Matter of Casale v Metropolitan Transp. Auth.

[*1] Matter of Casale v Metropolitan Transp. Auth. 2009 NY Slip Op 50880(U) [23 Misc 3d 1121(A)] Decided on May 8, 2009 Supreme Court, New York County York, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 8, 2009
Supreme Court, New York County

In the Matter of the Application of Nicholas Casale, Petitioner/, Plaintiff, For a judgment pursuant to Article 78 of the CPLR and other relief

against

Metropolitan Transportation Authority, Peter S. Kalikow, Chairman, Metropolitan Transportation Authority, Katherine N. Lapp, Executive Director, Metropolitan Transportation Authority, Martin Sansverie, Inspector General, Metropolitan Transportation Authority and Gary J. Dellaverson, Director, Labor Relations, Metropolitan Transportation Authority, Respondents/, Defendants.



115718/2003



Attorneys for Plaintiff:

Norman Siegel, Esq.

260 Madison Avenue

New York, NY 10016

Tele. No. (212) 532-7586

McLaughlin & Stern, LLP

260 Madison Avenue

New York, NY 10016

Tele. No. (212) 448-1100

Attorneys for Defendant:

Proskauer, Rose, LLP

1585 Broadway

New York, NY 10036

By: Neil H. Abramson, Esq. Joshua F. Alloy, Esq.

Dylan S. Pollack, Esq.

(212) 969-3000

Louis B. York, J.

The following summary of facts has been culled from prior Court decisions in this action, the Special Master's Decision, the federal court decision in Anemone v. Metropolitan Transit Auth., No. 05 Civ. 3170 (LAP)(S.D.NY May 2, 2008)(avail at 2008 WL 1956284), and deposition and other testimony related to these various proceedings. There is a great deal of conflicting testimony in this case, and the Court has attempted to present the uncontroversial contentions. To the extent that parties dispute some of the statements, however, they should be aware that the Court does not base its decision on these particulars but on the question of whether the Special Master's decision should be upheld.

Petitioner Nicholas Casale was hired by the Metropolitan Transit Authority ("MTA") as the Deputy Director of Security in January 2002. As Deputy Director, he directed the counter-terrorism program which aimed to provide security against terrorism within the MTA system. He also ran the day-to-day operations of the Joint Infrastructure Task Force ("the Task Force"), which he created. Louis Anemone was MTA's Deputy Executive Director of Security and Casale's immediate supervisor. Anemone and Casale had enjoyed a productive working relationship in the police force and Anemone recruited Casale when he accepted his own position with MTA. Katherine N. Lapp, one of the respondents in this proceeding, was the Executive Director of MTA at the time.

As part of his work with the Task Force, Casale investigated MTA contract fraud and other improper dealings. Among other things, the Task Force initiated investigations into I-Lite and Figliolia Plumbing Company, two contractors which gave MTA fraudulently inflated bills. Three MTA officials ultimately were terminated by MTA and indicted by the Manhattan District Attorney for overlooking the inflation of the bills in exchange for bribes.

Subsequently, Casale commenced the investigation into Kenneth Bauer, then head of the Long Island Railroad ("LIRR"), and his relationship with the Virginia-based contractor Plasser American Corporation ("Plasser"). According to Casale and to Anemone, respondent Gary J. Dellaverson — who, at that time was MTA's Labor Relations Director — suggested to Casale that he undertake the investigation. Also according to Casale and Anemone, Dellaverson told Casale that Plasser bought Bauer expensive dinners and provided other inducements in order to obtain contracts with LIRR.[FN1] [*2]

Around January 2003, based on the alleged tip from Dellaverson, Casale commenced an investigation he called Operation Campfire into the relationship between Bauer and Plasser ("the Plasser investigation"). Anemone and Casale suggest that the top executives at MTA, including Lapp, were uncomfortable with their activity in unearthing corruption at MTA. In addition, they suggest that Lapp and others resented the fact that they conducted the Plasser investigation without obtaining approval for various actions from their supervisors or informing them of their investigatory activities. According to Anemone, Lapp was furious when Casale requisitioned records without notifying her first. Sometime later in January, Lapp told Anemone that she rather than Casale would determine the focus of all future Task Force investigations. Anemone related this information to Casale and also mentioned that Lapp was dissatisfied with Casale's work and wanted to fire him.

Regardless of the concerns Lapp had voiced to Anemone, Casale proceeded vigorously with the Plasser investigation. Around this time, Anemone asked Lapp to delay approval of a contract between LIRR and Plasser pending the conclusion of the Task Force investigation. He also asked Lapp to keep the reason for the delay confidential. Lapp delayed the approval, but MTA Chairman Peter Kalikow announced the reason at an MTA meeting at which the press was in attendance.

As indicated earlier, Anemone and Casale claim to have obtained information about Bauer and Plasser from a confidential source. Allegedly Anemone and Casale also had told Lapp the Plasser investigation had been commenced as the result of information from a confidential source or a confidential informant; the parties vigorously dispute the precise terminology the men used to describe the source. The Court notes that a February 11, 2003 Task Force report states that Casale's office "received an anonymous report alleging misconduct with respect to the awarding of contracts for rail equipment to Plasser American Corporation from the Long Island Railroad Company." (Task Force Investigation Report, at 1). The Court further notes that a February 26, 2003 report by MTA's Office of the Inspector General ("OIG") indicates that "[a]n anonymous source called contacted the MTAPD to say that Ken Bauer had been wined and dined' by Plasser . . . ." (OIG Complaint No. 17533) but that subsequent memoranda state that Anemone told OIG that Casale's source was a confidential informant. Casale's emails to Anemone and to Lapp refer to a "source" (3/3/03 email to Anemone) and a "confidential community source." (3/3/09 email to Lapp). Representatives of the Queens DA's office have stated that Casale repeatedly and explicitly referred to his source as a confidential informant. There is a plethora of other information and testimony related to this issue.

Shortly after these incidents and in keeping with her earlier comments to Anemone, Lapp instructed OIG to take over the Plasser investigation. She also directed Casale to discontinue the Task Force investigation into this matter. Moreover, Lapp ordered Casale to cooperate with the OIG investigation.

According to Anemone, he and Casale had "strong and severe doubts about [OIG's] impartiality about [the Plasser] and other investigations." Casale v. Metropolitan Transit Auth., Index No. 115718/2003, Transcript of Hearing June 25, 2007, at 109. Therefore, despite the directives from Lapp, Casale did not cease the Plasser investigation. Instead, he arranged to [*3]meet with Michael Mansfield of the Queens District Attorney's office ("Queens DA") , seeking the DA's office's cooperation and assistance. Casale had worked with attorneys at this office in connection with prior, successful investigations. By his own admission, Casale did not inform Lapp or OIG that he was proceeding with the investigation or that he had contacted the Queens DA. He also did not tell Mansfield or anyone at the Queens DA's office that OIG was conducting the officially sanctioned investigation into Bauer's dealings with Plasser. The Court notes that the parties had a history of conflict and power struggles which partly explain both Lapp's decision to take the investigation from Casale and transfer it to OIG and Casale's decision to disregard Lapp's order to him. Indeed, Anemone nearly resigned prior to the Plasser investigation when Lapp attempted to exert more control over his and Casale's investigatory activities. In that instance, Dellaverson persuaded Anemone to remain at the MTA. Anemone v. Metropolitan Transit Auth., No. 05 Civ. 3170 (LAP)(May 2, 2008) (avail at 2008 WL 1956284, at *3).

Around February 28, 2003, in order to conduct its Plasser investigation, OIG asked Casale for the identity of his alleged confidential source or informant. Casale refused to provide the name. According to respondents, both in phone conversations and voice mail messages, Casale indicated that he was reluctant to provide the name because the "informant" desired anonymity. After relations between MTA officials had deteriorated sufficiently, Casale further stated that he himself was under investigation and he had to protect his own interests. OIG Interim Report dated March 31, 2003, at 3 (Casale Exh. 4). In addition, Anemone has stated that one of his and Casale's concerns was that OIG would not keep the information confidential. This concern stemmed at least partly from the fact that despite their earlier request for confidentiality, MTA Chairman Peter Kalikow had publicly announced that MTA was holding up approval of the Plasser contract pending investigation.

When its efforts to obtain the information otherwise was fruitless, OIG subpoenaed Casale to appear for deposition on March 4. Casale did not appear on that date, apparently alleging medical problems. Despite a March 10 memo from Lapp to Anemone directing Casale to cooperate with the OIG investigation, Casale continued to avoid compliance with the subpoena until March 26 and March 28, when he appeared for a deposition before OIG and named respondent Labor Relations Director Dellaverson as the source of the information about Bauer and Plasser.

Until this point, OIG allegedly believed that Casale was working with a registered confidential informant in his investigation of the Bauer-Plasser matter. Allegedly, therefore, the revelation that he was not working with a CI was as big a surprise to OIG as the news that Dellaverson, a highly placed MTA employee, was the source. However, during the deposition and in this lawsuit Casale has denied that he ever referred to his source as a confidential informant. The term "confidential informant" generally has a specific meaning which is not applicable to Dellaverson. Casale states that, instead, Dellaverson was a confidential source and he always referred to him accordingly.

OIG also deposed Dellaverson and Anemone during this period. Anemone supported Casale's version of the story and confirmed that Casale had stated his tip came from a confidential source rather than a confidential informant. During his deposition, however, Dellaverson stated that he had been present during the discussion concerning Bauer but that he had not been the source of the information. Instead, he stated, another party had provided the tip. [*4]

By this point, relations between top MTA officials and Casale and Anemone allegedly had deteriorated to the point that the two realized their jobs were in serious jeopardy. After their and Dellaverson's depositions were held, Anemone and Casale contacted the media. In an article published in The New York Times on March 30, 2003, the pair blamed MTA officials for impeding their investigation into the corruption charges. By their conduct, Casale and Anemone stated, these officials were costing the agency millions of dollars and potentially undermining efforts to protect the transit system from counterterrorist attacks. The men also explained that "they had made the highly unusual decision to speak publicly about the allegations only as a last resort, after trying repeatedly to work through internal channels." The article noted that a prior inspector general at MTA left in 2000, alleging he had encountered similar problems in his investigations of corruption. In addition, the article pointed out that regardless of the merits of Casale and Anemone's statements, they "reflect an extraordinary rift within the authority . . . ." Randy Kennedy and Bruce Lambert, Graft is Alleged at Transit Agency, NY Times, March 30, 2003.

When they were contacted in connection with this article, MTA officials countered that OIG and Lapp had not impeded investigations into the alleged corruption and that it was Casale who had impeded the OIG investigation by refusing to reveal the name of his confidential informant. Martin Sansverie, the Inspector General and a respondent here, further stated that Casale himself was the subject of an internal affairs investigation. (Id.)On March 31, the date after the article appeared, Inspector General Martin Sansverie of OIG issued an interim report which detailed Anemone and Casale's alleged obstruction of the Bauer-Plasser investigation and recommended the termination of both Anemone and Casale. Among other things, the interim report stated that "the repeated references to a confidential informant by Casale are clearly acts of deception and obstruction of the OIG investigation. OIG Interim Report dated March 31, 2003, at 3 (Casale Exh. 4). The interim report also found that Casale misrepresented the existence of a confidential informant to the Queens DA on several occasions and hid the existence of his involvement with the Queens DA from Lapp and other individuals at MTA. Id. at 3-5. The interim report did not find Casale's statement that his use of the phrase "confidential informant" was a mistake, instead viewing it as a fabrication enabling him to accuse Bauer of misconduct. Moreover, according to the interim report, this fabrication constituted a "grave deviation from acceptable practices." Of significance here, the interim report also stated that Casale and Anemone's subsequent conduct, including the concealment of their collaboration with the Queens DA from their supervisors, was part of a pattern of "obstruction, half truths and outright misrepresentations made to avoid admitting their wrongdoing." Id. at 6-7. The interim report also opined that Casale had made misrepresentations to the Queens DA as well. See id. at 8. Finally, the interim report questioned Casale and Anemone's motives in going to the media in connection with the March 30, 2003 article, suggesting they wanted "to cloak themselves in the garb of whistleblower before the MTA could take action against them for this misconduct." Id.

The following day, April 1, 2003, MTA issued a press release which included the interim report and announced its findings. The press release further noted that both men had received the interim report and that they would receive an opportunity to respond to the charges leveled against them. Casale, along with Anemone, was placed on administrative leave immediately pending the conclusion of the investigation into their conduct.

Casale submitted his response to the Interim Report on April 22. In a letter, he also objected to Dellaverson's role in the investigation, given the central part he allegedly played in [*5]the events at the heart of the dispute. On May 8, 2003, in a letter signed by Dellaverson, MTA rendered its final determination:

I am writing to advise you that, based on my careful review of the information in my possession and known to me, your employment as Deputy Director of Security is being terminated because of your dishonesty, including your fabrication of the existence of a confidential informant in connection with the Plasser American matter, as well as your failure to perform the duties and responsibilities of your position in a satisfactory manner. Casale bears the burden of proof by a preponderance of the evidence to refute these charges.

Dellaverson terminated Anemone around the same time — among other things, based on his failure to properly supervise Casale.

In response to the letter, Casale asked for a name clearing hearing. MTA denied the request, stating that Casale had received a sufficient opportunity to present his position and that Casale should seek further relief, if at all, through an Article 78 proceeding.

Several months later, on September 10, 2003, OIG concluded its investigation into Plasser and Bauer. OIG stated that there was no evidence of wrongdoing with respect to the 2003 contract between Plasser and LIRR which had prompted Casale's original investigation. However, Bauer and other MTA employees did accept improper gifts from Plasser and other entities on numerous occasions, and were "entertained" to an extent that exceeded the restrictions set forth in Public Officers Law § 73(5). OIG Report dated September 10, 2003 (Casale Exh. 14).

Procedural Background

I.The Litigation.

Also in September 2003, Casale (hereinafter "petitioner") commenced this hybrid Article 78 proceeding and action ("the petition"). The petition was amended in 2005 and, in its current form, it asserts (1) petitioner is entitled to a name clearing hearing; (2) petitioner's termination was arbitrary and capricious and he is entitled to reinstatement with back pay; and (3) because of respondents' conduct, petitioner has lost income and sustained emotional and other injuries, including injury to his reputation. Petitioner seeks a declaration that he is entitled to a name clearing hearing, a declaration that respondents acted in an arbitrary and capricious manner, an order mandating that respondents reinstate him and provide back pay with interest and other damages, and an award of monetary damages, costs and attorney's fees. In their amended answer, respondents deny the allegations in the petition and assert a number of affirmative defenses.

This proceeding originally was before the Honorable Sherry Klein Heitler, who has since been appointed to the Appellate Term. Justice Heitler rendered a decision on April 7, 2005 in which she granted petitioner's unopposed motion to amend his petition to include the claim for compensatory and monetary damages that this Court has described above, and denied Sansverie's motion to dismiss the proceeding as against him.[FN2] In addition, the Court made determinations [*6]which are relevant to the current motion. The Court held that the allegations of dishonesty in the termination letter were sufficiently stigmatizing to satisfy the "stigma plus" standard,[FN3] and petitioner was entitled to a name clearing hearing to clear himself of the charge. The Court rejected respondents' argument that by providing petitioner an opportunity to respond to the Interim report they'd given him a de facto name clearing hearing, obviating the need for an actual one. It also found that because respondents had promised petitioner an opportunity to defend himself against the charges against him, his status as an at-will employee was irrelevant to his right to a hearing.

Also of significance here, the Court concluded that there were several factors which cast doubt onto the impartiality of the decision to terminate petitioner's employment. The Court noted that, among other reasons, respondents purportedly terminated petitioner for fabricating the existence of a confidential informant. However, OIG apparently still credited the information Casale provided. In its September 2003 report to the Ethics Commission, OIG acknowledged that it initiated its investigation on the basis of the tip from the allegedly fabricated informant. Moreover, after Casale and Anemone were fired, OIG continued its investigation and found that there had been improper conduct by Bauer and Plasser executives. The Court also noted that Dellaverson, who signed Casale's termination letter and was one of the decision makers involved, was also the alleged confidential source, and that this raised a potential conflict of interest. Moreover, Casale's request that an uninvolved official decide whether he should be fired was denied.

2.The Name Clearing Hearing.

The parties entered into a stipulation governing the proceedings for the name clearing which the Court had ordered. The parties agreed to hold the hearing before Washington D.C. attorney Kenneth R. Feinberg. Special Master Feinberg is a leading arbitrator and mediator who, among other things, served as Special Master for the Federal September 11th Victim Compensation Fund of 2001; volunteered his services to Virginia Tech when it began its own effort to compensate victims of the massacre there; and mediated claims relating to asbestos, the Dalkon shield and Agent Orange. The parties further stated:

The sole purpose of the Hearing, and Mr. Feinberg's jurisdiction over the parties, shall be limited to determining whether the statements contained in Casale's May 8, 2003 letter of termination that he was terminated on the basis of his "dishonesty, including . . . fabrication of the existence of a confidential informant in connection with the Plasser American matter" are false.

The parties also stipulated that petitioner bore the burden of proof and that a preponderance of the evidence was required. Finally, the parties agreed that they could appeal Special Master Feinberg's decision to this Court. [*7]

Special Master Feinberg held a hearing from June 25 through June 28, 2007. In his opening statement petitioner's counsel described petitioner as a lifelong dedicated public servant who gave up his career in the police force to investigate corruption at MTA and enhance the security of the system. He stated that prior to petitioner's tenure, MTA only investigated two corruption charges; and it only initiated one investigation following petitioner's departure. However, during petitioner's time as head of the Task Force, in addition to the Bauer-Plasser investigation he looked into allegations against I-Lite Electric, Figliola Plumbing, and various MTA employees as well; moreover, these investigations resulted in indictments and/or convictions. Counsel also contended that Dellaverson was a source with respect to some of these investigations and that he gave Casale information resulting in the Bauer-Plasser investigation. However, counsel stated, the Bauer-Plasser investigation and those preceding it, and the discomfort of MTA's top officials with Casale's dogged explorations into MTA corruption, led these top officials to view Casale as "a roadblock that they want removed, and they come up with the canard confidential informant." Casale v. Metropolitan Transit Auth., Index No. 115718/2003, Transcript of Hearing June 25, 2007, at 18 ("Hearing Transcript"). Counsel contended that petitioner did not use the phrase "confidential informant. Even if he had used the terminology, however, because of the meaning and the context of the discussion petitioner could not be accused of lying. More significantly, counsel said, petitioner was truthful in that he had a source, and this was dispositive on the issue of his honesty. Counsel also stated that throughout petitioner behaved with "honesty, and integrity and rightness . . . ." Id., at 25.

Counsel for the MTA defendants framed the issue much more narrowly. According to counsel, "the purpose of this Name Clearing' hearing is to permit [petitioner] the opportunity to prove that the . . . statement regarding his fabrication of a confidential informant is false." Id. at 27. He cited Justice Heitler's decision, which stated that the crux of the dispute was two-pronged. First, there was a question as to whether petitioner alleged his information came from a confidential informant; and, second, there was a question as to whether a confidential informant existed. Counsel stated that "the stigmatizing statement that [petitioner] must prove is false" was that "he did not have a confidential informant, and he said he had one and he lied about that." Id. at 39. Therefore, if petitioner had a source but the source was not a confidential informant, MTA should prevail at the hearing.

Counsel for Sansverie also gave an opening statement, but as Sansverie has been dismissed from the case, see, supra at n.2, this Court will not recount it.

At the hearing, which started on June 25, 2007 and ended on June 28, Special Master Feinberg heard the testimony of Louis Anemone and of petitioner Nicholas Casale. In addition, he heard the testimony of Robert Terret, an MTA employee who worked with Casale on the Plasser investigation; John M. Ryan, the Chief Assistant District Attorney at the Queens DA's office, and one of the individuals who claimed that Casale repeatedly asserted there was a "confidential informant"; Michael Mansfield and James Liander of the Queens DA's office, who concurred with Ryan; Dellaverson; Stephen Spahr, who during the period in question worked with OIG, and who also stated that Casale had used the term "confidential informant." The witnesses were examined and cross examined at length.

In an 11-page decision, Special Master Feinberg initially stated that, as he saw it, his role was to determine whether petitioner had proven by a preponderance of the evidence that petitioner was not dishonest in connection with the Plasser investigation. He noted that there was substantial evidence in the record supporting the position that petitioner was "a dedicated [*8]enforcement officer who was zealously pursuing the investigation of potential corruption within the MTA." Casale v. Metropolitan Transit Auth., Index No. 115718/2003, Name Clearing Opinion, at 2-3 (Nov. 5, 2007)("Name Clearing Opinion"). However, he added:

Although I have little doubt that Casale believed his actions were justified to achieve his goal of successfully concluding an investigation into potential corruption at the highest levels of the MTA, Casale's own testimony demonstrates that in his dogged pursuit of this goal he violated directives from Katherine Lapp . . ., concealed these violations from Lapp, the Queens DA and the OIG, and obstructed the investigation of the OIG. This constitutes a pattern of dishonesty that precludes the petitioner from prevailing in this Name Clearing Hearing.

Id. at 3.

Special Master Feinberg's analysis was three-pronged. First, he addressed the question of whether petitioner used the term "confidential informant" to describe his source; and if so, whether the use of this term was dishonest. As he noted, this was the focus of much of the parties' openings and examinations. He found that to members of the law enforcement community the phrases "confidential informant" and "confidential source" have specific meanings, and that "a CI assists in making a case effectively and quickly." Id. at 5. In this, the special master implicitly rejected petitioner's counsel's argument that the terms were not markedly different. Moreover, in so ruling, he credited MTA's statement that OIG would have accorded more weight to the information if it came from a registered confidential informant. He noted that several witnesses — in particular, Ryan, Liander and Mansfield of the Queens DA — testified that Casale had referred specifically to a confidential informant. He weighed this against Casale's impassioned testimony that he had never used the term in question. "This clear conflict in the testimony, coupled with the fact that petitioner has the burden of proving the absence of dishonesty, leads to the conclusion that petitioner's effort to clear his name in this proceeding must fail." Id. at 6.

Special Master Feinberg then proceeded to the second prong of his analysis, and what he apparently viewed as stronger evidence of dishonesty. He found that "the record is replete with numerous instances of dishonesty designed to accomplish what Casale believed was necessary . . . ." Id. He found it particularly compelling that at the hearing petitioner acknowledged that he did not tell OIG he was working on the Plasser investigation and consulting the Queens DA, and he did not tell anyone at the Queens DA's office that OIG was conducting its own investigation. Id. at 7; see Hearing Transcript, at 466 (N. Casale - Cross).

In addition, the special master concluded that, with the purpose of obstructing OIG's investigation while he continued with his own, petitioner also made misrepresentations to OIG. Among other things, he found that petitioner's statement that his source was "in the wind" was dishonest, as it incorrectly suggested that the source was unavailable, uncooperative or both. Name Clearing Opinion, at 8-9; see Hearing Transcript, at 352-53 (N. Casale - Direct). Also, at the hearing, Casale acknowledged that he once told OIG representatives he'd spent the weekend trying to get his source to come forward, and this was not the case. Also, the special master noted, petitioner acknowledged he asked Ryan of the Queens DA's office not to let Lapp know about his visit there.

In the third prong of his analysis Special Master Feinberg referred to several instances of obstruction and insubordination by petitioner, and he concluded that petitioner was guilty of insubordination when he violated Katherine Lapp's clear orders. The special master detailed [*9]several examples of this conduct by petitioner. He culled these examples solely from petitioner's own hearing testimony.

Based upon all of the above, Special Master Feinberg concluded that:

Quite apart from this conflicting testimony, the evidence evidence adduced during the Hearing demonstrates that petitioner engaged in a pattern of dishonesty including: violating specific orders from the Executive Director of the MTA directing him to stop investigating the Plasser American matter; concealing his continued involvement in the Plasser American investigation from the Executive Director of the MTA and the OIG; concealing his violations of MTA directives from the Queens DA; and obstructing the OIG investigation into the Plasser American matter.

Name Clearing Opinion, at 10-11.

Following the issuance of this decision, petitioner moved to vacate the Special Master's decision and the MTA respondents opposed the motion.

3.Analysis.

In the motion before the Court, petitioner asks the Court to vacate and reverse the determination of Special Master Feinberg as a matter of law. The motion centers solely on the questions of (1) whether the Special Master's finding that petitioner engaged in a pattern of dishonesty is supported by the record; and (2) whether the Special Master exceeded his authority as defined by the stipulation. To consider the application, the Court must determine the appropriate standard of review.

According to Justice Heitler's order, the name clearing hearing was required under Article 78 on these facts. Moreover, the parties chose Special Master Feinberg rather than the adminstrative agency to conduct the hearing. Among other things, the special master considered petitioner's Bauer-Plasser investigation file, the records from Anemone's federal court case, Justice Heitler's prior rulings, the parties' stipulation referring the matter to him, the record and prior papers submitted in this case, and the parties' briefs. He heard several days of testimony from the parties to this litigation and several others with firsthand knowledge of the underlying facts. Accordingly, this Court should not conduct a de novo review. Instead, the Court agrees with the MTA defendants that as in a review of an administrative name clearing hearing it should affirm the special master's findings unless there is no rational factual basis for them. See Marzullo v. Suffolk County, 97 AD2d 789, 789, 468 NYS2d 530, 530 (2nd Dept. 1983). Therefore, if there is evidence supporting Casale's arguments but there nonetheless is a rational factual basis for the special master's determination, the special master's findings should not be overturned.

Plaintiff also alleges the special master exceeded his authority and made erroneous findings based on the law. It is not disputed that the special master's jurisdiction was limited to the issues encompassed by the so-ordered stipulation. See Semigran Enterprises, Inc. v. Noren, 285 AD2d 409, 409, 730 NYS2d 586, 586 (2001)("Semigran") (involving special referee); Batista v. Delbaum, Inc., 234 AD2d 45, 46, 650 NYS2d 219, 220 (1st Dept. 1996) (involving JHO). Moreover, perhaps because the issue is not controversial, no party discussed the applicable standard of review as to these challenges. At any rate, the Court should set aside the decision if it finds that the special master clearly exceeded his authority and/or misapplied the prevailing law. Cf. Anonymous v. Commissioner of Health, 21 AD3d 841, 843, 801 NYS2d 302, 304 (1st Dept.2005) ("standard of review [in a mandamus and/or review proceeding] is [*10]whether the agency determination was arbitrary and capricious or affected by an error of law")(citing Scherbyn v. Wayne Finger-Lakes Bd. of Co-op. Educ. Serv., 77 NY2d 753, 758, 570 NYS2d 474, 478 (1991)).

Based on the above, the Court concludes that the special master's decision should not be vacated. Relying on the extensive record and on the testimony elicited at the hearing, he issued a clear and persuasive decision in which he correctly set forth the parameters of his role, demonstrated a grasp of the complicated and hotly contested factual background, and supported his findings with numerous references to the hearing transcript. It is also noteworthy that on the issue of petitioner's use of the word "confidential informant" the special master did not reject the contentions of petitioner altogether, but simply noted that petitioner carried the burden of proof and he had not satisfied that burden. In light of the heated disputes about what actually transpired and what language petitioner used, this also was a rational conclusion. Finally, the special master relied heavily on petitioner's own admissions that he concealed from Lapp and Sansverie the fact that he was continuing with the Bauer-Plasser investigation; and that he also concealed from the Queens DA's office the fact that the case had been reassigned to OIG. The special master cited ample evidence in support of this finding as well, and it was rational of him to conclude that petitioner's conduct was dishonest.

A.Dishonesty.

Next, the Court turns to several of petitioner's specific challenges to the special master's decision. First, petitioner argues that the special master applied an improper definition of the word "dishonesty." According to petitioner, Special Master Feinberg was required to adopt the definition of dishonesty set forth in World Exchange Bank v. Commercial Cas. Ins. Co., 255 NY 1, 173 N.E. 902 (1930)("World Exchange"). In that case, a bank teller accepted fraudulent checks and drafts from a man named Martin Katz, paying Katz case in exchange for the instruments although there were insufficient funds in the account to cover the checks and drafts. Although approval of the supervisor was required in such circumstances, the teller obtained the bank president's approval for the first check and paid all subsequent checks and drafts without approval. The plaintiff Bank sued its insurance company when the company denied indemnification. The Bank argued that, among other things, the loss was covered under a policy provision indemnifying it for "any loss through any dishonest or criminal act of any of the insured's officers, clerks or other employees . . . whether committed directly or by collusion with others." Id. at 4, 173 N.E. at 903.

The First Department reversed the trial court decision entering a directed verdict in favor of the bank. World Exchange Bank v. Commercial Cas. Ins. Co., 229 A.D. 458, 242 N.Y.S. 821 (1st Dept.), aff'd, 255 NY 1, 173 N.E. 902 (1930). In affirming the First Department's order, the Court of Appeals stated that the question was "whether the act within the meaning of the policy must be said to be dishonest,' for dishonesty within such a contract may be something short of criminality." World Exchange, 255 NY at 5, 173 N.E. at 903 (emphasis supplied). Though honesty was not "a term of art," id., the Court looked to the generally understood meaning of the word rather than to statutes. It concluded that there must be "an infirmity of purpose so opprobrious or furtive as to be fairly characterized as dishonest in the common speech of men." Because a contract was involved the trier of fact had to consider "the reasonable expectation and purpose of the ordinary business man when making an ordinary business contract." Id. Moreover, an act can be wrongful but not dishonest — especially in cases where there might be "innocence of motive." Id. at 5, 173 N.E. at 904. [*11]

Petitioner argues that World Exchange governs here because like the plaintiff in that case he is being evaluated in an employment context. Morever, he argues that, like the plaintiff in World Exchange he should be deemed "honest" because he was not acting to benefit himself but to further his employer's goals. However, petitioner's analysis is flawed for a few reasons. For one thing, in World Exchange, the Court of Appeals did not state that the plaintiff was honest but that his honesty was an issue for the trier of fact. See id. at 5, 173 N.E. at 903. Here, a trier of fact did consider the issue of petitioner's honesty and found that he had not satisfied his burden of proof. For another thing, in World Exchange the Court noted that an act could be wrongful but not dishonest. However, the Court did not find that every act committed in furtherance of a business purpose was honest. Therefore, petitioner cannot rely on World Exchange to show that a finding of honesty is required. Moreover, from the decision in World Exchange it does not appear that the teller concealed or lied about his conduct to his superiors. The special master here, faced with a pattern of concealment, was not irrational to consider them dishonest; and his ruling is not inconsistent with World Exchange. As respondents point out, too, the World Exchange Court emphasized the importance of considering the challenged action in its proper context and did not state that a hard and fast rule applied. This is all the more reason to defer to the trier of fact.

Similarly, petitioner's reliance on Boyle v. Petrie Stores Corp., 136 Misc 2d 380, 390, (Sup. Ct. NY County 1985) is misplaced. As in the case at hand, in Boyle power struggles erupted between the plaintiff and his superiors, resulting in the plaintiff's termination. In Boyle, the court had to determine whether the plaintiff had been fired "for cause" within the meaning of the contract. If there was no cause, the plaintiff was entitled to damages. Petitioner is correct that the court there determined that the omissions, mistakes and irregularities at issue did not constitute dishonesty, one of the permitted causes of termination. Id. at 388, 518 NYS2d at 859. Moreover, the Court does not find it dispositive, as respondent suggests, that Boyle involved a contract. However, in Boyle the court found that the plaintiff, who improperly charged personal expenses to his business account and was fired before he had the opportunity to reimburse the company, was not dishonest largely because "t[]here was no blatant attempt at . . . concealment by Mr. Boyle, there was no submission of nonexistent items, there was no misrepresentation or concealment." Id. at 389, 518 NYS2d at 860. This distinguishes it from the case at hand, where the special master explicitly found a pattern of misrepresentation and concealment.

Capuano v. Island Computer, 382 F. Supp. 2d 326 (D. Conn. 2005)(applying New York law), is also distinguishable. That case involved the firing of an employee who used puffery in his job descriptions on his job application and who did not fully describe his role in one of his prior positions. The court evaluated the description of the prior job on the resume, and determined that the description might be considered functionally descriptive and reasonably accurate rather than fraudulent. Then, citing Boyle, the court noted that "secrecy and concealment are the hallmarks of dishonesty," id. at 340, and that the plaintiff was not necessarily guilty of secrecy or concealment — again, a distinction from the case at hand. Most significantly, the court in Capuano did not determine the plaintiff's dishonesty as a matter of law. Instead, the court concluded that the plaintiff's "undisputed statements and omissions were not falsehoods per se, but a determination of whether they were contextually dishonest . . . must be left to the jury." Id. at 341. Again, this distinguishes it from the current situation, in which a fact finder has considered the evidence and reached a determination.

B.Confidential Informant. [*12]

Second, Casale argues that Special Master Feinberg's sole job was to determine whether Dellaverson was Casale's source.[FN4] Casale alleges that the phrase "confidential informant" has multiple meanings and, as defined by MTA, can include the type of source Casale described to MTA. Accordingly, if Dellaverson provided the information concerning Bauer and Plasser to Casale, he did not lie and the allegation concerning his dishonesty was unfounded.

As to the meaning of the term "confidential informant," the special master found there was no dispute that the term had a specific meaning in the law enforcement community. There is support in the record for the special master's conclusion — including Casale's statements to this effect at the hearing before the special master. See Hearing Transcript, at 379-85 (N. Casale - Cross). As the MTA defendants note, there is hearing testimony from Anemone which supports this conclusion as well. Moreover, Casale testified at the hearing that he clearly understood the meaning of the phrase; and, it is his alleged misuse of the phrase that is at issue. Thus, though excerpts from Sansverie's deposition in Anemone's federal action and other evidence arguably supports counsel's position, there also is a rational basis and ample evidence supporting Special Master Feinberg's decision. In addition to petitioner's testimony, during the hearing the special master mentioned that in Sansverie's report recommending the termination of Casale and Anemone, he referred to Casale's use of the phrase "confidential informant" as not simply a semantical error but severe police misconduct.

Nor was Special Master Feinberg's analysis faulty because he did not determine whether Dellaverson was petitioner's source. The Court can sympathize with petitioner's position. He was accused of dishonesty including the fabrication of a confidential informant, and he wanted the special master to clear his name as to every particular of the alleged dishonesty. Ultimately, it was not necessary for the special master to determine every particular of the alleged dishonesty. Instead, he had to determine whether respondents had a basis for firing petitioner for dishonesty. Moreover, it was petitioner's burden of proof to show that he was not dishonest. The special master concluded that petitioner had not satisfied this burden on several critical issues, and in particular found that his pattern of concealment was, in fact, dishonest. Therefore, he did not have to evaluate the issue further. Also, as the MTA respondents note, the parties' stipulation did not require the special master to determine the identity of the source.

c.Pattern of Dishonesty.

Third, as noted earlier, Special Master Feinberg found that Casale had engaged in a pattern of dishonesty in connection with the Plasser investigation. If anything, he found this issue dispositive. In fact, he explicitly stated that even if Casale's use of the term "confidential informant" was not considered dishonest, his pattern of conduct was sufficient to justify the MTA's allegation. Casale argues that the special master's jurisdiction was limited to determining whether he was dishonest in fabricating a confidential informant, and that therefore this finding is a nullity.

The Court agrees with the MTA defendants that petitioner's argument lacks merit. In fact, as noted above, see, supra , at 12, the stipulation provided that the special master would [*13]determine whether Casale was guilty of dishonesty including the fabrication of a confidential informant. Thus, it is clear on the face of the stipulation that the special master had the jurisdiction to determine whether Casale had engaged in dishonesty in other relevant respects.

Furthermore, contrary to Casale's contention, the special master did not state that he only had jurisdiction to determine whether Casale had lied about having a source. Nor did he state that he only had jurisdiction to determine whether Casale had misused the term "confidential informant." Instead, in his closing comments to the parties the special master set forth all of the parties' arguments and all of the possible questions they had raised. He made it clear in his comments that he was not rendering a conclusion or articulating his own point of view at that time. Thus, petitioner has quoted this portion of the hearing out of its proper context.

d.Obstruction of Investigation and Violation of Katherine Lapp's Orders.

Fourth, petitioner states that the special master improperly held that petitioner obstructed the OIG investigation and in other ways violated Katherine Lapp's orders. As petitioner states, Special Master Feinberg discussed his belief that petitioner was guilty of insubordination and this issue was not before him. However, the point on which the special master focused in his discussion was that petitioner took measures to conceal this insubordination from Lapp as well as from the Queens DA's office and OIG. The special master viewed these acts of concealment as examples of petitioner's dishonesty. For the most part, he did not make these findings for the purpose of showing that petitioner disobeyed orders but to show that petitioner concealed his insubordination and made misstatements to further his goal of obstructing OIG. The Court finds that this was a rational interpretation of the facts by the special master. At any rate, as petitioner notes, if a referee or special master makes a determination that exceeds his jurisdiction, that determination alone must be considered a nullity. See Semigran, 285 AD2d at 409, 730 NYS2d at 586. Therefore, to the extent that the special master exceeded his authority in determining that petitioner was guilty of insubordination, that part of the ruling is a nullity but the remainder of his decision stands.

Conclusion

The Court notes that the special master's statement that "Casale believed his actions were justified," Name Clearing Opinion, at 3, was dicta, intended to express some sympathy for petitioner's goals even while finding that he engaged in a pattern of concealment in order to achieve them. Therefore, contrary to the suggestion of petitioner, this does not render the special master's determination erroneous. In fact, the Court shares the special master's belief that petitioner and Mr. Anemone were at least partly motivated by the desire to expose corruption at MTA, and that the two men may have believed they had to bypass proper channels in order to do so most effectively. Indeed, the investigation these men initiated did yield positive results. However, the motive behind petitioner's conduct was not before the special master and it is not before this Court. Instead, the special master had to decide whether petitioner could show that the means he chose to satisfy these ends were not dishonest. As stated, the special master's finding that petitioner had not satisfied his burden is a rational conclusion amply supported by the evidence.

The Court has considered all of the parties' other arguments and it does not alter the Court's determination that the special master's ruling should be upheld.

Accordingly, it is

ORDERED that the motion to vacate the special master's determination is denied, and it is further [*14]

ORDERED that the determination is confirmed.

ENTER:

Dated: May 8, 2009_______________________________

Hon. Louis B. York, J.S.C. Footnotes

Footnote 1: The information about this is not altogether consistent. In a deposition related to his own action against various MTA defendants, for example, Anemone stated that he interpreted Dellaverson's comment that Bauer was a bad guy, coupled with his subsequent reference to the impending Plasser contract, as an oblique request to investigate the deal. Anemone v. Metropolitan Transit Auth., No. 05 Civ. 3170 (LAP)(S.D.NY May 2, 2008) (avail at 2008 WL 1956284, at *3-4). At the hearing before Special Master Feinman, Anemone stated that Dellaverson said Bauer took gratuities or gifts from Plasser. Casale v. Metropolitan Transit Auth., Index No. 115718/2003, Transcript of Hearing June 25, 2007, at 97. There is also evidence indicating someone else made the statements.

Footnote 2:In August 2006, the Court denied Sansverie's motion to reargue and his motion to dismiss the amended complaint as against him. However, the First Department reversed the portion of the order relating to Sansverie's motion to dismiss, and severed and dismissed the claims asserted against him. Casale v. Metropolitan Transit Auth., 47 AD3d 519, 850 NYS2d 79 (1st Dept. 2008).

Footnote 3: To constitute a stigma, defamatory statements "must call into question plaintiff's good name, reputation, honor, or integrity." Anemone v. Metropolitan Transit Auth., 410 F. Supp. 2d 255, 269 (S.D.NY 2006). To be actionable under the "stigma plus" standard, the statements also must call a plaintiff's good name into question. Id.

Footnote 4: The parties appear to have switched their positions since their opening statements to Special Master Feinberg. See Hearing Transcript, at 18-25, 27-39; see also id., at 1035 (Special Master Feinberg noted that Casale's objective was "to demonstrate a pattern of dishonesty or corruption").