Opinion
# 2017-015-204 Claim No. 120992 Motion No. M-89297
02-22-2017
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
Defendant's motion to compel discovery relating to criminal investigations of fraud involving the Minority and Womens' Business Enterprise (M/WBE) requirements of other contracts involving a joint venture in which claimant was a partner and certain other named subsidiaries was granted in part and denied in part. Defendant was entitled to discovery relating to the investigation of the joint venture's alleged M/WBE fraud since the claimant was a partner of the joint venture at the time of the alleged fraud and such evidence may be relevant on the issue of claimant's intent to perform the M/WBE requirements of the subject contract. The defendant's demands for documents relating to M/WBE fraud of certain subsidiaries was denied.
Case information
| UID: | 2017-015-204 |
| 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-89297 |
| 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: | February 22, 2017 |
| City: | Saratoga Springs |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
Defendant moves to compel responses to its demands numbered "2"-"9" contained in its Fourth Notice for Discovery and Inspection pursuant to CPLR 3120 and 3124.
Claimant, Tutor Perini Corporation (Perini), seeks damages for breach of contract arising from extra work and delays allegedly incurred during the performance of its contract with the New York State Department of Transportation (NYSDOT). Defendant asserts certain affirmative defenses and counterclaims (as an offset) alleging fraud in both the inducement and performance of the contract. These defenses are based on the allegation that defendant was induced to enter into the contract based, in part, upon Perini's fraudulent representations regarding its intent to comply with the Minority and Women's Business Enterprise (M/WBE) requirements of the contract, and its fraudulent representations during the performance of the contract that M/WBE enterprises were performing certain subcontract work when, in fact, they were performing no commercially useful function.
The work which was the subject of the contract involved the reconstruction of 3.2 kilometers of highway and 14 bridges on Interstate 495 in Douglaston, New York.
Since the statute of limitations had expired by the time defendant asserted its fraud defenses and counterclaims, the counterclaims were permitted to stand only to the extent they may offset claimant's damages.
The parties have referred to the requirements for disadvantaged, minority and or women's business owned enterprises variously. For the sake of uniformity, the Court will refer to the Minority and Women's Business Enterprise requirements of the subject contract as M/WBE.
Defendant's prior motion to compel the examination before trial of Ronald N. Tutor, Perini's Chairman and Chief Executive Officer, was granted in order to allow the defendant to explore matters that may be relevant and necessary to the prosecution of its fraud defenses and counterclaims. The Court found that "defendant is entitled to explore Mr. Tutor's knowledge of M/WBE fraud by Perini on other projects" (Tutor-Perini Corporation v State of New York, UID No. 2016-015-117 [Ct Cl, Collins, J., Jan. 28, 2016]). Such evidence is 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]). Thus, while proof of similar acts is generally inadmissible to prove that a person committed a particular act on another occasion, such evidence is admissible to establish motive, intent, the absence of mistake or accident and a common scheme or plan (id. at 211). Moreover, the Court found such information relevant on the issue of defendant's entitlement to punitive damages (as an offset) because such recovery is limited to cases in which the fraudulent 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]). Evidence of fraud in the inducement or performance of the M/WBE requirements of other contracts is therefore relevant to both the claimant's intent to fulfill the M/WBE requirements of the subject contract and defendant's entitlement to punitive damages as an offset.
Following the examination before trial of Mr. Tutor, defendant served its Fourth Notice for Discovery and Inspection in which it requested, as relevant here, three categories of documents: (1) documents relating to the San Francisco Airport litigation (City and County of San Francisco v Tutor-Saliba Corp. 2005 WL 645389 [US Dist Ct, ND, Calif 2005]) (defendant's Exhibit 4, demand numbered "2"); (2) documents and materials provided to the United States Department of Justice (USDOJ) during the course of its investigation of M/WBE fraud involving WDF, Inc. (WDF) and any in-house investigative reports prepared by either Perini or WDF relating thereto (id. at demands numbered "3"-"5"), and (3) documents and materials relating to the USDOJ's investigation of M/WBE fraud involving Five Star Electric Corporation (Five Star) and any in-house investigation relating thereto (id. at demands numbered "6"-"9").
With respect to the San Francisco Airport litigation, defendant contends that similar allegations of M/WBE fraud were made against Perini in a lawsuit by the City and County of San Francisco, which resulted in a settlement of a $18.5 - $19 million (defendant's Exhibit 7, pp. 403 - 404). Defendant contends that the pleadings and discovery related to that lawsuit are relevant to establish the intent element of its fraud defenses and counterclaims and on the issue of punitive damages. Perini's counsel opposes the motion on the ground that Perini had no involvement in the San Francisco Airport project "even though it was at one time a joint venture partner" (affirmation of Jessica Singh dated Nov. 4, 2016, ¶ 27). Perini contends that it sold its interest in the joint venture to Tutor-Saliba Corporation (Tutor-Saliba) toward the end of 1997 and did not participate in the settlement. According to Perini, the San Fancisco Airport project was bid and performed entirely by Tutor-Saliba, a privately held corporation headed by Ronald N. Tutor as its Chief Executive Officer. As a result, Perini contends that the acts of Tutor-Saliba may not be imputed to Perini for the purposes of the punitive damages claim or serve as an indicator of Perini's intent to perform its M/WBE obligations on the Long Island Expressway (LIE) project.
Notably, Mr. Tutor entered into a Management Agreement with Perini to serve as its Chief Operating Officer in 1997. In 2008, Perini Corporation and Tutor-Saliba Corporation merged and the name was changed to Tutor-Perini Corporation in 2009 (see Tutor Perini Corp. v State of New York, UID No. 2016-015-117 [Ct Cl, Collins, J., Jan. 28, 2016]; affirmation of Jessica Singh, dated Nov. 4, 2016, ¶¶ 9-10).
With respect to defendant's demands for documents provided to the USDOJ during the course of its investigation into alleged M/WBE fraud involving WDF, defendant contends that the sought-after documents are relevant, or at least calculated to lead to the discovery of relevant evidence, because Perini purchased WDF in 2011 or 2012 when the USDOJ investigation was ongoing. Defendant indicates, based upon Mr. Tutor's examination before trial testimony, that the investigation into WDF's M/WBE practices resulted in a $4 million settlement (see defendant's Exhibit 7, p. 180). Defendant argues, therefore, that Perini's purchase of WDF during the period of the USDOJ investigation underscores its disdain for the M/WBE laws and flouts the public policy behind those laws. According to defendant, this type of repetitive fraud "exemplifies [Perini's] pattern of similar conduct directed at the public generally" (affirmation of Michael I. Getz dated Sept. 28, 2016, ¶ 32). In opposition to the production of the requested documents, Perini contends that it did not acquire WDF until 2011, only after the issue of WDF's M/WBE compliance arose. Mr. Tutor testified that he knew nothing about the investigation into WDF's M/WBE practices and that "[t]hey paid the fine. It didn't come out of Tutor or Perini" (defendant's Exhibit 7, p. 181). Perini argues that WDF's M/WBE compliance is irrelevant to defendant's fraud defenses because the issue arose prior to WDF being purchased by Perini and therefore has no bearing on whether Perini intended to fulfill the M/WBE requirements of the LIE contract nearly a decade earlier.
Defendant's request for the records relating to the USDOJ's investigation of M/WBE fraud by Five Star is based upon the testimony of Mr. Tutor in which he indicated Perini purchased Five Star in either 2011 or 2012 and that an investigation by the USDOJ into Five Star's M/WBE practices is currently underway (id., pp. 422-423). In opposition, Perini contends that the actions of Five Star are irrelevant to the issue of Perini's intent to comply with the M/WBE requirements of the LIE contract because the LIE contract was substantially completed by January 9, 2004, a date "prior to the period covering Five Star's investigation" (affirmation of Jessica Singh dated Nov. 4, 2016, ¶ 44). Moreover, Mr. Tutor testified that Perini (as distinct from Five Star) is not being investigated with regard to Five Star's M/WBE contract compliance issues (defendant's Exhibit 7 at 423).
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" (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]; see also Kavanagh v Ogden Allied Maintenance Corp., 92 NY2d 952, 954 [1998]). 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]). A motion to compel responses to discovery demands is properly denied where the demands seek information that is irrelevant, overly broad, or burdensome (Pesce v Fernandez, 144 AD3d 653, 655 [2d Dept 2016]; Accent Collections, Inc. v Cappelli Ent., Inc., 84 AD3d 1283 [2d Dept 2011]).
Review of the complaint in the San Francisco Airport case indicates that the named defendants included Tutor-Saliba, Tutor-Saliba Perini & Buckley, J.V., a California joint venture, and Perini, among others. The complaint alleges that Tutor-Saliba was the managing sponsor of Tutor-Saliba Perini & Buckley, J.V. (TSPB) and, in that capacity, provided all labor, materials, supervision and management for TSPB (defendant's Exhibit 6, ¶ 8). The complaint also alleges that Perini and Buckley, as joint venture partners of TSPB, are liable for the acts of TSPB (id. at ¶ 11). With respect to the conduct of TSPB, the complaint alleges that both Tutor-Saliba and TSPB fraudulently induced San Francisco to award them the airport contracts by representing that they would subcontract with legitimate M/WBE subcontractors, when they had no intention of doing so (id. at ¶ 31). The complaint further details instances of M/WBE fraud in the performance of the contract by both Tutor-Saliba and TSPB from July 1996 through July 2001 (id. at ¶ 35). Inasmuch as the allegations against Perini in the San Francisco Airport litigation arose solely from its participation in the TSPB joint venture, analysis of the consequences of its status as a joint venture partner is necessary.
Mr. Tutor also testified that "I controlled [TSPB] in total, as to the estimates, the terms, the bid, everything" (defendant's Exhibit 7, p. 259).
As succinctly stated by the Court of Appeals in Gramercy Equities Corp. v Dumont (72 NY2d 560, 565 [1988]):
"A joint venture is a special combination of two or more persons where in some specific venture a profit is jointly sought. It is in a sense a partnership for a limited purpose, and it has long been recognized that the legal consequences of a joint venture are equivalent to those of a partnership" ([internal quotation marks and citation omitted]; see also Alper Rest., Inc. v Catamount Dev. Corp., 137 AD3d 1559, 1561 [3d Dept 2016]; Walton & Willet Stone Block, LLC v City of Oswego Community Dev. Off. & City of Oswego, 137 AD3d 1707 [4th Dept 2016]; Sagus Mar. Corp. v Rynne & Co., 207 AD2d 701 [1st Dept 1994]).
Pursuant to Partnership Law § 23, a partnership is charged with knowledge of or notice to a partner as follows:
"Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner."
With respect to the liability of a partnership for a partner's wrongful act, Partnership Law § 24 provides:
"Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership, or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act" (see also Partnership Law § 25).
Lastly, Partnership Law § 26 makes clear that all partners are liable "jointly and severally for everything chargeable to the partnership." The legal consequences of a joint venture being equivalent to those of a partnership, TSPB, as a joint venture, may be charged with the knowledge acquired by Tutor-Saliba during the course of the joint venture (Partnership Law § 23); TSPB may bear liability to third parties for injury or penalties incurred to the same extent as the partner committing the wrongful act (Partnership Law § 24; see also Partnership Law § 25), and Perini, as a joint venture partner of TSPB, is liable jointly and severally for everything chargeable to the joint venture (Partnership Law § 26 [1]). Thus, Perini's contention that the San Francisco Airport project was bid and performed entirely by Tutor-Saliba provides no basis for resisting defendant's discovery demands relating to this project. Perini's contrary assertion notwithstanding, the acts of Tutor-Saliba allegedly occurring during the course of the joint venture may be imputed to TSPB, the joint venture, and to Perini as one of its partners (see Masson v Wiggins & Masson, LLP, 110 AD3d 1402, 1404-1405 [3d Dept 2013]; Peterson v Kelly, 173 AD2d 688, 690 [2d Dept 1991]; Mileasing Co. v Hogan, 87 AD2d 961 [3d Dept 1982]). To the extent it may be argued that the imposition of liability on a joint venture partner for the acts of another partner is by operation of law, without the necessity for a showing of any wrongdoing on its part, it is not insignificant that in 1997 Mr. Tutor served as the Chief Executive Officer for both Perini Corporation (which later merged with Tutor-Saliba to become Perini) and Tutor-Saliba (claimant's Exhibit D, ¶ 2). As a result, defendant sufficiently established for the purposes of the instant motion that its request for materials relating to the San Francisco Airport project are reasonably calculated to lead to the discovery of relevant evidence concerning Perini's intent to fulfill the M/WBE requirements of the subject contract and defendant's entitlement to punitive damages as an offset.
Perini's contention that it sold its interest in the joint venture to Tutor-Saliba toward the end of 1997 circumscribes the period for which the conduct of Tutor-Saliba may be attributed to TSPB and Perini as a joint venture partner, but does not absolve Perini of responsibility for Tutor-Saliba's acts during the course of their joint venture. Consequently, Perini must respond to defendant's demand number "2" contained in defendant's Fourth Notice for Discovery and Inspection.
A different conclusion is reached with respect to the defendant's demands for documents related to the USDOJ investigations of WDF and Five Star. These companies were not purchased by Perini until 2011 (affirmation of Jessica Singh, dated Nov. 4, 1026 ¶ 11). To the extent defendant's document demands are not limited to investigations and documents relating to projects bid or performed by WDF or Five Star after the date Perini acquired its interest in these companies, they are over broad. Perini obviously cannot be charged with knowledge of or responsibility for a subsidiaries conduct that occurred prior to the date of their acquisition. Moreover, Mr. Tutor clearly testified that the conduct which resulted in the fine against WDF, which WDF paid, "didn't come out of Tutor or Perini" (defendant's Exhibit 7, p. 181).
Perini's counsel also represents that the USDOJ's investigation of Five Star's M/WBE practices commenced two years after the date the LIE project was substantially completed on January 9, 2004. As with WDF, Perini cannot be charged with M/WBE irregularities committed by Five Star prior to the date it purchased the company. While Mr. Tutor testified that the USDOJ's investigation into Five Star's M/WBE practices continues, it is unclear whether the investigation relates to conduct which occurred after the date the company was purchased by Perini. Nevertheless, both WDF and Five Star are subsidiaries of Perini and it is well settled that "[a] parent company will not be held liable for the torts of its subsidiary unless it can be shown that the parent exercises complete dominion and control over the subsidiary (see Billy v Consolidated Mach. Tool Corp., 51 NY2d 152, 163 [1980]; Potash v Port Auth. of N.Y. & N.J., 279 AD2d 562 [2d Dept 2001]). There is no indication that Perini exercised complete dominion and control over the conduct of WDF or Five Star. Absent such control, the conduct of neither WDF nor Five Star may be imputed to Perini for the purposes of establishing either Perini's intent to fulfill the M/WBE requirements of the subject contract or defendant's entitlement to punitive damages as an offset. Nor is there any indication of Perini's involvement in the alleged fraudulent conduct of its subsidiaries, WDF or Five Star. Accordingly, Perini is not required to respond to defendant's demands numbered "3"-"9".
Based on the foregoing, defendant's motion is granted to the extent of requiring claimant to respond to the demand numbered "2" in defendant's Fourth Notice for Discovery and Inspection within 45 days of the date this Decision and Order entered. The motion is in all other respects denied.
February 22, 2017
Saratoga Springs, New York
FRANCIS T. COLLINS
Judge of the Court of Claims The Court considered the following papers:
1. Notice of motion dated September 28, 2016; 2. Affirmation of Michael I. Getz dated September 28,2016 with exhibits; 3. Memorandum of Law of Michael I. Getz dated September 28, 2016; 4. Affirmation of Jessica Singh dated November 4, 2016 with exhibits; 5. Memorandum of Law of Jessica Singh and Mark A. Canizio dated November 4, 2016; 6. Reply affirmation of Michael I. Getz dated November 14, 2016 with exhibits.