author: Graffeo, J.

text:
    [986 NE2d 430, 963 NYS2d 613]
    Rubin Schron et al., Plaintiffs, v Troutman Sanders LLP et al., Defendants. Mich II Holdings LLC et al., Plaintiffs, and SVCare Holdings, LLC, Appellant, v Rubin Schron et al., Defendants, and Cammeby’s Equity Holdings LLC, Respondent.
    Argued January 10, 2013;
    decided February 14, 2013

      POINTS OF COUNSEL

      Zuckerman Spaeder LLP, New York City (Paul Shechtman and Christina P. Skinner of counsel), for appellant.
    Parol evidence is admissible to give content to the words “other good and valuable consideration.” (Ronnen v Ajax Elec. Motor Corp.,
      88 NY2d 582; Greenfield v Philles Records, 98 NY2d 562; Boghosian v SCS Props., 299 AD2d 693; McCreary Co. v People, 267 NY 37; Diamond v Scudder, 45 AD3d 630; Baker v Higgins, 21 NY 397; O’Neil Supply Co. v Petroleum Heat & Power Co., 280 NY 50; Rudman v Cowles Communications, 30 NY2d 1; W.W.W. Assoc. v Giancontieri, 77 NY2d 157; Reed v Insurance Co., 95 US 23.)

      Dechert LLP, New York City (Andrew J. Levander and Steven A. Engel of counsel), for respondent.
    I. The subsequent trial moots this appeal. (City of New York v Maul, 14 NY3d 499; Matter of Hearst Corp. v Clyne, 50 NY2d 707; People v Payne, 88 NY2d 172; Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208; Matter of Anonymous v New York City Health & Hosps. Corp., 70 NY2d 972; People v Hecker, 15 NY3d 625.) II. Leonard Grunstein, Murray Forman, and SVCare Holdings, LLC may not appeal the nonfinal order. (Burke v Crosson, 85 NY2d 10.) III. The First Department correctly held that the option agreement, as a fully integrated and unambiguous contract, may not be modified through extrinsic evidence. (Matter of Primex Intl. Corp. v Wal-Mart Stores, 89 NY2d 594; Jarecki v Shung Moo Louie, 95 NY2d 665; Braten v Bankers Trust Co., 60 NY2d 155; Ronnen v Ajax Elec. Motor Corp., 88 NY2d 582; Torres v D’Alesso, 80 AD3d 46; Levey v Saphier, 83 Misc 2d 146; Boghosian v SCS Props., 299 AD2d 693; Holt v Feigenbaum, 52 NY2d 291; Loika v Howard, 103 AD2d 874; Weiner v McGraw-Hill, Inc., 57 NY2d 458.) IV Any ambiguities in the SVCare option must be construed against the conflict-ridden attorneys who drafted it. (Eastside Exhibition Corp. v 210 E. 86th St. Corp., 18 NY3d 617; 151 W Assoc. v Printsiples Fabric Corp., 61 NY2d 732; Shaw v Manufacturers Hanover Trust Co., 68 NY2d 172; Schlanger v Flaton, 218 AD2d 597; Shapiro v Glens Falls Ins. Co., 39 NY2d 204; Hemsley v Pannick, 131 AD2d 940.)
   OPINION OF THE COURT

Graffeo, J.

In this case, we conclude that the option contract at issue is valid and enforceable and that the optionor may not introduce parol evidence to import a separate obligation as consideration for the agreement. We therefore affirm the order of the Appellate Division.

Leonard Grunstein and Murray Forman manage and indirectly own plaintiff SVCare Holdings LLC (SVCare), which operates nursing homes through a subsidiary. Rubin Schron, a real estate investor, controls a number of entities, including defendant Cammeby’s Equity Holdings LLC (Cam Equity). For years, Grunstein was Schron’s attorney and Forman was his investment banker.

In 2004, Grunstein and Forman sought Schron’s participation in the acquisition of Mariner Health Care, Inc., a publicly held company engaged in the nursing home business. Schron agreed to finance the $1.3 billion purchase of Mariner; Grunstein and Forman did not contribute any funds to the buyout. The deal was structured to provide that Schron, through a corporate entity (SMV Property Holdings LLC), would own the underlying real estate and a separate company would manage the facilities. SVCare and its operating subsidiary, SavaSeniorCare LLC (Sava), were formed to carry out the operating and administrative functions. In other words, Schron’s company was to hold title to the properties and Grunstein’s and Forman’s companies (SVCare and Sava) were to manage the nursing homes.

The transaction closed in December 2004 and involved two written agreements relevant to this appeal, both of which were amended in June 2006. First, Cam Equity (the Schron entity) received an option to acquire 99.999% of the membership units of SVCare. The consideration given by Cam Equity to SVCare for the option was described in the contract as “the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties).” Under the terms of the agreement, Cam Equity had until June 2011 to exercise the option at the strike price of $100 million. In the event that Cam Equity exercised the option but later sold the company, the contract specified that Cam Equity could retain no more than $400 million of the sale proceeds, with any remaining moneys to be assigned to SVCare. The option agreement also contained a merger clause, which stated:

“This Agreement contain[s] the entire agreement and understanding of the Parties . . . and supersedes and completely replaces all prior and other representations, warranties, promises, assurances and other agreements and understandings (whether written, oral, express, implied or otherwise) among the Parties with respect to the matters contained in this Agreement.”

The second pertinent contract related to the Mariner transaction was a loan agreement under which another of Schron’s entities—Cammeby’s Funding III LLC (Cam III)—agreed to lend $100 million to SVCare for the purpose of capitalizing its subsidiary, Sava. The loan agreement and the option contract were executed on the same date in December 2004 and amended on the same day in June 2006 as part of a refinancing of the Mariner transaction. At some point after the refinancing, the relationship between the parties deteriorated.

In anticipation that Cam Equity would exercise the option, Grunstein, Forman and their related companies (including SV-Care) commenced this action in March 2010 under the caption Mich II Holdings LLC v Schron. The only claim relevant to this appeal is the fifteenth cause of action in the complaint, wherein SVCare alleges that the option is unenforceable because the consideration underlying its agreement to offer the option was contingent on Cam III loaning it $100 million, which SV-Care claims was never paid.

Despite the pending litigation, Cam Equity gave written notice to SVCare of its intent to exercise the option in June 2010. When SVCare refused to honor the option, Schron and his affiliated entities (including Cam Equity) brought a separate lawsuit—Schron v Troutman Sanders LLP—seeking specific performance of the option agreement.

Cam Equity later moved in limine in the Schron suit for the exclusion of any parol evidence by SVCare intended to show that the $100 million loan was the “other good and valuable consideration” referenced in the option agreement. In the Mich II action, Cam Equity also filed a motion to dismiss SVCare’s fifteenth cause of action that asserted similar claims.

Supreme Court consolidated and granted both motions in favor of Cam Equity, concluding that the option and loan were entirely separate agreements; that the option was supported by consideration, namely, the mutual covenants cited; and that SV-Care could not offer extrinsic evidence regarding the $100 million loan obligation that was not mentioned in the option agreement (32 Misc 3d 231 [2011]). The Appellate Division affirmed (97 AD3d 87 [1st Dept 2012]), and we granted SVCare leave to appeal from so much of the Appellate Division order that affirmed the dismissal of the fifteenth cause of action in the Mich II litigation (19 NY3d 811 [2012]).

In the meantime, following a 10-day bench trial in the Schron action, Supreme Court issued a decision in September 2012 determining that Cam III had, in fact, fully funded the $100 million loan to SVCare pursuant to the loan agreement (36 Misc 3d 1238[A], 2012 NY Slip Op 51730[U] [2012]). SV-Care has taken an appeal to the Appellate Division.

On this appeal, SVCare no longer presses its argument raised below that the option and loan agreement—involving separate subject matters, different parties and without any cross-references—are inextricably intertwined and must be read together. Instead, SVCare maintains that the courts below erred in precluding it from introducing extrinsic evidence regarding the meaning of the phrase “other good and valuable consideration” in the option contract. SVCare asserts that the language is ambiguous and that it should be permitted to adduce parol evidence showing (1) the parties intended the “other consideration” to mean the $100 million loan obligation between Cam HI and SVCare and (2) the loan was never funded. Cam Equity responds that the “mutual covenants” set forth in the option agreement suffice for consideration and objects to SVCare’s attempt to change the terms of the option by imposing an additional $100 million condition on the parties’ agreement. We conclude that Cam Equity’s position better comports with our well-established contract jurisprudence.

Option contracts, like any other agreement, are subject to basic contract interpretation principles. Under New York law, written agreements are construed in accordance with the parties’ intent and “[t]he best evidence of what parties to a written agreement intend is what they say in their writing” (Greenfield v Philles Records, 98 NY2d 562, 569 [2002] [internal quotation marks and citation omitted]). As such, “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” {id.).

Parol evidence—evidence outside the four corners of the document—is admissible only if a court finds an ambiguity in the contract. As a general rule, extrinsic evidence is inadmissible to alter or add a provision to a written agreement. This rule gives “stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses . . . infirmity of memory . . . [and] the fear that the jury will improperly evaluate the extrinsic evidence” (W.W.W. Assoc. v Giancontieri, 11 NY2d 157, 162 [1990] [internal quotation marks and citation omitted]). Furthermore, where a contract contains a merger clause, a court is obliged “to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing” (Matter of Primex Intl. Corp. v Wal-Mart Stores, 89 NY2d 594, 599 [1997]).

Applying these precepts, we agree with the courts below that the option agreement unambiguously provided that the mutually beneficial covenants constituted the consideration and that the importation of another obligation, such as the separate loan obligation, would impermissibly alter the writing in violation of the parol evidence rule. Contrary to SVCare’s contention, the commonplace recital of “other good and valuable consideration” does not render the option contract ambiguous or incomplete. We therefore cannot accept SVCare’s view that it should be permitted to introduce extrinsic evidence&emdash;presumably in the form of oral testimony&emdash;to show that the parties intended to include the $100 million loan obligation addressed in a distinct agreement between Cam III and SVCare as consideration for the option.

Moreover, had these sophisticated business entities, represented by counsel, intended to make the $100 million loan payment a condition to the enforceability of the option, they easily could have included a provision to that effect (see Braten v Bankers Trust Co., 60 NY2d 155, 163 [1983] ["Such a fundamental condition would hardly have been omitted"]; see also Fundamental Long Term Care Holdings, LLC v Cammeby's Funding LLC, 20 NY3d 438, 445 [2013] [decided today] ["(T)his is not the sort of term these sophisticated, counseled parties would have reasonably left out of the option agreement"]). Notably, the option does not even mention the existence of the loan agreement, let alone condition its validity on the effectuation of the loan. To allow parol evidence at this late stage to inject an entirely different obligation into the parties' option contract would not only modify the requirements spelled out in that agreement, it would also negate the merger clause, which states that the option is a fully integrated document superseding all other understandings, whether written or oral.

In sum, we conclude that the option is a valid, stand-alone contract and that Cam Equity is free to exercise the option by paying the agreed-upon amount of $100 million.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs.

Chief Judge Lippman and Judges Read, Smith and Pigott concur; Judge Rivera taking no part.

Order, insofar as appealed from, affirmed, with costs.

      . Although there are many parties to this litigation, only two are before us on this appeal—plaintiff SVCare and defendant Cam Equity.

      . Mariner’s assets included 170 skilled nursing facilities that it owned and operated.

      . The parties agree that the 2006 documents are the relevant agreements.

      . This lawsuit is one of several involving Schron, Grunstein, Forman and their related companies (see also Fundamental Long Term Care Holdings, LLC v Cammeby’s Funding LLC, 20 NY3d 438 [2013] [decided today]).

      . [1] As a threshold matter, Cam Equity asks us to dismiss this appeal in the Mich II action on the basis that Supreme Court’s determination after the trial in Schron moots the appeal. Cam Equity submits that, even if we were to decide that SVCare could introduce parol evidence in support of its contention that the $100 million loan was the true consideration for the option, the rights of the parties would not be affected because the loan monies were paid to SVCare. In Cam Equity’s view, because Supreme Court has determined that the loan was funded, it follows that the option is necessarily valid and enforceable regardless of whether the loan was the consideration for it. But a case is moot when “the rights of the parties cannot be affected by the determination of th[e] appeal” (Matter of Hearst Corp. v Clyne, 50 NY2d 707, 714 [1980]). Although the trial court in Schron found that Cam III loaned $100 million to SVCare, that ruling is pending on appeal at the Appellate Division. If that court reverses and concludes that Cam III did not fund the loan, or remits for a new trial, the rights of the parties could possibly be affected by the outcome of this appeal. Consequently, this appeal is not moot.

      . In fact, General Obligations Law § 5-1109 provides that
      “when an offer to enter into a contract is made in a writing signed by the offeror, or by his agent, which states that the offer is irrevocable during a period set forth or until a time fixed, the offer shall not be revocable during such period or until such time because of the absence of consideration for the assurance of irrevocability.”
      This provision has been applied to option contracts (see Levey v Saphier, 83 Misc 2d 146, 150 [Sup Ct, Nassau County 1975] [10-year stock option agreement would be enforceable under the statute even if unsupported by consideration]; see also Capalongo v Desch, 81 AD2d 689, 690 [3d Dept 1981], affd for reasons stated below 57 NY2d 972 [1982] [“The proper interpretation of this statute is that lack of consideration does not affect revocability, provided the writing contains reference either to a specific period of time, or simply states that it is irrevocable”]).

      . Grunstein and his former law firm drafted the option.


source: Caselaw Access Project

author: Read, J.

license: Public Domain

text:
    [985 NE2d 893, 962 NYS2d 583]
    Fundamental Long Term Care Holdings, LLC, et al., Appellants, v Cammeby’s Funding LLC et al., Respondents.
    Argued January 10, 2013;
    decided February 14, 2013

      POINTS OF COUNSEL

      Arent Fox LLP, New York City (Allen G. Reiter and Asari Aniagolu of counsel), and DLA Piper LLP (US) Anthony P. Coles and Shand S. Stephens of counsel) for appellants.
    I. The Appellate Division’s order disregards the law governing limited liability companies. (Hart v General Motors Corp., 129 AD2d 179; Kaplan v Lippman, 75 NY2d 320; Torres v D’Alesso, 80 AD3d 46, 15 NY3d 951; Tropical Leasing v Fiermonte Chevrolet, 80 AD2d 467; Procopis v G. P. P. Rests., 43 AD2d 974; TVT Records v Island Def Jam Music Group, 412 F3d 82; Nau v Vulcan Rail & Constr. Co., 286 NY 188; Shutter v Hillside Med. Inv. Corp., 192 AD2d 699; Nassau v Associates 66, 149 AD2d 489; Duration Mun. Fund, L.P. v J.P. Morgan Sec. Inc., 25 Misc 3d 1203[A], 2009 NY Slip Op 51962[U].) II. Both the operating agreement and the option must be enforced to avoid an “unreasonable” and “absurd” result. (Fleischman v Furgueson, 223 NY 235; Metropolitan Life Ins. Co. v Noble Lowndes Intl., 84 NY2d 430; ERC 16W Ltd. Partnership v Xanadu Mezz Holdings LLC, 95 AD3d 498; Superb Gen. Contr. Co. v City of New York, 39 AD3d 204; Tibbetts Contr. Corp. v O & E Contr. Co., 15 NY2d 324; Schoellkopfv Coatsworth, 166 NY 77; Gillet v Bank of Am., 160 NY 549; Matter of Lipper Holdings v Trident Holdings, 1 AD3d 170; Greenwich Capital Fin. Prods., Inc. v Negrin, 74 AD3d 413.) III. Torres v D’Alesso (80 AD3d 46 [1st Dept 2010]) should not be expanded to exclude consideration of the terms of an operating agreement. (Hicks v Bush, 10 NY2d 488; Procopis v G. P. P. Rests., 43 AD2d 974; Tropical Leasing v Fiermonte Chevrolet, 80 AD2d 467; Mack-Lowe v Picault-Cadet, 33 AD3d 504.)

      Dechert LLP, New York City (Steven A. Engel and Andrew J. Levander of counsel), for respondents.
    I. This Court lacks jurisdiction over the non-final order. (Matter of Jazmin A., 15 NY3d 439; Burke v Crosson, 85 NY2d 10; Doyle v Allstate Ins. Co., 1 NY2d 439.) II. If the Court reaches the merits, the decision below should be affirmed. (W.W.W. Assoc. v Giancontieri, 77 NY2d 157; Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470; Matter of Wallace v 600 Partners Co., 86 NY2d 543; Braten v Bankers Trust Co., 60 NY2d 155; Jarecki v Shung Moo Louie, 95 NY2d 665; Fineman Family LLC v Third Ave. N. LLC, 90 AD3d 549; British Am. Dev. Corp. v Schodack Exit Ten, LLC, 83 AD3d 1247; Nathanson v Nathanson, 20 AD3d 403; Kaplan v Lippman, 75 NY2d 320; Silverstein v United Cerebral Palsy Assn. of Westchester County, 17 AD2d 160.)
   OPINION OF THE COURT

Read, J.

This lawsuit is one of several between business entities controlled by plaintiffs Leonard Grunstein and Murray Forman and defendant Rubin Schron (see also Schron v Troutman Sanders LLP, 20 NY3d 430 [2013] [decided today]). Cammeby’s Funding LLC (Cam Funding) is a limited liability company managed by Schron, a real estate investor; Fundamental Long Term Care Holdings, LLC (Fundamental) is a limited liability company whose sole members are Grunstein—formerly Schron’s attorney—and Forman—formerly Schron’s investment banker.

In 2003, SWC Property Holdings LLC (SWC), another company controlled by Schron, acquired the facilities and real estate occupied by a string of 26 nursing homes and, through subsidiaries, leased these properties to an independent operating company. In 2006, Grunstein and Forman purchased all of the issued and outstanding capital stock of these nursing homes, having formed Fundamental in December 2005 for the purpose of owning companies that manage health care facilities. Grunstein and Forman each contributed $50 in equity for a half interest in Fundamental; they paid $10 million for the stock, financed by debt. Additionally, Schron executed a covenant not to sue on any claims that SWC, the landlord, might have against the nursing homes.

On July 1, 2006, Fundamental and Cam Funding entered into an option agreement entitling Cam Funding (or its designee) to acquire one third of Fundamental’s membership units for a strike price of $1,000, provided the option was exercised on or before June 9, 2011. This agreement was signed by Forman, as manager of Fundamental, and was accepted and agreed to by Schron, as manager of Cam Funding, and Grunstein and For-man, the sole members of Fundamental.

The agreement’s preamble states that the option was given “[i]n consideration of the mutual covenants and agreements hereinafter set forth, and for $10 and other good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties [i.e., Fundamental, Grunstein, For-man and Cam Funding]).” Section 3 provides that “on the requested closing date . . . [Fundamental] shall execute and deliver to [Cam Funding] . . . (i) certificates for the Acquired Units, and (ii) all resolutions, documents and instruments necessary or required to properly issue to [Cam Funding] all of the Acquired Units” (emphasis added). Section 4 specifies that, upon exercise of the option, Cam Funding “shall be admitted as a member of [Fundamental]” (emphasis added).

Sections 5 and 6 obligate Fundamental, Grunstein and For-man to facilitate, and prohibit their interference with, Cam Funding’s exercise of the option. Specifically, in section 5, Fundamental agreed not to

“cause, suffer or permit any of its subsidiaries to, enter into any agreement or commitment with any unitholder, subscriber, officer, director or employee or other person that would conflict with or interfere with any of the rights of [Cam Funding] under this Agreement, including (without limitation) the exercise of the Option, and any such conflicting agreement or commitment shall be deemed void and of no force or effect.”

Similarly, in section 6, Grunstein and Forman, as the sole members of Fundamental, promised not to take any action inconsistent with the option and, upon Cam Funding’s exercise of it, to

“(a) consent to the issuance of the Acquired Units to [Cam Funding], (b) consent to the admission of [Cam Funding] as a member of [Fundamental], and (c) cause [Fundamental] to carry out its obligations herein and to execute and deliver such amendments and schedules to the Operating Agreement of [Fundamental] to reflect the issuance of the Acquired Units to [Cam Funding]” (emphases added).

Finally, section 15 sets out a standard merger clause, stating that there was no “agreement or understanding (whether written, oral, express, implied or otherwise) . . . respecting any of the matters contained in this Agreement except for those expressly set forth in this Agreement.” As a result, the option agreement encompassed

“the entire agreement and understanding of the Parties [i.e., Fundamental, Grunstein, Forman and Cam Funding], and supersedes and completely replaces all prior and other representations, warranties, promises, assurances and other agreements and understandings (whether written, oral, express, implied or otherwise) among the Parties with respect to the matters contained in this Agreement.”

On December 20, 2010, Cam Funding notified Fundamental in writing that it was exercising the option, designating Quality Health Services LLC to acquire the ownership interest, specifying January 20, 2011 at its lawyers’ offices as the date and place of closing, and enclosing a certified check for $1,000. On January 18, 2011, Fundamental responded that, pursuant to its operating agreement, “no membership units in Fundamental can be issued to [Cam Funding] until . . . [Cam Funding] provides the required capital contribution of ‘at least the fair market value’ of its proposed interest, which is 33.33%.”

Fundamental relied on paragraph 3.3 of its operating agreement, dated December 22, 2005 and amended and restated September 3, 2009, which states that

“ [additional Interests shall not be issued except upon the consent of the Board of Managers [i.e., Grunstein and Forman] and the unanimous consent of the Members [i.e., Grunstein and Forman]. Upon the issuance of any additional Interests, the Person to whom such Interests are issued shall make a capital contribution to the Company in respect of such issuance in an amount equal to at least the fair market value per Interest so issued.”

At the time Cam Funding exercised the option, the market value of a one-third interest in Fundamental was estimated to be more than $33 million.

By complaint dated February 7, 2011, Fundamental sought a declaration that Cam Funding was bound by the membership requirements in the operating agreement to “make the requisite capital contribution upon the issuance of any additional interests in Fundamental.” On or about March 1, 2011, Cam Funding filed an answer, affirmative defenses and counterclaim for breach of contract, along with a motion for summary judgment; Fundamental thereafter cross-moved for summary judgment.

By decision and order entered on August 29, 2011, Supreme Court disposed of the motion and cross motion, ruling that the option agreement unambiguously granted Cam Funding the right to acquire a one-third interest in Fundamental upon payment of the strike price of $1,000. The judge determined that enforcing paragraph 3.3 of the operating agreement, as Fundamental advocated, would violate section 5 of the option agreement by “allowing] a subsequent agreement—the Operating Agreement—to interfere with Cam Funding’s rights under the terms of the Option Agreement.” Supreme Court interpreted section 6 of the option agreement as evidence that “the parties contemplated a future operating agreement and intended that the Operating Agreement yield to the Option Agreement.” Indeed, he opined, to the extent that paragraph 3.3 “prohibit[ed] issuance of the requisite number of units to Cam Funding upon exercise of the option at the option strike price, it [was] incumbent on [Fundamental] under the terms of Section 6 of the Option Agreement to amend the Operating Agreement and its schedules to enable Fundamental to issue such units to Cam Funding.”

Consistent with Supreme Court’s decision, Cam Funding proposed an order directing the clerk to enter judgment declaring that Fundamental was required to “close on the Option promptly following the completion of all required regulatory filings and approvals, if any.” The judge signed this order, which was entered on October 6, 2011. Fundamental then appealed; on December 13, 2011, the Appellate Division issued a stay of Supreme Court’s orders pending hearing and determination of the appeal (2011 NY Slip Op 92223[U] [2011]).

In a decision issued February 7, 2012, the Appellate Division affirmed (92 AD3d 449 [1st Dept 2012]). The Court concluded that “[r]egardless of which document was executed first,” the option agreement unambiguously entitled Cam Funding to acquire one third of Fundamental’s membership units for $1,000 “without the need for any capital contribution” (id. at 450). The Court further noted that the option agreement’s integration clause “bar[red] parol evidence of the parties’ intent and of any other agreements or understandings” (id.). On May 22, 2012, the same panel denied Fundamental’s motion for leave to appeal, and granted Cam Funding’s cross motion to vacate the stay (2012 NY Slip Op 73848[U] [2012]). Fundamental then asked us for permission to appeal, and on June 5, 2012, a Judge of this Court granted an interim stay pending the motion’s resolution. On September 11, 2012, we granted Fundamental’s motions for leave to appeal and a stay (19 NY3d 1012 [2012]). We now affirm.

As an initial matter, Fundamental and Cam Funding agree that the parol evidence rule has no bearing on this case. Fundamental does not argue that the operating agreement should be looked at to explain ambiguous terms in the option agreement (see Hicks v Bush, 10 NY2d 488, 491 [1962] [“Parol testimony is admissible to prove a condition precedent to the legal effectiveness of a written agreement, if the condition does not contradict the express terms of such written agreement” (citations omitted)]). Instead, Fundamental takes the position that the two agreements must be read together as creating a “two-step process”—i.e, under the option agreement, Cam Funding pays $1,000 for the right to acquire a one-third interest in Fundamental, a privately held company, and the operating agreement governs the terms for issuance of membership units reflecting this interest if the option is exercised; namely, a capital contribution equivalent to the one-third interest’s fair market value.

In support of its position, Fundamental cites several cases in which courts have considered multiple agreements together, even though they were executed on different dates and/or by different parties. In these cases, however, the agreements are inextricably intertwined, unlike the option agreement and the operating agreement in this case (see e.g. Nau v Vulcan Rail & Constr. Co., 286 NY 188, 197 [1941] [three agreements “executed at substantially the same time, related to the same subject-matter, . . . must be read together as one . . . since they were to effectuate the same purpose and formed a part of the same transaction”]; TVT Records v Island Def Jam Music Group, 412 F3d 82, 89 [2d Cir 2005] [two agreements were both “intended to effectuate . . . the production and release of [an] album,” and one of them explicitly required honoring all terms and conditions of the other]). Further, the breach of either the option agreement or the operating agreement would not undo the obligations imposed by the other (see TVT Records, 412 F3d at 90). And if it were, in fact, the case that the parties meant for fair market value to be due upon Cam Funding’s exercise of the option, this is not the sort of term these sophisticated, counseled parties would have reasonably left out of the option agreement. The mere reference in the option agreement to the operating agreement is not enough to evidence clear intent for these two separate contracts to be read as one.

Finally, Fundamental argues that the payment of $1,000 for a membership interest valued at $33 million is commercially unreasonable. First, an inquiry into commercial reasonableness is only warranted where a contract is ambiguous. Here, the option agreement is unambiguous, and therefore its reasonableness is beside the mark. In any event, parties enter into option agreements for all sorts of reasons, and, as noted earlier, this agreement was executed by sophisticated, counseled parties.

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

Chief Judge Lippman and Judges Graffeo, Smith and Pigott concur; Judge Rivera taking no part.

Order affirmed, with costs.


author: Graffeo, J. Pigott, J. (dissenting in part). Smith, J. (concurring).

text:
    [985 NE2d 903, 962 NYS2d 592]
    The People of the State of New York, Respondent, v Robert Pealer, Appellant.
    Argued January 3, 2013;
    decided February 19, 2013

      POINTS OF COUNSEL

      D.J. & J.A. Cirando, Esqs., Syracuse (John A. Cirando, Bradley E. Keem and Elizabeth deV. Moeller of counsel), for appellant.
    I. The District Attorney of Seneca County was not authorized to prepare, file and serve the People’s brief in the Appellate Division. (People v Di Falco, 44 NY2d 482; Matter of Haggerty v Himelein, 89 NY2d 431.) II. The police stop of appellant’s vehicle was improper. (Whren v United States, 517 US 806; People v Robinson, 97 NY2d 341; People v Wright, 42 AD3d 942; People v Rose, 67 AD3d 1447; People v Ingle, 36 NY2d 413; People v Wright, 98 NY2d 657.) III. Appellant was prejudiced by Deputy Lerch’s testimony that appellant requested to speak to an attorney prior to submitting to a breath test. (People v Von Werne, 41 NY2d 584; People v Goldston, 6 AD3d 736; People v Hunt, 18 AD3d 891; People v Al-Kanani, 26 NY2d 473; People v Bianculli, 9 NY2d 468; People v Travato, 309 NY 382; People v Fisher, 18 NY3d 964.) IV Appellant was denied his constitutional right to confront the witnesses against him when the trial court admitted certified documents into evidence under the business record exception to the hearsay rule. (People v Mertz, 68 NY2d 136; People v Huertas, 75 NY2d 487; People v Nieves, 67 NY2d 125; People v Settles, 46 NY2d 154; People v Gaimari, 176 NY 84; Crawford v Washington, 541 US 36; Melendez-Diaz v Massachusetts, 557 US 305; People v Brown, 13 NY3d 332; People v Freycinet, 11 NY3d 38; People v Rawlins, 10 NY3d 136.) V Appellant was denied due process of law due to prosecutorial misconduct. (People v Bailey, 58 NY2d 272; People v Zimmer, 51 NY2d 390; People v Higgins, 88 AD2d 921, 57 NY2d 678; People v Toomer, 87 AD2d 875; People v Millard, 247 App Div 253; People v Alicea, 37 NY2d 601; People v De Tore, 34 NY2d 199; People v Whalen, 59 NY2d 273; People v Rivera, 116 AD2d 371; People v Mott, 94 AD2d 415.) VI. The trial court erred in allowing improper and prejudicial rebuttal testimony. (Marshall v Davies, 78 NY 414; People v Harris, 84 AD2d 63, 57 NY2d 335, 460 US 1047; People v Schwartzman, 24 NY2d 241, 396 US 846; People v Castro, 101 AD2d 392, 65 NY2d 683; People v Crimmins, 36 NY2d 230.) VII. Appellant’s constitutional right to a fair trial was violated. (People v Crimmins, 36 NY2d 230; People v Robinson, 71 AD2d 1008; People v Tucker, 133 AD2d 787.)

      Jason L. Cook, District Attorney, Penn Yan, and Hannah E.C. Moore, New York Prosecutors Training Institute, Inc., Albany, for respondent.
    I. The Appellate Division correctly upheld the trial court’s determination that the vehicle stop was proper since defendant was initially stopped for a violation of the Vehicle and Traffic Law. (People v Robinson, 97 NY2d 341; Whren v United States, 517 US 806; People v Petikas, 10 Misc 3d 915; People v Edwards, 14 NY3d 741; People v Mundo, 99 NY2d 55; People v Wright, 98 NY2d 657; People v Jeffery, 2 AD3d 1271; People v Lowe, 12 NY3d 768; People v Krom, 61 NY2d 187.) II. As the Appellate Division found, the admission of breath test documents did not violate defendant’s Sixth Amendment right to confront the witnesses against him. (People v Carreira, 27 Misc 3d 293; People v Lebrecht, 13 Misc 3d 45; Crawford v Washington, 541 US 36; Marks v United States, 430 US 188; United States v Cundiff, 555 F3d 200; Nichols v United States, 511 US 738; Green v DeMarco, 11 Misc 3d 451; People v Kanhai,
      8 Misc 3d 447; People v Krueger, 9 Misc 3d 950; People v Fisher, 9 Misc 3d 1121[A], 2005 NY Slip Op 51726[U].) III. Defendant’s claim that he was prejudiced by Officer Lerch’s testimony that he requested to speak to an attorney prior to submitting to a breath test is unpreserved and without merit, and was properly rejected by the Appellate Division. (People v Patterson, 39 NY2d 288; People v Al-Kanani, 26 NY2d 473; People v Von Werne, 41 NY2d 584; People v Smith, 18 NY3d 544; People v Shaw, 72 NY2d 1032; People v Curkendall, 12 AD3d 710; Matter of Jimmy D., 15 NY3d 417; People v Scott, 86 NY2d 864; People v Crimmins, 36 NY2d 230.) IV The trial court properly allowed rebuttal testimony, and the Appellate Division properly rejected this claim. (People v Harris, 98 NY2d 452; People v Blair, 90 NY2d 1003; People v Hernandez, 71 NY2d 233; People v Taylor, 24 AD3d 1269; People v Crimmins, 36 NY2d 230.) V The prosecutor’s conduct did not deprive defendant of a fair trial, and this unpreserved claim was properly rejected by the Appellate Division. (People v Ashwal, 39 NY2d 105; Williams v Brooklyn El. R.R. Co., 126 NY 96; People v Ortiz, 116 AD2d 531; People v Galloway, 54 NY2d 396; People v D’Alessandro, 184 AD2d 114; People v Calabria, 94 NY2d 519; People v Arce, 42 NY2d 179; People v Savinon, 100 NY2d 192; People v Heide, 84 NY2d 943; People v Medina, 53 NY2d 951.) VI. The People’s Appellate Division brief was properly prepared and filed, and this issue is not properly before this Court. (People v Ford, 69 NY2d 775; People v Paz, 158 AD2d 1008; People v Perez, 67 AD3d 1324; People v Higgins, 55 AD3d 1303; People v Chianese, 41 AD3d 1168; People v Bowen, 17 AD3d 1054; People v Delair, 6 AD3d 1152; People v Brown, 6 AD3d 1125; People v Allen, 301 AD2d 57; People v Luedecke, 22 AD2d 636.)

      Cyrus R. Vance, Jr., District Attorney, New York City (Susan Axelrod of counsel), and Morrie I. Kleinbart, Staten Island, for District Attorneys Association of the State of New York, amicus curiae.
    I. Records of the results of tests that are done as part of the Police Department’s administrative requirements to maintain its equipment in proper working order, and that are not prepared in connection with or anticipation of a particular defendant’s prosecution, are not testimonial. (Crawford v Washington, 541 US 36; Davis v Washington, 547 US 813; Melendez-Diaz v Massachusetts, 557 US 305; People v Fisher, 9 Misc 3d 1121[A], 2005 NY Slip Op 51726[U]; People v Brown, 13 NY3d 332; People v Rawlins, 10 NY3d 136; People v Hulbert, 93 AD3d 953; People v Damato, 79 AD3d 1060; People v Lent, 29 Misc 3d 14; People v Bonner, 31 Misc 3d 142[A], 2011 NY Slip Op 50830[U].) II. The assistance rendered by District Attorney Porsch was lawful and appropriate. (People v Di Falco, 44 NY2d 482; Matter of Lewis v Carter, 220 NY 8; Matter of Sedore v Epstein, 56 AD3d 60; People v Herman, 187 AD2d 1027; People v Coger, 2 AD3d 1279; People v McClure, 26 AD3d 674; Matter of Haggerty v Himelein, 89 NY2d 431; Matter of Schumer v Holtzman, 60 NY2d 46; People v Sanducci, 195 NY 361.)
   OPINION OF THE COURT

Graffeo, J.

The question presented in this appeal is whether records pertaining to the routine inspection, maintenance and calibration of breathalyzer machines can be offered as evidence in a criminal trial without producing the persons who created the records. We hold that because such documents are nontestimonial, the records are not subject to the Confrontation Clause requirements set forth in Crawford v Washington (541 US 36 [2004]).

I

Early one morning in October 2008, the Penn Yan Police Department in Yates County received an anonymous telephone call indicating that someone who was possibly intoxicated had left a particular restaurant and was driving a gray car with a sticker on its rear window. Shortly after receiving this information, a police officer on patrol saw a gray 1996 Subaru and he followed the car for several minutes. After observing the car weaving, he stopped the vehicle for the illegal window sticker (see Vehicle and Traffic Law § 375 [1] [b] [i]).

The driver, defendant Richard Pealer, stated that he had just left work at the restaurant that had been identified by the tipster. When asked if he had consumed any alcohol, defendant replied that he had “two beers” after finishing his shift. The officer noticed that defendant’s eyes were red and glossy, his speech was impaired and defendant had an odor of alcohol. After defendant failed several field sobriety tests and a breath screening test confirmed that defendant had been drinking, he was arrested for driving while intoxicated (see Vehicle and Traffic Law § 1192 [3]).

At the police station, defendant telephoned a lawyer and then agreed to take a breathalyzer test. A breath-test operator conducted the testing and the machine computed defendant’s blood alcohol content at .15% (close to twice the legal limit). Defendant was eventually indicted for felony DWI (defendant had two prior felony DWI convictions).

During the jury trial, the People offered into evidence documents pertaining to the routine calibration and maintenance of the breathalyzer machine used in defendant’s breath test, in order to demonstrate that it was in proper working order at the time defendant was tested. Specifically, two of the documents certified that the breathalyzer had been calibrated by the New York State Division of Criminal Justice Services in Albany in September 2008 and March 2009, respectively. The third document stated that a sample of the simulator solution had been analyzed and approved for use in the breathalyzer by the State Police. The People intended to introduce these records through the testimony of the officer who administered the breathalyzer test to defendant.

Defendant raised a Confrontation Clause challenge to these documents, contending that he was entitled to cross-examine the authors of the three records. County Court disagreed and allowed the documents to be received in evidence. The jury found defendant guilty of DWI as a D felony (along with driving while ability impaired) and defendant was later sentenced to a prison term of 2/3 to 7 years.

The Appellate Division affirmed (89 AD3d 1504 [4th Dept 2011]), concluding that no Confrontation Clause error had occurred. It reasoned that the breathalyzer documents were neither accusatory nor testimonial because they merely established the functionality of the machine and did not directly prove an element of the charged crimes or specifically inculpate defendant.

A Judge of this Court granted defendant leave to appeal (18 NY3d 961 [2012]) and we now affirm.

II

Defendant argues that the People’s use of the three breathalyzer records violated his rights under the Confrontation Clause since he was not given an opportunity to cross-examine the persons who performed the testing of the machine or the simulator solution. According to defendant, the records were testimonial in nature since their purpose was to prove that the breathalyzer was in proper working order and, consequently, they were created in anticipation of their use in a criminal proceeding. The People counter that the documents were not testimonial because they were not generated for use against a specific individual, nor did they establish an element of the crimes charged.

The Confrontation Clause of the Sixth Amendment to the United States Constitution prohibits the “admission of testimonial statements of a witness who did not appear at trial unless he was unavailable to testify, and the defendant ha[s] had a prior opportunity for cross-examination” (Crawford v Washington, 541 US at 53-54). The key inquiry focuses on the category that a statement falls into—whether the nature of the statement or record is testimonial or nontestimonial (see Michigan v Bryant, 562 US —, —, 131 S Ct 1143, 1152-1153 [2011]; Davis v Washington, 547 US 813, 823-824 [2006]). “[T]he basic objective of the Confrontation Clause ... is to prevent the accused from being deprived of the opportunity to cross-examine the declarant about statements taken for use at trial” and a statement will be treated as testimonial only if it was “procured with a primary purpose of creating an out-of-court substitute for trial testimony” (Michigan v Bryant, 562 US at —, 131 S Ct at 1155). If a different purpose underlies its creation, the issue of admissibility of the statement is subject to federal or state rules of evidence rather than the Sixth Amendment (see id.).

Based on relevant precedent, we have identified two factors that are “especially important” in resolving whether to designate a statement as testimonial—“first, whether the statement was prepared in a manner resembling ex parte examination and second, whether the statement accuses defendant of criminal wrongdoing” (People v Rawlins, 10 NY3d 136, 156 [2008], cert denied sub nom. Meekins v New York, 557 US —, 129 S Ct 2856 [2009]). Furthermore, the “purpose of making or generating the statement, and the declarant’s motive for doing so,” also “inform these two interrelated touchstones” (People v Rawlins, 10 NY3d at 156).

We have held that the Confrontation Clause applies to an affidavit of an employee of the Department of Motor Vehicles attesting to the revocation of an accused’s license in a prosecution for aggravated unlicensed operation of a motor vehicle in the first degree because the document had an accusatory purpose in that it provided proof of an element of the crime and resembled testimonial hearsay (see People v Pacer, 6 NY3d 504, 512 [2006]). Similarly, fingerprint comparison reports that directly linked the accused to the charged crimes “could be nothing but testimonial” (People v Rawlins, 10 NY3d at 157). The same held true for an affidavit identifying a substance connected to the defendant as cocaine (see Melendez-Diaz v Massachusetts, 557 US 305, 310-311 [2009]) and a report certifying that the accused’s blood alcohol content was above the legal limit (see Bullcoming v New Mexico, 564 US —, —, 131 S Ct 2705, 2716-2717 [2011])—both of these-documents were generated for law enforcement purposes in order to establish a necessary element of the charged offenses.

In contrast, we determined that a graphical DNA report that did not explicitly tie the accused to a crime was deemed to be nontestimonial since it “shed no light on the guilt of the accused in the absence of an expert’s opinion that the results genetically match a known sample” (People v Rawlins, 10 NY3d at 159; see also People v Brown, 13 NY3d 332, 340-341 [2009]; Williams v Illinois, 567 US —, —, 132 S Ct 2221, 2243 [2012, plurality op] [“the primary purpose of the (DNA) report, viewed objectively, was not to accuse (the) petitioner or to create evidence for use at trial. . . . (I)ts primary purpose was to catch a dangerous rapist who was still at large, not to obtain evidence for use against (the) petitioner, who was neither in custody nor under suspicion at that time”]). A similar conclusion applied to an autopsy report prepared by a civilian agency in that it was a contemporaneous, objective account of observable facts that did not link the commission of the crime to a particular person (see People v Freycinet, 11 NY3d 38, 42 [2008]).

We now consider these principles in assessing the admissibility of the breathalyzer calibration and maintenance documents in this case. As our case law makes clear, to determine whether these records are the functional equivalent of in-court testimony, it is necessary to identify the primary purpose for their creation by evaluating the following factors:

“(1) whether the agency that produced the record is independent of law enforcement; (2) whether it reflects objective facts at the time of their recording; (3) whether the report has been biased in favor of law enforcement; and (4) whether the report accuses the defendant by directly linking him or her to the crime” (People v Brown, 13 NY3d at 339-340).

In examining these factors, the records at issue bear some resemblance to traditional testimonial hearsay because they contain certified declarations of fact attesting that the breathalyzer machine was functioning properly and its readings were accurate and reliable. Nevertheless, the remaining considerations weigh against application of the Confrontation Clause. Melendez-Diaz recognized the possibility that records “prepared in the regular course of equipment maintenance”—precursors to an actual breathalyzer test of a suspect—“may well qualify as non-testimonial records” (557 US at 311 n 1). It may reasonably be inferred that the primary motivation for examining the breathalyzer was to advise the Penn Yan Police Department that its machine was adequately calibrated and operating properly (see generally People v Boscic, 15 NY3d 494, 500 [2010]). The testing of the machine was performed by employees of the Division of Criminal Justice Services, an executive agency that is independent of law enforcement agencies, whose task was to ensure the reliability of such machines—not to secure evidence for use in any particular criminal proceeding. The fact that the scientific test results and the observations of the technicians might be relevant to future prosecutions of unknown defendants was, at most, an ancillary consideration when they inspected and calibrated the machine.

Belatedly, it is also significant that, as with an autopsy report or a graphical DNA report, and unlike the certification of the accused’s actual blood alcohol content in Bullcoming, the breathalyzer testing certificates do not directly inculpate defendant or prove an essential element of the charges against him. All three records simply reflected objective facts that were observed at the time of their recording in order to establish that the breathalyzer would produce accurate results, rather than to prove some past event. At their core, these documents should be viewed as business records (see CPLB 4518 [a]) which, as a class, are generally deemed nontestimonial (see People v Rawlins, 10 NY3d at 150 n 11; Crawford, 541 US at 56).

For these reasons, we believe that the US Supreme Court’s primary purpose test, and the analytical framework articulated in Rawlins, Freycinet and Brown, indicate that the breathalyzer calibration documents offered in this case were not testimonial in nature. Although it has been suggested that Melendez-Diaz pronounced a shift in Confrontation Clause analysis that might call our precedent into question, we reject this assertion. Melendez-Diaz itself avowed that it was not breaking new ground because it “involve[d] little more than the application of [the] holding in Crawford” (557 US at 329). Moreover, both before and after Melendez-Diaz was decided, a virtually uniform national consensus emerged classifying documents similar to these as nontestimonial (see e.g. State v Benson, 287 P3d 927, 932 [Kan 2012]; Chambers v State, 2012 Ark 407, *8, — SW3d —, — [2012]; State v Lutz, 820 NW2d 111, 117-118 [ND 2012]; State v Britt, 283 Neb 600, 603, 813 NW2d 434, 437 [2012]; Matthies v State, 85 So 3d 838, 844 [Miss 2012], cert denied 568 US —, 133 S Ct 317 [2012]; Commonwealth v Zeininger, 459 Mass 775, 788-789, 947 NE2d 1060, 1070 [2011], cert denied 565 US —, 132 S Ct 462 [2011]; State v Chun, 194 NJ 54, 144, 943 A2d 114, 167-168 [2008], cert denied 555 US 825 [2008]; State v Fischer, 272 Neb 963, 971-972, 726 NW2d 176, 182-183 [2007]; Rackoff v State, 281 Ga 306, 309, 637 SE2d 706, 709 [2006]; Commonwealth v Walther, 189 SW3d 570, 575 [Ky 2006]; State v Carter, 326 Mont 427, 437, 114 P3d 1001, 1007 [2005]). Additionally, the Appellate Divisions that have considered this issue have concurred that, even under Melendez-Diaz, these types of records fall outside the ambit of the Confrontation Clause (see e.g. People v Hulbert, 93 AD3d 953, 953-954 [3d Dept 2012]; People v Damato, 79 AD3d 1060, 1061-1062 [2d Dept 2010]).

We endorse this widely-held view and hold that documents pertaining to the routine inspection, maintenance and calibration of breathalyzer machines are nontestimonial under Crawford and its progeny. Consequently, the Confrontation Clause was not implicated in this case and the trial judge did not err in declining defendant’s request to cross-examine the authors of the testing records before the court ruled on their admissibility.

Ill

Defendant raises additional issues, many of which are either unpreserved or otherwise unreviewable, and the remainder lack merit: the curative instruction during the prosecutor’s summation corrected any perceived error (see People v Heide, 84 NY2d 943, 944 [1994]); it was not an abuse of discretion to permit a rebuttal witness (see People v Anonymous, 96 NY2d 839, 840 [2001]); defendant has failed to demonstrate that he was deprived of meaningful legal assistance (see e.g. People v Baker, 14 NY3d 266, 270 [2010]); and there was no basis for suppression (see e.g. People v Edwards, 14 NY3d 741, 742 [2010]).

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

Pigott, J. (dissenting in part).

While I concur with the majority’s Confrontation Clause analysis, I part company with it on the reasonableness of the police officer’s initial stop of defendant. The suppression court ruled that the police officer lacked probable cause to stop the defendant but for the fact that defendant had a Finger Lakes Community College sticker in the rear window (police officer: “I can’t recall what side it was on, the left or the right”).

Prior to 2001, all four Departments of the Appellate Division uniformly held that evidence obtained as a result of pretext stops was inadmissible (see People v Young, 241 AD2d 690 [3d Dept 1997]; People v Roundtree, 234 AD2d 612 [2d Dept 1996]; People v Laws, 213 AD2d 226 [1st Dept 1995]; People v Camarre, 171 AD2d 1002 [4th Dept 1991]). Then, in People v Robinson (97 NY2d 341 [2001]), this Court adopted the rationale of Whren v United States (517 US 806 [1996]), which held that an investigatory stop is valid, regardless of the officer’s motivation, so long as there is an objectively reasonable basis for it (see id. at 812-815).

In my view, the stop in this case was not objectively reasonable, and was premised on what could only be deemed a “de minimis” violation of Vehicle and Traffic Law § 375 (1) (b) (i). That section provides that “[t]he use or placing of posters or stickers on windshields or rear windows of motor vehicles other than those authorized by the commissioner, is hereby prohibited.” The concern, of course, as the commissioner notes in the regulations, is that the placement of such items not approved by the commissioner will “interfere with visibility” (15 NYCRR 174.1).

Here, the suppression court concluded that an anonymous tip and the fact that defendant’s car was weaving, but within its lane of traffic, were insufficient to justify the stop. However, the suppression court found that the presence of a transparent college sticker located on the bottom, left-hand corner of the rear windshield of defendant’s car at 1:26 a.m. provided sufficient justification to stop defendant’s vehicle. While having a sticker on the car’s back window may have transgressed section 375 (1) (b) (i), this is the type of school pride that is commonly exercised by New York drivers every day and, I suspect, the statute is rarely, if ever, enforced. Stopping a vehicle at 1:26 in the morning because of a college sticker on the back window is, in my view, not objectively reasonable and therefore the evidence discovered as a result of the stop should have been suppressed.

Smith, J. (concurring).

I join Judge Graffeo’s majority opinion, and add this concurrence to reply to the dissent.

I concede that my dissenting colleague has a point; like him, I am uncomfortable with what happened in this case. It presents an extreme example of the opportunities given to law enforcement officers by the United States Supreme Court’s holding in Whren v United States (517 US 806 [1996]), and ours in People v Robinson (97 NY2d 341 [2001]), that a traffic stop made with probable cause may not be challenged as pretextual—i.e., that the motive for the stop is irrelevant. Here, the pretext—a small sticker in a corner of a car’s rear window—is as transparent as the sticker. But under Whren and Robinson that does not matter. v

The dissent suggests that, where police blatantly exploit a trivial offense, we can avoid the more unpleasant consequences of Whren and Robinson by finding the officers’ actions to be “not objectively reasonable” (dissenting op at 457). The dissent’s position is similar to that of the dissenters in Atwater v Lago Vista (532 US 318, 360-373 [2001, O’Connor, J., dissenting])—a case involving an arrest, not just a traffic stop. In At-water, a woman was arrested, without a warrant, for an offense (having her children in the front seat of a car without seatbelts) punishable only by a fine under state law. The Supreme Court majority held that the arrest was consistent with the Fourth Amendment. It concluded that a state does not violate the Federal Constitution when it authorizes warrantless arrest for a criminal offense, no matter how minor (532 US at 354).

It is clear from Atwater that there was no violation of the Federal Constitution here. Indeed, for two reasons, this case is a fortiori from Atwater-, defendant here was not arrested for the traffic infraction, and his offense, unlike Atwater’s, could theoretically be punished by imprisonment (see Vehicle and Traffic Law § 375 [32]). We have not addressed the Atwater issue in interpreting our State Constitution (NY Const, art I, § 12), though we have held that the seriousness of an offense is relevant to the validity of a search incident to arrest (People v Marsh, 20 NY2d 98, 102-103 [1967] [search not justified by arrest for “minor traffic violations”]; see also People v Troiano, 35 NY2d 476, 478 [1974] [suggesting that the rule of Marsh applies only “where an arrest was not necessary”]; People v Howell, 49 NY2d 778 [1980] [suppressing evidence in reliance on Marsh and Troiano]).

Today’s dissent would hold that, under the State Constitution, an officer may be held to have acted unreasonably in stopping a car for a trivial violation of a statute. I would not accept this rule. Where the challenge is only to a traffic stop, the interference with a person’s liberty is much less than when that person is arrested or searched. And while the dissent’s rule may seem attractive in this case, it will be hard to administer: defendants will not hesitate to invoke it on less sympathetic facts than these, and deciding whether an officer used good judgment in stopping a car will become part of the routine fare of judges deciding suppression motions. The certainty and predictability that result from the Whren and Robinson holdings will be in large part lost.

My reluctance to agree with the dissent is fortified by my distaste for the suppression of relevant evidence as a remedy for every mistake a police officer makes. As I have said before, I think that the exclusionary rule is a blunt instrument that lets too many guilty people go free (see People v Weaver, 12 NY3d 433, 451 [2009, Smith, J., dissenting]; People v Gavazzi, 20 NY3d 907, 909-910 [2012, Smith, J., dissenting]). There are surely other remedies for law enforcement that is too aggressive. Here, the remedy seems obvious enough: the legislature can amend Vehicle and Traffic Law § 375 [1] [b] [i] to remove the ban on small, transparent stickers. That is preferable, I think, to dismissing a well-founded drunk driving prosecution because we think the sticker law has been over-enforced.

Chief Judge Lippman and Judges Read and Smith concur with Judge Graffeo; Judge Smith in a separate concurring opinion; Judge Pigott dissents in part in an opinion; Judge Rivera taking no part.

Order affirmed.

      . See also State v Kramer, 153 Idaho 29, 36 (Ct App 2012); State v Lindner, 227 Ariz 69, 71-72, 252 P3d 1033, 1035-1036 (Ct App 2010), cert denied 565 US —, 132 S Ct 1111 (2012); Jacobson v State, 306 Ga App 815, 818, 703 SE2d 376, 379 (2010); People v Jacobs, 405 Ill App 3d 210, 217, 939 NE2d 64, 71 (2010); Ramirez v State, 928 NE2d 214, 220 (Ind Ct App 2010), transfer denied 940 NE2d 824 (2010); Settlemire v State, 323 SW3d 520, 522 (Tex Ct App 2010); Commonwealth v Dyarman, 2011 PA Super 245, 33 A3d 104, 108 (2011), appeal granted 41 A3d 1282 (2012); Hamilton v State, 2010 WL 4260608, *3, 2010 Alas App LEXIS 125, *7-10 (Alaska Ct App 2010); State v Bergin, 231 Or App 36, 42, 217 P3d 1087, 1090 (2009), review denied 348 Or 280, 230 P3d 933 (2010); Salt Lake City v George, 189 P3d 1284, 1289 (Utah Ct App 2008), cert denied 200 P3d 193 (2008); Pflieger v State, 952 So 2d 1251, 1254 (Fla Ct App 2007); State v Marshall, 114 Hawai’i 396, 402, 163 P3d 199, 205 (Ct App 2007), cert denied 117 Hawai’i 234 (2007); United States v Forstell, 656 F Supp 2d 578, 581 (ED Va 2009). But see United States v Gorder, 726 F Supp 2d 1307, 1314 (D Utah 2010); People v Carreira, 27 Misc 3d 293, 296 (Watertown City Ct 2010).

      . [2] Probable cause to believe that the Vehicle and Traffic Law has been violated provides an objectively reasonable basis for the police to stop a vehicle and, contrary to the dissent’s suggestion, there is no exception for infractions that are subjectively characterized as “de minimis” (see e.g. People v Robinson, 97 NY2d 341, 349 [2001]).


author: Smith, J.

text:
    [985 NE2d 899, 962 NYS2d 589]
    The People of the State of New York, Respondent, v Daniel Vasquez, Appellant.
    Argued January 10, 2013;
    decided February 19, 2013

      POINTS OF COUNSEL

      Lynn W.L. Fahey, Appellate Advocates, New York City (Warren S. Landau of counsel), for appellant.
    Appellant was denied the effective assistance of counsel when defense counsel, who argued that the People failed to prove appellant’s identity, failed to seek preclusion of the complainant’s showup identification although the People had given no CPL 710.30 notice of their intent to elicit that evidence. (Strickland v Washington, 466 US 668; People v Turner, 5 NY3d 476; People v Baldi, 54 NY2d 137;
      People v Benevento, 91 NY2d 708; People v Zaborski, 59 NY2d 863; People v Caban, 5 NY3d 143; Murray v Carrier, 477 US 478; Kimmelman v Morrison, 477 US 365; United States v Cronic, 466 US 648; People v Cass, 18 NY3d 553.)

      Daniel Vasquez, appellant pro se.
    I. Appellant was denied effective assistance of counsel when defense counsel failed to properly object to the admission of hearsay identification testimony and the Court’s decision to allow the arresting officer to testify regarding the victim’s out-of-court identification violated the requirements of CPL 60.25 and did not meet the statutory exception to the Trowbridge bolstering doctrine. (People v LaBree, 34 NY2d 257; People v Prado, 4 NY3d 725; People v Brown, 45 NY2d 852; Strickland v Washington, 466 US 668; People v Riley, 101 AD2d 710; People v Zaborski, 59 NY2d 863; People v Bayron, 66 NY2d 77; People v Quevas, 81 NY2d 41; Brady v Maryland, 373 US 83; Manson v Brathwaite, 432 US 98.) II. Defendant was deprived of a fair trial, where the jury was tainted by the assistant district attorney, who maliciously misstated and fabricated her own version of the 911 transcribance to the jury at summation, after the Court previously corrected and ruled on the true contents of the 911 transcribance, denying appellant due process of law. (People v Moye, 52 AD3d 1; People v Paperno, 54 NY2d 294; Berger v United States, 295 US 78; People v Lovello, 1 NY2d 436; People v Torres, 223 AD2d 741; People v Allen, 127 AD2d 840; People v Russell, 307 AD2d 385; People v Fielding, 158 NY 542; People v Esposito, 224 NY 370; People v Collins, 12 AD3d 33.)

      Richard A. Brown, District Attorney, Kew Gardens (Donna Aldea and John M. Castellano of counsel), for respondent.
    I. Defendant received meaningful representation at trial and his attorney committed no error—let alone any prejudicial error—by not registering a baseless objection to identification testimony on the grounds of deficient notice when notice was not legally required and was, in any event, waived by counsel’s strategic choice to litigate the constitutionality of the identification procedures at the hearing. (Strickland v Washington, 466 US 668; People v Benevento, 91 NY2d 708; People v Baldi, 54 NY2d 137; People v Baker, 14 NY3d 266; People v Satterfield, 66 NY2d 796; People v Borrell, 12 NY3d 365; People v Turner, 5 NY3d 476; People v Henry, 95 NY2d 563; People v Flores, 84 NY2d 184; People v Rivera, 71 NY2d 705.) II. Defendant’s claim that the prosecutor improperly relied on an incorrect transcription of the victim’s 911 call during her summation is unpreserved and without merit. (People v Fleming, 70 NY2d 947; People v Gajadhar, 38 AD3d 127; People v Halm, 81 NY2d 819; People v Ashwal, 39 NY2d 105; People v Crimmins, 36 NY2d 230; People v Galloway, 54 NY2d 396; People v Wood, 66 NY2d 374.)
   OPINION OF THE COURT

Smith, J.

We hold that defendant’s trial counsel was not ineffective for failing to object under CPL 710.30 to testimony about a victim’s out-of-court identification.

I

A jury convicted defendant of attempted robbery, menacing and possession of a weapon, based on evidence that defendant approached a man in the street, asked for money, and pointed a knife at him. Evidence at trial showed that the victim ran into a nearby store and called 911. When Officer Brian Herbert responded to the call, defendant was still in the vicinity; the victim pointed him out, and Herbert arrested him. After the arrest, before taking defendant to the station house, Herbert asked the victim if he was sure that this was the man who robbed him, and the victim said “yes.”

Thus, the victim twice said to Herbert that defendant was the guilty party—before the arrest, when he pointed him out, and after it, when he told the officer he was sure. However, the People’s notice of intention to offer identification testimony, served before trial pursuant to CPL 710.30 (1) (b), said only:

“the People intend to offer at trial testimony of a witness, [naming the victim], who identified the defendant in a Pointout, on July 4, 2007, at approximately 10:08 Pm., at Cypress Avenue and Madison Street.”

The notice did not mention that the victim had also said he was sure of his identification a few minutes later, while viewing defendant in Herbert’s custody.

Defendant moved to suppress the point-out identification. The motion was denied after a Wade hearing at which Herbert was the only witness. The victim’s post-arrest statement to Herbert was not mentioned at the hearing.

At trial, the People’s first witness was Herbert, who testified that he responded to a radio call, went to the scene and spoke to the victim, arrested defendant and recovered a knife from a tree nearby. The second witness was the victim, who described his encounter with a man who tried to rob him. The victim said that he had pointed the man out to a police officer, and that the officer had arrested the offender, but the victim was not able to identify defendant in court as the man who committed the crime. He did say, however, that he had seen the offender throw away a knife near a tree, and that he had given that information to the officer.

The victim testified that, before the officer made the arrest, the person he arrested turned a corner and was briefly out of the victim’s sight. In this, the victim’s recollection differed from Herbert’s; Herbert had testified that he arrested defendant on the corner. The victim also testified, without objection, that he had seen the person the officer had in custody, and that that person was indeed the would-be robber.

After the victim testified, the People re-called Herbert to give testimony authorized by CPL 60.25. Section 60.25 (1) (a) applies where a witness testifies that he “observed” a person at the time and place of a crime or on another “incriminating occasion,” and that he later saw someone he recognized to be the same person, but cannot say at trial whether that person was the defendant. In such cases, the witness may testify that he observed the same person both times, and another witness may supply the missing link by testifying that the defendant was the person observed on the second occasion (CPL 60.25 [2]).

Here, the victim had testified to what may be viewed as three separate occasions, close to each other in time, on which he observed the man who tried to rob him: the crime itself; the moment when he pointed the offender out to Herbert; and the moment when he saw the arrested man in Herbert’s custody. Herbert testified about both the second and third observations; the critical one for our purposes is the third. Herbert recounted the victim’s post-arrest statement that he was sure the man arrested—identified by Herbert as defendant—was the man who robbed him. Defense counsel questioned whether the prerequisites of CPL 60.25 had been met, but did not object to testimony about the post-arrest statement on the ground that it was omitted from the pretrial CPL 710.30 notice.

The People concluded their case by offering defendant’s testimony before the grand jury, in which he said that, just before being arrested, he had asked “a gentleman” for change (without brandishing a weapon); and that the gentleman “went in this restaurant and I guess maybe he misunderstood me . . . but when he came back out there was police around.”

Defendant was convicted. He argued on appeal that the People had violated CPL 710.30, and that trial counsel’s failure to raise that issue deprived him of the effective assistance of counsel. The Appellate Division held that the section 710.30 issue was unpreserved, and added that “although the trial court may have erred in admitting the showup identification testimony . . . any such error was harmless” (People v Vasquez, 87 AD3d 1042, 1043 [2d Dept 2011]). The court also held that “defendant was not deprived of the effective assistance of counsel, as defense counsel provided meaningful representation” (id.). A Judge of this Court granted leave to appeal (18 NY3d 862 [2011]), and we now affirm.

II

CPL 710.30 requires the People to serve on a defendant, before trial, a notice of their intention to offer “testimony regarding an observation of the defendant either at the time or place of the commission of the offense or upon some other occasion relevant to the case, to be given by a witness who has previously identified him as such.” The notice “must be served within fifteen days after arraignment and before trial” but the court may permit a late notice “[flor good cause shown” and if it does so “must accord the defendant reasonable opportunity thereafter to make a suppression motion” (CPL 710.30 [2]). When no notice is served, evidence of the kind specified in the statute may not be offered, unless defendant “has, despite the lack of such notice, moved to suppress such evidence and such motion has been denied” (CPL 710.30 [3]). Defendant contends that he was entitled under this statute to the suppression of testimony about the victim’s post-arrest identification.

We do not decide whether a CPL 710.30 violation justifying suppression occurred in this case. We are satisfied that, if defense counsel did make a mistake in failing to object to the evidence, the mistake was not so “egregious and prejudicial” as to deprive defendant of a fair trial (People v Caban, 5 NY3d 143, 152 [2005]).

The People argue that there was no CPL 710.30 violation, saying among other things that the point-out was not separable from the post-arrest conversation minutes later. Because the two are part of the same continuum of events, the People say, the notification of the point-out gave defendant all the notice that he was entitled to. The argument is not without merit, especially if the People, when they served their CPL 710.30 notice, did not know (and nothing in the record indicates they did know) that the victim would testify at trial that he lost sight of the offender between his two conversations with the officer. If the offender was continuously in the victim’s view, the argument that there was really only one post-crime “observation,” even though the victim identified defendant twice within a few minutes’ time, seems a reasonable one. It is more plausible to speak of two observations—and the victim’s post-arrest statement that he was sure the officer had the right man takes on greater importance—if the victim’s view of the offender was interrupted.

Assuming that there was a section 710.30 violation, it might not have resulted in exclusion of the evidence in question. CPL 710.30 (2) provides for the possibility of late notice, and a belated suppression hearing, when the People show “good cause.” The belated notice and hearing may occur during the trial (People v Anderson, 66 NY2d 529, 537 [1985]), and if the trial court thought the People had made an excusable error it might have granted such a remedy here.

In short, it is not obvious that defendant’s counsel could have successfully sought preclusion of the evidence of the victim’s post-arrest identification under section 710.30. An argument for preclusion could have been made, but not an argument “so compelling that a failure to make it amounted to ineffective assistance of counsel” (People v Carter, 7 NY3d 875, 877 [2006]). Counsel’s performance should not be “second-guessed with the clarity of hindsight” (People v Benevento, 91 NY2d 708, 712 [1998]). Any deficiency in her performance was not so great that it can support an ineffective assistance claim.

Nor has defendant shown any serious likelihood that he was prejudiced by trial counsel’s alleged error. Even if the trial court had precluded evidence of the victim’s post-arrest identification, the evidence against defendant would remain strong. That evidence included the victim’s description of an attempted robbery; the victim’s pointing out of a man, whom Herbert identified as defendant, immediately after the crime; the victim’s testimony that the would-be robber had thrown away a knife near a tree; Herbert’s recovery of the knife from that location; and defendant’s admission to the grand jury that he had asked a “gentleman”—who the jury could readily infer was the victim—for money. It is hard to believe that, in light of this evidence, a jury that did not know of the post-arrest identification would have been left in doubt of defendant’s guilt.

Under the Federal Constitution, a defendant claiming ineffective assistance of counsel “must show that there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different” (Strickland v Washington, 466 US 668, 694 [1984])—a showing defendant cannot make here. Under our State Constitution, a showing of prejudice is “not indispensable” but it is nevertheless “significant” in evaluating a claim of this kind (People v Stultz, 2 NY3d 277, 284 [2004]). Under the circumstances here, where trial counsel committed at most a single, and not egregious, error, the absence of prejudice is fatal to defendant’s claim.

The arguments made in defendant’s pro se brief are not preserved for our review.

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

Chief Judge Lippman and Judges Graffeo, Read and Pigott concur; Judge Rivera taking no part.

Order affirmed.


author: Pigott, J. Chief Judge Lippman (dissenting).

text:
    [985 NE2d 911, 962 NYS2d 600]
    In the Matter of M.G.M. Insulation, Inc., et al., Appellants, v Colleen C. Gardner, as Commissioner of Labor, Respondent.
    Argued January 2, 2013;
    decided February 19, 2013

      POINTS OF COUNSEL

      Gates & Adams, P.C., Rochester (Anthony J. Adams, Jr., of counsel), for appellants.
    I. Prevailing wage requirements apply only to those entities specified in Labor Law § 220. (Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532, 63 NY2d 810; Brukhman v Giuliani, 94 NY2d 387; Varsity Tr. v Saporita, 71 AD2d 643, 48 NY2d 767; New York State Coalition for Criminal Justice v Coughlin, 64 NY2d 660; Matter of New York Charter School Assn. v Smith, 15 NY3d 403; Tri-City Elec. Co. v People, 96 AD2d 146, 63 NY2d 969; Bender v Jamaica Hosp., 40 NY2d 560; Doctors Council v New York City Employees’ Retirement Sys., 71 NY2d 669.) II. “Substantial evidence” is not the test of whether the Commissioner exceeded her statutory enforcement authority by extending it to “functional equivalents” of specified entities. (Matter of Rosenbluth v Finkelstein, 300 NY 402; Matter of National Merchandising Corp. v Public Serv. Commn., 5 NY2d 485; Matter of Raritan Dev. Corp. v Silva, 91 NY2d 98; Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127; Matter of Stephens & Rankin v Hartnett, 160 AD2d 1201; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Doctors Council v New York City Employees’ Retirement Sys., 71 NY2d 669; Cattaraugus Community Action v Hartnett, 166 AD2d 891; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285.) III. As a matter of law the Bath Volunteer Fire Department firehouse project was not a “public work.” (Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532, 63 NY2d 810; Varsity Tr. v Saporita, 71 AD2d 643; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127; Matter of Vulcan Affordable Hous. Corp. v Hart-

      nett, 151 AD2d 84; Cattaraugus Community Action v Hartnett, 166 AD2d 891; Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205, 76 NY2d 993.)

      Eric T. Schneiderman, Attorney General, Albany (Zainab A. Chaudhry, Barbara D. Underwood and Andrew D. Bing of counsel), for respondent.
    I. The firehouse project satisfies the first prong of the Matter of Erie County Indus. Dev. Agency v Roberts (94 AD2d 532 [1983]) prevailing wage law test. (Harland Enters. v Commander Oil Corp., 64 NY2d 708; Matter of Westchester Rockland Newspapers v Kimball, 50 NY2d 575; Miller v Morania Oil of Long Is., O.C.P., 194 AD2d 770; Helman v County of Warren, 114 AD2d 573; Matter of New York Charter School Assn. v Smith, 15 NY3d 403; Matter of New York Charter Schools Assn., Inc. v DiNapoli, 13 NY3d 120; Janusaitis v Middlebury Volunteer Fire Dept., 607 F2d 17; Gibson v Hurleyville Fire Co. No. 1, 1 F Supp 2d 329; United States v Craft, 535 US 274; Matter of Oswald N., 87 NY2d 98.) II. The firehouse project is a public work and thus satisfies the second prong of the Matter of Erie County Indus. Dev. Agency v Roberts (94 AD2d 532 [1983]) test. (Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205, 76 NY2d 993; Harland Enters. v Commander Oil Corp., 64 NY2d 708; Matter of Long Is. Light. Co. v Industrial Commr. of N.Y. State, 40 AD2d 1003, 34 NY2d 725; Feher Rubbish Removal, Inc. v New York State Dept. of Labor, Bur. of Pub. Works, 28 AD3d 1, 6 NY3d 711; Matter of Sarkisian Bros. v Hartnett, 172 AD2d 895, 78 NY2d 859; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285.)

      Couch White, LLP, Albany (Joel M. Howard, III, of counsel), for Associated General Contractors of New York State, LLC, amicus curiae.
    I. The new standard of review promulgated by the “functional equivalent” test departs from decades of legislative and judicial determinations. (Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532, 63 NY2d 810; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285; Matter of Stephens & Rankin v Hartnett, 160 AD2d 1201; Matter of New York Charter School Assn. v Smith, 15 NY3d 403.) II. The uncertainty generated by the “functional equivalent” standard will have a detrimental impact on the construction industry statewide. (Matter of Naftilos Painting & Sandblasting v Hartnett, 173 AD2d 964; Matter of Taj Airconditioning & Refrig. Co. v Goldin, 158 AD2d 350; Matter of

      Chesterfield Assoc. v New York State Dept. of Labor, 3 AD3d 491; Matter of City Constr. Dev. v Hartnett, 192 AD2d 651; Matter of Sierra Telcom Servs. v Hartnett, 174 AD2d 279.)

      Couch White, LLP, Albany (Joel M. Howard, III, of counsel), for Empire State Chapter of the Associated Builders and Contractors, Inc., amicus curiae.
    I. The Department of Labor’s “functional equivalent” test constitutes an impermissible administrative amendment to Labor Law § 220 (2). (Matter of New York Charter School Assn. v Smith, 15 NY3d 403; Weiss v City of New York, 95 NY2d 1; Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471; Saratoga County Chamber of Commerce v Pataki, 100 NY2d 801; Boreali v Axelrod, 71 NY2d 1; Packer Coll. Inst. v University of State of N.Y., 298 NY 184; Ellicott Group, LLC v State of N.Y. Exec. Dept. Off. of Gen. Servs., 85 AD3d 48; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285.) II. The broad discretion assumed by the Department of Labor to determine “functional equivalents” is ripe for abuse and selective enforcement. (Matter of Cayuga-Onondaga Counties Bd. of Coop. Educ. Servs. v Sweeney, 89 NY2d 395; Matter of CNP Mech., Inc. v Angello, 31 AD3d 925.)

      Hurwitz Law, P.C., Rochester (Jayme Hurwitz of counsel), for Firemen’s Association of the State of New York, amicus curiae.
    I. The Department of Labor may not bring fire corporations within the reach of Labor Law § 220 when the legislature has declined to do so. (Helman v County of Warren, 114 AD2d 573; Steitz v City of Beacon, 295 NY 51; Moch Co. v Rensselaer Water Co., 247 NY 160; People v Tychanski, 78 NY2d 909; Pajak v Pajak, 56 NY2d 394; Matter of Alonzo M. v New York City Dept. of Probation, 72 NY2d 662; Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205; Matter of Town of Riverhead v New York State Bd. of Real Prop. Servs., 5 NY3d 36; Walker v Town of Hempstead, 84 NY2d 360; Matter of Roberts v Community School Bd. of Community Dist. No. 6, 66 NY2d 652.) II. Standard service agreements made between a village and a volunteer fire corporation are not agreements “which may involve the employment of laborers, workers or mechanics” under Labor Law § 220. (Matter of New York Charter School Assn. v Smith, 15 NY3d 403.)

      McMahon, Kublick & Smith, P.C., Syracuse (Jan S. Kublick of counsel), for New York State Council of the National Electrical Contractors Association Chapters, amicus curiae.
    I. The functional equivalence test would not result in a high level of uncertainty, and offers much needed guidance. II. A functional equivalency standard is needed in an increasingly complicated contracting environment. (Matter of Griffiss Local Dev. Corp. v State of N.Y. Auth. Budget Off., 85 AD3d 1402, 17 NY3d 714; Matter of New York Charter School Assn. v Smith, 15 NY3d 403.) III. Empire State Chapter of Associated Builders and Contractors, Inc.’s and Associated General Contractors of New York State, LLC’s claim that prevailing wage requirements significantly increase construction costs are unfounded. IV Prevailing wages support local economic development. V Empire State Chapter of Associated Builders and Contractors, Inc.’s and Associated General Contractors of New York State, LLC’s claim that prevailing wage is discriminatory is not empirically supported and is not a reason to weaken prevailing wage. VI. Acceptance of prevailing wage extends well beyond labor unions.
   OPINION OF THE COURT

Pigott, J.

In this CPLR article 78 proceeding, we are asked to determine whether the prevailing wage requirement of Labor Law § 220 is applicable to a construction contract entered into by the Bath Volunteer Fire Department (BVFD). We hold that because no public agency, as contemplated by the statute, is a party to the contract, the prevailing wage law does not apply.

The Bath Volunteer Fire Department is a not-for-profit fire corporation under Not-For-Profit Corporation Law § 1402. Historically, it operated from a building owned by the Village of Bath. Sometime prior to 2002, it determined that the facility was inadequate for its needs. After the Village declined to build it a new firehouse, BVFD commissioned a feasibility study and obtained its own financing for the construction of one. It acquired land and invited contractors to bid for the construction work. In September 2006, it hired petitioner R-J Taylor General Contractors, Inc. (Taylor) as the general contractor. Taylor subsequently hired a number of subcontractors to construct the various portions of the firehouse.

After an investigation, the Department of Labor (DOL) issued an opinion letter, concluding that the firehouse project was a public work subject to the prevailing wage law. Once the subcontractors learned of the DOL’s determination, work on the project halted. In December 2006, BVFD agreed to indemnify Taylor and its subcontractors against any liability resulting from their failure to pay the prevailing wages, and construction resumed and the project was completed.

In the meantime, an administrative hearing was held on the question of the applicability of the prevailing wage law to the firehouse project. The Hearing Officer determined that the project was subject to the prevailing wage law, concluding that the firehouse project satisfied both prongs of the so-called Erie County test for prevailing wage law applicability (see Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532 [1983], affd for reasons stated below 63 NY2d 810 [1984]). Specifically, the Hearing Officer concluded that volunteer fire corporations, such as BVFD, are the “functional equivalent [s]” of municipal corporations and are therefore “covered entities” under Labor Law § 220. In the alternative, the Hearing Officer reasoned that even if a volunteer fire corporation did not generally satisfy the public entity test, the protection services agreement between BVFD and the Village of Bath satisfied the first prong of the test. Further, because the Village authorized and supported the firehouse project, and the object of the project entailed provision of fire protection services for the community, the project satisfied the “public works” requirement.

Petitioners commenced this article 78 proceeding for review of that determination. The Appellate Division confirmed the determination and dismissed the petition (86 AD3d 812 [3d Dept 2011]). This Court granted petitioners’ motion for leave to appeal (18 NY3d 806 [2012]) and we now reverse.

We begin by considering whether the first prong of the Erie County test—the public agency prong—has been met. The prevailing wage law covers contracts involving each of four specific public entities: the state, a public benefit corporation, a municipal corporation or a commission appointed pursuant to law (see Labor Law § 220 [2]). It is undisputed that BVFD is a fire corporation as defined by the Not-For-Profit Corporation Law, and it is not one of the public entities named in the statute. Nevertheless, the Commissioner determined that BVFD could be deemed “the functional equivalent” of a “municipal department” within the meaning of the Labor Law. In doing so, the Commissioner considered, among other things, that volunteer fire corporations receive immunity for negligence in extinguishing fires just like district and municipal fire corporations; members of volunteer fire corporations enjoy many of the same benefits as public service employees, including immunity from liability in performance of their duties; and volunteer fire corporations are statutorily under the supervision of the municipality they service.

The “functional equivalent” test, however, was rejected by this Court in Matter of New York Charter School Assn. v Smith (15 NY3d 403 [2010]). There, the DOL deemed charter schools “public benefit corporations” because the schools serve a valuable public purpose and their existence is the result of a charter issued by a state or local municipal entity. Given those factors, the DOL determined that charter schools met the requirements established by the courts of this State for public work projects. We rejected that argument because while charter schools, like volunteer fire corporations, may be “quasi-public” in nature, they are not a specified public entity and thus, do not fit within the ambit of the statute {id. at 410).

Had the legislature intended to include volunteer fire corporations under the statute, it could easily have done so. Notably, in 2007, the legislature expanded the statute’s coverage to include contracts involving other types of entities, but only when it can be shown they were acting on behalf of the public entity (Labor Law § 220 [2]; see Charter School Assn., 15 NY3d at.410). Indeed, certain volunteer fire department contracts may fall under the prevailing wage law based on the amendment language. At the time of this contract, however, the 2007 amendment of the prevailing wage law did not exist.

The Commissioner argues alternatively that the service agreements entered into with the Village trigger the prevailing wage requirement. However, these contracts are for emergency services pursuant to Village Law § 4-412 (9). That provision empowers a village to contract with the local fire corporation for the “furnishing of fire protection within the village” {id.). The service agreements do not include any provision contemplating the work involved here: the construction of a new firehouse (see Charter School Assn., 15 NY3d at 409). Thus, the service agreements are not a contract for public work within the meaning of the prevailing wage law.

Because of our determination, we need not reach the issue of whether the construction project meets the criteria of a “public work” under the second prong of the prevailing wage law test.

Accordingly, the judgment of the Appellate Division should be reversed, with costs, the petition should be granted and respondent’s determination should be annulled.

Chief Judge Lippman (dissenting).

Article I, section 17 of our State Constitution commands that

“[n]o laborer, worker or mechanic, in the employ of a contractor or sub-contractor engaged in the performance of any public work . . . [shall] be paid less than the rate of wages prevailing in the same trade or occupation in the locality within the state where such public work is to be situated, erected or used.”

The provision says absolutely nothing about public agency contracting; it simply requires that the prevailing wage be paid to workers engaged in the performance of “any public work.” Conditioning payment of the prevailing wage upon the existence of a contract with a public agency, is an interpolation traceable instead to the legislature, which, in implementing article I, section 17, provided that “[e]ach contract [for a public work] to which the state or a public benefit corporation or a municipal corporation or a commission appointed pursuant to law is a party . . . and which may involve the employment of laborers, workers or mechanics” would trigger the prevailing wage requirement (Labor Law § 220 [2], [3]). Although this language could have been understood differently, it was judicially read as limiting the prevailing wage requirement to work contracted for by a public agency (see Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532 [4th Dept 1983], affd 63 NY2d 810 [1984]). And, while this construction was dicta in Erie County—a case which turned entirely upon whether the contracted for project qualified as a public work (94 AD2d at 537-540)—it has stuck, with results, likely unforeseen, that are now generally acknowledged to have been incompatible with the categorical constitutional command that workers employed on public works be paid the prevailing wage. In Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor (223 AD2d 285 [1996]), the most commonly cited example of this disjunction, a highway ramp constructed by a private party pursuant to a State Department of Transportation permit was found to be a public work (id. at 287), but the Appellate Division was constrained to deem it immune from section 220’s prevailing wage requirement because, notwithstanding the state permit and the contemplated state ownership of the ramp once completed, the State had not itself contracted for the improvement (id. at 288).

To address what is now commonly referred to as the “loophole” created by section 220’s original public agency contract requirement, the statute was amended in 2007 to provide, in substance, that that requirement could be met not only by the already specifically enumerated public entities, but also by third parties contracting for a public work on a public entity’s behalf (see Labor Law § 220 [2] [as amended by L 2007, ch 678]).

The contract for the construction of the new Bath firehouse was entered into by the Bath Volunteer Fire Department (the BVFD) and R-J Taylor General Contractors, Inc. in 2006. It was, then, not subject to section 220’s “loophole” closing amendment. Had it been, it is clear that it would have qualified as a prevailing wage trigger, since it was plainly a contract for a public work—a firehouse having as its purpose the provision of a quintessentially governmental service under municipal control (see N-PCL 1402 [e] [l])—and was executed by a party (the BVFD) duly found by the Commissioner, after an evidentiary hearing at which the Village of Bath’s close financial and consultative involvement with the firehouse construction project was set upon the record, to have been contracting on behalf of a municipal entity.

The question thus arising is whether respondent Commissioner should be deemed to have erred when, in September 2010—that is to say, subsequent to section 220’s remedial amendment and the attendant recognition of the preamendment statute’s inadequacy (see Governor’s Mem approving L 2007, ch 678, 2007 NY Legis Ann at 425)—she construed the pre-amendment statute to capture, as an entity capable of triggering the prevailing wage requirement, a fire corporation, clearly acting in the stead of and for the benefit of a statutorily covered municipal entity, and doing so for the frankly acknowledged purpose of avoiding the prevailing wage requirement. While plugging a legislative loophole is ordinarily a legislative task and, as such, not one appropriate for an administrative agency, the situation confronting the Commissioner was not so clear-cut. The Commissioner was charged with enforcing a statute that in its pre-amendment form was, as it had been read, demonstrably unequal to and, indeed, an occasional impediment to achieving the constitutional objective of assuring that workers employed on public works projects would be paid the prevailing wage. The liberty that the Commissioner took with the statute’s application—employing the concept of functional equivalency to treat the BVFD as a municipal entity within the statutory enumeration—does not in this unusual legal and temporal context appear at all unreasonable as a means of achieving what the statute, in implementing article I, section 17 of the State Constitution, was supposed to, but sometimes failed to, accomplish because of its legislatively acknowledged “loophole.”

Having said this, I acknowledge that the rules of statutory construction, acontextually deployed, plausibly support the result the Court has reached. The statute said what it said in 2006 and its enumeration of entities capable of triggering the prevailing wage requirement admits of being understood as exclusive, if one’s understanding is guided solely by the commonly applied statutory construction maxim that what the legislature did not include when it undertook to describe the situations to which an enactment would apply, it intended to omit (see e.g. Walker v Town of Hempstead, 84 NY2d 360, 367 [1994]; Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205, 208-209 [1976]).

But, leaving aside the circumstance that, as has been clear since the statute’s 2007 “loophole” patching amendment, the omission which the Court now vests with decisive import, was not intentional but simply attributable to a failure to anticipate a device by which the prevailing wage mandate could and would be circumvented by public agencies, application of the relied upon maxim does not require today’s constitutionally dissonant redux of the Pyramid anomaly. This is because it is clear that, as the Commissioner found, the Village of Bath—a municipal entity indisputably covered by the unamended statute’s enumeration—itself triggered the prevailing wage requirement when, in the annual contract pursuant to which it retained the services of the BVFD, it agreed to increase BVFD’s fee by $150,000—an uncommonly large ongoing commitment for a small municipality—for the clearly understood purpose of amortizing the debt to be assumed by the BVFD in connection with its financing of the construction of the Bath firehouse. While it is the majority’s view that the subject services contract was for services only, and it is true that the contract did not expressly provide that the additional funding was to be applied to pay for the firehouse, the factual record made at the administrative hearing leaves not the slightest doubt that the contract did contemplate in a most concrete way the construction of the new village firehouse.

The chartering of a school, this Court has held, is not an agreement susceptible of description pursuant to Labor Law § 220 (2) as one “which may involve the employment of laborers, workers or mechanics” and thus may not occasion the applicability of the prevailing wage (Matter of New York Charter School Assn. v Smith, 15 NY3d 403, 409 [2010]). But, as the Court simultaneously acknowledged, an agreement pursuant to which money is paid for contemplated construction is quite different (id., citing Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205 [3d Dept 1990], affd 76 NY2d 993 [1990]; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127 [3d Dept 1991]). When public entities enter into agreements involving, even remotely, public payment for construction, the threshold for public entity contracting within the description of Labor Law § 220 (2) has been deemed to have been crossed (see e.g. Matter of Bridgestone/Firestone, Inc. v Hartnett, 175 AD2d 495 [3d Dept 1991] [warranty purchased on the State’s behalf and eventually used to pay for a roof repair held to satisfy the public agency contracting requirement]). And, this is in keeping with the often adverted to admonition that section 220 “is to be interpreted with the degree of liberality essential to the attainment of the end in view,” namely, that the State’s territorial subdivisions will be held “to a standard of social justice in their dealings with laborers, workmen and mechanics” (Bucci v Village of Port Chester, 22 NY2d 195, 201 [1968] [internal quotation marks omitted]). It cannot be consistent with that admonition for the Court to hold, as it now does, that service agreements requiring annual payments by a municipality of public monies in substantial additional increments, explicable and explained in the extensive administrative record only as amounts necessary to service debt incurred in the construction of a village firehouse, are not contracts which “may involve the employment of laborers, workers or mechanics,” and thus are not contracts for public work within the meaning of the Labor Law.

The confirmed factual finding of the Administrative Hearing Officer was that “the municipalities, [while] aware of and supporting the construction of a new firehouse, specifically agreed to increase the payments under the fire protection service agreement in amounts sufficient to fund its construction and loan amortization.” It is only by overlooking this unreviewable finding (see Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 230 [1974] [“the doctrine is well settled, that neither the Appellate Division nor the Court of Appeals has power to upset the determination of an administrative tribunal on a question of fact”] [internal quotation marks omitted]), that the Court today manages to grant a state subdivision a dispensation from the prevailing wage law.

I would affirm the well-considered decision and order of the Appellate Division confirming the Commissioner’s determination and dismissing the petition.

Judges Graffeo, Read and Smith concur with Judge Pigott; Chief Judge Lippman dissents and votes to affirm in an opinion; Judge Rivera taking no part.

Judgment reversed, with costs, petition granted and respondent’s determination annulled.

      . This provision states in relevant part that special Type B “fire corporations,” such as the BVFD, are subject to “the control of the city, village, fire district or town authorities having, by law, control over the prevention or extinguishment of fires therein” (N-PCL 1402 [e] [1]).

      . The Chief of the BVFD acknowledged at the administrative hearing that “the reason we [the BVFD] were owning the station[ ] [was] because we could significantly lower the labor rates . . . .”