New York State Court of Claims

New York State Court of Claims

L.M. Business v. THE STATE OF NEW YORK, #2003-009-62, Claim No. 107559, Motion Nos. M-66905, CM-67496


Synopsis


Case Information

UID:
2003-009-62
Claimant(s):
L.M. Business Associates, Inc., Northeast Staffing Group, Inc., Triple County Agency, Inc., Executive Rserources, Inc., Pro To Call, Inc. and 1649 Monroe Associates, LLC The Court, sua sponte, has amended the caption to reflect the State of New York as the only proper defendant before this Court.
Claimant short name:
L.M. Business
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :
The Court, sua sponte, has amended the caption to reflect the State of New York as the only proper defendant before this Court.
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
107559
Motion number(s):
M-66905
Cross-motion number(s):
CM-67496
Judge:
NICHOLAS V. MIDEY JR.
Claimant's attorney:
FINUCANE AND HARTZELL, LLP
BY: Leo G. Finucane, Esq.,Of Counsel.
Defendant's attorney:
HON. ELIOT SPITZER
Attorney General
BY: Gordon J. Cuffy, Esq.,
Assistant Attorney GeneralOf Counsel.
Third-party defendant's attorney:

Signature date:
December 22, 2003
City:
Syracuse
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

Defendant has brought this motion seeking an order dismissing the claim pursuant to CPLR Rule 3211, for failure to state a cause of action. Claimants have responded with a cross-motion, not only in opposition to defendant's motion to dismiss, but also seeking permission to serve and file an amended claim.

The following papers were considered by the Court in connection with these motions:
Notice of Motion, Affirmation, with Exhibits (M-66905) 1,2


Notice of Cross-Motion (CM-67496) 3

Attorney's Affidavit, with Exhibit (Proposed Amended Claim) (CM-67496) 4


Affidavit of Donald R. Adair (CM-67496) 5


Affidavit of John T. Purves (CM-67496) 6


Affidavit of Mark P. Boerman, with Exhibits (CM-67496) 7


Claimants' Memorandum of Law (CM-67496) 8

In the original claim, claimants have asserted causes of action alleging negligence, conversion, tortious interference with business, prima facie tort, denial of due process under the 14th Amendment of the United States Constitution, denial of equal protection, unjust taking without due process, and deprivation of civil rights under 42 USC § 1983.

The claim has its genesis in a criminal investigation instituted by the State Insurance Fund against one Mark Boerman. On April 5, 2001, investigators executed a search warrant of claimants' premises at 209-213 East Main Street, Palmyra, New York, and in the process of this search, seized records, computers, and computer servers from the offices. The records and equipment were retained by defendant during its continued investigation of Mr. Boerman. Eventually, in November, 2002, a 38 count indictment was returned against Mr. Boerman by the grand jury of Monroe County, alleging a series of insurance frauds committed by Mr. Boerman through several businesses. Subsequently, Mr. Boerman entered a guilty plea to Offering a False Instrument for Filing in the First Degree on March 24, 2003 in Monroe County Court.

From the papers submitted in connection with both the motion and cross-motion, it is apparent that Mr. Boerman was, in some manner or another, actively involved in the operations of each of the listed claimants, whether as corporate officer, majority shareholder, and/or manager. It is equally clear, however, from the same papers that the indictment was handed down against Mr. Boerman individually, and there was no indictment issued against any of the businesses proceeding as claimants in this action.

All of the causes of action asserted by claimants, whether in the original claim or the proposed amended claim, are based upon the fact that the computers, computer servers, and information stored therein were all continuously retained by defendant during the pendency of the criminal investigation, from April 5, 2001, up to the time that Mr. Boerman plead guilty in March, 2003. Additionally, it is also apparent that upon said conviction, the computer equipment was still not returned to claimants, but rather was turned over to the United States Attorney pursuant to a federal subpoena in connection with a federal criminal investigation. According to claimants' attorney, the equipment has now been returned to claimants by agents of the federal government, and no federal criminal proceedings have been instituted against any of the claimants herein.

The claimants allege, in both the original claim and proposed amended claim, that representatives of the claimants made numerous requests to defendant for the return of the equipment, and that defendant's agents were made well aware that such equipment was absolutely essential for the conduct of claimants' businesses. Claimants further allege that agents of the defendant made numerous promises and representations that the equipment would be returned within a certain time-frame, and that such representations were relied upon, to their detriment, by claimants. As a result of the continued retention of the computers and information stored therein by defendant, claimants contend that they were unable to conduct their businesses and were forced by these circumstances to terminate operations.

As set forth above, defendant now seeks to dismiss each and every cause of action asserted in the original claim. In their cross-motion, claimants, however, are requesting permission to amend certain of these causes of action, as well as seeking permission to assert additional causes of action based upon the same alleged conduct of defendant. Additionally, claimants have also indicated, by their attorney's affirmation, that they wish to withdraw certain causes of action set forth in the original claim.

Specifically, and as set forth in their attorney's affidavit (see Item 4), claimants have indicated that the cause of action for prima facie tort is to be withdrawn.

Also, after apparently realizing that the Court of Claims does not have jurisdiction over federal constitutional tort claims (see, Zulu v State of New York, 2001 WL 880833 [ct cl 2001]), claimants seek to withdraw their cause of action alleging violations of the due process clause of the 14th Amendment, their cause of action alleging a denial of equal protection under the 5th Amendment, and their cause of action for unjust taking without compensation or due process arising under the 5th Amendment. Similarly, claimants' cause of action alleging a violation of claimants' federal civil rights under 42 USC § 1983 cannot be maintained against the State (see, Thomas v New York Temporary State Commn. on Regulation of Lobbying, 83 AD2d 723, affd 56 NY2d 656).

The Court also notes that in their original claim, claimants had also sought punitive damages, which are not recoverable against the State (see, Sharapata v Town of Islip, 56 NY2d 332).

Accordingly, these causes of action are all hereby dismissed.

As previously mentioned, claimants, in their cross-motion, also seek to amend and clarify causes of action based upon negligence, conversion, and tortious interference, all causes of action which were asserted, in some form, in the original claim.

Pursuant to CPLR Rule 3025(b), a party may amend pleadings at any time with Court approval, which shall be freely given. It is well settled that in the absence of prejudice or surprise resulting therefrom, leave to amend pleadings should be freely granted (McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755). In this matter, it does not appear that there would be any prejudice or surprise whatsoever to the defendant in allowing claimants to serve and file an amended claim, since claimants are attempting to amplify and clarify previously asserted causes of action. The Court, therefore, will consider the allegations set forth in claimants' proposed amended claim in determining defendant's motion to dismiss.

In a motion to dismiss a claim for failure to state a cause of action, the movant is treated as having conceded the truth of every fact alleged by a claimant. Determination of such a motion is based not upon a resolution of any disputed material facts, but rather on whether the facts asserted by the claimants are sufficient to make out a claim (see, Stukuls v State of New York, 42 NY2d 272).

With regard to the cause of action for negligence asserted in the original claim, defendant seeks dismissal since negligent investigation is not a recognized cause of action against the State (see, Hernandez v State of New York, 228 AD2d 902). In their cross-motion, however, claimants assert that their cause of action for negligence is grounded in negligent misrepresentation and that defendant violated a "special duty" owed to claimants. Claimants allege that agents of the defendant assumed an affirmative duty to claimants when they expressly promised to return claimants' computers and equipment within a specified time, when they were well aware that failing to return the property would have significant consequences to claimants' businesses, and that defendant was aware that claimants were relying upon these promises.

Therefore, viewing the allegations in a light most favorable to claimants, this Court must find that for purposes of this application, claimants have asserted, in their proposed amended claim, a valid cause of action for negligence.

With regard to the cause of action for conversion, defendant contends that there is no conversion because claimants failed to allege a refusal to return the property upon demand. Clearly, in their proposed amended claim, such allegations have been made by claimants, sufficient to sustain this cause of action.

Similarly, in the proposed amended claim, claimants have also alleged that defendant's agents were aware of the existence of numerous contracts for which the information contained in the seized computers was essential, and that by retaining said computers, defendant caused claimants to breach these contractual obligations. Claimants have therefore substantially alleged a cause of action for tortious interference, and at this stage of the proceedings, this cause of action may not be dismissed.

Claimants, in their cross-motion, also seek to add causes of action based upon alleged violations of State constitutional rights, specifically a denial of equal protection (New York Constitution, Article I, § 11) and a violation of the search and seizure clause (New York Constitution, Article I, § 12).

In Brown v State of New York (89 NY2d 172), the Court of Appeals recognized that violations of State constitutional rights, in certain limited circumstances, could give rise to an action for money damages in the Court of Claims. As set forth in Brown, in determining whether a cause of action for a constitutional tort may properly be brought in the Court of Claims, the Court of Appeals requires the Court to consider whether: (1) the applicable constitutional provision is self-executing; (2) a monetary damage remedy furthers the purpose of the underlying constitutional provision and necessarily assures its effectiveness; (3) the provision imposes a clearly defined duty on the State officers and employees; (4) declaratory and injunctive relief is inadequate; and (5) money damages necessarily deter governmental misconduct and make the claimant whole.

The decision in Brown is considered a "narrow remedy" with two interests, that (1) the "private interest" to ensure that citizens harmed by constitutional violations have an appropriate means of redress, and (2) the "public interest" to ensure that future constitutional violations will be deterred. (Martinez v City of Schenectady, 97 NY2d 78, 83).

In Brown, as in the instant claim, the Court of Appeals considered constitutional violations of the search and seizure provisions and the equal protection provision, of the State Constitution, and found such provisions to be self-executing and imposing a clearly defined duty upon State officers and employees. Additionally, in the instant claim, since none of the named claimants have been subject to criminal prosecution, neither declaratory nor injunctive relief is available.

At this stage of the proceedings, therefore, claimants have established sufficient grounds to proceed with their causes of action asserting constitutional torts. Ultimately, claimants will have to establish their entitlement to a damages remedy and will have to establish that such remedy furthers the purpose of the underlying provisions and assures their effectiveness, and that such damages will necessarily deter such governmental conduct in the future.

Therefore, based on the foregoing, it is

ORDERED, that Motion No. M-66905 is hereby GRANTED, in part, and DENIED, in part, as provided for herein; and it is further

ORDERED, that Cross-Motion No. CM-67496 is hereby GRANTED; and it is further

ORDERED, that claimants are hereby directed to serve and file their amended claim within 40 days from the date of filing of this decision and order. Defendant shall have 40 days from such service of the amended claim to serve and file its answer, in accordance with § 206.7 of the Uniform Rules for the Court of Claims.


December 22, 2003
Syracuse, New York

HON. NICHOLAS V. MIDEY JR.
Judge of the Court of Claims