Lipco Elec. Corp. v ASG Consulting Corp.

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Lipco Elec. Corp. v ASG Consulting Corp. 2012 NY Slip Op 30370(U) January 26, 2012 Supreme Court, Nassau County Docket Number: 008775-01 Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. ..,....................................... ........ [* 1] SUPREME COURT- STATE OF NEW YORK SHORT FORM ORDER Present: BON. TIMOTHY S. DRISCOLL Justice Supreme Court LIP CO ELECTRICAL CORP. and ACTION ELECTRICAL CONTRACTING CO. INC., J. v., Plaintiffs, - against - Action No. ASG CONSULTING CORP., ANTHONY Index No. 008775- CARILLO, TAP ELECTRICAL CONTRACTING Motion Seq. No. SERVICE INC. and PHILIP P. GULIZIO, Submitted 11/15/11 Defendants. ASG CONSULTING CORP., TAP ELECTRICAL CONTRACTING SERVICE INC., ANTHONY CARILLO and PHILIP P. GULIZIO, Plaintiffs, Action No. - against. Index No. 013379- ACTION ELECTRICAL CONT. CO. INC. a/kia/ ACTION ELECTRICAL CONTRACTING COMPANY, INC., LIPCO ELECTRICAL CORP., LIPCO ELECTRICAL CORP. and ACTION ELECTRICAL CONTRACTING CO; INC., J. V., Defendants. Papers Read on this Motion: Notice of Motion, Affrmation in Support and Exhibits..................... Memorandum of Law in Support............".............................................. Amend ed Affirmatio n in Op position..... Appendix Exhibits to Amended Affirmation in Opposition - Vol. and Affidavit in Opposition... n............. ...................... ........................ ...... x Appendix Exhibits to Amended Affrmation in Opposition. VoJ. 2... Deposition Testimony of Anthony Spina pages 1- 275....................... Deposition Testimony of Anthony Spina pages 276- 545.................... [* 2] Papers Read (cont.) Deposition Testimony of Anthony Spina pages 546-806.................... Memorandum of Law in Opposition..............................................."...... Amended Memorandum of Law in Opposition................................. Reply Affrma tio n an d Exhibits....... ...... ""888"""" ................................... Reply Memorandum of Law...............................................................",... Correspondence date November 11 , 2011 with Exhibit KK............. 1993 and 1997 Documentation discussed at Oral Argument............... This matter is befote the cour on the motion by Lipco Electrical Corp. and Action Electrical Contracting Co., Inc. , lV. , the Plaintiffs in Action No. 1 (Index Number 8775- 01) and Action Electrical Cont. Co. Inc. aJa Action Electrical Contracting Company, Inc., Lipco Electrical Corp., Lipco Electrical Corp. and Action Electrical Contracting Co. , Inc. , J. V., Gaspare ("Sal") Lipari and Anthony Spina the Defendants in Action No. 2 (Index No. 013379- 01) (collectively " Lipco/Action ) fied on May 10, 2011 and submitted on November 15, 2011 following oral argument before the Court. For the reasons set forth below, the Court denies the motion. BACKGROUND A. Relief Sought Lipco/Action move for an Order striking the Answer of the Defendants in Action No. and dismissing the Complaint of the Plaintiffs in Action No. , 1) pursuant to CPLR 3212 on the grounds of an ilegal agreement, and 2) pursuant to CPLR 3126 , based on spoliation of evidence , for which movants also seek an Order sanctioning Defendants with all costs of electronic discovery. ASG Consulting Corporation, Anthony Cardilo , Tap Electrical Contracting Service , Inc. and Philp P. GuIizio, the Defendants in the above captioned matter designated Action No. (Index Number 8775- 01), and the Plaintiffs in the above-captioned matter designated Action No. 2 (Index Number 13379- 01) e' ASGlTap ) oppose the motion. B. The Paries ' History The corporate entities involved, with the exception of ASG, are electrical contractors. Lipco Electrical Corp. and Action Electrical Contracting Co. , Inc. entered into a joint venture relationship for the puroses of bidding on various public works projects. The written agreement [* 3] fonnalizing the paries ' relationship designated the name of the joint venture as Lipco Electrical Corporation and Action Electrical Contracting Co., Inc., A Joint Venture (Lipco/Action), the Plaintiffs in Action No. By letter dated November 9, 1989, Tap was notified by the Deputy Commissioner of Labor that pursuant to Labor Law 9 220-b(3)(b), it was debared, unti November 8 , 1994, from bidding on , or being awarded, any public work contracts with the state, any muncipal corporation or public body. The debarment was based on two final determinations of wilful failure to pay prevailng wages or to payor provide prevailng supplements. The debanent provision applicable to Tap provided , in relevant par , as follows: When final detenninations have been rendered against a contractor or subcontractor and/or its successor in two instances within any consecutive six-year period detennining that such contractor or subcontractor and/or its successor has wilfully failed to pay the prevailng rate of wages or to provide supplements in accordance with this aricle, such contractor or subcontractor and/or its successor shall be ineligible to submit a bid on or be awarded any public work contract with the state, any municipal corporation or public body for a period of five years, from the second final detennination. Nodell Aff. in Opp. at p. 3. Although Tap contested the debarment decision in a series of court challenges, the debanent order was ultimately confirmed insofar as it had been determined that Tap had violated Labor Law 9 220 and was debalTed from bidding on , or being awarded , any public work contract for a period of five years. Subsequent to Tap s .debanent , the corporation s principals allege, they were advised by counsel that, although the corporate entity was debared , Tap s principals were not prohibited from performing consulting services for other companies engaged in public work contracts. Thereafter, ASG was formed in or about March 12 , 1990 , for the purose of providing administrative consulting services to contractors performing electrical work on public contracts. The actions at bar arise from a series of consulting agreements between ASG and either Lipco Action, J. V. or Action executed in 1990 , ASG was to provide consulting services vis-a-vis 1991 , 1992 , 1993 and 1995 , pursuant to which six public work contracts to be performed for inter alia that ASG was the contractor s professional consultant for electrical and communications work; was responsible for methods/means used in performing consultant services; and was not a joint venturer with the contractor. The agreements provided, [* 4] andlor on behalf of the New York City Transit Authority. Pursuant to documents entitled Revisions to Modifcation Agreement " one undated and one dated Februar 6, 1995 respectively, the paries agreed that ASG was to be a parer with respect to certain specifi contracts with Lipco/Action (undated) and with Action (February 6, 1995). The modification agreements provided that each corporation would share in any profits or loss on a 1/- 1/ or !t- basis , respectively. In Action No. 1, Lipco/Action assert claims against ASG , which controlled and maintained the books and records for specified projects , in accordace with the consulting agreements, and its president , Anthony Cardilo (" Cardilo ), for breach of contract and fiduciar duty, predicated on numerous acts of alleged fraud based on overbiling for labor charges wortWess equipment, automobiles owned by ASG andlor Tap, as well as miscellaneous insurance charges , and for wrongful conversion of project supplies. Lipco/Action seek, inter alia 1) an accounting of all income and payments ASG received by virte consulting agreements , and expenses it paid out on account of the varous projects, 2) restitution with of the respect to payments made to ASG by Lipco/Action on account of the projects, and 3) the retun of project supplies wrongfully converted. In the amended complaint in Action No. 2,2 ASG/ Tap, and their principals, Cardilo and Philp P. Gulizio (" Gulizio ), seek an accounting of parnership assets and moneta damages against Lipco/ Action and Gaspare " Sal" Lipari (" Lipari") and Anthony Spina (" predicated on allegations of breach of fiduciary duty, conversion , breach of contract Spina , tortious interference with prospective business relations and fraud. B. The Paries ' Positions Lipco/Action seek to strike the answer interposed by the Defendants in Action No. , and the Amended Complaint in Action No. , on the grounds that the agreements on which ASGlTap s allegations are based are ilegal. Lipco/Action allege that , in contravention of Labor Law 220- b(3)(b), ASG was a silent parter, pursuant to a secret oral agreement , in the Lipco/Actionjoint venture during the period of Tap s debarent when Tap was prohibited from bidding on , or being awarded, public work. Movants maintain that there was an oral agreement between the principals of Lipco/Action (Spina and Lipari) and Cardilo 2 By Decision dated April 26 Action No. , the president of Tap, , 2011, the Court granted the motion by ASO/Tap to fie an Amended Complaint in [* 5] making ASG a silent parner in the Lipco/ Action joint venture from the beginnng with the first the New York City Transit Authority. Although ASG was ostensibly a consultant to the Lipco/Actionjoint ventue, movants maintain that it was actually a of the four successful contracts with silent parer which shared in the profits of the joint ventu and its role as such was not revealed to the New York City Transit Authority. In opposition , ASG and Tap argue that the debarent provision of Labor Law 9 220- b(3)(b) as amended in July, 1989 , shortly before Tap s disbarent , was limited to "a contractor or subcontractor and/or its successor. " They further claim that a debarred contractor such as Tap was not precluded from using its resources to perform non-prevailng work in connection with a public contract, such as estimating jobs, bookkeeping, purchasing of materials, preparing work schedules and leasing equipment. ASClTap argue that Lipco/Action have failed to demonstrate as a matter of law, that Tap s debarent in November of 1989 precluded its principals , and a separately formed business entity, ASO , from performing consulting services on public work contracts. ASGlTap also argue that the principals of Lip co/Action seek to void the subject contracts predicated on their purported ilegality/unenforceabilty in an effort to avoid liability for their own wrongful conduct in denying ASO access to the books and records of Lipco and Action, failing to provide an accounting, fraudulently transferring/converting parnership assets for their own benefit and wrongfully depriving ASG of its share of parnership profits. ASOlTap also submit that the Lipco/Action motion must fail as a matter of law based on the doctrine of judicial estoppel. ASO argues that , having previously taken a directly contradictory position in judicial and administrative pleadings , sworn statements and testimony on the issue of whether ASO was a silent partner in the joint ventue, Lipco/ Action are estopped from espousing a contrary position in this action. With respect to the spoliation application, Lipcol Action argues that , although it was allegedly provided with a hard copy printout of the records sought , the only way to confirm the accuracy of hard copy data was by obtaining raw data in computerized form. hearings regarding electronic discovery After lengthy over a period of several years, Lipcol Action argue, and ASG/Tap dispute, that ASO/Tap s hard drive was tampered withencryted to prevent Lipco/ Action from obtaing electronic fies of Lipco/ Action projects relating to records , costs expenses , and other relevant information. [* 6] RULING OF THE COURT Summary Judgment A. To grant summary judgment , the court must find that there are no material , triable issues of fact , that the movant has established his cause of action or defense sufficiently to warant the cour, as a matter oflaw, directing judgment in his favor , and that the proof tendered is in Crean 222 A. 2d 418, 419- 420 (2d Dept 1995). If the movant tenders sufficient admssible evidence to show that there are no material issues offact, the admissible fonn. Menekou v. burden then shifts to the opponent to produce admissible proof establishing a material issue of fact. at 420. Summar judgment is a drastic remedy that should not be granted where there Id. Id. is any doubt regarding the existence of a triable issue of fact. B. Ilegality Defense It is a general rule of law that no right of action can spring out of an ilegal Par pal Rest. v. Martin Co. contract. 258 A.D. 2d 572 573 (2d Dept. 1999). The general rule, however . does not always apply. The violation of a statute that is merely wil not malum prohibitum Benjamin v Koeppel 85 N. necessarily render a contract ilegal and unenforceable. 2d 549 Pat Henchar, Inc. 80 N. 2d 124 , 127 (1992). This is especially true where there are issues as to whether a pary is attempting to utilze an ilegality 553 (1995), quoting Lloyd Capital Corp. v. defense as a sword for personal gain rather than as a shield for public good. Chirra 22 A.D. 3d Bommareddy, 223, at 128. If the statute does not expressly provide that its violation wil deprive the paries oftheir right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public 224 (1st Dept. 2005), citing policy, the right to recover wil not be denied. Rosasco Creameries v. Cohen, Lloyd Capital, supra, Lloyd Capital Corp. 80 N. 2d at 127 , quoting 276 N. Y. 274 , 278 (1937). Debanent Provisions Debarent C. provisions are penal in nature. (1991), citing McKinney s Cons. Laws of N. constred against the part against. Id., seeking Hull Corp. , Book 1, Statutes v. Hartnett 77 N. 273. They must be strictly their enforcement and in favor of the part quoting McKinney s Cons. Laws of N. 2d 475, 481 being proceeded , Book 1 Statutes g 271(a). [* 7] Judicial Estoppel D. The doctrine of estoppel against inconsistent positions precludes a par from framing his pleadings in a manner inconsistent with a position taken in a prior judicial proceeding. 163 AD. 2d New York, Inc. v. Devon, 573 , Kimco of 574 (2d Dept. 1990). It is to be distinguished from collateral estoppel which assumes a full and fair opportunity to litigate the issue in the prior Id. Kaufan 2d 449, 455 (1985). The doctrine rests upon the principle that a litigant should not be permitted to lead a cour to find a fact one way and then action. citing v. Lily Co., 65 N. contend in another judicial proceeding that the same fact should be found otherwise. The policies underlying preclusion of inconsistent positions are general considerations of the orderly administration of justice and regard for the dignity of judicial proceedings. Id., quoting Environmental Concern v. Larchwood Constr. Corp. 101 AD. 2d 591 593' (2d Dept. 1984). E. Spoliation The Supreme Court has broad discretion in determining sanctions for spoliation of evidence. 56 AD.3d 750 (2d Dept. 2008). To support a determination of Scarano v. Bribitzer, 3126 , the moving par has the burden of demonstrating that the sanctions pursuant to CPLR responsible par' s actions were wilful and contumacious or in, bad quoting Denoyelles v. Gallagher 40 AD. 3d 1027 (2d Dept. 2007). The common law doctrine of spoliation allows for sanctions when a part faith. Id, of evidence; the cour, however, must consider prejudice resulting from spoliation in determining what type of sanction negligently disposes if any, is waranted as a matter of fundamental fairness. Id at 750- 751. When a part alters , loses or destroys key evidence before it can be examined by the other par' s expert, the Court should dismiss the pleadings of the City of New York, 248 AD. 2d 201 , 202 (1 sl Dept. 1998). Squiteri v. part responsible. Although sanctions may be imposed for even negligent spoliation, striking a pleading is usually not walTanted unless the evidence is crucial and the spoliator s conduct evinces some higher degree of culpabilty. Russo v. BMW of 82 AD. 3d 643, 644 (Pi Dept. 2011). N. Am.. LLC, F. Application of these Principles to the Instant Action The Court denies the motion to dismiss, based on the alleged ilegality of the contracts at issue, in light of the Court' s conclusion that Lipco/Action are attempting to utilze the ilegality defense as a sword for personal gain rather than as a shield for public good , especially in light of the fact that they seek relief in Action No. 1 based on the very agreements they seek to repudiate. [* 8] In addition , the Court denies the motion for summar judgment dismissing the Amended Complaint based on the Court' s conclusion that in light ofthe factual disputes , it cannot be said as a matter oflaw, that an oral silent parership agreement existed during the period of Tap debarent pursuant to which Tap was a silent parner in the Lipco/Actionjoint venture in c01U1ection with public works contracts in violation of Labor Law 220- b(3)(b). While Lipco/ Action argue the existence of a silent parnership agreement between Tap and Lipco/Action during the period of Tap s debarent, this claim is arguably at odds with inter alia the denial by Lipari and Spina of such an agreement at a hearing before the New York City Transit Authority. These arguably conflcting statements fuer demonstrate that there is an issue of fact as to the existence of the alleged silent parnership, rendering summar judgment inappropriate. The Court also denies the motion to dismiss, or for sanctions , based on alleged spoliation. As noted during oral argument in this matter on October 31, 2011 , Lipco/ Action, in fact, ultimately decrypted the data and obtained the data as it existed prior to encrytion. As such, there do not appear to be grounds to dismiss the Complaint in Action No. , or to impose a monetar sanction against ASG/Tap for the cost of electronic discovery based on a claim of spoilation, given the hotly contested contradictory arguments of the paries and the decisions of the Referee in this matter. Movants have made no showing that there, in fact , was any loss of evidence, or that their abilty to defend the claims in Action No. 2 have been adversely affected. In light of the foregoing, the Cour denies the motion in its entirety. All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. The Cour reminds counsel for the paries of their required appearance before the Cour for a conference on Februar 1, 2012 at 9:30 a. m., at which time this matter shall be scheduled for trial. ENTER DATED: Mineola, NY Januar 26, 2012 ENTERED FEB 02 2012 NASSAU COUNTY COUNTY CLERK' S OFFICE

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