New York State Court of Claims

New York State Court of Claims


Motion for permission to intervene was denied.

Case information

UID: 2010-015-165
Footnote (claimant name) :
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 117565
Motion number(s): M-78278
Cross-motion number(s):
Claimant's attorney: Hiscock & Barclay, LLP
By: Douglas J. Nash, Esquire
Defendant's attorney: Honorable Andrew M. Cuomo, Attorney General
By: Timothy P. Mulvey, Esquire
Assistant Attorney General
For Intervenor Mohawk Valley Water Authority:
Hancock & Estabrook, LLP
By: John L. Murad, Jr., Esquire
Ashley D. Hayes, Esquire
Third-party defendant's attorney:
Signature date: July 22, 2010
City: Saratoga Springs
Official citation:
Appellate results: Affirmed, App Div 3d, 12/15/11
See also (multicaptioned case)


Movant Mohawk Valley Water Authority (MVWA) seeks permission to intervene pursuant to CPLR 1012 or 1013.

Claimant, Erie Boulevard Hydropower, L.P. (Erie), produces hydroelectric power using water released from the Hinckley Reservoir located in Hinckley, New York. Erie alleges that pursuant to a 1921 agreement between the State of New York and its predecessor in interest, Utica Gas & Electric Co. (Utica), the defendants were required to release designated minimum amounts of water from the Hinckley Reservoir for Erie's use in producing hydroelectric power, which they failed to do. Specifically, Erie alleges that between September 24, 2007 and October 23, 2007 releases from the Hinckley Reservoir should have been at or between 370 c.f.s. (cubic feet per second) and 400 c.f.s. pursuant to an operating diagram incorporated into the 1921 agreement. Instead, Erie alleges that during the operative period the defendants reduced water flow to levels below those required by the operating diagram. As a result, Erie was forced to reduce or discontinue hydroelectric power generation at certain downstream facilities resulting in a consequent loss of revenue for which it seeks monetary compensation.

The 1921 agreement in issue resolved certain eminent domain claims related to the construction of the Hinckley Reservoir wherein it was agreed that "after serving canal uses and purposes" the State may operate the reservoir for the benefit of Erie to the extent practicable:

"The intent and purpose of the agreement being so to operate the Hinckley State Reservoir that, after serving the canal uses and purposes, of the State, it may so far as practicable, be fully used for the storage of water and the regulations of the flow of the West Canada Creek below the same for the benefit of the power property and riparian lands of [Utica] on West Canada Creek below the Hinckley State Reservoir. Provided, [h]owever, that during periods of extraordinary or unusual drought[,] flood, or emergency caused by the temporary failure of other sources of water supply for the canal use, or the necessity to maintain, repair or reconstruct any part or portion of the Hinckley State Dam, the Superintendent of Public Works or other officer or board succeeding to his powers and duties, without the payment of any damages to [Utica], upon such reasonable notice to [Utica] as the circumstances will permit may temporarily vary or entirely suspend the operation of the said dam and reservoir as described and laid down in the operating diagram aforesaid during the periods of such extraordinary or unusual drought[,] flood or emergency caused by the temporary failure of other sources of supply for the canal use, or the necessity to maintain, repair or reconstruct any part or portion of the Hinckley State Dam" (Claimant's Exhibit B) .

Erie alleges that the Canal Corporation's decision to deviate from the Operating Diagram and reduce the flow of water to Erie was the result of pressure brought to bear by MVWA and others concerned that the elevation in the reservoir threatened MVWA's ability to deliver water to its customers.

MVWA is a public authority which uses the Hinckley Reservoir to supply drinking water to its customers. It commenced a declaratory judgment action in the Supreme Court, Oneida County, against Erie, the State of New York and the Canal Corporation seeking a declaration that it possesses an unrestricted right to divert up to 75 c.f.s from the reservoir without providing compensation in the form of money or water. As reflected in the Decision, Order and Judgment of the Hon. Samuel D. Hester dated May 15, 2009, the relationship between Erie and MVWA dates back to a 1905 agreement between their predecessors in interest in which Utica, Erie's predecessor, consented to the diversion of water from the West Canada Creek by the Consolidated Water Company of Utica, N.Y. (Consolidated), MVWA's predecessor, subject to the requirement that the flow must be sufficient for the operation of Utica's power plant (movant's Exhibit C, p. 40). The agreement was modified in 1919 to recognize Consolidated's right to divert water from the creek above Utica's power plant and to require Consolidated to contribute to the flow of water between the Hinckley Dam and the [Utica] plant whenever the flow was less than 335 c.f.s. (MVWA's Exhibit C, p. 40). The additional waters to be used in supplementing water flow would come from "'storage or compensating reservoir or reservoirs'" to be established pursuant to the agreement, as modified. Another agreement between these parties, entered into in 1925, continued the compensating flow requirements. However, in 1958 the parties "released each other from all obligations arising from the prior agreements" (Id. at p. 41).

The focus of the declaratory judgment action was a 1917 agreement between the State of New York and Consolidated that settled an appropriation dispute and provided that the appropriation "shall be interpreted and considered to except, reserve and leave to [Consolidated] . . . the easement and right to use the State dam and reservoir as a settling basin . . . and to take, draw and convey the said unappropriated flow through said State dam, by means of two iron pipes . . . such amount of water so taken not to exceed seventy-five (75) cubic feet per second . . ." (Id. at 27). The 1917 agreement expressed that the "purpose and intent of this agreement [was] to leave the relations of [Consolidated and Utica] , and their respective rights and obligations under [their] contracts the same as if this contract had not been entered into, nor the State's dam built . . ." (Id. at 28). The agreement thereafter sets forth 335 c.f.s. as the "low flow" of the West Canada Creek "below which, under no circumstances or conditions whatsoever . . . shall any water be directly or indirectly drawn from the State reservoir, by [Consolidated] . . . unless it is mutually stipulated and agreed that when the quantity of the natural flow of said creek is below three hundred and thirty-five (335) cubic feet per second [Consolidated] shall . . at all times and under all circumstances and conditions . . . contribute to the natural flow of the stream, from the stored water in its storage reservoir or reservoirs, an amount and quantity of water equal to the amount and quantity of water below three hundred and thirty-five (335) cubic feet per second which it diverts . . . (Id. at 29).

The State's motion for summary judgment in the Supreme Court action was based on the contention that by destroying the Gray Dam in 2002, MVWA breached the 1917 agreement and forfeited its right to divert water at the Hinckley Dam because it failed to provide the required compensating reservoir. Judge Hester rejected that argument, finding no record evidence establishing the fact that the "water flowing into the Hinckley Reservoir at the West Canada Creek above Hinckley dam had fallen below the required 335 cfs at any time in the past . . . The record fails to establish . . . that the conditions which trigger the requirement for a compensating reservoir or compensating flow have existed at any point in time in that there is no evidence in the record to establish that the flow into Hinckley Reservoir had fallen below 335 cfs" (Id. at 32-33). Several of the State defendants' counterclaims were dismissed on this basis as well (Id. at 37).

The Court also held that while MVWA was not entitled to divert 75 c.f.s. of water without providing compensating flow according to the terms of the 1917 agreement, it did establish

"the right to divert amounts of water that are consistent with its usage and practice over the years. The submissions by [MVWA] indicate that the maximum amount of flow that [MVWA] has utilized has not exceeded 35 cfs. Since historically, [MVWA's] diversion has not exceeded flow above these levels, it is not entitled to exceed those amounts based on the equities of the matter. Accordingly, [MVWA] is entitled to a declaration that the State defendants may not restrict the right of [MVWA] to divert the flow at the Hinckley dam at a rate not to exceed 35 cfs" (Id. at p. 39).

Judge Hester also determined that Erie failed to establish the existence of any rights against MVWA with regard to the flow of the West Canada Creek at the Hinckley Dam. This determination was based on two facts: (1) that Erie's predecessor released MVWA's predecessor from its obligations under the 1919 agreement, and (2) the 1921 agreement between Erie and the State provided for the surrender of Erie's rights with regard to the flow of water at the Hinckley Dam in exchange for an obligation by the State to operate the Hinckley Reservoir in such a manner as to minimize the effect of the diversion by the State for canal purposes and the operation of the facilities (Id. at p. 43).

The parties have indicated that an appeal from the Decision, Order and Judgment of Judge Hester is pending.

MVWA seeks to intervene on the following bases: (1) a determination in this breach of contract action may adversely affect its interest in maintaining its water supply during low-level conditions; (2) the State has demanded defense and indemnification from MVWA on this claim; (3) a joint defense agreement between the State defendants and Erie in the Supreme Court action prevents adequate representation of its interests, and (3) "the MVWA's defense raises identical questions of fact and law to those already at issue" (affirmation of John L. Murad, Jr. dated May 14, 2010, 4).

"Intervention is a joinder procedure by which a nonparty seeks to become an additional plaintiff or defendant in a pending action in which the judgment may adversely affect the intervenor's interests." (Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C1012:1). Intervention is permissible as of right pursuant to CPLR 1012 or by permission of the Court pursuant to CPLR 1013. CPLR 1012 (a) provides for intervention as of right under the following circumstances:

"1. When a statute of the state confers an absolute right to intervene; or

2. When the representation of the person's interest by the parties is or may be inadequate and the person is or may be bound by the judgment; or

3. When the action involves the disposition or distribution of, or the title or a claim for damages for injury to, property and the person may be affected adversely by the judgment."

Intervention by permission is available pursuant to CPLR 1013 "when a statute of the state confers a right to intervene in the discretion of the court, or when the person's claim or defense and the main action have a common question of law or fact . . . ". "Whether intervention is sought as a matter of right under CPLR 1012 (a), or as a matter of discretion under CPLR 1013, is of little practical significance since a timely motion for leave to intervene should be granted, in either event, where the intervenor has a real and substantial interest in the outcome of the proceedings" (Wells Fargo Bank, N.A. v McLean, 70 AD3d 676, 677 [2010]; see US Bank Nat'l Assoc. as Trustee for Credit Suisse First Boston MBS v Gestetner, 74 AD3d 1538 [2010]).

In the Court's view, MVWA has failed to establish that intervention is appropriate under either CPLR 1012 or CPLR 1013.

MVWA is not entitled to intervention as a matter of right pursuant to CPLR 1012 (a) (2) because it has failed to establish that the State's representation is inadequate or that it will be bound by a judgment against the State. The contention that the State's representation may be inadequate in light of its joint defense agreement with Erie in the Supreme Court action overlooks the fact that such an agreement, also known as a common interest agreement, is not synonymous with joint representation. As explained by the Court in Merck Eprova AG v ProThera, Inc. (670 F Supp 2d 201, 211 [2009]):

"The common interest doctrine 'permits the disclosure of a privileged communication without waiver of the privilege provided the party claiming an exception to waiver demonstrates that the parties communicating: (1) have a common legal, rather than commercial, interest; and (2) the disclosures are made in the course of formulating a common legal strategy'. . . In such a situation, the parties are not joint clients and may have separate counsel" (citations omitted).

Thus, the common interest agreement is an exception to the general rule that the voluntary disclosure of attorney-client communications to third parties constitutes waiver of the attorney-client privilege. That such an agreement was utilized in defending against MVWA's claims in the Supreme Court action, where the focus of the litigation was the interpretation of the 1917 agreement between MVWA's predecessor (Consolidated) and the State, provides no basis for concluding that the State's interests will not be adequately defended in the instant action involving interpretation of the 1921 agreement between Erie's predecessor (Utica) and the State.

Nor does MVWA assert that it is in privity with the State so as to be bound by a judgment under principles of res judicata. "[W]hether [a] movant will be bound by the judgment within the meaning of that subdivision [CPLR 1012 (a) (2)] is determined by its res judicata effect" (Vantage Petroleum, Bay Isle Oil Co. v Board of Assessment Review of Town of Babylon, 61 NY2d 695, 698 [1984]). Since MVWA is not a party, or in privity with a party, it will not be bound by any judgment rendered in the instant action pursuant to principles of res judicata (Kaczmarek v Shoffstall, 119 AD2d 1001, 1002 [1986]; citing Ryan v New York Tel. Co., 62 NY2d 494, 500 [1984]). As a result, MVWA failed to establish its right to intervene under CPLR 1012.

Nor has MVWA established that intervention by permission under CPLR 1013 is appropriate on the basis that the main action and MVWA's claim or defense have a common question of law or fact, or that MVWA has a real and substantial interest in the outcome of this action. The contract at issue here arises out of a 1921 agreement to which MVWA was not a party. MVWA argues that a determination in favor of Erie will adversely affect its ability to maintain its water supply during low-level conditions at Hinckley Reservoir because "[i]n the event Erie prevails on this claim, any time a future deviation is required, Erie will undoubtedly point to the outcome as determinative of the interpretation of the 1921 Agreement . . . whether directly or through the State as its conduit" (memorandum of law submitted on behalf of MVWA dated June 21, 2010, p. 9). Such speculation regarding the adverse effects of a potential judgment is insufficient to support intervention (see Quality Aggregates v Century Concrete Corp., 213 AD2d 919 [1995]; Matter of Pier v Board of Assessment Review of Town of Niskayuna, 209 AD2d 788 [1994]). More importantly, this contention overlooks the fact that MVWA's water rights are controlled by its predecessor's 1917 agreement with the State, which is not the subject of this litigation. "When the determination of the action will be needlessly delayed, and the rights of the prospective intervenors are already adequately represented, and there are substantial questions as to whether those seeking to intervene have any real present interest in the property which is the subject of the dispute, intervention should not be permitted" (Quality Aggregates v Century Concrete Corp., 213 AD2d at 920). MVWA pursued vindication of its rights under its predecessor's 1917 agreement with the State in the declaratory judgment action. Here, Erie is not seeking an injunction, but monetary relief arising from the defendants' alleged deviations from the water flow requirements of their contract. No purpose would be served by MVWA's intervention into a contract dispute which has no bearing on its rights under the 1917 agreement.

The fact that the defendants have allegedly requested defense and indemnification from MVWA provides no basis for intervention(1) . Issues involving defense and indemnification may be resolved in a declaratory judgment action. The Court does not view a potential obligation to defend or indemnify as bearing on the issue of whether or not MVWA's rights may be adversely affected for the purposes of a motion to intervene.

The defendants' contention that this Court lacks jurisdiction to grant MVWA's motion to intervene is incorrect. This Court has jurisdiction to "hear and determine a claim of any person, corporation or municipality against the state for . . . breach of contract , express or implied" (Court of Claims Act 9 [2]). The Court of Claims clearly has jurisdiction to hear the instant claim, which sounds in breach of contract. That MVWA seeks to intervene in order to defend the interests of the defendants does not transform the character of the claim so as to divest this Court of jurisdiction. Notwithstanding this fact, however, MVWA has failed to establish that it has a substantial interest in this litigation or that it may be adversely affected by the outcome. Accordingly, MVWA's motion is denied.

July 22, 2010

Saratoga Springs, New York


Judge of the Court of Claims

The Court considered the following papers:

  1. Notice of motion dated May 17, 2010;
  2. Affirmation of John L. Murad, Jr. dated May 14, 2010 with exhibits;
  3. Memorandum of law of John L. Murad, Jr. dated May 17, 2 010;
  4. Affirmation of Douglas J. Nash dated June 8, 2010 with exhibits;
  5. Memorandum of law of Douglas J. Nash dated June 8, 2010;
  6. Affirmation of Timothy P. Mulvey dated June 11, 2010;
  7. Memorandum of law of Timothy P. Mulvey dated June 11, 2010;
  8. Memorandum of law of John L. Murad dated June 21, 2010;
  9. Letter from Timothy P. Mulvey dated June 29, 2010.

1. At oral argument of the motion held on June 28, 2010, counsel for the defendants indicated that the basis for the request for defense and indemnification arises from the 1917 agreement.