author: Titone, J.

text:
    [660 NE2d 1108, 637 NYS2d 329]
    In the Matter of Robert O., a Person Alleged to be a Juvenile Delinquent, Appellant.
    Argued October 24,1995;
    decided December 5, 1995

      POINTS OF COUNSEL

      Schisler & Sall, Poughkeepsie (Richard C. Schisler and David B. Sall of counsel), for appellant.
    The refiling of the juvenile delinquency petition herein, after its dismissal on speedy hearing grounds pursuant to Family Court Act §§ 310.2 and 320.2 (1), where appellant did nothing to cause the delay, was totally improper and without authority and the refiled petition should have been dismissed. (Matter of Robert S., 192 AD2d 612; Matter of Frank C., 70 NY2d 408; Matter of Detrece H., 78 NY2d 107; Matter of Shannon FF., 189 AD2d 420; Matter of Tommy C., 182 AD2d 312.)

      Ian G. MacDonald, County Attorney, Poughkeepsie (Victor A. Civitillo and Christian R. Cullen of counsel), for presentment agency, respondent.
    I. The court below properly found that the presentment agency may file a second petition identical to one which was dismissed for failure to conduct the first appearance within 10 days because there is no right to a speedy first appearance comparable to the right to a speedy fact finding. (Matter of Frank C., 70 NY2d 408; Matter of Randy K., 77 NY2d 398; Matter of Christopher WW., 189 AD2d 411; Matter of Robert S., 192 AD2d 612; Matter of Jose R., 83 NY2d 388; Matter of Atthis D., 205 AD2d 263; Matter of Satori R., 202 AD2d 432.) II. The court below properly found that the presentment agency may file a second petition identical to the first one which was dismissed for failure to conduct the first appearance within 10 days because appellant’s right to a speedy fact-finding hearing was not violated. (Matter of Gabriel R., 208 AD2d 984; Matter of Shannon FF., 189 AD2d 420; Matter of Tommy C, 182 AD2d 312; Matter of Jessie C., 154 Misc 2d 103; Matter of J. V., 127 Misc 2d 780; Matter of Rodney J., 83 NY2d 503; Matter of Jahron S., 79 NY2d 632; Matter of Detrece H., 78 NY2d 107; Matter of David T., 75 NY2d 927.)

      Jane M. Spinak, New York City, and Robyn B. Millman for the Juvenile Rights Division of The Legal Aid Society, amicus curiae.

    The presentment agency in a juvenile delinquency proceeding should not be allowed to refile an identical petition to one which was previously dismissed due to a violation of Family Court Act § 320.2 (1). (Matter of Jose R., 83 NY2d 388;
      Matter of Randy K., 77 NY2d 398; Matter of Frank C., 70 NY2d 408; Matter of Satori R., 202 AD2d 432; Matter of Robert S., 192 AD2d 612; Matter of Atthis D., 205 AD2d 263; Matter of Detrece H., 78 NY2d 107; Matter of Shannon FF., 189 AD2d 420.)

      Paul A. Crotty, Corporation Counsel of New York City (Kristin M. Helmers and Deborah R. Douglas of counsel), for New York City, amicus curiae.

    The Court below properly concluded that a dismissal based upon the failure to hold an initial appearance within 10 days after the filing of the petition did not preclude the filing of a second petition on "speedy trial” grounds, where, as here, the fact-finding proceeding commenced within 60 days of the juvenile’s initial appearance on the original petition. (Matter of Detrece H., 78 NY2d 107; People v Lomax, 50 NY2d 351; Matter of Gabriel R., 208 AD2d 984; Matter of Shannon FF., 189 AD2d 420; Matter of Tommy C., 182 AD2d 312; Matter of Aaron J., 80 NY2d 402; Matter of Atthis D., 205 AD2d 263, 85 NY2d 924; Matter of Kevin G., 159 Misc 2d 288; Royal Zenith Corp. v Continental Ins. Co., 63 NY2d 975; Matter of Jose R., 83 NY2d 388.)
   OPINION OF THE COURT

Titone, J.

In this juvenile delinquency proceeding we are called upon to determine the consequences of a failure to hold the "initial appearance” within 10 days of the filing of the delinquency petition as required by Family Court Act § 320.2. We conclude that this flaw is not alone a reason to foreclose a timely prosecution of the underlying charges.

On March 2, 1993, the presentment agency filed a petition alleging that respondent committed acts, which if committed by an adult, would constitute the crimes of burglary in the first degree, burglary in the second degree and petit larceny. The charges stem from respondent’s alleged breaking and entering into a residence while armed and his theft of property therefrom. Respondent’s initial appearance on the petition was not held until March 29, 1993.

Respondent then moved to dismiss the petition on the ground that the initial appearance was not held within 10 days of the date the petition was filed as required by Family Court Act § 320.2 (1) and no good cause was shown for the delay. The presentment agency conceded that dismissal of that petition was proper since no good cause had been shown, but argued that dismissal should be without prejudice to refile the petition. Family Court granted the motion and dismissed the petition on April 26, 1993. On May 3, 1993, the presentment agency filed an identical petition against respondent. Respondent’s appearance on the second petition was held on May 11, 1993.

Respondent then moved to dismiss the second petition pursuant to Family Court Act §§ 310.2, 320.2 and 332.1 (8) on the ground that his right to a speedy fact-finding hearing was violated. Family Court denied the motion, holding that the right to speedy fact finding guaranteed by the Family Court Act "is not compromised by allowing the refiling of a petition” where, as here, the fact-finding hearing commenced within 60 days of the initial appearance on the first petition. Respondent preserved his right to appeal after admitting that he committed acts constituting unlawful possession of a weapon by a person under 16 in satisfaction of all charges in the petition. Respondent was adjudicated a juvenile delinquent and placed on probation for a term of 12 months.

The Appellate Division affirmed, with one Justice dissenting. The majority concluded that the presentment agency was not precluded from refiling a delinquency petition after the first was dismissed for failure to hold the initial appearance within 10 days of such filing where the juvenile’s separate right to a "speedy hearing” was observed. The dissent opined that the presentment agency’s failure to show "good cause” for the belated initial appearance required dismissal of the petition with prejudice in order to give effect to the statutory "good cause” language. We granted respondent permission to take this appeal, and now affirm.

The Family Court Act prescribes the procedures and time frames for conducting the juvenile’s "initial appearance,” which is "the proceeding on the date the respondent first appears before the court after a [delinquency] petition has been filed and any adjournments thereof’ (Family Ct Act § 320.1). At the initial appearance, the juvenile is appointed a Law Guardian if independent counsel has not been retained, informed of the charges contained in the petition, and furnished with a copy of the petition (Family Ct Act § 320.2 [2]; § 320.4 [1]). At that time, the court must determine whether detention of the juvenile is warranted, whether the case should be referred to the probation service for adjustment services, the date of the probable-cause hearing for a detained child, the date of the fact-finding hearing, and other issues properly before it {id., § 320.4 [2] [a]-[e]). Family Court Act § 320.2 (1) provides that "[i]f the respondent is not detained, the initial appearance shall be held as soon as practicable and, absent good cause shown, within ten days after a petition is filed.”

Where the juvenile is not detained, an adjudication on the merits of the petition’s charges, known as the "fact-finding” phase of the process, "shall commence not more than sixty days after the conclusion of the initial appearance” (Family Ct Act § 340.1 [2]), subject to adjournments for good cause and special circumstances {see, id., § 340.1 [3]-[5]). The Legislature has given the time frame for commencing the fact-finding phase special status by providing that "[ajfter a petition has been filed * * * the respondent is entitled to a speedy fact-finding hearing” {id., § 310.2). No counterpart to this section exists for the initial appearance. To protect a juvenile’s right to a "swift and certain adjudication” within the designated 60-day time period (see, Matter of Frank C., 70 NY2d 408, 413), Family Court Act § 332.1 (8) expressly authorizes the filing of a pretrial motion to "dismiss! ] a petition, or any count thereof, on the ground that the respondent has been denied a speedy fact-finding hearing contrary to section 310.2” {id., § 332.1 [8]). Thus, under the legislative scheme, so long as the adjudication is completed within 60 days, unless good-cause or special-circumstances adjournments are in order, a respondent’s right to a speedy fact finding has been preserved.

We reject respondent’s contention that a violation of the 10-day period for holding the initial appearance alone warrants dismissal of the petition with prejudice, regardless of the date fact finding has commenced. While the Legislature has seen fit to give protected status to the 60-day limit for commencing the fact-finding phase by enacting the speedy fact-finding right and by providing an express ground for dismissal for its violation, the time period for holding the initial appearance has not been granted similar protected status (cf., Matter of Jose R., 83 NY2d 388 [dismissal of petition for failing to timely complete dispositional phase not warranted where Family Court Act lacks provisions establishing right to a speedy disposition and authorizing dismissal of petition for such violation]).

The Family Court does not have inherent power to dismiss a juvenile delinquency petition. Rather, that authority is governed by statute, and is available only in carefully delineated circumstances (see, Family Ct Act §§ 315.1, 332.1). Specifically, in addition to a dismissal for a denial of the right to a speedy fact finding, the grounds for dismissal are expressly limited to the existence of factual, legal or jurisdictional defects in a petition (see, id., § 315.1), a violation of the Statute of Limitations of Family Court Act § 302.2 (id., § 332.1 [9]) and a violation of the prohibition against double jeopardy as provided by Family Court Act § 303.2 (id., § 332.1 [10]). Where a petition is dismissed as jurisdictionally defective, dismissal is generally without prejudice, and the presentment agency’s proper recourse is to refile the petition (see, Matter of Detrece H., 78 NY2d 107, 111). While the parties here agree that dismissal of the first petition was in order, they dispute whether that dismissal was with prejudice. Nowhere in the Family Court Act is a dismissal for a violation of the 10-day limit for holding the initial appearance elevated to the status of a ground for dismissal with prejudice, and we decline to read such a provision into this statute.

Respondent and supporting amicus curiae conclude that although the right to a speedy initial appearance is not explicitly found in the statute, it is encompassed in the right to a speedy fact finding. In other words, they argue that because the date of the fact-finding phase is derived from the date of the initial appearance, a delay of the initial appearance without good cause necessarily constitutes a violation of the speedy trial right and is thus similarly subject to the remedy of dismissal under Family Court Act § 332.1.

While theoretically a late initial appearance may directly delay adjudication of the merits in contravention of the statutory speedy fact-finding mandate, here that consideration is insignificant because no violation of the speedy fact-finding right occurred. From start to finish, respondent’s adjudication was completed within 60 days of his appearance on the original petition. Respondent does not claim that an adjudication on the merits had to be postponed due to the petition’s refiling.

Indeed, were we to accept respondent’s argument that the right to a speedy fact finding attaches to all individual proceedings taking place after the petition is filed, and is thus violated by holding a late initial appearance, we would be constrained to reach the same conclusion for an untimely probable cause hearing, which by definition occurs after the initial appearance, but prior to fact finding (see, Family Ct Act § 325.2 [1], [2]). Nonetheless, Family Court Act § 325.3 (4) belies that contention, providing that "[i]f the court or the presentment agency cannot hold a probable cause hearing within the limits of subdivision two of section 325.1, the court may dismiss the petition without prejudice or for good cause shown adjourn the hearing and release the respondent pursuant to section 320.5” (emphasis added). Given that this provision contemplates that dismissal without prejudice may be an appropriate remedy for failure to meet pre-fact-finding phase statutory deadlines in lieu of a showing of good cause for an adjournment, we conclude that similar relief is appropriate to redress a belated initial hearing, where no separate speedy fact-finding violation has occurred. Indeed, it would be illogical to permit dismissal without prejudice for a probable cause hearing violation and not for an initial appearance violation, where the former is further along in the process and involves resolution of the substantive question whether reasonable cause to believe that respondent committed a crime exists.

Contrary to the views expressed by the Appellate Division dissent below, the requirement of Family Court Act § 320.2 that "good cause” for the delay be shown before departing from the 10-day initial appearance time limit is far from eviscerated by permitting refiling of the petition. The initial appearance, like the arraignment of an adult charged with a crime, is the process by which the court obtains jurisdiction over the minor, determines if detention is warranted, and sets the dates for further proceedings (Family Ct Act §§ 320.2, 320.4; see also, Matter of Atthis D., 205 AD2d 263, 267). The presentment agency’s failure to show good cause for the arraignment delay resulted in significant consequences — the original petition was dismissed, jurisdiction over the juvenile was thereby lost, and the entire proceeding was stalled. As a result, the presentment agency was then required to refile the petition to regain jurisdiction and begin the process anew (see, Matter of Detrece H., 78 NY2d 107, supra).

Accordingly, the order of the Appellate Division should be affirmed, without costs.

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

Order affirmed, without costs.

      . The order of dismissal does not indicate whether dismissal was with or without prejudice to refile.

      . The presentment agency does not contest respondent’s right to appeal in this case.

      . The clerk of the court "shall notify the presentment agency and any appointed law guardian of the initial appearance date” (id., § 320.2 [4]) to "insure [ ] that that agency will be apprised of the appearance and afforded an opportunity to participate” in the proceedings (Sobie, Practice Commentary, McKinney’s Cons Laws of NY, Book 29A, Family Ct Act § 320.2, at 364).

      . Notably, we do not address whether the 60-day period should be measured for speedy fact-finding purposes from the date of the initial appearance on the first petition or on the refiled petition because here the fact-finding hearing was held within 60 days of the earlier appearance (compare, Matter

        of Gabriel R., 208 AD2d 984, and Matter of Tommy C., 182 AD2d 312 [measure 60 days from appearance on original petition], with Matter of Marcus A., 155 Misc 2d 482 [speedy trial "clock” does not begin to run until initial hearing on new petition]; cf., People v Osgood, 52 NY2d 37 [speedy trial clock in criminal action commences when first accusatory instrument is filed]).

      . Family Court Act § 320.4, which sets forth the procedures to be followed at the initial appearance, is derived from CPL 210.15, which governs arraignments in the criminal justice system {see, Sobie, Practice Commentary, McKinney’s Cons Laws of NY, Book 29A, Family Ct Act § 320.4, at 371; Preiser, Practice Commentaries, McKinney’s Cons Laws of NY, Book 11 A, CPL 210.15).


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    [660 NE2d 1112, 637 NYS2d 333]
    In the Matter of Rochester Telephone Corporation et al., Appellants, v Public Service Commission of the State of New York et al., Respondents.
    Argued September 21,1995;
    decided October 31, 1995

      POINTS OF COUNSEL

      Michael J. Shortley, III, Rochester, Helen A. Zamboni and Nixon, Hargrave, Devans & Doyle (Michael T. Tomaino of counsel), for Rochester Telephone Corporation, appellant; Davis Polk & Wardwell, New York City (Guy Miller Struve of counsel), Patrick A. Lee and Jerome M. Balsam for New York Telephone Company, appellant; Cullen and Dykman, Brooklyn (Steven L. Zelkowitz, Peter M. Metzger and Deborah M. Franco of counsel), for Brooklyn Union Gas Company and another, appellants; Gould & Wilkie, New York City (Walter A. Bossert, Jr., and Peter V. K. Funk, Jr., of counsel), for Central Hudson Gas & Electric Corporation, appellant; Edwin W. Scott, New York City, Marc Richter and Henri M. Gueron for Consolidated Edison Company of New York, Inc., appellant; Ronald J. Tanski, Buffalo, for National Fuel Gas Distribution Corporation, appellant; Huber Lawrence & Abell, New York City (Frank J. Miller of counsel), for New York State Electric & Gas Corporation and others, appellants; Thomas J. O’Neill, Syracuse, and Matthew J. Picardi for Niagara Mohawk Power Corporation, appellant; Philip P. Steptoe, Pearl River, for Orange and Rock-land Utilities, Inc., appellant; and Jeffrey R. Clark, Rochester, for Rochester Gas and Electric Corporation, appellant.
    I. The regulated value assurance mechanism component of the royalty imposed by the Commission improperly allows ratepayers to profit from a nonutility asset on which the utility is not permitted to earn a return. (Board of Commrs. v New York Tel. Co., 271 US 23; Pacific Gas & Elec. Co. v Public Utils. Commn., 475 US 1; Matter of Kessel v Public Serv. Commn., 193 AD2d 339; Matter of GLC Inv. Co. v Public Serv. Commn., 136 AD2d 857; Matter of General Motors Corp. v Public Serv. Commn., 95 AD2d 876, 60 NY2d 557; Matter of New York Tel. Co. v Public Serv. Commn., 62 NY2d 57; Matter of Spring Val. Water Co. v Public Serv. Commn., 176 AD2d 95, 80 NY2d 825, 758; Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232.) II. The Court below wrongly permitted an unprecedented disallowance, in the absence of any finding of imprudence, based upon the mere fact of affiliation. (Matter of Crescent Estates Water Co. v Public Serv. Commn., 77 NY2d 611; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 69 NY2d 365; Matter of Long Is. Light. Co. v Public Serv. Commn., 134 AD2d 135; Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588; Securities Commn. v Chenery Corp., 332 US 194; Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753; Matter of Aronsky v Board of Educ., 75 NY2d 997; Matter of Montauk Improvement v Proccacino, 41 NY2d 913; Matter of Barry v O’Connell, 303 NY 46; Matter of New York Tel. Co. v Public Serv. Commn., 309 NY 569.) III. Both components of the royalty imposed by the Commission majority, as well as its quantification of the royalty, are unsupported by the findings of fact and by evidence in the record. (Matter of Bryant v Coughlin, 77 NY2d 642; Matter of Compo v Perales, 76 NY2d 948; Matter of Crescent Estates Water Co. v Public Serv. Commn., 77 NY2d 611; Matter of General Tel. Co. v Lundy, 17 NY2d 373; 300 Gramatan Ave. Assocs. v State Div. of Human Rights, 45 NY2d 176; Matter of Zivitz v J & S Meat Corp., 114 AD2d 709, 67 NY2d 868; Anrob Enters. v New York State Liq. Auth., 82 AD2d 770, 55 NY2d 679; West Ohio Gas Co. v Commission [No. 1], 294 US 63; Matter of Hecht v Monaghan, 307 NY 461; Matter of MCI Telecommunications Corp. v Public Serv. Commn., 108 AD2d 289, 66 NY2d 760.) IV. The royalty imposed by the Commission is an unconstitutional taking under the Federal and State Constitutions. (Chicago, Burlington R. R. v Chicago, 166 US 226; Seawall Assocs. v City of New York, 74 NY2d 92, cert denied sub nom. Wilkerson v Seawall Assocs., 493 US 976; Nollan v California Coastal Commn., 483 US 825; Rochester Gas & Elec. Corp. v Public Serv. Commn., 71 NY2d 313; Matter of Crescent Estates Water Co. v Public Serv. Commn., 77 NY2d 611; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 69 NY2d 365; Matter of New Rochelle Water Co. v Public Serv. Commn., 31 NY2d 397; New York Tel. Co. v Public Serv. Commn., 29 NY2d 164; Ruckelshaus v Monsanto Co., 467 US 986.) V. The royalty imposed by the Commission violates the Commerce Clause of the United States Constitution. (American Tel. & Tel. Co. v New York State Dept. of Taxation & Fin., 84 NY2d 31; Labor Bd. v Jones & Laughlin, 301 US 1; Edgar v MITE Corp., 457 US 624; Lewis v BT Inv. Mgrs., 447 US 27; Pike v Bruce Church, 397 US 137; New Energy Co. of Ind. v Limbach, 486 US 269; South-Central Timber Dev. v Wunnicke, 467 US 82; South Carolina State Highway Dept. v Barnwell Bros., 303 US 177; Healy v Beer Inst., 491 US 324; Brown-Forman Distillers Corp. v New York Liq., 476 US 573.)

      Lawrence G. Malone, Albany, Maureen O. Helmer and Carl F. Patka for Public Service Commission, respondent.
    I. The royalty imputation is a routine prudence adjustment. (Matter of General Tel. Co. v Lundy, 17 NY2d 373; Matter of Public Serv. Commn. v Norton, 304 NY 522; Matter of Colton v Berman, 21 NY2d 322; Matter of Spring Val. Water Co. v Public Serv. Commn., 176 AD2d 95, 80 NY2d 758; Town of Massena v Niagara Mohawk Power Corp., 45 NY2d 482; Matter of Edwards, 67 NY2d 153; Humphrey v State of New York, 60 NY2d 742; Morgan Servs. v Lavan Corp., 59 NY2d 796.) II. The Court below correctly concluded that the Public Service Commission had. an ample evidentiary basis for its royalty decision. (Matter of Consolidated Edison Co. v Public Serv. Commn., 74 AD2d 384; Matter of ADT Co. v Public Serv. Commn., 128 AD2d 1; Matter of Brooklyn Union Gas Co. v Public Serv. Commn., 101 AD2d 453; Scenic Hudson Preservation Conference v Federal Power Commn., 354 F2d 608; Battista v Board of Estimate, 51 Misc 2d 962; Matter of City of New York v Public Serv. Commn., 17 AD2d 581, 13 NY2d 594; Matter of Consolidated Edison Co. v Public Serv. Commn., 107 AD2d 73, 66 NY2d 369, 475 US 1114; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451.) III. The royalty is consistent with well-established rate-making principles. (Rochester Gas & Elec. Corp. v Public Serv. Commn., 51 NY2d 823, 450 US 961; Louisiana R. R. Commn. v Cumberland Tel. Co., 212 US 414; Matter of General Tel. Co. v Lundy, 17 NY2d 373; Matter of Spring Val. Water Co. v Public Serv. Commn., 176 AD2d 95, 80 NY2d 758; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 66 NY2d 83; Matter of Abrams v Public Serv. Commn., 67 NY2d 205; Matter of Consumer Protection Bd. v Public Serv. Commn., 97 AD2d 320; Matter of New York Water Serv. Corp. v Public Serv. Commn., 12 AD2d 122, 13 AD2d 610, 10 NY2d 705.) IV. Appellants’ taking claim is without merit. (Nollan v California Coastal Commn., 483 US 825; Power Commn. v Hope Gas Co., 320 US 591; Permian Basin Area Rate Cases, 390 US 747, reh denied sub nom. Bass v Federal Power Commn., 392 US 917; Jersey Cent. Power & Light Co. v Federal Energy Regulatory Commn., 810 F2d 1168; Matter of St. Lawrence Gas Co. v Public Serv. Commn., 54 AD2d 815, 42 NY2d 461; Armstrong v United States, 364 US 40; Rochester Gas & Elec. Corp. v Public Serv. Commn., 71 NY2d 313; Matter of Crescent Estates Water Co. v Public Serv. Commn., 77 NY2d 611; Matter of National Fuel Gas Distrib. Corp. v Public Serv. Commn., 107 AD2d 357, 66 NY2d 956.) V. The royalty imputation does not violate the Commerce Clause. (Pike v Bruce Church, 397 US 137; Arkansas Elec. Corp. v Arkansas Pub. Serv. Commn., 461 US 375.)

      Joel Blau, Albany, and Victoria Ramundo for New York State Consumer Protection Board, respondent.
    I. The Public Service Commission lawfully adopted a rebuttable presumption of a royalty pursuant to its authority to set just and reasonable utility rates. (Rochester Tel. Corp. v United States, 307 US 125; Matter of Pell v Board of Educ., 34 NY2d 222; 300 Gramatan Ave. Assocs. v State Div. of Human Rights, 45 NY2d 176; Matter of Fineway Supermarkets v State Liq. Auth., 48 NY2d 464; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451;
      Matter of Solomon v Public Serv. Commn., 286 App Div 636; Matter of Berenhaus v Ward, 70 NY2d 436; Matter of Abrams v Public Serv. Commn., 67 NY2d 205; Matter of Hurley Water Co. v New York State Pub. Serv. Commn., 87 AD2d 678, 58 NY2d 601; Matter of Abrams v Public Serv. Commn., 91 AD2d 795, 59 NY2d 760, 60 NY2d 557.) II. The constitutional arguments advanced by appellants lack merit. (Erie R. R. Co. v Williams, 233 US 685; Rochester Gas & Elec. Corp. v Public Serv. Commn., 71 NY2d 313; Munn v Illinois, 94 US 113; Keystone Bituminous Coal Assn. v DeBenedictis, 480 US 470; Andrus v Allard, 444 US 51; Manocherian v Lenox Hill Hosp., 84 NY2d 385; Rochester Gas & Elec. Corp. v Public Serv. Commn., 754 F2d 99.)

      Cullen & Dykman, Brooklyn (Steven L. Zelkowitz, Peter M. Metzger and Deborah M. Franco of counsel), for American Gas Association and others, amici curiae.

    I. The royalty adjustment improperly allows ratepayers to benefit from the transfer of an asset owned by the New York utilities that never has been included in the calculation of regulated utility rates. (Matter of Spring Val. Water Co. v Public Serv. Commn., 176 AD2d 95, 80 NY2d 825, 758; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 101 AD2d 369, 66 NY2d 83; Board of Commrs. v New York Tel. Co., 271 US 23; Matter of Kessel v Public Serv. Commn., 193 AD2d 339; Matter of GLC Inv. Co. v Public Serv. Commn., 136 AD2d 857; Matter of General Motors Corp. v Public Serv. Commn., 95 AD2d 876, 60 NY2d 557; Pacific Gas & Elec. Co. v Public Utils. Commn., 475 US 1; Matter of New York Edison Co. v Maltbie, 244 App Div 436.) II. The royalty adjustment effects an unconstitutional taking of utility shareholder-owned property for public use without just compensation in violation of the Federal and State Constitutions. (Nollan v California Coastal Commn., 483 US 824; Manocherian v Lenox Hill Hosp., 84 NY2d 385; Seawall Assocs. v City of New York, 74 NY2d 92, cert denied sub nom. Wilkerson v Seawall Assocs., 493 US 976; Ruckelshaus v Monsanto Co., 467 US 986; Levitt Corp. v Levitt, 593 F2d 463; Rochester Gas & Elec. Corp. v Public Serv. Commn., 71 NY2d 313.)
   OPINION OF THE COURT

Smith, J.

In July 1993, the Public Service Commission (PSC) reduced the permissible utility rate Rochester Telephone Corporation (RTC) could charge its ratepayers by imputing revenue to RTC in the form of a 2% royalty arising out of improper cost-shifting and uncompensated transfers of RTC’s intangible assets between RTC and its subsidiaries and affiliates. PSC also created a rebuttable presumption of a 2% royalty in the future for other regulated utilities. The issue presented to this Court is whether the Appellate Division erred in confirming the actions of the PSC. We affirm the Appellate Division because we conclude that the royalty and the rebuttable presumption are rational means for achieving just and reasonable utility rates.

In 1983, staff members of the Department of Public Service proposed imputing revenues to RTC in the form of a royalty to compensate ratepayers for the free transfer of intangible assets to RTC’s affiliate, Rotelcom, and improper cost shifting from Rotelcom to RTC. PSC called for hearings on the need for and the propriety of levying such a royalty. After the completion of hearings in June 1985, the Administrative Law Judge concluded that PSC had the legal authority to impose a royalty.

In 1990, PSC reopened the record to receive additional evidence on the propriety of imposing a royalty on RTC based on RTC’s dealings with its subsidiaries and affiliates, and the appropriate level of such a royalty. Although the proceedings focused primarily on RTC, other utilities, at PSC’s invitation, participated in the hearings and filed written submissions. In July 1993, after a series of hearings in 1990 and 1991, PSC issued opinion No. 93-11 which imposed a 2% royalty on RTC and created a rebuttable presumption of a 2% royalty for rate-making purposes whenever a utility invests in competitive enterprises. PSC also announced that no general challenges to the royalty presumption would be entertained in future individual rate proceedings, although utilities would be able to challenge the application of that presumption to their particular cases. Various requests for a rehearing, clarification and stay of opinion No. 93-11 were denied by the PSC in opinion No. 93-11 (A).

RTC filed a CPLR article 78 proceeding, in which various interested utilities intervened, questioning PSC’s authority to levy a royalty and challenging the royalty as an irrational means of achieving State interests. Appellants also raised various State and Federal constitutional issues, including claims that the royalty violated the Commerce Clause and constituted an unlawful taking. Appellants’ petition, originally filed in Supreme Court, was transferred to the Appellate Division at appellants’ request.

The Appellate Division confirmed the PSC determinations and held that the 2% royalty fell within PSC’s broad authority to determine just and reasonable rates, and that the royalty was a rational means of exercising that authority. Consequently, PSC’s authority to apply a 2% royalty to RTC and the rebuttable presumption to other utilities was confirmed. The Appellate Division also rejected appellants’ constitutional claims, holding that the PSC actions did not violate the Commerce Clause, equal protection, due process of law or constitute an unlawful taking. Appellants’ petition was dismissed.

On July 29, 1994, appellants filed a notice of appeal as of right on constitutional grounds, pursuant to CPLR 5601 (b) (1), and, alternatively, moved for leave to appeal to this Court. Three trade associations also sought to appear as amici curiae in support of the motion for leave to appeal. On December 8, 1994 we retained the appeal, denied the motion for leave as unnecessary, and granted the amici motion.

Shortly before we decided to retain this appeal, PSC issued an order, effective as of November 10, 1994, approving a Joint Stipulation and Agreement (Joint Stipulation) between the Department of Public Service staff and RTC. The Joint Stipulation implemented a corporate restructure for RTC, established a multiyear rate plan from January 1, 1995 through December 31, 2001 and enhanced the competitive market in the Rochester area. The parties also agreed that,

"All outstanding revenue requirement issues including * * * the royalty issue that is the subject of an Article 78 proceeding (Rochester Telephone Corp. v. Public Service Comm’n, A.D. No. 69820 (3d Dep’t), are resolved without further adjustment, except, with respect to the royalty issue, as provided below. Except as already reflected in this Agreement, neither RTC (which will be R-HC) nor R-Net shall have imputed a royalty, as described in [opinion No. 93-11] * * * Issued and Effective July 6, 1993, by the Commission for the period covered by this Agreement, or for any prior period, except as set forth in paragraphs I.E.4. Upon the termination of the rate plan period, nothing prevents the Commission, subject to the outcome of the Article 78 proceeding referred to above, from imputing a royalty for the period beginning on the termination date.”

By motion returnable March 13, 1995, PSC argued to this Court that this appeal should be dismissed as nonjusticiable because the Joint Stipulation fixed the rates which RTC could charge its customers through the year 2001, regardless of the outcome of the appeal. PSC also argued that the appeal was not justiciable as to the remaining appellants because no utility except for RTC had been ordered to pay a royalty. Appellants opposed the motion to dismiss on the ground that the Joint Stipulation, by its "subject to the outcome of the Article 78 proceeding” language, completely resolved all outstanding revenue issues except for the royalty. Appellants also argued this appeal presented a justiciable controversy over PSC’s general authority to impose a royalty. Appellants further argued that because opinion No. 93-11 precluded any further challenge to the royalty imputation policy, they would be foreclosed from seeking review of PSC’s general exercise of authority in any other forum. We denied the motion to dismiss the appeal without prejudice to renewal of the motion upon oral argument. At oral argument, PSC renewed its motion to dismiss this appeal.

PSC did not approve the Joint Stipulation until after the Appellate Division rendered its judgment. Consequently, the rationality and constitutionality of PSC’s opinions Nos. 93-11 and 93-11 (A) were properly before the Appellate Division. We must now decide whether this appeal is properly before this Court.

We cannot agree with appellants that the Joint Stipulation resolved all revenue issues except for the royalty. The clear language of the Joint Stipulation reserves PSC’s right to impose a royalty after the termination of the rate period on December 31, 2001. Consequently, the outcome of this article 78 proceeding becomes relevant only after the Joint Stipulation expires. Nothing indicates that the parties intended to adjust the utility rates set from January 1995 through December 2001 to conform with the outcome of this appeal.

Even if some aspects of a controversy have become nonjusticiable through a change in conditions,

"Review is still appropriate if substantial questions remain, on which an effective disposition can be made * * * If a case is academic, but for the award of costs below, the appeal will be dismissed nevertheless. But if, in any other substantial way, any rights of the parties can be affected by the decision, the determination is a reviewable one in so far as it is necessary to determine those rights” (Cohen and Karger, Powers of the New York Court of Appeals § 98, at 417 [rev ed] [n omitted]).

Although the Joint Stipulation resolved the propriety of PSC’s application of the 2% royalty to RTC’s case through December 31, 2001, we conclude that a justiciable controversy exists as to PSC’s general authority to order payment of a 2% royalty based upon a utility’s relationship with its subsidiaries and affiliates. An article 78 proceeding is the proper avenue to obtain review of a PSC ruling allegedly beyond its authority (Matter of Public Serv. Commn. v Rochester Tel. Corp., 55 NY2d 320, 325). Issues arising out of PSC’s adjustment of RTC’s rates by ordering the payment of a 2% royalty may not be justiciable until at least the year 2002. However, a live controversy remains as to the authority of the PSC to impute a 2% royalty on all regulated utilities. Given PSC’s refusal to entertain further general challenges in individual rate cases, appellants have no other forum in which to challenge the authority of the PSC to impute a 2% royalty and impose the rebuttable presumption. We now turn to the merits of this appeal.

The royalty at issue contains two components, a regulated value assurance mechanism (the RVAM) and a positive benefits element. The RVAM was designed to compensate the ratepayers for the imprudent, uncompensated use of RTC’s intangible assets, such as its name and reputation, while the positive benefits aspect, a misnomer, was designed to address the improper shifting of costs from the unregulated subsidiaries and affiliates to the regulated utility.

Appellants argue that the imposition and quantification of the royalty is unsupported by the record. Appellants contend that the RVAM improperly permits ratepayers to benefit from a non-rate-making asset because the utility does not earn a rate of return on the utility’s name and reputation. Appellants also argue that the record does not contain any finding of imprudence on the part of the utility and that diversification did not impose any costs on ratepayers. Appellants further argue the record contains no basis for the quantification of the 2% royalty.

The Legislature has granted the PSC broad regulatory authority over various public utilities in the highly technical field of setting just and reasonable rates (Public Service Law § 65 [vesting the PSC with authority over gas and electricity utilities]; § 79 [steam]; § 89-b [waterworks]; § 91 [telephone and telegraph]; see also, Matter of Abrams v Public Serv. Commn., 67 NY2d 205, 211-212; Niagara Mohawk Power Corp. v Public Serv. Commn., 69 NY2d 365, 369, rearg denied 69 NY2d 1038). The PSC’s determinations, within the ambit of its authority, are entitled to deference and may not be set aside unless they are without rational basis or without reasonable support in the record (Matter of Abrams v Public Serv. Commn., supra, at 212).

We have held that the PSC may not deny a utility a reasonable rate of return on its investment in the exercise of its rate-making power (Niagara Mohawk Power Corp. v Public Serv. Commn., supra, at 369). The PSC is also charged with the duty of ensuring that a telephone utility charges just and reasonable rates to its customers (Public Service Law § 91). In determining whether a utility has set reasonable rates, we have held that the PSC must evaluate the economic consequences of a utility’s actions so that ratepayers may be protected from the utility’s imprudent acts (see, Niagara Mohawk Power Corp. v Public Serv. Commn., supra, at 369; Matter of Abrams v Public Serv. Commn., supra [applying the prudent investment test]).

We conclude that the PSC had a rational basis for the RVAM element of the royalty. The record contains support for PSC’s conclusion that RTC’s name and reputation have value. RTC sought to exploit these intangible assets by closely associating itself with its affiliates in various advertising campaigns. It is undisputed that the unregulated subsidiaries and affiliates did not pay for the use of RTC’s logo and name.

Where a utility derives benefit from the use of a non-rate-based asset paid for by the ratepayers, we have held that the PSC may allocate part of the cost borne by the ratepayers to the shareholders. In Matter of Consolidated Edison Co. v Public Serv. Commn. (66 NY2d 369, appeal dismissed 475 US 1114), a utility sought to include nonbilling information with the billing statements sent to its ratepayers. Although the inserts would not impose any additional expense on the fixed costs (paid by the ratepayers) of preparing and mailing the billing statements, we agreed that the PSC may require the shareholders to bear 50% of the costs involved in mailing the billing information. "[Njothing in the Constitution requires that the shareholders get a free ride on the backs of the ratepayers” (66 NY2d, at 372).

Insofar as the ratepayers have borne the costs for creating value in RTC’s name and reputation, the ratepayers are entitled to a prudent use of those assets (see, Matter of General Tel. Co. v Lundy, 17 NY2d 373, 378). The RVAM properly compensates ratepayers for RTC’s imprudence in allowing the free use of its intangible assets rather than impermissibly granting ratepayers a direct interest in those assets (see, Board of Commrs. v New York Tel. Co., 271 US 23, 31-32; see also, Matter of Kessel v Public Serv. Commn., 193 AD2d 339, 346).

Appellants’ repeated protestations that PSC failed to make an imprudence finding in opinion No. 93-11 are unpersuasive. A fair reading of opinion No. 93-11 indicates that the PSC concluded that RTC acted imprudently by permitting its subsidiaries and affiliates to use valuable intangible assets, i.e., RTC’s name and logo, free of charge. For example, PSC states the following in opinion No. 93-11,

"Turning first to statutory authority, the Public Service Law requires that rates be just and reasonable but says little about what that concept means; we have broad authority to put flesh on the statute’s bones. Most often this is done by attempting to project actual costs and revenues as closely as possible and then setting rates on the basis of those projections, but non-cost items may also be considered, and, indeed, 'there is no requirement in law that any specific factors * * * be considered in fixing utility rates nor that any be excluded from consideration.’ Other available techniques include the use of reasonable, percentage-based rules of thumb for such items as productivity improvements and advertising expenses, and the imputation of revenues that a reasonable and prudent utility could have tried and likely would have been able to earn” (at 36-37).
"A utility in an arms-length transaction could be expected to receive revenues for allowing the use of its employees or goodwill” (at 38).
"A utility should make [a reasonable level of off-system electric] sales and receive such revenues [from directory publishing]; if it chooses not to, the revenue (and return) shortfall is its own fault. Similarly, a utility should receive reasonable remuneration when its affiliates benefit from it” (at 41).
"Because ratepayers have funded the salaries, training, advertising, and other activities that generate good will, they are entitled to rate recognition of revenues received by the utility in exchange for the use of that asset by an affiliate or otherwise” (at 37).
"[A]ssets should be devoted to serving ratepayers and not dissipated for shareholders’ benefit” (at 66).

The PSC also considered the prudence standard in making its determinations. It observed that various methods for determining just and reasonable rates could be used and that "Traditionally, regulation has proceeded by allowing for recovery of reasonable, prudent costs, plus a fair profit” (at 66).

The Appellate Division upheld PSC’s imprudence finding. Although it would have been preferable for the PSC to explicitly state that RTC acted imprudently, we find no reason to require the incantation of certain "magic” words when PSC’s opinion clearly contains, through the use of other words, a finding of imprudence. Because the record supports that finding, we refuse to disturb the Appellate Division’s affirmance of PSC’s imprudence determination.

PSC’s conclusion that RTC’s imprudence could be imputed to all utilities through the rebuttable presumption is also rational. The circumstances which led to RTC’s imprudence finding are not unique to that utility. In opinion No. 94-2, the PSC found that NYNEX and its affiliates relied heavily on the reputation of New York Telephone (a party to this appeal) in establishing itself and that New York Telephone "has certainly conveyed to the joint operation the good will and reputation that were developed with ratepayer funding.” Moreover, PSC noted that full page advertisements appeared in major newspapers associating NYNEX with New York Telephone and the former Bell system.

In an Order Authorizing Additional Investment by Niagara Mohawk Power Corporation (another party to this appeal), in its subsidiary, HYDRA-CO (case 93-M-0453), the PSC found that HYDRA-CO obtained financing at terms it might not otherwise have obtained because of its affiliation with Niagara Mohawk. Although Niagara Mohawk had not lent the use of its name to HYDRA-CO, PSC found that Niagara Mohawk had helped its subsidiary in a variety of ways. Recognizing the relevance of other factors, PSC ordered Niagara Mohawk to file an affidavit stating whether it would allow its subsidiary to use Niagara Mohawk’s name, financial position, logo, expertise and experience, and over-all reputation.

PSC arrived at the RVAM component after considering the submissions of numerous regulated utilities who, at PSC’s invitation, participated in the hearings before two different Administrative Law Judges. The record of the hearings indicates that ALLtel New York Inc., Central Hudson Gas & Electric Corporation, Continental Tel. of New York, the Empire State Petroleum Assoc. Inc., New York Gas Group, Brooklyn Union Gas Company, Rochester Gas and Electric Corporation, New York State Electric and Gas Corporation, National Fuel Distribution Corporation, and Long Island Lighting Company submitted some or all of the following: initial briefs, reply briefs, posthearing briefs, briefs on exceptions, briefs opposing exceptions, reply briefs on exceptions, memoranda, comments, supplemental comments, supplemental briefs, or their equivalents, during the initial and reopened hearings. Almost none of the regulated utilities disputed that utilities possessed intangible assets arising out of their name and reputation. Instead, most of the utilities argued that ratepayers did not possess an interest in those intangible assets or that the value of those assets could not be quantified. The Empire State Petroleum Inc. agreed with the PSC that the RVAM encompassed "generic factors which are relevant to the relationship between a utility and its unregulated subsidiary, regardless of whether that utility is engaged in the provision of telephone, gas, electric or water service.”

It is reasonable to conclude, as PSC did from this record, that a utility that permits its subsidiaries and affiliates to exploit valuable intangible assets for free, acts imprudently. Moreover, the imputation of the royalty does not result in an automatic obligation to pay the royalty. Utilities will have the opportunity to demonstrate that the RVAM component does not apply to their individual cases. The record indicates that the PSC had a rational basis for adopting the RVAM component of the rebuttable presumption.

The positive benefits component of the royalty is also supported by the record. The record contains evidence of actual costs imposed on ratepayers as a result of RTC’s diversification and evidence of RTC’s abundant incentive to shift costs from its unregulated subsidiaries and affiliates to its monopoly operations. A parent utility has an incentive to support its subsidiaries by not entering into transactions at arm’s length, and pass off any additional expense which may result to the parent’s ratepayers. For example, RTC bought AT&T switching equipment from Rotelcom, a RTC subsidiary, at a mark-up from AT&T prices, when RTC could have bought the equipment directly from AT&T without paying the mark-up.

Regulated utilities also subsidize their subsidiaries and affiliates when the expertise and experience of the utilities’ employees are placed at the disposal of the subsidiaries and affiliates for consultation and advice. Since ratepayers have paid for these human resources through training, salaries, bonuses and other incentive programs, the diversion of employee resources on subsidiary and affiliate matters imposes costs on the ratepayers. The record reflects that RTC did not adequately track and/or compensate its ratepayers for the costs of permitting its subsidiaries and affiliates access to RTC employees.

"When a utility guarantees the bank debt of a subsidiary or affiliate, higher costs will be imposed on the guaranteeing utility’s ratepayers if a bailout of that subsidiary or affiliate becomes necessary. For example, RTC guaranteed loans for RCI, a subsidiary. Consequently, RCI’s lenders have recourse against RTC in the event of a default by RCI. RTC also invested over $40 million in RCI, to prevent the subsidiary from defaulting, when RCI could not meet the financial criteria set forth in a loan agreement.

The foregoing is not meant to be an exhaustive listing, but sets forth some of the various cost factors associated with the positive benefits component of the royalty. Given the complexity of the relationships between various utilities and their subsidiaries and affiliates, as well as the volume of transactions that must be scrutinized, PSC’s conclusions that certain costs could not be adequately quantified and that current oversight systems could not capture all cases of improper cost shifting, were rational and supported by the record.

We also reject appellants’ claim that PSC’s exercise of discretion in setting the royalty level at 2% lacked a rational basis. Rate making is a highly technical field within the special expertise of the PSC (Matter of Abrams v Public Serv. Commn., supra, at 211-212; Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661, 672). In quantifying the royalty, PSC applied the expertise it had acquired in the context of previous settlements, where the amount of rate adjustments could not be precisely or objectively determined. The record also contained evidence that the PSC had previously imputed a percentage in quantifying objectively unascertainable items such as reasonably anticipated productivity improvements and allowances for certain types of advertising.

The 2% royalty was designed to compensate ratepayers for the uncompensated use of RTC’s intangible assets and the costs of diversification, without imposing a penalty on RTC. PSC’s exercise of judgment in this highly technical field was reasonable, especially given the ability of individual utilities to rebut the 2% figure. As recognized by the Appellate Division, the PSC envisioned situations in which individual utilities would be required to pay a different or no royalty percentage. This built-in flexibility renders the rebuttable presumption rational because any royalty ultimately imposed will be tailored to the individual circumstances of particular utilities.

Appellants raise two constitutional questions. Appellants argue that the royalty presumption constitutes an unconstitutional taking under the Federal and New York State Constitutions, and that the royalty presumption violates the Commerce Clause. We conclude that the takings issue before us is not justiciable because the impact of the rebuttable presumption cannot be evaluated separate and apart from the actual application of the royalty to a particular utility. As already noted, due to the Joint Stipulation, any takings issue arising from the specific application of the royalty to RTC is moot. We do not foreclose the possibility that a utility directly affected by the application of the rebuttable presumption may raise a takings challenge at some future appropriate date.

Appellants also argue that the royalty violates the Commerce Clause because the royalty imposes a heavy and discriminatory burden on interstate commerce, unjustified by any legitimate local interest. The Supreme Court has articulated the general rule for determining the validity of State statutes affecting interstate commerce:

"Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” (Pike v Bruce Church, 397 US 137, 142.)

We may properly decide the Commerce Clause claim because the relevant standard permits evaluation of the widespread, general effects of a State regulation. We need not limit our evaluation of the royalty to the effects generated by specific applications of the rebuttable presumption, but may look to the royalty’s general effects on interstate commerce. Here, the royalty is to be applied evenhandedly, since opinion No. 93-11 contains no exemptions for investment in New York State subsidiaries or affiliates. Moreover, since the royalty is imposed on the utilities, not on out-of-State subsidiaries and affiliates, the financial impact on interstate commerce appears negligible. Since the State has a legitimate interest in setting just and reasonable utility rates, and the royalty is rationally related to that end, PSC’s actions do not impose an impermissible burden on interstate commerce.

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

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

Judgment affirmed, with costs.

      . Other signatories to the Joint Stipulation were Time Warner Communications, the Communications Workers of America, AFL-CIO, the New York State Telephone Association, the New York State Department of Economic Development and the Public Utility Law Project of New York.

      . As noted by the PSC in opinion No. 93-11, RTC ratepayers have funded the salaries, training, advertising and other activities that generate good will. Ratepayers have also paid for capital investments which have contributed positively to RTC’s name and reputation. Moreover, a utility is able to establish widespread name recognition because the monopoly nature of the utility industry provides a widespread, captive ratepayer base in which to instill the name recognition. These ratepayers cannot obtain the same services from a competitor because no competitor exists.

      . The opinion arose out of five consolidated proceedings at the PSC: case 92-C-0665, Proceeding on Motion of the Commission to Investigate Performance-Based Incentive Regulatory Plans for New York Telephone Company; case 92-C-0001, Petition of New York Telephone Company for Permission to Defer Its Share of the Costs Resulting from Two Recent Settlements of Tax Issues Involved in an Internal Revenue Service Audit of American Telephone and Telegraph Company Covering the Years 1981 to 1983, Filed in case 8579; and cases 92-C-0150, 92-C-0228 and 92-C-0342, all Petitions for Approval, Pursuant to Public Service Law, Section 113 (2), of a Proposed Allocation of Certain Tax Refunds between New York Telephone Company and Ratepayers

      . In a Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulation of National Fuel Gas Distribution Corporation for Gas Service (case 93-G-0756), the PSC declined to impose a royalty for intangible assets despite the urging of the Consumer Protection Board and the staff of the Department of Public Service to do so. PSC observed that National Fuel had submitted evidence, which had not been challenged, that all of the benefits associated with the National Fuel name, logo, and reputation were as much associated with National Fuel operations outside New York as with the local distribution company.


author: Bellacosa, J.

text:
    [660 NE2d 1121, 637 NYS2d 342]
    Vigilant Insurance Company of America et al., Respondents, v Housing Authority of the City of El Paso, Texas, et al., Appellants.
    Argued September 20,1995;
    decided November 1, 1995

      POINTS OF COUNSEL

      Bondy & Schloss, New York City (Joel S. Forman and Jacqueline I. Meyer of counsel), for appellants. I.
    The Statute of Limitations began to run in 1983 when the facts giving rise to plaintiffs’ causes of action were made known to Drexel and when Drexel suffered its loss. (Solnick v Whalen, 49 NY2d 224; Otten v Marasco, 235 F Supp 794, 353 F2d 563; Neinken v Brill, 251 App Div 730; Valdes v Atlantic Steamer Fire Co., 120 AD2d 661, 68 NY2d 609; Aetna Life & Cas. Co. v Nelson, 67 NY2d 169; Morawski v Board of Educ., 85 AD2d 850; Rieser v Baltimore & Ohio R. R. Co., 123 F Supp 44, 228 F2d 563; Phoenix Acquisition Corp. v Campcore, Inc., 81 NY2d 138; Insurance Co. v United States, 561 F Supp 106; Cruden v Bank of N. Y., 957 F2d 961.) II. Policy considerations espoused by this Court weigh heavily in favor of defendants. (Jensen v General Elec. Co., 82 NY2d 77; Snyder v Town Insulation, 81 NY2d 429; Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399; Martin v Edwards Labs., 60 NY2d 417; Flanagan v Mount Eden Gen. Hosp., 24 NY2d 427; Kronos, Inc. v AVX Corp., 81 NY2d 90; Schwartz v Heyden Newport Chem. Corp., 12 NY2d 212; Schmidt v Merchants Desp. Transp. Co., 270 NY 287, 271 NY 531; Simcuski v Saeli, 44 NY2d 442.)

      D’Amato & Lynch, New York City (Ronald H. Alenstein, Donna Marie Hughes and Jeffrey Underweiser of counsel), for respondents.
    The bonding companies’ main cause of action is for a declaratory judgment that they have the rights of bona fide purchasers with respect to the bearer bonds, and thus have the right to obtain payments of interest when due and principal at maturity. The only sensible limitation period and accrual rules to apply in the circumstances are those applicable to actions upon "time instruments”. The Court below correctly did just that. (Valdes v Atlantic Steamer Fire Co., 120 AD2d 661, 68 NY2d 609; Solnick v Whalen, 49 NY2d 224; Gutekunst v Continental Ins. Co., 486 F2d 194; Manufacturers

      & Traders Trust Co. v Sapowitch, 296 NY 226; Gruntal v United States Fid. & Guar. Co., 254 NY 468; Morawski v Board of Educ., 85 AD2d 850; Aetna Life & Cas. Co. v Nelson, 67 NY2d 169; Matter of Board of Educ. [Wager Constr. Corp.], 37 NY2d 283; Long Is. R. R. Co. v Northville Indus. Corp., 41 NY2d 455; Medaris v Lionel Corp., 25 AD2d 735.)
   OPINION OF THE COURT

Bellacosa, J.

Plaintiffs, collectively referred to as "Vigilant,” are subrogees of Drexel Burnham Lambert. They plead three discretely denominated causes of action that have some overlapping features. A predominant objective is the declaration of their superior right and title with respect to certain bearer bonds and interest coupons issued by defendant Housing Authority of the City of El Paso. The stolen bonds have had a checkered history culminating in two key legal issues on this appeal. First, we must determine the respective Statutes of Limitations applicable to plaintiffs’ various causes of action and, second, the governing accrual events. The merits of the causes of action and the appropriate relief are not before us on this appeal.

Supreme Court dismissed the complaint, but the Appellate Division reinstated all the causes. The Appellate Division then certified the following question to this Court: "Was the order of this Court, which reversed the order of Supreme Court, properly made?” We modify the order of the Appellate Division and, thus, answer the certified question, in the main, in the negative.

Plaintiffs had jointly issued a brokers bond and policy to the Drexel firm, a former member of the New York Stock Exchange. The policy covered Drexel for any loss caused by alleged stolen securities. On or about July 21, 1983, Drexel’s Switzerland office purchased 41 El Paso Housing Authority bearer bonds for $112,681 from Chessed Anstalt, a Liechtenstein corporation. The bonds, originally issued in 1967, bore a maturity date of July 1, 1997. Plaintiffs allege that Drexel purchased the bonds in good faith, for value, without notice of adverse claims and thus qualified as a bona fide purchaser for value (see, Uniform Commercial Code § 8-302). On July 27, 1983, Drexel sold the bearer bonds to Irving Trust Co. for $118,218. Plaintiffs assert that Irving also took possession of the bonds in good faith, for value and without notice of any adverse claims. Irving shortly discovered that a holder previpus to Drexel had reported the bonds stolen. Under these circumstances, New York Stock Exchange rule 272 and Securities Exchange Commission rule 17f-l (17 CFR 240.17f-l) required Drexel to reclaim and replace the bonds for its purchaser, Irving. Drexel complied by going to the open market and purchasing replacement bonds. Irving then assigned to Drexel all of its right, title and interest in the stolen bonds and coupons.

Drexel sought indemnification from plaintiffs for its losses. Plaintiffs paid the claim and Drexel, in turn, assigned to plaintiffs all of its right, title and interest in the bonds. Plaintiffs claim, therefore, also to be bona fide purchasers as assignees through the bona fide purchasers’ chain of transfers.

Plaintiffs also note that the Federal Bureau of Investigation seized the bonds and their interest coupons from Drexel as evidence in 1983 as part of its investigation of the bond theft. The FBI first returned the bonds and coupons to plaintiffs in 1989. At that first opportunity, plaintiffs detached the interest coupons then due and payable and presented them to the El Paso Housing Authority via its transfer agent, Morgan Guaranty Trust Company. Morgan refused payment, confiscated the coupons and declined to remove "stops” placed against the bonds themselves, as requested by plaintiffs.

Plaintiffs sued in 1990, seeking relief under three separate causes of action: a declaration of their rights and title to the bonds and coupons; tortious conversion of the bonds and interest coupons by Morgan; and breach of the bond obligations.

At Supreme Court, defendants successfully resisted the suit on Statute of Limitations grounds. The court held that plaintiffs’ rights were wholly derivative from Drexel and that all the claims thus accrued in 1983, when Drexel first learned of the theft.

The Appellate Division reversed on the law and reinstated plaintiffs’ complaint, with two Justices dissenting (201 AD2d 58). It applied UCC 3-109, concluding that accrual of the declaratory judgment claim would occur on the first day after maturity of the bonds in 1997 (see, UCC 3-122). As to other claims, the Court held that "[a]ny of these interest [coupon] claims which accrued six years prior to the commencement of this action are presumably precluded by the period of limitations” (201 AD2d, at 61). By implication, the others were held viable and not stale. Defendants-appellants seek reinstatement of Supreme Court’s dismissal of the entire complaint.

In Solnick v Whalen (49 NY2d 224), the Court stated that the CPLR prescribes no general period of limitation for a declaratory judgment action. Courts must look to the underlying claim and the "nature of the relief sought” to determine the applicable period of limitation (id., at 229; see also, Sears, Roebuck & Co. v Enco Assocs., 43 NY2d 389, 395). Stated another way, a court’s inquiry focuses on the "substance of [the] action to identify the relationship out of which the claim arises and the relief sought” (Solnick v Whalen, supra, at 229; New York City Health & Hosps. Corp. v McBarnette, 84 NY2d 194, 201; Save the Pine Bush v City of Albany, 70 NY2d 193, 202; Press v County of Monroe, 50 NY2d 695, 701). When the rights of parties sought to be stabilized in a declaratory judgment action are, or have been, open to resolution through a particular procedural route for which a specific limitation period is statutorily provided, then that period generally governs the time for commencement of the declaratory judgment action (Solnick v Whalen, 49 NY2d 224, 229, supra). Otherwise, the six-year catch-all Statute of Limitations set forth in CPLR 213 (1) applies (see, New York City Health & Hosps. Corp. v Mc-Barnette, supra, at 201; Solnick v Whalen, supra, at 230; Sears, Roebuck & Co. v Enco Assocs., supra, at 396; Press v County of Monroe, supra, at 701).

The gravamen of plaintiffs’ declaratory judgment action is that they are bona fide purchasers entitled to payment on the bonds upon maturity and on the interest coupons when due. The declaratory prayer for relief includes that "plaintiffs right and title to the El Paso bonds and coupons is superior to all other parties [and] that defendants withdraw all stops and other impediments preventing plaintiffs from freely negotiating the aforesaid bearer bonds.”

We note initially that CPLR 211 (a) grants a 20-year limitation period to recover on a bond. It provides:

"An action to recover principal or interest upon a written instrument evidencing an indebtedness of the state of New York or of any person, association or public or private corporation * * * secured only by a pledge of the faith and credit of the issuer, regardless of whether a sinking fund is or may be established for its redemption, must be commenced within twenty years after the cause of action accrues.”

Although defendant City of El Paso Housing Authority qualifies as a public corporation under CPLR 211 (a), plaintiffs cannot avail themselves of that lengthy stretch of repose. The bonds at issue on their face declare that they are backed by the "full faith and credit of the United States.” Since the bonds are not secured "only” by a pledge of full faith and credit of the "issuer,” the long relaxation allowed under CPLR 211 (a) is unavailing.

Next, CPLR 213 (4) relates specifically to actions on bonds. Subdivision (4) provides that "an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property” must be commenced within six years. Because the bonds at issue are not secured by a mortgage upon real property, that prerequisite discounts its applicability. Without any other specific limitation periods being statutorily applicable to plaintiffs’ declaratory relief claims, the cow-catcher six-year period obtains (see, CPLR 213 [1]; Solnick v Whalen, 49 NY2d 224, 230, supra).

The dispositive fulcrum, thus, becomes the accrual date. The question is whether 1983, 1989 or 1997 controls. Defendants-appellants urge 1983, when Drexel first became aware that the bonds were stolen (Cruden v Bank of N. Y., 957 F2d 961 [2d Cir 1992]; Insurance Co. v United States, 561 F Supp 106 [ED Pa 1983]; Rieser v Baltimore & Ohio R. R. Co., 123 F Supp 44, affd 228 F2d 563 [2d Cir 1955]). That was Supreme Court’s view and ruling, though the Appellate Division differed.

Plaintiffs seek to uphold the 1997 accrual date on the ground that the bearer bonds are time instruments governed by UCC 3-109 (see also, UCC 3-122). UCC 3-109 (1) provides that "[a]n instrument is payable at a definite time if by its terms it is payable (a) on or before a stated date or at a fixed period after a stated date.” Subdivision (1) of UCC 3-122 provides that "[a] cause of action against a maker or an acceptor accrues (a) in the case of a time instrument on the day after maturity” (emphasis added). UCC 1-201 (1) defines an "[ajction” to include "recoupment, counterclaim, set-off, suit in equity and any other proceedings in which rights are determined.” The Appellate Division reversed and granted plaintiffs reinstatement of the declaratory judgment cause on that ground (201 AD2d 58, 60; see, Valdes v Atlantic Steamer Fire Co., 120 AD2d 661, 662, lv denied 68 NY2d 609).

A major difficulty with this rationale, however, is that the general provisions of article 3 expressly exclude "investment securities” from its governance. Notably, Uniform Commercial Code § 3-103 states: "[t]his article does not apply to money, documents of title or investment securities” (emphasis added). Additionally, the Official Comment to article 3 provides: "It should be noted especially that this Article does not apply in any way to the handling of securities. Article 8 deals with that subject” (Uniform Commercial Code § 3-101, Official Comment, McKinney’s Cons Laws of NY, Book 621/2, at 4).

Turning then to article 8 of the Uniform Commercial Code, we see that it governs stocks, bonds and other evidences of indebtedness. A security is defined in article 8 as an instrument which (1) is issued in bearer or registered form; (2) is a security commonly dealt in a security exchange or market and; (3) is either one of a class of series or divisible into a class or series (see, UCC 8-102). Because bearer bonds satisfy all three elements of UCC 8-102, they are "securities” as defined in that section (see, Silverman v Alcoa Plaza Assocs., 37 AD2d 166, 170-171; Matthysse v Securities Processing Servs., 444 F Supp 1009; Phoenix Ins. Co. v National Bank & Trust Co., 366 F Supp 340; Andrews v Troy Bank & Trust Co., 529 So 2d 987, 990 [Ala]; Morris v Kaiser, 292 Ala 650, 299 So 2d 252; 7 Hawk-land, Alderman & Schneider, Uniform Commercial Code Series art 8, § 8-102:4, at 30). Because a security is specifically governed by article 8 and expressly excluded from article 3, the accrual provision of UCC 3-122 (1) is not applicable to this case (Uniform Commercial Code § 8-102, Official Comment, McKinney’s Cons Laws of NY, Book 621/2, at 129; see generally, Comment, The Status of an Investment Security Holder Under Article 8, 33 Fordham L Rev 466 [1965]). Thus, we must look elsewhere for the rationale that justifies our agreement with the result reached by the Appellate Division.

As the Court has stated in other contexts, a cause of action does not accrue until an injury is sustained (see, LaBello v Albany Med. Ctr. Hosp., 85 NY2d 701, 705; Snyder v Town Insulation, 81 NY2d 429, 432; Kronos, Inc. v AVX Corp., 81 NY2d 90; Jacobus v Colgate, 217 NY 235, 241). An action accrues, then, when all of the facts necessary to sustain the cause of action have occurred, so that a party could obtain relief in court (see, Aetna Life & Cas. Co. v Nelson, 67 NY2d 169, 175). We conclude that the general six-year CPLR limitations period, as applied in this case, will only begin to run on the day after maturity of the bonds, July 2, 1997.

The accrual of an action "depends on a nice balancing of policy considerations” (Victorson v Bock Laundry Mach. Co., 37 NY2d 395, 403). A defendant’s interest in defending a claim must be balanced with a plaintiff’s interest in not being deprived of a claim before a reasonable chance to assert it arises (Martin v Edwards Labs., 60 NY2d 417, 425). Declaratory judgment actions do not fit neatly into the balancing equation, since they are often commenced "before there has been conduct which might give rise to a right to remedial or coercive relief’ (Solnick v Whalen, 49 NY2d 224, 230, supra).

In Phoenix Acquisition Corp. v Campcore, Inc. (81 NY2d 138), we added illumination that helps to support the correct rationale and result in the portion of the dispute we are here discussing. There, the creditor loaned money secured by a promissory note providing that the creditor had the option to accelerate the entire debt due at any time if the debtor failed to make payment of any sum of principal or interest. When Campcore defaulted, the creditor waited until maturity to demand full payment of the principal and interest. In rejecting Campcore’s argument that the Statute of Limitations blocked the suit, we held that the creditor’s right to accelerate the debt did not affect the Statute of Limitations, which ran only upon the maturity of the discrete obligation (id., at 140).

That rationale parallels the present controversy with respect to plaintiffs’ pursuit of declaratory relief. Since the right to sue on the bond’s principal debt does not accrue until the debt is "due and payable” (id., at 141), we perceive no reasonable basis to bar on Statute of Limitations grounds plaintiffs’ opportunity to seek a declaration of those seriously disputed rights on the debt instrument prior to maturity of the bond, especially in the unusual evolution of this controversy.

Plaintiffs’ other causes of action are classified as tortious conversion and breach of contract. We agree with Supreme Court on this aspect of the case that these two causes are barred by pertinent Statutes of Limitations.

Plaintiffs’ second cause of action alleges that "[djefendants’ confiscation of the coupons presented by plaintiffs and their refusal to redeem” the coupons and bonds effectively constituted a tortious conversion of the bonds and the coupons. Conversion is the "unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner’s rights” (Employers’ Fire Ins. Co. v Cotten, 245 NY 102, 105; Industrial & Gen. Trust v Tod, 170 NY 233, 245). For Statute of Limitations purposes, an action for conversion as well as an action for damages for the taking of a chattel are subject to a three-year limitation period (see, CPLR 214 [3]). Since accrual runs from the date the conversion takes place (see, Sporn v MCA Records, 58 NY2d 482, 488) and not from discovery or the exercise of diligence to discover (see, Varga v Credit-Suisse, 5 AD2d 289, affd 5 NY2d 865), we deem the conversion, as alleged, to have occurred in July 1983. That is the date when defendant Morgan placed "stops” on the bonds and allegedly first refused to honor the title and right of Drexel to negotiate the bonds or to redeem the interest coupons. Since the whole action was not commenced until 1990, the three-year limitation bars this conversion claim and any tort-related relief or damages, as such. The action denominated as a breach of contract similarly accrued in 1983 under like reasoning and is, accordingly, barred by the applicable six-year statute (CPLR 213 [2]).

Last, as to plaintiffs’ claim regarding past due coupon interest, we have held that when a contract provides for the payment of money in installments, such as interest installments, the Statute of Limitations runs on each installment from the date it becomes due (Phoenix Acquisition Corp. v Campcore, Inc., 81 NY2d 138, 141, supra; Matter of Philippe, 31 Misc 2d 193, affd 19 AD2d 587, affd 14 NY2d 600; see also, 18 Williston, Contracts § 2026C, at 787 [3d ed 1961]). Thus, the Appellate Division correctly curtailed how far back plaintiffs’ request for relief could reach in that regard.

Accordingly, the order of the Appellate Division should be modified in accordance with this opinion, with costs to plaintiffs-respondents, and, as so modified, affirmed and the case is remitted to Supreme Court for further proceedings. The certified question should be answered in the negative.

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

Order modified in accordance with the opinion herein, with costs to plaintiffs-respondents, and, as so modified, affirmed. Certified question answered in the negative.


text:
    [660 NE2d 1126, 637 NYS2d 347]
    Earl W. Brian, Appellant, v Elliot L. Richardson, Respondent.
    Argued October 17, 1995;
    decided November 29, 1995

      POINTS OF COUNSEL

      Camhy Karlinsky & Stein, New York City (Sheldon D. Camhy and Claudia E. Silbert of counsel), for appellant.
    I. The courts below erroneously held that the article was protected opinion. (Gross v New York Times Co., 92 NY2d 146; Polish Am. Immigration Relief Comms. v Relax, 189 AD2d 370.) II. The affirmance of the Court below permits an attorney to advance his personal interests with constitutional immunity. (600 W. 115th St. Corp. v Von Gutfeld, 80 NY2d 130.)

      Milbank, Tweed, Hadley & McCloy, New York City (Toni C. Lichstein and Andrew J. Fields of counsel), for respondent.
    I. Respondent’s editorial is protected opinion. (Gross v New York Times Co., 82 NY2d 146; 600 W. 115th St. Corp. v Von Gutfeld, 80 NY2d 130; Immuno AG. v Moor-Jankowski, 77 NY2d 235; James v Gannett Co., 40 NY2d 415; Steinhilber v Alphonse, 68 NY2d 283; Ollman v Evans, 750 F2d 970, 471 US 1127; Orr v Lynch, 60 AD2d 949, 45 NY2d 903; Schermerhorn v Rosenberger, 73 AD2d 276; Holy Spirit Assn. for Unification of World Christianity v New York Times Co., 49 NY2d 63; Carlucci v Poughkeepsie Newspapers, 57 NY2d 883). II. Public policy favors dismissal of appellant’s complaint. (Immuno AG. v Moor-Jankowski, 77 NY2d 235; 600 W. 115th St. Corp. v Von Gutfeld, 80 NY2d 130.)
   OPINION OF THE COURT

Titone, J.

This defamation action concerns an article that was published on the Op Ed page of the New York Times on October 21, 1991. Although plaintiff alleged that the statement falsely accused him of participating in an illegal conspiracy, his complaint was dismissed on the theory that the publication was a nonactionable statement of the author’s opinion. The correctness of this determination depends on the proper application of the principles established in Immuno AG. v Moor-Jankowski (77 NY2d 235, cert denied 500 US 954), in which this Court held that both the immediate context and the broader social context in which a published statement was made should be considered in determining whether the statement is one conveying opinion or fact.

The disputed article, entitled "A High-Tech Watergate,” was written by defendant Elliot Richardson, a former United States Attorney General. In the article, defendant described his role as attorney for a software company, Inslaw, Inc., which had sold a computer-based case-tracking system to the United States Department of Justice. According to the article, the Department of Justice soon created a series of "sham” controversies regarding the software’s cost and performance and eventually withheld payment, leading to Inslaw’s bankruptcy. Meanwhile, defendant charged, the Department made illegal copies of the software.

The focus of the remainder of the article was a series of charges that had come to defendant’s attention regarding the use of this pirated software to further a subversive criminal conspiracy. According to the article, defendant had been told by former Justice Department employees that plaintiff Dr. Earl W. Brian, who had been "California health secretary under Gov. Ronald Reagan and a friend of Attorney General Edwin Meese 3d,” was "linked to a scheme to take Inslaw’s stolen software and use it to gain the inside track on a $250 million contract to automate Justice Department litigation divisions.” Plaintiff was identified as the controlling shareholder of a corporation in which Attorney General Meese’s wife also had an interest. Further, the article noted, this corporation controlled another computer company that had earlier launched an "aggressive” effort to acquire Inslaw.

The article also referred to claims made by a Michael Riconosciuto, "an out-of-fiction character believed by many knowledgeable sources to have C.I.A. connections,” to the effect that Inslaw’s software had been "stole[n]” "as part of a payoff to [plaintiff] for helping to get some Iranian leaders to collude in the so-called October surprise, the alleged plot by the Reagan campaign in 1980 to conspire with Iranian agents to hold up release of the American Embassy hostages until after election.” According to the article, "other informants from the world of covert operations” not only "confirm[ed] and supplement[ed]” Riconosciuto’s statements but also alleged that "scores of foreign governments now have [Inslaw’s] software” and that plaintiff had been given the opportunity to sell this software as a reward. These sources identified the conspiracy’s goals as follows: "to generate revenue for covert operations not authorized by Congress” and "to supply foreign intelligence agencies with a software system that would make it easier for U.S. eavesdroppers to read intercepted signals.”

Defendant acknowledged that his informants "are not what a lawyer might consider ideal witnesses.” However, defendant went on to argue that in his view their story was credible. According to defendant’s theory, "the picture that emerges from the individual statements is remarkably detailed and consistent, all the more so because these people are not close associates of one another.” Further, "[i]t seems unlikely that so complex a story could have been made up, memorized all at once and closely coordinated.” Defendant noted that a skeptical free-lance journalist, one Danny Casolaro, had obtained "many leads” from the same informants and had been found dead in a hotel room after telling friends he was investigating evidence "linking Inslaw, the Iran-contra affair and the October surprise.” Defendant opined that Casolaro had been murdered, although the authorities had concluded that his death was a suicide.

The remainder of the article discussed defendant’s efforts to persuade Edwin Meese’s successor, Attorney General Thorn-burgh, to investigate, as well as the Justice Department’s purported resistance to a congressional investigation. The article ended with a review of defendant’s own decision as former President Richard Nixon’s Attorney General to utilize an independent prosecutor to investigate the Watergate affair. In the article’s final paragraph, defendant argued that the question of the need for a special prosecutor to investigate the In-slaw affair was one that should be considered not only by the Justice Department, but also by Congress, other entities within the executive branch and, lastly, the public itself.

Following the article’s publication, plaintiff commenced the present action for damages, alleging that it contained false and defamatory assertions about him and that defendant had published these assertions with reckless disregard for their accuracy. Specifically, plaintiff’s complaint alleged that he had been defamed by the article’s assertions that (1) he was part of a scheme to steal Inslaw’s software to gain an unfair business advantage, (2) he was the beneficiary of politically motivated favoritism, (3) he had participated in a morally reprehensible scheme to delay the safe return of American hostages, (4) he had sold stolen software to foreign governments to advance illegal covert activities and (5) he had somehow been involved in the murder of an investigative journalist.

On February 26, 1993, the trial court dismissed the complaint, reasoning that "A High-Tech Watergate” would be understood by a reasonable reader "as a policy argument on a matter of public concern” and that its allegations were therefore not actionable under this Court’s opinion in Immuno AG. v Moor-Jankowski (77 NY2d 235, supra). The dismissal was affirmed by the Appellate Division, which cited Gross v New York Times Co. (82 NY2d 146) as well as Immuno and concluded that the article made clear to "the average reader or listener” that its accusations were " 'merely a personal surmise’ ” built upon allegations and claims made by others (211 AD2d, at 414, quoting Gross v New York Times Co., supra, at 155). Both courts below stressed that the article in question was published on the Op Ed page of the newspaper, a space that is traditionally reserved for the expression of opinion and encouragement of public debate. Plaintiff then took a further appeal by permission of this Court.

The law governing defamation actions involving communications purporting to convey opinion has been explored in a quartet of recent Court of Appeals decisions (Gross v New York Times Co., supra; 600 W. 115th St. Corp. v Von Gutfeld, 80 NY2d 130, cert denied 508 US 910; Immuno AG. v Moor-Jankowski, supra; Steinhilber v Alphonse, 68 NY2d 283). The essence of the tort of libel is the publication of a statement about an individual that is both false and defamatory. Since falsity is a sine qua non of a libel claim and since only assertions of fact are capable of being proven false, we have consistently held that a libel action cannot be maintained unless it is premised on published assertions of fact (Gross v New York Times Co., supra, at 152-153; Immuno AG. v Moor-Jankowski, supra; see also, Milkovich v Lorain Journal Co., 497 US 1, 17-21).

Distinguishing between assertions of fact and nonactionable expressions of opinion has often proved a difficult task. The factors to be considered are: "(1) whether the specific language in issue has a precise meaning which is readily understood; (2) whether the statements are capable of being proven true or false; and (3) whether either the full context of the communication in which the statement appears or the broader social context and surrounding circumstances are such as to ' "signal * * * readers or listeners that what is being read or heard is likely to be opinion, not fact” ’ ” (Gross v New York Times Co., supra, at 153, quoting Steinhilber v Alphonse, supra, at 292; accord, Immuno AG. v Moor-Jankowski, supra). It is the last of these factors that lends both depth and difficulty to the analysis.

The significance of the context factor was explicated in Immuno AG. v Moor-Jankowski (supra). In that case, we rejected an analysis that would first search a publication for specific factual assertions and then hold those assertions actionable unless they were couched in figurative or hyperbolic language (id., at 254). Instead, we held that, in distinguishing between actionable factual assertions and nonactionable opinion, the courts must consider the content of the communication as a whole, as well as its tone and apparent purpose. Rather than sifting through a communication for the purpose of isolating and identifying assertions of fact, the court should look to the over-all context in which the assertions were made and determine on that basis "whether the reasonable reader would have believed that the challenged statements were conveying facts about the libel plaintiff” (id., at 254, citing Steinhilber v Alphonse, supra, at 293).

In addition to considering the immediate context in which the disputed words appear, the courts are required to take into consideration the larger context in which the statements were published, including the nature of the particular forum. In Im muno, for instance, the challenged communication was a letter to the editor of a professional journal — a medium that is typically regarded by the public as a vehicle for the expression of individual opinion rather than " 'the rigorous and comprehensive presentation of factual matter’ ” (77 NY2d, at 253, quoting 145 AD2d 114, 129). Similarly, in 600 W. 115th St. Corp. v Von Gutfeld (supra, at 143-144), the alleged defamatory remarks were made at a public hearing, where the listeners presumably expect to hear vigorous expressions of personal opinion. In the same vein, the disputed statements in Steinhilber v Alphonse (supra, at 294) were made by the defendant union official as part of a recorded telephone message that was calculated to punish a "scab” in the aftermath of an acrimonious labor conflict. In that context, where the " 'audience may anticipate [the use] of epithets, fiery rhetoric or hyperbole,’ ” we opined that statements which might otherwise be viewed as assertions of fact may take on an entirely different character (id., quoting Information Control Corp. v Genesis One Computer Corp., 611 F2d 781, 784).

By way of contrast, in Gross v New York Times Co. (supra, at 155-156), where the defendants’ statements were held to be actionable assertions of fact, we stressed that the accusations had been made "in the course of a lengthy, copiously documented newspaper series that was written * * * after what purported to be a thorough investigation.” Further, we noted that the articles appeared in the news section of the newspaper where, unlike the editorial section, the reader expects to find factual accounts (id., at 156). Finally, the identity, role and reputation of the author may be factors to the extent that they provide the reader with clues as to the article’s import.

We emphasize that an article’s appearance in the sections of a newspaper that are usually dedicated to opinion does not automatically insulate the author from liability for defamation. Despite our firm commitment to encouraging the robust exchange of ideas through these and similar media, we have never suggested that an editorial page or a newspaper column confers a license to make false factual accusations and thereby unjustly destroy individuals’ reputations (see, e.g., Immuno AG. v Moor-Jankowski, supra, at 254). To the contrary, we have repeatedly emphasized that the forum in which a statement has been made, as well as the other surrounding circumstances comprising the "broader social setting,” are only useful gouges for determining whether a reasonable reader or listener would understand the complained-of assertions as opinion or statements of fact.

In this case, the statements in dispute were made in an article that was published on the Op Ed page of a newspaper. Like the "letters to the editor” section in which the Immuno publication appeared, the Op Ed page is a forum traditionally reserved for the airing of ideas on matters of public concern. Indeed, the common expectation is that the columns and articles published on a newspaper’s Op Ed sections will represent the viewpoints of their authors and, as such, contain considerable hyperbole, speculation, diversified forms of expression and opinion. Thus, the "broader context” in which "A High-Tech Watergate” was published provided some signals to the reader that its contents were expressions of opinion.

The immediate context in which the challenged statements were made also supports the conclusion that the specific accusations of which plaintiff complains could not have been understood by a reasonable reader as assertions of fact that were proffered for their accuracy. At the outset of the article, defendant disclosed that he had been Inslaw’s attorney, thereby signalling that he was not a disinterested observer (cf., Immuno AG. v Moor-Jankowski, supra, at 254). Further, the predominant tone of the article, which was rife with rumor, speculation and seemingly tenuous inferences, furnished clues to the reasonable reader that "A High-Tech Watergate” was something less than serious, objective reportage.

Finally, the purpose of defendant’s article was to advocate an independent governmental investigation into the purported misuse of the software that Inslaw had sold to the Justice Department. To support this argument, defendant marshalled the relevant rumors and accusations that were floating around the Justice Department and strung them together with the few supporting "facts” that he had been able to glean from the public record and from private sources and personal knowledge. Indeed, without a recitation of the existing unresolved charges, defendant’s call for a full-scale investigation would have made no sense. Given this contextual background, we conclude on this record that a reasonable reader would understand the statements defendant made about plaintiff as mere allegations to be investigated rather than as facts.

Significantly, most of the accusations about plaintiff that defendant recounted were identified in the article as mere "claims” that had been made by identified and unidentified sources. Further, although defendant unquestionably offered his own view that these sources were credible, he also set out the basis for that personal opinion, leaving it to the readers to evaluate it for themselves. Thus, there was no suggestion in the article that there were additional undisclosed facts on which its credibility assessment had been based (see, Gross v New York Times Co., supra, at 153, citing Hotchner v Castillo-Puche, 551 F2d 910, 913, cert denied sub nom. Hotchner v Doubleday & Co., 434 US 834).

To be sure, the fact that a particular accusation originated with a different source does not automatically furnish a license for others to repeat or publish it without regard to its accuracy or defamatory character. Here, however, the repeated charges were included in the article not necessarily to convince the reader of plaintiff’s dishonesty but rather to demonstrate the need for an investigation that would establish the truth or falsity of the charges.

In sum, both the immediate context of the article itself and the broader context in which the article was published made it sufficiently apparent to the reasonable reader that its contents represented the opinion of the author and that its specific charges about plaintiff were allegations and not demonstrable fact. Under these circumstances, plaintiff failed to state a cognizable libel claim and his complaint was properly dismissed.

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

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

Order affirmed, with costs.