New York State Court of Claims

New York State Court of Claims

FRANBILT v. THE NEW YORK STATE THRUWAY AUTH., #2000–015-089, Claim No. 101208, Motion Nos. M-61657, CM-61942, CM-61959


Synopsis


Court granted defendant's motion to dismiss claim alleging tortious interference with contractual relations, tortious interference with potential contractual business relations, defamation and de facto debarment/denial of due process.

Case Information

UID:
2000–015-089
Claimant(s):
FRANBILT, INC.
Claimant short name:
FRANBILT
Footnote (claimant name) :

Defendant(s):
THE NEW YORK STATE THRUWAY AUTHORITY
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
101208
Motion number(s):
M-61657
Cross-motion number(s):
CM-61942, CM-61959
Judge:
FRANCIS T. COLLINS
Claimant's attorney:
Law Firm of Joseph A. Camardo, Jr.By: Kevin P. Ryan, Esquire
Defendant's attorney:
Honorable Eliot Spitzer, Attorney General
By: Arthur Patane, EsquireAssistant Attorney General
Third-party defendant's attorney:

Signature date:
October 2, 2000
City:
Saratoga Springs
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

In addition to the defendant's motion for summary judgment seeking dismissal of the claim there are two cross-motions made by claimant. The first seeks an order pursuant to CPLR 3124 compelling responses to discovery demands and the second cross-motion seeks an "order striking the motion of the Claimant [sic], the New York State Thruway Authority for summary judgment with respect to this matter, as well [sic] and award of costs and fees." The defendant's motion is granted and the claimant's cross-motion to compel is denied as moot. Although claimant's counsel's affidavit details some of the deposition scheduling problems experienced in this matter and alleges that the defendant's summary judgment motion is nothing more than a delay tactic, he has failed to separately allege that a good faith effort was made to resolve the disclosure issue prior to the motion as required by 22 NYCRR 206.8 (see, Romero v Korn, 236 AD2d 598). The Court finds no merit to the claimant's other cross-motion to strike the defendant's summary judgment motion. New York practice recognizes no such motion and this Court declines to permit it. It is, accordingly, denied. This decision and order will address itself exclusively to the motion for summary judgment.

The instant claim was filed on October 6, 1999 and asserts various causes of action, all of which are related to a dispute between the parties arising from the claimant's delivery of allegedly defective gate leaves as part of the Lock C-4 Rehabilitation Project, Champlain Canal. The "Statement of Relief Requested" contained in paragraph 5 of the claim states the following:
5. For the reasons set forth herein, Franbilt seeks to recover damages from the NYSTA resulting from its scheme to wrongfully and improperly prohibit Franbilt from performing on NYSTA projects, thereby subjecting Franbilt to a De Facto Debarment. This scheme was carried out through the publication of false and defamatory statements to Franbilt's customers in the general business community, the interference with Franbilt's contractual relationships with ongoing customers, and the intentional interference with Franbilt's prospective contractual relationships with ongoing customers.
The defendant is a public authority created pursuant to section 352 of the Public Authorities Law and is responsible for constructing, reconstructing, improving, maintaining, and operating the Thruway System of the State of New York as well as the New York State Canal System. Claimant Franbilt, Inc. is a corporation duly organized and existing under the laws of the State of New York with principal offices located at 6746 Akron Road, Lockport, New York. Claimant alleges that it has functioned as a supplier, contractor and/or subcontractor on numerous projects for the Thruway Authority over the past ten years.

As set forth in the claim, the alleged tortious acts of the New York State Thruway Authority are "focused on a number of separate NYSTA projects, [in] all of which Franbilt was either a subcontractor or was about to be selected as a subcontractor by the prime contractor."

Under the facts alleged in the instant claim there is only one contract to which Franbilt was already a party at the time its subcontractor approval was withdrawn and it was barred from further work on the project. Pursuant to a subcontract with Schultz Construction Company, Inc.(SCI), the general contractor, Franbilt was to fabricate and deliver gate leaves for the Lock C-4 Rehabilitation Project, Champlain Canal. Franbilt was also to perform related work on that project which included the renovation of lock operating equipment owned by the Canal System. The affidavit of Keith E. Giles, Chief Engineer of the New York State Thruway Authority, dated October 19, 1998 and originally submitted to the Supreme Court, County of Albany in an article 78 proceeding captioned Franbilt, Inc. v New York State Thruway Authority, Index No. 98-5989, and resubmitted as Exhibit "B" to Gile's later affidavit dated May 1, 2000 alleges that the fabrication of the gate leaves by Franbilt was inspected at the plant by an employee of S.J.B,. a sub-consultant to M.J. Engineering, the Thruway Authority's consultant inspecting firm. According to Giles' affidavit, upon delivery in November, 1997 certain deficiencies in the welding of the gates were noted and Franbilt was asked to provide a plan for their repair. Giles alleges that the magnitude of the repairs required on the gates was not recognized until a more thorough inspection was made in March of 1998. Mr. Giles states that the subsequent visual and radiographic inspection showed, among other deficiencies, a lack of fusion in critical welds throughout the gates and undersized and missing welds which, together, created doubt as to the overall integrity and soundness of the gates. While claimant alleges in opposition to the motion that its contract merely specified visual inspection of the welds and that the radiographic and other testing to which the gate leaves were subjected in March 1998 prejudiced the claimant, the parties agree that the New York State Steel Construction Manual (NYSSCM) was incorporated by reference into the contract (see, Exhibit 4 to affidavit of Francis S. Licata dated June 27, 2000). Section 306 of such manual in relevant part provides that:
"If non-destructive testing other than visual inspection is not specified in the original Contract Document but is subsequently requested by the State, the Contractor shall perform any required testing or shall permit testing to be performed by the State. . . . The State shall be responsible for all associated costs including handling, surface preparation, nondestructive testing and the repair of discontinuities other than those that would be expected to be discovered by visual inspection or discovered by testing specified in the Contract Documents. The rates for work associated with nondestructive testing ordered after execution of the Contract Document shall be agreed upon between the State and the Contractor. However, if such testing should disclose an attempt to defraud or gross nonconformance to requirements of this Manual, repair work and/or replacement shall be done at the Contractor's expense."
According to Giles, the visual and radiographic testing "by several involved and uninvolved engineering firms, and professional engineers employed at the Authority" (Giles Affidavit 10/19/98, paragraph 8) revealed that a major repair effort would be required to address the welding deficiencies and Franbilt was directed to put sufficient welders in the field to accomplish the task. In paragraph 11 he states: "However, after a few days, with the available construction days rapidly disappearing, Franbilt proved incapable of meeting our requirements. Therefore, I directed SCI to terminate Franbilt for inadequate response and put sufficient qualified welders on the job to get it done. SCI did this through another subcontractor, L & L Nelson Welding, Inc." Giles alleges that he also attempted to determine how these gates could have come out of the Franbilt shop in such poor condition. The sub-consultant's inspector who allegedly was present during the manufacturing process was questioned and dismissed. The State Police investigated but found no evidence of a crime. Neither the consultant nor the sub-consultant were able to explain why the in-plant inspector did not alert them to the magnitude of the welding deficiencies during fabrication. The results of both a visual inspection and a subsequent radiographic inspection of the gates are detailed in letters addressed to the New York State Thruway Authority dated March 26, 1998 and April 2, 1998 from Able Testing & Inspection, Inc., copies of which are attached to the October 19, 1998 affidavit of Keith E. Giles.

By letter dated April 7, 1998 from Keith Giles to Franbilt's Project Manager, Franbilt was disapproved as a subcontractor with respect to this project and was immediately and temporarily suspended from any further work on Thruway Authority/Canal Corporation projects. That letter stated:
Dear Mr. Licata:

You were previously approved as a subcontractor to Schultz Construction on Contract No. TAA 97-27C and you have been approved for certain other Thruway Authority/Canal Corporation work.

It has recently come to our attention that there has been visually apparent gross nonconformance with contract plans and specifications, in the fabrication of the C-4 Lock gates, and additional gross nonconformance that is obscured by the manufacturing process. The potential failure of these lock gates implicates public safety concerns.

After the prime contractor gave you a chance to repair these deficiencies, your response was totally inadequate to remedy the defects and to get the contract back on schedule in order to meet the deadline for opening the canal.

Your apparent non-responsibility on this project raises concerns with regard to any further work on Contract No. TAA 97-27C. In addition, you are immediately suspended from any further work on any and all Thruway Authority/Canal Corp. projects in any capacity whatsoever, pending a full review of the circumstances surrounding the C-4 Lock gates.

If you believe any further review of this determination of non-responsibility is warranted, or if you wish to present any information or comments you believe the Authority should take into account or may have overlooked, a meeting has been scheduled in my office this Friday, April 10th at 9:00 AM for this purpose.
Franbilt's disapproval and suspension with respect to this project was later modified by letter dated April 13, 1998 from Keith Giles which approved Franbilt as subcontractor for the limited purpose of the renovation and installation of the Canal System lock operating equipment. The April 7 disapproval remained in effect as to the gate weld repairs which had been subcontracted out to L & L Nelson Welding, Inc.

In his October 19, 1998 affidavit Giles asserts that the decision to approve Franbilt to renovate and install the lock operating equipment occurred as a result of a meeting which Franbilt requested in lieu of a responsibility determination hearing. Subsequent to such meeting, however, Giles states that he became embroiled in negotiations for several days between Franbilt and Schultz and their attorneys regarding Franbilt's refusal to deliver the refurbished Canal owned equipment without an advance resolution of certain issues between Franbilt and Schultz. Despite this additional delay the canal opening date was met. However, as of the date of Gile's affidavit (October 19, 1998), some items allegedly had still not been delivered by Franbilt. Giles asserts in paragraph 17 that the job was accepted on September 25, 1998 with an uncompleted work agreement for the delivery of certain Canal Corporation items including patterns, certification documentation, shop drawings and replacement parts still in the possession of Franbilt, Inc., and the subject of currently pending litigation between SCI and Franbilt.

The Lock E-24 Project

Claimant alleges in the claim that the defendant attempted to preclude Franbilt from submitting a bid as a general contractor or preparing a quote as a sub-contractor regarding a separate project, identified as the Lock E-24 Rehabilitation Project, by amending the solicitation to require that all steel fabricators be certified by the American Institute of Steel Construction (AISC). At the time the solicitation was amended Franbilt did not possess such certification.

In paragraph 18 of Giles' October 19, 1998 affidavit, which predated the filing of this claim by almost a year, Giles alleged that "[a]s a result of the Authority's experience on this job, as well as recent experience with steel fabricators new to the Authority on certain bridge projects, my professional design staff recommended that fabrication plants utilized in the manufacture of certain steel products should be required to obtain AISC certification related to the plant's quality control procedures and plant capabilities." The first canal project to require AISC certification was a project designated TAS98-52C which was described as "upper miter gates replacement and retaining wall rehabilitation at Lock E-24. The work includes steel gate fabrication and erection, concrete resurfacing, construction of a concrete traffic barrier, asphalt paving, and other miscellaneous work" (Claim, paragraph 18). The original advertisement soliciting bids for the project was issued on or about July 20, 1998. NYSTA issued Amendment No. 1 to the solicitation on or about July 31, 1998. Item No. 4 of the amendment added the requirement that, "the four gate leaves furnished under Item 564.0501 and 564.0502 shall be furnished by a firm currently certified by the American Institute of Steel Construction ['AISC'] for the fabrication of either Major Steel Bridges (Cbr) or Complex Steel Buildings (Cbd). A copy of this certification shall be furnished to the Engineer no later than 14 days after the award of the contract." (see, Claim paragraphs 18-21). Franbilt, apparently believing that the requirement of AISC certification was an attempt on the part of NYSTA to preclude Franbilt from bidding on this project as either a general contractor or sub-contractor commenced an article 78 proceeding in Supreme Court, Albany County, by order to show cause signed by the Honorable Bernard Malone. In that proceeding Franbilt sought an order of the Court directing NYSTA to accept and award bids from firms not possessing AISC certification. The return date of the article 78 proceeding was adjourned and during the adjournment period Franbilt obtained AISC certification. Consequently, it withdrew the proceeding. The contract on the Lock E-24 Project was awarded to the apparent low bidder, M. A. Bongiovanni, Inc., on September 16, 1998. By letter dated September 24, 1998 M.A. Bongiovanni advised Ed Warner of the New York State Canal Corporation of its intention to utilize Franbilt, Inc. of Lockport, New York to supply the quoin plates, pivots, sockets and gates for the above referenced project. This letter closed with the following sentence. "If you have any comments on our selection please contact us as soon as possible to discuss your concerns as time is of the essence on this project." The Thruway Authority responded to Bongiovanni by letter of Edward E. Giles dated September 28, 1998. That letter in pertinent part provided:
Please be advised that the Authority will make a determination as to whether you are a responsible bidder with respect to the use of Franbilt, Inc. as a subcontractor/supplier on this project. As a result of circumstances which occurred on TAA 97-27C and other experiences, there is a concern as to whether Franbilt, Inc. is a responsible company for the purposes of the present contract. In addition, the Authority does not have a satisfactory explanation of how the problems occurred and what the company has done to give the Authority any assurance that these types of problems will not recur.

The Authority has reason to believe that several instances of gross non-conformance to contract requirements occurred during the fabrication of lock gates and other work on recent contracts for which Franbilt was responsible.
The writer then listed a number of items allegedly demonstrating non-conformance with contract specifications and concluded with the following language:
The seriousness of these matters and the documentation which I have appear to support a determination that Franbilt, Inc. of Lockport, New York is not a responsible supplier/subcontractor for purposes of performance on this public works contract.

As the performance of your subcontractors/suppliers is your responsibility and could have significant impact on your ability to complete this project by the specified completion date, I am scheduling a meeting to allow you and your subcontractor/supplier, Franbilt, Inc., the opportunity to present any documentation and explanations before a final determination is made. This meeting will be held at Thruway Authority Headquarters at 1:00 PM on Wednesday, October 7, 1998. (Exhibit 18 to affidavit of Keith E. Giles dated October 19, 1998).
Francis S. Licata, Franbilt's President, in his affidavit in opposition to this motion alleges that during the October 7, 1998 meeting between NYSTA, Franbilt and Bongiovanni the Thruway Authority "spent more than 5 hours disparaging, defaming and criticizing Franbilt's performance on the Lock C-4 matter." Licata alleges that the presentation included photographs which were represented to be of certain welds when, in fact, completely different welds were depicted. He alleges further that certain information contained in the charts which were displayed on an overhead projector were blatantly false. These conclusory and self-serving allegations are not supported by any documentation attached to Licata's affidavit. Licata asserts that as a result of the October 7, 1998 meeting, and a subsequent meeting between Bongiovanni and the Thruway Authority, Bongiovanni decided not to utilize Franbilt as a subcontractor on the Lock E-24 Project.

Prior to the October 7, 1998 hearing Franbilt commenced a second article 78 proceeding against the New York State Thruway Authority in Supreme Court, Albany County, under Index No. 98-5989. That proceeding apparently sought a judgment enjoining the New York State Thruway Authority from directly interfering with Franbilt's contractual rights under its "commitment"[1] with Bongiovanni allegedly stemming from Franbilt's quote submission and enjoining the Thruway Authority from holding the October 7, 1998 responsibility hearing. Franbilt apparently tried to withdraw this proceeding but the Honorable Harold Hughes, to whom this proceeding had been assigned, signed an order permitting its discontinuance without prejudice only upon the payment of $100.00 in costs by petitioner to respondent's counsel. (Exhibit F to the Affidavit of Arthur A. Patane dated May 1, 2000). Such order indicated "the underlying issues have become moot . . . ." Licata, in paragraph 18 of his affidavit of June 27, 2000 admits that Franbilt withdrew its second article 78 proceeding after Bongiovanni elected to abandon Franbilt and utilize another subcontractor.

The Lock E-12/Dam 8 Project

Franbilt was a materialman on a pre-existing and partially completed project which was known as the Lock E-12/Dam 8 Project. The claim at paragraphs 29-41 alleges that the Thruway Authority inappropriately attacked Franbilt by the issuance of a letter dated September 9, 1998 (Exhibit 10 attached to Licata affidavit of June 27, 2000) which Franbilt alleges contained false statements regarding the Lock C-4 Project in an attempt to disparage and defame Franbilt's reputation to members of the contracting community. The letter addressed to Francis S. Licata, Jr. reiterated the Thruway Authority's concerns regarding Franbilt's gross non-conformance on Contract TAA 97-27C (i.e., Lock C-4), informed Franbilt that the Thruway Authority was considering the possible "discontinuance of the use of your firm due to irresponsibility" and that a meeting would be held on Tuesday, September 22, 1998 to afford Franbilt the opportunity to provide further information regarding the circumstances associated with the issues related to the alleged gross non-conformance of Franbilt's work on that earlier project. By letter dated September 15, 1998 to the New York State Thruway Authority, Franbilt's attorney objected to the basis and format of the meeting regarding Franbilt's participation in the Lock E-12 Project. Allegedly, in response to the letter, the Thruway Authority on September 18, 1998 faxed a letter dated September 17, 1998 addressed to Kubricky Construction and D.A. Collins, the general contractor and subcontractor on the E-12 Project, inviting them both to the September 22, 1998 meeting. Claimant alleges that after a discussion with Franbilt's attorney on September 19, 1998 the Authority indefinitely postponed the responsibility determination hearing on the Lock E-12 Project and agreed to hold an "off the record" discussion to address the issues. Claimant fails to allege who was in attendance at the September 22, 1998 discussion but alleges that the Thruway Authority produced for Franbilt's counsel a binder of documents allegedly demonstrating that Franbilt's substandard work on the Lock C-4 Project was grossly non-conformant to the project plans and specifications. Claimant alleges that it was subsequently discovered that the binder contained false and defamatory information. No responsibility determination hearing was ever held with respect to this project. No damages are sought in the claim with respect to this project nor is there any allegation that claimant was prevented from completing its work with regard to the project.

Bid Invitation No. 98147

Claimant alleges in paragraph 65 of the claim that the Thruway Authority's actionable conduct continued with respect to yet another project identified as Bid Invitation No. 98147 which involved the furnishing of cast steel components. It is apparently unrefuted that Franbilt was low bidder on this project with a bid in the amount of $35,390 while the next lowest bid submitted was $89,390. By letter dated March 1, 1999 Franbilt was advised that it was in fact the low bidder but that a responsibility determination hearing would be scheduled to determine whether or not Franbilt was a responsible bidder. Claimant alleges that after being advised with respect to the Lock C-4 Project that the Thruway Authority would be asserting its contractual right of setoff arising from Franbilt's disapproval on the Lock C-4 Project, Franbilt attempted to withdraw its bid and no longer sought to perform on the project identified as Bid Invitation No. 98147. Franbilt allegedly took the position that since it had withdrawn its bid any responsibility determination hearing with respect to Bid Invitation No. 98147 would be a nullity and Franbilt declined to attend the hearing. The Thruway Authority, however, refused to allow Franbilt to withdraw its bid and proceeded with the responsibility determination hearing without Franbilt in attendance. The Thruway Authority issued a formal determination of non-responsibility as a result of such hearing.

Exchange Street Bridge

The claim alleges further that on or about June 4, 1999 Nicholas, Long & Moore Construction Corp. forwarded to Franbilt a purchase order and subcontract agreement for certain bridgework spanning the New York State Canal which was to be performed pursuant to a contract with the New York State Department of Transportation. Claimant alleges that a letter dated June 29, 1999 from Charles T. Randall, a Thruway Authority attorney to James Shear, an employee of the Department of Transportation Contract Management Bureau improperly advised the Department of Transportation of Franbilt's dispute with the Thruway Authority regarding the C-4 Project. In his affidavit in support of the defendant's motion James Shear asserts that the information regarding Franbilt's past performance on the Lock C-4 Project was shared pursuant to Executive Order No. 170.1, a copy of which is attached to his affidavit. The announced purpose of Executive Order No. 170.1 was to promote the public interest through the uniform application of guidelines to be used by State agencies in determining the responsibility of contractors and the approval of subcontractors with regard to competitively bid State contracts. It seeks to achieve such goal by promoting the sharing of information regarding, among other criteria, the past performance of bidders, contractors and subcontractors on pubic works projects with other State agencies and departments. Such sharing is deemed essential to effect the purpose of this Executive Order and to promote the public interest. The Court finds that the Thruway Authority's sharing of information regarding Franbilt's performance on the Lock C-4 Project with DOT relative to the Exchange Street Bridge Project was accomplished in conformity with the letter and spirit of the Executive Order. Franbilt was informed on June 30, 1999 that Nicholas, Long & Moore Construction Corp. would not be subcontracting with Franbilt on the Department of Transportation Project.

Court Street Dam Project

The claim alleges further that in early 1999 Crane Hogan Structural Systems, a large contracting firm with its principal place of business located in Spencerport, New York submitted a proposal to the Thruway Authority regarding the Court Street Dam Project located in Rochester, New York. The project required Crane Hogan to rehabilitate one of the lock gates at the Court Street Dam. It is alleged that Crane Hogan as the successful low bidder on this project notified the Thruway Authority at a preconstruction meeting that it planned to use Franbilt as a subcontractor to perform certain portions of the work specified for the project. The date of the meeting is not set forth in the claim but on April 14, 1999, the Thruway Authority advised both Crane Hogan and Franbilt that it was concerned as to whether Franbilt was a responsible contractor for purposes of the contract and summoned the parties to a responsibility hearing to be held at its headquarters on May 4, 1999. The claimant alleges that at the hearing both Franbilt and Crane Hogan attempted to convince the Thruway Authority that the Court Street Dam project did not involve any fabrication or manufacturing by Franbilt and that the project therefore differed significantly from the Lock C-4 Project which remained a concern of the Thruway Authority. It is alleged that at this meeting the Thruway Authority continued to insist upon the submission of a written explanation for Franbilt's past performance with respect to the C-4 Project.

On or about June 2, 1999 the Thruway Authority advised Franbilt that it was considered a non-responsible subcontractor for purposes of the Court Street Dam Project and advised that it would not allow Crane Hogan to subcontract this project to Franbilt.

Claimant seeks damages which are itemized on page sixty-three of the claim including lost profits with respect to the Lock E-24 Rehabilitation Project, Court Street Dam Project, Exchange Street Bridge and a dredge castings project. The claim contains little more than a passing reference in paragraph 64 to purchase orders for castings, presumably the dredge castings project, which allegedly were shipped by Franbilt and accepted by the Thruway Authority. The claim alleges that although these purchase orders were initially subjected to a claim of setoffs or counterclaims by the Thruway Authority that they were later paid. The claim offers no factual basis for this monetary claim and no legal authority for any payment to be made with regard to them.

Claimant further alleges that it invested work effort on certain projects which it could not perform due to the actions of the Thruway Authority; these include the Lock E-24 Rehabilitation Project, the Court Street Dam Project, the Exchange Street Bridge Project and dredge castings project. Finally, claimant alleges that as a result of the improper actions of the Thruway Authority and its representatives Franbilt has been unable to accept any public contracts for the last two years; and that its good name and reputation has been thereby damaged causing irreparable harm to Franbilt. It seeks damages in the amount of $5,000,000.

Section 359 of the Public Authorities Law governs the procurement of contracts for the construction, reconstruction and improvement of the Thruway, connecting highways and the New York State Canal System. It provides that such contracts shall be let to the lowest responsible bidder and provides the mechanism for obtaining the bids.

The Authority's power to determine the responsibility of its contractors and subcontractors is discretionary. In exercising such discretion the Thruway Authority, specifically named therein as a contracting agency, is guided by Executive Order No. 170.1 which is dated June 23, 1993 and was filed on June 25, 1993. The Executive Order in relevant part provides:
A. Guidelines for Responsibility Determinations

In deliberating upon the responsibility of a bidder or a subcontractor, all contracting agencies shall give due consideration to any credible evidence or reliable information that the past or current record of a bidder or proposed subcontractor includes any of the following:

1. Lack of adequate expertise, prior experience with comparable projects, or financial resources to perform the work of the contract or subcontract in a timely, competent, and acceptable manner. . . .

13. Any other cause of so serious or compelling a nature that it raises questions about the present responsibility of a contractor or subcontractor, including but not limited to, submission to a contracting agency of a false or misleading statement on a uniform questionnaire, or in some other form, in connection with a bid for or award of a contract or a request for approval of a subcontractor.

In addition to the factors specified above, contracting agencies may also give due consideration to any other factors considered by the contracting agencies to bear upon responsibility, including but not limited to, any mitigating factors brought to the agency's attention by the bidder or proposed subcontractor.
Claimant herein argues unpersuasively that the guidelines may not be applied nor may a responsibility determination be made regarding a subcontractor after a contract has been awarded to the general contractor. Claimant cites no authority and the court on its own found no case law in support of this proposition which would restrict the power of the authority to act where circumstances have changed or information regarding a subcontractor's reliability comes to light after the awarding of a contract. The Court refuses to create such an impediment. Having rejected this argument the Court moves on to consider the claimant's causes of action.

Tortious Interference With Contractual Relations

The elements of a cause of action for tortious interference with contractual relations were restated by the Court of Appeals in Kronos, Inc. v AVX Corp., 81 NY2d 90, 94 as follows:
The tort of inducement of breach of contract, now more broadly known as interference with contractual relations, consists of four elements: (1) the existence of a contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to plaintiff (Israel v Wood Dolson Co., 1 NY2d 116, 120; see generally, Restatement [Second] of Torts § 766; 4 Lee and Lindahl, Modern Tort Law § 45.02, at 20 [rev ed.]).
Several cases have held that the inducement to breach element of a tortious interference with contractual relations cause of action must be "without justification" (see, Alvord & Swift v Muller Constr. Co., Inc., 46 NY2d 276 (1978); Artwear, Inc. v Hughes, 202 AD2d 76; see also, Wolff & Munier v New York City School Constr. Auth., 224 AD2d 683).

In Alvord, (supra, at 281) the Court of Appeals stated the following:
Intentional interference with contractual relations is, of course, recognized as a tort (see, e.g., Hornstein v Podwitz, 254 NY 443, 448). But the interference must be intentional, not merely negligent or incidental to some other, lawful purpose (see Rockaway Blvd. Wrecking & Lbr. Co. v Raylite Elec. Corp., 26 AD2d 9, 11-12, and cases cited; see generally, Prosser Torts [4th ed], pp 938-946, esp pp 941-942). On this view, to survive a motion for summary judgment, plaintiff was obliged to produce evidence, not just unsubstantiated allegations or assertions, that the owner intentionally and unjustifiably interfered with the work to be done by the subcontractor.
"Whether conduct which interferes with another's contractual relations is improper, and thus actionable, is determined by reference to a number of factors, including the nature of the conduct itself, the motives of the interfering party and the interests which it acts to protect, the interest with which it interferes and the relationship between the parties (see, Guard-Life Corp. v Parker Hardware Mfg. Corp., supra, at 190; Restatement [Second] of Torts § 767)" (MLI Indus. v New York State Urban Dev. Corp., 205 AD2d 998, 999).

The defects discovered by both visual and radiographic inspection of the gate leaves for the Lock C-4 Project manufactured by Franbilt caused the Thruway Authority to reject them. Upon this determination Franbilt was directed to perform repair work pursuant to a work schedule designed to complete the repairs in sufficient time to allow the opening of the Canal by the scheduled opening date. When the Thruway Authority determined that Franbilt would not complete the repair work in time it withdrew its approval of Franbilt as a subcontractor and directed the general contractor to replace Franbilt with L & L Nelson Welding, Inc. The repairs were completed in a timely manner and the canal opening occurred on schedule.

Beyond question the Thruway Authority has a duty to insure that its public projects are completed in conformity with established specifications in order to promote public safety and protect the public treasury (see, Public Authorities Law § 359). Upon its discovery of Franbilt's gross non-conformance, as well as Franbilt's inadequate repair efforts, the Thruway Authority disapproved Franbilt and barred it from completing its work under the contract. Given the critical nature of the defects and the time constraints which were then present it cannot be determined upon any fair interpretation of the record herein that the defendant acted without justification. Accordingly, the cause of action for tortious interference with contractual relations must fail.

A. Tortious interference with potential contractual/business relations:

In contrast to a cause of action for tortious interference with an existing contract, a claimant seeking to establish a cause of action for tortious interference with potential contractual/business relations must demonstrate that defendant acted solely for the purpose of harming the claimant or employed "wrongful means," such as fraud or misrepresentation (Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, 191). Persuasion alone, even if knowingly directed at interference with a prospective business relationship, does not support such a cause of action (Jabbour v Albany Med. Ctr., 237 AD2d 787). In addition, the claimant must establish that but for the malicious, fraudulent and deceitful acts of the defendant, it would have entered into a contractual relationship with some third party (WFB Telecommunications v NYNEX Corp., 188 AD2d 257, lv denied 81 NY2d 709; Mogull Music Corp. v Madison-59th St. Corp., 162 AD2d 336).

Claimant's tortious interference with potential contractual/business relations causes of action appear to be premised upon allegations that the Thruway Authority illegally conducted responsibility determination hearings with regard to Bid Invitation No. 98147, the Court Street Dam Project, Lock E-24 Project and the Exchange Street Bridge Project in which Franbilt was not a named subcontractor at the time of the responsibility determination hearings. Claimant submitted no evidence in opposition to this motion which demonstrates, or even creates a question of fact, as to whether the defendant's actions in conducting the responsibility determination hearings were aimed solely at harming the claimant. Moreover, claimant has offered no proof in evidentiary form from any of the general contractors involved in this project which tends to show that but for the acts of the defendant claimant would have entered into a contractual relationship with Bongiovanni on the E-24 Project, with Crane Hogan on the Court Street Dam Project or with Nichols Long & Moore Construction Corp. on the Exchange Street Bridge Project. Claimant has not even identified the general contractor on Bid Invitation No. 98147 and has not properly supported a claim in that regard. Claimant has, therefore, failed to establish the wrongful conduct and requisite causation necessary to a cause of action for tortious interference with potential contractual business relations.

Justice E. Michael Kavanaugh in a decision and order dismissing the claimant's third article 78 proceeding which addressed many of the same issues raised in this claim regarding the Court Street Dam Project found that there was ample support for the Thruway Authority's determination that Franbilt was not a responsible bidder on that project. The decision and order, attached to the defendant's motion as Exhibit "H", was based in part upon the Thruway Authority's prior determination of gross nonconformance to specifications on the Lock C-4 Project. Justice Kavanaugh found that there was ample support for the Thruway Authority's determination of irresponsibility and refused to substitute the Court's judgment for that of the Thruway Authority. That finding precludes this Court from determining that the Thruway Authority was motivated solely by malice in deciding that Franbilt was not a responsible bidder on the Court Street Dam Project.

The Court finds that claimant failed to make a showing of malicious intent with regard to Bid Invitation No. 98147, the E-24 Project and the Exchange Street Bridge Project as well. Accordingly, claimant's cause of action for tortious interference with potential contractual business relations fails.

Defamation

CPLR 3016 (a) requires that "the particular words complained of shall be set forth in the complaint, but their application to the plaintiff may be stated generally." In fact, the requirement that the defamatory words must be quoted verbatim [in a libel action] is strictly enforced (Varela v Investors Ins. Holding Corp., 185 AD2d 309; citing Erlitz v Segal, Liling & Erlitz, 142 AD2d 710, 712). Even if this Court were to construe the letter of Keith E. Giles dated September 9, 1998 (Exhibit 10 to affidavit of Francis S. Licata dated June 27, 2000), which claimant alleges was improperly published among non-specified members of the contracting community, as the alleged defamation this cause of action would still be dismissed

In order to support a finding of liability on a cause of action for defamation, claimant must demonstrate, in the first instance, that the statements complained of are false and defamatory (Carney v Memorial Hosp. & Nursing Home of Greene County, 64 NY2d 770). The allegations set forth in the claim regarding the September 9, 1998 letter or the allegations regarding the binder allegedly containing "false and defamatory information" which was produced at the September 22, 1998 "off the record" discussion regarding the Lock E-12 Project ( see, claim paragraphs 32-40) are insufficient to defeat the instant motion seeking dismissal of the claim as it pertains to defamation. Claimant has clearly failed not only to particularize the actionable words but to submit evidence in admissible form to create a material question of fact as to the falsity of the language or specific representations of the defendant set forth in the claim.

Accordingly, the cause of action for defamation must be dismissed.

De Facto Debarment/Due Process

If Franbilt was aggrieved by the alleged illegal, arbitrary and capricious decision of the Thruway Authority's March, 1998 determination that the gate leaves manufactured by Franbilt were in gross non-conformance with the specifications for the project, or the Authority's determination that Franbilt failed to exert sufficient effort to timely repair the non-conformance, or by the dismissal of Franbilt from the Lock C-4 Project, its remedy was to pursue an article 78 proceeding. Having failed to pursue such remedy within the applicable four month Statute of Limitations claimant is now precluded from seeking monetary recovery in this claim which is based upon allegations that the Thruway Authority acted illegally, arbitrarily and capriciously in determining Franbilt to be non-responsible as a result of its work on the Lock C-4 gate leaves.

Defendant further alleges that its determination of Franbilt's irresponsibility stems from its subsequent refusals to satisfactorily explain how the gross non-conformance on the C-4 Project occurred and to provide a plan of action to assure that such gross non-conformance would not occur in the future. The Thruway Authority's insistence on such a course of action appears to be in conformity with the holding of the Appellate Division, Third Department, in Matter of Callanan Indus. v White, 118 AD2d 167. There the Court found that while the Department of Transportation was not statutorily authorized "to create a mechanism for the debarment or suspension of prospective bidders" the Department, having found a bidder to be irresponsible for a particular reason (assuming such finding was not arbitrary and capricious) could proceed to reject each of that bidder's future bids. This was, of course, conditioned upon a consideration of that bidder's responsibility on a contract by contract basis and the change of the Department's position when and if the bidder remedies the cause underlying the finding of irresponsibility.

In Matter of Schiavone Constr. Co. v White, 117 AD2d 440, 443, the Court held that a determination by DOT that a contractor was not a responsible bidder was a determination in which the contractor "had a cognizable liberty interest," giving rise to due process protection, which requires notice of the charges and an opportunity at a hearing to rebut the charges. The record in the instant case demonstrates that Franbilt was afforded multiple opportunities to present its arguments in person, represented by counsel, at meetings held prior to any formal action being taken against it.

The Appellate Division First Department in Romano Enterprises of N. Y. v New York City Dept. of Transp., 254 AD2d 233 recently held:
The non-responsibility determination, which was made only after petitioner, through its principals and attorney, was afforded an opportunity to present their arguments in person and in writing, and was reviewed in three levels of agency appeal, did not deprive petitioner of any due process rights and we reject petitioner's claim that the instant agency determination, when coupled with a prior similar determination, amounted to de facto debarment (Matter of Callanan Indus. v White, 118 AD2d 167, 170-171, lv denied 69 NY2d 601; see also, Matter of Mid-State Indus. v City of Cohoes, 221 AD2d 705, 706-707).
Similarly, the First Department in Housing Works v City of New York, 255 AD2d 209, 215 on facts analogous to the instant case found that it was understandable that the City would attempt to locate other contracts between the City and a non-profit organization which contracted to provide housing for homeless persons with Acquired Immunodeficiency Syndrome (AIDS) following an audit which revealed financial irregularities. That Court held that "[s]uch actions do not constitute de facto debarment, and are consistent with the City's position that it was merely examining each contract on a case-by-case basis." That Court further addressed the issue of the contractor's allegation that its due process rights had been violated by saying:
Additionally, even if the City's actions constituted a debarment or suspension, there is no due process violation where 'a state employee intentionally deprives an individual of property or liberty, so long as the state provides a meaningful post deprivation remedy (Hudson v Palmer, 468 US [517] at 531, 533).' (Hellenic Amer. Neighborhood Action Comm. v City of New York, 101 F3d 877, 880, cert dismissed 521 US 1140 [injunction vacated where plaintiff failed to raise debarment claim in abandoned CPLR Article 78 proceeding which would have provided adequate post deprivation remedy]). In the instant case, plaintiffs did not seek, nor were they deprived of, a post-deprivation remedy. Rather than pursuing any administrative remedies afforded by the City Charter and the PPB Rules, or by commencing an Article 78 proceeding, plaintiffs commenced the instant action less than one month after the City's adverse actions. While plaintiffs are entitled to choose their own litigation course, where their due process claim rests on the deprivation of notice and an opportunity to be heard, plaintiffs' own failure to pursue the available remedies may be fatal to such a claim (Hellenic Amer. Neighborhood Action Comm. v City of New York, 101 F3d supra at 881-882) id., 215.
In the instant case, Franbilt was afforded notice of the responsibility determination hearings and an opportunity to appear and present its explanation of its prior gross non-conformance and its plan to avoid such problems on each of the subsequent projects. This claimant failed to do so. Furthermore, after each such determination of irresponsibility was made, Franbilt had a meaningful post deprivation remedy available in the form of an article 78 proceeding and chose not to pursue it.

Claimant has demonstrated neither a de facto debarment nor a due process violation under the circumstances of which it complains. Accordingly, defendant's motion to dismiss the claim is granted.


October 2, 2000
Saratoga Springs, New York

HON. FRANCIS T. COLLINS
Judge of the Court of Claims


The Court considered the following papers:
  1. Notice of motion (M-61657) for summary judgment dated May 1, 2000;
  2. Affidavit of Assistant Attorney General Arthur Patane dated May 1, 2000 with exhibits;
  3. Affidavit of Keith E. Giles dated May 1, 2000 with exhibits including prior affidavit dated October 19, 1998 (Exhibit B);
  4. Affidavit of James Shear dated May 1, 2000 with attachment;
  5. Notice of cross-motion (CM-61942) dated June 28, 2000;
  6. Affidavit of Kevin P. Ryan dated June 27, 2000 with exhibits;
  7. Affidavit of Francis S. Licata dated June 27, 2000 with exhibits;
  8. Notice of cross-motion (CM-61959 dated July 3, 2000;
  9. Affidavit of Kevin P. Ryan dated July 3, 2000;
  10. Affidavit of Arthur Patane dated July 26, 2000;
  11. Affidavit of Keith E. Giles dated July 25, 2000;
  12. Affidavit of Kevin P. Ryan dated August 1, 2000 with exhibits.

[1]Franbilt does not allege that it had entered into a subcontract with Bongiovanni.