Opinion
Index No. 155304/2016
01-13-2017
EDWARD S. SAWCHUK, Plaintiff, v. THE CITY UNIVERSITY CONSTRUCTION FUND, PHILIP A. BERRY, BRIAN G. OBERGFELL, DR. GUILLERMO LINARES, ROBERT F. MUJICA, JR., BENNO C. SCHMIDT, JR., MICHAEL M. WALSH, DR. MARCELLA MAXWELL, and HILL INTERNATIONAL INC., Defendants.
Hon. C. E. Ramos, J.S.C. :
Motion sequence 001 and 002 are herein consolidated for disposition. In motion sequence 001, Defendant Hill International ("Hill") moves to dismiss the complaint ("Complaint") filed by Plaintiff Edward Sawchuk ("Sawchuk") pursuant to CPLR 3211 (a)(5) and (7). In motion sequence 002, Defendants City University Construction Fund ("CUCF"), Philip A. Berry ("Berry"), Brian G. Obergfell ("Obergfell"), Dr. Guillermo Linares ("Linares"), Robert F. Mujica, Jr. ("Mujica"), Benno C. Schmidt, Jr. ("Schmidt"), Michael M. Walsh ("Walsh"), and Dr. Marcella Maxwell ("Maxwell")(collectively, "Defendants") move to dismiss the Complaint pursuant to CPLR 3211(a)(5) and (7) and the doctrine of laches.
For the reasons set forth below, the Court grants Defendants' motions to dismiss.
Background
CUCF is a public benefit corporation organized and existing under Article 125-b of the New York Education Law ("NY Education Law § 6273") (See Complaint, ¶ 13). Under Section 6279 of the Education Law of the State of New York, CUCF receives state funds (See Complaint, ¶ 13). CUCF provides facilities for the City University of New York ("CUNY") to support CUNY's educational services.
Sawchuk is a citizen taxpayer of the State of New York. Hill is a corporation focusing on construction organized and existing under the laws of the State of Delaware and authorized to transact business in the State of New York.
CUCF engaged in a process to award a public works contract known as Brooklyn College Performing Arts Center Construction Services, Project BY600-006 ("Public Works Contract"), for the building of a 64,000 square foot performing arts center. In September 2008, CUCF issued proposal requests to enter into the Public Works Contract, and received proposals from eleven different construction management firms, including Hill (See Schaffer Affidavit, ¶5). After CUCF eliminated five of the firms, the remaining six were invited to submit detailed proposals.
On August 12, 2009, Hill was awarded the Public Works Contract. On April 12, 2010, CUCF and Hill entered into an agreement for the amount of $69,086,736 ("Construction and Services Agreement"). Pursuant to the Construction and Services Agreement, Hill was required to provide a bond in the amount of $5,000,000. Thereafter, Hill entered into a subcontract with E.W. Howell Co., LLC ("Howell") for the performance of certain work in connection with the Public Works Contract ("Subcontract").
On October 26, 2015, Howell commenced an action, entitled E.W. Howell Co., LLC and Howard Rowland v The City University Construction Fund, Philip A. Berry, et al., Index no. 653551/2015, seeking a declaration that the Public Works Contract was illegal, null, and void ("Prior Action"). On May 9, 2016, this Court dismissed the Prior Action in its entirety based upon the doctrine of laches and for lack of standing (See Pallas Aff., Exh. B).
On June 10, 2016, Sawchuk commenced the instant action, seeking a declaration that the Public Works Contract is illegal, null, and void under General Municipal Law § 101 and § 103 ("Current Action"). When the Current Action was commenced, the Project BY600-006 was nearly complete (See Schaffer Aff., ¶11).
Discussion
Defendants move to dismiss the Complaint in its entirety on the basis that the action is barred by applicable statute of limitations under CPLR 3211(a)(5), the doctrine of laches, and a lack of standing under State Finance Law § 123-b. Sawchuk's Action is barred by the statute of limitations
On a motion to dismiss a cause of action pursuant to CPLR 3211(a)(5), "a defendant bears the initial burden of establishing, prima facie, that the time to sue has expired" (Benn v Benn, 82 AD3d 548, 548 [1st Dept 2011]). "To meet this burden, a defendant must establish, inter alia, when the plaintiff's cause of action accrued" (Lebedev v Blavatnik, 144 AD3d 24, 28 [1st Dept 2016]).
Defendants argue that the current action is time barred under the applicable statute of limitations. According to Defendants, CPLR 215(4) provides that a citizen-taxpayer action under State Finance Law 123-b must be commenced within one year after the subject contract was entered into.
In support of their argument, Defendants rely on New York State Assn. of Plumbing-Heating Cooling Contrs. v Egan, in which the Court of Appeals held that citizen taxpayer actions are bound by a one year statute of limitations ( 65 NY2d 793, 796 [1985]). Sawchuk attempts to distinguish that case by arguing that he does not seek a forfeiture of any money that has been paid by CUCF to Hill under the Public Works Contract.
The Court finds this argument unpersuasive; Sawchuk fails to point to any authority supporting his claim that the applicability of the one-year statute of limitations depends on whether a plaintiff seeks a forfeiture of money. As such, the Court is persuaded that the applicable statute of limitations is one year. Since the contract was entered into on February 26, 2011, Sawchuk had until February 26, 2012 to commence this action. Because this action was not commenced until more than six years later, it cannot be considered timely.
Defendants assert, in the alternative, that Sawchuk's action is untimely under the six-year "residuary" clause of CPLR 213(1), which applies to "an action for which no limitation is specifically prescribed by law." Defendants argue that even if a six year statute of limitation applies, Sawchuk's complaint is still untimely as it was commenced after February 26, 2016.
In his papers, Sawchuk concedes that the relevant statute of limitations is six years under the "residuary" clause found in CPLR 213(1). However, Sawchuk asserts that the Complaint would still be timely with respect to any payments made by CUCF in the six years prior to the commencement of this action but has not provided any case law in support of his contentions.
The Court finds that Defendants have established that the cause of action accrued on February 26, 2010, the date the Public Works Contract was entered into. Even if the Court were to accept a six years statute of limitations, Sawchuk's action would still be untimely. As such, Sawchuk is not entitled to a declaration that the Public Works Contract is illegal, null, and void.
b. Sawchuk's action is barred by the doctrine of laches
Laches is defined as an unreasonable delay by a plaintiff which causes prejudice to a defendant (Philippine American Lace Corp. v 236 West 40th Street Corp., 32 AD3d 782, 784 [1st Dept 2006]). The mere passing of time absent prejudice will not sustain a defense for laches (See Galyn v Schwartz, 56 NY2d 969 [1982]).
Defendants also assert that Sawchuk's claim seeking to void the Public Works Contract is barred under the doctrine of laches because voiding the Public Works Contract would cause significant disorder and disruption. Should the Public Works Contract be declared void, CUCF would have to re-procure construction management services or appoint a new construction manager even though the project is substantially complete.
In opposition, Sawchuk cites to Saratoga County Chamber of Commerce v Pataki (100 NY2d 801 [2003]). Saratoga involved a challenge to a compact granting Indian tribes the exclusive right to regulate gaming activity on their territories. There, the Court of Appeals concluded that the apparent delay in bringing the action did not harm the Indian Tribes because they had been operating the casino profitably during the pendency of the action (Id. at 817). However, this action is distinguishable from Saratoga. The Defendants have made a clear showing of harm and prejudice that would result if the Public Works Contract were to be invalidated after six year years of construction.
Moreover, Sawchuk has failed to offer any substantial justification for the delay in bringing this action. Thus, Defendants have established that the relief requested is barred by the doctrine of laches.
c. Sawchuk lacks standing under State Finance Law 123-b.
On a pre-answer motion to dismiss for lack of standing, the burden is on the defendant to establish, prima facie, that plaintiff has no standing to sue (Brunner v Estate of Lax, 137 AD3d 553, 553 [1st Dept 2016]).
Defendants argue that Sawchuk lacks standing to bring this action pursuant to State Finance Law § 123-b. State Finance Law § 123-b provides, in relevant part:
Any person, who is a citizen taxpayer...may maintain an action for equitable or declaratory relief, or both, against an officer or employee of the state who in the course of his or her duties has caused, is now causing, or is about to cause a wrongful expenditure, misappropriation, misapplication, or any other illegal or unconstitutional disbursement of state funds or state property...
It is undisputed that CUCF is a public benefit corporation of the State of New York under Education Law (See Complaint, ¶ 2, 13). Defendants assert that since CUCF is a public benefit corporation, the corporation as well as its Trustees do not constitute "officer[s] or employee[s] of the state". On this basis, Defendants argue that under State Finance Law § 123-b, a taxpayer cannot bring an action against a public benefit corporation such as CUCF (See Madison Sq. Garden, L.P. v New York Metropolitan Transp. Authority, 19 AD3d 284 [1st Dept 2005]).
Defendants also assert that CUCF, as a public corporation, is considered independent and autonomous and, therefore, a citizen taxpayer cannot bring an action challenging its actions under State Finance Law §123-b. In support of this argument, Defendants cite to Matter of Plumbing, Heating, Piping & A.C. Contrs. Assn. v New York State Thruway Auth., which held that public corporations are "independent and autonomous, deliberately designed to be able to function with a freedom and flexibility not permitted to an ordinary state board, department, or commission" (5 NY2d 420, 423 [1959]).
Defendants also assert that even if State Finance Law § 123-b applies to a public benefit corporation like CUCF, Sawchuk still does not have standing under the statute to challenge the procedure followed in implementing the Public Works Contract. According to Defendants, Sawchuk' does not have standing to "obtain judicial scrutiny of the nonfiscal activities of the agencies of municipal government" (See Matter of Urban League of Rochester, N.Y. Inc. v Monroe County, 49 NY2d 551, 555 [1980]).
Sawchuk argues in opposition that CUCF's acceptance of funds from the State is sufficient to constitute state action. However, this contractual relationship cannot rationally lead to the conclusion that CUCF is a state actor. Sawchuk also attempts to distinguish CUCF from the public authorities mentioned in relevant case law because CUCF does not have the power to raise revenue by incurring debt but does receive direct State funding. Nonetheless, it is undisputed by both parties that CUCF is a public benefit corporation. Sawchuk fails to elaborate on how the abovementioned factors prevent CUCF from being considered a public benefit corporation or to present case law in support of his argument.
Therefore, Sawchuk does not have standing under State Finance Law § 123-b because CUCF and its Trustees are not state actors.
Furthermore, Sawchuk's suit is beyond the scope of actions permitted and authorized by State Finance law § 123-b. He does not have standing to challenge the validity of a request for proposals for a public works contract because he has failed to allege that he suffered an injury in fact. (See Transactive Corp v New York State Dept. Of Social Services, 92 NY2d 579 [1998]). Sawchuk seeks to challenge the process in which CUCF entered into the Public Works Contract and not CUCF's authority to do so. A claim of this kind is not covered under State Finance Law §123-b. Furthermore, Sawchuk fails to demonstrate that he suffered an injury within the zone of interests to be protected by the statute.
This Court's conclusion is also supported by sound public policy. Permitting future taxpayers to contest the manner in which State agencies, such as CUCF, implement and negotiate contracts might "seriously disrupt state operations" (Transactive, 92 NY2d at 589).
Nonetheless, Courts have granted taxpayer standing when failure to do so would "erect an impenetrable barrier to any judicial scrutiny of" executive or legislative action (Weimer v Board of Educ. of Smithtown Cent. School Dist. No. 1., 52 NY2d 148, 154 [1981]). However, there is no "impenetrable barrier" when there are many other individuals other than the plaintiff who meet the requirements allowing them to challenge government action (Id. At 155). Here, there is no impenetrable barrier to judicial review, as any of the unsuccessful bidders could have brought suit (See Madison Square Garden, 19 AD3d at 286). The previous lawsuit against CUCF was dismissed largely because CUCF is not a state actor and the significant delay in bringing the action would cause much harm to Defendants and not for lack of standing.
This Court has considered Sawchuk's remaining arguments and finds them unpersuasive.
Accordingly, it is hereby
ORDERED that Defendants' motions to dismiss are granted in their entirety and the complaint is dismissed. The Clerk is directed to enter judgment accordingly with no costs. DATED: January 13, 2017
ENTER:
/s/_________
J.S.C.