West Hills Auto Repair, Inc. v State of New York

[*1] West Hills Auto Repair, Inc. v State of New York 2007 NY Slip Op 51686(U) [16 Misc 3d 1133(A)] Decided on July 30, 2007 Ct Cl Marin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 30, 2007
Ct Cl

West Hills Auto Repair, Inc., Claimant,

against

The State of New York, Defendant.



101030



For Claimant:

Marc P. Gershman, Esq.

By: Radna & Androsiglio, LLP

By: Robert G. Androsiglio, Esq. and

Sandra M. Radna, Esq.

For Defendant:

Andrew M. Cuomo, Attorney General

By: Arthur Patane, AAG

Alan C. Marin, J.

This is the decision following the trial of the claim of West Hills Auto Repair, Inc., relating to its contract with the State to provide roadside assistance to motorists for portions of the Northern State, Southern State and Sagtikos Parkways in Suffolk County (cl exh 1, p. 12). West Hills had entered into such contract with the defendant for an original period of September 6, 1994 through August 31, 1996. The contract provided that the State Department of Transportation (DOT), with the consent of the contractor, had the option of extending the contract for "a term or terms not to exceed two additional years" (cl exh 1, pp. 5 and 64).[FN1] The fee for an extension would be the same as that paid under the main contract, approximately $388,000 per year.

The parties agreed to an initial contract extension for one year beginning September 1, 1996. Near the end of that contract year, on June 13, 1997, the Department sent West Hills a letter offering to extend the contract again, for the period from September 1, 1997 through August 31, 1998, "pending approval of the Office of the State Comptroller." This letter included [*2]a signature page, and was signed by representatives of West Hills and DOT on July 8 and July 16, 1997. (Cl exhs 4 & 5).

Two months later on August 13, 1997, Kevin Ruff, the director of DOT's procurement bureau, sent West Hills a letter that precipitated this lawsuit. It stated that the "offer has been rescinded" because of "several additional contract violations which have occurred since we made the offer to extend . . ." (cl exh 6).

Claimant argues that the offer was accepted, a contract was in force for 1997 to 1998, and thus the offer cannot be rescinded. Defendant's position turns on the language in the June 13, 1997 letter that its offer was subject to approval by the State Comptroller.

The central issue of whether a contract was in existence from September of 1997 through August of 1998 has been the subject of motion practice, which made its way to the Appellate Division. In its ruling that West Hills was not entitled to summary judgment, the Second Department stated that the " supplemental agreement' by which the claimant indicated its acceptance of an offer to extend a certain Highway Emergency Local Patrol contract [HELP], was expressly conditioned upon the approval of the [State] Comptroller . . . ," and that West Hills presented no evidence that the Comptroller had approved the supplemental agreement. West Hills Auto Repair, Inc. v State of New York, 32 AD3d 849, 850, 821 NYS2d 620 (2d Dept 2006).

At the trial of this matter, evidence was presented that could support a conclusion that the absence of such approval was a result of unwarranted or improper acts or omissions by DOT. With that said, the law of this case, per the Second Department's ruling, was that there can be no supplemental agreement between the parties for September 1, 1997 to August 31, 1998 without the approval of the State Comptroller, and no proof was offered at trial that the 1997-1998 supplemental agreement was approved by the Comptroller.[FN2]

Moreover, assuming for example, that a proposed contract is not sent to the Comptroller's Office or that contract approval by the Comptroller is otherwise not effected and that in either instance, such is actionable, that action lies with an Article 78 proceeding, not in the Court of Claims. See Kick v Regan, 110 AD2d 934, 487 NYS2d 403 (3d Dept 1985), appeal denied 66 NY2d 601, 496 NYS2d 1025 (1985); Matter of Express Industries and Terminal Corp. v New York State Department of Transportation, 93 NY2d 584, 693 NYS2d 857 (1999); and Matter of Worth Construction Co., Inc. v Hevesi, 8 NY3d 548, 838 NYS2d 10 (2007).

Accordingly, claimant's first cause of action alleging that there was a contract to provide emergency road services for one year commencing on September 1, 1997 is dismissed.

Causes of Action from the Contract

Claimant's remaining causes of action arise from the period before September 1, 1997 when the viability of the road service contract was not at issue.

Interest

[*3]West Hills seeks $3,630.16 in interest for late payments under its contract with defendant.[FN3] The Prompt Payment Law, which is State Finance Law §179-d et seq., requires the State to pay its contractors within 30 calendar days; if it fails to do so, interest is credited from the thirty-first day (§§179-f.2 and 179-g). However, the start of the 30-day period is not measured from the date of the contractor's bill, or the date received. See subdivisions two and three of State Finance Law §179-f. At trial, Howard White, who at the relevant time was DOT's Supervisor of Purchasing, explained the timing:

In this case with these, you have the receipt of an invoice coming into an office in the State of New York, [which] does not start a clock . . . until it gets to the individual who is the administrator of that contract . . . have the services checked to make sure that they were [performed] . . . ensure that the billing was proper, that there was nothing that had been charged against them, any hours that weren't operating . . . [G]o back to your log books . . . So, until the administrator of the contract receives an invoice and has received services and has reviewed those, the clock really doesn't start on the Prompt Payment Legislation.

For example, consider claimant's exhibit 12D together with defendant's exhibit A. Exhibit 12D is an invoice from West Hills Auto Repair, Inc. for $218.80 in interest. The invoice contains a brief descriptive section, which provides that a West Hills invoice dated November 27, 1996 was received by the State on December 5, the State's check in payment was dated January 17, 1997 and received at the West Hills Office in Huntington Station on January 22, 1997.

Exhibit A is the paperwork generated by the State in response to the bill, on a form known as the Standard Voucher. This document states that the service was for four trucks on the road as part of the HELP Program for November of 1996. We do not have the original invoice from West Hills, but Exhibit A apparently indicates that at least one adjustment to the bill was made by DOT. There is a basic amount owed of $29,488: four trucks on the road for 152 hours each during the month at $48.50 per hour. Then in DOT's response, there is an add-on of $72.78 for overtime, and a deduction of $388 for time that one truck was out of service, resulting in a net of $29,172.78, which was the amount the State paid West Hills.

Item 3 of the Standard Voucher contains a space for the "MIR Date." That date is filled in as January 6, 1997, and as indicated, payment was made January 17, 1997 - - within 30 days of the MIR date. Mr. White explained that the MIR date triggers the beginning of the 30-day prompt payment period, and that setting the MIR date is two-pronged: the invoice from the vendor is received, and the services or merchandise checked to see if they were performed or provided.

To this trier of fact, the evidence offered by defendant on the timing of the 30-day prompt payment period was credible, is a sufficiently accurate description of this process, and went effectively unchallenged. [*4]

Similarly, defendant supplies standard vouchers for seven other West Hills' invoices corresponding to all but two of claimant's requests for interest, each of which contains an interval between the MIR date and payment date of fewer than 30 days (def exhs B through H). Claimant had asserted that interest was due on ten items; defendant specifically responded to eight of them. As for the other two West Hills' invoices, inasmuch as claimant's methodology is flawed, even without the corresponding specific vouchers, claimant has failed to meet its burden.

Other Items of Damages

1. First Aid. West Hills submitted a bill of $1,582 covering mandatory first aid training and CPR certification for its drivers (cl exh 7). Defendant responded on September 17, 1997, denying the request for reimbursement solely on the basis of insufficient substantiation (cl exh 8). Claimant's paperwork, including the listing of each employee, the date and whether first aid, CPR or both courses were taken, was sufficient to support its invoice (cl exhs 7 and 9). Claimant is entitled to $1,582, with interest from September 17, 1997 subject to subdivision one of section 19 of the Court of Claims Act. This provision of the Act provides that "If a claim which bears interest, is not filed until more than six months after the accrual of said claim, no interest shall be allowed between the expiration of six months from the time of such accrual and the time of the filing of such claim." West Hills' claim was filed on September 9, 1999.

2. Placards. West Hills submitted a bill of $1,010 on September 2, 1997 for the removal of placards on the side doors of its trucks, the repair of rivet holes in the doors and the removal of stickers, which necessitated some repainting (cl exh 10). Michael Napoli, vice-president of West Hills, testified that these were placards DOT requested "[a]fter about the first year in the contract."

Susan Fischer in 1997 held the position Engineer in Charge in Mobility and Contracts - - she administered nine contracts including the HELP contracts. On the stand at trial, Ms. Fischer conceded the bill was for an after-contract modification, but noted that none of the contractors, including West Hills, objected, principally because the placards were photos of missing children (see cl exh 11). Mr. Napoli did not dispute that he assented to placing the placards and stickers. Such contract modification was not required to be reduced to writing. This requested item of damages is denied.

3. Painting. A memo dated May 14, 1997 from Ms. Fischer to three HELP service companies, including West Hills, provided that, "due to the numerous rear end collisions HELP trucks have sustained," the vertical face of each truck's rear bumper must be painted in "Safety Green" (cl exh 21). West Hills did the painting and on August 1, 1997, submitted a bill for $415, which defendant rejected in a letter from Ms. Fischer (cl exhs 19 and 20). Fischer argued that this was regular maintenance covered by the contract, which, according to the May 14 letter, it was not. The contract provided that, "HELP vehicles will be painted white" (cl exh 1, p.16). Claimant is entitled to be paid $415, with interest from the September 17, 1997 rejection letter, subject to the provisions of §19 of the Act.

4. Operational Penalties. West Hills submitted an invoice of $33,743.88 for the month of July in 1997. DOT reduced that amount by $921.50 in penalties, which are enumerated in its letter of September 10, 1997 (cl exh 23). Ms. Fischer testified that, as a general matter, the contact administration staff could conduct an internal review if there were some question about a penalty. Appendix I of the contract contains sixteen pages under the heading "Contractors' [*5]Penalties"; it does not set forth an appeals process (cl exh 1, pp. 41-56).

The Department's letter lists six penalties, by date, truck and time lost. Three were for late starts of 15, 30 and 45 minutes; the other penalties were for: "[n]o driver for truck 705 AM shift," a blown drive shaft which resulted in two hours' penalty, and "Mike [being] out of uniform,"also a two-hour penalty.[FN4]

Appendix I does not directly reference trucks starting late, but implicitly covers same (see items 13 and 14 for leaving the worksite and taking excessive break time). [FN5] The contract allows a penalty if an employee is not in "full uniform" (id., p. 50).

There was testimony suggesting that the starting time was determined via radio/telephone contact with DOT, and that there were technical problems with the communications system, but such was never fully developed. Napoli credibly said that he did not learn of the penalties until his company was docked for them, except he stated that he had been aware of the time that one of his vehicles was 45 minutes late. As for the drive shaft, Napoli testified that it had not had a "blown" drive shaft, adding if a truck had to be taken out of service due to mechanical problems, "we had a certain amount of time to put in a spare truck."

West Hills had no prior penalties assessed during its three-year contractual service work. The penalties at issue were assessed for one month just before the end of the first extension and billed after it had run, and defendant supplied no additional information in support. Other than the 45-minute lateness offset, which amounted to $72.75, the other penalties assessed by defendant are disallowed and claimant is entitled to $848.75 with interest from the date of defendant's letter, September 10, 1997, subject to the provisions of §19 of the Act.

5. Equipment Return. The State deducted $7,884.44 from West Hills' invoice for August 1997 road services (cl exh 27). A small portion, $36.38, is for late penalties like those in item 4 above, which are denied to defendant for the reasons stated above.

There are three entries totaling $5,348.06, which related to the return of certain communication equipment, given that West Hills would no longer be providing road service. The letter from DOT's Fischer setting this out was dated October 27, 1997.

Michael Napoli credibly testified that on at least four occasions after the contract offer was rescinded his firm attempted to return the radios - - either to the contractor that installed the radios or to DOT's HELP office. He clearly recalled these events:

Q. And what was the [reason] why they were rejecting the acceptance of the radios?

A. They . . . Central Radio . . . were ordered not to accept them.

* * *

Q. And did they tell you who gave them direction not to accept the radio? [*6]

A. Susan Fischer.

Q. And did you try anywhere else to return these radios?

* * *

A. . . . Central Radio again . . .

Q. Who told you to go to Central Radio?

A. Florence Mainsweta . . . she worked under Sue Fischer.

Q. And when you went to Central Radio, did they accept the radios?

A. No, they didn't accept the radios.

Ms. Fischer testified that they refused to accept the radios because she wanted them "bench checked at the same time that the vendor was there so that there would be no question that the radios had been given back to us in good shape." But Fischer conceded that had the radios been damaged, DOT could have, in any event, charged West Hills. To the extent DOT maintains that it needed a little more time to check the radios, its overall posture here undercuts that position. Defendant's argument is more than a little forced, and I find it unpersuasive; claimant is entitled to $5,348.06.

DOT's October 27, 1997 letter also contains $2,500 to be "[w]ithheld until [the] Department can verify that all markings on contractor's vehicles, associating it with the State's program, have been removed." This kind of holdback is not mentioned in the contract. Fischer conceded that DOT could have checked the trucks at West Hills' garage, but has no recollection of whether that was done. She said the holdback came about because "we had received reports that the markings were not off yet," for which Fischer supplied no documentation, log entry or, for that matter, a source. She testified as to being ordered to withhold $2,500 from West Hills, but could not recall who told her, although she thought the direction was likely given over the telephone. Napoli went unchallenged in asserting that his company never received the $2,500. Accordingly, defendant's reduction for this amount is denied.

In sum, on this combined item covering late penalties, equipment return and truck markings, claimant is entitled to $7,884.44, with interest from the date of the October 27, 1997 letter, subject to the provisions of §19 of the Act.

6. Roof Welding. On November 12, 1997, DOT returned a West Hills' invoice for welding and refinishing the roofs of its five trucks at $750 plus $38 for paint and materials for each truck, a total of $3,940 (cl exhs 31 and 32). Defendant states in its letter that these costs should have been reflected in its bid. The Court agrees; this would be part of their vehicle costs. At some point, the antenna would have to be removed; it just happened sooner than West Hills [*7]would have liked. Granted, had the contract been held a sufficient amount of time such that the trucks were fully amortized, West Hills would not have faced this cost, but that was not defendant's burden. Claimant's cause of action is denied.

7. Cell Phone Use. West Hills seeks reimbursement for cell phone use that it paid for. In evidence is an invoice dated November 1, 1997, which lists three years of bills, by calendar year: $6,425.98 for 1995; $4,211.32 for 1996 and $3,876.98 for 1997. The invoice totals $14,514.28, and adds interest of $1,535.70. (Cl exh 28).

The contract provides as follows: "The Contractor will supply a cellular phone. Motorists will be allowed to use the cellular phone for local calls only "(cl exh 1, p. 17). Note that the contract also provides that a HELP truck is not to spend more than ten minutes trying to get a disabled vehicle going and, "[i]f a vehicle cannot be mobilized within the 10 minute time limit, the HELP vehicle operator will call the Operations Center which will arrange assistance for the motorist." (id., p. 12). Further, cellphone usage is not covered by the list of HELP truck expenses in Appendix H of the contract (cl exh 1, p. 39).

Defendant rejected claimant's invoice by letter dated November 10, 1997 to the effect that West Hills had not supplied sufficient documentation, attaching a sample tabular form for itemizing costs (cl exh 29). At the top of this form is a statement as to what is reimburseable:

"The only cellular phone charges that will be reimbursed are those costs incurred by the contractor when the cellular phone was used as a back-up for the State supplied communication equipment."

Claimant's exhibit 30 is an earlier letter from Ms. Fischer to the three HELP contractors in the area (dated October 24, 1995), which also contains a sample form, one which is slightly different from the one attached to the 1997 DOT letter, and at the top of the page, contains the following: "Reimbursement of cellular phone calls made to/received from INFORM and/or State Inspectors." The earlier form, unlike the second one, contained the direction to attach copies of the phone bills.

The November 10, 1997 letter from Fischer provided that "this is the first bill received requesting reimbursement for these costs." Napoli testified that the invoices from West Hills, together with backup, were previously sent on an annual basis, were not paid, and the entire amount was re-billed in its November 1, 1997 invoice. Ms. Fischer did not recall the annual bills or what transpired with the other contractors on cell phone usage, but as for whether the communications equipment operated smoothly:

Q. Wouldn't you agree [there were] problems with the radio systems involved with the HELP and the dispatch?

A. At times we had problems and we had the back up of their cell phone.

The West Hills' vice-president explained:

Well the cell phones, as per the contract, were for the motorists' use only . . . but the State decided to use them because their radio system was majorly inadequate, and the State started to use them causing us a hardship from all three contractors. So the State decided to pay for the phone usage.

Napoli's testimony was credible, and the core of it went unchallenged by Fischer: West [*8]Hills Auto Repair made expenditures for cellular usage that were not comprehended by the contract, outlays, which defendant promised to pay, at least at some point - - re Fischer's October 24, 1995 letter. However, determining or calculating same presents a challenge. The most detail that was offered on the $14,514.28 of phone usage was Mr. Napoli's testimony:

Q. [What are] are these . . . cell phone calls . . . ?

A. It's mainly from the State Department of Transportation's phone calls to us and from our drivers to them.

Q. When you say mainly, what are the other phone calls?

A. They were like maybe 30 seconds for a motorist here and there . . . Even when [the system] was working somewhat, they would still use the phone.

Q. Who would use the phone?

A. The dispatchers or the inspectors.

Given the above, it is not necessary to decide what is needed to demonstrate sufficient support for this expense: each phone bill; a business record that is the summary of them; a selected sample that can be proven to be representative; or a credible percentage mix of motorist use and non-contract use. We do not have any of this information on the trial record, and the Court is thus constrained to deny the cell phone expense request in its entirety.

* * *

In view of the foregoing, West Hills Auto Repair, Inc. is entitled to $10,730.19. The Clerk of the Court is directed to enter judgment for claimant in the amount of the sum of the following: i) $848.75, with interest thereon from September 10, 1997 though March 10, 1998 and then interest from September 9, 1999 to date; ii) $1,997, with interest thereon from September 17, 1997 through March 17, 1998 and then interest from September 9, 1999 to date; and iii) $7,884.44 with interest thereon from October 27, 1997 through April 27, 1998 and then interest from September 9, 1999 to date.

LET JUDGMENT BE ENTERED ACCORDINGLY.[*9] Footnotes

Footnote 1: Claimant's exhibit 1 is a 66-page packet. Strictly speaking, the contract itself, C002726, covers pages 62-66, but it incorporates the other material comprising the exhibit - - the bid solicitation document and various appendices. In the text of the decision, the reference to the contract will mean the entirety of exhibit 1.

Footnote 2: Thus, not a factor here is City of New York v State of New York, 87 NY2d 982, 642 NYS2d 611 (1996), in which the Court of Appeals held that approval by the State Comptroller is not required for extension on the same terms of an initial fixed-period contract.

Footnote 3: The amount of $3,630.16 is the sum of ten separate interest calculations - - claimant's exhibits 12A through 12 F: $242.99, $256.08, $244.54, $218.80, $242.90, and $498.19; claimant's exhibits 24 A through 24 C: $253.08, $443.24, and $664.86; claimant's exhibit 33 for $565.48.

Footnote 4: The penalty is the putative hours lost multiplied by the hourly rate and then by the factor of two.

Footnote 5: See claimant's exhibit 1, pp. 51-52.