Although a contract may provide for the resolution of disputes by arbitration, litigation-related conduct by a party may constitute a waiver of its right to demand arbitration

Although a contract may provide for the resolution of disputes by arbitration, litigation-related conduct by a party may constitute a waiver of its right to demand arbitration

Cusimano v Schnurr, 2015 NY Slip Op 09232, Court of Appeals

The issues presented by this appeal are whether the Federal Arbitration Act [FAA] is applicable to disputes arising under the several agreements at issue in this action and, if so, whether the plaintiffs, Rita and Dominic Cusimano waived their right to arbitrate the dispute by pursuit of this litigation in court. The Court of Appeals held that although the FAA does apply in this instance, the Cusimanos, by their actions in initiating litigation concerning the matter in Supreme Court, waived their right to arbitrate their complaint.

Citing 9 USC §2, the Court of Appeals said that the FAA provides that "[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

In this instance the court found that the ultimate purpose of the agreements was to authorize participation in the business of commercial real estate and that was, in fact, what the entities did. In determining whether the FAA applies, the emphasis is meant to be on whether the particular economic activity at issue affects interstate commerce — and, concluded the Court of Appeals, here it does.

In Stark v Molod Spitz DiSantis & Stark, PC, 9 NY3d 59, it was held that “like contract rights generally, a right to arbitration may be modified, waived or abandoned.”  Thus, said the court, a litigant may not compel arbitration when its use of the courts is “clearly inconsistent with [its] later claim that the parties were obligated to settle their differences by arbitration.”

Although not every attempt to litigate an issue in court “effects a waiver of the right to arbitrate," in this instance the Court of Appeals was satisfied that the totality of the Cusimanos' conduct here establishes its waiver of its right to arbitrate the matter, explaining that although federal policy expresses a preference in favor of arbitration, when addressing waiver, courts should consider the amount of litigation that has occurred, the length of time between the start of the litigation and the arbitration request, and whether prejudice has been established.

In the words of the Court of Appeals, “[a]fter vigorously pursuing their litigation strategy for approximately one year, the Cusimanos moved to compel arbitration. Even more telling, said the court, the Cusimanos' desire for arbitration only arose after Supreme Court made plain its view that the Cusimanos' claims were vexatious and largely time-barred. Indeed, in the court of its litigation before the Supreme Court, the Cusimanos had expressly represented to the court that they did not want to go to arbitration.”

Deeming the Cusimanos' behavior in this regard suggests “forum-shopping,” the Court of Appeals concluded that under these circumstances, prejudice against Schnurr has clearly been established. Finding that the Cusimanos actions had constituted a waiver their right to arbitration, the Court of Appeals said that the issue of timeliness should be determined by the court. Further, the court noted that although in previous cases it had, in dicta,* indicated that waiver is generally one of the issues that should be decided by the arbitrator, courts have held that whether a party has waived arbitration by litigation-related conduct is an issue for the courts,

* Dicta – a statement or observation in a judicial ruling or interpretation that was not part of the legal basis for judgment.

The decision has been posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2015/2015_09232.htm

Removing a public officer holding an office for specific term pursuant to a “municipal cooperative agreement” before his or her term of office expires for other than cause

Removing a public officer holding an office for specific term pursuant to a “municipal cooperative agreement” before his or her term of office expires for other than cause

Rubeor v Town of Wright, 2015 NY Slip Op 08895, Appellate Division, Third Department

Steven Rubeor was appointed to fill the unexpired term of his predecessor as Assessor of the Town of Wright [Wright], the Town of Esperance and the Town of Schoharie, each town having entered into a municipal cooperative agreement establishing a coordinated assessment program [CAP]. Under a CAP, "a single assessor [is] appointed to hold the office of assessor in all the participating assessing units."

In December 2012, prior to the expiration of Rubeor 's term, Wright’s Town Board [Board] resolved to withdraw from the CAP and appointed Susan Crosby as the Town's interim Assessor. Rubeor initiated a combined CPLR Article 78 proceeding and action pursuant to 42 USC §1983, a federal civil rights law,* asserting that the Board improperly removed him from office, depriving him of a vested property right. Supreme Court granted Rubeor’s petition to the extent of annulling the Board's determination to remove him as Wright’s assessor, concluding that he was entitled to complete his term, which ended on September 30, 2013. Wright appealed.

The Appellate Division affirmed the Supreme Court’s ruling.

Noting that “This dispute raises an issue of first impression as to whether a town's withdrawal from a CAP truncates an assessor's term of office,” the court said that: 

[1] there is no dispute here that Wright is required to appoint an assessor, whose term of office shall be six years; and 

[2] an assessor is a public officer who ordinarily may only be removed from office for cause under Public Officers Law §36. 

The question presented here, said the Appellate Division “is whether a CAP changes this structure.”

While the statute provides that an assessor's term shall be for six years, it further provides that a member of a CAP may withdraw from a CAP at any time, provided that it does so at least 45 days before the next taxable status date. However, the said the court, “The statute is otherwise silent as to what happens to an assessor's term when, as here, a CAP member opts to withdraw prior to the expiration of the [assessor’s] term.”

In construing a statute the Appellate Division said the court must:

1. Determine the Legislature's intention, giving due effect to the plain meaning of unambiguous statutory language; and

2. Where the statute has “competing provisions,” the statute must be construed “as a whole and that its various sections must be considered with reference to one another."

Noting that an amendment to the Real Property Tax Law §579 in 2009, among other things, clarified that an assessor appointed in a CAP receives a six-year term and shortened the notice period for a CAP member to withdraw from the CAP, the Appellate Division concluded that the adoption of these companion provisions demonstrated that the Legislature intended to keep an assessor's six-year term intact even where a CAP member elects to withdraw from the CAP. Accordingly, insofar as the assessor is concerned, the effect of withdrawal from the CAP “is merely delayed until the assessor's term expires, at which time the assessing unit is free to choose a new assessor, without approval from any other assessing unit” in the CAP.**

Although in an 1997 the Department of Taxation and Finance's counsel  opined that the adoption of a CAP "may truncate the term of office of an incumbent appointed assessor,"*** the Appellate Division observed “that is not the situation presented here,” and, more significantly, commented “nor is that letter opinion binding, particularly in view of the 2009 amendment to RPTL 579.”

The bottom line: the court held that Rubeor’s term of office did not end when the Town Board adopted a resolution to withdraw from the CAP and that Rubeor held a right to continued employment until the expiration of his term of office.

* Wright removed the action to the United States District Court for the Northern District of New York but that court abstained from exercising jurisdiction pending the resolution of the underlying statutory dispute in state court, staying Rubeor's claims pursuant to 42 USC §1983.

**As Rubeor's term of office had since ended, Supreme Court had declined to reinstate him to the position as Town Assessor for Wright. The Appellate Division said that “Given that [Rubeor] did not appeal from the determination and expressly seeks to affirm the judgment in his brief, we do not address the corollary issue of back pay.”

*** 10 Opinions of Counsel SBRPS 35 - Posted on the Internet at:

https://www.tax.ny.gov/pubs_and_bulls/orpts/legal_opinions/v10/35.htm

The Rujbeor decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2015/2015_08895.htm

Employee terminated as the result of disciplinary action not entitled to his or her unused vacation credit accruals

Employee terminated as the result of disciplinary action not entitled to his or her unused vacation credit accruals

Kozlow v City of New York, 2015 NY Slip Op 08960, Appellate Division, First Department

The Appellate Division affirmed the City of New York’s dismissal police officer David R. Kozlow holding that substantial evidence supported the City’s finding that Kozlow had engaged in numerous acts of misconduct, including failing to follow “proper procedure in presenting a prisoner at the station house; delaying his return to the station house in order to earn overtime; abandoning a fixed post; failing to follow directions to proceed immediately to a post; writing improper comments on his monthly report; and being discourteous to supervisors.”

As to the penalty imposed, termination, the court said that Kozlow’s prior disciplinary record, which included prior dismissal probations, and in light of the number and persistency of his infractions, termination from employment does not shock its sense of fairness.

The Appellate Division also ruled that the Police Commissioner was authorized to impose the penalty of a 30-day suspension without pay and to dismiss petitioner Kozlow City of NY § 14-115[a] and that Kozlow was not entitled to his “unused accrued vacation and sick leave” upon separation from service since he was terminated from employment.

Similarly with respect to employees of the State as the employer, 4 NYCRR 23.1, provides, in pertinent part that “No employee who is removed from State service as a result of disciplinary action or who resigns after charges of incompetency or misconduct have been served upon him shall be entitled to compensation for vacation credits under the provisions of this Part.” §23.1 also provides that the appointing authority may require, as a condition for payment for unused vacation credit that the employee submit written notice of his or her resignation at least two weeks prior to his or her last day of work.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2015/2015_08960.htm

The statute of limitations for an Article 78 action begins to run once the administrative agency's final position concerning the issue becomes “readily ascertainable”

The statute of limitations for an Article 78 action begins to run once the administrative agency's final position concerning the issue becomes “readily ascertainable”

Plainview-Old Bethpage Congress of Teachers v New York State Health Ins. Plan, 2015 NY Slip Op 08676, Appellate Division, Third Department

[See, also, Roslyn Teachers Assn. v New York State Health Ins. Plan, 2015 NY Slip Op 08677, Appellate Division, Third Department, decided with Plainview-Old Bethpage Congress of Teachers.]

Plainview-Old Bethpage Central School District [District] is a participating agency in the New York State Health Insurance Program [NYSHIP]. During collective bargaining negotiations between the District and the Plainview-Old Bethpage Congress of Teachers and its Clerical Unit and Teachers Unit [Congress], the Department of Civil Service issued its Policy Memorandum No. 122r3 [122r3]* setting out limited the circumstances under which an employee of a participating agency may choose to decline NYSHIP coverage in exchange for a cash payment. 

Although earlier collective bargaining agreements had included such a buyout program without the new limitations, the District took the position that it was required to conform its buyout program to the new NYSHIP restrictions set out in 122r3. In response, the Congress initiated a combined CPLR Article 78 proceeding and Action for Declaratory Judgment seeking, among other things, a declaration that 122r3 was null and void.

Supreme Court agreed with the Association's position and granted its petition and, declared 122r3 null and void, whereupon the District appealed.

The Appellate Division vacated the Supreme Court’s ruling, holding that the Congress’ petition must be dismissed on the procedural ground that it was untimely, not having been filed before Article 78’s four-month statute of limitations had expired. The Appellate Division explained that in determining the date upon which the limitations period began to run, in this instance the four-month statute of limitations began to run on May 15, 2012, the date that NYSHIP issued the memorandum as NYSHIP’s decision on the new policy was deemed final and binding on that date and was "readily ascertainable"  by the Congress on that date.

The CPLR and case law make clear that the statute of limitations period for a CPLR Article 78 proceeding begins to run when the determination to be reviewed becomes final and binding upon the entity or person bring the action. Courts have ruled that such a challenged determination becomes final and binding when two requirements are met: [1] completeness or finality of the determination and [2] the exhaustion of administrative remedies available to the complaining party.

In the context of a quasi-legislative determination such as a policy memorandum, here 122r3, actual notice of the challenged determination is not required in order to trigger the running of the statute of limitations. Rather the statute of limitations begins to run once the administrative agency's definitive position on the issue becomes readily ascertainable to the affected party. In such instances courts apply what is termed constructive notice, i.e., the court deems a person or entity to have knowledge of the law, rule, regulation or policy at issue even if they have no actual knowledge of it.

As the Congress did not commence its Article 78 proceeding until December 21, 2012, the Appellate Division ruled it to be time-barred and granted NYSHIP’s motion for summary judgment, dismissing the Congress’ petition.

* The Department of Civil Service’s “PA/PE Health Insurance Buyouts” policy memorandum is posted on the Internet at: http://www.pobschools.org/cms/lib/NY01001456/Centricity/Domain/9/NYSHIP%20Buyout%20Policy%20Memo.pdf

The Plainview-Old Bethpage Congress of Teachers decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2015/2015_08676.htm

The Roslyn Teachers Assn. decision, decided on the same day, is posted on the Internet at: http://www.nycourts.gov/reporter/3dseries/2015/2015_08677.htm

Another ruling concerning Policy Memorandum No. 122r3, School Adm'rs Assn. of N.Y. State v New York State Dept. of Civ. Serv., 124 AD3d 1174, is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2015/2015_00676.htm

A school administrator's transfer to another position within his or her tenure area at a lower salary as the result of a reorganization held not a disciplinary action

A school administrator's transfer to another position within his or her tenure area at a lower salary as the result of a reorganization held not a disciplinary action

Appeal of Charles R. Soriano Decisions of the Commissioner of Education, Decision #16,849

Charles R. Soriano, a tenured administrator was employed in the district as an assistant superintendent of schools until he was transferred, within his tenure area of “Administrator,” to the position of middle school principal.

Soriano had initially entered into an Employment Agreement [Agreement] with the school board in 2003 as assistant superintendent. The Agreement fixed his salary and benefits for a four-year period. 

This Agreement was subsequently amended by addenda in 2006, 2007, and 2010, with the 2010 Agreement including an extension of its term through July 1, 2012.  Together with the addenda, the Agreement included a salary schedule with annual increases as well as several other benefits tied to Soriano’s salary such as a deferred tax annuity contribution by the district, life insurance in the amount of three and one half times Soriano’s annual salary, and "sell-back options" for unused vacation and sick time at a pro-rata share of Soriano’s annual salary. 

At its June 19, 2012 meeting, the school board approved a reorganization of the administrative staff within the district, including the appointment of Soriano to the position of middle school principal, effective July 1, 2012 at a lower annual salary.

Soriano wrote the school board demanding that the then-current annual rate of compensation he received as an Assistant Superintendent be continued in accordance with the “board’s legal obligations” and contended that the decrease in his compensation approved by the school board was “unreasonable and constituted discipline”  In response, a letter signed by the school board president dated June 29, 2012, advised Soriano that the school board “declined to reinstate [Soriano’s] previous salary," stating that the new salary was an adjustment which was appropriate under the circumstances, not a disciplinary action.  

Soriano appealed the school board’s decision to the Commissioner of Education. As a remedy, he asked for the restoration of his salary and benefits retroactive to July 1, 2012, “as well as salary increases at increments prescribed in the [relevant collective bargaining agreement] and any benefits exceeding those provided to him in the 2011-2012 school year.”

In its defense, the school board contended that Soriano’s salary reduction [1] was not arbitrary or capricious, rather it was reasonable under the circumstances; [2] the  Agreement relied upon by Soriano was not binding as it had expired on June 30, 2012; [3] “even if the Employment Agreement had not expired, it would be considered void as against public policy as one board cannot bind a successor board by a contract extending beyond the term of the contracting board;” and [4] the tenure statutes and broad administrative tenure area of the district do not require an administrator to retain  his or her prior salary when transferred to a new position within his or her tenure area. 

The Commissioner initially addressed two procedural issues:

1. In its memorandum of law the school board argued that Soriano failed to file a grievance as required by the relevant collective bargaining agreement and thus had failed to exhaust his administrative remedies prior to filing his appeal to the Commissioner.  The Commissioner said that the school board had failed to raise the exhaustion of administrative remedies argument in its answer as an affirmative defense and ruled that such a defense has been waived by the school district.

2. Soriano had cited Stokes v. City of Mount Vernon in a letter to the Commissioner submitted by him after filing of his memorandum of law. The Commissioner declined to consider the decision as it had been available before Soriano had submitted his memorandum of law.

Turning to the merits of Soriano’s appeal, the Commissioner said Soriano salary was not decreased as a result of dissatisfaction with his performance or as the result of a disciplinary action and the minutes of school board’s July 3, 2012 board meeting reflect board approval of Soriano’s salary without noting any disciplinary reason.

The Commissioner also noted that in Appeal of Cadicamo* the then Commissioner of Education ruled that a salary decrease such as the one Soriano experienced cannot fall below an individual’s starting salary. Cadicamo explains that “[w]hile the salary of an employee may be reduced, it may not be reduced to a point below that at which the employee was induced to join the system.” Finding that Soriano’s starting salary in 2003 was less than his current salary as middle school principal and was neither below that starting salary nor below the minimum level for a middle school principal position within the district, the Commissioner said that absent some showing that the school board’s actions were disciplinary in nature, she “cannot find that the salary reduction was contrary to law.”

Soriano also argued that in “a parallel situation under the Civil Service Law, a lateral transfer of a tenured civil service employee that results in a reduction of salary constitutes disciplinary action that may only be imposed after a hearing under Civil Service Law §75, citing Bailey v. Susquehanna Valley Cent. School Dist. Board of Educ., 276 AD2d 963 and Borrell v. County of Genesee, 73 AD2d 386. Soriano contended that “the principle of those Civil Service Law cases” should be extended to tenured teachers under the Education Law.

The Commissioner said she did not agree that the principle articulated in the cases decided under the Civil Service Law should be applied “on these facts to confer upon [Soriano] a right to retain his salary and benefits as assistant superintendent upon transfer within his tenure area,” explaining that although CSL §75 prohibits imposition of a disciplinary penalty without a hearing and Civil Service Law §75(3) specifically provides that a “reduction in grade or title” is a disciplinary penalty that can be imposed, “there is no comparable language in Education Law §§3020 or 3020-a and thus no explicit statutory requirement that a demotion with reduction in pay be considered a disciplinary action.”

Turning to Soriano’s argument that the Agreement remained in effect absent an extension or new agreement, the Commissioner said that “juxtaposed with the expiration date plainly set forth therein, [such an argument] is unpersuasive,” and the Agreement cannot bind the school board beyond its stated expiration date of June 30, 2012. 

As the Agreement was not binding on the school board, the Commissioner ruled that Soriano “was not entitled to the salary contained therein beyond the expiration of his employment contract” nor, on these facts, found that the setting of Soriano’s salary constituted discipline or was arbitrary or capricious.

Based on the record before her, the Commissioner held that Soriano failed to meet his burden of establishing that the salary and benefits designated by school board upon his appointment to the position of middle school principal was arbitrary and capricious or that such action was disciplinary in nature.

* Appeal of Cadicamo, 15 Ed Dept Rep 274, Decision #9,167; aff’d as Bd. of Ed., Mt. Sinai UFSD v. Nyquist, Supreme Court, Albany Co., [Cobb, J.], June 23, 1976, [Not selected for publication in the Official Reports].

The decision is posted on the Internet at:

http://www.counsel.nysed.gov/Decisions/volume55/d16849