New York State Court of Claims

New York State Court of Claims
LOCAL 851 v. THE STATE OF NEW YORK, #2004-010-023, Claim No. 100842, Motion Nos. M-68290, M-68363
Synopsis

Defendant’s motion for summary judgment granted and claimant’s motion for summary judgment denied based on untimely claims.
Case Information
UID:
2004-010-023
Claimant(s):
LOCAL 851 OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, by its court-appointed Independent Supervisor and Union Trustee
Claimant short name:
LOCAL 851
Footnote (claimant name) :

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

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
100842
Motion number(s):
M-68290, M-68363
Cross-motion number(s):

Judge:
Terry Jane Ruderman
Claimant’s attorney:
DE PETRIS & BACHRACH, LLPBy: Ronald E. DePetris, Esq.
Defendant’s attorney:
HON. ELIOT SPITZER
Attorney General for the State of New YorkBy: Richard Lombardo, Assistant Attorney General
Third-party defendant’s attorney:

Signature date:
March 22, 2005
City:
White Plains
Comments:

Official citation:
AFFIRMED 36 AD3D 72 2D DEPT 1/16/07
Appellate results:

See also (multicaptioned case)



Decision

The following papers numbered 1-6 were read and considered by the Court on defendant’s motion for summary judgment dismissing the claim and claimant’s motion for summary judgment in the amount of 2.1 million dollars in damages and oral argument was heard on January 31, 2005:
Notice of Motion, Attorney’s Supporting Affirmation and Other Supporting Affirmations, Memorandum of Law, Five Volumes of Exhibits................................1
Affidavit in Opposition to Defendant’s Motion, Memorandum of Law, Two Volumes of Exhibits................................................................................................................2
Claimant’s Notice of Motion and Exhibits, Supporting Affidavit, Memorandum of Law, Three Volumes of Exhibits.............................................................................3
Affirmations in Opposition to Claimant’s Motion, Memorandum of Law, Two Volumes of Exhibits.................................................................................................4
Reply Affirmations/Affidavits in Opposition to Claimant’s Motion, Memorandum of Law, One Volume of Exhibits..............................................................................5
Reply Affidavit in Support of Claimant’s Motion, Memorandum of Law..............6This consolidated claim arises out of a criminal investigation by the New York State Organized Crime Task Force (the Task Force), the resulting forfeiture settlement agreements, and the distribution of the forfeiture funds by the Task Force. The subjects of the investigation were Amerford International Corporation and its President and Chief Executive Officer Harald Niehenke. Amerford employed Union members of Local 851 of the International Brotherhood of Teamsters (the Union) in the airfreight forwarding business at JFK International Airport. The basis of the investigation was allegations that Amerford, Niehenke and the Union’s Secretary and Treasurer, Anthony Razza, had participated in a scheme of racketeering activity by laying off more than 20 Union employees and paying the resulting savings in labor costs to the Luchese organized crime family. In 1993, Amerford and Niehenke each entered into a forfeiture agreement with the Task Force (the Amerford Agreement, the Niehenke Agreement). Pursuant to the Amerford Agreement, Amerford paid the Task Force 2.5 million dollars (the Amerford Forfeiture Fund) in settlement of its forfeiture liability and pursuant to the Niehenke Agreement, Niehenke paid 100,000 dollars to the Task Force (the Niehenke Forfeiture Fund) in settlement of his forfeiture liability.
The Union brings this action in the Court of Claims seeking 2 million dollars of the Amerford Forfeiture Fund and all of the Niehenke Forfeiture Fund. The Union’s claim for relief is based upon two main arguments. One, the Union claims to be a “victim” entitled to restitution, reparations and damages under CPLR Article 13-A Proceeds of a Crime-Forfeiture and that the Task Force subverted the statutory scheme by distributing the funds without commencing a civil forfeiture proceeding.
[1]
Two, the Union argues that it is an assignee of Amerford and Niehenke pursuant to the terms of stipulated settlements entered into by Amerford and Niehenke in settlement of the Union’s Federal Court actions against them.
[2]
Summary Judgment Motions
Defendant seeks summary judgment dismissing the claim on numerous grounds. Preliminarily, defendant maintains that the claim is untimely. Defendant next attacks the two arguments advanced by the Union as a basis for relief. First, defendant contends that the Union, qua union, is not a “victim” who has suffered a compensable loss that falls within the contemplation of Article 13-A, and which is separate and distinct from its members’ loss. Rather, defendant maintains that the individual Union members are the victims within the meaning of Article 13-A and restitution has already been made to them. Second, defendant asserts that it is not required to commence a civil forfeiture proceeding prior to distribution of the forfeiture funds. Third, defendant argues that the purported assignments by Amerford and Niehenke are not valid because, as wrongdoers, they had no transferable interest.
The Union moves for summary judgment in the amount of 2.1 million dollars and opposes defendant’s motion arguing, inter alia, that the claim is timely because it accrued when the Task Force denied the Union’s demands for a distribution from each of the forfeiture funds, i.e., August 12, 1998 for the Amerford Forfeiture Fund and July 9, 2002 for the Niehenke Forfeiture Fund.
Background
In accordance with the terms of its forfeiture agreement, Amerford employed an Independent Private Sector Inspector General (Independent Inspector) to determine the amount of restitution to be paid from the Amerford Forfeiture Fund to its Union employees.
[3]
Based upon the Independent Inspector’s reports, the Task Force distributed approximately 500,000 dollars from the Amerford Forfeiture Fund, from March 1994 through November 1994, as restitution to the named Union employees (Defendant’s Motion, Vol. II; Exs. S, X, Y). In December 1994, though not required by the Amerford Agreement, the Task Force authorized the distribution of 50,000 dollars from the Amerford Forfeiture Fund to settle claims for unpaid pension and welfare contributions by the Local 851 Employee Group Pension Fund and the Welfare Fund. Additionally, in December 1997, the Task Force authorized the distribution of 75,939 dollars from the forfeiture fund to settle a claim of four Union members who commenced a civil action against Amerford rather than accept the amount proposed by the Independent Inspector.
[4]

Unlike the Amerford Agreement, there was no provision in the Niehenke Agreement reserving any part of the forfeiture funds as restitution to Amerford’s employees. Niehenke made four 25,000 dollar payments to the Task Force as follows: March 1994; August 1994; October 1994; and February 1995. In October 1994, the Task Force distributed 34,000 dollars to itself and 16,000 dollars to the Office of Alcoholism and Substance Abuse Services (OASAS). In November 1994, the Task Force distributed 17,000 dollars to itself and 8,000 dollars to OASAS. In March 1995, the Task Force distributed 17,000 dollars (plus interest) to itself and 8,000 dollars to OASAS.
The Task Force sent notices to the New York State Division of Criminal Justice Services and the New York State Crime Victims Board regarding the monies paid by Amerford and Niehenke in settlement of their forfeiture liability (Defendant’s Motion, Vol II, Ex. W). The Task Force did not commence a civil forfeiture action against either Amerford or Niehenke.
1998 Amerford Consent Order
In December 1995, the Union commenced an action in the United States District Court, Eastern District of New York against Amerford, Razza and others. The Union sought damages resulting from Amerford’s engagement in racketeering activities (Claimant’s Motion,Vol. I, Ex. 2). The Union claims it did not learn of the 1993 Amerford Forfeiture Agreement and the resulting fund until March 1997, when the Union obtained a copy of the Amerford Agreement in discovery, pursuant to a protective order (Claimant’s Supporting Memorandum of Law, p 7, fn 2). On June 16, 1998, the Federal action against Amerford and others was resolved by a Consent Order wherein the parties stipulated that the Union would be paid 1.2 million dollars in settlement of its RICO claims and 2 million dollars for the gains and profits made by Amerford as a result of Amerford’s participation in Razza’s breach of his fiduciary duty to the Union in violation of New York Labor Law §725 (Claimant’s Motion, Vol. I, Ex. 3). The parties further stipulated that the 2 million dollars was to be paid to the Union as a “victim” within the meaning of Article 13-A of the CPLR; “provided however, that said award can only be satisfied from an apportionment of the Forfeiture Funds,” i.e., the 2.5 million dollars Amerford had previously paid to the Task Force under the 1993Amerford Forfeiture Agreement (id.). The Consent Order also stated that Amerford “assigns” “any rights it has” under the 1993 Amerford Forfeiture Agreement and “any interest it has in the Forfeiture Funds” to the Union (id.).
1998-Task Force Denies Union’s Demand For
Distribution From the Amerford Forfeiture Fund
In the latter part of June 1998, the Union presented the Task Force with a demand for a 2 million dollar distribution from the Amerford Forfeiture Fund, arguing that the Union was a victim within the meaning of Article 13-A and that Amerford had assigned its rights and interest in the Forfeiture Fund to the Union. On August 12, 1998, the Task Force informed the Union that its demand had been rejected (Claim No. 100842, ¶35; Defendant’s Motion, Exs. AAA; BBB).
On September 23, 1998, the Union commenced an ancillary proceeding in the United States District Court, Eastern District of New York against the then New York Attorney General Dennis Vacco
[5]
and the then New York Deputy Attorney General George Quinlan. The Union claimed to be a victim under Article 13-A and alleged that it was deprived of its due process rights when the forfeiture funds were distributed without regard to the statutory scheme.
On November 6, 1998, the Union served a Notice of Intention to File a Claim upon the State regarding the Amerford Forfeiture Fund and a claim was served and filed within one year (Claim No. 100842).
2002-Task Force Denies Union’s Demand for Distribution From Niehenke Forfeiture Fund
By letter dated June 28, 2002, the Union demanded that the Task Force pay the Union 100,000 dollars from the Niehenke Forfeiture Fund. By letter dated July 9, 2002, the demand was rejected (Defendant’s Motion, Ex. EEE; Claim No. 107616, ¶32). The Union then served the State with a Notice of Intention to File a Claim dated July 19, 2002 and a claim was served and filed within one year (Claim No. 107616).
[6]
2002 Niehenke Consent Judgment
On November 18, 2002, the Union commenced a Federal action in the United States District Court, Eastern District of New York against Niehenke alleging violations of Labor Law §725 due to his involvement in the scheme with Razza and Razza’s breach of his fiduciary duties to the Union (Claimant’s Motion, Vol. 3, Ex. 49). The Union sought to recover 100,000 dollars for the gains and profits made as a result of the Labor Law violation (id., Ex. 50). The parties stipulated to a Consent Judgment similar to the Amerford Consent Order. The terms state that Niehenke was liable to the Union as a victim for 100,000 dollars restitution, reparations and damages provided that the money could only be satisfied from the 1993 Niehenke Forfeiture Fund. It also stated that Niehenke was assigning to the Union any rights and interest he had in the Forfeiture Fund (id., Ex. 50).
On November 26, 2002, the Union commenced an action in United States District Court, Eastern District of New York against Aronchick seeking a judgment in the amount of 100,000 dollars, the amount of the 1993 Niehenke Forfeiture Fund (Defendant’s Motion, Ex. RRR). On January 29, 2003, this action was consolidated with the Union’s Federal Court action regarding the 1993 Amerford Forfeiture Fund.
Union’s Federal Court Action Dismissed
By Memorandum and Order dated September 30, 2004, the Federal Court dismissed the Union’s consolidated action on the grounds of qualified immunity (see Local 851 of Intern. Broth. of Teamsters v Thyssen Haniel Logistics Inc., ___ FSupp3d ___ [Sept. 30, 2004], 2004 WL 2269703). The Federal Court stated that it was “unclear” whether the Union had a property interest in the forfeiture funds as a “victim” under CPLR Article 13-A (2004 WL 2269703, p 8). The Court noted that, “it appears to be unsettled as a general proposition of State law whether a union or other representative entity, as opposed to a natural person, can be a victim for purposes of Article 13-A” (id. at 9). The Federal Court explicitly rejected the argument that the Union was a victim “simply because its members suffered an injury for which they have already received relief” (id.). With respect to the violation of Labor Law §725, regarding the Union’s right to loyalty from its officers, the Federal Court noted that Amerford and Niehenke were not “convicted of this crime” and that Article 13-A provides for forfeiture actions only against criminal defendants (id.). The Federal Court reasoned that:
“Regardless, that Amerford and Niehenke settled Local 851's claims under section 725 does not translate to Local 851 being a ‘victim’ of a crime entitled to distribution under Section 13-A. Nor can Local 851 be adjudicated a ‘victim’ of a violation of section 725 for purposes of Article 13-A simply because the consent judgments settling its claims against Amerford and Niehenke referred to it as such.”

(id., at 9-10). The Court noted that “a carefully worded consent decree” is not a substitute for a judicial determination, nor is it an adjudication on the merits (id. at 10). Similarly, the Federal Court did not find persuasive the Union’s argument that it had attained a property interest in the funds by virtue of a purported assignment from Amerford and Niehenke to the Union. The Federal Court reasoned:
“Because the forfeited funds bear the taint of that unlawful act, it is unlikely that Amerford and Niehenke had transferable title in the funds. Accordingly, the Court questions whether a New York court would ever conclude that a criminal defendant who voluntarily forfeited wrongfully acquired funds retained a transferrable property interest in those funds.”

(id. at 11).
Court of Claims Summary Judgment Motions
Each party seeks summary judgment in its favor. Defendant moves for summary judgment dismissing the claim on the ground that it is untimely. As a condition of the State’s limited waiver of sovereign immunity, the service and filing requirements set forth in Court of Claims Act §§10 and 11 are strictly construed and the failure to comply with these requirements is a jurisdictional defect compelling dismissal of the claim (see Lyles v State of New York, 3 NY3d 396; Alston v State of New York, 97 NY2d 159; Flynn v City Univ. of NY at Brooklyn Coll., 6 AD3d 656; Welch v State of New York, 286 AD2d 496, 497-98). Court of Claims Act §10(3-b) provides that a claim to recover damages for injury to property shall be filed and served within 90 days after accrual of the claim unless, within that time period, a Notice of Intention is served upon the Attorney General. In that event, the claim shall be filed and served within one year after the accrual. Section 10(4) provides that a claim for breach of contract and any other claim not provided for by Section 10 shall be filed and served within 6 months after the accrual unless, within that time period, a Notice of Intention is served upon the Attorney General. In that event, the claim shall be filed and served within two years after the accrual. The State adequately pleaded the timeliness defense with sufficient particularity to meet the requirement of Court of Claims Act §11(c) (Amended Answer, Claim No. 100842 ¶34; Answer, Claim No. 107616, ¶¶62-64)(see Augat v State of New York, 244 AD2d 835).
The date of accrual is critical to the determination of the timeliness issue. In opposition to defendant’s motion, the Union makes two related arguments. First, the Union argues that the claim is timely because the claim could not accrue until an order was issued as to the disposition of the forfeiture funds in the priority mandated by CPLR §1349(2). Second, the Union argues that the claim did not accrue until the Task Force rejected the Union’s demands for distribution from each of the forfeiture funds.
As to the first argument, there has been no case law found nor any legislative history cited to support claimant’s proposition that a purpose of enacting Article 13-A was to require resorting to a judicial proceeding in all instances and to end any practice of accepting forfeitures by stipulation (see Governor’s Mem approving L 1984, ch 669, 1984 McKinney’s Session Laws of NY, at 3627-28; Governor’s Mem approving L 1983, ch 1017, 1983 McKinney’s Session Laws of NY, at 2827; Mem of Off of Ct Admin, 1984 McKinney’s Session Laws of NY, at 3876). The Union’s position that its claim should not be deemed to have accrued and any limitations period should not begin to run until the State obtained a judicial order of distribution, has no basis in law and is contrary to first principles of jurisprudence because it would effectively allow a claim to be brought at any time in perpetuity. Thus, the Court rejects the Union’s argument that the State’s failure to commence a civil forfeiture proceeding “could cast the [Union’s] claims into legal limbo forever” (Claimant’s Memorandum of Law in Opposition to Defendant’s Motion, p 38; City of New York v State of New York, 40 NY2d 659, 668).
[7]
Any “legal limbo” claimed by the Union was self-imposed by its own inaction and failure to initiate a claim against the State, even though the Union knew that substantial amounts of the forfeiture funds had been distributed and no judicial proceeding was even contemplated. Accordingly, the Union’s argument that the claim could not accrue until an order of distribution was obtained is without merit (see Marine Midland Bank v State of New York, 195 AD2d 871).
[8]

The Union’s second argument is that the determinative date of accrual is when the Task Force rejected the Union’s demand for distribution from each of the forfeiture funds, i.e., August 12, 1998 and July 9, 2002. In support of this argument, the Union contends that prior to the Task Force’s rejection the Union’s damages were speculative because it was possible that the Task Force would either comply with the Union’s demands or commence a forfeiture action. This argument is specious. Contrary to the Union’s arguments, this is not a case where accrual is appropriately based upon the Task Force’s rejection of the Union’s demands for distribution from each of the forfeiture funds (cf. Commack Self-Serv. Kosher Meats v State of New York, 270 AD2d 687 [court rejected claimant’s attempt to involve the “continuing violation” doctrine and held that such doctrine is predicated on continuing unlawful acts and not the continuing effects of earlier unlawful conduct based upon claimant’s most recent demand]). Generally, a claim accrues for purposes of the Court of Claims Act when damages are “reasonably ascertainable” (see Bullard v State of New York, 307 AD2d 676, 677; Arbor Hill Partners v New York State Commr. of Hous. & Community Renewal, 267 AD2d 675, 675-76), even if the damages “might be indefinite to some extent” (Ton-Da-Lay, Ltd. v State of New York, 70 AD2d 742, 743). Although there are certain specific statutory exceptions which provide that the date of accrual may be measured from the date of discovery of the alleged wrong, no such exceptions are applicable in this matter (see Konigsberg v State of New York, 256 AD2d 982, 983); nor is there any basis to extend the discovery rule beyond the limited instances provided by the legislature (see Flushing Natl. Bank v State of New York, 210 AD2d 294, concurring opinion).
As early as September 1994, the Union knew about the Amerford Forfeiture Agreement and that, pursuant to that agreement, Amerford had retained an Independent Private-Sector Inspector General to determine the amount of restitution to be paid to Amerford’s Union employees (Defendant’s Motion, Ex. M, p 141). Sometime after February 1996 and prior to December 16, 1996, the Union learned that Amerford had actually paid the 2.5 million dollars to the Task Force (id. at 116-20). In February 1996, the Union verbally asked for a copy of the forfeiture agreement (id. at 99-100, 144, 242). After Amerford declined the request, the Union then sent a letter dated February 14, 1996 to the Task Force requesting the same along with other information (Defendant’s Motion, Ex. OO). The Task Force declined the request by letter dated February 16, 1996 (Defendant’s Motion, Ex. PP, pp 73-74, 76-78) and advised the Union to make an application to the U. S. District Court, Eastern District of New York (Defendant’s Motion, Ex. QQ, pp 74, 77-79). By discovery demand dated December 16, 1996, the first written request for a copy of the forfeiture agreement was sent to Amerford (Defendant’s Motion, Exs. M, pp 100, 107-08, 242-43; RR). Amerford asserted that it was confidential and could not be produced without a protective order (Defendant’s Motion, Ex. M, pp 241-47). On February 27, 1997, the Union and Amerford stipulated to the terms of a protective order and the agreement was produced on March 5, 1997 (Defendant’s Motion, Exs. M, pp 110, 247-48; SS).
This Court finds, however, that the Union’s damages were reasonably ascertainable long before the Union obtained a copy of the Amerford Forfeiture Agreement (see Conner v State of New York, 268 AD2d 706 [claim of improper detention was dismissed as untimely; Court rejected argument that claim accrued upon claimant’s discovery of the dismissal of his indictment because claimant failed to demonstrate that he had attempted to obtain a copy of the dismissal; thus claim accrued when damages were reasonably ascertainable, not when actually discovered]). The Union cannot perpetuate its claim by failing to take reasonable steps to ascertain its damages
[9]
(see Greenspan Bros. v State of New York, 122 AD2d 249, 250 [“The fact that the claimant, for one reason of another, chose not to ascertain its damages at that time is irrelevant”]). Moreover, even if this Court were to find the Union’s damages were not reasonably ascertainable until March 5, 1997, when the Union obtained a copy of the agreement in discovery, the Union still did not even serve a Notice of Intention until November 6, 1998, more than 90 days and more than six months after the date when the Union concededly had a copy of the Amerford Forfeiture Agreement (Exs. M, pp 108-09, 249-50; R). Thus, the claim based upon the Amerford Forfeiture Fund is untimely.
With regard to the Niehenke Forfeiture Agreement, in May 2001 the State provided the Union with a computer printout of an account which shows that the entire 100,000 dollars of the Niehenke Forfeiture Fund was paid to the Task Force and distributed to the Task Force and OASAS (Defendant’s Motion, Ex. XX). In June 2001, at an examination before trial in this matter, the printout was marked for identification and the Union sought documents explaining why the Task Force had distributed the monies from the Forfeiture Fund (Defendant’s Motion, Ex. YY, pp 280-88). In September 2001, the State provided the Union with a copy of the Niehenke Forfeiture Agreement, the minutes of Niehenke’s guilty plea, a report to DCJS showing distribution from the Niehenke Fund to the Task Force and OASAS (Defendant’s Motion, Ex. ZZ). Thus, the July 2002 Notice of Intention to File a Claim based upon the Niehenke Forfeiture Fund was not timely and, therefore, did not preserve the time to commence an action against the State.
Accordingly, the Union’s failure to comply with the service and filing requirements is a fatal jurisdictional defect requiring dismissal (see Finnerty v New York State Thruway Auth., 75 NY2d 721; Welch v State of New York, 286 AD2d 496, supra). Defendant’s motion for summary judgment dismissing the claim is GRANTED and the Union’s motion for summary judgment is DENIED.
In light of this Court’s decision, it is not necessary to reach the other issues raised by the parties.

March 22, 2005
White Plains, New York

HON. TERRY JANE RUDERMAN
Judge of the Court of Claims




[1] Specifically, the union also argues that it should be considered a victim because the loss it suffered was a deprivation of the honest services of its officer, Anthony Razza.
[2] As set forth more fully infra, the Union commenced an action in the United States District Court, Eastern District of New York against Amerford in 1995 and against Niehenke in 2002 alleging damages resulting from Amerford’s and Niehenke’s engagement in racketeering activities. Those actions were resolved by stipulation. The stipulation between the Union and Amerford is set forth in a 1998 Consent Order and the stipulation between the Union and Niehenke is set forth in a 2002 Consent Judgment. Neither the Task Force nor the office of the Attorney General were parties to the Federal Court actions.
[3] The Amerford Agreement provided that if the amount was in excess of one million dollars, Amerford would make an additional settlement payment to the Task Force not to exceed 500,000 dollars. The agreement also provided that, upon completion of the Independent Inspector’s final reporting of the distribution of the settlement amounts and the restitution determinations, as approved by the Task Force, Amerford would enter into a consent decree in a form prepared by the Task Force. A Consent Decree was never prepared.
[4]The Task Force also distributed 1,365,340 dollars of the Amerford Forfeiture Fund to itself and 642,560 dollars of the fund to the Office of Alcoholism and Substance Abuse Services in accordance with the provisions of CPLR 1349(2). This left approximately 50,000 dollars remaining in the forfeiture fund.
[5] In April 1999, respondents in the federal proceeding moved to dismiss and the Union cross-moved for summary judgment. On March 30, 2000, the United States District Court, Eastern District of New York granted the motion to dismiss to the extent that the petition named respondents in their official capacities, but denied the motion to the extent that they were named in their individual capacities. The Union’s cross-motion for summary judgment was denied (Local 851 of Intern. Broth. of Teamsters v Thyssen Haniel Logistics Inc. v Vacco, 90 F Supp 2d 237).
The proceeding was dismissed as against Vacco by Stipulation and Order dated February 13, 2003 and subsequently, the Union was permitted to add respondents Ronald Goldstock, the then Director of the Task Force, and Martin Aronchick, the then Attorney-in-Charge of Civil Enforcement for the Task Force. The Union was also permitted to add a state-law conversion cause of action.
[6] By Stipulation and Order filed-stamped August 6, 2003, Claim No. 107616 was consolidated with Claim No. 100842.
[7] Claimant’s reliance upon City of New York v State of New York, 40 NY2d 659 is misplaced. In that case, the City was seeking reimbursement from the State under the Highway Law which provided the procedural path which had to be followed before the City could obtain payment and the law also provided that payment could be made only after audit by the State Comptroller. In compliance with the statute, the City submitted vouchers for payment to the State; however, pursuant to the State’s advice and so as not to delay payment on the undisputed amounts, the City drafted vouchers to segregate the disputed amount of additional interest. After years of attempting to resolve the issue of payment of the additional interest, the City sent a letter to the State indicating that it would deem the secondary vouchers rejected if they were not audited within 60 days. Less than six months after the expiration of the 60 day period, the City commenced an action in the Court of Claims seeking payment of the disputed amount. The Court of Appeals held that the claim was timely because the State’s inaction in failing to either audit or reject the City’s secondary vouchers could not be utilized as a bar to the City’s claim. The Court noted that the City had persistently pursued its claim and, after years of attempting to resolve the issue of payment, properly treated the vouchers as constructively rejected. The Court reasoned that, if constructive rejection were not available, then “the State could cast the city’s claim into legal limbo forever” (id. at 668). This Court of Appeals case does not stand for the proposition advanced by the Union that a claimant can wait years and then send a letter demand upon which rejection thereof starts the accrual of the claim. Unlike the City, the Union did not timely and persistently pursue its alleged entitlement to payment of a sum of money. Rather, the Union did nothing for years after it had knowledge of the forfeiture funds and then attempted to create an artificial date of accrual by sending a letter demand to the Task Force and await its rejection to affix an accrual date.
[8] In Marine Midland Bank v State of New York, 195 AD2d 871, claimant gave a loan secured by a tractor trailer titled in the name of A.W. Trucking and, upon default, claimant took possession of the truck. Subsequently, on March 28, 1988, the New York State Department of Motor Vehicles (DMV) notified A.W. Trucking that the Certificate of Title had been issued erroneously and that the true owner was Telmark. On April 14, 1988, DMV issued a corrected title to Telmark; claimant was still identified as the lien holder for the truck despite the fact that claimant did not have a loan agreement with Telmark. In June, Telmark brought suit against claimant and, by Order entered January 23, 1989, the lien was extinguished and Telmark gained possession of the truck. Claimant then brought suit against the State seeking to recover the balance of its outstanding loan and the expenses incurred as a result of the State’s alleged negligence. The claim was dismissed for improper service and the Appellate Division held that claimant’s late claim application had been improvidently granted by the trial court. The Appellate Division held that the claim was time barred and rejected the trial court’s finding that the claim accrued when the lien was formally extinguished by the court order entered January 23, 1989. The Appellate Division explained that the true source of the claim was the unpaid defaulted loan made to A.W. Trucking and not the judgment resulting from a third-party lawsuit. Thus, the Court reasoned that claimant “could have brought an action as soon as it became aware – as it must have during the course of the Telmark litigation, at the very latest – that the State’s actions had caused it to lend money on the basis of a ‘security interest’ in property that was not owned by the debtor” (id. at 873).
[9] The Union never sought to obtain the document by subpoena (Defendant’s Motion, Ex. M, p 105).