Odrich v Trustees of Columbia Univ. in City of New York

[*1] Odrich v Trustees of Columbia Univ. in City of New York 2005 NY Slip Op 51857(U) [9 Misc 3d 1130(A)] Decided on February 14, 2005 Supreme Court, New York County Cahn, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 14, 2005
Supreme Court, New York County

MARC G. ODRICH, M.D., STEVEN A. ODRICH, M.D. and STEVEN A. ODRICH, M.D., MARC G. ODRICH, M.D. AND KENNETH A. GREENBERG, M.D., P.C., Plaintiffs,

against

THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, COLUMBIA OPHTHALMOLOGY CONSULTANTS, INC., and THE NEW YORK AND PRESBYTERIAN HOSPITAL, Defendants.



601189/2004

Herman Cahn, J.

Defendants The Trustees of Columbia University in the City of New York (the University) and Columbia Ophthalmology Consultants, Inc. (COC)( the Columbia Defendants) move to dismiss the complaint's fourth and fifth causes of action, on the ground that those claims are barred by res judicata, CPLR 3211 (a) (5).

Plaintiffs cross-move for an order: (1) pursuant to CPLR 3211 (c), converting the Columbia Defendants' motion to one for partial summary judgment, and giving the parties the requisite notice of conversion; and (2) upon such conversion, pursuant to CPLR 3212 (e), granting plaintiffs partial summary judgment with respect to certain discrete issues of law and fact relating to the fourth and fifth causes of action.

FACTUAL ALLEGATIONS AND BACKGROUND

Plaintiffs Marc G. Odrich, M.D. and Steven A. Odrich, M.D. are licensed physicians, ophthalmologists, and together with non-party Kenneth A. Greenberg, M.D. the shareholders of plaintiff Steven A. Odrich, M.D., Marc G. Odrich, M.D. and Kenneth A. Greenberg, M.D., P.C., a professional services corporation (the P.C.).

The Odriches were operating a private medical practice when they became part-time faculty members at the University's medical school, in 1992 and 1993, separately. In conjunction with their status as faculty members, they enjoyed medical staff appointments and clinical privileges at defendant The New York and Presbyterian Hospital (the Hospital), which is associated with the University.

In 1998, the Odriches accepted positions as full-time faculty members at the University's medical school. As such, they were required to give up their private medical practice, and [*2]became salaried employees of COC, the University's "faculty practice corporation" in ophthalmology.

Effective January 1, 2001, the Odriches resigned from their full-time employment with COC, in order to resume private practice, and their full-time faculty appointments were changed to part-time appointments. The P.C. purchased the assets used by the Odriches in their medical practice from COC, pursuant to a letter agreement dated March 30, 2001 (the Asset Purchase Agreement).

By letters dated April 30, 2001, the University advised the Odriches that their part-time faculty appointments with the medical school would be renewed only upon the condition that they would pay the University an assessment amounting to 10% of the income of their private clinical practice, (the "Dean's Tax") . When the Odriches refused to pay the Dean's Tax, the University did not renew their part-time faculty appointments, which expired on June 30, 2001. Because the University did not forward the Odriches' applications for renewal of their medical staff appointments and clinical privileges to the Hospital, the Hospital did not renew those appointments and privileges.

The Odriches commenced an Article 78 proceeding in this court challenging the University's decision not to renew their part-time faculty appointments, based upon their refusal to pay the Dean's Tax. In the Article 78 Proceeding, the court (Yates, J.) held that the Odriches' payment of the Dean's Tax would constitute illegal fee-splitting, in violation of Education Law §§ 6530 (19) and 6531. The judgment directed the University to reconsider the Odriches' applications for renewal of their part-time faculty appointments, without any wrongful demand for a share of the Odriches' private practice income, and to forward their applications for renewal of their hospital privileges, to the Hospital (see Matter of Odrich v Trustees of Columbia University in City of New York, 193 Misc 2d 120, 131, 133-134 [Sup Ct, NY County, 2002, Yates, J.], affd 308 AD2d 405 [1st Dept 2003]).

The complaint in this action asserts six causes of action alleging breach of contract, unjust enrichment, and tortious interference with prospective business relations.

DISCUSSION

Insofar as plaintiffs cross-move to convert the Columbia Defendants' CPLR 3211 (a) motion to dismiss to a motion for partial summary judgment, CPLR 3211(c), the cross motion is granted. Although plaintiffs ask the court to give notice of the conversion to the parties, such notice need not be given in this instance. Under a recognized exception to the notice requirement set forth in CPLR 3211 (c), a court may properly treat a CPLR 3211 (a) motion to dismiss as a motion for summary judgment, without first giving notice of its intention to do so, where the motion "involves no issue of fact, but only issues of law which are fully acknowledged and argued by the parties" (Wiesen v New York Univ., 304 AD2d 459, 460 [1st Dept 2003]; see also Mihlovan v Grozavu, 72 NY2d 506, 508 [1988]; Spilka v Town of Inlet, 8 AD3d 812, 813 [3d Dept 2004] ["notice of ... conversion is excepted where only questions of law are raised, they have been fully briefed by the parties and such treatment is requested by one party"]). Here, the issues presented by the motion and cross motion are purely legal in nature, as plaintiffs and the Columbia Defendants acknowledge (see Zarett Affirm., ¶ 2; Rizzotti Affirm., ¶ 2; Def. Reply Mem. of Law, at 1), and the parties have fully addressed those issues in their respective papers.

The Columbia Defendants' motion to dismiss the fourth and fifth causes of action is [*3]denied. The Columbia Defendants argue that those claims are barred by the doctrine of res judicata, because the claims arise from the same facts as the Article 78 Proceeding, and because the claims could have been asserted in that proceeding.

"Under res judicata, or claim preclusion, a valid final judgment bars future actions between the same parties on the same cause of action" (Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 347 [1999]). "As a general rule, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" (id. [citation and internal quotation marks omitted]). "Thus, where a plaintiff in a later action brings a claim for damages that could have been presented in a prior CPLR article 78 proceeding against the same party, based upon the same harm and arising out of the same or related facts, the claim is barred by res judicata" (id. at 347-348).[FN1]

However, res judicata does not bar plaintiffs' assertion of the fourth and fifth causes of action in this action, because those claims could not have been asserted in the Proceeding. CPLR 7806 provides that any restitution or damages granted to the petitioner in an Article 78 proceeding "must be incidental to the primary relief sought by the petitioner, and must be such as [the petitioner] might otherwise recover on the same set of facts in a separate action or proceeding suable in the supreme court against the same body or officer in its or his official capacity." Accordingly, if a claim for damages "could not have been joined as part of an Article 78 proceeding because it was not 'incidental to the primary relief sought' (CPLR 7806)," the assertion of the claim in a subsequent action is not barred by res judicata, even though the claim "aris[es] out of the same operative facts as the prior proceeding" (Parker v Blauvelt Volunteer Fire Co., 93 NY2d at 348; see also La Duke v Lyons, 250 AD2d 969, 971 [3d Dept 1998]).

Whether a claim for restitution or damages is incidental to the primary relief sought in an Article 78 proceeding is "dependent upon the facts and issues presented in a particular case" (Matter of Gross v Perales, 72 NY2d 231, 236 [1988]). However, a claim for money damages has generally been held to be incidental to the primary relief sought where the petitioner's entitlement to the money damages in question is dependent upon, and follows as a substantially [*4]automatic consequence of, a determination in the petitioner's favor with respect to the issue(s) which are the primary focus of the Article 78 proceeding (see e.g. id.).

Thus, for example, where a petitioner brings an Article 78 proceeding to annul or rescind an administrative determination which resulted in termination of the petitioner's employment, claims for lost salary and other economic benefits derivable directly from the petitioner's status as an employee have been held to be incidental, because, if the determination is annulled or rescinded, and the petitioner is reinstated as an employee, the petitioner will automatically be entitled to recover those economic benefits (see e.g. Pauk v Board of Trustees of City Univ. of New York, 68 NY2d 702, 704-705 [1986]; La Duke v Lyons, 250 AD2d at 971). In such cases, the petitioner will be entitled to recover the economic benefits if and "only if" the challenged determination is annulled or rescinded (see La Duke v Lyons, 250 AD2d at 971; cf. Matter of Gross v Perales, 72 NY2d at 236).

The damage claims asserted in the complaint's fourth and fifth causes of action are not incidental to the primary relief sought in the Proceeding. The fourth cause of action asserts a claim by the P.C. against the Columbia Defendants for breach of contract. The claim alleges that, by failing to renew the Odriches' faculty appointments, the University and COC breached a provision of the Asset Purchase Agreement (the Non-Interference Provision) which provides that:

COC ... agrees that it will not take any steps, directly or indirectly, to interfere with any contracts, business, or patient relationships which the [P.C.] or its physicians might have with any other third-parties under any circumstances, nor to interfere with the medical practice of the individual physicians associated with the [P.C.].

(Zarett Affirm., Ex. D, at 246, ¶ 8 [a].)

The fifth cause of action asserts a claim by all of the plaintiffs against the Columbia Defendants for tortious interference with prospective business relations and economic advantage. That claim alleges that, by not renewing the Odriches' faculty appointments, and by causing the non-renewal of their hospital privileges, the University and COC "willfully intended" to harm plaintiffs' prospective business relations and economic advantage with various third parties, including patients, referring physicians, health plans, managed care organizations, and independent physician associations (Complaint, ¶ 125). The claim, which alleges that plaintiffs have sustained damages including "lost profits, lost income, other damages (such as attorneys fees in the prior ... Article 78 proceeding), [and] injury to their professional reputations," seeks compensatory, special, and punitive damages (Complaint, ¶¶ 133-135).

The primary relief sought by the Odriches in the Article 78 proceeding was a determination that the University's decision not to renew was arbitrary, capricious, and unlawful. However, the fourth and fifth causes of action do not merely seek the restoration of economic benefits derivable directly from the Odriches' status as part-time faculty members, which plaintiffs might be entitled to receive if and only if the University's decision not to renew the Odriches' faculty appointments was improper (see Parker v Blauvelt Volunteer Fire Co., 93 NY2d at 348). Plaintiffs are not, as a consequence of the determination in their favor in the Article 78 proceeding, automatically entitled to the damages alleged in the two causes of action.

The Asset Purchase Agreement is not an employment contract, or a contract which sets [*5]forth or establishes the terms and conditions of, or remuneration attendant to, the Odriches' status as faculty members. Rather, it is a contract which sets forth the terms and conditions of an asset sale, and to which the Odriches, in their individual capacities, are not even parties. The judicial determination made in the Article 78 Proceeding i.e., that the University acted improperly in refusing to renew the Odriches' faculty appointments does not in and of itself resolve the question of the University's and/or COC's liability for breach of the Non-Interference Provision. Rather, to prevail on that claim, plaintiffs must establish that the University and/or COC have "take[n] steps, directly or indirectly, to interfere with" the third-party relationships identified in the Non-Interference Provision. The fourth cause of action's claim for damages arising from the University's and/or COC's breach of a contractual obligation owed primarily by COC to the P.C.[FN2] is clearly independent of, and not merely incidental to, the primary relief sought in the Article 78 Proceeding, i.e., a determination that the University's conduct with regard to the Odriches was in violation of certain statutes.

Nor are the damages sought in the fifth cause of action compensatory and punitive damages allegedly resulting from the University's and COC's tortious interference with plaintiffs' prospective business relations and economic advantage incidental to the primary relief sought in the Proceeding (see e.g Murphy v Capone, 191 AD2d 683, 684-685 [2d Dept 1993] [holding that a physician's claim against a hospital for wrongful interference with prospective economic advantage, "based entirely on" a judicial determination in a prior Article 78 proceeding that the hospital's suspension of the physician from his position as an anesthesiologist on the hospital's medical staff was unlawful, was not incidental]; see also Antonsen v Ward, 943 F2d 198, 203-204 [2d Cir 1991] [holding that compensatory damages are not included in the classification of incidental relief]; Vega v State Univ. of New York Bd. of Trustees, 67 F Supp 2d 324, 334 [SD NY 1999] [stating that, "(b)ecause compensatory and punitive damages could not have been awarded in the Article 78 proceeding, these demands for relief are not precluded by res judicata" (citation omitted)]; Pinckney v Board of Educ. of Westbury Union Free School Dist., 920 F Supp 393, 398 [ED NY 1996] [finding that compensatory and punitive damages are not incidental]; Laskin v Town of Athens, 1992 WL 3182, *3 [ND NY, Jan. 6, 1992] [stating that "compensatory damages are not available in an article 78 proceeding"; La Duke v Lyons, 250 AD2d at 971 [holding that compensatory damages for the torts alleged in that action were not incidental]).

Thus, plaintiffs in the fourth and fifth causes of action seek damages which are not incidental to the primary relief sought in the Proceeding, and plaintiffs' assertion of those claims in this action, is not barred by res judicata.[FN3] [*6]

Plaintiffs' cross motion, insofar as it seeks partial summary judgment, is also denied. Plaintiffs seek partial summary judgment based upon the doctrine of collateral estoppel, and upon the decision issued in the Article 78 proceeding, determining: (1) as regards the fourth cause of action, that the University's conduct constituted interference with the Odriches' medical practice, rendering the University liable for breach of the Non-Interference Provision; and (2) as regards the fifth cause of action, that the University's unlawful conduct with regard to the Odriches is sufficient to satisfy the requirement of "wrongful means," for purposes of plaintiffs' tortious interference claim.

"Collateral estoppel, or issue preclusion, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party ..., whether or not the tribunals or causes of action are the same" (Parker v Blauvelt Volunteer Fire Co., 93 NY2d at 349 [citation and internal quotation marks omitted]). "The doctrine applies if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the [party] had a full and fair opportunity to litigate the issue in the earlier action" (id.) "The burden rests upon the proponent of collateral estoppel to demonstrate the identicality and decisiveness of the issue ..." (id. [citation and internal quotation marks omitted]).

With respect to the fourth cause of action, plaintiffs have failed to satisfy their burden, as the proponents of collateral estoppel, of establishing that the issue of whether the University's conduct constituted a breach of the Non-Interference Provision is identical to an issue which was raised, necessarily decided, and material in the Article 78 proceeding. That Proceeding determined that it was unlawful for the University to condition renewal of the Odriches' faculty appointments upon their payment of the Dean's Tax, but did not address or necessarily decide the question of whether the University's conduct constituted a breach of the Non-Interference Provision, that question being immaterial to the issues before the court. Indeed, a determination as to whether the University breached the Non-Interference Provision would require consideration of certain matters which were not relevant to the Article 78 proceeding, including: (1) whether breach of that provision requires an intent to interfere or simply the causation of interference; and (2) whether the University can be held liable for breach of the Non-Interference Provision, which sets forth COC's agreement not to interfere, and which is contained in an agreement that the University executed only under the heading "Approved."

With respect to the fifth cause of action, plaintiffs seek partial summary judgment determining that the finding as to the illegality of the University's conduct, establishes "wrongful means" for purposes of plaintiffs' tortious interference claim. In order to establish a claim for tortious interference with prospective business relations or economic advantage, a plaintiff must demonstrate either that the defendant acted for the sole purpose of harming the plaintiff, or that the defendant's interference was accomplished by "wrongful means" (see e.g. Snyder v Sony Music Entertainment, Inc., 252 AD2d 294, 299-300 [1st Dept 1999]). The Columbia Defendants argue that plaintiffs' request for partial summary judgment with respect to their tortious interference claim should be denied, because "wrongful means" has been defined to include "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure" (NBT Bancorp Inc. v Fleet/Norstar Financial Group, Inc., 87 NY2d 614, 624 [1996] [citation and internal quotation marks omitted]), but not to include [*7]conduct which is unlawful.

Plaintiffs are correct in asserting that unlawful or illegal conduct may satisfy the prerequisite of wrongful means for purposes of a claim for tortious interference with prospective business relations (see e.g. Sandra's Jewel Box Inc. v 401 Hotel, L.P., 273 AD2d 1, 1-2 [1st Dept 2000]; Pamilla v Hospital for Special Surgery, 223 AD2d 508, 509 [1st Dept 1996]; Entertainment Partners Group, Inc. v Davis, 198 AD2d 63, 64 [1st Dept 1993]). Plaintiffs' request for partial summary judgment with respect to the fifth cause of action is nevertheless denied, inasmuch as the determination sought (i.e., that the University's unlawful conduct constituted the requisite wrongful means, for purposes of plaintiffs' tortious interference claim) would neither adequately resolve an issue which is properly separable from the larger question presented by the claim (i.e., whether the University and/or COC effected actionable interference by wrongful means), nor be useful in significantly advancing this litigation.

CONCLUSION AND ORDER

For the foregoing reasons, it is hereby

ORDERED that the branch of plaintiffs' cross motion which seeks an order converting the CPLR 3211 (a) motion to dismiss brought by defendants The Trustees of Columbia University in the City of New York and Columbia Ophthalmology Consultants, Inc. (both, collectively, the Columbia Defendants) to a motion for partial summary judgment is granted, and the motion is so converted; and it is further

ORDERED that, upon such conversion, the Columbia Defendants' motion for partial summary judgment dismissing the fourth and fifth causes of action, and plaintiffs' cross motion for partial summary judgment with respect to certain discrete elements of the fourth and fifth causes of action, are both denied; and it is further

ORDERED that the Columbia Defendants are directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry.

Dated: February 14, 2005

ENTER:

__________/s/_______________

J.S.C. Footnotes

Footnote 1:Res judicata also bars the future litigation of claims arising out of the same or related facts by those who are in "privity" with the parties to the prior action or proceeding, a term which includes those whose interests were represented by a party to the prior action or proceeding (see Bayshore Family Partners, L.P. v Foundation of Jewish Philanthropies of Jewish Fedn. of Greater Fort Lauderdale, 270 AD2d 374, 375 [2d Dept 2000]; Castellano v City of New York, 251 AD2d 194, 194 [1st Dept 1998], cert denied 526 US 1131 [1999]). The Columbia Defendants assert that, although the P.C. and COC were not parties to the Proceeding, they are in privity with parties to the Proceeding: the P.C. with the Odriches, because they represented the P.C.'s interests; and COC with the University, because the University represented COC's interests (see Def. Mem. of Law, at 6 n 2). Plaintiffs do not appear to oppose the Columbia Defendants' motion on the ground that the res judicata effect of the Proceeding does not extend to the P.C., which asserts the fourth cause of action, and/or to COC, which is alleged to be liable upon the fourth and fifth causes of action.

Footnote 2:In the Non-Interference Provision, it is COC rather than the University which expressly "agrees that it will not take any steps ... to interfere ... ." Moreover, the Asset Purchase Agreement, which contains the provision, appears to have been executed by the P.C. and COC as primary parties, and by the University in a different capacity, under the heading "Approved."

Footnote 3:This determination does not apply, however, to the portion of the fifth cause of action which claims as damages "attorneys fees in the [Article 78 proceeding]" (Complaint, ¶ 133), such damages having been held to be incidental to the primary relief sought in an Article 78 proceeding (see e.g. Antonsen v Ward, 943 F2d at 201-202).