| Northern Elec. Power Co., L.P. v Hudson Riv.-Black Riv.Regulating Dist. |
| 2014 NY Slip Op 08280 [122 AD3d 1185] |
| November 26, 2014 |
| Appellate Division, Third Department |
[*1]
| Northern Electric Power Company, L.P., et al.,Respondents, v Hudson River-Black River Regulating District,Appellant. |
Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), forappellant.
K & L Gates, LLP, New York City (Brian D. Koosed of counsel) and GoldbergSegalla, LLP, Albany (William J. Greagan of counsel), for respondents.
Stein, J. Appeal from an order of the Supreme Court (Teresi, J.), entered February 5,2013 in Albany County, which, among other things, denied defendant's cross motion forsummary judgment dismissing the complaint.
Plaintiffs are the owners and operators of hydroelectric power plants (hereinafterhydros) that are located downstream from the Conklingville Dam (hereinafter the Dam).Defendant is a New York public benefit corporation that maintains and operatesdams—including the Dam—reservoirs and appurtenant facilities in theHudson River and Black River districts for the purpose of regulating the rivers' flow(see ECL 15-2103, 15-2137). Because of the headwater benefits[FN1] resulting from the Dam,defendant has, since the 1920s, levied annual assessments upon hydros such as plaintiffsto recover capital, maintenance and operating costs with respect to the Dam (seeECL 15-2121 [2]; 15-2123, 15-2125).
In 2002, defendant received a license from the Federal Energy RegulatoryCommission (hereinafter FERC), after which it continued to levy assessments. In 2006,Albany Engineering Corporation (hereinafter AEC)—another hydro—fileda complaint with FERC challenging the assessments levied by defendant since it becamea FERC licensee. FERC concluded that certain costs assessed by defendant werepreempted by the Federal Power Act (see 16 USC § 803 [f]), butthat it was unauthorized to direct defendant to issue refunds for assessments paid. AECappealed that decision arguing, among other things, that all costs assessed by defendantwere preempted and that FERC should have issued refunds. In 2008, the US Court ofAppeals for the District of Columbia found in favor of AEC, holding that, because theFederal Power Act preempted state law, defendant did not have the authority to assesshydros for headwater benefits pursuant to ECL 15-2121, and remitted the matter toFERC to determine the appropriate remedy (see Albany Eng'g Corp. v Federal EnergyRegulatory Commn., 548 F3d 1071, 1079 [2008]).[FN2]
Plaintiffs commenced this action in June 2012, seeking a refund of the assessmentsthey paid to defendant between 2002 and 2008 on the basis that such assessments wereunauthorized and, therefore, that defendant had been unjustly enriched. After issue wasjoined, plaintiffs moved for summary judgment in their favor and defendant cross-movedfor summary judgment dismissing the complaint, this time asserting, among other things,that the action was untimely. Supreme Court found that the action was timelycommenced, that defendant was collaterally estopped by its decision in the AEC actionfrom raising certain defenses, and that plaintiffs were entitled to summary judgment intheir favor. Defendant now appeals.
Inasmuch as we find merit to defendant's assertion that plaintiffs' claims aretime-barred, we reverse. The basis for Supreme Court's determination that the action wastimely was that it was brought on a theory of unjust enrichment, for which theappropriate statute of limitations is [*2]six years(see CPLR 213 [1]).[FN3] However, for the reasons that follow,we agree with defendant's contention that Supreme Court erred in applying a six-yearstatute of limitations because, even though plaintiffs have now labeled their cause ofaction as one for unjust enrichment, they could have raised their claim for refunds in aCPLR article 78 proceeding challenging each annual assessment, for which theapplicable statute of limitations is four months (see CPLR 217 [1]).
"Where, as here, governmental activity is being challenged, the immediate inquiry iswhether the challenge could have been advanced in a CPLR article 78proceeding" (Matter ofAdirondack Med. Center-Uihlein v Daines, 119 AD3d 1175, 1176 [2014][emphasis added; internal quotation marks omitted]; accord Thrun v Cuomo, 112 AD3d 1038, 1040 [2013],lv denied 22 NY3d 865 [2014]; Spinney at Pond View, LLC v Town Bd. of the Town ofSchodack, 99 AD3d 1088, 1089 [2012]; see Bango v Gouverneur Volunteer Rescue Squad, Inc., 101AD3d 1556, 1557 [2012]). Thus, whether plaintiffs' "claims are subject tothe four-month statute of limitations period under CPLR article 78 . . . turnson whether the parties' rights could have been resolved in an article 78 proceeding" (Walton v New York State Dept. ofCorrectional Servs., 8 NY3d 186, 194 [2007]; accord New York Coalition forQuality Assisted Living, Inc. v Novello, 53 AD3d 914, 916 [2008], lvdenied 11 NY3d 715 [2009]). Indeed, the analysis does not depend upon howplaintiffs label their claims but, rather, we "must look to the underlying claim and thenature of the relief sought and determine whether such claim could have been properlymade in another form" (Thrun v Cuomo, 112 AD3d at 1040 [internal quotationmarks and citation omitted]). The purpose of this rule, which results in the imposition ofa short statute of limitations to governmental action, is to ensure "that the operation ofgovernment [will] not be trammeled by stale litigation and stale determinations" (NewYork City Health & Hosps. Corp. v McBarnette, 84 NY2d 194, 206 [1994][internal quotation marks and citations omitted]; see Mundy v Nassau County Civ.Serv. Commn., 44 NY2d 352, 359 [1978] [Breitel, Ch. J., dissenting]; Matter of Terrace HealthCare Ctr.,Inc. v Novello, 54 AD3d 643, 647 [2008], lv denied 12 NY3d 712[2009]; Rosenthal v City of New York, 283 AD2d 156, 159 [2001], lvdismissed 97 NY2d 654 [2001]).
Here, in concluding that a six-year statute of limitations applied because plaintiffscharacterized their claim as being based on unjust enrichment, Supreme Court failed torecognize that, inasmuch as the relief sought was premised upon defendant's lack ofauthority to levy the annual assessments—as opposed to a challenge to theconstitutionality of the statute pursuant to which the assessments were made (seeThrun v Cuomo, 112 AD3d at 1040; compare Matter of First Natl. City Bank vCity of N.Y. Fin. Admin., 36 NY2d 87, 93 [1975])—plaintiffs could haveraised the claim of federal preemption in one or more CPLR article 78 proceedingscontesting each levied assessment (see ECL 15-2125 [3]; Matter of Disney Enters., Inc. vTax Appeals Trib. of State of N.Y., 10 NY3d 392, 402-405 [2008]; Matterof Holtzman v Oliensis, 91 NY2d 488, 497 [1998]; Matter of ConsolidatedEdison Co. of N.Y. v Public Serv. Commn., 63 NY2d 424, 433-441 [1984],appeal dismissed 470 US 1075 [1985]; compare Mary K. v Levy, 109 AD3d 587, 588 [2013]).Moreover, the refunds that plaintiffs now seek would have been available as incidentalrelief in such proceedings (see CPLR 7806; Whitmer v New York State Dept. of Taxation & Fin., 120AD3d 1590, 1592 [2014]).
We are unpersuaded by plaintiffs' assertion that a CPLR article 78 proceeding wouldnot lie because their claims are for damages only. Although plaintiffs are not nowseeking a determination with respect to the validity of defendant's administrativeconduct, this is so only [*3]because the challengedconduct of defendant—the levy of assessments—was contested in theFERC proceeding and the federal AEC action and was determined therein to beunauthorized because the assessments were preempted by federal law. However, suchdetermination is not relevant to whether plaintiffs could have challengeddefendant's conduct in a CPLR article 78 proceeding in the first instance.
We also reject plaintiffs' argument that, because defendant was a licensee of FERC,proceedings before that agency provided the exclusive forum for their preemptionchallenge. Plaintiffs challenged defendant's authority as a state public benefit corporationto issue assessments under state law; defendant's status as a FERC licensee was relevantonly because it resulted in federal preemption of its authority under the state statute.Unlike plaintiffs, we do not read FERC's decision as holding that a federal challenge wasthe only forum in which the issue of preemption could have beenraised.[FN4]
Nor are we convinced that, under these circumstances, plaintiffs are entitled to avoidthe shortened limitations period by bringing a collateral attack on the assessments (compare Regional EconomicCommunity Action Program, Inc. v Enlarged City School Dist. of Middletown, 18NY3d 474, 476 [2012]; Matter of First Natl. City Bank v City of N.Y. Fin.Admin., 36 NY2d at 93). Here, plaintiffs failed to bring a CPLR article 78proceeding—although they could have—or provide other prompt notice todefendant that the assessments were being challenged. In this regard, we also note that,from 2002 to 2006, plaintiffs paid the assessments without any indication that they weredoing so under protest or otherwise providing notice to defendant that the assessmentswere being challenged.[FN5] Consistent with the reason for ashortened limitations period, notification to a municipality that a payment is being madeunder protest is essential to warn the municipality that "it may be obliged to refund the[payment] and must be prepared to meet that contingency" (Video Aid Corp. v Townof Wallkill, 85 NY2d 663, 667 [1995]; see Matter of Walton v New York State Dept. of CorrectionalServs., 13 NY3d 475, 489 [2009]; City of Rochester v Chiarella, 58NY2d 316, 323 [1983]). Considering that plaintiffs did not challenge the leviedassessments here until 2006, at the earliest, and made no representation that theirpayments were being made under protest (compare Matter of First Natl. City Bank vCity of N.Y. Fin. Admin., 36 NY2d at 93), defendant was not on notice that it facedthe possibility that it might be required to refund such payments. This is precisely thescenario sought to be prevented by a shortened limitations period for a CPLR article 78proceeding and by the protest requirement.
In short, plaintiffs paid assessments for the six-year period in question withoutasserting any state challenge thereto and, only after receiving the favorable federal AECdecision with respect to another hydro, did they commence this action—in theguise of an unjust enrichment claim—seeking the return of payments made as longas a decade before. If permitted to engage in such course of conduct, plaintiffs and otherssimilarly situated could wait a prolonged period [*4]oftime to challenge defendant's authority to impose assessments. In our view, this would becontrary to the very purpose of imposing a short statute of limitations for challenges togovernmental action. For all of the foregoing reasons, we conclude that plaintiffs' claimsare subject to a four-month statute of limitations (see CPLR 217 [1]), runningfrom the date each annual assessment was paid (see Regional Economic CommunityAction Program, Inc. v Enlarged City School Dist. of Middletown, 18 NY3d at 480;Matter of First Natl. City Bank v City of N.Y. Fin. Admin., 36 NY2d at 93).Therefore, plaintiffs' action was untimely and should have been dismissed. To the extentnot specifically addressed, we have examined the parties' remaining contentions and findthem to be either lacking in merit or rendered academic by this determination.
Peters, P.J., Rose, Egan Jr. and Clark, JJ., concur. Ordered that the order is reversed,on the law, with costs, plaintiffs' motion denied, defendant's cross motion granted,summary judgment awarded to defendant and complaint dismissed.
Footnote 1:Headwater benefits aredescribed as "the additional energy production possible at a downstream hydropowerproject resulting from the regulation of river flows by an upstream storage reservoir"(https://www.ferc.gov/industries/hydropower/gen-info/comp-admin/headwater.asp[accessed Nov. 10, 2014]).
Footnote 2:On remand, FERCdetermined that settlement proceedings would be commenced and, if unsuccessful, that aheadwater benefits investigation would be initiated. FERC also noted that AEC had theright to seek refunds in the courts. AEC then commenced an action in Supreme Courtseeking a refund of all assessments it had paid to defendant after 2002, asserting thatdefendant had been unjustly enriched by such unauthorized assessments. Supreme Court(Teresi, J.) granted summary judgment to AEC and issued a judgment in its favor for thefull amount requested, plus interest (Albany Eng'g Corp. v Hudson Riv./Black Riv.Regulating Dist., 2012 NY Slip Op 30814[U] [Sup Ct, Albany County 2012]). Onappeal, after finding that many of defendant's asserted defenses—including, aspertinent here, that the action was time-barred and that the assessments were not paidunder protest—were not properly before this Court because they had not beenraised at the trial level, we affirmed the award of summary judgment to AEC, butmodified the amount of the judgment and remitted the matter to Supreme Court forfurther proceedings not relevant in the case now before us (Albany Eng'g Corp. v HudsonRiver/Black Riv. Regulating Dist., 110 AD3d 1220, 1223-1224 [2013]).
Footnote 3:Supreme Court furtherfound—incorrectly in our view—that the claim accrued at the time of the2008 federal AEC decision.
Footnote 4:Notably, while plaintiffsjoined the FERC proceeding, they were not parties to the federal AEC action. Further,while FERC decided that it did not have the authority to order refunds and concludedthat refunds could be pursued in the courts, it did not address the question of whether aproceeding for refunds would be timely under state law.
Footnote 5:Plaintiffs concede thatdefendant had no notice that they were seeking refunds until 2006, when they appearedbefore FERC.