Matter of Lasertron Inc. v Empire State Dev. Corp.
Annotate this CaseDecided on January 4, 2021
Supreme Court, Erie County
In the Matter of the Application of Lasertron, Inc., and its wholly-owned subsidiary LT JOINT VENTURES, INC., Petitioner,
against
Empire State Development Corporation, COUNTY OF ERIE, and ERIE COUNTY DEPARTMENT OF HEALTH, Respondents.
813573/2020
ROACH, LENNON & BROWN
J. Michael Lennon, Esq.
Attorneys for Petitioner
LETITIA JAMES
Attorney General of the State of
New York
George M. Zimmerman, Esq.
Attorney for Respondent Empire
State Development Corporation
MICHAEL A. SIRAGUSA
Erie County Attorney
Attorney for Respondents
County of Erie and Erie County
Department of Health
Emilio Colaiacovo, J.
This proceeding was brought by way of a Petition filed pursuant to Article 78 of the Civil Practice Law and Rules challenging a determination made by the Erie County Department of Health (hereinafter "ECDOH") that directed Petitioners (hereinafter "Lasertron") to cease operations. Lasertron argues that Respondents reclassified its business activities arbitrarily despite an inspection that found compliance with all COVID-19 guidelines. Lastertron sought a permanent injunction restraining Respondents from enforcing the determination that forced it to close. Respondents maintain that the determination to close Lasertron was consistent with the Governor's Executive Orders made in response to the COVID-19 pandemic. Further, [*2]Respondents insist that the decision to reclassify Lasertron was neither arbitrary nor capricious. The Court's decision is as follows.
STATEMENT OF FACTS & PROCEDURAL HISTORY
Lasertron operates a "laser-tag" facility in Amherst, New York where patrons engage in recreational shooting using infrared-emitting light guns to tag designated targets. Essential to this application is the manner in which laser-tag is classified. According to the Petition, laser-tag is classified by the North American Industry Classification System (hereinafter "NAICS") with paintball and "other similar fields and arenas". See Verified Petition, ¶6 and "Exhibit A". "Paintball" is listed as a "moderate risk sport in a 'non-exhaustive' list." Id. ¶7 and "Exhibit B". Moderate risk sports and activities are permitted to operate under existing COVID-19 guidelines.At the nascent stage of the novel coronavirus pandemic, Lasertron was forced to close in March 2020. Thereafter, as part of the Governor's re-opening directives, Lasertron resumed operations in July 2020. According to the Petition and the affidavit of James Kessler, the CEO of Lasertron, Lastertron asserts that it has exceeded guidelines enacted to maintain the safety of patrons. In particular, face masks are required, there are hand-sanitizing stations, and social distancing markers are placed throughout the 9,200 square foot facility. Also, Lasertron limits the number of players to twenty-four. This is less than 50% of its normal capacity. See Affidavit of James Kessler, ¶12. It is estimated that the reduction in capacity ensures approximately twenty feet of distance between individual patrons in the laster-tag facility. The facility has three separate HVAC units to facilitate air movement. Id. at ¶16. All vests and equipment are cleaned and disinfected using "hospital-grade virucide" that has a ten-minute kill time. Id. at ¶18.
On September 18, 2020, an inspector from the ECDOH visited Lasertron's facility and conducted an inspection to ascertain whether there was compliance with COVID-19 guidelines and the Governor's Executive Orders. The ECDOH inspector noted in her report that all vests were disinfected after each use as were "seats, joysticks and scoops." See, Verified Petition, "Exhibit C". The inspector concluded her inspection and issued a report stating that safety measures at the Lasertron facility were "satisfactory." Id.
On October 6, 2020, Lastertron received a determination from the ECDOH reclassifying Lasertron as a "place of public amusement" and, in accordance with the State's Re-Opening guidelines, directed it to cease operations. Id., "Exhibit D". Notwithstanding Lasertron's efforts to seek clarification or reversal of its determination, on October 22, 2020, ECDOH refused to withdraw its determination. Although ECDOH advised Lasertron it could "appeal" the determination, it failed to explain or point to the appellate process that it advised was available for administrative agency appeals.
Subsequent to the October 22, 2020 refusal, Lasertron commenced this proceeding on October 27, 2020. In its Petition, Lasertron alleged that ECDOH's determination that it cease operations deprived Petitioner of its property rights without due process. Further, Lasertron maintained that the ECDOH's decision was contrary to the COVID-19 guidelines and prior classifications. Lastly, Petitioner alleged that Respondent Empire State Development Corporation (hereinafter "ESDC") did not have the authority to enforce the determination.
This Court, after being presented with an Order to Show Cause and upon hearing argument from counsel, granted Lasertron a Temporary Restraining Order on October 29, 2020 enjoining Respondents from enforcing the October 6, 2020 determination. Argument was scheduled thereafter to consider whether Lasertron was entitled to a preliminary injunction. [*3]After argument, in lieu of calling witnesses, the parties agreed to submit further affidavits in response to issues raised during argument.
FINDINGS OF FACT
Petitioner
Argument was held on December 15, 2020 on whether Lastertron was entitled to a preliminary injunction pending a determination on the merits of this proceeding. Lasertron maintained that by "shutting down" its facility without any administrative remedy, Lasertron was deprived of its property rights without due process. While Lastertron acknowledges that it had a right, pursuant to Article 78, to challenge the determination made by ECDOH, it argues that it was assured by ECDOH when it was closed that they had a right to appeal, though a procedure for one never existed. That, in and of itself, Lasertron insists, was a due process violation.
Also, Lasertron argues that the reclassification from the prior categorization along with "paintball" to a "place of public amusement" was done without a sufficient rationale. Without any explanation, ESDC determined that Lasertron should be treated the same as trampoline parks as opposed to its long-standing classification with other similar recreational activities.
Notwithstanding the reclassification, Lasertron maintains that numerous places of public amusement have been allowed to open and continue operations in Phase IV though Lasertron was directed to close. Lasertron pointed to the State's own website that permitted "paintball and other sports and recreation activities with similar abilities to maintain physical distance and/or limit exposure to shared equipment prior to such equipment being cleaned and disinfected." See Verified Petition, ¶28. Because Lasetron took steps to limit patrons to less than 50%, required face masks, promoted significant social distancing, and disinfected equipment and common areas with great frequency, they were compliant with State guidelines and thus could remain open. The decision to shut down Lasertron, it argued, contradicted the State's own guidelines. As such, the Respondents' decision was arbitrary and capricious.
ECDOH
ECDOH did not contest the fact that its own inspector found no compliance issues and made a favorable determination following the inspection on September 18, 2020. Instead, it argued that when a supervisor reviewed the inspection report, it sought clarification from ESDC. ECDOH did not sufficiently explain why the Supervisor sought clarification from the ESDC.
ECDOH submitted the affidavit of Thomas Muscarella, a Senior Public Health Sanitarian for the Erie County Department of Health. Muscarella, who prior to the COVID-19 pandemic coordinated lead-paint based projects in the County, now is entrusted with the weighty responsibility of second-guessing the work of trained professionals whose job it is to inspect facilities based on their knowledge of applicable guidelines and regulations during a public health crisis. In his affidavit, Muscarella explained that he had questions about the inspection report that necessitated his contact with ESDC. More specifically, Muscarella maintained that the inspection report focused more on sanitation of Lastertron's restaurant area than the laser-tag facility. It was the absence of information about the laser-tag facility that prompted his outreach. This explanation is belied by the most cursory examination of the inspection report, which plainly shows the inspector's notation of steps taken by Lasertron to ensure compliance with COVID-19 guidelines, namely social distancing, mask-wearing, hand sanitizing, and sanitizing of equipment with hospital grade virucide. Based on Muscarella's affidavit, his after-the-fact explanations for the reason for his outreach to ESDC is certainly suspect.
Muscarella sent an email to ESDC asking for clarification about certain facilities. [*4]Though redacted, Lasertron and what appeared to be kids' gymnasiums, were included in his email seeking clarification.While short on details, Muscarella simply listed the name of the facility and their web site. He cites to no specific concern nor does he reference the fact that Lasertron was inspected days before and received a favorable report. Subsequently, Muscarella received an email from Amanda Mays, who appears to work for ESCD. Though it remains unclear what her position is with ESCD or what authority she possesses, on September 23, 2020 she responded:
Hi Tom,
They should all be closed as places of amusement
But otherwise the facility falls under the same way thattrampoline parks do, which is for amusement.
Thanks!
Amanda
See Answer and Response to Petition, County of Erie and Erie County Department of Health. In this very short email, Mays found that because amusement was derived from this activity, it needed to be closed. No mention was made of the original NAICS categorization nor any reference to any other specific regulation, Executive Order, or code. Instead, with little explanation or record of the reasons for this decision, the ECDOH relied on this unsupported conclusion.
During argument, the ECDOH conceded that it was unaware of any positive cases of COVID-19 traced back to Lasertron. Further, ECDOH conceded that no contract tracers were ever deployed to Lasertron or communicated with any patrons regarding any exposure.
Regarding the right to appeal the determination to close, Thomas Muscarella sent an email to Lasertron on October 22, 2020 that advised any appeal should be directed to Jennifer Delaney, Director of Environmental Health. However, in an affidavit from Jennifer Delaney, she conceded that "ECDOH Environmental Health does not have an appeals process for a cease and desist letter." See Affidavit of Jennifer Delaney, P.E., ¶5. Interestingly, Delaney maintains that an appellate process only exists if a fine is issued. Id. at ¶6-7. Curiously, notwithstanding the assurances of a supervisor, no appeals process exists for the closure of a business.
ESDC
ESDC is a public benefit corporation whose mission is to promote economic development in New York State through such mechanisms as loans, grants, and various tax incentives. Since the onset of the COVID-19 pandemic, ESDC is now tasked with providing assistance to businesses with COVID-19-related information and resources. ESDC was the municipal authority to which the County DOH sought guidance on whether Laserton should remain open or closed. In its Answer, ESDC attempted to lay the appropriate foundation to otherwise convince the Court that notwithstanding its prior reclassification, Lasertron was a public place of amusement and did not fit into any of the exceptions contained in one of the many Executive Orders.
ESDC relied heavily on the Affidavit of Debra S. Blog, M.D., MPH, in support of its conclusory determination to close Lasertron. In her affidavit, Dr. Blog, the Director of Epidemiology for the State Department of Health, provided a lengthy history of the current pandemic and a self-laudatory examination of the steps taken by the State to address the pandemic. Though much of the affidavit was more of a historical accounting of the coronavirus, Dr. Blog asserted generalized risks associated with Lasertron and concluded that it posed an [*5]unacceptable health risk. However, in its reply, Lasertron notes that Dr. Blog's affidavit barely mentions the favorable health inspection report or the steps taken by Lasertron to ensure safety. Despite the first-hand observations of the Health Inspector, Dr. Blog's affidavit is more appropriate for the classroom rather than authority to address the practicalities of everyday life, which businesses such as Lasertron have been faced with since the early stages of COVID-19. In its rebuttal, Lasetron asserts that:,
"Respondents stubborn insistence that Petitioner is simply a 'place of public amusement' and therefore cannot re-open is belied by the guidance put out by the State, which does not specifically forbid laser tag facilities to re-open (while specifically listing other facilities that must remain closed and provides exceptions for 'other sport and recreational activities under this code', which 'may be permitted only if and as described by the Sports and Recreation guidance."See Affidavit of J. Michael Lennon, Esq., ¶15. Also, Lasertron reiterates that it ensured proper social distancing, adequate ventilation, and cleaning and disinfecting equipment, all of which is not disputed by Respondents.
ESDC relied heavily on Supreme Court precedent decided over a century ago to support the expansive and broad reach of authority the Governor has relied on in promulgating his Executive Orders. In Jacobson v. Commonwealth of Massachusetts, the United States Supreme Court declared that "a community has the right to protect itself against an epidemic of disease which threatens its members. 197 U.S. 11, 27 (1905). ESDC argues that this authority, which had rarely been tested prior to the onset of the COVID-19 epidemic, shields the Executive from judicial scrutiny and challenges like those of the Petitioner and other affected businesses. To that end, ESDC maintains that Lasertron cannot "second guess" the otherwise rational exercise of duty delegated to the Executive during a health crisis, seemingly suggesting that rights and protections of due process do not exist when a health crisis presents itself.
ESDC also submits that judicial deference must be afforded to administrative agencies like the Respondents so long as regulations are not irrational. Further, Respondent maintains that notwithstanding the closure order, Lasertron has not been able to demonstrate a deprivation of a business right. ESDC argues that the negative impact on business operations, as Lasertron suggests, is insufficient to argue a due process claim. Lastly, ESDC insist that its decision to recommend closure was not arbitrary or capricious. It is worth noting that during oral argument, the Court requested some explanation from Amanda Mays as to the process she followed when she made the determination to close Lastertron. No affidavit or reply addressing this critical issue was ever supplied.
STANDARD OF LAW
On a motion for a preliminary injunction, the moving party must demonstrate by clear and convincing evidence a likelihood of ultimate success on the merits, irreparable injury if the injunction were not granted, and a balancing of equities in favor of granting the injunction. Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 NY3d 839 (2005); Aetna Ins. Co. v. Capasso, 75 NY2d 860 (1990).If any one of these three requirements are not satisfied, the motion must be denied. Faberge Intern., Inc. v. Di Pino, 109 AD2d 235 (1st Dep't. 1985). An injunction is a provisional remedy to maintain the status quo and prevent the dissipation of property that could render a judgment ineffectual. However, it is not to determine the ultimate rights of the parties. As such, absent extraordinary circumstances, a preliminary injunction will not issue where to do so would grant the movant the ultimate relief sought in the complaint. Reichman v. Reichman, [*6]88 AD3d 680, (2nd Dep't. 2011); SHS Baisley, LLC v. Res Land, Inc., 18 AD3d 727 (2nd Dep't. 2005). In addition, preliminary injunctions should not be granted absent extraordinary or unique circumstances or where the final judgment may otherwise fail to afford complete relief. SHS Baisley, LLC v. Res Land, Inc., 18 AD3d at 727, supra. However, the decision whether to grant or deny a preliminary injunction is within the sound discretion of the Court. Masjid Usman, Inc. v. Beech 140, LLC, 68 AD3d 942 (2nd Dep't. 2009).
Here, the Court must evaluate the preliminary injunctive standard in the context of the requirements under Article 78 of the CPLR. Article 78 of the CPLR is the main procedural vehicle to review and challenge administrative action in New York. On judicial review of an administrative action under CPLR Article 78, courts must uphold the administrative exercise of discretion unless it has "no rational basis" or the action is "arbitrary and capricious." Matter of Pell v. Board of Ed. Union Free School District, 34 NY2d 222 (1974). "The arbitrary and capricious test chiefly relates to whether a particular action should have been taken or is justified . . . and whether the administrative action is without foundation in fact. Arbitrary action is without sound basis in reason and is generally taken without regard to the facts." Id. at 231; See also Jackson v. New York State Urban Dev Corp., 67 NY2d 400 (1986). Rationality is the key in determining whether an action is arbitrary and capricious or an abuse of discretion. Matter of Pell v. Board of Education, 34 NY2d at 231. The Court's function is completed on finding that a rational basis supports the administrative determination. See Howard v. Wyman, 28 NY2d 434 (1971). "Where the administrative interpretation is founded on a rational basis, that interpretation should be affirmed even if the court might have come to a different conclusion." Mid-State Management Corp. v. New York City Conciliation and Appeals Board, 112 AD2d 72 (1st Dep't. 1985) aff'd 66 NY2d 1032 (1985); Matter of Savetsky v. Zoning Bd. of Appeals of Southampton, 5 AD3d 779 (2d Dep't. 2004).
CONCLUSIONS OF LAW
It is important to note that, in considering the Petitioner's request, the Court need not answer the ultimate question here. Instead, when confronted with the request for a preliminary injunction, the Court need only demonstrate (1) the likelihood of success on the merits, irreparable injury, and a balancing of the equities in favor of granting the preliminary injunction. Family-Friendly Media, Inc. v. Recorder Television Network, 74 AD3d 738 (2nd Dep't. 2010). From the available record, the Court finds that a preliminary injunction is warranted under the circumstances.
While it is understood that recommendations of those in the public health field should be given considerable weight, this does not mean that carte blanche is generously given to governmental authorities without redress or review. The Court finds the cavalier process adopted by the State when it reclassified Lasertron is nothing short of arbitrary and capricious. When asked to explain the evaluation process EDSC undertook when asked by the DOH to review the determination of the health inspector, the Court received an unavailing, perfunctory response. When ECDOH was asked to explain what was in the Inspector's report that prompted the Supervisor to seek guidance from the State, again, the Court received generalities and few specifics. In reviewing whether the closure was arbitrary or capricious, Lasertron has demonstrated that the Respondents' decisions were haphazard and devoid of logic.
It is clear that the decision to force closure will most certainly result in discharging employees, loss of goodwill and have adverse business effects that the Respondents dismissed as irrelevant. Even Dr. Blog's affidavit is replete with dismissive conclusions that, while perhaps of [*7]interest in academia, are of little comfort to businesses that are forced to see their source of income and support for their families, let alone that of their employees, vanish. Notwithstanding issues of public health, a higher standard must be expected of government officials who take these drastic steps. Here, the record lacks any meaningful insight as to why the decision was made to second guess an Inspector who, based on a physical inspection of the premises, found compliance and made a determination that the results were satisfactory.
Respondents could not (or would not) answer why certain indoor activities were permitted and others, like Lasertron, were not. When considering the example of indoor soccer, Respondents argued that it is not a physical activity that involves physical contact. Respondents clearly have not observed many youth soccer games.Arguably, there is more physical contact in youth soccer where participants chase after the same ball, than, for example, laser tag, where the object is to stay as far away as possible from your opponent. This was one of many examples Respondents failed to adequately clarify to the Court's satisfaction.
Here, the record demonstrates that Petitioner abided by all COVID-19 restrictions and adopted even more stringent practices than required. Lasertron greatly reduced occupancy rates, closed its arcade, sanitized the equipment with hospital grade virucide and enhanced social distancing inside the laser tag facility. No one disputes the inspector's report that found no issues with Lasertron's compliance. In turn, Respondents offered no evidence or credible theory that would otherwise support such closures. Further, the Respondents conceded they were unaware of any COVID-19 cases that were traced back to Lasertron. Given the steps Lasertron took to ensure compliance and the favorable inspection report, the ECDOH's decision to seek guidance and ESDC's whimsical response defies credulity. While there exists a basis for the State to protect the public, Respondents' actions here are arbitrary and capricious and do not exhibit the least restrictive means to achieve the State's goals.
Respondent ESDC relies heavily on Jacobson to justify its expansive and sweeping powers. However, Jacobson is hardly the super-precedent that it is purported to be. The 1905 case addresses a challenge to a state law that required residents to be vaccinated against smallpox or pay a $5 fine. The burden in Jacobson was fairly modest - either get vaccinated or pay a fine. Here, the burden is unlimited, as the result is closure and the forfeiture of your business and livelihood. As Justice Gorsuch noted in his concurring opinion in Roman Catholic Diocese of Brooklyn, New York v. Cuomo,
"Why have some mistaken this Court's modest decision in Jacobson for a towering authority that overshadows the Constitution during a pandemic? In the end, I can only surmise that much of the answer lies in a particular judicial impulse to stay out of the way in the times of crisis. But if that impulse may be understandable or even admirable in other circumstances, we may not shelter in place when the Constitution is under attack. Things never go well when we do."592 U.S. ______ (2020)[FN1] . Granted, the fate of the Republic is not endangered should Lasertag not be permitted. Further, the rights under assault in the current case are different from those in Roman Catholic Diocese of Brooklyn, New York v. Cuomo. However, this is not how we balance rights or priorities. Each right or value adversely affects the aggrieved party in such a way that forces them to seek certain relief. This is precisely Lasertron's motivation here. The [*8]haphazard manner in which the Respondents applied Executive Orders forced the closure of this business, which left it without redress. The Court must not shy away from performing their independent and constitutionally required role in reviewing the decisions of the State so as to ensure that government does not take its broad authority to a point of abuse. Judicial deference has its limits.Here, considering the record shows full compliance by Lastertron with state imposed requirements — to the satisfaction of ECDOH - and no scientific evidence of any coronavirus transmission from its facility, the decision to seek clarification, when none was necessary, which resulted in an arbitrary reclassification with no account of the facts only goes to prove the Court's concern.
The Court finds that Lasertron has demonstrated the need for injunctive relief pending a determination on the merits. In light of the Court's analysis, Lasertron has demonstrated that there is a likelihood of success that it will prevail on the merits of its petition. As to irreparable harm, Lasertron must show that absent injunctive relief, it will suffer "an injury that is neither remote or speculative, but actually and imminent." Freedom Holdings v. Spitzer, 408 F.3d 112 (2005). A moving party's loss of current or future market share may constitute irreparable harm. Id. at 114-115; See also Battenkill Veterinary Equine P.C. v. Cangelosi, 1 AD3d 856 (3rd Dep't. 2003). Lasertron has shown that the continued closure of its business will result in incalculable financial damages and loss of customers. For Respondents to suggest otherwise shows a disconnect with the perils small businesses face, especially when confronted with governmentally imposed restrictions, the likes of which have never been seen before. Lastly, as to the balancing of equities, Lasertron would suffer a greater burden than that of the Respondents if a preliminary injunction is not granted. See Destiny USA Holdings, LLC v. Citigroup Global Mkts. Realty Corp., 69 AD3d 212 (4th Dep't. 2009). The Court certainly takes into account the interests of the general public as well as the interests of the litigants here when making its finding. De Pina v. Educational Testing Serv., 31 AD2d 744 (2nd Dep't. 1969). Wholesale determinations such as the one made here by executive fiat at the expense of the rights of individuals and businesses, without a right of appeal, cannot be permitted to continue. As such, Petitioner is hereby granted a preliminary injunction from enforcing the October 6, 2020 determination.
As to the issue of an undertaking, the Court hereby reserves on directing the posting of an undertaking. The Court shall address the question of an undertaking, and its necessity, at a conference to be held on February 1, 2021 at 10:00 a.m.
Petitioner shall submit an Order in accordance with this memorandum decision.
_________________________________
Hon. Emilio Colaiacovo, J.S.C.
ENTER
January 4, 2021
Buffalo, New York Footnotes
Footnote 1:Citation pending.
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