New York State Court of Claims

New York State Court of Claims
CGI v. THE STATE OF NEW YORK, # 2019-038-541, Claim No. 132590, Motion No. M-93541

Synopsis

In claim seeking money damages for the State's alleged breach of a contract relating to the development and implementation of software, claimant's motion for preliminary injunctive relief denied. Claimant sought to enjoin defendant from continuing use and alleged sharing of intellectual property, equitable relief that relates to claimant's request for declaratory judgment, over which Supreme Court has exclusive jurisdiction.

Case information

UID: 2019-038-541
Claimant(s): CGI TECHNOLOGIES AND SOLUTIONS, INC.
Claimant short name: CGI
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 132590
Motion number(s): M-93541
Cross-motion number(s):
Judge: W. BROOKS DeBOW
Claimant's attorney: McNAMEE LOCHNER, P.C.
By: Christopher Massaroni, Esq.
Margaret H. Warner, Esq., admitted pro hac vice
Lisa M. Richman, Esq., admitted pro hac vice Theodore E. Alexander, Esq., admitted pro hac vice
Defendant's attorney: LETITIA JAMES, Attorney General
of the State of New York
By: Richard C. Maider, Assistant Attorney General
Cornelia Mogor, Assistant Attorney General
Third-party defendant's attorney:
Signature date: May 8, 2019
City: Saratoga Springs
Comments:
Official citation:
Appellate results:
See also (multicaptioned case)

Decision

This claim arises from a dispute over a State contract between claimant CGI Technologies and Solutions, Inc., (CGI) and the New York State Office of Mental Health (OMH). CGI is an information technology consulting company that develops and implements software solutions for government and private sector entities. OMH is a State agency that operates 23 mental health facilities and oversees approximately 310 outpatient mental health programs throughout New York State. The parties executed a four-year contract on August 27, 2013 pursuant to which CGI would provide OMH with an Electronic Medical Record (EMR) system to be used in its facilities and outpatient programs. The contract amount was in excess of $51,000,000.00, and there were two optional one-year renewal periods. The claim alleges that CGI was obligated to implement a "new commercial off-the-shelf EMR" while providing support for OMH's old system during the transition to the new system. The contract was to proceed on two "tracks," with Track 1 addressing the inpatient facilities and Track 2 addressing the outpatient programs. As alleged in the claim, certain staffing issues and significant alterations to the project on the part of OMH created "constantly changing parameters and increasing demands [that] fundamentally altered the project from a standard commercial off-the-shelf project with configuration, to a custom development project that was specifically tailored to OMH's requests" (Claim No. 132590,  57). The claim alleges that in addition to OMH's demands, lack of staff preparedness, unexpected changes to site locations, various infrastructure deficiencies, and a lack of responsive communication by OMH personnel contributed to delays and problems with the contract.(1) One day prior to the contract's expiration in August 2017, a two-year extension of the agreement was approved that extended the date of performance but did not alter the contract amount. According to the claim, CGI and OMH agreed that additional costs occasioned by the extension of time were to be agreed upon at a later date.

The claim alleges that CGI continued its work under the contract, that OMH had full use of the custom EMR product beginning in October 2017, but that the intellectual property rights for the EMR product would not transfer from CGI to OMH until there was full payment for the EMR. Difficulties arose regarding documentation of costs and payment to CGI, and the claim alleges that OMH suspended the contract due to contractual issues on May 18, 2018.(2) At that time, CGI shut down the project, and the parties continued efforts to resolve these issues. During that period of discussions, OMH's access to the unfinished work product was reestablished, allegedly upon assurances from OMH that the contract would resume. By letter dated August 6, 2018, OMH invoked the contract's "convenience" clause to terminate the contract. The claim alleges that OMH has failed to pay sums due on the contract, and that it has continued to use the EMR product at the facilities where it was fully implemented by completion of Track 1 of the contract. The claim asserts causes of action sounding in breach of contract, among others, as well as a cause of action entitled "Declaratory Judgment of Intellectual Property and Trade Secret Ownership" (Claim No. 132590, Count VI,  183-192), and it seeks compensatory damages and a declaration that CGI is the owner of all protectable intellectual property relating to the contract.

Claimant moves for a preliminary injunction, which, claimant asserts, is relief incidental to its claim for money damages. Claimant asserts that - because defendant has yet to pay amounts that are due on the contract - claimant is the owner of "the unique and proprietary software and intellectual property" that was created by claimant during its performance of the contract, and claimant seeks to enjoin OMH from using, modifying, or providing access to third parties the alleged intellectual property and artifacts or, in the alternative, declaratory relief regarding CGI's ownership of the intellectual property (see Notice of Motion for Preliminary Injunction). Defendant opposes the motion for injunctive relief on the ground that this Court lacks subject matter jurisdiction to grant the motion inasmuch as it seeks purely equitable relief. Claimant counters that the ownership of the intellectual property is integrally related and incidental to the causes of action for breach of contract, and thus, the Court may grant the relief it requests. For the reasons that follow, claimant's motion will be denied.

The Court of Claims lacks jurisdiction to grant "strictly equitable relief" (Madura v State of New York, 12 AD3d 759, 760 [3d Dept 2004], lv denied 4 NY3d 704 [2005], citing Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670, 671 [3d Dept 1997]), although it has been recognized that the Court may grant some measure of equitable relief when such relief is incidental to a claim for money damages that is properly before the Court (see Psaty v Duryea, 306 NY 413, 417 [1954]). "The question, then, is '[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim' " (Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d at 671, quoting Matter of Gross v Perales, 72 NY2d 231, 236 [1988]). Here, the pleading includes, essentially, two separate claims that seek two different types of relief, each of which is subject to the jurisdiction of a different court.

Nine of the ten "counts" or causes of action asserted in the claim arise from the alleged breach of the contract and related alleged tortious conduct by defendant with respect to payment of amounts claimed due under the contract, and seek money damages (see Claim No. 132590, Counts I-V, VII-X), and are clearly within the jurisdiction of the Court of Claims (see Court of Claims Act  9 [2]). However, the sixth cause of action seeks a declaratory judgment upon a determination of whether certain of the product that is the subject of the contract, characterized by claimant as intellectual property and "custom work" - belongs to claimant. While determination of ownership of the intellectual property is certainly an issue that must be resolved by interpretation of the contract and analysis of the product of the contract, and may turn, in part, on whether the alleged custom work has been paid for, the sixth cause of action seeks only relief in the nature of declaratory judgment, which Supreme Court has the exclusive jurisdiction to grant (see CPLR 3001). In seeking a preliminary injunction to protect its claimed ownership of the property pending determination of its request for declaratory judgment, claimant will be required to demonstrate its likelihood of success in obtaining a declaratory judgment in its favor, and thus, the requested preliminary injunction is inextricably intertwined with the cause of action that is within the exclusive jurisdiction of Supreme Court. Thus, in the circumstances of this claim, because the subject of the request for equitable relief is factually and legally distinguishable and severable from the claim for money damages, as well as ultimately subject to the exclusive jurisdiction of Supreme Court, it cannot be said to be incidental to the claim for money damages flowing from the breach of contract.(3) Thus, this Court is without jurisdiction to grant the equitable relief of a preliminary injunction requested in claimant's motion. Notably, claimant is not without a forum in which to pursue the equitable relief it seeks.

Accordingly, it is

ORDERED, that claimant's motion M-93541 is DENIED.

May 8, 2019

Saratoga Springs, New York

W. BROOKS DeBOW

Judge of the Court of Claims

Papers considered:

(1) Claim No. 132590, filed January 31, 2019;

(2) Verified Answer, filed April 5, 2019;

(3) Notice of Motion for Preliminary Injunction, dated February 14, 2019;

(4) Affirmation of Christopher Massaroni, Esq., in Support of Motion for a Preliminary

Injunction, dated February 14, 2019, with Exhibit A (Claim with Exhibits 1-20) and

Exhibit B (Affidavit of James Titus, sworn to February 13, 2019);

(5) Memorandum of Law in Support of Motion for a Preliminary Injunction, dated

February 14, 2019;

(6) Affirmation of Richard C. Maider, AAG, in Opposition to Claimant's Motion for a

Preliminary Injunction, dated April 5, 2019;

(7) Affidavit of Gerald M. Engel in Opposition to Motion for Preliminary Injunction,

sworn to April 5, 2019, with Exhibits A-U;

(8) Affidavit of Paul J. Murray in Opposition to Motion for Preliminary Injunction,

sworn to April 5, 2019;

(9) Memorandum of Law in Opposition to Claimant's Motion for a Preliminary Injunction,

dated April 5, 2019;

(10) Affidavits and Exhibits in Further Support of CGI's Motion for a Preliminary Injunction,

dated April 23, 2019, including:

Affidavit of Steve Starace, sworn to April 23, 2019;

Affidavit of Douglas Lapham, sworn to April 22, 2019;

Affidavit of James Titus, sworn to April 23, 2019;

Affidavit of Paul Doty, sworn to April 22, 2019;

Affidavit of Mel Frizzell, sworn to April 22, 2019;

Affidavit of Michael Pogozelski, sworn to April 22, 2019;

Affidavit of Michael Reagan, sworn to April 22, 2019;

Affidavit of Nicholas Agrios, sworn to April 22, 2019;

Affidavit of Michael Keating, sworn to April 23, 2019;

and Exhibits 1-18;

(11) Reply Memorandum of Law in Further Support of CGI's Motion for a

Preliminary Injunction, dated April 23, 2019;

(12) Correspondence of Christopher Massaroni, Esq., dated April 30, 2019;

(13) Sur-Reply Affidavit of Paul J. Murray, sworn to May 3, 2019, with Exhibit V;

(14) The State's Sur-Reply Memorandum of Law, dated May 3, 2019.

*A teleconference on the motion was conducted on April 26, 2019, at which Christopher Massaroni, Esq., and out-of-state attorneys Margaret H. Warner, Lisa M. Richman, and Theodore E. Alexander, all admitted pro hac vice, appeared for claimant, and Richard C.

Maider, AAG and Cornelia Mogor, AAG appeared for defendant.


1. Defendant disputes these allegations with asserts that the contract delays were due to problems with CGI's performance of the contract (see e.g. Engel Affidavit,  35).

2. In contrast to the allegations in the claim that OMH was responsible for the breakdown of the contract, defendant asserts in its memorandum of law in opposition to claimant's motion that the project was suspended "primarily due to delays caused by CGI, poor management, contract disagreements and inferior deliverables" (Defendant's Memorandum of Law, p.1).

3. The Court does not agree with defendant that the question of whether an element of relief is "incidental" to the primary relief sought should be determined by magnitude (see State's Sur-reply Memorandum of Law, p.2).