author: Bellacosa, J. Hancock, Jr., J.

text:
    [624 NE2d 129, 604 NYS2d 1]
    Northeast General Corporation, Appellant, v Wellington Advertising, Inc., et al., Respondents.
    Argued September 1, 1993;
    decided October 14, 1993

      POINTS OF COUNSEL

      Jasper & Jasper, New York City (Harvey M. Jasper and Diana T. Heitmann of counsel), for appellant.
    I. It was error for the court below to charge that a finder owes a fiduciary duty. (Ames v Ideal Cement Co., 37 Misc 2d 883; Minichiello v Royal Bus. Funds Corp., 18 NY2d 521; Simon v Electrospace Corp., 32 AD2d 62, 28 NY2d 136; Seckendorff v Halsey, Stuart & Co., 234 App Div 61, 259 NY 353; Train v Ardshiel Assocs., 635 F Supp 274, 805 F2d 391.) II. Sufficient evidence was submitted at trial to sustain the jury finding in appellant’s favor and it was error for the court below to set aside the jury verdict. (Dominguez v Manhattan & Bronx Surface Tr. Operating Auth., 46 NY2d 528; Cohen v Hallmark Cards, 45 NY2d 493; Somersall v New York Tel. Co., 74 AD2d 302, 52 NY2d 157; Dauria v City of New York, 178 AD2d 289; Lindeman v Textron, Inc., 229 F2d 273; O’Boyle v Avis Rent-A-Car Sys., 78 AD2d 431; Bonanno v Bradt, 86 AD2d 941.)

      Gibson, Dunn & Crutcher, New York City (Randy M. Mastro and Robin L. Baker of counsel), and Bobrow Greenapple Skolnik & Shakarchy (Lawrence Greenapple and Steven J. Brog of counsel), for respondents.
    I. Northeast had a duty to disclose material adverse information about potential purchasers that it presented to its clients in anticipation of being paid a fee upon consummation of a transaction. (Flickinger v Brown & Co., 947 F2d 595; Litton Indus, v Lehman Bros. Kuhn Loeb, 767 F Supp 1220; Mandelblatt v Devon Stores, 132 AD2d 162.) II. Northeast breached its duty to disclose to Wellington material adverse information about Sternau and, therefore, forfeited any commission. (TPL Assocs. v Helmsley-Spear, Inc., 146 AD2d 468; John J. Reynolds, Inc. v Snow, 11 AD2d 653; Kule Resources v Reliance Group, 49 NY2d 587; International Ore & Fertilizer Corp. v SGS Control Servs., 743 F Supp 250.) III. There is no evidence whatsoever that defendant Harry Arpadi prevented Northeast’s Dunton from disclosing to defendants material adverse information about Sternau. (Nicastro v Park, 113 AD2d 129; Zachara v Occidental Chem. Corp., 144 AD2d 926; Pire v Otero, 123 AD2d 611; Cohen v Hallmark Cards, 45 NY2d 493; Dominguez v Manhattan & Bronx Surface Tr. Operating Auth., 46 NY2d 528.)
   OPINION OF THE COURT

Bellacosa, J.

The dispositive feature of this case, in which plaintiff Northeast seeks to recover a finder’s fee, is whether the finder-seller agreement between the parties created a relationship of trust between them producing a fiduciary-like obligation on the finder. The particular facet of this case devolves from a duty imposed by the lower courts on the finder to disclose adverse reputational information about the prospect tendered to its client, Wellington, the failure of which disentitles the finder of its otherwise earned fee.

This Court granted leave to appeal from the Appellate Division order, which affirmed Supreme Court’s grant of defendants’ CPLR 4404 (a) motion to set aside the jury verdict that would have awarded plaintiff finder its fee for services rendered. Defendants persuaded Supreme Court that Northeast violated a newly notched finder’s fiduciary-like obligation when it failed to disclose the adverse reputation information about the prospect.

We reverse the Appellate Division order affirming the holding of the Supreme Court and reinstate the verdict of the jury. In these circumstances, a fiduciary relationship does not arise by operation of law, but must spring from the parties themselves, who agree to and accept the responsibilities that flow from such a contractual fiduciary bond. Courts look to the parties’ agreements to discover, not generate, the nexus of relationship and the particular contractual expression establishing the parties’ interdependency. Finders have a recognized role in the law and perform a fairly customary market service. Unless the particular agreement establishes a relationship of trust, one will not spring from a finder’s contract in and of itself, for without some agreed-to nexus, there is no relationship of trust and, thus, no duty of highest loyalty. Rather, absent special agreement or special circumstances, the forces and mores of the marketplace govern such finder arrangements.

I.

In July of 1988, plaintiff finder Northeast General Corporation, through its agents Dunton and Margolies, entered into an agreement with defendant seller Wellington Advertising, Inc., authorized by its president Arpadi. Northeast was to act "as a non-exclusive independent investment banker and business consultant for the purposes of finding and presenting candidates for purchase, sale, merger, or other business combination.” The agreement further provided that the finder would be entitled to a "Completion Fee when a Transaction is closed within three (3) years after the termination of this Agreement with a party introduced and/or presented by [finder] to [Wellington].” By its terms, the understanding between these parties called for a simple service: the finder was to introduce purchaser "candidates” to Wellington for which the finder would be paid a finder’s fee if a completed transaction ensued.

Margolies, after consultation with Northeast’s new president Dunton, introduced Sternau to Wellington’s Arpadi as a potential purchaser of Wellington. Ultimately, Sternau and Wellington entered into a purchase agreement. The record shows that before introducing Sternau to Wellington, finder’s president Dunton was informed by an unidentified investment banker that Sternau had a reputation for buying companies, removing assets, rendering the companies borderline insolvent, and leaving minority investors unprotected. Dunton did not, prior to the closing of the Wellington-Sternau deal, disclose this adverse information. It is undisputed that after Northeast’s introduction of Sternau to Wellington, prior to the merger agreement, Dunton called Arpadi and offered further help with the transaction. Arpadi declined that help and discouraged Dunton from any further involvement. After the merger agreement, companies controlled by Sternau purchased controlling stock of Wellington, leaving Wellington’s principals, including Arpadi, as minority investors. Ultimately, Wellington was rendered insolvent and Arpadi and other minority investors suffered financial losses.

Wellington delivered a check for Northeast’s finder services, but before it could be negotiated, payment was stopped. Northeast then sued to recover its finder’s fee and, after trial, the jury rendered a verdict with special findings.

Defendants moved to set aside the verdict and to dismiss the action notwithstanding the verdict in favor of plaintiff. Supreme Court granted the motion essentially based on a newly notched fiduciary-like duty on finders, predicated on public policy, not expressly on the parties’ agreement. No special duty to investigate was articulated as part of the new rule, only a duty to disclose known negative reputational information (151 Misc 2d 389, 393). The Appellate Division affirmed by adopting the opinion at Supreme Court (187 AD2d 302).

II.

Before courts can infer and superimpose a duty of the finest loyalty, the contract and relationship of the parties must be plumbed. We recognize that "[m]any forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties” (Meinhard v Salmon, 249 NY 458, 464). Chief Judge Cardozo’s oft-quoted maxim is a timeless reminder that "[a] trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive” (id., at 464). If the parties find themselves or place themselves in the milieu of the "workaday” mundane marketplace, and if they do not create their own relationship of higher trust, courts should not ordinarily transport them to the higher realm of relationship and fashion the stricter duty for them.

The Northeast-Wellington agreement contains no cognizable fiduciary terms or relationship. The dissent ascribes inordinate weight to the titles nonexclusive independent "investment banker and business consultant” (dissenting opn, at 171, 173). These terms in the context of this agreement are not controlling, since Dunton did not perform the services of an investment banker or consultant. Instead, Dunton’s sole function was "for the purposes of finding and presenting candidates”. That drives the analysis of this case because he was a traditional finder functioning under a finder’s agreement, and his role ceased when he found and presented someone. The finder was not described or given the function of an agent, partner or coventurer. An elongated foot of the Chancellor extends too far with a decree declaring a fiduciary-like duty here. (See, Powell, "Cardozo’s Foot’’: The Chancellor’s Conscience and Constructive Trusts, 56 Law & Contemp Probs 7 [1993].) Such a ukase earns small jurisprudential profit in this commonplace field of commercial transaction. Probing our precedents and equitable principles unearths no supportable justification for such a judicial interposition, however highly motivated and idealistic. Indeed, responding to this fine instinct would inappropriately propel the courts into reformation of service agreements between commercially knowledgeable parties in this and perhaps countless other situations and transactions as well.

Also, a finder is not a broker, although they perform some related functions. Distinguishing between a broker and finder involves an evaluation of the quality and quantity of services rendered. The finder is required to introduce and bring the parties together, without any obligation or power to negotiate the transaction, in order to earn the finder’s fee (Ames v Ideal Cement Co., 37 Misc 2d 883, 886). While a broker performs that same introduction task, the broker must ordinarily also bring the parties to an agreement. A broker in New York, unlike a finder, thus carries a defined fiduciary duty to act in the best and more involved interests of the principal (TPL Assocs. v Helmsley-Spear, Inc., 146 AD2d 468; see also, John J. Reynolds, Inc. v Snow, 11 AD2d 653, affd 9 NY2d 785). In this regard, defendants’ effort at analogizing whatever fiduciary-like obligation brokers may have to a finder’s role fails. Moreover, the finder in this case under the terms of the written agreement is definitely not a broker and did not function as a broker.

We note that a finder has far less involvement in the ultimate transaction quantitatively and qualitatively, and thus has significantly fewer and different responsibilities to the hiring client. Often, for example, the finder may accomplish work in as little as two phone calls (Minichiello v Royal Bus. Funds Corp., 18 NY2d 521, 527, cert denied 389 US 820). Here, Margolies and Dunton, as Northeast’s agents, did no more than introduce Sternau to Arpadi in accordance with the agreement. Indeed, the service was completed at that point under the agreement and by the ensuing conduct of the parties. Ultimately, the dispositive issue of fiduciary-like duty or no such duty is determined not by the nomenclature "finder” or "broker” or even "agent,” but instead by the services agreed to under the contract between the parties. The dissent’s reliance on communications between the parties before they made their agreement is misplaced (dissenting opn, at 171). None of the duties the dissent would derive from those precontract discussions was incorporated into the formal contract, which defined the relationship as one solely involving a finder. Indeed, the parties have treated their relationship solely as one involving a finder throughout. The discussions of the parties prior to the contract should not be used now to enhance the written agreement. Nor does the record support the dissent’s contention that Dunton was unquestionably acting in a confidential role as investment banker and business counselor (dissenting opn, at 174). To the contrary, after the finder presented the prospect to the buyer, Arpadi explicitly rejected Dunton’s offer to participate further in the transaction. A finder is not transformed into a broker or fiduciary because the finder is informed of the special needs of the client so the finder can perform the finder service.

We note, too, that while agents in New York are bound to exercise the utmost good faith toward their principals (Cristallina v Christie, Manson & Woods Intl., 117 AD2d 284, 292), the plaintiff finder in this case was also not an agent in the actual or functional meaning of that term and relationship. This finder had no explicit or implied power to bind Wellington. This finder did not have the power to negotiate the transaction. This finder did not have the power to do anything except find and introduce prospects; in fact, its offer to Wellington to participate further in the transaction after presenting a prospect was rejected by Wellington. Thus, by agreement and through the actions of the parties, this finder had no power to affect any legal relations of Wellington and the prospective buyer that would propel the duties into the fiduciary-like sphere.

This Court may sense a sympathetic impulse to balance what it may view as the equities of a situation such as this. The hard judicial obligation, however, is to be intellectually disciplined against that tug. Instead, courts must focus on the precise law function reposed in them in such circumstances, which is to construe and enforce the meaning and thrust of the contract of the parties, not to purify their efforts.

In Knauss v Gottfried Krueger Brewing Co. (142 NY 70), this Court analyzed a conflict of interest situation where a finder working for the seller of a brewery also took a commission from the buyer. This Court found no violation of a duty, because the character of the employment was not such as to require a duty. The path of disposition for this case is marked by parallel reasoning. The character of the Northeast-Wellington agreement was not one of trust importing duties beyond finding a prospect. The fact that Wellington did not employ its own independent, traditional methods to check out the reputation of the prospect and accepted what turned out to be a bad prospect does not warrant this Court rescuing it from its soured deal by any postagreement fiduciary lifeline.

If Wellington wanted fiduciary-like relationships or responsibilities, it could have bargained for and specified for them in the contract. We should emphasize that there is nothing inherently objectional about the "morals of the market place”. Once again, Chief Judge Cardozo offers illuminating instruction:

"Some relations in life impose a duty to act in accordance with the customary morality and nothing more. In those the customary morality must be the standard for the judge” (Cardozo, The Nature of the Judicial Process, reprinted in Selected Writings of Benjamin Nathan Cardozo, at 152 [Margaret E. Hall ed 1947]).

They are an acceptable fact of life in a well-ordered, free society. This Court should not attempt to elevate all the mores of society to the standard of the "punctilio of an honor the most sensitive” (Meinhard v Salmon, 249 NY 458, 464, supra), where that is not justified, agreed to or expected. This Court, after all, is not the omniscient, great equalizer of the marketplace, with all its ups and downs, give and take, and varieties of conduct and relationships.

The commonplace mores of the marketplace suffice and are appropriate to govern relationships established by contract of the type involved here, which contemplates and asks nothing more of the parties than performance of a simple service. In sum, defendants’ financial losses from their market mishap with Sternau is not reason enough to propel a sweeping new fiduciary-like doctrine into finders’ agreements. Finally, the courts should not reform the agreed-upon finder relationship established by particular contract in this case.

We have considered the other arguments advanced by the parties and conclude that they are without merit and do not warrant further explication.

Accordingly, the order of the Appellate Division should be reversed, with costs, defendants’ motion to set aside the jury verdict denied, and case remitted to Supreme Court for further appropriate proceedings (see, 151 Misc 2d 389, 390, n, supra).

Hancock, Jr., J.

(dissenting). Does an investment banker/ business consultant who is privy to critical adverse information about a prospect he is presenting to a client for a possible merger with his client’s business have an obligation to disclose that information before the merger is finalized? The majority holds that, as a matter of law, there is no such duty even when, as here, the business consultant’s compensation is to be based on a percentage of the dollar value of the consummated transaction and when disclosing the information would jeopardize the completion of the transaction and as a consequence, the consultant’s receipt of the fee. I believe that the plaintiffs conduct constituted a breach of the minimum duty of disclosure that the law requires in these circumstances and that the plaintiff, at the very least, should be precluded from claiming his fee — a percentage of a transaction whose disastrous results for his client’s business he helped orchestrate. I agree with the view of Supreme Court and the unanimous Appellate Division that the law requires a higher standard of conduct in these circumstances than the majority finds acceptable. I, therefore, dissent. A discussion of this issue requires a narration of the facts and circumstances.

I

The facts are taken from the record of the trial in which the jury reached a unanimous verdict that:

"Northeast General Corporation, by its agent Kim-ball Dunton, [had, prior to the date of the merger of Wellington with one of Sternau’s companies,] material adverse information concerning Fred Sternau, which it failed to disclose to Harry Arpadi and the Wellington Corporation”.

In mid-March 1988, Harry Arpadi, president of Wellington Advertising, Inc., and a principal shareholder with 85% of its issued shares, and Kimball Dunton, chairperson of Northeast General Corporation, were introduced by a mutual friend for the purpose of discussing Arpadi’s concerns about his financial future and that of his company, Wellington. Among other things, they talked about the highly liquid nature of Arpadi’s company and of the possibility of another entity’s acquiring an interest in it or of Arpadi’s buying a second business. Between then and July 26, 1988, when the Northeast/Wellington compensation agreement was entered into, Dunton and Arpadi met a dozen times to continue their discussions about structuring a financial transaction regarding Wellington’s assets in order to create a retirement plan for Arpadi. He was then 65. Arpadi disclosed confidential information to Dunton about his desires and plans and gave Dunton Wellington’s audited financial statements for several periods as well as unaudited internal statements.

Wellington was a small advertising agency that had "considerable excess cash”, with a liquid net worth of approximately $2 million. Arpadi wanted to take out as much cash as possible from Wellington while at the same time continuing the business so that his employees would not lose their jobs. He also wanted to continue on the Wellington payroll after the contemplated transaction. Dunton knew and acknowledged Arpadi’s desires. Dunton also knew that Arpadi "was enamored of making an acquisition for the upside potential, but terrified at the prospect of losing everything if the acquisition did not work out”. Dunton understood "perfectly” that Arpadi was looking for a transaction with Wellington’s assets —either as a buyer or a seller — that would be lucrative yet relatively nonrisky to maximize his retirement reserve.

At a meeting at Northeast on July 26, 1988, among Arpadi, Dunton and Mel Margolies, then president of Northeast, Margolies suggested that Arpadi sign an agreement that defined Northeast’s compensation for its services in bringing about the desired transaction. The compensation agreement was immediately prepared in Northeast’s offices under the supervision of Margolies, an attorney. At this same meeting, Arpadi signed his acceptance to the agreement without having an attorney review it. Northeast was to be compensated as a nonexclusive, independent investment banker and business consultant for finding and presenting prospects for a purchase, sale, merger or other transaction relating to Wellington. The compensation was fixed as a percentage of the dollar amount of the transaction.

Three days after the compensation agreement was signed, Margolies left the employ of Northeast and immediately began working for Charles Street Securities, whose clients included Fred Sternau, owner of RFLR Sub, the company which eventually bought out Wellington’s shareholders in a merger. At a meeting on August 8, 1988, at which Arpadi, Margolies and Dunton were present, the three determined that Arpadi should be a seller, not a buyer. Also, at this meeting, the three men agreed that Margolies, now no longer in the employ of Northeast, could introduce clients of his current company, Charles Street, to Arpadi as prospective buyers and that Dunton would still receive his fee based on a percentage of the deal.

About three weeks after Margolies left Northeast, he telephoned Arpadi telling him that some of Charles Street’s clients had expressed an interest in acquiring Wellington. Within weeks, Margolies introduced Sternau, and a few other candidates, to Arpadi. By mid-September, Dunton had learned from Margolis that Fred Sternau was involved in the transaction.

It is undisputed that Dunton possessed critical information about Sternau throughout the contract period. Several years before, he had had prior contact with Sternau when he was considering buying a Sternau-owned printing company. After reviewing its financial statements submitted by Sternau, Dun-ton determined that the printing company bordered on insolvency. Dunton’s own "investment banker who introduced [Dunton] to [Sternau] had told [Dunton] of other transactions that [it] had investigated, and they all followed the same general pattern”: Sternau would buy a company, siphon off the cash, leave it insolvent, with the minority shareholders "holding the bag”. Thus, aided by the disclosure from his own investment banker who had acted as finder to introduce Sternau to him, Dunton concluded that Sternau’s integrity as a business prospect was questionable, and decided not to buy Sternau’s company. Dunton did not disclose this information to Arpadi.

In September 1988, Dunton called Arpadi to discuss the prospects of a deal with Fred Sternau and to offer help in the upcoming discussions with Sternau. Arpadi told Dunton that he was "comfortable” with the advisors he was using — Arpadi now relied heavily on Margolies — and he did not need Dun-ton’s services at that time, but would call on him if needed. In late November or early December knowing that preparations for the merger were in high gear, Dunton wrote Arpadi, requesting arrangements for the payment of his fee at closing; a few days later, over the telephone, Arpadi and Dunton made such arrangements. During the period from the signing of the compensation agreement until the closing of the merger between Wellington and Sternau’s company, RFLR Sub, Dunton knew the following three pieces of information about Wellington and Arpadi. First, Dunton knew that Arpadi intended to use the proceeds of the transaction to fund his retirement plan, that this transaction represented to Arpadi the culmination of his years at Wellington. Second, Dunton knew from Wellington’s financial statements that Wellington was a highly liquid, profitable corporation, which made it a prized target to any investor who wanted to acquire such a company in order to extract the cash for use in other transactions. Third and most important, Dunton knew the structure of the Wellington deal: that Arpadi planned to continue on the payroll at Wellington after the merger; indeed, the merger agreement included a covenant that Arpadi and Wellington were to enter into an employment agreement, under which Arpadi could continue on the payroll of the merged company for five years.

Even though his own investment banker had in the past disclosed adverse information to him about Sternau, at no time from Dunton’s first awareness that Sternau was involved in the Wellington deal until the closing did Dunton reveal to Arpadi the adverse business facts he possessed about Sternau. Arpadi testified that, during the December telephone call with Dunton, he asked Dunton "do you know Mr. Sternau, do you have any knowledge about him” and that Dunton said "I vaguely know of him”.

On January 9, 1989, Sternau’s company, RFLR Sub, merged into Wellington, with Wellington as the surviving corporation. The merger was accomplished by RFLR, the parent of RFLR Sub, purchasing from Arpadi, his wife, and another stockholder their Wellington common stock, 1,416,437 shares, which constituted 85% of the company’s shares, at $1 per share. Arpadi received approximately $1.2 million for his shares. The purchase thus left Arpadi and his wife as minority stockholders. Also as part of the merger, RFLR Sub was to issue to these stockholders RFLR Sub preferred stock, par value $100 per share, in the amount of 10% of Wellington’s total equity, that is, for $239,817. Further, it was agreed that Arpadi could remain employed at Wellington for five years at a salary of $175,000 per year, with a bonus of $300,000 after two years; he was to receive $25,000 per year for five years for not competing with Wellington.

The deal soured shortly thereafter. Arpadi never received the RFLR Sub preferred stock. A year and a half later during the summer of 1990, Arpadi learned that the company was having "some problems”, that there was "not enough money to pay bills and salaries”. By September 1990, Arpadi was no longer getting his promised salary; he had received only one year’s noncompeting payment and never received his bonus. All in all, Arpadi was out approximately $950,000 in expected payments. In the Wellington merger, Sternau had held true to his previous pattern. He had emptied Wellington of its cash, in part, for investment in transactions with Merrill Lynch, leaving Arpadi and the other minority stockholders "holding the bag”. For introducing Arpadi to Margolies, Sternau’s agent, Dunton claims that Arpadi now owes him $150,000.

The Supreme Court concluded it "would be unconscionable and contrary to public policy” if Dunton could collect a fee for soliciting "prospective buyers among known confidence men, swindlers and the like.” (Northeast Gen. Corp. v Wellington Adv., 151 Misc 2d 389, 393, 394, supra.) The court reasoned that "[pjublic policy requires at the very least that a finder reveal to his client such material adverse information as he has before he can claim any fee for bringing the parties together” (id., at 394). The Appellate Division affirmed for the reasons stated by Supreme Court.

II

The sole question is whether, in view of the relationship between Arpadi and Dunton in which Arpadi revealed confidential business information and his personal desires, wishes, and intentions for Wellington’s future, Dunton had any legal obligation to divulge crucial negative information he possessed about Sternau. In an answer to a submitted interrogatory, the jury found that this adverse information was material. Indeed, there can be no doubt that Dunton — given his awareness of Sternau’s proclivity as a raider and of confidential information relating to Arpadi’s business plans — must have known that the proposed merger was of the very kind that Arpadi had said he was "terrified” he "would lose everything [in]”. Dun-ton certainly had good reason to fear that disclosure of the negative information would terminate the deal and, with it, his prospects for receiving a percentage fee. Yet, the majority holds that Dunton need not have said anything contrary about Sternau; he could simply sit back, let the deal play out towards its disastrous end, and collect his commission.

The majority’s conclusion that Dunton could reap the benefits of his own calculated silence rests on two premises: (1) that the relationship between Dunton and Arpadi during the period when Dunton withheld material information can be equated with the sort of "arm’s length” transaction referred to in Meinhard v Salmon (249 NY 458, 464), and (2) that no legal duty can be imposed on Dunton to disclose material adverse knowledge because no fiduciary relationship is specifically spelled out in the agreement. Neither premise has support in the record or in established legal principles.

First, the majority describes the relationship between Dun-ton and Arpadi as within the "commonplace field of commercial transaction” (majority opn, at 162) because Dunton was to perform merely the services of a "finder” (id., at 162-163). The majority characterizes an agreement for finding services as the sort of arm’s length transaction which deserves no more protection than that afforded by the "morals of the market place” (Meinhard, supra, at 464; see, majority opn, at 162). By thus labelling the services to be performed under the agreement, the majority concludes that there can be no relation of trust or confidentiality. Consequently, in this "buyer beware” context, Dunton’s conduct was perfectly permissible.

The record — the contract as well as the "special circumstances” of Dunton’s and Arpadi’s conduct (majority opn, at 160) — establishes conclusively that the relationship was not at all as the majority would have it. Far from calling only for services as a finder, the compensation agreement specifies that Northeast was retained as an rrinvestment banker and business consultant for the purposes of finding and presenting candidates for” (emphasis added) a business transaction involving Wellington. Not only did the contract provide that Northeast was to act as an investment banker and business consultant in finding and introducing a prospect, but the record shows that Northeast, acting through its agent Dunton, performed in precisely these capacities. Dunton and Arpadi held a dozen meetings before the contract was signed, in which Dunton obtained confidential information about Wellington’s financial makeup and Arpadi’s private business plans. The record thus indicates that Dunton was not engaged in an arm’s length transaction with Arpadi, but as his business advisor and counselor to introduce Arpadi to candidates likely to undertake the kind of transaction that he was seeking.

For its second premise supporting the conclusion that there could be no fiduciary relationship between Dunton, acting for Northeast, and Arpadi, the majority focuses on the compensation agreement. It reasons that "a fiduciary relationship * * * must spring from the parties themselves, who agree to and accept the responsibilities” of such a relation in the contract and that "absent special agreement or special circumstances” a finder compact does not establish a relationship of trust (majority opn, at 160). Because no fiduciary relationship is spelled out in the agreement and because Dunton was assertedly only to be a finder (an assertion that the wording of the agreement itself refutes), the argument is that there can be no fiduciary relationship and, thus, no duty to disclose critical adverse information. But the cases do not so narrowly restrict the categories of relationship from which fiduciary duties may arise. It is fundamental that a fiduciary duty "is not dependent solely upon an agreement or contractual relation between the fiduciary and the beneficiary but results from the relation.” (Restatement [Second] of Torts § 874, comment b; see, e.g., Fisher v Bishop, 108 NY 25; United States v Reed, 601 F Supp 685, 708 [SD NY], revd in part on other grounds 773 F2d 477 [2d Cir 1985]; Mandelblatt v Devon Stores, 132 AD2d 162.) The established rule is:

"A fiduciary relationship is one founded on trust or confidence reposed by one person in the integrity and fidelity of another. The term is a very broad one. It is said that the relation exists, and that relief is granted in all cases in which influence has been acquired and abused, in which confidence has been reposed and betrayed. The origin of the confidence and the source of the influence are immaterial. The rule embraces both technical fiduciary relations and those informal relations which exist whenever one man trusts in and relies upon another. Out of such a relation, the law raises the rules that neither party may exert influence or pressure upon the other” (Mobil Oil Corp. v Rubenfeld, 72 Misc 2d 392, 399-400, affd 77 Misc 2d 962, revd on other grounds 48 AD2d 428, affd 40 NY2d 936 [emphasis added]; see also, Quintel Corp. v Citibank, 567 F Supp 1357 [SD NY 1983]; Penato v George, 52 AD2d 939, appeals dismissed 42 NY2d 908).

A "fiduciary relation exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation” (Restatement [Second] of Torts § 874, comment a; see also, Mandelblatt, supra, at 168). The essential elements of a fiduciary relation are "the concepts of reliance, and de facto control and dominance” (Reed, supra, at 708 [quoting United States v Margiotta, 688 F2d 108, 125 (2d Cir 1982), cert denied 461 US 913 (1983)]); that is, "[a] fiduciary relation exists when confidence is reposed on one side and there is resulting superiority and influence on the other” (id., at 707).

The narrow question applying the above rules is whether Arpadi’s and Dunton’s relationship exhibits sufficient trust and de facto control upon which to ground Dunton’s duty to disclose negative information regarding the very deal he was promoting. The record reveals more than enough evidence to demonstrate both elements. By imparting confidential business details as well as his personal plans and intentions, Arpadi reposed trust in Dunton as a business counselor to find candidates likely to conform to Arpadi’s investment goals. Arpadi expected Dunton to perform as a finder with Arpadi’s interests at heart, i.e., not to remain silent as Wellington was being circled by a corporate predator. Dunton exerted de facto control and influence over Arpadi by deliberately remaining silent about Sternau’s business history, thereby fostering Arpadi’s false belief that there was no reason not to accept Sternau as a suitable candidate. Dunton’s review of the intimate details of Arpadi’s business marked Dunton’s acceptance of that trust. There is no doubt that as regards the proposed merger with RFLR Sub, Dunton and Arpadi stood in a fiduciary relation to each other.

The majority’s view of this case is epitomized in the statement "[a] finder is not transformed into a broker or fiduciary because the finder is informed of the special needs of the client” (majority opn, at 164). By holding fast to a formalistic, a priori assumption that performance as a finder categorically negates any confidential relationship, the majority simply concludes that Dunton, performing as a finder here, could not possibly have acted as a fiduciary to Arpadi. The majority misses the point, though, that even if the services that Dunton performed under the contract are labelled as only those of a finder, Dunton would nonetheless be in a fiduciary relationship with Arpadi and still owe him a duty to disclose negative facts about Sternau. It is in the entire complex of the Arpadi-Dunton association, not just in the agreement, that the fiduciary relation is found. Thus, performance of the act of finding cannot be isolated from the realities of the transaction in which the finding is to take place (see, Restatement [Second] of Torts § 874; Fisher, supra, at 29; Reed, supra, at 708; Mandelblatt, supra, at 168).

The record shows that both before and after the compensation agreement was signed, Dunton obtained confidential information pertaining to Arpadi’s own business needs as well as the financial records of Wellington. Dunton needed this information to accomplish the complex tasks. of structuring possible mergers or other deals and finding candidates for those deals that would accommodate Arpadi’s retirement plans and his goals for Wellington and its employees; in doing so, Dunton was unquestionably acting in a confidential role as investment banker and business counselor. Contrary to the majority view (see, majority opn, at 163), it is unreasonable to conclude that once Dunton’s services progressed to the stage of actually finding a deal — which, significantly, contemplated Arpadi’s continued stake as a minority shareholder and further involvement in its affairs — Dunton’s relationship with Arpadi would lose all aspects of trust and confidentiality and he could, without restriction, propose a candidate inimical to Arpadi’s interests. Realistically, it is impossible to separate Dunton’s responsibility for tailoring a program of transactions likely to meet Arpadi’s "wish list” (see, supra, n 5) from his finding a candidate suitable to fit in with that program.

There is a final point. Even if only the agreement between Northeast and Arpadi were to be considered, the law would, I submit, imply a duty on the part of Dunton to disclose critical adverse information in these circumstances. As we said in Wieder v Skala (80 NY2d 628) in finding an implied promise by the employer law firm not to fire an associate for adhering to ethical standards of professional conduct:

" 'What courts are doing [when an omitted term is implied]’, Professor Corbin explains, 'whether calling the process "implication” of promises, or interpreting the requirements of "good faith”, as the current fashion may be, is but a recognition that the parties occasionally have understandings or expectations that were so fundamental that they did not need to negotiate about those expectations’ (3 Corbin, Contracts § 570, 1992 Supp, at 411)” (id., at 637).

One can hardly think that it must be spelled out in the retainer of a business consultant that the consultant will not propose a prospect that he or she knows could be dangerous to the client’s interest without at least disclosing that information. Such a covenant is so fundamental to the performance of the contract as not to require expression. Yet the majority holds that the law does not impose on Dunton this minimal duty of disclosure. It is not necessary to bind Dunton to the "punctilio of an honor the most sensitive” (Meinhard, supra, at 464) to hold that in these circumstances that he should not have withheld damaging information about Sternau, thereby assuring the consummation of the deal and in turn the collection of his fee. I think that fundamental legal principles imposed on him, at the very least in these circumstances, the duty to disclose. Indeed, I believe that many would agree that even the "morals of the market place” (id., at 464) would require it. Surely, he should not be rewarded for his failure.

Chief Judge Kaye and Judges Simons and Titone concur with Judge Bellacosa; Judge Hancock, Jr., dissents in a separate opinion in which Judge Smith concurs; Judge Levine taking no part.

Order reversed, with costs, defendants’ motion to set aside the jury verdict denied, and case remitted to Supreme Court, New York County, for further proceedings in accordance with the opinion herein.

      . At this time Margolies did not inform Dunton or Arpadi that Sternau might be a potential prospect.

      . Ultimately, Dunton earned his finder’s commission for "introducing” Arpadi not to Fred Sternau, who controlled the corporation that bought out Wellington, but to Sternau’s agent, Margolies, who only three weeks before had prepared the agreement by which Dunton was to be compensated.

      . By this time Margolies still had not informed Arpadi or Dunton that Sternau was a potential prospect.

      . Supreme Court expressly rejected plaintiff’s contention that Arpadi prevented Dunton from revealing adverse information about Sternau, stating: "By no rational interpretation of any of the evidence can such a conclusion be reached. There was nothing to prevent Dunton * * * from picking up the telephone and conveying to Arpadi * * * that he had adverse information concerning Sternau” (Northeast Gen. Corp. v Wellington Adv., 151 Misc 2d 389, 394).

      . Dunton testified that at his first meeting in mid-March with Arpadi: "We discussed his clientele, which was unique; his financial status of his company, which was highly liquid; his approach in retirement, which had not been fully anticipated or planned from a financial standpoint. We also discussed preliminarily the advantages of using the excess cash that existed in his company * * * for acquisition purposes to enhance the value of the company as opposed to dividending the stock out and incurring a current tax on the dividend. We also discussed the possibility that * * * some other corporate entity * * * might have an interest in acquiring his family’s ownership in Wellington”. Dunton testified that up to July of 1988, he and Arpadi had had "[pjrobably a dozen, maybe more” meetings.
      Dunton reported that Arpadi had given Dunton a "wish list” of his goals for any transaction with Wellington’s assets: to "take out of the company as much of his cash he had accumulated as possible”; to "continue the business so that his employees could have continued employment”; to "continue to serve and enjoy revenues from his then employment”.
      Dunton testified that he had requested June 30, 1988 internal financial statements for Wellington and that these were not ready until August. Dunton had requested them "[b]ecause they were necessary to * * * transmit to any prospective purchaser in the event that serious interest in the company developed on the part of a purchaser”. Also, after the compensation agreement had been signed, Arpadi had sent to Dunton draft financial statements for forwarding to Charles Street Securities.


source: Caselaw Access Project

author: Levine, J.

license: Public Domain

text:
    [624 NE2d 139, 604 NYS2d 11]
    The People of the State of New York, Respondent, v Jeffrey Collins, Appellant.
    Argued October 13, 1993;
    decided November 11, 1993

      POINTS OF COUNSEL

      Jonathan P. Willmott, New York City, and Philip L. Weinstein for appellant.
    I. Dismissal of the indictment pursuant to CPL 30.30 is required, when the Court below properly found that 179 days were chargeable and the trial assistant did not adduce an adequate statutory basis for the exclusion of the six days between October 5, 1989 and October 11, 1989, which preceded a declaration of readiness. (People v Berkowitz, 50 NY2d 333; People v Brothers, 50 NY2d 413; People v Cortes, 80 NY2d 201; People v Osgood, 52 NY2d 37; People v Dean, 45 NY2d 651; People ex rel. Franklin v Warden, 31 NY2d 498; People v Correa, 77 NY2d 930; People v Hudson, 162 AD2d 617; People v Kendzia, 64 NY2d 331; People v Parris, 79 NY2d 69.) II. The admission at trial of appellant’s statement that he was selling drugs, which the Court below held to have been illegally obtained, was not harmless beyond a reasonable doubt when, among other things, the evidence did not definitively demonstrate that appellant was the seller, the prosecutor relied on the confession in summation, and the defense theory, that appellant was only a user and buyer of drugs, found support in the evidence. (People v Reddick, 65 NY2d 835; People v Crimmins, 36 NY2d 230; People v Harrison, 57 NY2d 470; People v Centano, 76 NY2d 837; People v Bryant, 59 NY2d 786; People v Williamson, 51 NY2d 801; People v Mayorga, 64 NY2d 864; People v Bay, 54 NY2d 808; People v Albro, 52 NY2d 619; People v Huntley, 15 NY2d 72.)

      Robert M. Morgenthau, District Attorney of New York County, New York City (Mary C. Farrington and Hilary Hassler of counsel), for respondent.
    I. The People were chargeable with 172 days of pretrial delay, which was within the six months permitted by CPL 30.30. (People v Lomax, 50 NY2d 351; People v Anderson, 66 NY2d 529; People v Brothers, 50 NY2d 413; People v Correa, 77 NY2d 930; People v Worley, 66 NY2d 523; People v Friscia, 51 NY2d 845; People v Boyd, 189 AD2d 433; People v Wood, 115 AD2d 834; People v Hughes, 180 AD2d 908.) II. Defendant’s statement was spontaneous and not the product of custodial interrogation. In any event, its admission, even if error, was entirely harmless in this case. (Miranda v Arizona, 384 US 436; People v Bryant, 59 NY2d 786; People v Maerling, 46 NY2d 289; People v Lynes, 49 NY2d 286; People v Lucas, 53 NY2d 678; People v Paulin, 25 NY2d 445; People v Kaye, 25 NY2d 139; People v Rivers, 56 NY2d 476; People v Lanahan, 55 NY2d 711; People v Rogers, 48 NY2d 167.)
   OPINION OF THE COURT

Levine, J.

On defendant’s motion for dismissal of the indictment on statutory ready trial grounds, the People conceded that they were chargeable with 165 days of the six-month period (in this case 183 days) from the inception of the criminal action against him, within which they were required to be ready for trial, exclusive of any period of time for which they were not responsible (CPL 30.30 [1] [a]). The People’s responsibility for one period of prereadiness delay and one period of postreadiness delay are at issue on this appeal. The Appellate Division held that the period of prereadiness delay in issue was not chargeable to the People, that the period of postreadiness delay in dispute should be charged to the People, and concluded that defendant was not denied his statutory right to a speedy trial (189 AD2d 564). A Judge of this Court granted defendant leave to appeal, and we now reverse, concluding that the People were not ready for trial within the statutorily prescribed period of time.

The first period in dispute is the six days between October 5, 1989, when defendant was arraigned, and October 11, 1989, the date to which defendant’s case was adjourned for purposes of transfer to an Individual Assignment System (IAS) Part of Supreme Court, New York County, for all further proceedings, as required by the Uniform Rules for Trial Courts (22 NYCRR 200.11 [b], [c]), and also "to join defendant’s other [pending] case”. The Appellate Division erred in excluding that period. The People do not contend that the adjournment to an IAS Part was joined in or consented to by defendant. They argue, however, that the period was excludable because: (1) court rules mandated the transfer to an IAS Part and, thus, the adjournment was an unavoidable administrative step outside of the People’s control; (2) the rules further mandated that all motion practice was to take place before the IAS Judge; hence, the adjournment was a necessary antecedent to defendant’s making pretrial motions and thus excludable under CPL 30.30 (4) (a) as a period of delay attributable to pretrial motions; and (3) insofar as the adjournment was also for the purposes of joining before the same IAS Part the instant case with another case pending against defendant, it was also statutorily excludable as a delay "resulting from other proceedings concerning the defendant” (CPL 30.30 [4] [a]).

None of the foregoing grounds for excluding the six-day period following defendant’s arraignment is persuasive. A delay occasioned by a rule-mandated transfer from an Arraignment Part to an IAS Part is not covered by any of the express statutory exclusions set forth in CPL 30.30. Moreover, the rules merely mandate the assignment of the case to an IAS Part, not any given period of adjournment for such purposes. Thus, the six-day adjournment in this case for transfer to an IAS Part was merely another instance of a delay occasioned by court scheduling which, as we have previously held, does not excuse the People from filing a certificate of readiness (see, People v Smith, 82 NY2d 676, 678).

As to the People’s argument that the adjournment was excludable as a delay "resulting from * * * pre-trial motions” (CPL 30.30 [4] [a]), the record is entirely devoid of any suggestion that the adjournment was made for the purpose of defense motions or even for the purpose of setting up a motion schedule. To accept the People’s argument that the adjournment was an excludable motion-related delay because transfer to an IAS Part was a condition precedent to any defense motion which might later be made falls outside of a fair reading of the statutory language, which generally refers to delays attributable to responding to and deciding motions actually made (see, People v O’Connell, 133 AD2d 970, 971; see also, People v Torres, 60 NY2d 119, 127-128).

The record is likewise barren of any showing that the six-day adjournment was somehow justified by the pendency of the other case against defendant (cf., People v Dean, 45 NY2d 651). Without more support in the record, the adjournment (without defendant’s consent) to "join” defendant’s other pending case seems again to be for scheduling convenience purposes, affording the People no excuse for failing to announce readiness for trial (People v Smith, supra).

The second period in dispute was the 14 days’ adjournment between February 7, 1990 and February 21, 1990. The prosecution contended before Supreme Court that only the first five days of this period should be chargeable to the People, in that only a five-day adjournment had been sought on February 7, due to a death in the family of the trial assistant assigned to the case. However, the minutes of defendant’s appearance on February 7 merely reveal a request by another trial assistant for an indefinite adjournment, without any response when the trial court twice stated that defendant’s case was adjourned to February 21, over defendant’s objection. Moreover, in none of the People’s oral or written responses in opposition to defendant’s motion is there an unequivocal statement by someone with firsthand knowledge that the People’s request for a continuance actually addressed to the court was only for a five-day adjournment. Under these circumstances, the People clearly failed to meet their burden of making a record to reflect the true basis for this two-week adjournment and, hence, the Appellate Division properly charged the entire delay to the People (see, People v Cortes, 80 NY2d 201, 215-216; People v Liotta, 79 NY2d 841, 843).

It follows from the foregoing that the 20 days at issue here were entirely chargeable to the People which, with the conceded 165-day delay prior to arraignment, exceeded the statutory speedy trial period.

The order of the Appellate Division should be reversed, defendant’s conviction vacated and the indictment dismissed.

Chief Judge Kaye and Judges Simons, Titone, Hancock, Jr., Bellacosa and Smith concur.

Order reversed, etc.


author: Chief Judge Kaye.

text:
    [624 NE2d 142, 604 NYS2d 14]
    In the Matter of General Motors Corporation—Delco Products Division, Appellant, v Margarita Rosa, as Commissioner of the New York State Division of Human Rights, et al., Respondents.
    Argued October 13, 1993;
    decided November 11, 1993

      POINTS OF COUNSEL

      Baker & Daniels (Wendell R. Tucker of counsel, of the Indiana Bar, admitted pro hac vice) and Harris Beach & Wilcox, Rochester (James Charles Holahan and Paul J. Yesawich, III, of counsel), for appellant.
    I. Delco was denied due process and a fair hearing where the Division’s Hearing Officer abandoned the robe of impartial arbiter and took on the mantle of advocate, and the prosecutor became the Judge who decided her own cause. (Wasson v Trowbridge, 382 F2d 807; Trans World Airlines v Civil Aeronautics Bd., 254 F2d 90; Matter of City of Rochester, 208 NY 188, 209 NY 529; Matter of Beer Garden v New York State Liq. Auth., 79 NY2d 266; Matter of Washington County Cease v Persico, 120 Misc 2d 207, 99 AD2d 321, 64 NY2d 923; In re Murchison, 349 US 133; Matter of Megson v New York State Tax Commn., 105 AD2d 481; Marshall v Jerrico, Inc., 446 US 238; Rocha v Great Am. Ins. Co., 850 F2d 1095; Anderson v Sheppard, 856 F2d 741.) II. Delco was denied due process and a fair hearing where the Division reversed the burden of proof, failed to make required findings of fact and conclusions of law and based its order upon nothing more than conjecture and uncorroborated testimony of an interested and untruthful party. (Matter of Pell v Board of Educ., 34 NY2d 222; 300 Gramatan Ave. Assocs. v State Div. of Human Rights, 45 NY2d 176; Bache & Co. v State Div. of Human Rights, 35 AD2d 928, 31 NY2d 1021; Matter of Simpson v Wolansky, 38 NY2d 391; Matter of Multari v Town of Stony Point, 99 AD2d 838; Matter of Spetalieri v Quick, 96 AD2d 611; Delco-Remy Div., Gen. Motors

      Corp. v National Labor Relations Bd., 596 F2d 1295; Liberty Mut. Ins. Co. v National Labor Relations Bd., 592 F2d 595; Texas Dept. of Community Affairs v Burdine, 450 US 248; McDonnell Douglas Corp. v Green, 411 US 792.)

      Michael K. Swirsky, New York City, and Lawrence Kunin for State Division of Human Rights, respondent.
    I. The Rule of Necessity obligates the Commissioner of Human Rights to sign all orders after hearing, regardless of any potential conflict of interest in doing so. (Trade Commn. v Cement Inst., 333 US 683; Matter of Morgenthau v Cooke, 56 NY2d 24; Matter of City of Rochester, 208 NY 188; Matter of Ryers, 72 NY 1; People v Mobil Oil Corp., 48 NY2d 192; People v Gowasky, 244 NY 451; State Div. of Human Rights v New York Roadrunners Club, 101 Misc 2d 239; Wasson v Trowbridge, 382 F2d 807; Matter of Washington County Cease v Persico, 120 Misc 2d 207, 99 AD2d 321, 64 NY2d 923.) II. In examining General Motor’s witnesses and directing the production of evidence, the Administrative Law Judge was acting well within the scope of his authority. (Reserve Min. Co. v Lord, 529 F2d 181; Matter of Tuminia v Kuhlmann, 139 Misc 2d 394; Matter of O’Connor [Howell — Hartnett], 165 AD2d 946; Matter of State Div. of Human Rights v Howard Johnson Co., 122 AD2d 949.) III. Substantial evidence supports the Commissioner’s finding that General Motors discharged Briggs because of his race. (300 Gramatan Ave. Assocs. v State Div. of Human Rights, 45 NY2d 176; State Div. of Human Rights v City of Niagara Falls, 61 AD2d 1128; Matter of Mize v State Div. of Human Rights, 33 NY2d 53; Matter of State Div. of Human Rights v County of Onondaga Sheriff’s Dept., 71 NY2d 623; Matter of Club Swamp Annex v White, 167 AD2d 400; State Off. of Drug Abuse Servs. v State Human Rights Appeal Bd., 48 NY2d 276; McDonnell Douglas Corp. v Green, 411 US 792; Matter of Pace Coll, v Commission on Human Rights, 38 NY2d 28; Flowers v Crouch-Walker Corp., 552 F2d 1277; Cannon v Fargo, 222 NY 321.)
   OPINION OF THE COURT

Chief Judge Kaye.

This appeal arises from a complaint filed with the State Division of Human Rights by Clifford C. Briggs, an African-American, alleging that he was terminated by appellant General Motors Corporation in violation of the Human Rights Law (Executive Law § 290 et sea.). Having lost before the Division, appellant challenges the procedures and grounds underlying the administrative determination, contending (1) that the Commissioner — who at the time of the hearings was Division General Counsel — improperly issued the final order in the case; (2) the Administrative Law Judge (ALJ) exceeded his authority at the hearing; and (3) the determination was not supported by substantial evidence. Agreeing with the first ground, we reverse and remit the matter to the Division of Human Rights for further proceedings.

Briggs, a certified welder, was hired by General Motors on August 15, 1983 to perform factory work at GM’s Delco Products Division in Rochester, New York. After a five-day orientation, Briggs was assigned to Department 211, where he worked on an assembly line making door locks. On Saturday, August 27, his sixth working day, Briggs was allegedly subjected to harassment by a white co-worker, who thereafter complained about him to their supervisor. In the middle of his shift, Briggs was escorted off the premises and summarily discharged by the supervisor, also white.

Days later, Briggs filed a complaint with the State Division of Human Rights, charging that his termination was motivated by racial discrimination. The Division thereafter conducted an investigation and issued a finding of probable cause. Appellant denied the allegations, asserting that Briggs had been terminated both for repeated violations of shop rules and for threatening a co-worker.

Between June 1987 and September 1988, four days of hearings were conducted before the AU. At those hearings, the Division — which presented the case for Briggs — was represented by "Margarita Rosa, General Counsel, New York State Division of Human Rights, Robert P. Leacy, of counsel.” While Rosa’s appearance was noted for the record, Leacy conducted the proceedings for the Division. In 1990 Rosa was named Commissioner of the Division.

During the hearings, the ALJ questioned each witness at length, in all asking several hundred questions. After the close of the Division’s presentation, and during the examination of appellant’s first witness, the ALJ additionally directed appellant to compile and produce statistics showing hires and terminations during 1983, by race, which appellant refused to do. Appellant objected that the ALJ had gone beyond the role of the trier of fact and improperly assumed the role of developing the facts of the case for the Division.

In July 1989, the AU issued his Recommended Findings of Fact, Decision and Order, concluding that the supervisor’s failure to allow Briggs an opportunity to respond to the coworker’s accusations and his failure to conduct a fair investigation by questioning the other workers on the assembly line had been motivated by racial discrimination. These findings were based, in part, on an adverse inference that the statistical evidence requested by the AU "if supplied, would have damaged [appellant’s] case, and aided [the Division’s] case.” The AU additionally found that Briggs had suffered embarrassment and humiliation as a result of his termination, and had developed a nervous condition requiring medical attention. The proposed order awarded Briggs reinstatement with back pay and compensation of $25,000 for mental anguish and humiliation.

Appellant objected to the AU’s submission, and in May 1990 the Division’s Adjudication Counsel, having reviewed the record, issued an Alternative Proposed Order dismissing the complaint. Citing evidence that Briggs had threatened his coworkers to slow the pace of the work and had repeatedly violated shop rules, Adjudication Counsel concluded that appellant had terminated Briggs for legitimate, nondiscriminatory reasons. The Division and Briggs filed objections.

In accordance with 9 NYCRR 465.15 (c), both proposed orders were submitted for review to the Commissioner — Margarita Rosa. Commissioner Rosa in March 1991 issued a final order (in her words) "adopting], with only minor stylistic changes” the AU’s Recommended Findings of Fact, Decision and Order. In her notice accompanying the order accepting the AU’s determination, she placed particular emphasis on appellant’s "refusal to produce pertinent, relevant and material evidence at the hearing, pursuant to the direction of the presiding Administrative Law Judge.”

By CPLR article 78 proceeding, General Motors challenged the Commissioner’s order, contending that appellant was denied due process of law by Commissioner Rosa’s issuance of the final order and the AU’s participation in creating the factual record, and further that the finding of unlawful discrimination was not supported by substantial evidence.

After transfer (see, Executive Law § 298), the Appellate Division confirmed Commissioner Rosa’s order, holding that she was required to issue that order under the Rule of Necessity because no other person was authorized to do so. The court concluded, moreover, that the ALJ had acted within the scope of his authority, and that the substantial evidence supported the finding of discrimination. The appeal is before this Court as a matter of right on constitutional grounds (see, CPLR 5601 [b] [1]).

The Rule of Necessity

The participation of an independent, unbiased adjudicator in the resolution of disputes is an essential element of due process of law, guaranteed by the Federal and State Constitutions (see, US Const, 14th Amend, § 1; NY Const, art I, § 6; see also, Matter of 1616 Second Ave. Rest, v New York State Liq. Auth., 75 NY2d 158, 161; Redish and Marshall, Adjudicatory Independence and the Values of Procedural Due Process, 95 Yale LJ 455, 475-505 [1986]). Judicial independence contributes not only to accurate determinations but also to the appearance of fairness, equality between the parties, and predictability and rationality of result (id., at 482-491).

The Rule of Necessity provides a narrow exception to this principle, requiring a biased adjudicator to decide a case if and only if the dispute cannot otherwise be heard (see, Matter of Morgenthau v Cooke, 56 NY2d 24, 29-31, n 3; Maresca v Cuomo, 64 NY2d 242, 247, n 1, appeal dismissed 474 US 802; Matter of Ryers, 72 NY 1, 10-15; 3 Davis, Administrative Law Treatise § 19:9 [2d ed]; Schwartz, Administrative Law § 6.19 [2d ed]). Thus, where all members of the adjudicative body are disqualified and no other body exists to which the appeal might be referred for disposition, the Rule of Necessity ensures that neither the parties nor the Legislature will be left without the remedy provided by law (see, Trade Commn. v Cement Inst., 333 US 683, 700-703, reh denied 334 US 839; Matter of Morgenthau, 56 NY2d, at 29, n 3; Sharkey v Thurston, 268 NY 123, 128).

Given the principle at stake, "necessity” must be construed strictly, in favor of delegating judicial authority to others whenever possible (see, Resnik, On the Bias: Feminist Reconsiderations of the Aspirations for Our Judges, 61 S Cal L Rev 1877, 1890-1896, 1935-1937 [1988]).

The Division does not seriously question that Margarita Rosa’s two roles in the matter, first as General Counsel and then as Commissioner, presented at least an appearance of unfairness. While there is no reason to believe that she in fact had any bias against appellant by reason of her prior appearances as General Counsel, all other things being equal Commissioner Rosa should not have been the person choosing between the conflicting proposed orders and issuing the final order holding appellant liable for racial discrimination. As we noted in Matter of Beer Garden v New York State Liq. Auth. (79 NY2d 266, 279), undertaking the role of prosecutor in an administrative proceeding is "inherently incompatible with * * * subsequent participation as its Judge.”

The parties’ argument, rather, is concentrated on the Rule of Necessity.

The Division insists that the Rule of Necessity is applicable because, by statute, Commissioner Rosa is the only person who could have performed the review and issued the final order, and her disqualification would have both negated the legislative scheme and left Briggs without a remedy. For this proposition, the Division points first to Executive Law § 293 (1), declaring that there shall be "a commissioner” — just one— to head the Division, and second to Executive Law § 297 (4) (c), spelling out the procedure for entry of a final order. As the statute specifies, it is "the commissioner” who is to state findings of fact and issue the order, and only "the commissioner” who is charged with that ultimate responsibility.

The Human Rights Law, however, in delineating the Division’s functions — including the power and duty "[t]o receive, investigate and pass upon complaints alleging violations of this article” — explicitly empowers the Commissioner to act through a "duly authorized officer or employee” (see, Executive Law § 295 [6] [a]; see also, State Div. of Human Rights v New York Roadrunners Club, 101 Misc 2d 239, 242). Moreover, Public Officers Law §9 carries forward the concept that appointment of a subordinate may be made even where not otherwise specified. While the Division urges that Executive Law § 295 can be read as a mere general outline subject to the specific mandate of Executive Law § 297 (4) (c), we reject that interpretation in favor of another reading of the statute: that section 295 (6) (a) means what it says. That reading is especially appropriate in a situation where "necessity” is to be construed narrowly and strictly.

In the circumstances presented, we are not persuaded that there was any necessity for Commissioner Rosa — having appeared as General Counsel in the matter — also to issue the final order, rather than appoint a subordinate to conduct the review required by 9 NYCRR 465.15.

That the matter must be remitted to the Division for review by an impartial arbiter before issuance of a final order renders it unnecessary for us to pass upon appellant’s remaining contentions. Among other things, the new review may or may not favor the ALJ’s findings over those of the Adjudication Counsel; and the new review may or may not place particular reliance, as Commissioner Rosa did, on appellant’s refusal to compile and produce the statistical evidence requested by the ALJ. We therefore leave for another day, when such questions are necessary to the disposition of the case before us, the issue whether the ALJ exceeded his authority by actively questioning witnesses and directing the creation and production of documents.

Accordingly, the judgment of the Appellate Division should be reversed, with costs, respondent’s determination annulled, and the case remitted for further proceedings in accordance with this opinion.

Judges Simons, Titone, Hancock, Jr., Bellacosa, Smith and Levine concur.

Judgment reversed, with costs, respondent’s determination annulled and matter remitted to Supreme Court, Monroe County, with directions to remand to the New York State Division of Human Rights for further proceedings in accordance with the opinion herein.

       We thus do not reach appellant’s argument that, had the Rule of Necessity authorized Commissioner Rosa’s adjudication, the final order would have been subject to heightened scrutiny (see, 3 Davis, Administrative Law Treatise § 19:9 [2d ed]; 1 Cooper, State Administrative Law, at 349-350 [1965]).


author: Bellacosa, J.

text:
    [624 NE2d 146, 604 NYS2d 18]
    In the Matter of Niagara Mohawk Power Corporation, Respondent, v New York State Department of Environmental Conservation et al., Appellants.
    Argued October 7, 1993;
    decided November 11, 1993

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General, Albany (Kathleen Liston Morrison, Jerry Boone and Peter H Schiff of counsel), for appellants.
    The Department has the power to consider water quality impacts beyond water chemistry standards when evaluating applications for water quality certifications under section 401 of the Clean Water Act. (Monongahela Power Co. v Marsh, 809 F2d 41, 484 US 816; Keating v Federal Energy Regulatory Commn., 927 F2d 616; United States v Marathon Dev. Corp., 867 F2d 96; Matter of Long Lake Energy Corp. v New York State Dept. of Envtl. Conservation, 164 AD2d 396; Lake Erie Alliance for Protection of Coastal Corridor v U. S. Army Corps of Engrs., 526 F Supp 1063, 707 F2d 1392, 464 US 915; Roosevelt Campobello Intl. Park Commn. v United States Envtl. Protection Agency, 684 F2d 1041; United States Dept. of Interior v Federal Energy Regulatory Commn., 952 F2d 538.)

      Brian K. Billinson, Syracuse, Hiscock & Barclay, Albany (Timothy P. Sheehan of counsel), and Swidler & Berlin (Kenneth G. Jaffe and Joel deJesus of counsel, of the District of Columbia Bar, admitted pro hoc vice), for respondent.
    I. The Court below correctly held that the Federal Power Act establishes a comprehensive scheme of Federal regulation of hydroelectric projects that, with limited exceptions, preempts State regulation of hydroelectric facilities within the Federal Energy Regulatory Commission’s jurisdiction. (First Iowa v Power Commn., 328 US 152; Udall v Federal Power Commn., 387 US 428; Calvert Cliffs’ Coordinating Comm. v United States Atomic Energy Commn., 449 F2d 1109; California v

      Federal Energy Regulatory Commn., 495 US 490; Sayles Hydro Assocs. v Maughan, 985 F2d 451; Matter of Power Auth. v Williams, 60 NY2d 315.) II. The Court below correctly held that the "very limited” authority delegated to the States under section 401 of the Clean Water Act does not extend the myriad State law provisions that DEC has sought to apply. (Matter of Power Auth. v Williams, 60 NY2d 315; Cleveland v United States, 329 US 14; People v Shapiro, 50 NY2d 747; Matter of de Rham v Diamond, 32 NY2d 34; Fourth Branch Assocs. v Department of Envtl. Conservation, 146 Misc 2d 334; Matter of Long Lake Energy Corp. v Department of Envtl. Conservation, 164 AD2d 396.) III. The panoply of statutes and regulations that DEC seeks to apply are not water quality standards under section 303 of the Federal Water Pollution Control Act and, therefore, are outside the scope of section 401. (Matter of Power Auth. v Williams, 60 NY2d 315; California v Federal Energy Regulatory Commn., 495 US 490; Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d 400; National Fuel Gas Supply Corp. v Public Serv. Commn., 894 F2d 571, 497 US 1004.)

      Richard Roos-Collins and Jessica Notini, of the California Bar, admitted pro hac vice, for New York Rivers United and others, amici curiae.

    I. The Federal Power Act does not preempt DEC’S enforcement of water quality standards. II. The Court below erred in holding that fish, wildlife, and recreation are not regulated under the Clean Water Act. (Matter of de Rham v Diamond, 32 NY2d 34; Fourth Branch Assocs. v Department of Envtl. Conservation, 146 Misc 2d 334; Matter of Long Lake Energy Corp. v New York State Department of Envtl. Conservation, 164 AD2d 396; Matter of Power Auth. v Williams, 60 NY2d 315.) III. The Court below erred in holding that section 401 (d) conditions on certification are limited to Federally approved State laws.
   OPINION OF THE COURT

Bellacosa, J.

The New York State Department of Environmental Conservation (DEC) appeals by leave granted from this Court to review the Appellate Division’s order affirming Supreme Court’s judgment in favor of Niagara Mohawk Power Corporation. We agree with both courts that the DEC’S effort to broaden its scope of review under the Clean Water Act to include aspects of ECL article 15 is unfounded. For purposes of issuance of a Clean Water Act § 401 (33 USC § 1341) State certification, DEC is limited to considering the water quality standards set forth by the State and approved by the United States Environmental Protection Agency under section 303 of the Clean Water Act (33 USC § 1313). We are satisfied that Federal preemption principles and policies along with settled precedents interpreting the complementary statutory scheme of Federal-State regulatory authority support an affirmance of the Appellate Division order.

L

Niagara Mohawk, a private investor-owned utility company licensed under the Federal Power Act, owns and operates hydroelectric facilities throughout the State. It applied to the Federal Energy Regulatory Commission (FERC) for a license to approve construction of several new facilities, dam repair and reconstruction work on existing dams and anticipates filing similar applications in the future.

Under section 401 of the Federal Clean Water Act, before approval of a Federal license, a facility must obtain a "certification” from the State regulatory entity — in this case, the DEC — that the discharge from the new or altered facility meets with relevant State water quality standards. Basically, water quality standards are provisions of State and Federal law, which define the quality goals of a water body or some portion of it, by designating the use or uses to be made of the water, by setting criteria necessary to protect the uses, and by incorporating an antidegradation policy designed to prevent the gradual deterioration of the quality of the water body. These criteria are elements of State water quality standards, expressed as constituent levels or narrative statements, representing a quality of water that supports a particular use. States adopt a broad array of water quality standards to protect the public health or welfare, enhance the quality of water and serve the purposes of the Clean Water Act, which, in turn, serve to protect fish, wildlife, recreational use and, ultimately, aid in the use of the water for public water supply.

Niagara Mohawk did not apply for a State section 401 certification and, instead, initiated a threshold challenge alleging that DEC has officially declared its intent and jurisdiction to review Niagara Mohawk’s applications under ECL article 15 in super arrogation of the Federal Power Act. Niagara Mohawk proceeded by application to DEC in May 1990 pursuant to section 204 of the State Administrative Procedure Act for a declaratory ruling that ECL article 15, title 5 is not applicable to a section 401 certification, and that the Federal Power Act (16 USC § 791a et seq.) preempts and limits DEC’S reviewing scrutiny to specific State provisions as they pertain to the question of whether the project will affect the State’s water quality as prescribed in 6 NYCRR parts 701 to 704.

By letter opinion dated August 27, 1990, DEC declared that projects proposed by Niagara Mohawk must also satisfy multiple provisions of the Environmental Conservation Law, including the regulatory requirements of the State Environmental Quality Review Act (ECL art 8) before it will issue the requisite Clean Water Act § 401 certification.

DEC opined that by enacting section 401, Congress intended the States to have authority to exact compliance with all State laws which bear on water quality before granting a certification. DEC declared the following laws to be applicable in assessing issuance of the "certification” under a section 401 review:

(a) Protection of Waters: disturbance of stream beds (ECL 15-0501);
(b) Protection of Waters: dam construction (ECL 15-0503);
(c) Protection of Waters: excavation or fill (ECL 15-0505);
(d) Dam Safety (ECL 15-0507);
(e) Reservoir Release (ECL 15-0801 et seq.);
(f) Wild, Scenic and Recreational River System (ECL 15-2701 et seq.);
(g) Freshwater Wetlands (ECL art 24);
(h) Fish and Wildlife (ECL art 11); and
(i) Environmental Quality Review (ECL art 8).

Niagara Mohawk invoked CPLR article 78 review and brought a declaratory judgment action seeking annulment of DEC’S ruling. Its requested relief included a determination that the Clean Water Act § 401 certification process allows the DEC, from the State law’s standpoint and involvement, to consider the water quality standards set forth only in 6 NYCRR 701.19 and 704.2.

Supreme Court granted judgment to Niagara Mohawk, allowing only a " 'determination that a proposed project will meet the particular water quality standards for the applicable classification.’ ” Supreme Court limited DEC to review under 6 NYCRR 701.19 and 704.2, recodified in substantially the same form and contained within 6 NYCRR parts 701 to 704 (eff Sept. 1, 1991). The Appellate Division affirmed, holding DEC was restricted to the application of turbidity and temperature change as specified by 6 NYCRR 701 to 704 and concluding that it could not impose additional water quality analysis conditions to its section 401 certification.

IL

We agree with the Appellate Division that the Federal Power Act establishes a comprehensive scheme of Federal regulation of hydroelectric projects that essentially preempts State regulation of hydroelectric facilities within the Federal Energy Regulatory Commission’s jurisdiction. Settled law in New York has consistently supported the view that section 401 gives the State regulatory entity only a limited role of review, based on requirements affecting water quality, not on all State water quality provisions. Review by State agencies that would overlap or duplicate the Federal purview and prerogatives was not contemplated and would infringe on and potentially conflict with an area of the law dominated by the nationally uniform Federal statutory scheme.

Niagara Mohawk’s hydroelectric projects are subject to regulation under part I of the Federal Power Act, which vests in the FERC comprehensive authority over the construction, operation and maintenance of hydroelectric facilities located on the navigable waters of the United States (16 USC § 797 [e]; § 817 [1]). FERC is required to evaluate and ensure that a given project is founded on a comprehensive plan for the adequate protection and enhancement of wildlife and beneficial public uses, including irrigation, flood control and recreational use (16 USC § 803 [a] [1]; § 797 [e]; Electric Consumers Protection Act, added by Pub L 99-495, 100 US Stat 1243).

In addition, Niagara Mohawk’s projects are controlled by the Clean Water Act, which in "anticipating] a partnership between the States and the Federal Government” (Arkansas v Oklahoma, 503 US —, —, 112 S Ct 1046, 1054), establishes a system for effluent restrictions applicable to different categories of sources of water pollution (33 USC §§ 1311, 1312, 1313, 1316 and 1317), and defines the role for the States in controlling water pollution.

Under section 303 of the Clean Water Act (33 USC § 1313), States are authorized to establish "water quality standards” consisting of the "designated uses of the navigable waters involved and the water quality criteria for such waters based upon such uses” (33 USC § 1313 [c] [2] [A]). DEC concedes that in New York the water quality standards promulgated pursuant to Clean Water Act § 303 are found only in 6 NYCRR parts 701 to 704. That tie-in is highly relevant.

Section 401 of the Clean Water Act also serves as the conduit for the incorporation of relevant State water quality standards in this otherwise Federally filled universe. An applicant for a Federal license or permit authorizing an activity that may result in a discharge into navigable waters must provide "a certification from the State in which the discharge originates or will originate * * * that any such discharge will comply with the applicable provisions of sections 301, 302, 303, 306, and 307 of [the Clean Water Act]” (33 USC § 1341 [a] [1]). The State must act on a request for certification within a reasonable time of receipt, and if the State denies the certification, the Federal agency may not issue the license or permit.

¡IL

In 1973, Matter of de Rham v Diamond (32 NY2d 34) held that section 21 (b) of the Federal Water Pollution Control Act (33 USC former § 1171 [b]):

"[Relinquishes only one element of the otherwise exclusive jurisdiction granted the Power Commission by the Federal Power Act. It authorizes States to determine and certify only the narrow question whether there is 'reasonable assurance’ that the construction and operation of a proposed project 'will not violate applicable water quality standards’ * * * Congress did not empower the States to reconsider matters, unrelated to their water quality standards” (id., at 44).

Nevertheless, DEC relies heavily on a replacement of section 21 by the Federal Water Pollution Control Act Amendments, later codified as section 401 of the Clean Water Act (33 USC § 1341), as indicating a new and different approach by Congress. It suggests that Congress was shifting focus away from the quality of a given body of water to a greater emphasis on regulating the discharge of effluent and pollution at its source, and somehow that this was designed to release some of the exclusive Federal power to the States. These amendments in 1972, however, had no impact on this Court’s decision in de Rham. Nor did these amendments impress this Court 10 years later in 1983, when, in Matter of Power Auth. v Williams (60 NY2d 315, 326-327), we again held that the new section 401 certification process is still accomplished by a determination that a proposed project will meet the particular water quality standards related to the applicable classification (see also, Matter of Long Lake Energy Corp. v New York State Dept. of Envtl. Conservation, 164 AD2d 396, 401-403). Thus, the Appellate Division correctly noted that under settled New York law, such a broad reach is beyond DEC’S limited delegated powers.

The DEC determination of August 27, 1990, under review in this case, would have a section 401 applicant supply information only indirectly related to water quality. It seeks to change the thrust of analysis and the force of our precedents by asserting that section 401 today is different in its impact and relationship to the States because of the Clean Water Act. In effect, DEC asks this Court to open the dam of section 303 with respect to the section 401 certification process. DEC insists that by altering the wording of section 1341 in 1972 and then again in 1977 when creating the Clean Water Act, Congress returned to the States plenary power over water quality, eliminating its earlier preemption prerogatives under the 1935 Federal Power Act. Part of its argument turns on the fact that Congress’s decision not to include a limiting reference to section 303 (water quality standards) in section 401 (d), which deals with a State’s power to impose conditions on a certification, indicates that Congress did not mean to restrict conditions on certifications only to those necessary to assure compliance with section 303 water quality standards. This is especially so, it argues, since Congress did reference section 303 in section 401 (a) (1), (3), (4) and (5) and omitted it from section 401 (d).

To support this highly significant turnabout in law and policy and in the distribution of exclusive and complementary Federal-States power, DEC also points us to State of Washington v Public Utility Dist. No. 1 (121 Wash 2d 179, 849 P2d 646 [1993], cert granted — US —, 114 S Ct 55). To be sure, the Washington Supreme Court, in construing section 401 (d), has enunciated a broader view of its State’s authority under that provision. The Supreme Court of Washington considered the language Congress chose within the context of the Clean Water Act itself, noting Congress’s "broad purpose” in enacting the Clean Water Act "to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters” (id., 121 Wash 2d, at 189, 849 P2d, at 651). The court, therefore, broadly construed the power granted to the States under its view of section 401 because the Clean Water Act stated its purpose in broad terms. "This broad purpose suggests that what state laws qualify as 'appropriate’ for purposes of section 401 (d) should also be understood broadly” (id., 121 Wash 2d, at 189, 849 P2d, at 651-652). The court then noted:

"If Congress intended to refer only to state water quality standards [in section 401 (d)], it could have specifically referred to them. That Congress did not do so is evidence that it intended the phrase 'any other appropriate requirement of State law’ to refer broadly to all state water quality-related laws, not just to state water quality standards adopted pursuant to section 303 [of the Clean Water Act, 33 USC § 1313]” (id., 121 Wash 2d, at 190, 849 P2d, at 652).

This same type of analysis has been followed by the Oregon intermediate appellate court in Arnold Irrigation Dist. v Department of Envtl. Quality (79 Ore App 136, 717 P2d 1274, 1279, review denied 301 Ore 765, 726 P2d 377 [1986]). Whatever the outcome in the Supreme Court of the United States, we respectfully reach a different conclusion from those courts based on our analysis and our precedents.

DEC claims that the replacement of section 21 by section 401 (d) by Congress in 1972 which changed the phrase "applicable water quality standards” to the broader phrase "any other appropriate requirement of State law” (33 USC § 1341 [d]; see also, Senate Conference Report No. 92-1236 accompanying S 2770 [enacted as Pub L 92-500], reprinted in 1972 US Code Cong & Admin News 3776, 3815) dictates a conclusion that a section 401 review encompasses all applicable State water quality standards. One initial problem with this phase of the argument that persuades us to reject this view is that section 401 (d) does not control the analysis or outcome here. That subdivision applies only to the conditioning authority on a certificate issued by DEC. DEC’S enlarged reading of "appropriate requirement of State law” under section 401 (d) would enable DEC to impose onerous conditions that could contradict or undermine Federal licensing by superimposing unrelated conditions not within the EPA mandates and specifications. Such a strained construction would countermand the carefully worded authority of section 401 (a) (1). To permit DEC, through the conditioning power of subdivision (d), to usurp the authority that Congress reserved for FERC under the Federal Power Act, over issues beyond water quality standards directly relevant to the section 401 certification process, is not justified and would constitute unfounded statutory construction.

The Clean Water Act reads simply that a certification shall issue if a determination is reached "that any such discharge will comply with the applicable provisions of sections 301, 302, 303, 306, and 307 of this Act” (33 USC § 1341 [a] [1]). Unlike the EPA-issued effluent limitations and new source performance standards mentioned in section 401 (a) (1) (see, 33 USC §§ 1311, 1312, 1316, 1317), section 303 water quality standards are promulgated by each State (see, 33 USC § 1313), but even section 303 standards must be approved by EPA through a process delineated in section 303 (33 USC § 1313 [c]).

DEC concedes that in New York the water quality standards promulgated pursuant to section 303 are linked and found only in 6 NYCRR parts 701 to 704. Thus, there is nothing in the new language or legislative history of section 401 that would empower DEC to deny certification on the basis of broader environmental provisions of New York law or regulation, nor is there adequate support for DEC’s contention that the operation and reach of section 401 has been altered in a way that requires this Court to upset its settled analysis and resolution of the interrelated questions in Matter of de Rham v Diamond (32 NY2d 34, supra) and Matter of Power Auth. v Williams (60 NY2d 315, supra).

Additional support for our conclusion may be found in the Congressional expression when it amended section 401 in the Senate Report that "it is reasonable to require that Federal permits and licenses should take into account State water quality plans, standards and requirements adopted under section 303 to assure maintenance of water quality in the respective States” (Senate Report No. 95-370, accompanying S 1952 [Pub L 95-217], at 72-73, reprinted in 1977 US Code Cong & Admin News 4397-4398).

Therefore, while DEC is correct that Congress sought in section 401 to preserve the States’ role in maintaining water quality, Congress simultaneously maintained essentially preemptive Federal control by restricting State certification to compliance with requirements issued or approved by EPA. Congress envisioned that the States’ role would be fulfilled through the water quality standards adopted in harmony with and under Clean Water Act § 303 (Matter of Power Auth. v Williams, 60 NY2d, at 326-327, supra) and therefore, in this case, only in relation to 6 NYCRR parts 701 to 704.

We have considered all arguments advanced by the parties and conclude that an affirmance is warranted.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Kaye and Judges Simons, Titone, Smith and Levine concur; Judge Hancock, Jr., taking no part.

Order affirmed, with costs.