| DerOhannesian v City of Albany |
| 2013 NY Slip Op 06910 [110 AD3d 1288] |
| October 24, 2013 |
| Appellate Division, Third Department |
| Paul DerOhannesian II, Doing Business as DerOhannesian& DerOhannesian, et al., Appellants, v City of Albany,Respondent. |
—[*1] Rehfuss, Liguori & Associates, PC, Latham (Heather A. Clickner of counsel), forrespondent.
McCarthy, J. Appeal from an order of the Supreme Court (Devine, J.), enteredOctober 10, 2012 in Albany County, which granted defendant's motion to dismiss thecomplaint.
Plaintiff Kevin McKenna, a sergeant with the City of Albany Police Department,allegedly pointed a loaded firearm at a coworker, Shirley Morton. Based on that incident,McKenna was charged criminally. He retained plaintiff Paul DerOhannesian II torepresent him. Pursuant to the collective bargaining agreement (hereinafter CBA)between his union and defendant, McKenna sought reimbursement of his defense costsfrom defendant. Defendant denied the request on the basis that McKenna's conduct wasoutside the scope of his employment, an exclusion under the CBA. McKenna wasultimately acquitted of the criminal charge. Morton then commenced a federal civilaction and, later, a state action against, among others, McKenna and defendant.DerOhannesian represented McKenna in both civil actions. McKenna also requestedreimbursement of his defense costs in the civil actions, which defendant denied,prompting McKenna to file a grievance.
In January 2009, while the grievance was pending, John Reilly, defendant'scorporation counsel, sent a letter to DerOhannesian noting that the CBA requireddefendant to pay defense [*2]costs while the grievancewas pending and requesting a cost estimate for his services. DerOhannesian respondedby sending Reilly a proposal for his firm's hourly rates, including $225 for partners andlesser amounts for other staff. Reilly sent a letter rejecting those rates and offering to paya rate of $150 per hour. DerOhannesian apparently did not respond to that letter. InOctober 2009, DerOhannesian sent defendant a letter and invoice for his representationof McKenna in the federal action, charging various rates for different staff members,including $350 per hour for his time. Defendant did not respond to this invoice.
The federal action was dismissed. The state action was dismissed as againstdefendant, but Morton obtained a verdict against McKenna for approximately $23,000.After the civil actions concluded, the arbitrator denied McKenna's grievance, finding thatthe CBA did not require defendant to reimburse McKenna for any of his defensecosts.[FN1]Plaintiffs commenced this action alleging six causes of action to obtain payment forMcKenna's defense costs. Supreme Court granted defendant's motion to dismiss thecomplaint. Plaintiffs appeal.
Initially, we reject defendant's contention that this action is barred by collateralestoppel. Although collateral estoppel is applicable to determinations rendered inarbitration proceedings (see Matter of American Ins. Co. [Messinger—AetnaCas. & Sur. Co.], 43 NY2d 184, 189-190 [1977]; Matter of Kibler v New York StateDept. of Correctional Servs., 91 AD3d 1218, 1220 [2012], lv denied 19NY3d 803 [2012]), that doctrine does not bar the present action based on the arbitrationdetermination here. There is no identity of issues, as the issue in the grievance arbitrationproceeding was the right to reimbursement pursuant to the CBA, whereas the issue in thisaction is the right to reimbursement based on an alleged contract or agreement separatefrom the CBA (see Matter ofHoward v Stature Elec., Inc., 20 NY3d 522, 525-526 [2013]; Alaimo v McGeorge, 69 AD3d1032, 1034 [2010]; see also Kaufman v Eli Lilly & Co., 65 NY2d 449,456-457 [1985]). Additionally, DerOhannesian did not have a full and fair opportunity tolitigate any issues as he was not a party to that arbitration proceeding nor in privity to aparty (see Matter of Juan C. v Cortines, 89 NY2d 659, 667-668 [1997]). Thus,collateral estoppel does not apply here.
Nevertheless, Supreme Court did not err in dismissing the breach of contract cause ofaction. When considering whether to dismiss a complaint pursuant to CPLR 3211 (a) (7),"the pleading is to be given a liberal construction, the allegations contained within it areassumed to be true and the plaintiff[s] [are] to be afforded every favorable inference" (Simkin v Blank, 19 NY3d46, 52 [2012]). This liberal standard, however, will not save allegations that consistof bare legal conclusions or factual claims that are flatly contradicted by documentaryevidence or are inherently incredible (see Tenney v Hodgson Russ, LLP, 97 AD3d 1089, 1090[2012]; Mesiti v Mongiello,84 AD3d 1547, 1549 [2011]). "For a contract to be created, regardless of whether itis bilateral or unilateral, 'there must be a manifestation of mutual assent sufficientlydefinite to assure that the parties are truly in agreement with respect to all material terms'" (Thome v Alexander & LouisaCalder Found., 70 AD3d 88, 103-104 [2009], lv denied 15 NY3d 703[2010], quoting Matter of Express Indus. & Term. Corp. v New York State Dept. ofTransp., 93 NY2d 584, 589 [1999]; see Wilson v R. Patrick Ledger, 97 AD3d 1028, 1029[2012]). Price is a material term of a contract (see Tufano v Morris, 286 AD2d531, 534 [2001]; Village of Lansing v Triphammer Dev. Co., 193 AD2d 919,920 [1993]).[*3]
The complaint here alleges that Reilly's January2009 letters constituted a unilateral contract whereby defendant agreed to payDerOhannesian at the rate of $150 per hour, and that the contract became binding whenDerOhannesian performed under the contract by representing McKenna. Plaintiffs cannotprevail because their allegations are flatly contradicted by documentary evidence.DerOhannesian's October 2009 invoice billed defendant at the rate of $350 per hour forhis time and at other rates—all higher than listed in his January 2009estimate—for his staff. This invoice contradicts plaintiffs' assertion that the partieshad agreed on all material terms of a contract, namely a price of $150 per hour (see John Anthony Rubino & Co.,CPA, P.C. v Swartz, 84 AD3d 599, 599 [2011]).[FN2]As documentary evidence refutes the allegations and establishes that no valid contracthad been formed, Supreme Court properly dismissed the cause of action for breach ofcontract (see Tenney v Hodgson Russ, LLP, 97 AD3d at 1090).
Plaintiffs' promissory estoppel cause of action must be dismissed for the same reason.While the complaint facially makes out a cause of action by alleging a clear promise,reasonable and foreseeable reliance by DerOhannesian and an injury based on reliance onthe promise (see Clifford R.Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 986-987 [2006];Fleet Bank v Pine Knoll Corp., 290 AD2d 792, 797 [2002]), the documentaryevidence contradicts these allegations. In the October 2009 cover letter sent with hisinvoice, DerOhannesian stated that, while defendant had declined McKenna's request forindemnification of his legal fees, it was plaintiffs' "understanding" that defendant wasrequired to pay for McKenna's legal services while the grievance was pending. The letternever referred to Reilly's January 2009 letter or any agreement for defendant to pay him$150 per hour. DerOhannesian stated in his cover letter that he continued hisrepresentation based on plaintiffs' "understanding." Significantly, DerOhannesian madesuch statement with the knowledge that defendant had repeatedly rejected the requestsfor defense costs and did not refer to defendant's alleged promise. This letter, along withthe invoice in which DerOhannesian billed defendant at $350 per hour, establish that hedid not rely on defendant's alleged promise to pay him, let alone to pay him at the rate of$150 per hour. Similarly, the cause of action for account stated is deficient because theinvoice was based on a compensation rate that had not been agreed upon by the parties,and that invoice "cannot be made the instrument to create liability when none exists"(Gurney, Becker & Bourne v Benderson Dev. Co., 47 NY2d 995, 996 [1979];see M. Paladino, Inc. v Lucchese & Son Contr. Corp., 247 AD2d 515, 516[1998]).
The unjust enrichment cause of action also fails. An unjust enrichment cause ofaction requires that defendant be enriched, at DerOhannesian's expense, and that equityand good conscience do not permit defendant to retain what plaintiffs seek to recover (see Georgia Malone & Co., Inc. vRieder, 19 NY3d 511, 516 [2012]; Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182[2011]). In the complaint, plaintiffs alleged that defendant was unjustly enriched atDerOhanessian's expense and that it is against equity and good conscience to permitdefendant to [*4]retain the fair and reasonable value ofthe legal services he "performed under the contract to and in reliance on the promise of[defendant]." Although these factual allegations facially state a cause of action for unjustenrichment (see id.), the documentary evidence—particularlyDerOhannesian's October 2009 cover letter—shows that DerOhannesian wasaware that defendant rejected McKenna's request for defense costs several times andDerOhannesian did not represent him or continue his representation based on anypromise by defendant. As DerOhannesian acknowledged that defendant had repeatedlyrejected the requests to pay for McKenna's defense costs, but DerOhannesian nonethelesscontinued to represent McKenna and accrue associated legal fees, it is not against equityor good conscience to permit defendant to retain the amount of such legal fees. Thus,defendant was not unjustly enriched when it refused to pay McKenna's legal costs (see Baron v Pfizer, Inc., 42AD3d 627, 629-630 [2007]; Clifford R. Gray, Inc. v LeChase Constr. Servs.,LLC, 31 AD3d at 988).
For the same reasons, the quantum meruit cause of action must fail. That cause ofaction requires a plaintiff's performance of services in good faith, acceptance of thoseservices by a defendant, an expectation of compensation and proof of the reasonablevalue of the services provided (see Precision Founds. v Ives, 4 AD3d 589, 591 [2004]).We need not address the confusing question of whether defendant acceptedDerOhannesian's services, because plaintiffs' allegations on two other elements arecontradicted by documentary proof. DerOhannesian's cover letter, acknowledging thatdefendant had declined McKenna's request to pay for his legal fees, constituteddocumentary evidence refuting the allegations that DerOhannesian performed hisservices in good faith and with a legitimate expectation of compensation from defendant(cf. Estate of Goth vTremble, 59 AD3d 839, 841-842 [2009]; Rowley, Forrest, O'Donnell & Beaumont, P.C. v Beechnut NutritionCorp., 55 AD3d 982, 983-984 [2008]). Thus, DerOhannesian cannot collectfrom defendant under a theory of quantum meruit.
Supreme Court also properly dismissed the fraud cause of action. The elements offraud include a misrepresentation that is false and that the defendant knows is false, madeto induce the other party to rely on it, justifiable reliance on the misrepresentation by theother party, and injury (seeMandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 178 [2011]). Plaintiffsalleged that defendant falsely represented that defendant was required to pay McKenna'slegal expenses until an arbitrator ruled on his grievance. This was not a false statement,as defendant had such an obligation under the CBA. While defendant may not haveintended to pay for the legal services, allegations of an intention not to perform anobligation are insufficient to allege fraud (see Yenrab, Inc. v 794 Linden Realty, LLC, 68 AD3d 755,757-758 [2009]; WIT Holding Corp. v Klein, 282 AD2d 527, 528[2001]).[FN3]Accordingly, the court properly dismissed the complaint.[*5]
Peters, P.J., Stein and Spain, JJ., concur. Orderedthat the order is affirmed, without costs.
Footnote 1: Supreme Courtconfirmed the arbitrator's determination. That decision is apparently being appealed.
Footnote 2: We are unpersuaded byplaintiffs' belated and unsupported attempt, raised for the first time at oral argument, tochallenge the validity of a document created by DerOhannesian's own office by allegingthat the hourly rates enumerated in his October 2009 invoice may haveconstituted billing errors, or may have been an attempt to renegotiate thecontractual price.
Footnote 3: Indeed, defendant didnot pay the legal fees while the grievance was pending. Defendant might have beenrequired to do so under the CBA, but the arbitrator eventually ruled that, if defendant hadpaid any legal fees, McKenna was required to refund them to defendant. While this mayraise a question as to whether defendant failed to comply with the CBA by payingDerOhannesian, then later seeking to recoup its payments from McKenna, that is aquestion under the CBA. This action was not brought based on the CBA, but on the basisof an alleged separate contract or agreement. Thus, this question, while possiblyintriguing, is not before us.