Opinion
# 2016-015-117 Claim No. 120992 Motion No. M-87536
01-28-2016
TUTOR PERINI CORPORATION f/k/a PERINI CORPORATION v. THE STATE OF NEW YORK
Duane Morris LLP By: Mark A. Canizio, Esq. and Jessica Singh, Esq. Dingess Foster Luciana Davidson & Chleboski LLP By: John R. Dingess, Esq. Honorable Eric T. Schneiderman, Attorney General By: Michael I. Getz, Esquire, Assistant Attorney General
Synopsis
Claimant was ordered to produce of its corporate officers for an examination before trial in New York.
Case information
| UID: | 2016-015-117 |
| Claimant(s): | TUTOR PERINI CORPORATION f/k/a PERINI CORPORATION |
| Claimant short name: | TUTOR PERINI CORP. |
| Footnote (claimant name) : | |
| Defendant(s): | THE STATE OF NEW YORK |
| Footnote (defendant name) : | |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | 120992 |
| Motion number(s): | M-87536 |
| Cross-motion number(s): | |
| Judge: | FRANCIS T. COLLINS |
| Claimant's attorney: | Duane Morris LLP By: Mark A. Canizio, Esq. and Jessica Singh, Esq. Dingess Foster Luciana Davidson & Chleboski LLP By: John R. Dingess, Esq. |
| Defendant's attorney: | Honorable Eric T. Schneiderman, Attorney General By: Michael I. Getz, Esquire, Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | January 28, 2016 |
| City: | Saratoga Springs |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
Defendant moves pursuant to CPLR 3124 for an Order compelling Tutor Perini Corporation (claimant) to produce Ronald N. Tutor, its Chairman and Chief Executive Officer, for an examination before trial.
Claimant seeks damages for breach of a public improvement contract allegedly arising from extra work and delays incurred during the performance of the project. In June 2000, Perini Corporation (Perini) entered into a contract with the New York State Department of Transportation (NYSDOT), for the reconstruction of 3 Kilometers of highway and 14 bridges on Interstate 495 in Douglaston, New York (Defendant's Exhibit 5) (the LIE project) at a cost of $147,252,422.60 (affirmation of Michael I. Getz, ¶ 5). Among the contract's Standard Specifications is the requirement that Perini utilize Minority and Women's Business Enterprises (M/WBEs) in accordance with the goals set forth in the contract.
Tutor-Saliba Corporation merged with Perini Corporation to become Tutor Perini Corporation in 2008 (affidavit of Ronald N. Tutor, ¶ 2).
By Decision and Order dated December 9, 2013, this Court granted defendant's motion to supplement its defenses and counterclaims alleging fraud in both the inducement and performance of the contract and denied claimant's dismissal motion relating to these allegations. Defendant alleges in this regard that its contract award was induced by Perini's false representations that it intended to satisfy the contract's M/WBE requirements by engaging the services of certain certified M/WBE contractors when, in fact, it had no intention of engaging the services of these contractors. Defendant also alleges Perini committed fraud in the performance of the contract by submitting records and reports regarding its compliance with the M/WBE requirements that it knew or should have known were false and resulted in payment that was not merited under the terms of the parties' contract.
Since the statute of limitations had expired by the time defendant asserted its fraud defenses and counterclaims, these defenses and counterclaims were permitted to stand only to the extent they may offset claimant's damages.
In granting defendant's motion to supplement its defenses and counterclaims, the Court found that defendant's allegations relating to Perini's pre-award representations regarding its intent to fulfill the contract's M/WBE goals were more than conclusory allegations of a future intent not to perform, which could give rise to no more than a breach-of-contract cause of action. Rather, defendant sufficiently alleged facts which, if true, demonstrate that Perini promised to abide by the M/WBE requirements of the contract with a preconceived and undisclosed intention of not doing so, thereby giving rise to a cause of action for fraudulent inducement. The Court also found that defendant's allegations relating to fraud in the performance of the contract were sufficient to state a fraud cause of action separate and apart from any breach-of-contract claim. Notably, two of Perini's employees, Zohrab B. Marashlian and John Athanasiou, were indicted on charges of conspiracy to commit mail fraud, mail fraud, and money laundering in the United States District Court, Eastern District of New York, on December 18, 2008. The indictment included allegations that Marashlian and Athanasiou devised a scheme to defraud government contracting agencies, including the NYSDOT, by falsely representing in its proposal and other documents submitted by Perini that certain M/WBE contractors would perform commercially useful functions in satisfaction of the M/WBE requirements, when in fact these M/WBE contractors served merely as fronts for the performance of the work by other non-M/WBE contractors. Marashlian was found guilty and committed suicide shortly after the March 9, 2011 verdict. Athanasiou pled guilty to one count of the indictment on October 29, 2010.
Defendant contends in support of its motion to compel an examination before trial of Ronald N. Tutor that there is a substantial likelihood that his deposition testimony will yield relevant evidence in light of Mr. Tutor's position with Perini during the time of the allegedly fraudulent conduct and the fact that he was Mr. Marashlian's direct supervisor.
In 1997, prior to the 2008 merger of Perini Corporation and Tutor-Saliba Corporation (to form claimant, Tutor-Perini Corp.), Mr. Tutor entered into a Management Agreement (defendant's Exhibit 7) with Perini Corporation to serve as Chief Operating Officer. The agreement states, in part, that Mr. Tutor shall:
"provide direction with respect to Perini's ongoing and future construction operations, with the goal of achieving greater operating efficiencies, reducing Perini's need for working capital, reducing Perini's exposure to risk by negotiating and bidding on construction projects that will yield higher profit margins than current projects, negotiating with Perini's lenders, bonding companies and insurers, and generally improving Perini's cash flow situation and competitive position in the general contracting and construction industry" (defendant's Exhibit 7, ¶ 2 [b]).
Robert Band, President of Perini Corporation, testified that between 1998 and 2008 Mr. Marashlian, President of Perini's Civil Division, reported directly to Mr. Tutor (defendant's Exhibit 6, pp. 38-39). Mr. Band also testified that when Mr. Tutor joined Perini as its Chief Operating Officer in 1997, he instituted an incentive program which tied individual compensation to the achievement of certain corporate net income targets (defendant's Exhibit 6, pp. 128-129; Exhibit 8). By letter dated June 14, 2005, Mr. Tutor requested that Mr. Marashlian extend his retirement date to December 31, 2006 in return for certain compensation, including a stock grant tied to his management of the subject LIE Project claim process and achieving a minimum margin of $2,000,000 (defendant's Exhibit 8).
Defendant contends that there is a substantial likelihood that Mr. Tutor's deposition will yield relevant information because he was Mr. Marashlian's direct supervisor and, as such, provided significant financial incentives, in an effort to increase net profits, that may have motivated Mr. Marashlian to commit fraud in relation to the M/WBE goals set forth in the contract. In addition, defendant posits that Mr. Tutor took an active role in preparing the bid estimates for large contracts, such as the instant LIE Project, and knew or should have known that Perini's representations regarding its intent to fulfill the M/WBE goals in its pre-award bid estimates were false and fraudulent. Defendant supports this theory by reference to the examination before trial testimony of Mr. Band in which he testified that Mr. Tutor was known to review bids on major projects. Defendant also submits a magazine article in which Gerald W. Brown, Tutor-Saliba's Vice President of Heavy Civil Estimating, was quoted as saying " 'Ron puts his stamp on every estimate. He thinks that's one of the keys to our success' " (defendant's Exhibit 9). In addition, both Perini Corporation and Tutor-Saliba, the company which employed Mr. Tutor as its Chief Executive Officer during the relevant period, were defendants in lawsuits alleging M/WBE fraud in California (see defendant's Exhibits 12 and 13). Tutor-Saliba reportedly settled at least one such lawsuit for the sum of $19 million dollars. Inasmuch as Mr. Marashlian, who was convicted of M/WBE fraud involving the LIE Project, is now deceased, defendant argues that the deposition of Mr. Tutor is material and necessary to prove its allegations of fraud in the inducement and performance of the subject contract, and that this fraud was part of a pattern and practice of fraud aimed against the public generally. In opposition to the motion, claimant proffers Mr. Tutor's affidavit in which he states, in relevant part, the following:
"I can unequivocally state that I have no knowledge of the matters alleged in the State's Counterclaim, nor did I have any involvement with the day-to-day management of the Long Island Expressway/Cross Island Parkway ("LIE/CIP") project and, in particular any aspect of Perini's subcontracting arrangements with disadvantaged, minority and/or woman based enterprises (collectively "D/M/WBEs"). I also had no involvement in the preparation or review of Perini Corporation's estimate or bid for the LIE/CIP project, (Tutor affidavit, ¶ 4).
Mr. Tutor also states that he has no recollection of having been consulted by Mr. Marashlian or anyone else regarding the bidding or prosecution of the LIE Project and that although Mr. Marashlian reported to him directly, he did not speak to him with any great regularity (Tutor affidavit at ¶ 9). Mr. Tutor admits, however, that he learned of the investigation conducted by the U.S. Attorney's Office in 2001 when he was told that Perini had received a grand jury subpoena during the course of an ongoing investigation into M/WBE fraud on public works projects in the New York area. He states that he directed Mr. Band to hire an outside law firm to assist in responding to the government subpoena (id. at ¶ 10). Mr. Tutor also admits speaking with Mr. Marashlian regarding the criminal investigation, and that Mr. Marashlian denied that he or anyone else at Perini committed M/WBE fraud (id. at ¶ 11). Perini's involvement in M/WBE fraud with respect to its contracts with New York City was also the subject of investigation. Mr. Tutor indicates that both Marashlian and Athanasiou were "let go" when Mr. Marashlian refused to make himself available for questioning at a responsibility hearing, instead asserting his Fifth Amendment rights (id. at ¶ 12). It is against this backdrop that defendant seeks to compel the examination before trial on Mr. Tutor.
CPLR 3101 (a) provides for the "full disclosure of all matter material and necessary in the prosecution or defense of an action." The Court of Appeals has interpreted these words liberally to require the disclosure "of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason" (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]; see also Wiggins v Kopko, 105 AD3d 1132 [3d Dept 2013]). The scope of the statute is broad, "consistent with New York's policy of permitting 'open and far-reaching pretrial discovery' " (Kavanagh v Ogden Allied Maintenance Corp., 92 NY2d 952, 954 [1998] [citation omitted]). The party seeking disclosure need only establish either "that the method of discovery sought will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims" (Gomez v State of New York, 106 AD3d 870, 872 [2d Dept 2013], quoting Vyas v Campbell, 4 AD3d 417, 418 [2d Dept 2004] [other citation omitted]; Jordan v Blue Circle Atl., 296 AD2d 752 [3d Dept 2002]). Nevertheless, "[d]iscovery demands are improper if they are based upon "hypothetical speculations calculated to justify a fishing expedition" (Forman v Henkin, 134 AD3d 529, 530 [1st Dept 2015] [citation omitted]). Thus, where a party is seeking an additional deposition, it has the burden of demonstrating " '(1) that the representatives already deposed had insufficient knowledge, or were otherwise inadequate, and (2) there is a substantial likelihood that the persons sought for depositions possess information which is material and necessary to the prosecution of the case' " (Gomez v State of New York, 106 AD3d at 871, quoting Zollner v City of New York, 204 AD2d 626, 627 [2d Dept 1994]; see also Trueforge Global Mach. Corp. v Viraj Group, 84 AD3d 938, 940 [2d Dept 2011]; Colicchio v City of New York, 181 AD2d 528, 529 [1st Dept 1992]).
Defendant established that there is a substantial likelihood that Mr. Tutor possesses information which is material and necessary to the prosecution of its defenses and counterclaims or which may lead to the discovery of such information. Falsity, scienter, deception and injury are required to establish fraud (New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]). Mr. Band testified that Mr. Tutor reviewed bid proposals on major projects. The LIE Project was a major project. Insofar as Mr. Marashlian is deceased, defendant is entitled to depose Mr. Tutor in order to explore the extent, if any, of his involvement in the preparation of the bid proposal and any matters which may bear upon Perini's intent to fulfill the M/WBE requirements of the contract. In addition, defendant is entitled to explore Mr. Tutor's knowledge of M/WBE fraud by Perini on other projects. Such evidence is material and relevant on the issue of intent as "the successive repetition of similar unlawful acts tends to reduce the likelihood of the actor's innocent intent on the particular occasion in question" (Matter of Brandon, 55 NY2d 206, 212 [1982]). Moreover, to establish its entitlement to punitive damages (as an offset), defendant is required to show, among other things, that the conduct was aimed at the public generally (1515 Summer St. Corp. v Parikh, 13 AD3d 305, 307 [1st Dept 2004], citing Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 613 [1994]). Thus, proof of Perini's alleged M/WBE fraud relating to other projects may bear upon the issue of defendant's entitlement to punitive damages, as an offset. Inasmuch as Mr. Marashlian is now deceased and Mr. Tutor was his direct supervisor, defendant should have the opportunity to depose Mr. Tutor.
Based on the foregoing, defendant's motion is granted and the claimant is directed to produce Ronald N. Tutor for an examination before trial in accordance with CPLR 3110 (1) within forty- five days of the date this Decision and Order is filed.
January 28, 2016
Saratoga Springs, New York
FRANCIS T. COLLINS
Judge of the Court of Claims The Court considered the following papers:
1. Notice of motion dated October 16, 2015; 2. Affirmation of Michael I. Getz dated October 16, 2015 with exhibits 1 - 17; 3. Memorandum of Law of Michael I. Getz dated October 16, 2015; 4. Affidavit of Mark A. Canizio sworn to November 5, 2015 with Exhibit A - H; 5. Affidavit of Ronald N. Tutor sworn to November 2, 2015; 6. Memorandum of Law of Mark A. Canizio and Jessica Singh dated November 5, 2015; 7. Reply memorandum of law of Michael I. Getz dated November 16, 2015; 8. Reply affirmation of Michael I. Getz dated November 16, 2015.