Business Relocation Servs., Inc. v City of New York

[*1] Business Relocation Servs., Inc. v City of New York 2008 NY Slip Op 50681(U) [19 Misc 3d 1114(A)] Decided on April 3, 2008 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 3, 2008
Supreme Court, Kings County

Business Relocation Services, Inc., Plaintiff,

against

The City of New York And The New York City Department of Education, Defendants.



9921/06



Attorney for Plaintiff

Anthony Genovesi, Jr., Esq.

Borchert, Genovesi, LaSpina & Landicino P.C.

19-02 Whitestone Expressway, Suite 302

Whitestone, NY 11357

Attorney for Defendant

Carol Hsu, Esq.

New York City Law Department, Corporation Counsel

100 Church Street

New York, NY 10007

Carolyn E. Demarest, J.

Upon the foregoing papers in this action by plaintiff Business Relocation Services, Inc. (plaintiff) against defendants the City of New York (the City) and the New York City Department of Education (the DOE) (collectively, defendants) alleging the breach of a requirements contract and seeking payment for services rendered under that contract, defendants move[FN1] for an order, pursuant to CPLR 3101, 3124, and 3126, compelling plaintiff to produce: (1) [*2]Jesus Linares and Noreen Linares for full and complete depositions and to pay the cost of continuing Jesus Linares' deposition, (2) a privilege log in connection with plaintiff's response to their first request for discovery and inspection, (3) the documents requested in their first and second requests for discovery and inspection, which were not produced, and (4) responses to their first set of interrogatories. Defendants' motion further seeks an order: (1) pursuant to Uniform Rules for Trial Courts (22 NYCRR) § 202.21(e), vacating the note of issue and certificate of readiness filed by plaintiff on April 10, 2007, and (2) pursuant to CPLR 3212 (a) and the Supreme Court Commercial Division Guidelines and Rules, extending the time limit for dispositive motions until 60 days after the filing of a new note of issue.

Plaintiff cross-moves for an order striking defendants' answer, or, in the alternative, precluding defendants from offering testimony at the trial of this action. Plaintiff's cross motion further seeks an order compelling defendants to respond to its outstanding discovery demands, and setting this matter down for a trial.

In or about October 2003, plaintiff entered into a requirements contract with the DOE for moving and storage services, which was renewed three times with separate contract and purchase order numbers for each renewal (the contracts). Plaintiff had previously had contracts with the DOE, beginning in 1994, for moving and storage services. In August 2003, the Special Commissioner of Investigation for the New York City School District (the SCI) began investigating plaintiff's operations and practices under the contracts after a DOE employee reported allegations of bribery and vendor irregularities against plaintiff (the SCI Investigation). As part of the SCI Investigation, the SCI, by subpoenas duces tecum dated December 22, 2003 and March 11, 2004, subpoenaed plaintiff's owner and chief executive officer, Jesus Linares, to testify and produce documents. On May 25, 2004, Jesus Linares and Noreen Linares (who is Jesus Linares' wife and the office manager for plaintiff) appeared at the SCI's offices for scheduled interviews, and, upon the advice of counsel, they invoked their Fifth Amendment privilege against self-incrimination and refused to answer any questions pertaining to plaintiff.

On March 11, 2005, the SCI issued a report on the findings of its investigation (the SCI Report). The SCI Report stated that under the terms of the contracts, payroll documentation had to accompany requests for payment, and that the DOE generally paid plaintiff based upon the number of workers and the number of trucks present at a work site. The SCI Report explained that its investigators had interviewed a number of individuals whose names were listed on payroll reports which plaintiff had submitted to the DOE. The SCI determined, after its investigators examined paperwork submitted by plaintiff to the DOE and related payroll reports, that such documentation contained fraudulent information regarding the payment of prevailing wages and supplemental benefits to the workers, in accordance with the Labor Law, for the assignments performed. The SCI Report further explained that several of plaintiff's workers confirmed that they had signed a move register for each day of work, which contained the times that each employee worked on a given day. It noted, however, that in response to a subpoena, plaintiff had failed to provide the move registers requested by it. The SCI Report determined [*3]that the documentation submitted by plaintiff to the DOE listed a number of employees who had not worked on DOE jobs, but who were nevertheless included on plaintiff's payroll sheets submitted to the DOE.

The SCI, in the SCI Report, therefore, recommended that plaintiff be barred from holding DOE contracts for a period of five years, that plaintiff pay workers any prevailing wages and supplemental wages owed, and that plaintiff reimburse the DOE for any payments made for workers who were not present at DOE job sites when plaintiff falsely claimed that they had been present. By letter dated March 28, 2005, the DOE forwarded a copy of the SCI Report to plaintiff. However, the names of the witnesses, who had been interviewed by the SCI, were redacted from the copy of the SCI Report given to plaintiff.

Plaintiff claims that defendants have failed to pay it the sum of $656,628.97 owed to it, pursuant to the contracts. Consequently, on March 30, 2006, plaintiff filed this action against defendants, seeking recovery of the alleged contract balance amount of $656,628.97. Plaintiff's complaint sets forth causes of action for breach of contract and unjust enrichment. On June 5, 2006, defendants served their answer to plaintiff's complaint, as well as a first notice for discovery and inspection and a notice of deposition upon oral examination for persons with knowledge of the facts asserted in the complaint. Plaintiff served its responses and objections to defendants' first notice for discovery and inspection on or about December 14, 2006. However, in its responses and objections, plaintiff merely provided the contract, no privilege log, and blanket objections to 31 of defendants' 32 document demands.

On April 10, 2007, plaintiff filed a request for judicial intervention, a note of issue, and a certificate of readiness, and served it upon defendants' attorney, Carol Hsu, an Assistant Corporation Counsel of the City of New York (Corporation Counsel) that same day. The certificate of readiness stated that there were no outstanding requests for discovery and that the case was ready for trial. On April 30, 2007, defendants, contending that discovery was not complete, moved to vacate the note of issue and certificate of readiness, and to compel production of documents and depositions. Plaintiff opposed that motion.

By order dated May 30, 2007, the court denied defendants' motion to vacate the note of issue and certificate of readiness and permitted the action to remain on the trial calendar, subject to the condition that the parties comply with a preliminary conference order, which is also dated May 30, 2007. The May 30, 2007 preliminary conference order set forth a discovery schedule, which required plaintiff to produce documents in response to defendants' first notice for discovery and inspection by June 20, 2007, and to produce a witness for deposition. It also required defendants to submit to a deposition.

Defendants did not receive plaintiff's document production until July 31, 2007. On August 29, 2007, defendants served a second notice for discovery and inspection and a first set of interrogatories. Additionally, Corporation Counsel, by letter dated August 29, 2007, requested a privilege log to explain redactions made in plaintiff's documents in response to the first notice for discovery and inspection, and also noted plaintiff's failure to provide requested employee sign-in sheets (of which plaintiff claimed it was not in possession) and invoices or applications for payment.

Following a compliance conference, the court, by order dated September 12, 2007, directed that the depositions of all parties be completed on or before October 25, 2007. On September 17, 2007, plaintiff served upon defendants their first notice to produce, combined [*4]demands, and first set of interrogatories. Corporation Counsel objected to this demand as untimely and refused to respond. Defendants served notices of deposition dated September 20, 2007 on Jesus Linares and Noreen Linares.

Plaintiff produced Jesus Linares for deposition on October 18, 2007. However, at Jesus Linares' deposition, when Corporation Counsel introduced, as exhibits, subpoenas that the SCI had issued to him as part of the SCI Investigation into plaintiff, plaintiff's attorney refused to proceed with the deposition on the basis that it would be prejudicial for his client to testify because the SCI had allegedly improperly disclosed privileged documents in its investigation file to the Office of the Corporation Counsel. Plaintiff's attorney, at the deposition, also demanded that Corporation Counsel disclose to plaintiff the documents which defendants received from the SCI. Corporation Counsel, however, refused to do so. Thereafter, defendants and plaintiff brought the instant motion and cross motion.

With respect to defendants' motion, a party may move to vacate the note of issue if the moving party shows that the case is not ready for trial, and it appears to the court that a material fact in the certificate of readiness is incorrect (see Uniform Rules for Trial Courts [22 NYCRR] § 202.21 [e] ). Here, plaintiff's representations in its certificate of readiness that "[t]he case is ready for trial," and that "[t]here are no outstanding requests for discovery" are inaccurate. As discussed above, plaintiff has yet to provide defendants with certain requested documents and to submit to depositions. Indeed, plaintiff seeks responses to its own demands which, it asserts, are material and necessary to establish its causes of action and to defend against defendants' affirmative defenses. Thus, inasmuch as all necessary discovery has not been completed, the court must vacate the note of issue and certificate of readiness and strike this action from the trial calendar so that discovery may be completed (see 22 NYCRR 202.21 [e]; Lynch v Vollona, 6 AD3d 505, 505 [2004]; Prapaniotis v 36-08 33rd St. Corp., 288 AD2d 254, 254 [2001]; Barnett v DeMian, 207 AD2d 693, 693 [1994]). Since the court has granted defendants' motion to vacate the note of issue, the time within which a dispositive motion must be made is necessarily extended so as to recommence as of the time of the new filing of the note of issue (see Farrington v Heidkamp, 26 AD3d 459, 460 [2006]; Alexander v City of New York, 277 AD2d 334, 334 [2000]).

Insofar as defendants' motion and plaintiff's cross motion seek orders compelling responses to outstanding discovery demands, it is noted that plaintiff has not provided a privilege log to explain the redactions made in its documents in response to defendants' first notice for discovery and inspection. Plaintiff has also not responded to defendants' second notice for discovery and inspection or first set of interrogatories. Plaintiff bases its refusal to so respond upon defendants' failure to respond to its demands. As discussed above, defendants have refused to respond to plaintiff's first notice to produce, combined demands, and first set of interrogatories. Defendants predicate their refusal to respond to these discovery demands on the grounds that they are untimely sought after plaintiff filed its note of issue, and that the preliminary conference order did not specify that plaintiff was permitted to serve these discovery demands. Plaintiff points out, however, that defendants' first set of interrogatories and second notice for production of documents were also not directed in the preliminary conference order.

CPLR 3101 (a) directs "full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof" (see Allen v Cromwell-Collier Publ. Co., 21 NY2d 403, 406 [1968]). Pursuant to CPLR 3124, if a party fails to comply [*5]with discovery requests, the court may grant an order compelling compliance. Furthermore, CPLR 3126 (3) provides that an order precluding a party from introducing, in evidence, designated documents or items of testimony may be granted where a party fails to disclose information which ought to have been disclosed in discovery (see Getty v Zimmerman, 37 AD3d 1095, 1096-1097 [2007]; Manzo v Nealon, 18 AD3d 1043, 1043-1044 [2005]). Thus, since, in the case at bar, plaintiff has failed to fully and completely respond to defendants' first and second notices for discovery and inspection and first set of interrogatories, and defendants have failed to respond to plaintiff's discovery requests, they must be directed to so respond or be precluded from offering evidence with respect thereto (see CPLR 3124, 3126).

Similarly, since Noreen Linares has not been produced for deposition and Jesus Linares' deposition was discontinued, plaintiff, following the completion of all of the outstanding document exchanges, must produce its witnesses for depositions (see CPLR 3107, 3113, 3124, 3126). In this regard, defendants argue that since plaintiff cancelled the deposition of Jesus Linares without a proper basis, they are entitled to the monetary sanction of having plaintiff pay the cost of continuing his deposition (see CPLR 3116 [d]). However, in view of the fact that defendants did not disclose the SCI documents upon which they relied in conducting Jesus Linares' deposition, they are not entitled to have plaintiff pay the cost of continuing his deposition.

Plaintiff, in its cross motion, also seeks an order striking defendants' answer or precluding defendants from offering any evidence at the trial of this matter. Plaintiff requests this relief on the alleged basis that defendants have acted improperly in obtaining information regarding the SCI Investigation and the SCI Report from the SCI. Specifically, plaintiff contends that defendants colluded with the SCI to circumvent the notice requirements of CPLR 3120 and CPLR 2307.

Pursuant to CPLR 3120 (1), after an action is commenced, any party may serve a notice for discovery and inspection on a party or a subpoena duces tecum on a nonparty. CPLR 3120 (3) requires a party who issues a subpoena duces tecum on a nonparty to, at the same time, "serve a copy of the subpoena upon all other parties, and, within five days of compliance therewith, in whole or in part, give to each party notice that the items produced in response thereto are available for inspection and copying, specifying the time and place thereof." CPLR 3120 (4) requires compliance with CPLR 2307, which provides:

"A subpoena duces tecum to be served upon a library, or in a department or bureau of a municipal corporation or of the state, or an officer thereof, requiring the production of any books, papers or other things, shall be issued by a justice of the supreme court in the district in which the book, papers or other thing is located or by a judge of the court in which an action for which it is required is triable. Unless the court orders otherwise, a motion for such subpoena shall be made on at least one day's notice to the library, department, bureau or officer having custody of the book, document or other thing and the adverse party."

Plaintiff contends that since pursuant to CPLR 3120 and 2307, documents sought from a nonparty municipal entity must be sought by notice of motion for leave to serve a subpoena on the municipal entity, defendants were required to move, on notice to it, for leave to serve a subpoena on the SCI. Plaintiff complains that no such motion or even notice of a subpoena was [*6]ever served on it by defendants. Plaintiff asserts that defendants' failure to comply with CPLR 3120 and 2307 prevented it from moving for a protective order or from securing its own copy of the SCI investigatory records.

Plaintiff's contention that defendants were required to make a motion for a subpoena, pursuant to CPLR 3120 and 2307, however, is fatally flawed since it is based upon the inaccurate premise that the SCI is a nonparty municipal entity. The SCI is, in fact, a municipal entity, which was created in June 1990 pursuant to the authority of Executive Order No. 11 of the Mayor of the City of New York (Executive Order No. 11), the New York City Charter, and Education Law § 2554 (15) (a) and (21). Plaintiff, in support of its contention that the SCI is a nonparty to this action, cites the statement of purpose recited in Executive Order No. 11, which states as follows:

"By the power vested in me as Mayor of the City of New York, it is hereby ordered:

Section 1. Statement of Purpose. In its report on the Office of the Inspector General of the New York City Board of Education, dated March 15, 1990, the Joint Commission on Integrity in the Public Schools established by the Mayor, the Board of Education and the Chancellor, found that the Office of the Inspector General must be independent of those whom it is called upon to investigate. This Executive Order requires the Commissioner of Investigation to appoint a Deputy Commissioner of Investigation for the City School District of the City of New York (Deputy Commissioner), who will be independent from the Board of Education, and will be responsible for the investigation of corruption, conflicts of interest, unethical conduct and other misconduct within the school district of the City of New York" (emphasis supplied).

Plaintiff argues that since Executive Order No. 11 states that the SCI is independent from the Board of Education (now the DOE), it is a nonparty. Such argument, however, is unavailing since, while the SCI is a separate investigatory entity from the DOE, the SCI is part of the New York City Department of Investigation, which is an agency of the City. Indeed, the SCI is an arm and a part of the government of the City, and it exists for the protection of the government and the people of the City (see generally Board of Educ. of City of NY v Hershkowitz, 308 AD2d 334, 337 [2003]). Here, plaintiff has specifically named the City as one of the defendants in this action. Thus, inasmuch as the City is a named defendant in this action, the SCI, as an agency of the City, cannot be deemed to be a nonparty to this action.

Where documents or information sought are in the possession of an agency which can be deemed to be the City, there is no logical basis for Corporation Counsel to serve a subpoena on a constituent agency of one of her own clients in order to obtain the information which she needs to defend a lawsuit. The purpose of the CPLR 2307 requirements for the issuance of subpoenas and their service on public agencies was simply to afford them an adequate response time (see People v Brown, 128 Misc 2d 149, 151 [1985]). It, in no way, mandates that a subpoena, by court order, must be issued on a municipal public agency of the City, where the municipality itself is actually a party to the action.

In fact, courts have recognized that the DOE has access to investigative documents and reports maintained by the SCI by requiring that the DOE produce, in discovery, SCI documents and reports to the plaintiffs in civil actions (see Anonymous v High School for Envtl. Studies, 32 AD3d 353, 356 [2006]; Pinks v Turnbull, 13 Misc 3d 1204 [A], 2006 NY Slip Op 51687 [U],*1 [2006]). Furthermore, Corporation Counsel's access to reports prepared by the SCI in lawsuits [*7]against the DOE and the City has been noted by the Appellate Division, Second Department (see Matter of Vitucci v City of New York, 272 AD2d 620, 620 [2000]).

Moreover, CPLR 2307 and 3120 are, in any event, wholly inapplicable here since the documents at issue were not subpoenaed, but were voluntarily produced by the SCI. Thus, no judicial process was used to obtain the SCI materials, and there is no violation of procedural requirements where no subpoena is utilized to obtain materials from even a nonparty (see Connors, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 3120:12A, at 235).

Plaintiff's reliance on the case of Matter of Weinberg (129 AD2d 126, 132-133 [1987]) for the holding that an attorney may not obtain documents from a nonparty without giving notice to its adversary, is misplaced as the facts of that case and the legal issues involved are inapposite to those at bar. In Matter of Weinberg (129 AD2d at 132-134), a subpoena duces tecum was used by a party in conjunction with the deposition of a nonparty, and the materials were not shared with its adversary. Here, in contrast (as discussed above), a party, rather than a nonparty, is involved and no subpoena duces tecum was issued to obtain the SCI materials at issue.

Plaintiff asserts, however, that it does not know what information is contained in the SCI's investigation file. Plaintiff points out that the SCI conducted an investigation of it, interviewed its employees, and obtained its records, and did not fully disclose the product of its investigation to it. Although plaintiff admits that it had received a copy of the SCI Report, it complains that the SCI Report is redacted in certain places, and it claims that it is unaware of the SCI Report's true full content. Plaintiff further complains that Corporation Counsel has refused to reveal what documents she secured from the SCI.

Plaintiff's first notice to produce requests, among other things, copies of all documents pertaining to the SCI Investigation of any party involved in the contracts. As noted above, there must be full disclosure where the information sought is material, relevant, and necessary to the prosecution or defense of an action (see CPLR 3101 [1]; Allen, 21 NY2d at 406). Thus, if the evidence obtained by defendants from the SCI is used as a basis for their defense, it is material and relevant, and directly bears upon the claims prosecuted by plaintiff and defended by defendants. It, therefore, would be manifestly unjust to deprive plaintiff of access to this evidence (see CPLR 3101 [a]). Consequently, plaintiff is entitled to notice of the items produced by the SCI and access to this information prior to Jesus Linares' deposition in order for it to have an opportunity to review such evidence.

Defendants argue, though, that they should be permitted to produce the SCI Report in redacted form on the alleged basis that the SCI Report and the documents generated as part of the SCI Investigation are subject to government, public interest, law enforcement, and investigatory privileges. The burden of establishing that material sought to be discovered is privileged, however, falls upon the party opposing disclosure (see Salzer v Farm Family Life Ins. Co., 280 AD2d 844, 845 [2001]; Marten v Eden Park Health Servs., 250 AD2d 44, 46-47 [1998]). Therefore, if defendants seek to resist disclosure, it is incumbent upon them to demonstrate that the SCI materials which they are utilizing is privileged.

Accordingly, defendants' motion, insofar as it seeks an order vacating plaintiff's note of issue and certificate of readiness, pending further discovery, is granted, and the time limit for filing dispositive motions is thereby extended to 60 days following the filing of a new note of issue. Defendants' motion and plaintiff's cross motion are granted insofar as they both seek [*8]orders compelling discovery, and the parties are directed to provide complete responses to all outstanding discovery demands by April 16, 2008 or they shall be precluded from offering testimony or evidence with respect thereto at the trial of this action. Following the completion of the exchange of the outstanding discovery documents, the noticed depositions of Jesus Linares and Noreen Linares shall be scheduled, either by the agreement of the parties or at the further compliance conference to be held on April 16, 2008. Plaintiff's motion is denied insofar as it seeks an order striking defendants' answer, and an order setting this matter down for a trial at this time. Plaintiff's motion is also denied insofar as it seeks an order precluding defendants from offering testimony or evidence at trial with respect to the SCI Investigation or the SCI Report. However, defendants are directed to provide plaintiff with the SCI Report and the documentation supporting it and relating to the SCI Investigation, which they will rely upon at trial. Moreover, any records to be relied upon by defendants as a basis for questioning at Jesus Linares or Noreen Linares' depositions must be disclosed to plaintiff at least 10 days in advance of such depositions. To the extent that defendants consider any of this SCI material to be privileged, they may, if they be so advised, move for a protective order.

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:On January 16, 2008, the court heard oral argument of defendants' motion and plaintiff's cross motion. At that time, the court granted defendants' motion for an order striking plaintiff's note of issue and compelling discovery, and it also dealt with plaintiff's cross motion on the record (see Transcript dated January 16, 2008). However, due to the contentions of the parties and the nature of the legal issues raised, this written decision was necessitated.