| People v Grasso |
| 2008 NY Slip Op 02009 [49 AD3d 303] |
| March 11, 2008 |
| Appellate Division, First Department |
| The People of the State of New York, by Eliot Spitzer, AttorneyGeneral of the State of New York, Respondent, v Richard A. Grasso, Appellant, and TheNew York Stock Exchange, Inc., Respondent, et al., Defendant. Richard A. Grasso, Appellant, vThe New York Stock Exchange, Inc., et al., Respondents. (And a Third-PartyAction.) |
—[*1] Andrew M. Cuomo, Attorney General, New York City (Avi Schick of counsel), for AttorneyGeneral, respondent. Winston & Strawn LLP, New York City (Robert L. Michels of counsel), for The New YorkStock Exchange, Inc. and John S. Reed, respondents.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered September 14,2006, which denied defendant's motion for the court's recusal, unanimously affirmed, withoutcosts. Appeal from order, same court and Justice, entered August 14, 2006, which grantedplaintiff's motion for a bifurcated trial insofar as to sever the first cause of action for a nonjurytrial, unanimously dismissed as moot, without costs.
The underlying action was brought by the Attorney General to challenge compensation [*2]and benefits awarded to the former CEO of the New York StockExchange (NYSE), Richard Grasso. A detailed discussion of the background of the litigation andthe substance of the complaint is set forth in our decision in People v Grasso (42 AD3d 126 [2007]).
In May 2004, when the complaint in this action was filed, it was assigned to Justice Ramos.The case was removed to federal court at Grasso's request in mid-June 2004. The federal courtthen remanded it back to Justice Ramos on December 9. During a December 15, 2004 conferencecall, the Attorney General advised the parties and the court that it had a 2002 letter sent by anexecutive search firm to the NYSE suggesting that Justice Ramos be considered for a position onthe NYSE Board of Directors. The next day, Justice Ramos conferred with the parties and theircounsel in chambers. Grasso's counsel made it clear that his client had not been involved inemployment applications. Counsel for the NYSE advised those present that it had located anotherletter, sent in October 2003 by the same executive search firm, again suggesting that JusticeRamos be considered for a position on the NYSE Board.[FN*]It is undisputed that all of the parties agreed at the meeting that the letters did not provide a basisfor the court's recusal.
In April 26, 2006, Justice Ramos proposed holding conferences with each of the parties toexplore the possibility of settling the case. On May 2, 2006, the Attorney General sent a letter tothe court and the parties stating its position: "We continue to believe that the [c]ourt shouldproceed with its planned [settlement] meetings with the caveat, however, that no party laterassert that the meetings serve to disqualify the [c]ourt from acting as a fact-finderin this proceeding, or in any way affect the State's right to assert that equitable claims should bedecided by the [c]ourt. With those issues preserved, the meetings shouldoccur as scheduled." (Emphasis added.) The Attorney General reiterated this position in ane-mail sent to the court and the parties on May 4, 2006. Counsel for Grasso responded: "we didnot understand the [c]ourt to be setting any pre-conditions to the scheduled meetings. We will beprepared to address any of those issues at our conference."
The court met with third-party defendant H. Carl McCall and his counsel on April 26, 2006,and with Grasso and his counsel on May 10, 2006. One of Grasso's attorneys claims that [*3]he spoke privately with the Judge, and expressed his concern thatthe court would conduct settlement negotiations, decide motions for summary judgment, and ifnecessary, try the case. Another of Grasso's attorneys recounted that Justice Ramos said "hewould reassign the case, depending on 'how far things go' with the settlement discussions." Thecourt similarly recalled stating "as [required,] that if settlement negotiations progressed to thepoint that it would be improper for this [c]ourt to continue, [it] would reassign the matter."
There were no additional meetings with the court on the issue of settlement, and the partiesdid not come to any agreement. Between May 2006 and August 2006, the court heard summaryjudgment motions by defendant Langone and third-party defendant McCall. The court also hearda motion by defendant Grasso to obtain certain discovery from NYSE. On July 31, 2006, Grasso,the Attorney General, and the NYSE all moved for summary judgment.
On August 3, 2006, the Attorney General made a motion to bifurcate the first cause of actionand to proceed with a bench trial on that claim. Grasso opposed, contending that all of the claimswere subject to trial by jury. His counsel wrote a letter to Justice Ramos asking him to reassignthe case "consistent with the commitment made to [Grasso and his counsel] last May." The letterstated: "as one would expect when judges get involved in ex parte settlement negotiations,statements are made that make it inappropriate for the [c]ourt to keep the case for purposes oftrial. We do not believe that the [c]ourt—consistent with its commitment to the appearanceof fairness and impartiality in a trial of this importance—can now proceed to try the case.It is unthinkable that the [c]ourt would even contemplate sitting as trier of fact." The followingday, the court heard arguments on the Attorney General's motion to bifurcate the trial. At theclose of arguments, Grasso raised the issue of the court's recusal, and the court invited him tomake a formal motion. By order entered August 14, 2006, the court granted the motion for abifurcated trial insofar as to sever the first cause of action for a nonjury trial. Grasso challengesthis order.
Grasso then made a formal motion for reassignment of the case to another justice, which thecourt denied in a September 14, 2006 order. In its decision, the court stated that it had no interestin the case and had formed no opinion as to the validity of any claim or defense. It also stated thatthe executive search firm's actions in circulating his resume to the NYSE were not a basis fordisqualification. Finally, the court noted that "nothing of any substance or sensitivity (in thecontext of recusal) was revealed" in the single settlement conference that the court held withGrasso and his counsel. Defendant Grasso also appeals from this order.
As an initial matter, the order granting plaintiff's motion for a nonjury trial on the first causeof action has been superceded by our decision in People v Grasso (42 AD3d 126[2007], supra) in which we dismissed the first cause of action outright. We stated: "Thefirst cause of action, 'for Imposition of a Constructive Trust and Restitution,' relies on theprovisions of the N-PCL authorizing the payment of 'reasonable' compensation (N-PCL 202 [a][12]; 515 [b]) which 'shall be commensurate with services performed' (N-PCL 202 [a] [12]). Italleges that the annual compensation and other benefits Grasso received were neither 'reasonable'nor 'commensurate with the services performed,' and asserts that to the extent these paymentswere [*4]not 'reasonable' and not 'commensurate with the servicesperformed,' they were 'unlawful and ultra vires under N-PCL §§ 202 (a) (12)and 515 (b),' they were 'against public policy,' and they 'unjustly enriched' Grasso, and thatGrasso 'cannot in equity and good conscience retain such payments.' " (Id. at 130.) Wethen concluded that the Attorney General did not have explicit authority, under theNot-For-Profit Corporation Law, to enforce N-PCL 202 (a) (12) and 515 (b), and we dismissedthis claim. As this disposition moots the motion court's August 14, 2006 order, we dismiss theappeal from that ruling (see Matter ofStandley v New York State Div. of Parole, 40 AD3d 1344 [2007]; York Holdings vShafran, 278 AD2d 77 [2000]).
As to the appeal from the September 14 order, Judiciary Law § 14 governs thedisqualification of judges. It provides: "[a] judge shall not sit as such in, or take any part in thedecision of, an action, claim, matter, motion or proceeding to which he is a party, or in which hehas been attorney or counsel, or in which he is interested, or if he is related by consanguinity oraffinity to any party to the controversy within the sixth degree." Here, the parties concede thatthere are no grounds requiring disqualification as a matter of law under Judiciary Law §14. However, Grasso contends that Justice Ramos should nonetheless have recused himself.
It is settled that "[a]bsent a legal disqualification under Judiciary Law § 14, a TrialJudge is the sole arbiter of recusal" (People v Moreno, 70 NY2d 403, 405 [1987]; Matter of Alizia McK., 25 AD3d429, 430 [2006]; Best v Best, 302 AD2d 295 [2003]). In addition, the court'sdecision on a recusal motion will not be disturbed unless it constitutes an abuse of discretion(see People v Alomar, 93 NY2d 239, 246 [1999]; People v Moreno, 70 NY2d at405-406).
Defendant Grasso contends that Justice Ramos should have recused himself because of thetwo letters circulated to the NYSE by the executive search firm in 2002 and 2003 and hisparticipation in one settlement meeting with each of the parties. He argues that for Justice Ramosto retain the case, he would therefore be in violation of Rules Governing Judicial Conduct (22NYCRR) § 100.3 (B) (4). That section provides: "[a] judge shall perform judicial dutieswithout bias or prejudice against or in favor of any person." Grasso also relies upon 22 NYCRR100.3 (E) (1), which states:
"[a] judge shall disqualify himself or herself in a proceeding in which the judge's impartialitymight reasonably be questioned, including but not limited to instances where:
"(a) (i) the judge has a personal bias or prejudice concerning a party."
There is nothing in the record indicating that Justice Ramos could not be impartial in thismatter, or that he had a "personal bias or prejudice" towards any of the parties. Initially, theparties all agreed that neither the 2002 nor the 2003 letter sent by the executive search firm was abasis for recusal. Both were submitted well before this action was commenced and assigned toJustice Ramos (cf. Pepsico, Inc. v McMillen, 764 F2d 458, 461 [1985] [recusal requiredwhere judge, during trial, was in negotiation "albeit preliminary, tentative, indirect, unintentionaland [*5]ultimately unsuccessful" for a future position at the twolaw firms appearing before him]). Further, nothing in the record indicates that the NYSE's priorfailure to offer Justice Ramos a position biased, prejudiced, or predisposed the Judge to reach anyparticular conclusion in this litigation.
The settlement conferences that the court held with each of the parties are similarly not avalid basis for recusal. Rules Governing Judicial Conduct (22 NYCRR) § 100.3 (B) (7)states that "[a] judge shall dispose of all judicial matters promptly, efficiently and fairly," and thecommentary to this section provides, as relevant, "[a] judge should encourage and seek tofacilitate settlement [without coercion] . . . In matters that will be tried without ajury, a judge who seeks to facilitate settlement should exercise extreme care to avoid prejudgingor giving the appearance of prejudging the case." (Code of Judicial Conduct Canon 3,Commentary [3.13] [3B(7)].) Thus participation in settlement conferences is encouraged, even incases which may involve a bench trial. Justice Ramos attempted to settle this case, but he metwith the parties only once. He related that nothing of substance or sensitivity was revealed inGrasso's settlement conference, and that he was aware that Grasso had strong resistance to anyform of compromise. In his order denying recusal, Justice Ramos stated that he did not faultGrasso for his feelings about the claims asserted against him, and that given these beliefs, heappropriately ended any attempts to facilitate a settlement. In the circumstances, the court'sdecision to continue to preside over the case also constituted a proper exercise of its broaddiscretion to determine whether recusal was warranted. Concur—Mazzarelli, J.P., Saxe,Buckley and McGuire, JJ. [See 13 Misc 3d 1214(A), 2006 NY Slip Op 51823(U).]
Footnote *: Both the 2002 and the 2003letters are authored by a member of the search firm, and directed to the NYSE's CEO (Grasso in2002, Reed in 2003). Each briefly outlines Justice Ramos's relevant experience. Particularly, theOctober 2003 letter contains the following paragraph: "Recently Justice Ramos raised a judicialobjection to the billing of New York State at a rate of $14,000 per hour by a group of plaintiffattorneys for the Phillip Morris class action tobacco litigation. His objection is based on anethical guideline dealing with a legal professional's obligation to charge a reasonable fee." TheNYSE took no action on either letter, and Justice Ramos was never interviewed by the NYSE.