author: Hancock, Jr., J.

text:
    [624 NE2d 979, 604 NYS2d 884]
    In the Matter of New York City Asbestos Litigation (Brooklyn Naval Shipyard Cases). Marlene Didner, Individually and as Executrix of Saul Didner, Deceased, Respondent, v Keene Corporation, Appellant. (And Other Actions.)
    Argued October 13, 1993;
    decided November 18, 1993

      POINTS OF COUNSEL

      McCarter & English (Andrew T. Berry, Richard P. O’Leary and Stephen Marinko of counsel, of the New Jersey Bar, admitted pro hac vice), for appellant.
    I. Because plaintiff settled with Manville prior to the conclusion of trial and announced the settlement in open court, Keene is entitled to a setoff under General Obligations Law § 15-108 with respect to the Manville fund. (Didner v Keene Corp., 188 AD2d 15; Matter of Dolgin Eldert Corp., 31 NY2d 1; Cover v Cohen, 113 AD2d 502; Makeun v State of New York, 98 AD2d 583; Lettiere v Martin El. Co., 62 AD2d 810; Rock v Reed-Prentice Div., 39 NY2d 34; Raphael v Booth Mem. Hosp., 67 AD2d 702; In re Joint S. & E. Dists. Asbestos Litig., 760 F Supp 33; Matter of New York City Asbestos Litig. [Brooklyn Nav. Shipyard Cases], 188 AD2d 214.) II. General Obligations Law § 15-108 requires that nonsettling defendant Keene’s credits for plaintiff s settlements with codefendants be calculated on a "defendant-by-defendant” basis. (Williams v Niske, 81 NY2d 437; In re

      Eastern & S. Dists. Asbestos Litig., 772 F Supp 1380; Bonnot v Fishman, 88 AD2d 650, 57 NY2d 870; Apple v Jewish Hosp. & Med. Ctr., 829 F2d 326; Purcell v Doherty, 102 Mise 2d 1049, 80 AD2d 755, 55 NY2d 985; Killeen v Reinhardt, 71 AD2d 851; Arbutina v Bahuleyan, 159 AD2d 973; Matter of New York City Asbestos Litig. [Brooklyn Nav. Shipyard Cases], 188 AD2d 214.)

      Schapiro & Reich, Lindenhurst (Perry S. Reich of counsel), and Sybil Shainwald, New York City, for respondent.
    I. The postjudgment order denying appellant’s motion to vacate the judgment is not subject to review in this Court. (Nelson v Times Sq. Stores Corp., 110 AD2d 691, 67 NY2d 645; Matter of Haverstraw Park v Runcible Props. Corp., 33 NY2d 637; Ocean Acc. & Guar. Corp. v Otis El. Co., 291 NY 254; Roy v National Grange Mut. Ins. Co., 85 AD2d 832; Miskiewicz v Hartley Rest. Corp., 58 NY2d 963; Michaels v Hartzell, 64 NY2d 1028; Reichman v Warehouse One, 78 NY2d 1058; De Trabuc v Klein, 68 NY2d 660; McCummings v New York City Tr. Auth., 81 NY2d 923; People v Mackell, 40 NY2d 59.) II. Because the action was not "settled” with Manville prior to verdict General Obligations Law § 15-108 is inapplicable. (Matter of Coca-Cola Bottling Co. v Board of Estimate, 72 NY2d 674; People ex rel. Scarpetta v Spence-Chapin Adoption Serv., 28 NY2d 185; Matter of Dolgin Eldert Corp., 31 NY2d 1; Zambrana v Memnon, 181 AD2d 730; Monasebian v Du Bois, 30 AD2d 839; In re Brooklyn Navy Yard Asbestos Litig., 971 F2d 831; Lettiere v Martin El. Co., 62 AD2d 810, 48 NY2d 662; De Sano v Tower, 129 AD2d 976; Cover v Cohen, 113 AD2d 502.) III. If the issue need be reached, the aggregation method of calculating setoffs should be applied in this case in accordance with this Court’s opinion in Williams v Niske (81 NY2d 437). (National Bank & Trust Co. v Banco De Vizcaya, 72 NY2d 1005; Islamic Republic of Iran v Pahlavi, 62 NY2d 474; Varkonyi v S. A. Empresa De Viacao Airea Rio Grandense, 22 NY2d 333.)
   OPINION OF THE COURT

Hancock, Jr., J.

We granted leave in this case together with two other cases (Matter of New York City Asbestos Litig. [Brooklyn Nav. Shipyard Cases], 188 AD2d 214, affd 82 NY2d 821 [decided herewith]; Pollicina v Misericordia Hosp. Med. Ctr., 187 AD2d 217, mod 82 NY2d 332 [decided herewith]) primarily to resolve a question which we have not addressed pertaining to General Obligations Law § 15-108 (a) as applied in an action with multiple defendants where two or more of the defendants have settled with the plaintiff prior to submission of the case to the jury. This question, not answered by the plain language of the statute, is: Which method for computing the amount of the General Obligations Law § 15-108 (a) offset to the jury award should be adopted: (1) the case-by-case method, under which each settling defendant is taken separately and, for that defendant, the amount of the settlement or the amount of the corresponding apportioned share, whichever is higher, is deducted from the verdict; or (2) the aggregate method, in which the settling tortfeasors are viewed collectively, the settlement amounts and the corresponding apportioned shares are totaled, and the offset is allowed for the greater of the two totals.

The particular appeal before us is taken by defendant Keene Corporation (Keene), a nonsettling defendant in a multidefendant tort action arising out of plaintiffs decedent’s exposure to asbestos. The appeal turns on the effect to be given under General Obligations Law § 15-108 (a) to an agreement of settlement between plaintiff and the Manville Asbestos Disease Compensation Fund (Manville), announced in open court, which was to be effectuated by entering "a consent judgment” after the verdict. The Appellate Division has concluded with a divided court (Didner v Keene Corp., 188 AD2d 15) that this agreement did not constitute a settlement bringing General Obligations Law § 15-108 (a) into play for the reason that the agreement did not expressly release the tortfeasor. Thus, this holding of the Appellate Division presents a preliminary issue on which defendant Keene must prevail before the question concerning the proper method for calculating the offset can be discussed — i.e., whether the Man-ville agreement constitutes a settlement under General Obligations Law § 15-108. (a); in other words, whether General Obligations Law § 15-108 (a) applies at all. On this issue, for reasons explained hereafter in part II, we agree with defendant Keene and the dissent at the Appellate Division (id., at 26-30) that the Manville agreement is a settlement triggering General Obligations Law § 15-108 (a).

We thus reach the second issue which involves the choice between the case-by-case or the aggregate approach for determining an offset under General Obligations Law § 15-108 (a). Defendant Keene contends that the offset representing the Manville agreement should be calculated for that settling defendant separately under the case-by-case method. For reasons stated in part III, we reject defendant Keene’s argument and conclude that the aggregate method of computation, favored by the Appellate Division majority (see, id., at 23-26), is the correct approach. The order of the Appellate Division should be modified accordingly.

I

Plaintiff commenced this action against 18 defendants to recover damages for wrongful death, pain and suffering and loss of consortium by reason of the death of her husband due to asbestos exposure. The trial was conducted in two stages, With the jury considering damages first and questions of liability, including apportionment of fault, second. On June 27, 1990, the jury returned a damages verdict totaling $5,867,-353, later reduced by the trial court to $3,917,353. The liability phase commenced the next day, June 28, 1990.

On July 5, prior to the submission of the case to the jury, plaintiff’s counsel announced in open court that settlements had been reached with various defendants, including Man-ville. The record contains the following colloquy:

"the court: The Plaintiffs in the Didner case, have settled at this time with Owens Corning, Fiberboard—
"the court: We are going to lose Mr. Taber?
"mr. Gordon: Fiberboard and Pittsburgh-Corning.
Eagle Pitcher [sic], Manville Asbestos Disease Com pensation Fund, National Gypsum, U.S. Gypsum, GAF, and Armstrong.
"We are still open against Keene, H.K. Porter and Westinghouse. We are ready to proceed.
"the court: We are ready to proceed with Dr. Suzuki?
"mr. cordon: Yes.
"For the record, we have also resolved our differences with H.K. Porter and Southern” (emphasis added).

When the case was submitted to the jury, Keene and Westinghouse Electric Corporation (Westinghouse) were the only nonsettling defendants. The jury was asked to apportion liability pursuant to General Obligations Law § 15-108 (a) among all 18 defendants — i.e., the 16 settling defendants, including Manville, which were no longer participants in the trial, in addition to Keene and Westinghouse, the only defendants still in the case. On July 10, in its liability verdict, the jury apportioned fault among 13 of the 18 defendants, finding Keene responsible for 15%, Manville for 60.167%, and all other defendants responsible for the remaining 24.833% of liability.

On July 23, 1990, plaintiff’s counsel presented to the trial court a proposed form of order for a consent judgment to be entered against Manville. In the letter accompanying the proposed order, plaintiff’s counsel stated, '[i]n accordance with our agreement with the Manville Asbestos Disease Compensation Fund in the above-captioned case, we enclose a proposed order awarding judgment against the Fund in the amount of $800,000” (emphasis added). The trial court signed the order memorializing the consent judgment on August 6, 1990.

On February 5, 1991, a judgment against defendant Keene was filed in the total sum of $618,452, an amount equal to 15% of the reduced total verdict plus interest. The judgment did not reflect General Obligations Law § 15-108 (a) offsets for the amounts paid in settlement or the apportioned shares of the recovery for any of the settling defendants. Thereafter, defendant Keene filed objections to the judgment, contending that the court had erred in not following General Obligations Law § 15-108 (a) and in simply basing the judgment against Keene on its apportioned share (15%) of the recovery as reduced.

In letter submissions to the court, Keene argued that the judgment should have reflected General Obligations Law § 15-108 (a) offsets computed for each of the settling defendants individually on a case-by-case basis. Under this approach, for each defendant, except for Manville, the amount to be deducted would have been the amount of the agreed upon settlement because, in each case, the settlement was greater than the corresponding apportioned share. The total of the settlements for the defendants, other than Manville, is $2,500,000. For Manville, however, its apportioned share (60.167%) of the reduced recovery ($3,917,353) is $2,356,953.80, a sum in excess of the agreed upon consent judgment of $800,000. Applying Keene’s proposed case-by-case method, the total of the settlements ($2,500,000) for the settling defendants exclusive of Manville, and the apportioned share for Manville ($2,356,953.80) are added together to compute the total offsets under General Obligations Law § 15-108 (a) ($4,856,953.80), an amount which, if deducted from the reduced recovery ($3,917,353) would more than offset plaintiff’s judgment against Keene. Keene filed a motion seeking to vacate the February 5, 1991 judgment and requested the court to enter the form of judgment it proposed using its case-by-case approach. The trial court denied this motion and adhered to the original judgment, reasoning that the Manville agreement was not a settlement within General Obligations Law § 15-108 (a) because a stay order had been issued and Manville might be precluded from paying the $800,000 consent judgment.

The Appellate Division affirmed, with one Justice dissenting (Didner, 188 AD2d 15, supra). The majority concluded that General Obligations Law § 15-108 (a) was inapplicable because plaintiff had not given Manville a release as part of the settlement, noting that:

"subdivision (a) was amended to provide for a reduction of the verdict 'to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, or in the amount of the released tortfeasor’s equitable share of the damages * * * whichever is greatest’. (Emphasis added.) The entire thrust of the amended statute continued to focus on the actual 'release’ of another tortfeasor prior to the verdict as the operative event which would invoke any reduction in the litigating defendant’s liability or which would serve to insulate a discharged tortfeasor from a future claim for contribution” (id., at 21-22).

In dictum, the Appellate Division stated (id., at 23-26) that if it had applied General Obligations Law § 15-108 (a), it would have used the aggregate method, the approach adopted or approved by the Appellate Division, First Department, in other cases (see, e.g., Matter of New York City Asbestos Litig. [Brooklyn Nav. Shipyard Cases], 188 AD2d 214, affd 82 NY2d 821, supra [decided herewith]; Pollicina v Misericordia Hosp. Med. Ctr., 187 AD2d 217, mod 82 NY2d 332, supra [decided herewith]; Williams v Niske, 181 AD2d 307, affd 81 NY2d 437, supra) and found preferable by Judge Weinstein in various multidefendant asbestos cases pending in Federal court (see, In re Eastern & S. Dists. Asbestos Litig., 772 F Supp 1380, 1393-1397 [ED NY & SD NY 1991], affd in part and revd in part sub nom. In re Brooklyn Navy Yard Asbestos Litig., 971 F2d 831 [2d Cir 1992]). The dissent at the Appellate Division (Didner, supra, at 26-33) agreed with defendant Keene that General Obligations Law § 15-108 (a) should have been applied and that the case-by-case rather than the aggregate basis for computing the offsets is the proper approach.

We granted defendant Keene’s motion for leave to appeal and now modify.

II

We turn first to whether the agreement between plaintiff and Manville, announced as a settlement in open court on July 5 prior to the conclusion of the case, was a settlement for purposes of General Obligations Law § 15-108 (a). There can be no question that prior to the verdict the parties and the court treated the agreement with Manville as a settlement within General Obligations Law § 15-108 (a). The remainder of the trial was conducted against Keene as one of two nonsettling defendants and, at its conclusion, the jury was asked to apportion fault against Manville as a settling defendant along with the other defendants which had settled and left the proceedings. The argument that the agreement with Manville did not trigger General Obligations Law § 15-108 (a) depends on a literal reading of the statute as applying only when the settling tortfeasor has actually received a release in exchange for payment of the stipulated settlement sum.

In support of this construction of the statute, plaintiff points to the language in General Obligations Law § 15-108 (a) which provides for a reduction of the verdict "to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, or in the amount of the released tortfeasor’s equitable share of the damages * * * whichever is the greatest” (General Obligations Law § 15-108 [a]; emphasis added). She contends that the plain wording of the statute compels this restrictive application. We disagree. Such a literal interpretation ignores the realities of trial practice: that settlements made in open court during trial, although fully binding (see, CPLR 2104; Matter of Dolgin Eldert Corp., 31 NY2d 1), are seldom formally consummated by the actual payment of the agreed sum in exchange for a release until after the trial has ended. We should not ascribe to the Legislature the intent of imposing the unreasonable requirement that the trial court must hold up the proceedings until all of the settling defendants actually have releases in hand before any effect may be given to the settlements of the defendants under General Obligations Law § 15-108 (a). A construction of a statute which leads to such unreasonable result should be avoided (see, New York State Bankers Assn. v Albright, 38 NY2d 430, 436-437; McKinney’s Cons Laws of NY, Book 1, Statutes § 143, and § 111, at 226 [to the effect that "the literal meanings of words are not to be adhered to or suffered to defeat the general purpose and manifest policy intended to be promoted”]).

Just as in the case of a release not delivered until after completion of the trial, the fact that plaintiff and Manville formalized their open court settlement by entering a consent judgment after the trial verdict is of no moment. As stated by the dissenting Justice at the Appellate Division:

"A judgment would, of course, effectively end any action. The date of this purported 'consent judgment’, again emphasized by the majority opinion, is of no importance, since the written agreement simply memorialized what had been agreed upon by the plaintiff and defendant Manville on July 5, 1990 in open court, and the settlement was effective as of that date.” (Didner, supra, at 29 [Asch, J., dissenting]; see, Lettiere v Martin El. Co., 62 AD2d 810, 814-815, affd for reasons stated at App Div 48 NY2d 662.)

We have considered and rejected plaintiffs other contentions concerning the operative effect of the Manville agreement under General Obligations Law § 15-108 (a), including the argument that defendant Keene did not make timely and adequate objection to the entry of the February 5, 1991 judgment against it.

Ill

The question of which method of calculating offsets under General Obligations Law § 15-108 (a) for the settlement amounts or corresponding apportioned shares of the settling tortfeasors has been addressed extensively in opinions at the Appellate Division (see particularly, Matter of New York City Asbestos Litig., supra; and Didner, supra, at 23-26) and in Federal court (see, In re Eastern & S. Dists. Asbestos Litig., supra, at 1393-1397). As stated, under the aggregate approach, the verdict is reduced either by the total of the dollar amounts to be paid by the settling defendants or the total dollar amounts of their corresponding shares of the verdict, allocated in accordance with their apportioned liability, whichever is greater. Under the case-by-case approach — sometimes referred to as the "pick-and-choose” method — each settling defendant is viewed individually and the amount of the settlement for that defendant or the amount of the corresponding apportioned share of the verdict, whichever is higher, is deducted.

We agree with the conclusion reached by the above-mentioned courts that the aggregate method is preferable. It promotes the general purpose of General Obligations Law § 15-108 (a) of encouraging settlements and "assuring that a nonsettling defendant does not pay more than its equitable share” (Williams, 81 NY2d, at 443, supra). At the same time, it avoids the potential injustice that the case-by-case method of computing offsets can produce — i.e., that a nonsettling defendant will be permitted to take advantage of the settlements of the apportioned shares of the settling defendants so as to reduce the amount that it pays below its equitable share by cutting the compensation the jury has awarded to plaintiff.

This is precisely the consequence of adopting defendant Keene’s argument and applying the case-by-case method here. Keene, found by the jury to be responsible for 15% of the reduced recovery of $3,917,353, pays nothing; plaintiff, although entitled to compensation in the amount of $3,917,353, gets nothing beyond the $3,300,000, the total of the settlements including the $800,000 to be paid by Manville. Thus, we agree with the majority at the Appellate Division that:

"where the verdict is reduced by either the total dollar amount of all payments received by plaintiff in return for releases or the total dollar value of the percentages of fault allocated to the settling tortfeasors, whichever aggregation is greater — is the preferable method since under such calculation defendants would not be compelled to absorb more than their equitable share of liability and plaintiffs would not obtain any windfall benefit thereby serving the statute’s primary goals of encouraging settlements and preserving Dole’s equitable fault-sharing principles. (In re Eastern & S. Dists. Asbestos Litig., supra, at 1393.)” (Didner, supra, at 25.)

Defendant Keene maintains, nonetheless, that the wording of General Obligations Law § 15-108 (a) requires the application of the case-by-case method. This is the only permissible construction, it is argued, because the statute speaks throughout in the singular and refers to the reduction of the injured party’s claim for one settlement when "a release or a covenant not to sue or not to enforce a judgment is given to one of two or more persons liable or claimed to be liable in tort for the same injury, or the same wrongful death” (General Obligations Law § 15-108 [a] [emphasis added]). We find no merit in the argument. Nothing in the statute specifies how it should be applied in a case where the plaintiff, before the case is concluded, settles with two or more of the defendants. The statute simply does not address this situation. As pointed out by the Appellate Division in Matter of New York City Asbestos Litig. (188 AD2d 214, affd 82 NY2d 821, supra [decided herewith]) in rejecting the same argument:

"In view of the statutory [failure to address the case of settlements with multiple defendants], the courts are left to fashion an interpretation which is consistent with the object of the statute (McKinney’s Cons Laws of NY, Book 1, Statutes § 96), while avoiding an absurd result (McKinney’s Cons Laws of NY, Book 1, Statutes § 145). The particular outcome which the cases have attempted to avoid is the reduction of a nonsettling defendant’s liability to an amount which represents far less than his proportionate share of fault as determined by the trier of fact, in some cases 'virtually exonerating the nonsettling defendant’ ” (id., at 218).

Accordingly, the aggregate method of computing offsets under General Obligations Law § 15-108 (a) should be used. Manville’s apportioned share (60.167%) of the reduced recovery ($2,356,953.80) when added to the total of the apportioned shares of the other settling defendants ($976,047.70) makes a total of $3,333,001.50 for the apportioned shares of all the settling defendants. This sum is greater than the total of the settlements, including Manville’s, which is $3,300,000. Therefore, $3,333,001.50 should be deducted from the recovery of $3,917,353 leaving the sum of $584,351.50.

The order of the Appellate Division should be modified, with costs to plaintiff, and the matter remitted to Supreme Court, New York County, for further proceedings in accordance with the opinion herein and, as so modified, affirmed.

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

Order modified, etc.

      . In Williams v Niske (181 AD2d 307, affd 81 NY2d 437) this Court recently reviewed a question of how to apply General Obligations Law § 15-108 (a) in a multiple defendant tort action. We did not, however, decide the precise question presented here, whether the aggregate or case-by-case method of computing offsets under General Obligations Law § 15-108 (a) is preferable.

      . General Obligations Law § 15-108 (a) ("Release or covenant not to sue”) provides: "Effect of release of or covenant not to sue tortfeasors. When a release or a covenant not to sue or not to enforce a judgment is given to one of two or more persons liable or claimed to be liable in tort for the same injury, or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms expressly so provide, but it reduces the claim of the releasor against the other tortfeasors to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, or in the amount of the released tortfeasor’s equitable share of the damages under article fourteen of the civil practice law and rules, whichever is the greatest.”

      . Westinghouse was exonerated by the jury which answered that it had not contributed in any degree to plaintiffs decedent’s condition.


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    [624 NE2d 985, 604 NYS2d 890]
    Joseph E. McDermott, Individually and as President of the Civil Service Employees Association, Inc., Local 1000, AFSCME, AFL-CIO, et al., Respondents, v Edward V. Regan, as Comptroller of the State of New York, et al., Respondents, and State of New York, Appellant. Edward W. Guzdek, Individually and as President of the Police Conference of New York, Inc., et al., Respondents, v Edward V. Regan, as Comptroller of the State of New York, et al., Respondents, and State of New York, Appellant. Joseph P. Puma, Individually and as Executive Director of the New York State Inspection, Security and Law Enforcement Employees, District Council 82, American Federation of State, County and Municipal Employees, AFL-CIO, et al., Respondents, v Edward V. Regan, as Comptroller of the State of New York, et al., Respondents, and State of New York, Appellant.
    Argued October 14, 1993;
    decided November 16, 1993

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General, Albany (Peter G. Crary, Jerry Boone and Peter H. Schiff of counsel), for appellant in the three above-entitled actions.
    Chapter 210 of the Laws of 1990 does not violate the Nonimpairment Clause of the State Constitution. (Pharmaceutical Mfrs. Assn. v Whalen, 54 NY2d 486; Bimbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Sgaglione v Levitt, 37 NY2d 507; New York Pub. Interest Research Group v New York State Thruway Auth., 77 NY2d 86; Saxton v Carey, 44 NY2d 545; Anderson v Regan, 53 NY2d 356; Matter of Levine v Whalen, 39 NY2d 510; Hotel Dorset Co. v Trust for Cultural Resources, 46 NY2d 358; American Ins. Assn. v Chu, 64 NY2d 379.)

      Nancy E. Hoffman, Albany, and Robert Reilly for Joseph E. McDermott and others, respondents in the first above-entitled action.
    I. The contractual benefits protected from legislative interference by the State Constitution, article V, § 7 include the trustee’s right to choose the Common Retirement Fund funding methodology. (Bimbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Sgaglione v Levitt, 37 NY2d 507; New York Pub. Interest Research Group v New York State Thruway Auth., 77 NY2d 86; Saxton v Carey, 44 NY2d 545; Anderson v Regan, 53 NY2d 356; Greater Poughkeepsie Lib.

      Dist. v Town of Poughkeepsie, 81 NY2d 574; Matter of Levine v Whalen, 39 NY2d 510.) II. Chapter 210 of the Laws of 1990 has diminished and impaired the source of the Common Retirement Fund. (Matter of Village of Fairport v Newman, 90 AD2d 293, 58 NY2d 1112; Birnbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Sgaglione v Levitt, 37 NY2d 507.) III. The Comptroller as fiduciary amasses only those funds he deems necessary to protect the benefits of the fund and reduces or increases annual employer contribution rates accordingly. (Sgaglione v Levitt, 37 NY2d 507.)

      Dreyer, Boyajian & Tuttle, Albany (James B. Tuttle of counsel), for Edward W. Guzdek and others, respondents in the second above-entitled action.
    I. The Legislature has never specifically reserved the power to determine employer contributions to the Common Retirement Fund. (Matter of Levine v Whalen, 39 NY2d 510; Matter of People [International Workers Order], 199 Misc 941, 280 App Div 517, 305 NY 258.) II. Chapter 210 of the Laws of 1990 violates the Nonimpairment Clause of the State Constitution. (Birnbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Public Empls. Fedn. v Cuomo, 62 NY2d 450; Sgaglione v Levitt, 37 NY2d 507.)

      Rowley, Forrest, O’Donnell & Hite P. C., Albany (Richard R. Rowley, Mark S. Pelersi and Kevin S. Casey of counsel), for Joseph P. Puma and others, respondents in the third above-entitled action.
    I. Chapter 210 of the Laws of 1990 impairs the benefits of membership in the Employees’ Retirement System and the Police and Fire Retirement System. (Sgaglione v Levitt, 37 NY2d 507; National Labor Relations Bd. v Amax Coal Co., 453 US 322; Public Empls. Fedn. v Cuomo, 62 NY2d 450.) II. Preexisting statutes inconsistent with article V, § 7 were superseded by the constitutional amendment of 1938. (Matter of O’Brien v Boyle, 219 NY 195, 220 NY 622; Anderson v Regan, 53 NY2d 356; Birnbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Matter of Donner v New York City Employees’ Retirement Sys., 33 NY2d 413.) III. The Legislature may change the manner of paying contributions due, but may not dictate the method for computing amounts due. (Sgaglione v Levitt, 37 NY2d 507.) IV. Chapter 210 of the Laws of 1990 unconstitutionally impairs the contractual rights of retirement system members. (Birnbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Matter of Donner v New York City Employees’ Retirement Sys., 33 NY2d 413; Matter of Ayman v

      Teachers’ Retirement Bd., 9 NY2d 119; Kranker v Levitt, 30 NY2d 574; Kleinfeldt v New York City Employees’ Retirement Sys., 36 NY2d 95; Sgaglione v Levitt, 37 NY2d 507.) V. The purpose of article V, § 7 of the New York State Constitution is to protect the New York State Retirement System from raids by State and local governments. (Association of Surrogates & Supreme Ct. Reporters v State of New York, 940 F2d 766; Association of Surrogates & Supreme Ct. Reporters v State of New York, 79 NY2d 39; Alliance of Am. Insurers v Chu, 77 NY2d 573; County of Rensselaer v Regan, 80 NY2d 988; Matter of Schulz v State of New York, 81 NY2d 336.)

      John F. Black, Albany, and Paula L. Chester for Edward V. Regan and others, respondents in the three above-entitled actions.
    I. The Legislature may not impair the benefits of membership in the retirement systems. (Birnbaum v New York State Teachers Retirement Sys., 5 NY2d 1; Sgaglione v Levitt, 37 NY2d 507.) II. Chapter 210 impairs the benefits of membership in the retirement systems. (Sgaglione v Levitt, 37 NY2d 507.) III. A determination that chapter 210 is unconstitutional will not create an undue burden on the State of New York and the other participating employers. (Flushing Natl. Bank v Municipal Assistance Corp., 40 NY2d 731, 1094.)

      Richard E. Casagrande, Albany, Jeffrey G. Plant and Elizabeth R. Schuster for Howard A. Shafer, respondent in the first above-entitled action.
    I. Chapter 210 impairs the benefits of membership in the retirement system in violation of article V, § 7. (Sgaglione v Levitt, 37 NY2d 507; Public Empls. Fedn. v Cuomo, 62 NY2d 450; Association of Surrogates & Supreme Ct. Reporters v State of New York, 79 NY2d 39; Association of Surrogates & Supreme Ct. Reporters v State of New York, 940 F2d 766; Alliance of Am. Insurers v Chu, 77 NY2d 573; United States Trust Co. v New Jersey, 431 US 1; Birnbaum v New York State Teachers Retirement Sys., 5 NY2d 1.) II. There is no merit to appellant’s argument that the Legislature reserved to itself the sole power to determine the accounting method used to compute contributions to the retirement system. (Sgaglione v Levitt, 37 NY2d 507.) III. State and national public policy favoring the protection of pension benefits supports the decision below. (Post v Merrill Lynch, Pierce, Fenner & Smith, 48 NY2d 84; Nachman Corp. v Pension Benefit Guar. Corp., 446 US 359; Alliance of Am. Insurers v Chu, 77 NY2d 573.)
   OPINION OF THE COURT

Smith, J.

The issue here is whether chapter 210 of the Laws of 1990, which changes the funding method for New York State Retirement Systems from an Aggregate Cost (AC) method to a Projected Unit Credit (PUC) method, violates article V, § 7 of the New York State Constitution, requiring that a system member’s benefits not be "diminished or impaired.” Supreme Court granted the plaintiffs’ motions for summary judgment declaring sections 1 through 7 of chapter 210 unconstitutional. The Appellate Division affirmed.

The retirement system for public employees in New York State resulted from a report of the New York State Commission on Pensions issued in 1920 (see, L 1918, ch 414, as amended by L 1919, ch 22). The report recommended the establishment of a retirement system for State and municipal employees and that the management of the system and the direction of the investment of funds be vested with the State Comptroller (Report of Commn on Pensions, 1920 NY Legis Doc No. 92, at 27). The Legislature adopted a plan for State employees (L 1920, ch 741) which was extended to include county, city, town and village employees (see, L 1922, ch 591; L 1923, ch 708).

At the present time there are three pension funds for public employees in New York State. The largest fund is the Common Retirement Fund (CRF) which is composed of the New York State and Local Employees’ Retirement System (ERS) and the New York State Police and Fire Retirement System (PFRS). It provides retirement, death and disability benefits to approximately 800,000 past and present employees and their beneficiaries. The other two systems are the New York City Retirement Fund and the New York State Teachers’ Retirement Fund.

The CRF is funded by contributions made by employee members, the State, and participating local government employers. Between 1921 and 1990, by legislative mandate, the method of funding was the AC method. That method proceeds in the following fashion:

1. The total amount of funding necessary to pay all expected benefits, including future benefits, for all of the employees in the system is computed on an annual basis.
2. The present value of total projected benefits for all employees is reduced by the sum of plan assets and the present value of all future employee contributions.
3. The remainder is then allocated to each of the employers in order to produce the rate of contribution against payroll for a given year.

The AC method thus results in the funding of some benefits before they are accrued.

Chapter 210 requires the funding of benefits only when they accrue. Thus the contributions that have been put into the CRF exceed benefits actually accrued and become a so-called surplus which is returned to the governmental entity making the annual contribution. What this means is that for a number of years the governmental entities will pay a reduced annual contribution to the CRF or none at all. It is undisputed that chapter 210 was enacted not to protect the retirement funds earned by members and beneficiaries of the system but to deal with the budget crises being experienced by governmental entities in New York State.

Sections 6 and 7 of chapter 210 also prescribe the use of a five-year stock valuation method for fiscal years 1988-1989 and 1989-1990. In order to determine employer contributions on an annual basis, a so-called smoothing technique, or average of several years of stock market results, is used in order to account for fluctuations in stock. Prior to chapter 210, the Comptroller averaged stock market results over a four-year rather than five-year period, thus increasing the annual cost to employers.

Appellant State of New York argues that chapter 210 does not violate article V, § 7, the Impairment Clause of the New York State Constitution. It argues further that the Legislature has reserved to itself the determination of the funding method of the CRF, that the PUC method is actuarially sound and that sections 6 and 7 of chapter 210 which prescribe a return to a five-year stock valuation smoothing method for the fiscal years 1988-1989 and 1989-1990 do not impair the source of funds for pension benefits. Respondents argue that article V, § 7 gives to the fund trustee, the Comptroller, the right to choose the funding method, that chapter 210 diminishes and impairs the CRF and that the Comptroller now determines on an annual basis only the amount of contributions which he deems necessary to protect the benefits of the fund.

Turning first to the argument on impairment, we conclude that chapter 210 violates article V, § 7 of the New York State Constitution. That section reads:

"[Membership in retirement systems; benefits not to be diminished nor impaired]
"After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired” (adopted Nov. 8, 1938, eff Jan. 1, 1939).

Thus article V, § 7 establishes a contractual relationship between the employee and the retirement system in which benefits cannot be diminished or impaired.

The Comptroller’s authority as trustee of these retirement benefits was discussed and upheld by this Court in Sgaglione v Levitt (37 NY2d 507). There, acknowledging the Comptroller’s role as trustee of certain retirement funds as authorized by statute, this Court declared section 14 of the New York State Financial Emergency Act for the City of New York unconstitutional to the extent it violated section 7 of article V of the State Constitution. That constitutional provision was violated by the statute’s attempt to dictate to the Comptroller a scheme of purchasing newly created bonds using moneys from the ERS and the PFRS. Notably, we indicated that notwithstanding whether the scheme was "good, indifferent, or bad[,] [t]he ultimate difference is between authority to invest and a mandatory direction to invest in certain securities * * * whether or not the State Comptroller deems it advisable” (id,., at 513). After dismissing as immaterial the existence of taxes levied specifically to protect the retirement benefits, this Court further noted that the critical inquiry involved whether the "reserve funds * * * [would] be impaired by depriving the State Comptroller of freedom to exercise his independent judgment whether to invest in [the] bonds” (id., at 513-514). This Court answered that inquiry in the affirmative. Similarly, where the State Comptroller here has been divested of his autonomous judgment as to whether the PUC method is preferable to the AC method, we hold that section 210 violates the Nonimpairment Clause.

Appellant states that under article V, § 1 of the New York State Constitution, the Legislature is authorized to define the Comptroller’s "powers and duties”, a responsibility this Court recognized in Matter of New York Pub. Interest Research Group v New York State Thruway Auth. (77 NY2d 86, 89), and that the Comptroller was never statutorily empowered to choose the funding method for the retirement system. Distinguishing between the Comptroller’s role as trustee and administrative head of the retirement system and what appellant argues has always been the Legislature’s power to determine the system’s funding method, appellant contends that Retirement and Social Security Law §§ 13 and 313 limit the Comptroller’s duties to that of management, investment and disbursement of the assets of the retirement fund. Neither of these Retirement and Social Security Law provisions limits the Comptroller’s duties in a manner inconsistent with the exercise of his duties as trustee, which, as we held in Sgaglione, requires that system members have the benefit of the Comptroller’s independent judgment.

Moreover, in Sgaglione, we indicated that "[cjlose examination is therefore required of any radical change in means chosen to maintain the integrity and security of the sources from which the concededly protected benefits are to be paid” (Sgaglione v Levitt, 37 NY2d 507, 512, supra). Chapter 210 implements a "radical change.” The statute depletes several years of accrued retirement benefits involving millions of dollars and arguably destabilizes the fund. Indeed, even the Mercer Report (Actuarial Study to Compare Effects of Change in Actuarial Cost Method from Aggregate Cost Method to Projected Unit Credit Cost Method, by William M. Mercer, Inc. [1990]), lauded extensively by appellant, in addition to indicating the extreme volatility of the PUC method, warns that the amortization procedure inherent in the present PUC method creates an inappropriate level of risk. Such risk, compared to the stability of the AC method, in place without incident since 1921, results in a "radical change.”

Appellant contends that even Sgaglione recognized the Legislature’s "flexibility to change the manner of paying contributions, to fund deficiencies in actuarial reserve, and to authorize the investment of the funds” (id., at 512). Such flexibility, however, is not unfettered (id.).

Second, similar to the Comptroller’s fiduciary role as trustee in regard to these benefits is the State’s fiduciary duty to the participants in the retirement fund, to act in their best interests in exercising its limited oversight of the funds. As we indicated, supra, article V, § 1 of the New York State Constitution authorizes the State to circumscribe the Comptroller’s powers and duties. It is also unquestioned that the Legislature maintains some independent authority regarding the fund (see, Retirement and Social Security Law § 23 [delineating, inter alla, employer contribution rates and administration contributions]). Where the State maintains such authority in regard to the actual trustee of the funds, and specifically prescribes procedures for contributing to the benefits, concomitant with that authority is the State’s duty to act in a manner consistent with the goal of the "protection” of these funds as required by article V, § 7 of New York’s Constitution. The State must show, like any other trustee or fiduciary, that it has not breached that duty.

Thus, in those areas where the Legislature has some flexibility with respect to the administration of the fund (see, Sgaglione v Levitt, 37 NY2d 507, 512, supra), it yet remains bound by the same fiduciary duties required of any other acting in a fiduciary capacity, those of protecting the interests of the beneficiary. Here, it is uncontroverted that the only factor the Legislature considered when it chose to alter the funding method was that of the fiscal crisis facing the State.

Third, in seeking to uphold chapter 210, the State places reliance upon the Mercer Report for the proposition that funding under both the AC method and the PUC method is adequate. While the Mercer Report concluded that "both cost methods [AC and PUC] are appropriate,” it also concluded that "the Aggregate cost method may be preferred since it provides for smoother cost increases.” The Mercer Report does not provide the assurance of stability and nonimpairment of the CRF which appellant claims it does. That report bolsters plaintiffs’ claim that the PUC method impairs their retirement benefits. The Report indicates, inter alla, the following:

(1) Under PUC, "[b]enefit security is not an issue in the change in actuarial cost methods, provided the employer is able to make the higher contributions required in later years”;
(2) "The PUC method is twice as volatile as the Aggregate Method. If experience is particularly adverse it may be difficult for the employers to meet the contribution requirements”;
(3) "The current PUC amortization method is one that we believe can do harm to the Systems. Due to the well funded condition of the Systems and the strain on governmental budgets, we are concerned that the amortization method provides a level of risk which is inappropriate.”

Fourth, sections 6 and 7 of chapter 210 of the Laws of 1990 impair the means designed to assure benefits to public employees by depriving the Comptroller of his personal responsibility to maintain "the security of the sources of benefits” of the pension fund (see, Sgaglione v Levitt, 37 NY2d 507, 512, supra). That is not to say that the funding method used in pension funds of public employees may never change. However, the express authority to "adopt and * * * amend, from time to time, rules and regulations for the administration and transaction of the business of the retirement system and for the custody and control of its funds” rests largely with the Comptroller, as trustee of the pension funds (Retirement and Social Security Law § 11 [a]; see also, Retirement and Social Security Law §§ 13, 313).

In sum, chapter 210 impairs the benefits of the existing pension fund. Said legislation allows employers to deplete moneys in the existing pension fund by reducing the amount of employer contributions. Employers are allowed a credit of a portion of the existing moneys, and need not contribute to the pension until the reserved moneys are drastically reduced. To later replenish the fund, employers and employees must increase the amount of their contributions to the pension fund. As such, the reserve moneys will not be available for immediate investment, the return on investment of moneys in the existing fund will be significantly decreased, and the additional security provided by the reserve moneys in the pension funds will be impaired.

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

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

Order affirmed, with costs.


text:
    [624 NE2d 990, 604 NYS2d 895]
    In the Matter of Cellular Telephone Company, Doing Business as Cellular One, Respondent, v Armand Rosenberg et al., Constituting the Zoning Board of Appeals of the Village of Dobbs Ferry, Appellants.
    Argued October 5, 1993;
    decided November 18, 1993

      POINTS OF COUNSEL

      Richard M. Gardella, While Plains, for appellants.
    I. The Court below’s acceptance of Supreme Court’s expansion of the public utility use variance exception is not supported by case law, legislation or public policy. (Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598; Matter of Otto v Steinhilber, 282 NY 71.) II. The Court below’s acceptance of the expansion of the use variance test to cover Cellular Phone Company facilities is not backed by a reading of Consolidated Edison or by prior and subsequent case law. (Matter of Consolidated Edison Co. v Hoffman, 48 NY2d 598; Matter of Cellular Tel. Co. v Rosenberg, 153 Misc 2d 302; Matter of Long Is. Light. Co. v City of Long Beach, 280 App Div 823; Matter of Long Is. Water Corp. v Michaelis, 28 AD2d 887; Matter of Long Is. Light Co. v Incorporated Vil. of E. Rockaway, 279 App Div 926; Matter of Long Is. Light Co. v Horn, 23 AD2d 583; Video Microwave v Zoning Bd. of Appeals, 77 Misc 2d 798; Matter of Mammina v Zoning Bd. of Appeals, 110 Misc 2d 534; Stamanski v Romeo, 62 Misc 2d 1051; Matter of Payne v Taylor, 178 AD2d 979.) III. The expanded Otto exception approved by the Court below was not recognized by the Legislature when it amended use variance enabling statutes in 1991. (Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598; Matter of

      Otto v Steinhilber, 282 NY 71.) IV. The Court below’s affirmance of the lower court’s necessity and the lack of alternative findings was not supported by substantial evidence in the record. (Matter of Zagoreos v Conklin, 109 AD2d 281; Matter of United States Transmission Sys. v Schoepflin, 63 AD2d 970; Gottlieb v Board of Appeals, 139 AD2d 617; Matter of Niagara Mohawk Power v City of Fulton, 8 AD2d 523.) V. Precedential and jurisdictional concerns expressed by the Board were justified. (Knight v Amelkin, 68 NY2d 975; Matter of Long Is. Water Corp. v Michaelis, 28 AD2d 887.) VI. Appellant’s determination was rational and supported by the record; it should not have been disturbed. (People ex rel. Fordham Manor Refm. Church v Walsh, 244 NY 280; Matter of Faham v Bockman, 151 AD2d 665; Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598; Matter of Petruzzelli v Zoning Bd. of Appeals, 181 AD2d 825; Burger King Corp. v Amelkin, 70 AD2d 627; Matter of Agoglia v Glass, 35 AD2d 954, 29 NY2d 535; Matter of Baker v Zoning Bd. of Appeals, 67 AD2d 1071.)

      Keane & Beane, P. G, White Plains (Edward F. Beane and Judson K. Siebert of counsel), for respondent.
    I. The lower courts properly applied the Consolidated Edison v Hoffman standard. (Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598; Matter of Otto v Steinhilber, 282 NY 71; Matter of Zagoreos v Conklin, 109 AD2d 281.) II. The lower courts properly held that Cellular Telephone Co. is a public utility thereby warranting an application of the Consolidated Edison v Hoffman standard. (Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598; Matter of Consolidated Edison Co. v Village of Briarcliff Manor, 208 Misc 295; Matter of Long Is. Light. Co. v Horn, 23 AD2d 583; Matter of Niagara Mohawk Power Corp. v City of Fulton, 8 AD2d 523; Matter of Payne v Taylor, 178 AD2d 979; Video Microwave v Zoning Bd. of Appeals, 77 Misc 2d 798.) III. The amendment to the Village Law does not alter or affect the applicability of the Consolidated Edison v Hoffman standard. (Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598.) IV. The record establishes that Cellular Telephone Company satisfied the Consolidated Edison v Hoffman standard. (Matter of Consolidated Edison Co. v Hoffman, 43 NY2d 598; Matter of Piloto v Zoning Bd. of Appeals, 155 AD2d 864; Matter of Market Sq. Props. v Town of Guilderland Zoning Bd. of Appeals, 66 NY2d 893; American Nassau Bldg. Sys. v Press, 143 AD2d 789; Reed v

      Planning Bd., 120 AD2d 510; Matter of Pine Hill Concrete Mix Corp. v Town of Newstead Zoning Bd. of Appeals, 161 AD2d 1187.)

      Rice & Amon, Suffern (Terry Rice of counsel), for New York Planning Federation, amicus curiae.

    The history, rationale and necessity for providing limited immunity from local zoning laws for public utilities dictates that such preferred treatment not be expanded to cellular telephone companies. (People v De Jesus, 54 NY2d 465; Jancyn Mfg. Corp. v County of Suffolk, 71 NY2d 91; New York Club Assn. v City of New York, 69 NY2d 211, 487 US 1; Incorporated Vil. of Nyack v Daytop Vil., 78 NY2d 500; McMinn v Town of Oyster Bay, 66 NY2d 544; Matter of Wulfsohn v Burden, 241 NY 288; Village of Euclid v Ambler Realty Co., 272 US 365; Marcus Assocs. v Town of Huntington, 45 NY2d 501; Village of Belle Terre v Boraas, 416 US 1; Udell v Haas, 21 NY2d 463.)

      Donovan Leisure Newton & Irvine, New York City (Louis C. Lustenberger, Jr., Susan Hart-White and Christoph C. Heisenberg of counsel), for The Children’s Village, amicus curiae.

    The Board’s determination that the cell site posed a potential health hazard was arbitrary and capricious. (Matter of Dodson v Planning Bd., 163 AD2d 804; Matter of Piloto v Zoning Bd. of Appeals, 155 AD2d 864; Matter of C & B Realty Co. v Town Bd. of Oyster Bay, 139 AD2d 510; Reed v Planning Bd., 120 AD2d 510; Matter of North Shore Equities v Fritts, 81 AD2d 985; People ex rel. Fordham Manor Refm. Church v Walsh, 244 NY 280; American Nassau Bldg. Sys. v Press, 143 AD2d 789; 300 Gramatan Ave. Assocs. v State Div. of Human Rights, 45 NY2d 176; Matter of High Point Enters, v Board of Estimate, 67 AD2d 914, 47 NY2d 935.)
   OPINION OF THE COURT

Smith, J.

The primary issue on this appeal is whether the siting of a cellular telephone facility qualifies as a "public utility” use variance exception under Matter of Consolidated Edison Co. v Hoffman (43 NY2d 598).

Respondent Cellular Telephone Company (Cellular One), formerly known as Metro One, is a telephone corporation (Public Service Law § 2 [17]; Transportation Corporations Law § 25) and a public utility company (Public Service Law § 2 [23]; see also, Village Law § 5-524 [6] [defining public utility services to include telephone services]). Cellular One is licensed by the Federal Communications Commission (FCC) and the New York Public Service Commission (PSC) to provide cellular telephone service to subscribers throughout the New York-New Jersey metropolitan area. The FCC has authorized respondent "to establish a new cellular system operating on frequency Block A in the Domestic Public Cellular Radio Telecommunications Service” to serve the New York metropolitan area. The PSC has issued respondent a certificate of public convenience and necessity, as is required for every telephone corporation (Public Service Law § 99). In addition, the PSC is authorized to prescribe respondent’s service and rate standards (see, Public Service Law § 91). Cellular One operates more than 100 cell sites with over 3,500 transmitters in the New York-New Jersey area.

On July 20, 1990, Cellular One informed the Dobbs Ferry Planning Board of its proposal to establish a cellular telephone cell site on the 209-acre grounds of Children’s Village, a not-for-profit corporation licensed to provide treatment and a home for neglected children. Erection of the cell site would enable respondent to expand and fill gaps in its service area. Presently, due to the large intervals between its existing antennas, respondent cannot adequately transmit or receive calls in the area of the proposed site. Calls of respondent’s customers in that area are often interrupted or disconnected due to the scarcity of antennas, and interference from static. In addition, cross talk and intermodulation render inaudible calls that are connected. On September 26, 1990, pursuant to a lease agreement, Cellular One leased approximately 800 square feet of land from Children’s Village. The lease agreement allowed respondent to establish and operate the cell site on the grounds.

The proposed cell site involves the installation of nine cellular antennas, measuring 4 feet 1 inch by approximately 10 inches, which would be attached to an existing 70-foot water tower. The antennas would not increase the height of the water tower. A one-story 14-feet by 28-feet modular building would house computer equipment adjacent to the water tower. Located at approximately 400 to 500 feet from the nearest private residential dwelling, the water tower would also be at a higher elevation than residential dwellings in the area. In addition, the proposed site requires the enhancement of an existing dirt road to facilitate access to the site, and the installation of fencing.

The Children’s Village site is located in the E (Educational District) Zone under the Dobbs Ferry Zoning Code. The proposed cell site is not a permitted use in this zone. Thus, in October 1990, Cellular One applied for a permit to begin the installation. By letter dated October 9, 1990, the Dobbs Ferry Building Inspector informed respondent that its cell site proposal had to be denied because such business was nót a permitted use in the zone.

On October 18, 1990, Cellular One applied for a use variance to construct the cell site on the Children’s Village property. A series of public hearings regarding respondent’s application commenced on November 14, 1990 and continued on January 9, 1991 and February 13, 1991. During the hearings, the Chairman of the Zoning Board questioned the authority of the Board to grant the variance, in light of this Court’s holding in Matter of Otto v Steinhilber (282 NY 71). He also inquired about alternate sites and required the submission of the lease between Children’s Village and Cellular One. Several people who owned homes near the Children’s Village site raised concerns about noise, reception interference and health risks. Cellular One objected to the submission of the lease and its viewing by the public, but subsequently surrendered it to the chairman. In addition, respondent argued that other alternative sites were not suitable, and that the holding in Matter of Otto did not apply to its variance request since it is a "public utility.” Cellular One also offered expert testimony to show that the granting of the application will have no negative impact on the neighborhood and that any concerns in that respect were unwarranted. The experts stated that the proposed cell site would have no effect on washing machines, telephones, radios or televisions, that there would be no disruption of any other frequencies, and that there would be no effect of any of the transmissions on humans or animals or any other organisms. In addition, the experts explained that the additional traffic flowing from the installation of the cell site would be limited to one vehicle accessing the site once or twice a month for routine maintenance. Respondent asserted that it selected the Children’s Village site because of its natural elevation, its location in a heavily wooded area and proximity to highways, and the existing water structure, which would mean that Cellular One would not have to create a tower elsewhere.

Appellant Zoning Board denied the use variance, finding that Cellular One offered insufficient evidence to establish (1) "that the land at issue cannot yield a reasonable return if used only for the purpose allowed by the applicable zoning statute,” (2) "that its circumstance (or that of the Children’s Village) is due to a unique situation and not to the general condition of the neighborhood,” (3) "that there exists a public necessity for its service, or what the need of the broader public is relating to such service, or that it is a public utility relating to the zoning ordinance,” (4) "the absence of possible future hazards to the health and welfare of the community,” and (5) "the lack of alternate sites (i.e. on other than Children’s Village land) which would accommodate [Cellular One’s] needs for its business.”

This CPLR article 78 proceeding challenging the Board’s determination followed. Cellular One alleged that the Board’s actions in denying the use variance were arbitrary and capricious, unsupported by the record, not supported by substantial evidence, and contrary to law. Cellular One asserted that the Board failed to apply the appropriate standard of public necessity set forth in Matter of Consolidated Edison Co. v Hoffman (supra), and, instead, erroneously applied the test of unnecessary hardship applicable to nonutility applications for use variances. Supreme Court granted the petition and directed appellants to issue the use variance, finding, as a matter of law, that Cellular One is a public utility and that the Board’s finding and conclusions to the contrary were incorrect, and that the Board’s decision was "significantly flawed in its analysis and conclusions” and "arbitrary and capricious.” (153 Mise 2d 302, 309.) The Appellate Division affirmed, stating that Supreme Court properly determined that Cellular One is a public utility, that the test for a use variance set forth in Matter of Consolidated Edison Co. v Hoffman is applicable, that Cellular One made a sufficient showing to warrant the issuance of the use variance, and that the Board’s determination to the contrary was arbitrary and capricious (188 AD2d 648). This Court granted leave to appeal.

On this appeal, appellants contend that the determinations of Supreme Court and the Appellate Division unnecessarily expand the test for entitlement to a use variance in Matter of Consolidated Edison (supra) to include the facilities of all public utilities, regardless of whether they provide essential services to the community. Appellants urge that the exception should be used to protect only public utilities, such as electric, gas, steam and water corporations, that supply essential services which are commonly recognized by the grant of "governmental type” powers, including the power of eminent domain, monopoly status, and partial zoning exemption for their major facilities. Respondent argues that the test in Matter of Consolidated Edison (supra) applies to all public utilities, and that it is a public utility within the meaning of the Court’s decision in that case, and, thus, it is entitled to the application of the "public necessity” use variance test.

A "public utility” has been defined to mean " 'a private business, often a monopoly, which provides services so essential to the public interest as to enjoy certain privileges such as eminent domain and be subject to such governmental regulation as fixing of rates, and standards of service’ ” (2 Anderson, American Law of Zoning § 12.32, at 568-569 [3d ed]). Characteristics of the public utility include (1) the essential nature of the services offered which must be taken into account when regulations seek to limit expansion of facilities which provide the services, (2) "operation] under a franchise, subject to some measure of public regulation,” and (3) logistic problems, such as the fact that "[t]he product of the utility must be piped, wired, or otherwise served to each user * * *[,] the supply must be maintained at a constant level to meet minute-by-minute need[, and] [t]he user has no alternative source [and] the supplier commonly has no alternative means of delivery” (id., at 569).

We conclude that a cellular telephone company is a "public utility” as defined here and sufficiently possesses the characteristics outlined above. In addition, the construction of an antenna tower in a residential district to facilitate the supply of cellular telephone service is a "public utility building” within the meaning of a zoning ordinance (see, Matter of Payne v Taylor, 178 AD2d 979).

In Matter of Consolidated Edison (supra), this Court created a "public utility” exception to the test for unnecessary hardship, warranting the grant of a use variance, outlined in Matter of Otto v Steinhilber (supra). In Matter of Consolidated Edison, the Zoning Board of Appeals of the Village of Buchanan denied an application by Consolidated Edison Company for a variance for the construction of a wet cooling tower for its nuclear generating plant. The Board determined that no practical difficulties requiring a variance had been shown. Consolidated Edison Company commenced an article 78 proceeding, seeking to annul the Board’s determination. The Court held the factors outlined in Matter of Otto v Steinhilber (supra) are not appropriate where the entity requesting the variance is a public utility. Thus, the Court stated:

"Instead, the utility must show that modification is a public necessity in that it is required to render safe and adequate service, and that there are compelling reasons, economic or otherwise, which make it more feasible to modify the plant than to use alternative sources of power such as may be provided by other facilities” (Matter of Consolidated Edison, 43 NY2d 598, 611, supra).

The Court stated further that "where the intrusion or burden on the community is minimal, the showing required by the utility should be correspondingly reduced” (id., at 611).

Matter of Consolidated Edison (supra), applies to all public utilities. It also applies to entirely new sitings of facilities, as well as the modification of existing facilities. As we stated in that case, "[I]t has long been held that a zoning board may not exclude a utility from a community where the utility has shown a need for its facilities” (id., at 610). There can be no question of Cellular One’s need to erect the cell site to eliminate service gaps in its cellular telephone service area. The proposed cell site will also improve the transmission and reception of existing service. Application of our holding in Matter of Consolidated Edison (supra) to sitings of cellular telephone companies, such as Cellular One, permits those companies to construct structures necessary for their operatian which are prohibited because of existing zoning laws and to provide the desired services to the surrounding community. Furthermore, the test we announced in that case, as well as the regulations of the FCC and the PSC, serve to guard against appellants’ concerns about the potential proliferation of similar applications and the inability of local land use officials to exercise control to protect their communities.

Nothing in the plain language of the amendment to section 7-712-b (2) of the Village Law supports the conclusion that the Legislature intended to overrule Matter of Consolidated Edison. Section 7-712-b (2) makes no reference to a "public utility,” and, in essence, codifies the requirements for demonstrating unnecessary hardship established in Matter of Otto (supra). Furthermore, the effective date of the amendment to section 7-712-b was July 1, 1992, long after the Zoning Board denied petitioner’s variance application and after petitioner commenced this article 78 proceeding.

We are not persuaded by appellants’ argument that the record supports their conclusion that Cellular One did not establish its entitlement to a use variance. A board’s determination denying a variance will be sustained only if it has a rational basis and is supported by the record (Matter of Consolidated Edison, 43 NY2d, at 608, supra). The record supports the conclusion that the proposed installation would have a negligible impact on the surrounding neighborhood. It would not affect washing machines, telephones, radios or televisions, and there would be no disruption of any other frequencies. Furthermore, the transmissions from the cell site would not affect humans, animals or any other organisms. Moreover, the record supports the conclusion that Cellular One sustained its burden of proving the requisite public necessity. Cellular One established that the erection of the cell site would enable it to remedy gaps in its service area that currently prevent it from providing adequate service to its customers in the Dobbs Ferry area. No rational basis exists for the Board’s determination, and the Board abused its discretion, as a matter of law, in denying petitioner’s application for a use variance.

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

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

Order affirmed, with costs.

      . Public Service Law § 2 (23) states that the term "public utility company” applies to "one or more persons or corporations operating an agency or agencies for public service, and who or which is or are subject to the jurisdiction, supervision and regulations prescribed by or pursuant to this chapter.”

      . In Matter of Otto v Steinhilber, the Court articulated the factors that a zoning board must consider before finding unnecessary hardship warranting the grant of a use variance. The Court stated that "the record must show that (1) the land in question cannot yield a reasonable return if used only for a purpose allowed in that zone; (2) that the plight of the owner is due to unique circumstances and not to the general conditions in the neighborhood which may reflect the unreasonableness of the zoning ordinance itself; and (3) that the use to be authorized by the variance will not alter the essential character of the locality” (id,., at 76).

      . Section 7-712-b (2) (b) provides: "No such use variance shall be granted by a board of appeals without a showing by the applicant that applicable zoning regulations and restrictions have caused unnecessary hardship. In order to prove such unnecessary hardship the applicant shall demonstrate to the board of appeals that (1) under applicable zoning regulations the applicant is deprived of all economic use or benefit from the property in question, which deprivation must be established by competent financial evidence; (2) that the alleged hardship relating to the property in question is unique, and does not apply to a substantial portion of the district or neighborhood; (3) that the requested use variance, if granted, will not alter the essential character of the neighborhood; and (4) that the alleged hardship has not been self-created.”


author: Chief Judge Kaye. Bellacosa, J.

text:
    [624 NE2d 995, 604 NYS2d 900]
    Howard S. Denburg, Respondent, v Parker Chapin Flattau & Klimpl, Appellant.
    Argued October 5, 1993;
    decided November 18, 1993

      POINTS OF COUNSEL

      Parker Chapin Flattau & Klimpl, New York City (Alvin M. Stein, Mark Abramowitz and Amos Alter of counsel), appellant pro se.

    I. The court below erred in deciding this case summarily on the basis of Cohen v Lord, Day & Lord (75 NY2d 95). (Matter of Silverberg [Schwartz], 75 AD2d 817; Riviera Con

      gress Assocs. v Yassky, 18 NY2d 540; Lanier v Bowdoin, 282 NY 32; Hackett v Milbank, Tweed, Hadley & McCloy, 181 AD2d 519.) II. The 1986 agreement precludes Denburg’s claim. (Cohen v Lord, Day & Lord, 75 NY2d 95; 1420 Concourse Corp. v Cruz, 135 AD2d 371; Crylon Steel Co. v Globus, 185 F Supp 757; Hammerstein v Equitable Trust Co., 209 NY 429; Hobbs v City of Yonkers, 102 NY 13; Panto v Kentucky Distilleries & Warehouse Co., 215 App Div 511.) III. The court below should not have ordered an accounting. (Hermes v Compton, 260 App Div 507; Audino v Lincoln First Bank, 105 AD2d 1091, 65 NY2d 631; Henshel v Held, 13 AD2d 771.)

      Fried, Frank, Harris, Shriver & Jacobson, New York City (Sheldon Raab, Honey L. Kober and Dino Fusco of counsel), for respondent.
    I. Article 18 of the partnership agreement is void on its face as a forfeiture for competition provision. (Cohen v Lord, Day & Lord, 75 NY2d 95; Matter of Silverberg [Schwartz], 75 AD2d 817; Levy v Baumeister, 170 AD2d 385; Hackett v Milbank, Tweed, Hadley & McCloy, 181 AD2d 519, 80 NY2d 870; Graubard Mollen Horowitz Pomeranz & Shapiro v Moskovitz, 149 Misc 2d 481.) II. Parker Chapin’s conclusory assertion that the parties entered into an accord and satisfaction could not defeat Denburg’s motion for summary judgment. (Zuckerman v City of New York, 49 NY2d 557; Reilly v Barrett, 220 NY 170; Goldbard v Empire State Mut. Life Ins. Co., 5 AD2d 230; Hudson v Yonkers Fruit Co., 258 NY 168; Matter of Campbell, 256 App Div 693, 281 NY 685; Atterbury v Walsh Paper Corp., 261 App Div 529, 286 NY 578; Inter Bus. Mktg. v Kronengold, 135 AD2d 474; Freedman v Chemical Constr. Corp., 43 NY2d 260; Shaw v Time-Life Records, 38 NY2d 201; McMullen v Hoffman, 174 US 639.) III. The court below properly granted Denburg an accounting. (Bailly v Betti, 241 NY 22; Munyan v Curtis, Mallet-Prevost, Colt & Mosle, 99 AD2d 716; Gluck & Co. v Tankel, 12 AD2d 339; Boxill [Ford] v Boxill, 201 Misc 386; Riviera Congress Assocs. v Yassky, 25 AD2d 291, 18 NY2d 540; Matter of Bayswater Health Related Facility v New York State Dept. of Health, 57 AD2d 996.)
   OPINION OF THE COURT

Chief Judge Kaye.

In this dispute between a law firm and a former partner, we agree with the Appellate Division that a provision in the partnership agreement requiring certain payments upon a partner’s withdrawal is unenforceable under Cohen v Lord, Day & Lord (75 NY2d 95). Nevertheless, we conclude that the Appellate Division erred in granting the former partner’s summary judgment motion because there are disputed factual issues surrounding a purported settlement agreement. Accordingly, we modify and remit to the trial court for further proceedings.

I.

In 1983, the partners in the Manhattan law firm Parker Chapin Flattau & Klimpl — including plaintiff — executed an amended partnership agreement requiring withdrawing partners to pay certain specified sums to the partnership upon demand. In substance, subparagraph 18 (a) of the agreement provided that if a withdrawing partner practiced law in the private sector prior to July 1988, the former partner had to pay the firm greater of (i) 12.5% of the firm’s profits allocated to the partner over the two previous years or (ii) 12.5% of billings to former Parker Chapin clients made by the partner’s new firm over the ensuing two years. The agreement provided an exception to this requirement, however, for departing partners whose previous year’s profit allocation was less than $85,000 — but only if the partner’s new firm did no work for Parker Chapin clients over the next two years. The agreement also provided that the firm could apply the partner’s capital account — which would otherwise have been disbursed at the end of the fifth fiscal year after withdrawal — to satisfy the partner’s obligation.

In early 1984 plaintiff left Parker Chapin to join a New Jersey law firm, and allegedly continued serving some of the same clients. In August 1986 Irving Rosenzweig, a member of the Parker Chapin’s executive committee, wrote to plaintiff requesting information about his new firm’s billings to Parker Chapin clients from March 9, 1984 through March 9, 1986 so that plaintiff’s liability under the agreement could be computed. According to Rosenzweig, he spoke to plaintiff shortly afterwards, and plaintiff suggested that Parker Chapin simply keep the balance of his capital account in satisfaction of the obligation, whereupon Rosenzweig agreed on behalf of the firm and the account was "written off.” Plaintiff disputes these allegations.

The matter was dormant until February 1990 — two months after our decision in Cohen v Lord, Day & Lord (75 NY2d 95, supra) — when plaintiff commenced an action against Parker Chapin asserting four causes of action. The first sought a declaration that subparagraph 18 (a) was void as against public policy and directing defendant to repay sums illegally withheld, alleged to be at least $24,800; the second was for breach of the contract provision that would ordinarily require the capital account to be disbursed at the end of the fifth fiscal year following withdrawal; the third sought an accounting; and the fourth was for an "account stated.”

Defendant answered, raising affirmative defenses and counterclaims, and plaintiff moved for summary judgment and dismissal of the counterclaims. Parker Chapin defended the disputed clause on the ground that it was not a void forfeiture-for-competition provision in the Cohen mold, but was designed instead to assure that partners who left the firm equitably shared in the burden of extraordinary obligations it would be assuming in connection with a move to new quarters. Specifically, Parker Chapin submitted evidence that the firm entered into a new lease commencing December 1, 1983 at a six-fold rent increase and borrowed $4.5 million in June 1984, allegedly to finance the move and refurbish the space. According to the firm, moreover, it predicted that it would take at least five years to recover from the impact of these increased expenses and accordingly restricted subparagraph 18 (a) to that duration. Parker Chapin additionally contended that any issues relating to plaintiff’s obligations under subparagraph 18 (a) were finally settled in 1986, when plaintiff agreed that the balance in the capital account should simply be taken to resolve the matter.

Distinguishing Cohen, Supreme Court declined to declare subparagraph 18 (a) invalid because it might be shown to be a "reasonably limited arrangement for recoupment of partnership liabilities.” It also denied summary judgment on the breach of contract claim because of the factual dispute surrounding plaintiff’s purported settlement agreement. The court similarly denied plaintiff’s request for an accounting, and denied summary judgment on the "account stated” cause of action. The court did, however, grant plaintiff’s motion for dismissal of the counterclaims.

On plaintiff’s appeal, the Appellate Division modified by granting him summary judgment on the first three causes of action and remitting for an accounting. It held that while paragraph 18 might have had as an incidental objective the recoupment of partnership liabilities in connection with the firm’s relocation, its principal function was to prevent withdrawing partners from competing with the firm, and was thus as much an improper forfeiture-for-competition provision as the one in Cohen.

In response to defendant’s settlement argument, the court observed that even if plaintiff did agree to set off his capital account as alleged, it was "merely repetitive of, and no more enforceable than” the provision in subparagraph 18 (a) permitting the firm to apply the capital account in satisfaction of the obligations arising under the paragraph (184 AD2d, at 345). Accordingly, the court remitted for an accounting (third cause of action). Finally, the parties have consented to dismissal of the account stated claim.

On remittal, the accounting revealed a capital account balance of $24,933.62. Final judgment was entered in that amount, and this Court granted defendant leave to appeal. We now modify by affirming to the extent subparagraph 18 (a) was declared unenforceable and remit for further proceedings.

II.

Analysis begins with Cohen v Lord, Day & Lord. There, we held that DR 2-108 (A) of the Code of Professional Responsibility — which states that a lawyer may not "participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement”— reflects public policy, rendering certain anticompetition clauses void and unenforceable.

As we made clear, restrictions on the practice of law, which include "financial disincentives” against competition as well as outright prohibitions, are objectionable primarily because they interfere with the client’s choice of counsel: a clause that penalizes a competing attorney by requiring forfeiture of income could "functionally and realistically discourage” a withdrawing partner from serving clients who might wish to be represented by that lawyer (75 NY2d, at 98).

In Cohen, we voided a provision that required withdrawing partners to relinquish their share of revenues earned but uncollected by the firm if they worked in private practice or as in-house counsel in any State where the firm had an office, or in neighboring States. We concluded that the "significant monetary penalty it exacts, if the withdrawing partner practices competitively with the former firm, constitutes an impermissible restriction on the practice of law.” (75 NY2d, at 98.)

We acknowledged, however, a law firm’s legitimate interest in its own survival and economic well-being and cautioned against a "categorical interpretation or application” of the decision (75 NY2d, at 101-102). Parker Chapin thus argues that subparagraph 18 (a) had the legitimate purpose of assuring some restitution to the firm by partners who abandoned the enterprise just as the firm undertook extraordinary relocation expenses. Defendant emphasizes the limited duration of the clause, and argues that no anticompetitive effect was intended or realized because of the modest sums involved and the fact that plaintiff, as well as other partners, did leave the firm notwithstanding the clause.

While defendant criticizes the Appellate Division’s finding (184 AD2d, at 345) that the "principal function” of the clause was to discourage competition — it argues that the intended function is a fact issue — we note that in the present context focus should essentially be not on the intent of the clause but on its effect.

Even crediting Parker Chapin’s assertions as to the purpose of subparagraph 18 (a), we conclude that its effect is to improperly deter competition and thus impinge upon clients’ choice of counsel. First, it applies only to lawyers continuing in private practice — and thus potentially in competition with the firm — but not other practitioners (for example, government lawyers) who do not threaten the firm’s client base. Ability to pay cannot explain this discrimination because a departing partner becoming a high-paid corporate officer or embarking on a lucrative business venture is exempt from the required payment but an attorney starting a sole practice is not.

The provision, moreover, requires a departing partner to pay the greater of two amounts, one computed on the basis of billings to former clients of the firm. This bears little relation to the purported compensatory purpose of the clause and instead exacts an amount directly proportional to the success of a departing partner’s competitive efforts. Finally, the clause exempts partners who received relatively lower earnings — but only if no Parker Chapin clients are served. A junior partner changing firms might well insist that a Parker Chapin client not come along.

Defendant’s argument that the amount at issue is insubstantial, and indeed would not (and did not) discourage partners from leaving the firm or serving former clients, is similarly unpersuasive. A clause that is facially invalid cannot be saved merely because some partners chose to absorb the penalty imposed. Indeed, the partner in Cohen also left his firm, and we voided the clause. Nor is the sum involved here —about $25,000 — insubstantial. Finally, while the limited duration may be evidence of the firm’s intent, the effect of the clause nevertheless impacts substantially during the five years it operates (compare, Jacob v Norris, McLaughlin & Marcus, 128 NJ 10, 607 A2d 142 [voiding financial disincentive that operates for one year after departure]). Moreover, if a short duration were dispositive a firm could evade the law by periodically reexecuting partnership agreements containing short-term forfeiture-for-competition clauses.

Conspicuously absent from the dissent is any discussion of the terms of the disputed clause. Apparently, so long as the law firm can articulate an economic justification for a forfeiture (see, dissenting opn, at 386 [quoting from the Rosenzweig affidavit]), the dissent would hold that Cohen is inapplicable— even if competitors are the only ones affected. Neither defendant nor the dissent has adequately explained how the present clause is tailored to the concerns that purportedly inspired it.

In sum, we agree with the Appellate Division that subparagraph 18 (a) is unenforceable as against public policy.

III.

That does not end the matter, for we must also consider the effect of the purported 1986 settlement agreement.

Initially, we note the Appellate Division erred in its suggestion that plaintiff’s alleged agreement to forgo his capital account balance in satisfaction of his paragraph 18 obligation was "merely repetitive of,” and thus "no more enforceable than,” the clause’s set-off provision. Plaintiff’s obligation under paragraph 18 was not measured by the balance in the capital account, but by a computation based on previous profit allocations or future billings to ex-Parker Chapin clients. Although the firm had a "lien” on the account to discharge plaintiff’s obligation, the firm could insist upon additional payment if the balance were insufficient. It was in this context that, when asked to provide a list of billings to former Parker Chapin clients, plaintiff allegedly agreed to relinquish his account to settle the matter. Manifestly, that alleged agreement was not merely duplicative of the set-off provision.

Strong policy considerations favor the enforcement of settlement agreements (see, Hallock v State of New York, 64 NY2d 224, 230). A negotiated compromise of a dispute avoids potentially costly, time-consuming litigation and preserves scarce judicial resources; courts could not function if every dispute devolved into a lawsuit. Moreover, there is a societal benefit in recognizing the autonomy of parties to shape their own solution to a controversy rather than having one judicially imposed. Additionally, a settlement produces finality and repose upon which people can order their affairs.

These interests are advanced only if settlements are routinely enforced rather than becoming gateways to litigation (see, e.g., Matter of Olympic Tower Assocs. v City of New York, 81 NY2d 961, 963). Consequently, the law does not erect insuperable barriers to the creation of binding agreements. To constitute sufficient consideration, for example, a party need only have a good-faith belief in the merit of its position (see, Schuttinger v Woodruff, 259 NY 212, 216-217). That the party’s view of the law might ultimately prove meritless does not undermine the validity of the agreement (Restatement [Second] of Contracts § 74, comment b). Indeed, if the rule were otherwise, there would be little incentive to enter into a compromise.

As developed at common law, there was a distinction between the settlement devices of "accord and satisfaction” and "substituted agreement.” An accord and satisfaction, as its name implies, has two components. An accord is an agreement that a stipulated performance will be accepted, in the future, in lieu of an existing claim (Werking v Amity Estates, 2 NY2d 43, 51, appeal dismissed and cert denied 353 US 933; Reilly v Barrett, 220 NY 170, 172-173; General Obligations Law § 15-501 [1]). Execution of the agreement is a satisfaction (Reilly v Barrett, 220 NY, at 173). The distinctive feature of an accord and satisfaction is that the obligee does not intend to discharge the existing claim merely upon the making of the accord; what is bargained for is the performance, or satisfaction. If the satisfaction is not tendered, the obligee may sue under the original claim or for breach of the accord (Plant City Steel Corp. v National Mach. Exch., 23 NY2d 472, 478; General Obligations Law § 15-501 [3]).

By contrast, the parties may intend that a new agreement, though executory, will immediately discharge the existing obligation (see, e.g., Morehouse v Second Natl. Bank, 98 NY 503, 509). That is a substituted agreement (Calamari and Perillo, Contracts § 21-4, at 869 [3d ed]). Whether a particular arrangement is an accord or a substituted agreement hinges on the parties’ intent, determination of which may be aided by certain presumptions (Goldbard v Empire State Mut. Life Ins. Co., 5 AD2d 230, 234 [Breitel, J.]). In the present case, the litigants’ analyses center on the doctrine of accord and satisfaction, indicating no dispute about the parties’ intent in that regard.

Historically, executory accords were not enforceable; although the underlying obligation remained in effect, an accord without satisfaction was not binding (see, Larscy v Hogan & Sons, 239 NY 298, 301-302; Reilly v Barrett, 220 NY, at 173). Upon recommendation of the Law Revision Commission, however, the Legislature in 1937 discarded the common-law rule, and now an executory accord is enforceable so long as “the promise of the party against whom it is sought to enforce the accord is in writing and signed by such party” (General Obligations Law § 15-501 [2]). By implication, the common-law rule survives to the extent an executory accord is not reduced to writing.

The purported settlement agreement in the present case was oral and thus unenforceable unless executed. The parties agree that the accord would be satisfied when the capital account was “written off.” Because there is a factual dispute regarding when, if ever, the account was actually adjusted on defendant’s books, the case must be remitted to Supreme Court to resolve this issue.

Similarly, other factual issues must be resolved before the alleged settlement agreement may be given effect. Plaintiff contends, for example, that the purpose of his discussion with Rosenzweig was to quantify the amount owed, and that he never intended to surrender the right to challenge the validity of the paragraph 18. Plaintiff is correct that the parties’ intent governs the scope of an accord (see, Werking v Amity Estates, 2 NY2d, at 52). To effectuate the settlement agreement, however, the trial court would not have to find that plaintiff had a specific intent to relinquish a potential challenge to the clause’s validity; indeed, inasmuch as Cohen was not decided until well after the parties’ discussion, it is unlikely they had any intent with regard to that issue. Rather, it would be sufficient to find that plaintiff intended to conclude the matter and that he did not specifically reserve a challenge to the clause’s validity (see, Matter of Olympic Tower Assocs. v City of New York, 81 NY2d, at 963).

Finally, plaintiff argues that the unenforceability of paragraph 18 on public policy grounds renders any settlement of a claim arising under that paragraph likewise unenforceable, noting that were the rule otherwise, "the parties could by their private agreement waive the illegality and evade the prohibition against the original contract.” (Sweinhart v Bamberger, 166 Misc 256, 259; see, Restatement of Contracts § 590; 14 Williston, Contracts § 1629, at 9-10 [3d ed 1972].) While some bargains are so offensive to society that courts will not entertain the action — essentially leaving the parties where they are (see, e.g., McConnell v Commonwealth Pictures Corp., 7 NY2d 465, 467; Flegenheimer v Brogan, 284 NY 268, 272-273) — in other cases an illegal agreement is not so repugnant and may be enforced (see, Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124, 127-128). It is all a matter of degree.

Given the strong policies in favor of voluntary settlements of disputes, we conclude that an agreement to settle a dispute involving a forfeiture-for-competition provision may be enforced even though the clause itself is unenforceable (compare, Restatement [Second] of Contracts § 78). Financial disincentives to withdrawal from a law partnership are certainly not as offensive as commercial bribery (McConnell v Commonwealth Pictures Corp., 7 NY2d 465, supra) or fraud (Flegenheimer v Brogan, 284 NY 268, supra). Moreover, unlike outright prohibitions on the practice of law, agreements involving financial disincentives are not per se illegal but depend on the particular terms and circumstances. Accordingly, public policy is best served by permitting parties to amicably resolve disputes arising under such provisions rather than forcing each such controversy to be decided by the judiciary.

Appellant’s remaining contention is without merit.

Accordingly, the judgment of Supreme Court appealed from and the order of the Appellate Division brought up for review should be modified, without costs, and the case remitted to Supreme Court for further proceedings in accordance with this opinion and, as so modified, affirmed.

Bellacosa, J.

(dissenting). I respectfully dissent, concluding that the withdrawn partner’s case is meritless. The law firm partnership provision at issue should not be declared void as against public policy for it is not within the intendment or language of Cohen v Lord, Day & Lord (75 NY2d 95). The Court there expressly warned against "categorical interpretation or application” of such provisions, envisioned a flexible, practical analysis, and pinpointed the narrow effect of the adjudicated principle to the "contested clause” in the "context” of that "litigation” and "professional relationship” (id., at 102).

In this case, the Court turns away from those crucial qualifications and that admonition. The consequence of squeezing this capital account partnership provision — insofar as it affects partners who defect from the partnership and its capital obligations — into the narrow Cohen prohibition inevitably creates the eschewed absolutist universe. Ignored or bypassed are the individualized economic and professional factors, seasoned with the hoped-for but unrealized realism and practicality, that are the hallmarks of this provision, contrasted to that in Cohen. The fact that the provision here, understood and explained through appropriate extrinsic evidence, is keyed to a special, temporally limited proportionate capital leasehold risk affecting all then-liable partners, is ignored and given no weight or consideration. Those are the kind of features that the Court was concerned about when it asserted a flexible formula in Cohen to govern and guide future disputes relating to the wide variety of these extant and still adjusting and evolving provisions.

The partners here were bound by a fiduciary, contractual, long-term fiscal and professional relationship inter sese, as law partners. However, the provision that bound them together and defined the consequences when any one of them should leave the firm is sufficiently different in degree, in kind, and in litigation context and professional relationship to distinguish it from the one in Cohen v Lord, Day & Lord (75 NY2d 95, 102, supra). Here, it was formulated in 1983 to deal with a specific capital risk undertaken by all partners together and was designed to "insure that either the partners stayed together for five years to share the burden of these increased costs and expenses, or that those who chose not to do so would compensate the Firm appropriately” (affidavit of Rosenzweig; compare, Gillers, A Rule Without A Reason: [Let the market, not the bar, regulate settlements that restrict practice], 79 ABA J 118 [Oct. 1993]). Therefore, the provision at issue here should not be viewed in a vacuum, and the extrinsic evidence that legitimately explains its functional purpose cogently serves to take this provision out of the narrow, prohibited Cohen public policy blunderbuss. This one is not directed essentially at the concerns exalted in the Code of Professional Responsibility and only incidentally affects the lawyers’ relationships to clients.

Moreover, to allow lawyers, like plaintiff, to use the ennobling professional objectives that underlie Cohen v Lord, Day & Lord (75 NY2d 95, supra) to unearth settled matters, and to leverage dollar differences in this fashion, is an expressly contraindicated, puristic application of the Cohen rationale and objective, that gives plaintiff an unmerited, delayed-action windfall. Here, plaintiff entered the partnership agreement in 1983, negotiated with his firm, defendant Parker Chapin, about settling the capital account in 1986, and conspicuously abandoned this apparently amicably resolved dollar battle. Then, two months after this Court’s sharply divided decision in Cohen in 1990, the long gone partner resuscitated the dead-to-dormant dispute. These machinations do not foster the professionalism and the goals of the Code of Professional Responsibility that are the sole root of this Court’s narrowly fashioned remedy in Cohen. Rather, they further undermine those high concerns by emphasizing and rewarding dollars over service under the aegis of public policy that is broadly superimposed over contractual arrangements between reasonable lawyers, who are part of a public profession and are or were part also of a joint economic enterprise.

I could join in the Court’s remittal were I not convinced that the right result is to go the whole distance and reject plaintiff’s theory outright on the ground that the contested provision of this partnership agreement is not void as violative of the kind of professionalism that the Court had in mind when it declared its public policy view in such cautious fashion in Cohen (compare, Hackett v Milbank, Tweed, Hadley & McCloy, 181 AD2d 519, revd on other grounds 80 NY2d 870).

Judges Simons, Titone, Hancock, Jr., Smith and Levine concur with Chief Judge Kaye; Judge Bellacosa dissents in a separate opinion.

Judgment of Supreme Court appealed from and order of the Appellate Division brought up for review modified, etc.

       Subparagraph 18 (a) is quoted at 184 AD2d 343, 343-344.