Matter of Thomson v Data Field Servs. Inc.
Annotate this CaseDecided on April 14, 2011
Supreme Court, Richmond County
In the Matter of James Thomson, MEGHAN THOMSON, JAMES REYES SALAZAR, BRANDON LINKER and JAMES HART, Petitioners,
against
Data Field Services, Inc., DAVID THOMAS as the Treasurer of the Debi Rose 4 City Council, BOARD OF ELECTIONS IN THE CITY OF NEW YORK, and NEW YORK STATE BOARD OF ELECTIONS, Respondents.
80319/2009
Petitioners/movants were represented by Randy M. Mastro, Esq., Gibson, Dunn & Crutcher LLP
Respondent , Data and Field Services, Inc. was represented by Andrew G. Celli, Jr., Esq., Emery Celli Brinckeroff & Abady LLC
Anthony I. Giacobbe, J.
The following papers were submitted on this motion this 13th day of December 2010:
Order To Show Cause and supporting papers (dated October 1, 2010)1
Affirmation of Randy Mastro, Esq. (dated September 9, 2010)2
Affirmation in Opposition by Andrew G. Celli Jr., Esq
with supporting papers (dated October 12, 2010)3
Affidavit of Michael Boland (dated October 11, 2010)4
Supplemental Affirmation of Randy Mastro, Esq (dated November 5, 2010)5
______________________________________________________________________________
Upon the foregoing papers, petitioners' motion: (1) to hold respondent Data and Field Services, Inc ("DFS") in contempt of the so-ordered Stipulation of Settlement dated February 22, 2010; (2) to compel DFS's compliance with that order; and (3) to compel DFS's disclosure of certain documents is granted to the extent indicated herein, and otherwise is denied.
In this action, commenced pursuant to Election Law Article 14, petitioners alleged, inter alia, that respondent DFS, a for-profit corporation formed by the Working Families Party, charged less-than-fair-market value for the services it provided to its clients, including Debi Rose 4 City Council and other candidates endorsed by the Working Families Party (which is not a party herein).
More specifically, petitioners alleged that DFS made undisclosed in-kind contributions to Debi Rose 4 City Council, the Rose campaign committee for the 2009 primary and general elections, by either failing to charge or undercharging the Rose campaign for costs and services expended on its behalf.
Pursuant to a so-ordered Stipulation of Settlement, dated February 22, 2010, the parties [*2]agreed to resolve the action "on a consensual basis thereby obviating the need for any finding whether respondents violated the State Election Law."
In summary, the so-ordered Stipulation of Settlement provided that
DFS would issue, and Debi Rose 4 City Council would pay, a supplemental invoice in the amount of $8525.00;
Debi Rose 4 City Council would file amended disclosure forms with the New York State and New York City Campaign Finance Boards;
Debi Rose 4 City Council would review all of petitioners' allegations and make any additional disclosures required by law;
DFS would adhere to proper corporate formalities and would operate independently and not under the control of the Working Families Party, the Working Families Organization, and affiliated entities or organizations (collectively the "WFP").
In addition, the Stipulation provided that : (1) for good cause shown based upon changed circumstances, DFS could move before this Court for modification; (2) petitioners would discontinue this action; (3) the stipulation did not constitute an admission that respondents had violated the New York State Election Law or the New York City Campaign Finance Law; (4) a separate confidentiality agreement between the parties would be incorporated into and survive the Stipulation; and (5) this Court would retain jurisdiction over the proceedings.
On June 25, 2010, DFS adopted the advice of counsel for the Working Families Party set forth in a "report" postdating the so-ordered Stipulation, which recommended (1) that the DFS Board of Directors "reconstitute" DFS as a taxable not-for-profit corporation (NFPC) and (2) that, as a NFPC it resolve not to charge any of its clients that are subject to Campaign Finance Board regulation a fee below its own "best estimate" of the actual costs for its services.
Petitioners now move to punish DFS for contempt and to compel its compliance with the so-ordered Stipulation.
Petitioners' Allegations.
The gravamen of the application focuses on DFS's alleged violation of paragraph 4 of the Stipulation of Settlement. More specifically, petitioners alleges that DFS has violated the Court-ordered Stipulation in four material respects:
1. By resolving to reconstitute DFS as a "taxable nonprofit corporation," and adopting a "written policy that it will not contract to charge a CFB-regulated campaign below DFS's best estimate of its costs of fulfilling its contract," DFS has violated paragraph 4[e] which required it to charge fair market value for the actual services provided by DFS as a for-profit corporation.
2. By offering its valuable voter database (known as the Voter Activation Network, or VAN) to current and prospective clients without first retaining an independent expert acceptable to petitioners to evaluate its fair market value, DFS has violated paragraph 4[g].
3. By failing to appoint a majority of the members of the newly-constituted Board who are independent of the WFP (as defined in the Stipulation), DFS has violated paragraph 4[a].
4. By failing to take steps sufficient to establish management, administration and [*3]employment structures that are independent of and not controlled by WFP (as defined in the Stipulation), DFS has violated paragraphs 4[a] and 4[b].
Respondent's Opposition.
In opposition, DFS maintains that petitioners have not met their burden to show a "reasonable certainty" that it is in contempt. Rather, it argues that:
1. To the extent that the court-ordered Stipulation does not specify the precise corporate form that DFS must take and "there certainly is no term in the Stipulation that forbids DFS from adopting the status of a not-for-profit corporation," it was free to adopt the recommendation made by the attorneys hired by WFP that DFS reconstitute as a taxable not-for-profit corporation and then charge its clients at cost for the services it provides.
2. DFS has not offered the VAN to its clients. Rather, it asserts that its clients obtain the VAN and similar Customer Relations Management software from sources other than DFS, and DFS now merely "services" the software that its clients provide to it.
3. DFS has an independent Board as required by the Stipulation. For example, although Board member Ott worked within the past two years for a business that contributed to the Working Families Party, the contribution by that entity was made more than two years ago, and therefore, Ott's Board membership does not violate the two-year restriction in the Stipulation.
Finally, DFS maintains that it is under no obligation to produce any documents for petitioner's review and that its offer to provide them to the Court for in camera review suffices to meet any obligation under the Stipulation.
A. Contempt
It is well-settled that stipulations of settlement entered into in open court are contracts binding upon the parties thereto (Schwartz v. Schwartz, 79 AD3d 1006 [2nd Dep't 2010]). Moreover, when so-ordered by the Court, such stipulations are subject to the full panoply of judicial enforcement, as would any direct order of the Court (Judiciary Law §753; McCormick v. Axelrod, 59 NY2d 574 [1983], amended 60 NY2d 652).
Here, then, the question before the Court is to what extent, if any, DFS has violated this Court's Order of February 22, 2010.
As a general practice, such an issue would raise a question of fact requiring at a minimum an evidentiary hearing. However, where, as here, the essential facts are undisputed, or admitted, no such hearing is necessary, and the Court is presented only with a question of law, i.e., to what extent, if any, do the undisputed facts constitute contempt of its order (Brown v. Mudry, 55 AD3d 828 [2nd Dep't 2008]).
In this regard, the willful and contumacious character of a respondent's conduct properly may be inferred from its noncompliance with a so-ordered stipulation (Stinton v. Robin's Wood, Inc., 45 AD3d 203 [2nd Dep't 2007], lv denied 10 NY3d 708 [2008]), provided that the stipulation expresses an unequivocal judicial mandate (Hollander v. Fasano, 35 AD3d 210 [1st Dep't 2006]).
Such is the case presented here.
Initially, the Court notes that the Stipulation specifically provides that to the extent necessary, DFS may "apply to this Court, on notice to Petitioners through their attorneys, for an order modifying any provision set forth in paragraph 4 . . . for good cause shown based upon changed circumstances." It is undisputed that DFS did not make such an application to the Court. Rather, it engaged in self-help in a transparent attempt to finesse both the letter and spirit of the Court's Order. [*4]
The disingenuousness of DFS's contumacious conduct is only highlighted by its counsel's present argument that its conduct in (1) purporting to reconstitute itself as a not-for-profit corporation; (2) unilaterally determining its charges for services "at cost;" and (3) continuing to service its clients' Customer Relations Management software as the functional equivalent of the VAN, are not inconsistent with its interpretation of the so-ordered Stipulation of Settlement. At a minimum, these unilaterally-changed circumstances warranted application to the Court for modification of its Order.
Accordingly, to the extent DFS engaged in these activities without seeking modification, it has violated this Court's Order in the following respects:
1. DFS has resolved to reconstitute itself as a not-for-profit corporation and to charge its clients at cost for its services.
The instant action had its genesis in respondent's DFS's alleged violation of the Election Law in failing to charge its select clients fair market value for its services. While admitting no wrongdoing in resolving these allegations, DFS represented inter alia that it would thereafter provide its actual services as a for-profit corporation and charge its clients fair market value for those services.
Rather than either complying with this Court-ordered requirement or seeking its modification, DFS adopted the advice of an attorney engaged by the Working Families Party who recommended in "report"postdating the Court's order that DFS "reconstitute" itself as a not-for-profit corporation and set its "best estimate" of its costs as the basis for the fees it charges.
2. DFS has failed to obtain an independent evaluation of its Customer Relations Management software, the Voter Activation Network, before servicing its clients.
Moreover, it is clear that DFS is continuing to offer its clients the information contained in its Voter Activation Network database, To this extent, the affidavit of Michael Boland, Executive Director of DFS, is less than frank. Mr. Boland acknowledges that as part of its canvassing contracts, DFS manages and inputs data from the canvasses it conducts into its client relations management software. He further concedes that DFS continues to provide management and administration of CRM databases to its clients and does not deny that the data it provides is from its own VAN database.[FN1]
Thus, this Court is satisfied that the unrefuted evidence clearly establishes that DFS has violated the Court's Order by providing access to information contained in the VAN to its clients without an evaluation of its actual fair market value.
In this regard, it is irrelevant which CRM software DFS unilaterally chooses to use or discard in disseminating the data accrued through the VAN. It is the VAN-acquired data that is the sine qua non of its service to its clients and which is the primary subject of the Court-ordered Stipulation. Respondent will not be heard to finesse that unequivocal Order by the simple expedient of alternative dissemination.
3. DFS has failed to effectuate the appointment of sufficiently independent directors to constitute a majority of its Board of Directors as defined in the so-ordered Stipulation of Settlement.
It is undisputed that DFS has a four-member Board of Directors and that paragraph 4[a] of the Stipulation requires that a majority of the Board members be independent, i.e., for the preceding [*5]two-year period the member has not been an employee of, member of, or contributor to the Working Families Party, the Working Families Organization or affiliated agencies or of any contributor to those organizations.
It also is conceded that at least one Board member is not independent as defined, and that one other Board member has been employed within the last two years by an organization that contributed, albeit more than two years ago, to the Working Families Party.
In this regard, the clear language of the Stipulation is beyond cavil. No Board member shall be deemed independent if "for a period of at least two years prior to appointment" he has been "employed by a contributor to the WFP" (as therein defined). Given the challenged member's employment status within two years of appointment, he is ineligible for appointment to the Board, and his continued service as a board member constitutes a violation of the Court's order.
4. DFS has failed to establish and maintain its independence from the Working Families Party, the Working Families Organization and their affiliated entities or organizations.
It is undisputed that DFS continues to share office space with the Working Families Party; that its present Executive Director is the former Field Director for that party; and that there is no division of labor among employees DFS admittedly shares with that party.
To the extent stipulated by the parties, this Court ordered express changes in the management, administrative and employment structures between DFS and the Working Families Party. The mandate is clear and unequivocal: on and after February 22, 2010, DFS s payroll system, finance record keeping, IT department and its full-time administrative staff was to be independent of and not controlled by the WFP (as defined in the Stipulation).
That provision was a prospective requirement that all relevant connections be severed. It is not precatory. Nor, contrary to respondent's suggestion, is it satisfied by maintaining the status quo ante.
To the extent, then, that DFS has failed to establish and maintain its independence in accordance with paragraph 4, it is in contempt of this Court's Order.
Accordingly, petitioners, as the aggrieved party, are entitled to recover $250.00 from respondents, the amount which appears to be the statutory maximum that may be assessed for respondents' contempt, together with petitioners'costs and expenses in prosecuting this motion, to include reasonable attorneys' fees [Judiciary Law §773; Schwartz v. Schwartz, 79 AD3d 1006; Glanzman v. Fischman, 183 AD2d 748 [2nd Dept 1992]).
B. Disclosure.
To the extent obviated by the instant Decision and Order, so much of petitioner's application as seeks to compel DFS to disclose certain documents is denied without prejudice.
Accordingly, it is
ORDERED that petitioner's application to hold respondent DFS in contempt is granted; and it is further
ORDERED that respondent DFS is held in contempt of this Court's Order of February 22, 2010; and it is further
ORDERED the Stipulation of Settlement is incorporated herein and made a part hereof; and it is further
ORDERED that respondent DFS shall submit proof of compliance with all aspects of the Stipulation of Settlement and this Order within thirty days of service upon it of a copy of this Order [*6]with Notice of Entry; and it is further
ORDERED that respondent DFS is assessed $250.00 to be paid within ten days following service upon it of a copy of this Order with Notice of Entry; and it is further
ORDERED that petitioners shall recover of respondent DFS their costs and disbursements, including attorneys' fees, incurred in the prosecution of this contempt motion, the amount to be determined upon application to the Court; and it is further
ORDERED that the balance of the motion is denied.
ENTER
Dated:_________________________________
Justice Anthony I. Giacobbe
J.S.C Footnotes
Footnote 1: The Court rejects as tailored Mr. Boland's subsequent assertion to the contrary.
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