New York State Court of Claims

New York State Court of Claims
CMG v. THE STATE OF NEW YORK, # 2018-032-003, Claim No. 129453, Motion No. M-90471

Synopsis

Defendant's motion to dismiss the claim is granted.

Case information

UID: 2018-032-003
Claimant(s): CMG BRANDS, LLC
Claimant short name: CMG
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 129453
Motion number(s): M-90471
Cross-motion number(s):
Judge: JUDITH A HARD
Claimant's attorney: Sovich Minch, LLP
By: Theodore J. Minch, Esq.
Law Offices of Bonnie Mohr Jan
By: Bonnie Mohr Jan, Esq.
Defendant's attorney: Hon. Eric T. Schneiderman, NYS Attorney General
By: Brett R. Eby, Assistant Attorney General,
Of Counsel
Third-party defendant's attorney:
Signature date: March 12, 2018
City: Albany
Comments:
Official citation:
Appellate results:
See also (multicaptioned case)

Decision

Claimant filed the instant claim on March 21, 2017, seeking compensatory damages and equitable relief for defendant's alleged breach of contract regarding claimant's management and marketing of the INY® trademark (hereinafter "the Mark"). The claim asserts causes of action for breach of contract; quasi contract; promissory estoppel; and intentional interference with contractual relations. On May 24, 2017, defendant filed a motion to dismiss the claim pursuant to CPLR 3211 (a) (1), (2), (7) and (8) and Court of Claims Act 9, 10 and 11 (b). Claimant filed a response to defendant's motion on July 12, 2017. Defendant filed a reply on August 2, 2017. For the following reasons, the Court grants defendant's motion and dismisses the claim.

FACTS

In 1994, claimant entered into a partnership with defendant, through its agency the New York State Department of Economic Development (NYSDED), to develop a licensing, branding and enforcement program for intellectual property rights associated with the Mark. This partnership largely involved claimant's establishment and management of multiple Licensing Agreements regarding usage of the Mark. Claimant administered this program for 21 years until 2015, at which time defendant denied claimant's bid to continue its management of the Mark.

The most recent contractual agreement between claimant and defendant was executed in 2010. The 2010 Representation Agreement (hereinafter "the 2010 Agreement") expired in 2015. Pursuant to the 2010 Agreement, claimant retained the right to receive a percentage of gross receipts for Licensing Agreements until the Licensing Agreements terminated. Claimant asserts that under this provision, they are contractually entitled to continue to administer the licenses, collect the percentage of receipts to which they are entitled, and remit payment to NYSDED pursuant to the terms of the 2010 Agreement. The 2010 Agreement explicitly states that claimant is obligated to report revenues, including the sums retained by claimant, even after the expiration of the 2010 Agreement (Claim, Exhibit 1, section 4.3.6.6). This section also states that after the expiration of the 2010 Agreement, claimant "may turn over the administration of any or all License Agreements to [NYSDED] with no further consideration due [claimant]" (id.). Section 4.3.6.6 specifically states that the terms of that section will survive the expiration of the contract. Further, section 4.8.6 of the 2010 Agreement states that both claimant and defendant shall be entitled to their respective percentages of the gross receipts received after the cancellation date of the 2010 Agreement. That section also states that claimant is entitled to its respective percentage of the gross receipts "pursuant to the initial term of [any] License Agreements and any renewals, extensions or modifications thereof, whether prior to or after the effective date of [the] cancellation [of the 2010 Agreement]" (Claim, Exhibit 1, section 4.8.6).

In April 2015, defendant declined claimant's bid to continue as defendant's agent. The 2010 Agreement was extended through June 1, 2015. Following the expiration of the 2010 Agreement, defendant retained Brand Sense Partners, LLP (BSP) to enter into and administer new Licensing Agreements regarding the Mark. Claimant continued to administer the Licensing Agreements it had secured pursuant to the 2010 Agreement, but defendant informed claimant that BSP would take over the administration of the Licensing Agreements after June 1, 2015. Defendant also informed claimant that claimant could not negotiate or finalize any renewals, modifications or amendments to the Licensing Agreements, and that BSP would assume those duties instead. In mid-June 2015, NYSDED rejected claimant's request to amend an existing Licensing Agreement, stating that NYSDED would not agree to renewals that extended beyond June 1, 2015. On September 29, 2015, defendant sent correspondence to current licensees, informing them that as of July 1, 2015, BSP would handle any renewal or amendment of existing Licensing Agreements. On October 8, 2015, BSP sent e-mails to current licensees requesting copies of their current Licensing Agreements, along with any amendments and royalty reports. On March 18, 2016, a licensee confirmed to claimant that it was working with BSP to secure a renewal for its preexisting Licensing Agreement. Claimant filed a notice of intention to file a claim on June 29, 2016.

LAW AND ANALYSIS

I. EQUITABLE RELIEF

Defendant argues that the claim must be dismissed because claimant seeks equitable relief, and because the Court of Claims does not have the jurisdiction to hear cases that primarily seek equitable relief.

The threshold question in determining whether the Court of Claims has subject matter jurisdiction over a claim is "'[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim'" (Madura v State of New York, 12 AD3d 759, 760 [3d Dept. 2004], lv denied 4 NY3d 704 [2005], quoting Matter of Gross v Perales, 72 NY2d 231 [1988]). Where "[t]he essential nature of [the] claim[] is the recovery of monetary damages for the impact [] of allegedly invalid, illegal or improper conduct of the state, its officers, employees and agents[,]" the claim is properly brought in the Court of Claims, as opposed to Supreme Court (Olsen v New York State Dept. of Envtl. Conservation, 307 AD2d 595, 596 [3d Dept 2003]).

Here, claimant alleges that defendant's actions have caused a reduction in the amount of revenues that claimant is entitled to pursuant to the 2010 Agreement (Claim 67). This is not a case where the claimant is seeking to have the Court of Claims review an administrative determination, in which case an Article 78 proceeding would be the appropriate vehicle to obtain relief (Safety Group No. 194--New York State Sheet Metal Roofing & Air Conditioning Contractors Ass'n, Inc. v. State, 298 AD2d 785, 786 [3d Dept. 2002]). Rather, claimant seeks monetary damages that flow directly from defendant's alleged breach, which are a "quintessential breach of contract allegations" (Sims v State of New York, 30 AD3d 949, 949-950 [3d Dept. 2006], quoting Matter of Barrier Motor Fuels v Boardman, 256 AD2d 405, 405-406 [2d Dept. 1998] [internal quotation marks and additional citations omitted]; see also Corbeau Constr. Corp. v Bd. of Educ., Union Free School Dist. No. 9, Town of Greenburgh, Elmsford, 32 AD2d 958, 959 [2d Dept. 1969]). Thus, the Court finds that it has subject matter jurisdiction over the claim.

II. BREACH OF CONTRACT

As relevant here, "[a] claim for breach of contract, express or implied, . . . shall be filed and served upon the attorney general within six months after the accrual of such claim, unless the claimant shall within such time serve upon the attorney general a written notice of intention to file a claim therefor, in which event the claim shall be filed and served upon the attorney general within two years after such accrual" (Court of Claims Act 10 [4]). "The failure to comply with this provision constitutes a jurisdictional defect warranting dismissal of the claim" (Davis v State of New York, 89 AD3d 1287, 1287 [3d Dept. 2011]; see Court of Claims Act 10; Maude V. v New York State Off. of Children & Family Servs., 82 AD3d 1468, 1469 [3d Dept. 2011]; Langner v State of New York, 65 AD3d 780, 781 [3d Dept. 2009]). It is well settled that "[a] claim accrues for purposes of the Court of Claims Act when damages are reasonably ascertainable" (Flushing Natl. Bank v State of New York, 210 AD2d 294, 294 [2d Dept. 1994], lv denied 86 NY2d 706 [1995]; see Richard A. Hutchens CC, L.L.C. v State of New York, 59 AD3d 766, 768 [3d Dept. 2009], lv denied 12 NY3d 712 [2009]; Bullard v State of New York, 307 AD2d 676, 677-678 [3d Dept. 2003]). "Although the determination of the date on which damages are ascertainable may vary based on the facts and circumstances of each particular case, 'it generally has been recognized that damages [in a breach of contract claim] are ascertainable once the work is substantially completed or a detailed invoice of the work performed is submitted'" (C.S.A. Contr. Corp. v New York City School Constr. Auth., 5 NY3d 189, 192 [2005], quoting New York City School Constr. Auth. v Kallen & Lemelson, 290 AD2d 497, 497 [2d Dept. 2002]; see G.A. Contrs. v Board of Educ. of City of N.Y., 176 AD2d 856, 857 [2d Dept 1991]; see generally ACE Sec. Corp., Home Equity Loan Trust, Series 2006-SL2 v DB Structured Prods., Inc., 25 NY3d 581, 593-594 [2015]).

Claimant asserts that the cause of action for breach of contract accrued on March 18, 2016--the day that a licensee confirmed to claimant that it was working with BSP to secure a renewal of its preexisting Licensing Agreement. The Court disagrees. It is well-established that New York does not apply the "discovery rule" to breach of contract claims (First Transit Inc. v State of New York, UID No. 2017-032-020 [Ct Cl, Hard, J., Apr. 26, 2017]) "[R]ather, the 'statutory period of limitations begins to run from the time when liability for [a] wrong has arisen even though the injured party may be ignorant of the existence of the wrong or injury'" (Allard v Allard, 145 AD3d at 1256, quoting ACE Sec. Corp., Home Equity Loan Trust, Series 2006-SL2 v DB Structured Prods., Inc., 25 NY3d at 594). Thus, although claimant did not learn of defendant's alleged breach of the 2010 Agreement until March 18, 2016, it is indisputable that the actual breach occurred sometime before that date, and that March 18, 2016 was the date that the breach was discovered by claimant (see Grant Street v State of New York, UID No. 2017-015-210 [Ct Cl, Collins, J., Mar. 17, 2017] [finding that the breach of contract claim accrued, at the latest, on the date that claimant submitted a request for payment, not on the date that defendant denied the request]). Although a harsh result, "a contrary rule 'would be entirely dependent on the subjective equitable variations of different Judges and courts instead of the objective, reliable, predictable and relatively definitive rules that have long governed this aspect of commercial repose'" (ACE Sec. Corp., Home Equity Loan Trust, Series 2006-SL2 v DB Structured Prods., Inc., 25 NY3d at 594, quoting Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399, 403 [1993]; see Hahn Automotive Warehouse, Inc. v American Zurich Ins. Co., 18 NY3d 765, 767 [2012]).

Defendant argues that the proper accrual date for the purpose of calculating the statute of limitations is June 1, 2015, and the Court agrees. First, the contract at issue in this matter terminated on June 1, 2015. After that date, no new licenses established by claimant were approved by defendant. Additionally, the claim states that, starting in June 2015, defendant refused requests from claimant to amend or renew existing licenses (Claim 59). Tellingly, on July 24, 2015, claimant sent a copy of a draft complaint to defendant accusing defendant of breaching the 2010 Agreement. Considering this information, the Court finds that claimant's argument that the claim accrued on March 18, 2016 is disingenuous. It is clear to the Court that the work contemplated by the 2010 Agreement was substantially complete on June 1, 2015. Although claimant was entitled to receipts from the existing Licensing Agreements, this entitlement was merely incidental to the work contemplated by the 2010 Agreement (see Cabrini Med. Ctr. v Desina, 64 NY2d 1059, 1061 [1985]). Although claimant argues that this result is unjust given claimant's alleged ignorance of the breach until March 18, 2016, the Court of Appeals has held that ignorance of an alleged breach does not extend the accrual date in a breach of contract claim. (see ACE Sec. Corp., Home Equity Loan Trust, Series 2006-SL2 v DB Structured Prods., Inc., 25 NY3d at 594).

As set forth above, failure to timely comply with the statutory service and filing requirements of the Court of Claims Act constitutes a fatal jurisdictional defect requiring dismissal (see Lyles v State of New York, 3 NY3d 396, 400-401 [2004]; Langner v State of New York, 65 AD3d at 781; Ivy v State of New York, 27 AD3d 1190, 1190-1191 [4th Dept. 2006]). Moreover, the Court cannot waive a defect in jurisdiction that has been timely raised as a defense in a pre-answer motion (see Thomas v State of New York, 144 AD2d 882, 882 [3d Dept. 1988]). Accordingly, because claimant did not file and serve its claim for breach of contract, nor did it serve a notice of intention to file such a claim, within six months of the accrual of the breach of contract cause of action, it must be dismissed as untimely pursuant to Court of Claims Act 10 (4) (see Czynski v State of New York, 16 Misc 3d 465, 468 [Ct Cl 2007]).

III. INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS

A cause of action for intentional interference with contractual relations "accrues when the subject contract is breached, regardless of when the defendant supposedly induced the breach" (Kartiganer Assocs., P.C. v Town of New Windsor, 108 AD2d 898, 899-900 [2d Dept. 1985] [citations omitted]). Here, claimant asserts that defendant interfered with claimant's contractual relationship with certain licensees. Therefore, the requisite accrual date for timeliness is the date that the licensees breached their contract with claimant. Under this cause of action, the incorrect accrual date of September 29, 2015 was pled as opposed to the date that the subject contract was breached. Court of Claims Act 11 (b) states that a claim must state "the time when . . . such claim arose." It is well settled that "'[t]he Court of Claims Act does not require [defendant] to ferret out or assemble information that section 11 (b) obligates the claimant to allege'" (Rivera v State of New York, 52 AD3d 1075, 1076 [3d Dept. 2008], quoting Lepkowski v State of New York, 1 NY3d at 208; see Morra v State of New York, 107 AD3d 1115, 1116 [3d Dept. 2013]). Claimant has failed to allege the date that this cause of action arose. Thus, this cause of action must be dismissed for claimant's failure to state the proper accrual date in contravention of Court of Claims Act 11 (b).

IV. QUASI CONTRACT AND PROMISSORY ESTOPPEL

Claimant asserts causes of action for quasi contract and promissory estoppel (Claim 75-82). These causes of action cannot be maintained, as the existence of a valid and enforceable written agreement precludes recovery for causes of action sounding in quasi contract and promissory estoppel. "It is impermissible . . . to seek damages in an action sounding in quasi contract where the suing party has fully performed on a valid written agreement, the existence of which is undisputed, and the scope of which clearly covers the dispute between the parties (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987], citing Soviero Bros. Contr. Corp. v City of New York, 286 AD 435 [1st Dept. 1955]; 12 Williston, Contracts 1459 at 69 [3d ed]; 22 NY Jur 2d, Contracts, 465 at 410). Here, the claim alleges that claimant has fully complied with the terms of the 2010 Agreement (Claim 70), the existence of the 2010 Agreement is not disputed, and the scope of the 2010 Agreement covers the dispute between the parties (see Claim, Exhibit 1, sections 4.3.6.6, 4.8.6). Further, "the existence of valid and enforceable written contracts precludes recovery under [] causes of action sounding in promissory estoppel . . . which arise out of the same subject matter" (Grossman v New York Life Ins. Co., 90 AD3d 990 [2d Dept. 2011] [citations omitted]). Here, the cause of action for promissory estoppel arises out of the same subject matter of the 2010 Agreement, as the 2010 Agreement is referenced as the basis of claimant's promissory estoppel cause of action (Claim 78-82). Accordingly, claimant's causes of action for breach of a quasi contract and promissory estoppel are dismissed.

V. PERMISSION TO FILE A LATE CLAIM

In its response to defendant's motion to dismiss, claimant seeks permission to file a late claim. However, claimant failed to attach a proposed claim to the motion, which is required by Court of Claims Act 10 (6). This failure mandates denial of claimant's request to file a late claim. Further, claimant failed to initiate its request for such relief by motion or cross motion, as required by Court of Claims Act 10 (6) and Uniform Rules of the Court of Claims, 22 NYCRR 206.8, which also mandates denial of its request to file a late claim (Dennis v State of New York, UID No. 2015-045-008 [Ct Cl, Lopez-Summa, J., Mar. 12, 2015]). However, because the statute of limitations applicable to a breach of contract claim under CPLR 213 is six years, the Court notes that it appears that claimant is not foreclosed from seeking permission to file a late claim through a properly noticed and served motion for permission to file a late claim (White v State of New York, UID No. 2013-041-072 [Ct Cl, Milano, J., Dec. 2, 2013] [considering the merits of two properly filed motions for permission to file a late claim]).(1) CONCLUSION

Based upon the foregoing, the Court grants defendant's motion (M-90471) and dismisses the claim (No. 129453).

March 12, 2018

Albany, New York

JUDITH A HARD

Judge of the Court of Claims

Papers Considered:

1. Verified Claim, dated March 17, 2017.

2. Notice of Motion to Dismiss, dated May 24, 2017; and Affirmation in Support of Motion to Dismiss, sworn to by Brett Eby, AAG on May 24, 2017, with Exhibits.

3. Response to Motion to Dismiss, dated July 12, 2017, with Exhibit.

4. Reply Memorandum of Law, dated August 2, 2017.


1. Although the Court may, in the interest of judicial economy, excuse claimant's failure to attach a proposed claim (Larocco v State of New York, UID No. 2004-009-33 [Ct Cl, Midey, J., May 24, 2004]), the Court declines to do so here. Even if the Court were to assume that the proposed claim would be in the same form as the filed claim, the proposed claim would suffer from the same jurisdictional defect as the filed claim because it fails to plead the proper accrual date for the breach of contract and intentional interference with contractual relations causes of action (see Moss v State of New York, 24 Misc 3d 1128, 1129 [Ct Cl 2009]).