–A approval and Henry stating that the expenses “have been given programmatic approval” and that the amendment “should be approved on the system by tomorrow. I truly apologize for this-it has been an on-going saga” (claimant's exhibit 16; Tr. 92–96). This FS–10–A was logged into Grants Finance three months later on July 22, 2003 (Tr. 333; defendant's exhibit D).
During Zollo's testimony, defendant produced another copy of this FS–10–A containing edits by SED. This copy indicated a different project number of 0024–03–0207, the project number assigned to the Local Project, and listed a revised budget total of $377,454 (defendant's exhibit D; Tr. 301–303).
Barton–Richardson stated that, based on “confusion as to how to get our Demonstration Site expenses covered and approved,” CAMBA received “subsequent direction” to submit a second FS–10–A, which was submitted on August 28, 2003 seeking the full $343,678 in expenses arising from the 2002–2003 Demonstration Site (Tr. 43–44, 100; claimant's exhibit 14). This second FS–10–A referred to Project Number 0024–03–0207. Dambakly stated that this FS–10–A did not seek additional funds but “was just a reallocation between categories” (Tr. 99). In October 2003, Dambakly sent an e-mail to Henry inquiring as to the status of the August 28, 2003 submission (Tr. 101; claimant's exhibit 16). Dambakly stated that he never heard back from Henry, but eventually spoke with her in May 2004 about the submission. Henry did not recall the status of the second FS–10–A and asked for another copy. Dambakly arranged for the delivery of another copy to Henry and, in an e-mail to her dated May 13, 2004, Dambakly offered to accept some disallowances if the submission was processed to pay for supply and equipment expenses (Tr. 102–103; claimant's exhibit 19).
Dambakly sent Henry another e-mail dated June 24, 2004 expressing concern about a phone call from Grants Finance during which he learned that the second FS–10–A had apparently not been received by Henry and that the contract had been closed out (Tr. 107; claimant's exhibit 21). Dambakly attributed the confusion to a “number of miscommunications” and reliance on directions from Henry regarding the submission process (Tr. 109–110). The August 28, 2003 submission was ultimately not approved because, according to Dambakly, the submission did not include original signatures from CAMBA and Henry's original signature approving the document (Tr. 110–111). However, while the net effect of that disapproval was a loss of approximately $30,000, it appears that CAMBA was reimbursed for the remainder of its 2002–2003 Demonstration Site expenses on or about March 30, 2004 (Tr. 111, 178, 313, 343–344).
CAMBA's Budget Submission for the 2003–2004 Fiscal Year
In fiscal year 2003–2004, CAMBA operated a Local Program and a Demonstration Site.
A Local Program FS–10 dated July 10, 2003 seeking $146,990 was received by the Programs Office on July 15, 2003 and approved by Henry on August 21, 2003 (Tr. 112; claimant's exhibit 10). The Project Number assigned to the Local Program was 0024–04–0207.
On or about July 15, 2003, CAMBA submitted an FS–10–A with a revised budget total of $549,964 (claimant's exhibit 11). This amended total added the expenses from the Demonstration Site to the Even Start Local Program budget (Tr. 48–49, 113, 115). Based on notification from Henry that the programs would now be consolidated under a single project number, CAMBA used an FS–10–A for this submission rather than a FS–10 as it had done for the previous 2002–2003 fiscal year (Tr. 48–49, 113–114).
SED changed the project number after it was submitted to reflect that the Demonstration Site would be considered an addition to the Local Program budget (claimant's exhibit 11). This FS–10–A was approved by Henry on August 21, 2003. A week after the first FS–10–A was received, Henry instructed CAMBA to submit a second FS–10–A to reflect the new project number for the Demonstration Site. A second FS–10–A dated July 17, 2003 was prepared and received by SED on July 21, 2003 (Tr. 50–51, 115, claimant's exhibit 12). This FS–10–A was also approved by Henry on August 21, 2003, although Dambakly stated that CAMBA did not receive the approved copy of this budget amendment from SED until far after the program had closed out (Tr. 116, 124). Dambakly also stated that he had spoken directly with Maria Dos Santos in Grants Finance on numerous occasions about having not received an approved FS–10–A (Tr. 165–166). He recalled that she told him that she would attempt to locate the original document for him (Tr. 166).
In a July 10, 2003 e-mail to Henry, Dambakly noted the difficulty posed by submitting a 2003–2004 budget for the Demonstration Site when, at that time, he had not received notification that the 2002–2003 Demonstration Site budget had been approved: “How can I do an FS–10–A for 03–04, when I don't know what expenses you've approved in 02–03?” (claimant's exhibit 16).
Zollo testified that CAMBA should have received by mail notification from Grants Finance that the FS–10–A had been approved (Tr. 317–318). She stated that “[t]he approved expenditures are included on the copy of the approved budget, and any approved amendments are returned to the agencies by Grants Finance in window envelopes” (Tr. 339). In addition, Zollo stated that CAMBA would have also received quarterly status reports during the 2003–2004 project year reflecting amended budget totals and that CAMBA could have obtained current grant status information from an SED website (Tr. 315, 318–320). Zollo stated that the FS–10–A with an amended budget total of $549,964 was processed by Grants Finance on August 27, 2003 (Tr. 317–319, 337; claimant's exhibit 12). She agreed that the document does not show that the FS–10–A was approved (Tr. 338; claimant's exhibit 12).
CAMBA's Submission of the Final Reimbursement Request for the 2003–2004 Demonstration Site
In an August 11, 2004 letter, Grants Finance reminded CAMBA that the FS–10–F for the “ESEA I Even Start” program, with a project end date of August 31, 2004 and a budget amount of $549,964, was “due within 90 days of the close of a project” (claimant's exhibit 22; Tr. 124–126). Dambakly was “surprised” by the letter “because for the first time I saw some sort of a modification was approved, so I knew [the approval] had to be somewhere” (Tr. 126; claimant's exhibit 22, p. 2 [lists Project No. 024040207, the ESEA I Even Start program, with a project end date of August 31, 2004 and a budget amount of $549,964] ). He stated that while the August 11 letter indicated approval of the total budget, CAMBA had never previously received a copy of the approved FS–10–A, and the August 11 letter did not specify which expenditure categories had been approved, thus making submission of an FS–10–F, the final expense report for the Demonstration Site, impossible. An approved FS–10–A was required to be submitted as an attachment to the FS–10–F in order to show “whoever is reviewing the FS–10–F that—the amendments have been approved ... the FS–10–F also serves to show by category where the additional—the amended expenses sit, and without having that [FS–10–A] to show that there were no changes made between categories, I could not with any—any real accuracy submit the form or the documentation” (Tr. 127–128). The absence of notification that the Demonstration Site budget had been approved, according to Dambakly, “had become a constant situation. Items either got lost or misplaced, or it got approved and we didn't get notification of it for two or three or four or five months later. So this was becoming a repeat of the same story” (Tr. 127).
Dambakly called Grants Finance after receiving the August 11 letter and left messages (Tr. 180). Grants Finance directed him to contact the Program Coordinator (Tr. 180). He then contacted Henry, who stated that the budget amount referenced had received “programmatic approval” and been forwarded to Grants Finance. Dambakly stated that Henry offered to check on the status of the matter and locate a copy for him (Tr. 128). Dambakly also stated that Henry informed him that the 90–day deadline for submission of the FS–10–F “would, obviously, not hold in this case as it had not held in the prior year” (Tr. 129, 175). Henry retired in October 2004 and Dee Dwyer was hired as the Even Start Coordinator on November 1, 2004 (Tr. 131, 204).
On November 17, 2004 CAMBA timely submitted an FS–10–F seeking reimbursement of $146,585, the local share of the Even Start Local Project (claimant's exhibit 23; Tr. 320–321). CAMBA did not list the total approved budget amount of $549,964 on this FS–10–F given the uncertainty as to which portions of the Demonstration Site budget had been approved (Tr. 132–134). A 2003–2004 Demonstration Site final expenditure report was not submitted on or before the November 30, 2004 deadline because CAMBA did not have the necessary documentation, namely a copy of the approved Demonstration Site budget amendment (Tr. 134).
CAMBA continued its efforts to obtain a copy of the approved budget amendment for the Demonstration Site. Dambakly stated that following conversations with Dwyer in late 2004 and early 2005, an FS–10–F was submitted on or about January 12, 2005 to the Program Office seeking reimbursement for the 2003–2004 Demonstration Site budget, using the Local Program project number 0024–04–0207 (Tr. 136–137, 176; claimant's exhibit 24).
A week later Dambakly sent to Grants Finance, via Federal Express, a duplicate submission of the FS–10–F for the 2003–2004 Demonstration Site budget in the event that the previous submission was misplaced (Tr. 138–140, 176; claimant's exhibit 26). The duplicate copy was mailed in an envelope with another submission for a different program known as the 21st Century project (Tr. 139–140; see also claimant's exhibit 22 [August 11, 2004 letter] ). Dambakly stated that he handed the documents to the person who mailed them and watched as the documents were placed in the envelope and the envelope was sealed (Tr. 139–141; claimant's exhibit 26). Although Zollo testified that, “to my knowledge” the Federal Express package only contained the FS–10–F for the 21st Century project (Tr. 323), she stated during cross-examination that she neither opened nor saw the Federal Express mailing (Tr. 328). She also acknowledged that had this FS–10–F been received on or about January 18, 2005, Grants Finance would have treated it as a revised FS–10–F (Tr. 341–342). She stated that CAMBA's 2003–2004 Even Start grant closed out December 6, 2004, when the FS–10–F request of $146,585 was processed and paid out, and that CAMBA's deadline for submitting a revised FS–10–F would have been March 6, 2005 (Tr. 321, 342; claimant's exhibit 23). SED's position is that since, in its view, the revised FS–10–F was not received prior to March 6, 2005, SED would not reopen the project (Tr. 342).
Claimant's exhibit 24 is the FS–10–F for the 2003–2004 Demonstration Site which includes the expenses that CAMBA alleges it is owed.
Dambakly stated that it ordinarily takes six to eight weeks to receive reimbursement after the submission of an FS–10–F. CAMBA received reimbursement for the Local Program expenses in early 2005 and for the 21st Century project in late winter to early spring of 2005 (Tr. 141–142, 176). By late spring, however, CAMBA had not received reimbursement for the Demonstration Site expenses and Dambakly contacted Dwyer by phone and e-mail (Tr. 142). Dambakly testified that Dwyer told him to not be concerned as many programs were being closed out late (Tr. 143). In September 2005, having still not received any reimbursement for the Demonstration Site, Dambakly sent Dwyer another e-mail, which stated: “[s]ent you an email a while back on the Demo budget-have not heard from you-Can you call me and let me know how you are handling it? Also, we have not received ANY money for the Demo for the period ending 9/1/03–8/31/04. The amount is $395,486. This money is long overdue-closeouts were sent and corrected per the NYSED months ago-Can you find out where this money is?” (claimant's exhibit 27; Tr. 144). The FS–10–F submitted in January 2005 had included the $395,486 figure ( see claimant's exhibit 24). Dambakly stated that CAMBA received no response to the September 14, 2005 e-mail.
On November 9, 2005, following conversations with Dwyer, MaryAnn Lanzetta, CAMBA's Deputy Executive Director for Fiscal Systems, resubmitted the FS–10–F documents related to the 2003–2004 Demonstration Site expenditures and a cover letter summarizing the matter (Tr. 148, 221; claimant's exhibit 28). Dwyer recalled talking with Dambakly about CAMBA not having received payment for 2003–2004 Demonstration Site expenses totaling $395,486 (Tr. 222–223), but later could not recall if the communication was by e-mail or by phone (Tr. 225). Dambakly stated that SED responded by asking for further documentation, and that SED did not advise CAMBA that federal funding for the project would soon lapse (Tr. 148–149). Zollo stated that she was unaware that CAMBA was seeking $395,000 in reimbursement from its 2003–2004 Demonstration Site expenses until the November 9, 2005 letter from Lanzetta (Tr. 324; claimant's exhibit 28). She stated that the availability of funds to reimburse CAMBA for such expenses had lapsed, and that Grants Finance considered the reimbursement complete, with payment to CAMBA of $146,990 for the Local Program expenses, and distributed the remaining funds “for other projects” (Tr. 325). She stated further that she did not have the authority under federal award guidelines to use federal monies available for other fiscal years to reimburse CAMBA for the 2003–2004 Demonstration Site expenses (Tr. 326–327).
In early 2006, Dambakly learned that SED had denied the request for reimbursement of the $395,486 related to the 2003–2004 Demonstration Site budget (Tr. 149). Dambakly was “shocked” by the determination given the resources CAMBA had expended on the project, and its “good-faith” efforts to complete the project despite the absence of a clear reimbursement funding mechanism and SED's approval delays and misplacement, or loss, of CAMBA's submissions (Tr. 149–151). CAMBA was not reimbursed for the expenses it incurred in operating the Demonstration Site during fiscal year 2003–2004 (Tr. 53).
In its claim, CAMBA alleges three causes of action against defendant sounding in breach of contract, negligence and quasi contract to recover its expenses and costs arising from its operation of the Demonstration Site between September 1, 2003 and August 31, 2004. CAMBA further alleges two causes of action based on conversion and unjust enrichment against defendant seeking damages related to the development of training modules used by defendant in training sessions across the state.
Upon review of the applicable legal principles and their application to the facts presented, and considering all of the evidence, including the exhibits received into evidence and the testimony and demeanor of the witnesses, the Court finds that claimant has proven, by a preponderance of the credible evidence, its first cause of action sounding in breach of contract and that it should be reimbursed for the expenses it incurred during its operation of the Demonstration Site between September 1, 2003 and August 31, 2004. As set forth below, claimant proved that a valid agreement existed between SED and CAMBA, and that SED materially breached the agreement when it did not reimburse CAMBA for its 2003–2004 Demonstration Site costs. Further, the Court finds that claimant timely submitted its final reimbursement request form for the year at issue and that Section 112 of the State Finance Law is not applicable to the instant facts.
Governmental Immunity
Defendant contends in its post-trial brief that all of the acts undertaken by SED related to CAMBA and the operation of the Demonstration Site, including, but not limited to, selecting CAMBA as a Demonstration Site and maintaining its grantor-grantee relationship with CAMBA, constitute discretionary governmental conduct, and that it is therefore entitled to absolute immunity under the principles articulated in McLean v. City of New York, 12 NY3d 194 (2009). This argument, however, presupposes that the actions in question were, for sovereign immunity purposes, “governmental” actions. The threshold determination in any analysis of governmental immunity is whether the actions in question were proprietary or governmental in nature (Kochanski v. City of New York, 76 AD3d 1050, 1051 [2010] ).
As a general proposition, public entities are ordinarily immune from tort claims arising out of the performance of their governmental functions or from actions undertaken in a governmental capacity (Balsam v. Delma Eng'g Corp., 90 N.Y.2d 966, 967 [1997];Miller v. State of New York, 62 N.Y.2d 506, 513 [1984];Doe v. City of New York, 67 AD3d 854 [2009] ). Where, however, a governmental entity acts in a manner that displaces or supplements a traditionally private enterprise, and engages in activities that ordinarily are undertaken by private enterprises, it is deemed to be performing a private corporate function and acting in a proprietary capacity (Matter of Karedes v. Colella, 100 N.Y.2d 45, 50 [2003];Riss v. City of New York, 22 N.Y.2d 579, 581 [1968];Bass v. City of New York, 38 A.D.2d 407, 411 [1972],affd32 N.Y.2d 894 [1973] ).
By acting in a proprietary capacity, the governmental entity is “generally subject ... to the same duty of care as private individuals and institutions engaging in the same activit[ies]' “ (Sebastian v. State of New York, 93 N.Y.2d 790, 793 [1999],quoting Schrempf v. State of New York, 66 N.Y.2d 289, 294 [1985];Kochanski v. City of New York, supra at 1051; D & D of Delhi, Inc., v. Village of Delhi, 47 AD3d 1117, 1118 [2008];Signature Health Ctr, LLC v. State of New York, 28 Misc.3d 543 [2010] ), “and may be held liable for breach of that duty” ( Kochanski v. City of New York, supra ). In other words, where the conduct at issue arises during the performance of a proprietary function, the governmental actor is subject to ordinary tort liability ( Balsam v. Delma Eng'g Corp., supra at 967; see also Miller v. State of New York, supra at 511–512). “To determine whether a [governmental entity's] complained of act falls within the governmental or proprietary category, courts must examine the specific act or omission out of which the injury is claimed to have arisen and the [governmental or proprietary] capacity in which that act or failure to act occurred' “ (Lemery v. Village of Cambridge, 290 A.D.2d 765, 766 [2002], quoting Sebastion v. State of New York, supra at 794 [internal quotations omitted] ).
With these principles in mind, the Court must determine whether SED was acting in a proprietary or governmental capacity when it entered into an agreement with CAMBA. It is axiomatic that “[t]he sovereign can contract and has very many occasions to do so ... It must be governed by the same rules of common honesty and justice which bind individuals” (Danolds v. State of New York, 89 N.Y. 36, 44 [1882] ). Indeed, whenever
“litigation ensues on such a contract the rights and obligations of the contracting parties must be adjusted upon the same principles as if both contracting parties were private persons. Both stand upon equality before the law, and the sovereign is merged in the dealer, contractor and suitor' (People v. Stephens, 71 N.Y. 527, 550 [1878, Allen, J., concurring] ). The rules of construction which apply between persons apply to the State' (Hydraulic Race Co. v. Greene, 230 App.Div. 374, 375–376 [3d Dept 1930], affd 257 N.Y. 540 [1931];Amadeus, Inc. v. State of New York, 55 Misc.2d 27, 30–31 [Ct Cl 1967], mod 36 A.D.2d 873 [3d Dept 1971], lv dismissed 29 N.Y.2d 634 [1971], lv. denied 29 N.Y.2d 486 [1971] ). Thus, government contracts are to be interpreted in the same manner as are agreements between individuals (Hollerbach v. United States, 233 U.S. 165, 171 [1914];People ex rel. Graves v. Sohmer, 207 N.Y. 450, 458 [1913] )”
( Tiger Sec. Group, Inc. v. State of New York, 17 Misc.3d 1129(A) [2007]; see also Green Is. Contr. Corp. v. State of New York, 99 A.D.2d 330, 332 [1984],lv denied66 N.Y.2d 605 [1985] [“the State is bound by the same rules of honesty and justice as individuals when contracting”] ).
Moreover, courts have found that a governmental agency is engaged in a proprietary function when it elects to contract or seeks to enter into an agreement with another party ( see e.g. Matter of Karedes v. Colella, supra at 51 [village acting in its proprietary capacity in entering into contract with manager of village-owned golf facility]; Slattery Assoc. v. City of New York, 98 A.D.2d 686 [1983] [City did not breach contract entered into in its proprietary capacity by a failure to allocate police resources and protection in a certain way]; Green Is. Contr. Corp. v. State of New York, 117 Misc.2d 435, 440–441 [1983],affd99 A.D.2d 330 [1984],lv denied66 N.Y.2d 605 [1985] [court rejects argument that State was immune from review when it refused to perform remaining work under a highway construction contract as “the State was acting in its proprietary capacity ... and must perform its contractual obligations in the same manner as any individual or corporation”]; Harman v. City of Ft. Lauderdale, 134 Misc. 133, 135 [1929] [power of Port Authority to contract on behalf of port district is a “private and proprietary” function] ). To allow the State to “exact performance of a contract while it was advantageous to it, and absolutely arrest performance and escape liability when performance became disadvantageous, would shock the public conscience” ( Danolds v. State of New York, supra at 45).
The Court thus concludes that SED was acting in a proprietary capacity when it entered into an agreement with CAMBA and, therefore, that the State is not afforded immunity for breach of contract. Accordingly, inasmuch as defendant was acting in a proprietary manner, defendant's argument that its actions were discretionary and immune from liability, or alternatively, ministerial but immune because no special duty or special relationship was established, has no application here ( see D & D of Delhi, Inc., v. Village of Delhi, supra at 1118).
I. Demonstration Site Causes of Action
A. Breach of Contract
Claimant's primary argument is that SED breached its contract with CAMBA when it failed to reimburse CAMBA for various expenditures related to CAMBA's operation of the Demonstration Site during the 2003–2004 fiscal year. In order to prove a cause of action for breach of contract, claimant must establish (1) the existence of a valid contract; (2) the performance of the contract by claimant, (3) defendant's material breach of the contract and (4) resulting damages ( see Clearmont Prop., LLC v. Eisner, 58 AD3d 1052 [2009];see also JP Morgan Chase v. J.H. Elec. of NY, Inc., 69 AD3d 802 [2010];Noise in The Attic Prods., Inc. v. London Records, 10 AD3d 303 [2004];Furia v. Furia, 116 A.D.2d 694, 695 [1986] ). “To establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound” (Kowalchuk v. Stroup, 61 AD3d 118, 121 [2009] ). The inquiry centers on whether there was a meeting of the minds regarding the material aspects of the transaction (Amcan Holdings, Inc. v. Canadian Imperial Bank of Commerce, 70 AD3d 423, 426 [2010];lv denied15 NY3d 704 [2010];Robison v. Sweeney, 301 A.D.2d 815, 817 [2003];May v. Wilcox, 182 A.D.2d 939 [1992] ). “Generally, courts look to the basic elements of the offer and the acceptance to determine whether there is an objective meeting of the minds sufficient to give rise to a binding and enforceable contract” (Matter of Express Indus. & Term. Corp. v. New York State Dept. of Transp., 93 N.Y.2d 584, 589 [1999],rearg. denied93 N.Y.2d 1042 [1999] ).
The proof offered at trial establishes that a valid agreement existed between SED and CAMBA. CAMBA applied through a RFP offer process to be a Demonstration Site (claimant's exhibit 1; Tr. 21–23). SED accepted CAMBA's proposal to be one of four Demonstration Sites in April 2002, with the designation as a Demonstration Site effective through 2011 (claimant's exhibit 2; Tr. 27–29). The net effect of this designation was that CAMBA was not required “to apply competitively for continuing funds for the next two [four year] cycles (2011)” (claimant's exhibit 2) and would receive federal grant monies from SED to implement the program.
The understanding between the parties was that CAMBA would utilize monies from a federal categorical grant appropriated to the State for the purpose of implementing and operating a Demonstration Site.
SED awarded funds from grants “on a four-year cycle” (Tr. 238). Applicants selected following an RFP process would receive a grant for four years subject to available federal funding and would not have to compete again for the grant (Tr. 241). A grantee selected “would be assured funding for four years,” but would have to submit the necessary budget and reimbursement requests (Tr. 241–242).
In consideration for running the Demonstration Site, CAMBA would be reimbursed for its expenses once it submitted certain fiscal and budgetary documents to SED for its review and approval. For the 2003–2004 project year, the record shows that, in accordance with the understanding of the parties and the terms of the April 2002 letter from SED, CAMBA prepared and submitted proposed budgets, amendments to proposed budgets, interim requests for payments and requests for reimbursement relative to its operation of the Demonstration Site from September 1, 2003 through August 31, 2004 (claimant's exhibits 10 [7/10/03 FS–10]; 11 [7/11/03 FS–10–A]; 12 [7/17/03 FS–10–A]; 14 [8/28/03 faxed FS–10–A form]; 17 [2/10/04 FS–25]; 18 [3/16/04 FS–25]; 20 [6/11/04 FS–25]; 24 [1/12/05 FS–10–F] ). Correspondence dated August 11, 2004 from SED to CAMBA reminding CAMBA to submit reimbursement forms to recover its expenses further evidences a grantor-grantee relationship, and SED's intent to be bound relative to payment of Demonstration Site costs ( see claimant's exhibit 22, [“According to our records, your agency operated the 2003–2004 Federal Categorical grants listed on the reverse side”-“8/31/04 ... ESEA I Even Start ... 549,964”] ).
See generally Elementary and Secondary Education Act, 20 U . S.C.A. § 6301 et seq.
Indeed, Dwyer acknowledged that once the grantee is selected to receive the grant, the grantee need only submit an annual proposed budget, secure approval of the budget, and submit a Final Expenditure Report in order to receive the funding:
MR. GROSSMAN: As a general rule, if a grant has been issued and a budget has been approved, will the grantee[ s] submission of a Final Expenditure Report be approved and paid out?
MS. DWYER: Yes
(Tr. 215; see also Tr. 241–242).
Claimant also offered sufficient proof to establish its substantial performance of the contract, that defendant materially breached the contract and the extent of its damages. “A contractor can recover on the theory of substantial performance only where the failure of performance is relatively slight” (A–1 Gen. Contr. v. River Mkt. Commodities, 212 A.D.2d 897, 900 [1995] ). Substantial performance occurs where “the primary purpose of the contract was fulfilled ... [t]he breaches alleged ... are trivial in nature, particularly when contrasted with the substantial performance tendered by plaintiff pursuant to the terms of the contract ... [and] plaintiff continually proceeded with the utmost good faith” (Anderson Clayton & Co. v. Alanthus Corp., 91 A.D.2d 985 [1983]; Banks, New York Contract Law § 17:14; see also Tiger Sec. Group, Inc. v. State of New York, supra ). Questions of substantial performance generally turn on the facts of each case (Merrit Meridian Costr. Corp. v. Old Country Iron Works, 229 A.D.2d 661 [1996] ). In order to recover, claimant must demonstrate that any alleged failure to comply fully with the terms of the agreement was inadvertent or unintentional, or that the defects in performance were insubstantial, slight, trivial or minor (Botco Devs. v. Mikealice Mgt. Corp., 291 A.D.2d 871 [2002];Carefree Bldg. Prods. v. Belina, 169 A.D.2d 956, 957 [1991];Tiger Sec. Group, Inc. v. State of New York, supra ).
Significantly, defendant does not dispute that claimant performed the services it was required to perform—operating the Demonstration Site during the project year 2003–2004–and there are numerous fiscal submissions in the record documenting CAMBA's performance. There is also record evidence detailing $395,486.00 in expenditures by CAMBA from operation of the Demonstration Site which were not reimbursed ( see claimant's exhibits 11, 12, 24, 28). Rather, defendant argues that even if an agreement existed between SED and CAMBA, claimant breached the agreement by failing to timely submit the FS–10–F for the Demonstration Site and that, therefore, it has no duty to perform its obligation under the agreement, namely, to reimburse claimant for the costs of the services it rendered in operating the Demonstration Site.
“[A] condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises' “ (MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645 [2009], quoting Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 690 [1995] ). “Conditions may be express or implied” ( id.). “Express conditions are those agreed to and imposed by the parties themselves [and][i]mplied or constructive conditions are those imposed by law to do justice' “ ( id., quoting Calamari and Perillo, Contracts § 11–8, at 444 [3d ed] ). “Express conditions must be literally performed, whereas constructive conditions, which ordinarily arise from language of promise, are subject to the precept that substantial compliance is sufficient” ( id.). Whether express or implied, “the non-occurrence of the condition may yet be excused by waiver, breach or forfeiture” ( id.). “[T]o the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange' “ ( id., quoting Restatement [Second] of Contracts § 229).
“A party may waive a right if it dispenses with performance of something it had the right to demand or insist upon and does so with both knowledge of its existence and an intention to relinquish it' “ ( Tiger Sec. Group, Inc. v. State of New York, supra at 8, quoting Greater Johnstown School Dist v. Frontier Ins. Co., 252 A.D.2d 615, 618 [1998] ). Moreover, “a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition” (ADC Orange, Inc. v. Coyote Acres, Inc., 7 NY3d 484, 490 [2006], quoting Kooleraire Serv. & Installation Corp. v. Board of Educ. of City of NY, 28 N.Y.2d 101, 106 [1971];see also A–1 Gen. Contr. v. River Mkt. Commodities, supra at 900; Sunshine Steak, Salad & Seafood v. W.I.M. Realty, 135 A.D.2d 891 [1987] ). Indeed, “[e]very contract implies that neither party will do anything to prevent performance by the other party [citation omitted], and a party who violates this rule, which is founded in fair dealing, may not rely on such failure to excuse his own nonperformance” (Bass v. Sevits, 78 A.D.2d 926, 927 [1980] ).
Upon applying these principles, the Court concludes that defendant's argument that it is excused from performance because CAMBA breached its agreement with SED by failing to submit the final expenditure report within the 90–day period following the August 31, 2004 project end date is without merit. Any alleged failure to comply with the terms of the agreement was unintentional. CAMBA made repeated efforts to navigate the uncertainty surrounding SED's administration of the federal grant, and was diligent in its attempts to secure reimbursement. Moreover, any alleged breach in its multiple tries to submit the FS–10–F was minor, particularly when juxtaposed with CAMBA's undisputed operation of the Demonstration Site, which was the primary purpose of the agreement between SED and CAMBA.
Indeed, the record supports a finding that CAMBA's FS–10–F submission was timely and proper. SED guidelines provide that “[o]nce a project has been audited and closed, the local agency is allowed 90 days to reopen a project for further review” (defendant's exhibit E). Zollo testified that SED would have processed the 2003–2004 Demonstration Site Final Expenditure Report as a revised FS–10–F if it had been received prior to March 6, 2005, 90 days after December 6, 2004, the date SED maintains the project was closed out by the payment to CAMBA of $146,585, the reimbursement owed CAMBA for the Local Project costs (Tr. 341–342). Moreover, in her deposition, Zollo stated that Grants Finance would consider submission of a second FS–10–F (which occurred here as set forth below) as a request to reopen the project for further review (claimant's exhibit 33 at 93–94).
The Court credits the testimony and documentary proof from claimant indicating that it did in fact make two submissions of its Demonstration Site FS–10–F in January 2005, prior to the March 6, 2005 deadline, and that these submissions were the result of communications and conversations with SED as to how CAMBA could obtain reimbursement for the Demonstration Site expenses ( see claimant's exhibits 24 [FS–10–F]; 26 [copy of Federal Express invoice]; Tr. 136–141). The record also shows phone calls and e-mails from CAMBA to SED in the months following the January 2005 submissions seeking the status of the Demonstration Site expenses (Tr. 142–143, 225, claimant's exhibit 27; claimant's exhibit 32 at 67–68 [in her deposition Dwyer acknowledges contact with Dambakly “[m]uch in advance of when this (November 9, 2005) letter arrived where he said he was concerned because they hadn't received their payment”] ).
The Court also credits the testimony from Dambakly that CAMBA first received written notification that the Demonstration Budget had been approved in the August 11, 2004 letter from Grants Finance (Tr. 124–128; claimant's exhibit 22). CAMBA had never received a copy of the approved FS–10–A despite sending SED two FS–10–As in July 2003 that listed the revised budget total of $549,964.00 to reflect the costs of the Local Project and the Demonstration Site (claimant's exhibits 11 and 12; Tr. 111–116, 124). Following receipt of the August 11, 2004 letter, Dambakly reached out to Henry who indicated that she would look for a copy of the amendment (Tr. 128). When Dambakly expressed reservations about meeting the 90 day deadline without the amendment, Henry apparently told him that the deadline would not apply (Tr. 129). Specifically, Dambakly testified that he told Henry that he was in a “holding pattern until I get that document,” and that Henry advised him that “the November 30th deadline would, obviously not hold in this case as it had not held in the prior year” (Tr. 129).
Dwyer, Henry's successor, testified that she did not have the authority to grant extensions, and Zollo stated that only Grants Finance personnel could grant extensions (Tr. 244–245, 294). The Court is not persuaded by Zollo's testimony on this point given the August 11, 2004 letter from Grants Finance indicating that a program manager could change the submission date for an FS–10–F, and Zollo's testimony during cross-examination that verbal extensions “can” be granted, contradicting her earlier testimony that an extension of time could not be verbal (Tr. 336, 294).
Defendant objected to the admissibility of Henry's statement on hearsay grounds and the Court reserved on the objection. It is well settled that “the hearsay statement of an agent is admissible against his employer under the admissions exception to the hearsay rule only if the making of the statement is an activity within the scope of his authority” (Loschiavo v. Port Auth. of N.Y. & N.J., 58 N.Y.2d 1040, 1041 [1983] ). Upon review, the Court overrules the objection. There is sufficient evidence in the record indicating that Henry's statement to Dambakly that the 90 day rule would not apply in this instance was a statement that was within her authority to make. Henry was the principal contact for CAMBA on the Demonstration Site prior to her retirement in October 2004 (Tr. 77–78). Documents received into evidence identify Henry as the SED main contact or coordinator for the Demonstration Site project ( see e.g. claimant's exhibit 1 [RFP Demonstration Site memo from Henry at 5–6]; claimant's exhibit 2 [letter from Henry accepting CAMBA's application to be a Demonstration Site]; claimant's exhibit 4 [Grant Award Notice for 2002–2003] listing Henry as “SED Program Contact”). Henry described herself as “the program manager or the state coordinator” for the Even Start program (claimant's exhibit 31, pp. 5, 12; see also claimant's exhibit 33 [Zollo deposition, pp. 11–12, 62] ). Further, the August 11, 2004 letter from Grants Finance to CAMBA states that the “State Education Department program manager may have informed you of a different submission date for your Final Expenditure Report. If you have been notified of an earlier or even a later submission date ... then that program specific requirement supersedes the 90–day deadline” (claimant's exhibit 22) (emphasis added). Under these circumstances, the Court finds there is sufficient proof in the record to demonstrate that Henry's statement is admissible because it was within the scope of her authority to make the statement ( see Candela v. City of New York, 8 AD3d 45, 47–48 [2004];Johnson v. Hallam Enters., 208 A.D.2d 1110, 1111 [1994] ).
In addition, SED frustrated CAMBA's efforts to properly submit an FS–10–F and may not subsequently rely on CAMBA's alleged nonperformance to excuse its own nonperformance ( see ADC Orange, Inc. v. Coyote Acres, Inc., supra,; A–1 Gen. Contr. v. River Mkt. Commodities, supra; Sunshine Steak, Salad & Seafood v. W.I.M. Realty, supra; and Bass v. Sevits, supra ). CAMBA made numerous attempts to obtain from SED a copy of the budget amendment indicating that the Demonstration Site budget for project year 2003–2004 had been approved. The proof also shows that it was SED's practice to return, via mail, a copy of the approved amendment to the agency, and that such notification did not occur here. Thus, defendant cannot rely on CAMBA's alleged failure to follow proper submission procedures in order to avoid reimbursing CAMBA when SED's own actions frustrated CAMBA's ability to submit the reimbursement request.
Defendant also asserts in its post-trial memoranda that any purported agreement between SED and CAMBA was void for failure to comply with State Finance Law § 112(2)(a).
State Finance Law § 112(2)(a) expressly provides that “[b]efore any contract made for or by any state agency, department, board, officer, commission, or institution, ... shall be executed or become effective, whenever such contract exceeds fifty thousand dollars in amount ... it shall first be approved by the comptroller and filed in his or her office, provided, however, that the comptroller shall make a final written determination with respect to approval of such contract within ninety days of the submission of such contract to his or her office ...” “The purpose of this statute is twofold: to prevent State employees from making improvident or extravagant contracts and from creating liabilities for which there has been no appropriation” (230 Park Ave. Assoc. v. State of New York, 165 Misc.2d 920, 924 [1995] ). “[C]ompliance with State Finance Law Section 112 is a condition precedent' to the existence of a valid contract and an issue upon which claimant ha[s] the burden of proof” (Schenker v. State of New York, 126 Misc.2d 1038, 1041 [1984] ). “[T]he State's acceptance of benefits furnished under a contract made without authority does not estop it from challenging the validity of the contract or from denying liability pursuant to it” (Parsa v. State of New York, 64 N.Y.2d 143, 147 [1984];see also M/A–Com., Inc. v. State of New York, 78 AD3d 1293 [2010];Hamlin Beach Camping, Catering, & Concessions Corp. v. State of New York, 303 A.D.2d 849 [2003] ).
At the Court's request, the parties filed supplemental post-trial memoranda on this issue. Notably, both parties stated in their briefs that Section 112(2)(a) does not apply to the facts underlying this claim because federal grants are not subject to Section 112. “When interpreting a statute, it is fundamental that a court ... should attempt to effectuate the intent of the Legislature. The starting point is always to look to the language itself and where the language of a statute is clear and unambiguous, courts must give effect to its plain meaning' “ (Matter of Crucible Materials Corp. v. New York Power Auth., 13 NY3d 223, 229 [2009],rearg. denied13 NY3d 927 [2010], quoting Pultz v. Economakis, 10 NY3d 542, 547 [2008];see also Matter of Erin Estates, Inc. v. McCracken, 84 AD3d 1487 [2011] ). The plain language of Section 112(2)(a) indicates that only a “contract made for or by any state agency ...” is subject to its statutory requirements. The term “grant” is not included, and is not referred to in any language under Section 112. Although the supplemental post-trial briefs from both parties discuss “grants” and “grant contracts”, and suggest that only the latter may require Comptroller approval, there is nothing in the instant record to support a finding that the federal grant herein was a “grant contract” subject to Section 112.
While the Court could find no cases exactly on point, there is authority supporting the proposition that the agreement or contract created herein is one that is not subject to Section 112 because this agreement implements a federal grant for which there was a viable appropriation ( see 230 Park Ave. Assoc. v. State of New York, supra at 857 [the purpose of the statute is “to prevent State employees from making improvident or extravagant contracts and from creating liabilities for which there has been no appropriation ”] [emphasis added]; see also Edward C. Flaherty Corp., v. State of New York, 102 Misc.2d 438, 441 [1979] [“ Section 112 of the State Finance Law was enacted, inter alia, to prevent the undertaking of liabilities, for which no appropriations have been made ”] [emphasis added]; Deverho Constr. Co. v. State of New York, 94 Misc.2d 1053, 1058 [1978] ). Here, there was an appropriation, specifically a federal appropriation for a federal categorical grant in the amount of $549,964.00 to CAMBA ( see claimant's exhibit 22). Defendant acknowledged that SED was merely “a pass-through entity” through which the federal grant was managed (Tr. 265). The Even Start grants, including the Demonstration Site component, were “totally Federally funded” (Tr. 263, 264).
The rationale that a federal grant would not be subject to the requirements of Section 112 is consistent with the statute, which requires Comptroller approval “[b]efore any contract [is] made for or by any state agency” with a value that exceeds $50,000.00 (State Finance Law § 112[2][a] ) (emphasis added); ( see also Edward C. Flaherty Corp., v. State of New York, supra at 441[one of the purposes for Section 112 is “to provide a check on the making of improvident contracts to the State's detriment ” (emphasis added) ]; Deverho Constr. Co. v. State of New York, supra at 1058). Thus, Section 112 has been held to apply to instances where the State itself is a party to an agreement exposing the State's public fisc to financial liability in an amount greater than the statutory threshold ( see e.g. M/A–Com. Inc., v. State of New York, supra [agreement to establish a statewide wireless network]; Hamlin Beach Camping, Catering, & Concessions Corp. v. State of New York, supra [a licensing agreement for concession sales at a state park]; SHLP Assoc. v. State of New York, 262 A.D.2d 548 [1999] [a lease agreement]; Tiger Sec. Group, Inc. v. State of New York, supra [an agreement to hire private security guards] ).
Finally, the Court notes that none of SED's budget forms relating to the federal grant at issue compel or even suggest Comptroller approval or signature is required ( see claimant's exhibits 3, 5, 7, 10, 11, 12 14; see also claimant's exhibit 4, 2002–2003 Grant Award Notice). Nor is there evidence that the Comptroller in any way hindered or blocked any payment of monies from the federal grant. In fact, Zollo testified at trial and during her deposition that the Comptroller was notified of and involved with the processes related to payments to a grantee when the source of the payment is a federal grant ( see Tr. 267 [accounts set up with Comptroller]; 275, 279 [Comptroller receives an automated request for payment from SED's computer system]; 313–314 [Comptroller receives portion of FS–10–F in order to make payment]; see also claimant's exhibit 33, Zollo deposition at 18, 20, 51, 90 [describing interactions and communications between SED and Comptroller to make FS–10–F reimbursement payments to grantee] ).
Thus, the Court concludes that, under these circumstances, Section 112 is not applicable to the agreement herein to operate the Demonstration Site using federal grant funds.
B. Negligence
Claimant also alleges that defendant was negligent in its handling and processing of CAMBA's fiscal submissions, and that such negligence resulted in the loss of reimbursement of Demonstration Site expenses incurred between September 1, 2003 and August 31, 2004. In support of this cause of action, claimant relies on, inter alia, defendant's failure to notify CAMBA that the Demonstration Site budget had been approved until August 11, 2004 (claimant's exhibit 22); failure to provide CAMBA with a copy of its approved Demonstration Site budget; and its loss or misplacement of CAMBA's final reimbursement submissions.
The Court concludes that defendant is not immune from claimant's negligence action. SED's allegedly wrongful conduct occurred during implementation of the Demonstration Site agreement and is therefore proprietary in nature. Even assuming that SED's alleged conduct is governmental, defendant is not immune from claimant's negligence action because a special relationship existed between CAMBA and SED.
A governmental actor “will not be held liable for the negligent performance of a governmental function in the absence of a special relationship between the injured party and the [governmental entity]” (Sorrentino v. Mayerson, 82 AD3d 955 [2011] ). The special relationship “can be formed in three ways: (1) when the municipality violates a statutory duty enacted for the benefit of a particular class of persons; (2) when it voluntarily assumes a duty that generates justifiable reliance by the person who benefits from the duty; or (3) when the municipality assumes positive direction and control in the face of a known, blatant and dangerous safety violation' “ ( McLean v. City of New York, supra at 199, quoting Pelaez v. Seide, 2 NY3d 186, 199–200 [2004] ).
Neither the first nor third prongs are applicable here; no violation of a statutory duty is alleged and there is no allegation that the government assumed direction and control in the face of a known safety concern. Claimant alleges, however, that SED's actions toward CAMBA relating to the Demonstration Site were ministerial, and a special relationship arose from a duty voluntarily undertaken by SED to CAMBA. In order to establish this type of special relationship and duty there must be “(1) an assumption by the municipality, through promises or actions, of an affirmative duty to act on behalf of the party who was injured; (2) knowledge on the part of the municipality's agents that inaction could lead to harm; (3) some form of direct contact between the municipality's agents and the injured party; and (4) that party's justifiable reliance on the municipality's affirmative undertaking' “ ( McLean v. City of New York, supra at 201, quoting Cuffy v. City of New York, 69 N.Y.2d 255, 260 [1987] ).
Each of these four prongs is met here. A special duty was established through the agreement between SED and CAMBA to operate the Demonstration Site following CAMBA's selection as an Even Start Family Literacy Demonstration Site (claimant's exhibit 2). The agreement and course of conduct that followed CAMBA's selection created obligations for SED to act once budget documents and reimbursement requests were submitted by CAMBA. SED was aware of its obligation to reimburse CAMBA for services performed and there were also numerous direct contacts between SED and CAMBA. Finally, CAMBA was justified in relying on SED's assurances that it would reimburse CAMBA for the Demonstration Site costs at issue as SED had reimbursed CAMBA, albeit late, the majority of its 2002–2003 Demonstration Site costs, and had reimbursed CAMBA for that project year despite having lost documents, changed instructions on fiscal submissions, and not communicated in a timely manner.
CAMBA was reimbursed for the majority of its 2002–2003 Demonstration Site expenses on or about March 30, 2004, after having submitted two FS–10–Fs in February and March 2004, well beyond the November 30, 2003 due date (Tr. 305–309, 313).
However, upon turning to the merit of claimant's negligence claim, the Court finds that, under these circumstances, the cause of action cannot lie. A “defendant may be liable in tort when it has breached a duty of reasonable care distinct from its contractual obligations, or when it has engaged in tortious conduct separate and apart from its failure to fulfill its contractual obligations. The very nature of a contractual obligation, and the public interest in seeing it performed with reasonable care, may give rise to a duty of reasonable care in performance of the contract obligations, and the breach of that independent duty will give rise to a tort claim” (New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 316 [1995];Sommer v. Federal Signal Corp., 79 N.Y.2d 540 [1992];Clark–Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 389 [1987];Fort Ann Cent. School Dist. v. Hogan, 206 A.D.2d 723, 724 [1994];Carco, Inc. v. Beltrone Constr. Co. Inc., 183 A.D.2d 984, 985 [1992] ). Nevertheless, “where a party is merely seeking to enforce its bargain, a tort claim will not lie” ( New York Univ. v. Continental Ins. Co., supra; see also Sommer v. Federal Signal Corp ., supra at 552 [“where plaintiff is essentially seeking enforcement of the bargain, the action should proceed under a contract theory”]; 17 Vista Fee Assoc. v. Teachers Ins. & Annuity Assn.of Am., 259 A.D.2d 75, 83 [1999] [“a contracting party seeking only a benefit of the bargain recovery, viz., economic loss under the contract, may not sue in tort, notwithstanding the use of familiar tort language in its pleadings”]; Queensbury Union Free School Dist. v. Walter Corp., 94 A.D.2d 834 [1983] [those seeking “only the benefit of their bargain are limited to pursuing contractual remedies”] ).
Here, both the breach of contract and negligence causes of action essentially aver that claimant was not properly reimbursed and that the failure to reimburse arose from SED's failure to perform its responsibilities related to implementation of the federal grant, processing of budget submissions, maintenance of CAMBA's records and communication with CAMBA in a timely manner. No independent duty beyond performance of the agreement has been established. Further, CAMBA seeks the same amount of damages, namely $395,486.00, arising from its 2003–2004 Demonstration Site expenses under both the breach of contract and negligence causes of action (Verified Claim, ¶ ¶ 32 and 34; ¶ ¶ 41 and 43). Since claimant is essentially seeking enforcement of its agreement with SED, and no independent duty apart from the contract is present, the cause of action sounding in negligence cannot lie and is dismissed.
C. Quasi Contract
Claimant alleges further that, in the event the Court finds that a valid agreement did not exist, SED remains liable to CAMBA under a theory of quasi contract.
However, since CAMBA seeks “recovery in quasi contract for events arising out of the same subject matter” governed by its contract with SED, CAMBA is precluded from recovery in quasi-contract ( Clark–Fitzpatrick, Inc. v. Long Is. R.R. Co., supra at 388).
CAMBA was not required to elect its theory to pursue ( see Hochman v. LaRea, 14 AD3d 653, 654–655 [2005] [a party may plead causes of action in both breach of contract and quasi contract where there is a dispute concerning the existence of a contract or its application to the dispute at issue] ).
Even assuming that a valid agreement did not exist, claimant would nonetheless be precluded from recovery in quasi contract. Under the doctrine of quasi contract, or contract implied in law, “a quasi-contractual obligation is ... imposed by law where there has been no agreement or expression of assent, by word or act, on the part of either party involved. The law creates it, regardless of the intention of the parties, to assure a just and equitable result” (Bradkin v. Leverton, 26 N.Y.2d 192, 196 [1970] ). The contract implied in law is not a contract, but an obligation imposed by law to do justice even though no promise was ever made or intended (Farash v. Sykes Datatronics, 59 N.Y.2d 500, 504 [1983] ). “A contract implied in law exists where one party, without any expression of assent from the other, obtains or retains possession of money or other property that actually belongs to the latter, by oppression, extortion, deceit or similar means” (Rosefsky v. State of New York, 205 A.D.2d 120, 123 [1994] ).
Here, the record is replete with testimony, correspondence and documents evidencing words and acts between CAMBA and SED, which reflect an understanding between the parties that CAMBA had been approved as a Demonstration Site, that CAMBA would operate a Demonstration Site and that CAMBA would be reimbursed for costs related to operating the site. This is not a situation where monies or property were either retained by defendant or obtained from claimant though deceit, illegality or similar means. Thus, there is no evidence to support a claim of contract implied in law and this cause of action is dismissed.
II. Training Modules Claims
A. Conversion
This cause of action is premised on the alleged conversion by SED of training modules developed by a consultant retained by CAMBA. The record shows that on September 1, 2003, CAMBA hired Jessica Fitzpatrick as an Early Childhood consultant to work on the Demonstration Site project and entered into a one year Consultant Contract Agreement (hereinafter Consultant Agreement) commencing September 1, 2003 through August 31, 2004. SED was not a party to the Consultant Agreement (claimant's exhibit 15; Tr. 54–56). The Consultant Agreement listed the numerous services Fitzpatrick would provide, including, among other things, the “[r]esearch [and][d]evelopment of training modules”. These modules were translated by Fitzpatrick and another person into a curriculum to train staff on how to teach literacy skills to infants and toddlers (Tr. 58–59, 217, 219; claimant's exhibit 15). The curriculum developed from the training modules was presented in October 2005 and codified into a training manual entitled “Literacy in the First Three Years–Making it Happen” (claimant's exhibit 29). Approximately 174 persons who attended the November/December training sessions received a copy of the curriculum developed from the training modules (Tr. 217–218). Dwyer acknowledged that Fitzpatrick and Lila Gibbs “were the authors of this work product” (Tr. 219). Barton–Richardson also stated that Fitzpatrick's “work was [sic] the drafts for this document” (Tr. 59).
The Consultant Agreement provided that all work product including, but not limited to, information gathered, written reports, and lists and databases developed “are the exclusive property of CAMBA and shall be reserved for its exclusive use with the exception of those developed with Federal/State funding” (claimant's exhibit 15). SED never paid Fitzpatrick for her services and CAMBA never received reimbursement from SED for the Demonstration Site expenses, resulting in CAMBA paying Fitzpatrick from CAMBA funds (Tr. 55–56, 220).
“Conversion is an unauthorized exercise of dominion and control over property by someone other than the owner, where such control interferes with and is in defiance of the superior possessory right of the owner or another person” (Miller v. Marchuska, 31 AD3d 949, 950 [2006];see also AGFA Photo USA Corp. v. Chromazone, Inc., 82 AD3d 402, 403 [2011];Meese v. Miller, 79 A.D.2d 237, 242 [1981];Dippolito v. State of New York, 192 Misc.2d 395, 397 [2002] ). To prevail on a claim for conversion, claimant must establish that it is the owner of the subject property, that defendant had such property in its possession, and that defendant refused to return the property to claimant upon his demand ( see Miller v. Marchuska, supra at 950). A cause of action for conversion will, however, be dismissed if it is duplicative of a breach of contract claim ( see AD Rendon Communications Inc. v. Lunina Americas, 2007 WL 2962591 [S.D.NY 2007]; AJW Partners LLC v. Itronics, Inc., 68 AD3d 567 [2009];Anyika v. MoneyGram Payment Sys., Inc., 25 Misc.3d 1225(A) [2009] ). In determining whether a conversion claim is duplicative of a contract claim, courts look to the allegations or material facts underlying each claim ( see Sebastian Holdings, Inc. v. Deutsche Bank AG, 78 AD3d 446 [2010];New York Med. Coll. v. Histogenetics, Inc., 6 AD3d 410 [2004] ).
Although cast as a separate cause of action, the conversion claim is essentially duplicative of the breach of contract claim. Fitzpatrick was retained by CAMBA to assist it with its 2003–2004 Demonstration Site responsibilities. The agreement between CAMBA and SED to operate the Demonstration Site during the 2003–2004 project year using federal grant monies governs the expenditures related to Fitzpatrick's hiring and services. Her salary and expenses are included as costs CAMBA seeks reimbursement for as part of implementing the underlying Demonstration Site agreement ( see Tr. 55–56; claimant's exhibit 24, pp. 7 and 12). Having found that a breach of contract occurred, the conversion cause of action is duplicative.
Even assuming the conversion claim was not duplicative of the contract claim, claimant failed to prove conversion. The proof is not sufficient to establish that CAMBA held a superior possessory right to the training modules. The record indicates that Fitzpatrick was retained by CAMBA in September 2003 to perform a variety of tasks, including the development of training modules for use in a SED curriculum to train staff on teaching literacy skills. However, the process that led to the development of the curriculum began in January 2002, with the establishment of a work group charged with developing “an instructional framework for incorporating research on language and literacy development in very young children into the practice of Even Start Family Literacy Programs” (Tr. 229; claimant's exhibit 29). The “Acknowledgements” section of the curriculum lists over 30 persons who participated in workgroup meetings, which led to the “Literacy in the First Three Years–Making it Happen” training materials (claimant's exhibit 29). Although the “Acknowledgements” state that “[t]he outcome of this group's work were translated into training materials by Jessica Fitzpatrick and Lila Gibbs”, given the number of persons who directly or indirectly contributed to the development of the curriculum through the workgroup process, the Court cannot discern a superior possessory right by CAMBA over these training materials. Nor is there any proof that claimant made a demand for defendant to return the modules, and even if such a demand was made, that defendant refused. In addition, claimant was aware that defendant considered any work product developed by Fitzpatrick would belong to the State. Barton–Richardson testified that, with respect to work product developed under the Consultant Agreement, “[t]he State made it clear that as part of the Demonstration Site since they would be developing training materials that the work product would belong to the State” (Tr. 55–56).
B. Unjust Enrichment
Claimant's cause of action sounding in unjust enrichment arises from benefits defendant allegedly received from the development of the training modules, including retaining the modules and not having to pay for Fitzpatrick's services.
“The theory of unjust enrichment lies as a quasi-contract claim” (Goldman v. Metropolitan Life Ins. Co., 5 NY3d 561, 572 [2005];see also Feigen v. Advance Capital Mgt. Corp., 150 A.D.2d 281, 283 [1989],appeal dismissed in part, denied in part74 N.Y.2d 874 [1989] ). “The existence of a valid contract governing the subject matter generally precludes recovery in quasi contract for events arising out of the same subject matter” (EBC I, Inc. v. Goldman, Sachs & Co., 5 NY3d 11, 12 [2005];see also Clark–Fitzpatrick, Inc. v. Long Is. R.R. Co., supra at 388; Eagle Comtronics v. Pico Prods., 256 A.D.2d 1202 [1998] ). Indeed, where there exists a valid enforceable agreement governing the issue in dispute, the “unjust enrichment claim must be dismissed as duplicative of the breach of contract cause of action” (State of New York v. Industrial Site Servs., Inc., 52 AD3d 1153, 1161 [2008] ). Like the conversion claim, any recovery on an unjust enrichment claim would necessarily include the costs and expenses related to Fitzpatrick's hiring, and is thus duplicative of CAMBA's breach of contract claim.Even assuming a valid agreement governing the Demonstration Site did not exist, this cause of action has not been established. In order to prevail on a claim of unjust enrichment, a party must show that “(1) defendant was enriched, (2) at plaintiff's expense, and (3) that it is against equity and good conscience to permit ... defendant to retain what is sought to be recovered' “ (Lake Minnewaska Mtn. Houses v. Rekis, 259 A.D.2d 797, 798 [1999] quoting Paramount Film Dist. Corp. v. State of New York, 30 N.Y.2d 415, 421 [1972],cert denied414 U.S. 829 [1973] ). “[T]he mere fact that the plaintiff's activities bestowed a benefit on the defendant is insufficient to establish a cause of action for unjust enrichment” (Clark v. Daby, 300 A.D.2d 732 [2002] ). Given the insufficient proof establishing claimant's ownership of the modules, the Court finds that unjust enrichment is not warranted under these circumstances and that cause of action is dismissed.
Thus, for the aforementioned reasons, the Court concludes that claimant is only entitled to recover damages for its breach of contract claim, and that defendant is solely responsible for the damages suffered by claimant. The Clerk of the Court is directed to enter an interlocutory judgment on the issue of liability in accordance with this decision. Thereafter, a trial to determine damages will be scheduled as soon as practicable. Any motions upon which the Court had previously reserved or which remain undecided are hereby denied.