author: Fahey, J. Garcia, J.

text:
    [68 NE3d 671, 45 NYS3d 852]
    In the Matter of ACME Bus Corp., Appellant, v Orange County et al., Respondents.
    Argued October 20, 2016;
    decided November 22, 2016

      POINTS OF COUNSEL

      Hamburger, Maxson, Yaffe & McNally, LLP, Melville (Richard C. Hamburger, David N. Yaffe and Andrew K. Martingale of counsel), for appellant.

      Langdon C. Chapman, County Attorney, Goshen (Carol C. Pierce of counsel), for Orange County and another, respondents.

      Dickover, Donnelly & Donovan, LLP, Goshen (David A. Donovan of counsel), for Quality Bus Service, LLC, respondent.

      Finkelstein & Partners, LLP, Newburgh (Joseph P. Rones of counsel), for VW Trans, LLC, respondent.
   OPINION OF THE COURT

Fahey, J.

In this CPLR article 78 proceeding to annul Orange County’s award of transportation contracts to Quality Bus Service, LLC and VW Trans, LLC, the question presented is whether the award was arbitrary and capricious. We hold that it was. We address whether evaluation criteria for public bids submitted pursuant to General Municipal Law § 104-b must be followed as set out in the requests for proposals or if the criteria may be changed, after the receipt of proposals, by the government agency responsible for evaluating them.

L

In May 2013, the Orange County Department of General Services issued a request for proposals (RFP) from companies to provide transportation of children receiving preschool special education services in three transportation zones in Orange County. The County solicited proposals for three-year contracts for each zone, with options for two successive one-year extensions. The RFP evaluated proposals in nine categories, with a certain number of points assigned to each category, for a total of 100. The first eight categories measured performance by various criteria, while the ninth, worth 20 points, evaluated cost.

The RFP stated that “[t]he Offeror submitting the lowest cost proposal will be awarded 20 points. Awarding of points to the remaining Offerors will be based on percentage to points ratio.” In the same sentence, the RFP explained by way of “example” that “if the total cost [difference] between the lowest Offeror and the next lowest Offeror is 10% then Offeror two will have 2 points deducted from the maximum score of 20.”

The RFP further provided that

“[t]he submission of a proposal implies the Offeror’s acceptance of the evaluation criteria and Offeror’s acknowledgment that subjective judgments must be made by the Evaluation Committee. . . . The County reserves the right to: accept other than the lowest priced offer, waive any informality, or reject any or all proposals, with or without advertising for new proposals, if in the best interest of the County.”

Quality submitted a cost proposal for each of the three zones. VW submitted a cost proposal for the third zone only. ACME Bus Corp., which held the contract at the time, submitted two alternative proposals, one containing pricing for each of the zones, and one providing an estimate for all three zones combined, at a discounted price. Under both proposals, ACME had the highest cost for the three zones.

In July 2013, Orange County awarded transportation contracts for the first two zones to Quality and for the third zone to VW. Transportation services pursuant to the contracts commenced on September 1, 2013, and continued until August 31, 2016; the County then exercised its first option to extend the contracts, which now expire on August 31, 2017.

After it was notified of the award, ACME commenced this article 78 proceeding against the County, Quality, and VW, seeking to vacate the award of the contracts “as arbitrary and capricious, . . . affected by an error of law, and . . . made in violation of lawful procedure.” ACME alleges a number of defects in the County’s process of choosing its transportation providers, only one of which is pertinent here.

The County disclosed the proposals submitted by Quality and VW, as well as the score sheets used by the County to evaluate the proposals. As the parties interpret these documents, Quality had the highest overall scores for the first two zones, while VW had the highest total score for the third. In the cost category, ACME had been awarded only eight points out of 20, i.e. a 12-point deduction. ACME contended that if it had been awarded the RFP’s “percentage to points ratio” deduction for cost, it would have received only a 5.4-point deduction and achieved a higher total score than VW in the third zone.

The County, seeking dismissal of the proceeding, submitted an affidavit of the employee of the County’s consultant transportation management company who had been responsible for scoring the RFP’s cost category. The employee wrote that

“[i]n evaluating the cost proposals and determining a point to percentage ratio upon which to evaluate and score the three offerors, it was determined that we could not use the example as set forth in the RFP . . . because in Zone 3, there was only a 7% difference in price between the lowest bidder VW and the next lowest bidder Quality. . . . Therefore, if we used the example set forth in the RFP i.e. 2 points per 10% difference, we would not have been able to deduct any points from Quality.”

The transportation management company employee then stated that “it was determined that the County, in scoring the offerors on price . . . would use a 2 point deduction for every 4% difference in price, rounding to the nearest whole number,” instead of a two-point deduction for every 10%.

Supreme Court dismissed the proceeding, ruling that ACME “ha[d] failed to sustain its burden of demonstrating that the [County’s] determination lacked a rational basis or that an actual impropriety, unfair dealing or some other violation of statutory requirements occurred.” The court “decline[d] petitioner’s tacit invitation to redo the . . . scoring of the proposals,” stating that “the scorers had a rational basis for their determination and the court’s inquiry there ends.”

The Appellate Division affirmed (Matter of ACME Bus Corp. v Orange County, 126 AD3d 688 [2d Dept 2015]).

We granted ACME leave to appeal (26 NY3d 906 [2015]), and now reverse.

I I—I I—I

ACME contends that the County’s scoring mechanism in the cost category deviated from the formula stated in the RFP, and that its award was therefore arbitrary and capricious within the meaning of CPLR 7803 (3). We agree.

The contracts at issue here, “requiring] the exercise of specialized or technical skills, expertise or knowledge” (Matter of Omni Recycling of Westbury, Inc. v Town of Oyster Bay, 11 NY3d 868, 869 [2008]), were not subject to the competitive bidding statute (see General Municipal Law § 103), but were awarded under General Municipal Law § 104-b. That statute requires contracts to

“be procured in a manner so as to assure the prudent and economical use of public moneys in the best interests of the taxpayers of the political subdivision or district, to facilitate the acquisition of goods and services of maximum quality at the lowest possible cost under the circumstances, and to guard against favoritism, improvidence, extravagance, fraud and, corruption” (General Municipal Law § 104-b [1] [emphasis added]).

To further these objectives, the statute specifies that the County “shall adopt internal policies and procedures governing all procurements of goods and services which are not required to be made pursuant to the competitive bidding requirements . . . or of any other general, special or local law” {id. [emphasis added]). The written policy adopted by the County pursuant to this requirement specifies, in part v (procurement of professional services), that the County’s award of a contract pursuant to an “RFP must be made in accordance with the evaluation criteria specified in the RFP” (County of Orange Procurement Policy part V [E] [Mar. 2012] [emphasis added]).

Here, the County deviated from the criteria specified in its RFP when it evaluated the proposals received pursuant to its request. The emphatic language used in the RFP’s paradigm of a percentage to points ratio—stating that if a 10% cost difference exists between the lowest offeror and the next lowest, then the latter “will have 2 points deducted from the maximum score of 20”—makes clear that the “example” was meant to explain that a percentage to points ratio is one in which a one percent cost difference translates to one percent of the total number of points allocated to cost. Instead, the County used a two-point deduction for every 4% difference in price. Applying this new formula, a one percent cost difference corresponded to 2.5%, rather than one percent, of the number of points assigned to cost.

The County abandoned the cost formula it had promised to apply and instead created a new formula that disfavored ACME. This was arbitrary and capricious for two, independent reasons.

First, the County’s failure to follow the cost category evaluation criteria outlined in the RFP was in violation of the County’s own procurement policy, stating that the “award . . . must be made in accordance with the evaluation criteria specified in the RFP” (emphasis added). We have repeatedly held in a variety of contexts that an agency acts arbitrarily when it fails to comply with its own rules (see e.g. Matter of Vukel v New York Water & Sewer Mains, 94 NY2d 494, 497 [2000]; Matter of Frick v Bahou, 56 NY2d 777, 778 [1982]). The same principle applies to the County here.

The second reason has significance that extends beyond the present case. In Matter of AAA Carting & Rubbish Removal, Inc. v Town of Southeast (17 NY3d 136 [2011]), we held that a municipal contract, awarded pursuant to the competitive bidding statute, should be vacated if the municipality “accept [ed] a higher bid based on subjective assessment of criteria not specified in the bid request,” because such an action “gives rise to speculation that favoritism, improvidence, extravagance, fraud or corruption may have played a role in the decision” (AAA Carting & Rubbish Removal, Inc., 17 NY3d at 144). We conclude that the policy grounds articulated in AAA Carting with respect to the competitive bidding procedures of General Municipal Law § 103 apply to the procedures under section 104-b at issue here.

We now hold that an award of a contract under General Municipal Law § 104-b is arbitrary and capricious if the municipality evaluates a proposal using a standard that deviates from a standard expressly set forth in the RFR Such a deviation betrays a lack of “sound basis in reason” for the determination (Matter of Murphy v New York State Div. of Hous. & Community Renewal, 21 NY3d 649, 652 [2013]; see generally Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]).

Our holding promotes the goals of fairness and the prevention of fraud and corruption in the bidding process. The offeror is given notice of the standards to be applied and acts accordingly. When different standards are applied, the process is subverted. Changing the expressly defined rules midway gives rise to speculation of fraud or corruption.

The County would have us distinguish General Municipal Law §§ 103 and 104-b in this regard. The statutes, however, are alike in a fundamental legislative purpose. The primary purposes of competitive bidding under General Municipal Law § 103 “are the (1) protection of the public fisc by obtaining the best work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts” (AAA Carting & Rubbish Removal, Inc., 17 NY3d at 142 [internal quotation marks omitted and emphasis added]). Similarly, under General Municipal Law § 104-b, services that are not required by law to be procured by competitive bidding must nevertheless “be procured in a manner so as ... to guard against favoritism, improvidence, extravagance, fraud and corruption” (General Municipal Law § 104-b [1]; see also Letter in Support from Francis J. Pordum, Assembly Sponsor, July 11, 1991, Bill Jacket, L 1991, ch 413 at 22). It is true that, pursuant to General Municipal Law § 103, the contract must be awarded to the lowest responsible bidder, whereas under General Municipal Law § 104-b a contract may be awarded to one other than the lowest responsible dollar of-feror if the municipality can justify the award (see General Municipal Law § 104-b [2] [e]). However, insofar as the prevention of favoritism, fraud and corruption is concerned, the purpose is identical. The policy reasoning underlying our decision in AAA Carting & Rubbish Removal, Inc.—“guarding] against such factors” (AAA Carting & Rubbish Removal, Inc., 17 NY3d at 144)—is equally applicable in the General Municipal Law § 104-b context under the circumstances here, where a municipality evaluates a proposal by a standard which is not consistent with that set forth in the RFP.

The County emphasizes that it was changing its standards to ensure that the lowest cost proposal was accepted. If the County believed that the RFP’s methodology did not adequately reflect the importance of the cost consideration, its only option was to reject all the proposals and start over with an RFP that better reflected the weight to be given to cost (see AAA Carting & Rubbish Removal, Inc., 17 NY3d at 144). The County could not change its own rules mid-game, no matter the benefits. Indeed, to allow such conduct would be an invitation to impropriety. It would give any corrupt municipal employee a blueprint for avoiding judicial review of bid-rigging: first, advertise one set of standards in the request for bids; then, after the proposals have been received and the sealed portions opened, devise new standards to enable selection of your favored company, while making sure that your selection seems superficially reasonable from an economic point of view.

The dissent’s suggestion that it is improper to overturn the County’s award where there is no evidence of “improper motives” (dissenting op at 430) fails to recognize that awards may be overturned even without evidence of actual impropriety. The test is whether the award is “irrational, dishonest or otherwise unlawful” (AAA Carting & Rubbish Removal, Inc., 17 NY3d at 142, quoting Matter of Conduit & Found. Corp. v Metropolitan Transp. Auth., 66 NY2d 144, 149 [1985]). We overturn actions in which agencies fail to comply with their own rules not only to combat actual unfairness, but also to uphold the public’s perception that these agencies act fairly in awarding contracts. Moreover, the dissent’s hypothesis that “[h]ad Orange County provided no example, it could have justified its choice of the actual formula as rational” (dissenting op at 431) lacks merit, because the meaning of a percentage to points ratio is commonly understood, with or without an example. The new formula used by the County in the dissent’s hypothetical scenario would still represent a material change from the RFP criterion.

In sum, the County acted arbitrarily as a matter of law by accepting proposals based on a method of evaluation that is inconsistent with the standard set out in its RFP. Its determination must be set aside. There is no necessity for us to consider ACME’s remaining arguments.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court for further proceedings in accordance with this opinion.

Garcia, J.

(dissenting). ACME, an unsuccessful bidder, seeks to vacate a contract that Orange County awarded to the lowest bidder after evaluating all proposals pursuant to a proper RFP. ACME bore the burden here of demonstrating “actual impropriety, unfair dealing or some other violation of statutory requirements when challenging an award of a public contract” (Matter of Acme Bus Corp. v Board of Educ. of Roosevelt Union Free School Dist., 91 NY2d 51, 55 [1997] [internal quotation marks omitted]). Because ACME has failed to demonstrate that this contract was awarded arbitrarily and capriciously or without rational basis, I would decline to set aside Orange County’s decision.

ACME submitted two proposals, one with pricing for each zone separately and one with combined, discounted pricing for all three zones. There is no dispute that in terms of cost— under both proposals—ACME was the most expensive. Nevertheless, the majority faults Orange County for awarding the contract to the lower bidder because of what it characterizes as a wholesale “deviation] from the criteria specified in its RFP” (majority op at 424). A review of the language of the RFP and the review by Orange County of the proposals shows that this was not the case.

The RFP stated that the cost category would be worth 20% of the overall score, demonstrating Orange County’s assessment of the weight to be given to this important factor. Further, the RFP noted this category would be scored on a “percentage to points” ratio and provided an example of how this ratio would be applied:

“The Offeror submitting the lowest cost proposal will be awarded 20 points. Awarding of points to the remaining Offerors will be based on percentage to points ratio; example: if the total cost between the lowest Offeror and the next lowest Offeror is 10% then Offeror two will have 2 points deducted from the maximum score of 20” (emphasis added).

The majority describes the example’s language as “emphatic” (majority op at 424). But the language is far from emphatic, nor does it contain any language that supports the majority’s interpretation of the example as mandatory. The RFP could have stated that “the percentage to points ratio will use the following formula.” Instead, the RFP stated that it would use a percentage to points ratio, and then provided a hypothetical example of its application. While Orange County did not apply the formula given in the example, a rational basis existed for applying the ratio used, and the failure to do so is not equivalent to changing the RFP’s criteria (see Awl Indus., Inc. v Triborough Bridge & Tunnel Auth., 41 AD3d 141, 142-143 [1st Dept 2007]).

The scorer of the cost category explained that the formula actually applied differed from the example provided in the RFP in an attempt to “establish a point to percentage ratio that could be applied to each and every cost proposal in each zone fairly and accurately representing the proposed costing impact to the County” in light of a very small difference in price between the lowest bidder VW and the next lowest bidder Quality. The record supports this argument. Orange County rationally decided that had it applied the ratio as demonstrated in the RFP example, the significant price differential between ACME and the other proposals would not have been adequately reflected and so the differential in the points awarded would not have accurately reflected the weight to be given to this cost consideration. As the example was just that—an example—the decision to deviate from the hypothetical was not a failure to follow the agency’s own rules (see majority op at 425) and was not arbitrary and capricious. Moreover, the formula actually used by Orange County ensured that the final awards accurately reflected cost. Had the formula in the example been used instead, the proposals would have been scored in a way that did not appropriately “assure the prudent and economical use of public moneys in the best interests of the taxpayers” (General Municipal Law § 104-b [1]). Accordingly, Orange County’s decision not to apply the percentage to points ratio in the exact manner described in the RFP’s example had a rational basis and ACME has failed to demonstrate “favoritism, improvidence, fraud [or] corruption stemming from the process used to award the subject school transportation contracts” (Acme Bus Corp., 91 NY2d at 56 [internal quotation marks omitted]).

Orange County’s actions here were entirely consistent with the guiding principles of General Municipal Law § 104-b governing the RFP process, which is intended to be less stringent than section 103’s competitive bidding procedures (see Matter of Quest Diagnostics Inc. v County of Suffolk, 21 Misc 3d 944, 951 [Sup Ct, Suffolk County 2008] [noting that the legislature intended by means of General Municipal Law § 104-b to “afford( ) the municipalities a measure of discretion in determining what constitutes their best interests”]; Awl Indus., 41 AD3d at 142-143 [“(W)hile it is true that all who submit proposals (under RFPs) must be treated fairly, there is no legal requirement that a final contract must conform to the original RFP”]). The majority relies heavily on cases discussing contracts awarded pursuant to General Municipal Law § 103, which is inapplicable to the RFP process here. The fact that section 104-b bestows the counties with increased flexibility in the conduct of their RFPs than that which applies under section 103 is unacknowledged by the majority. Even the cases applying section 103 on which the majority relies, however, focus on preventing municipalities from awarding a contract to a “higher bid” (majority op at 425, 426-427, citing Matter of AAA Carting & Rubbish Removal, Inc. v Town of Southeast, 17 NY3d 136, 144 [2011]). While we agree with the majority that section 104-b, like section 103, focuses on protection of the public fisc and prevention of fraud, the majority’s holding undoes an award that protected the former without any evidence at all that Orange County acted with improper motives.

In addition, the majority’s analysis of Orange County’s procurement policy overlooks the fact that, had Orange County awarded the contract to ACME, it would have had to address the requirements of section 104-b. Section 104-b mandates a written justification when an award does not go to the lowest priced proposal that must address “how such an award furthers the public good; assures the prudent use of taxpayers’ money; ensures that the purchased goods are of the best quality at the lowest possible cost in light of the circumstances existing; and guards against favoritism, extravagance, fraud and/or corruption” (County of Orange Procurement Policy part V [B] [Mar. 2012]). An award to ACME, as a higher bidder, would have required Orange County to submit such a written justification addressing those factors, yet the record does not demonstrate that Orange County would have been able to articulate proper justifications sufficient to comply with this policy, in light of the $68,000 per month cost difference between ACME and VW. Its only justification would have been its inability to deviate from an example of the formula provided in the RFP despite the fact that it did not accurately account for cost differential.

It seems unfair to suggest that refusing to overturn as arbitrary and capricious a county’s use of a ratio that more accurately reflects the cost differential among bidders, and results in the award of the relevant contract to the lowest bidder, will result in a green light for municipal employees to engage in impropriety (majority op at 427). Rather, the majority’s holding empowers losing bidders to sue counties immediately upon the award of the contract to a lower bidder, and will require counties to factor into their budgets the cost of CPLR article 78 proceedings and Freedom of Information Law requests following the conduct of any RFP process (see e.g. Matter of Acme Bus Corp. v County of Suffolk, 136 AD3d 896 [2d Dept 2016]; Matter of Wilson Omnibus Corp. v Fallsburg Cent. School Dist., 167 AD2d 803 [3d Dept 1990]).

Had Orange County provided no example, it could have justified its choice of the actual formula as rational, indeed prudent. Perhaps the only lesson from today’s decision is that counties should leave themselves the flexibility afforded by section 104-b by not providing any such guidance or by making clear that any example is just that and not an invitation for costly litigation that ultimately undermines the very purpose of that statute.

Chief Judge DiFiore and Judges Rivera, Abdus-Salaam and Stein concur; Judge Garcia dissents and votes to affirm in an opinion in which Judge Pigott concurs.

Order reversed, with costs, and matter remitted to Supreme Court, Orange County, for further proceedings in accordance with the opinion herein.

      . We are troubled by the fact that the County, in seeking to demonstrate to the Court that VW had the highest score for the third zone, cites pages from the record that contain single score sheets for that zone, and not the average of the scores.

      . As the transportation management company employee’s affidavit revealingly states, this was “a point to percentage ratio,” rather than the “percentage to points ratio” contemplated by the RFP.

      . The County, in trying to explain why it deviated from its own specification, provided contradictory explanations that lack a rational basis. In an email, the transportation management company employee claimed that she had awarded points in the cost category by deducting a certain number of points for every $10,000 difference between the cost proposals. Such a method bears no resemblance to a percentage to points ratio. Shortly thereafter, the same employee submitted the affidavit in which she stated that the County deducted two points for every 4% difference in price. In an attempt to justify this change, the employee alluded to “a 7% difference in price between the lowest bidder VW and the next lowest bidder Quality” in the third zone, and suggested that no points could have been deducted from Quality had the RFP’s formula been used. The reasoning is spurious. A 7% difference between VW and Quality in the third zone would have equated to a 1.4-point deduction to Quality, the second-lowest offeror, not a zero deduction, and this number could have been rounded down to a one-point deduction.
      Additionally, the record reflects that the County awarded 18 points to Quality for cost in the third zone. Under the formula that the County purportedly used, a 7% difference would have equated to a four-point deduction or 16, rather than 18, points for Quality in the third zone, bringing into question whether the County used that formula after all.

       Even if the proposals had been scored in complete compliance with the descriptive example provided in the RFP, ACME still would have scored lower in the cost category than Quality in zones 1 and 2. While ACME would have had a higher total score than VW in zone 3 under that formula, VW’s proposal still cost approximately $68,000 per month less than ACME’s in zone 3.


source: Caselaw Access Project

author: Abdus-Salaam, J.

license: Public Domain

text:
    [68 NE3d 679, 45 NYS3d 860]
    The People of the State of New York, Respondent, v Anthony Perkins, Appellant.
    Argued November 16, 2016;
    decided December 20, 2016

      POINTS OF COUNSEL

      Patterson Belknap Webb & Tyler LLP, New York City (Stephen P. Younger, Harry Sandick and Ryan M. Mott of counsel), and Lynn W.L. Fahey, Appellate Advocates, New York City (Erica Horwitz and Paul Skip Laisure of counsel), for appellant.

      Richard A. Brown, District Attorney, Kew Gardens (Nancy Fitzpatrick Talcott, Robert J. Masters, John M. Castellano and Joseph N. Ferdenzi of counsel), for respondent.
   OPINION OF THE COURT

Abdus-Salaam, J.

On this appeal, we must determine whether there was record support for the lower courts’ finding that two of the four lineups conducted were not unduly suggestive. We hold that there was not.

L

After defendant was identified as a suspect in several gunpoint robberies, the detective assigned to the case used the New York City Police Department’s photo manager system to create photo arrays with his picture. In both arrays relevant here, defendant and all five “fillers” had visible dreadlocks. Each of the four victims (AB, SP, MB and MH) chose defendant’s photo. No issue is raised on this appeal as to the reliability of these identifications. Approximately three weeks later, the case detective conducted lineups with the same four victims. It is undisputed that at the lineup, defendant was the only participant with long dreadlocks, which were plainly visible despite the hats provided to all of the men. Again, all four victims identified defendant. Defendant was arrested and indicted for several counts of robbery. Subsequently, he moved to suppress the identification procedures.

After a Wade hearing, Supreme Court granted defendant’s motion to suppress the lineup identifications with respect to two victims (AB and SP) but denied it with respect to the other two victims (MB and MH). The court found that defendant’s dreadlocks were “distinctive.” However, its conclusions of law as to the four lineup procedures differed solely based upon whether the relevant identifying witness had given a prior description of the perpetrator to police in which dreadlocks “figured prominently.” The court concluded that because AB and SP had described their assailant as having dreadlocks, when they viewed the lineup where defendant was the only one with this distinctive feature, the lineup was unduly suggestive. However, the court also concluded that because MB and MH had not mentioned dreadlocks to the police, the same lineup was not unduly suggestive as to them, despite the presence of the same distinctive feature. The court cited several cases from the Appellate Division in support of its conclusion that a distinctive feature renders a lineup unduly suggestive only if it “figured prominently” in the viewer’s prior description of the perpetrator to the police.

After an independent source hearing for AB and SP, the court concluded that the People had established an independent basis for them to make in-court identifications of defendant at trial despite the suppression of their lineups. During the trial, AB, SP and MH all identified defendant in the courtroom. MB did not. The jury acquitted defendant of the robbery counts with respect to AB and SP and convicted him of the counts with respect to MH and MB.

The Appellate Division affirmed, stating that the dreadlocks did not render the lineups unduly suggestive, because defendant’s “hairstyle was not part of the subject complainants’ descriptions of the perpetrator” and “was minimized by the fact that the participants all wore hats” (People v Perkins, 124 AD3d 915, 915 [2d Dept 2015]). A Judge of this Court granted defendant leave to appeal (25 NY3d 1205 [2015]), and we now reverse.

IL

At the outset, we note that whether a lineup is unduly suggestive is a mixed question of law and fact, and so long as there is record support for a suppression court’s conclusion, the issue is beyond our review (see People v McBride, 14 NY3d 440, 448 [2010]). Here, Supreme Court referenced a line of decisions from the Appellate Division which supported its different conclusions as to the four victims. Several Appellate Division cases have held that a defendant’s distinctive feature does not render a lineup unduly suggestive unless that feature figured prominently in the witness’s description (see e.g. People v Jordan, 44 AD3d 875, 876 [2d Dept 2007], lv denied 9 NY3d 1035 [2008]; People v Ryan, 45 AD3d 1363 [4th Dept 2007], mod on other grounds 12 NY3d 28 [2009]). The Second Circuit has also found that even where a defendant in a lineup has a distinguishing characteristic—in that case a black leather coat—the lineup may be unduly suggestive as to one viewer who has stressed that particular characteristic in giving a description to police but not to another who has not (see Raheem v Kelly, 257 F3d 122, 134 [2d Cir 2001]).

Though these cases from the Appellate Division suggest that a witness’s prior mention of a distinctive feature can be a determinative factor in a lineup’s suggestiveness, we hold that a bright-line rule in this area would be unworkable, and unwise. A lineup’s suggestiveness should not turn solely on whether a defendant’s distinctive feature figured prominently in a witness’s prior description. Rather, a witness’s prior description is but one factor a court should consider in determining whether the lineup is one that “create [s] a substantial likelihood that the defendant would be singled out for identification” (People v Chipp, 75 NY2d 327, 336 [1990]). Our review remains limited and deferential to the suppression court’s findings on this mixed question of law and fact. Indeed, as we have already stated in the context of showups, identifications “are by their nature fact-specific; no two are ever going to be exactly alike. ... To the extent we indulge in second-guessing reasonable decisions made by the lower courts when applying the broad principles by which we have advised them to evaluate [identifications], we only sow confusion” (People v Howard, 22 NY3d 388, 403 [2013]).

We apply the same principles here. We by no means propose that a lineup is unduly suggestive, as a matter of law, merely because a defendant has a different hairstyle than some or all of the fillers. We further decline to categorically state what features may be considered so “distinct” as to render a lineup unduly suggestive. But here, the courts below concluded that defendant’s dreadlocks were distinctive—so much so that they rendered the lineup unduly suggestive as to the two victims, AB and SP, who had mentioned the perpetrator’s hairstyle in their initial description to the police. This conclusion is supported by the lineup photographs introduced into evidence at the hearing, which clearly depict defendant as the only person with long, visible dreadlocks. We note that this problematic distinction was heightened because all four victims had viewed a photo array some time earlier that depicted all participants with dreadlocks. The lower courts’ conclusion that this same distinctive feature was not unduly suggestive for MB and MH was premised solely on their having not included dreadlocks as part of their descriptions. No other findings of fact were made that would distinguish the outcomes from one another. Since our holding here clarifies that a witness’s failure to mention a distinctive feature in his or her initial description is not necessarily the determinative factor in assessing a lineup’s sugges-tivity, here, we must conclude that there was no record support for the lower courts’ denial of suppression for the MB and MH lineups.

hH 1—i I—I

Both lineups should have been suppressed. Because MB was unable to identify defendant in court, and the lineup identification was the only evidence linking defendant to that incident, the robbery count relating to her must be dismissed. Since MH did identify defendant at trial, we remit that count to Supreme Court for an independent source hearing, should the People choose to proceed in that manner. In light of our decision on the lineups, we need not reach defendant’s remaining arguments. Accordingly, the order of the Appellate Division should be reversed, defendant’s motion to suppress the lineup identifications granted, the second count of the indictment dismissed, and the case otherwise remitted to Supreme Court for further proceedings in accordance with this opinion.

Chief Judge DiFiore and Judges Pigott, Rivera, Stein, Fa-hey and Garcia concur.

Order reversed, defendant’s motion to suppress the lineup identifications granted, the second count of the indictment dismissed, and case otherwise remitted to Supreme Court, Queens County, for further proceedings in accordance with the opinion herein.

      . Detectives also conducted lineups with several other victims in connection with this pattern of robberies. Those incidents were not tried in connection with these four.

      . Defendant’s further arguments about disparities in height, weight and age between him and the fillers are unnecessary for resolution of the issue before us, and, in any event, are unavailing. We recognize that “[t]here is no requirement . . . that a defendant in a lineup be surrounded by people nearly identical in appearance” (People v Chipp, 75 NY2d 327, 336 [1990]).


author: Rivera, J.

text:
    [68 NE3d 683, 45 NYS3d 864]
    Stonehill Capital Management LLC et al., Appellants, v Bank of the West et al., Respondents.
    Argued November 14, 2016;
    decided December 20, 2016

      POINTS OF COUNSEL

      Law Offices of Martin Eisenberg, New York City (Martin Eisenberg of counsel), for appellants.

      Katten Muchin Rosenman LLP, New York City (David A. Crichlow and Gregory C. Johnson of counsel), for Bank of the West, respondent.

      Hoguet Newman Regal & Kenney, LLP, New York City (Damian R. Cavaleri, Laura B. Hoguet and Jeffrey A. Miller of counsel), for Mission Capital Advisors, LLC, respondent.

      Richard Kibbe & Orbe LLP, New York City {Brian S. Fraser, Robyn H. Frumkin, Katherine Kern Harrington and Rachel S. Mechanic of counsel), for Loan Syndications and Trading Association, amicus curiae.
   OPINION OF THE COURT

Rivera, J.

Plaintiffs Stonehill Capital Management LLC, Stonehill Institutional Partners, L.P. and Stonehill Master Fund Ltd. (collectively Stonehill) are affiliated commercial entities that seek to enforce the auction sale of a syndicated loan against defendant Bank of the West (BOTW). BOTW concedes that it accepted Stonehill’s bid and then refused to transfer the loan, but claims it had no legal obligation to do so because the parties never executed a written sales agreement and Stonehill failed to submit a timely cash deposit. However, these prerequisites are not conditions precedent to formation of the parties’ contract and do not render their agreement unenforceable. Therefore, Stonehill has established its entitlement to summary judgment.

L

BOTW, a lender of various nonperforming mortgage loans, retained codefendant Mission Capital Advisors, LLC to manage a competitive online sealed-bid auction of several of these loans. As part of the bid process, in March 2012 Mission issued an Offering Memorandum (Memorandum), which announced its solicitation of indicative bids for the purchase of the loans, individually or in any combination, and invited non-contingent final offers. The auction portfolio included a syndicated loan— with an aggregate principal value of $8,787,141—known to the parties as the “Goett Loan.” The Goett Loan is the underlying subject of the parties’ dispute.

The Memorandum set forth information about the loan portfolio and the asset pools contained therein. In the description of the “Loan Sale Process,” the Memorandum informed interested parties that

“[a]fter receipt of [the] indicative bids, Mission, in conjunction with the Seller, will select Final Bidders to complete final due diligence before submitting non-contingent offers on the Final Bid Date (the acceptance of which by Seller will require immediate execution of pre-negotiated Asset Sale Agreement (s) by Prospective Bidder accompanied by a 10% non-refundable wire funds deposit).”

The asset sale agreement would be made available for review to final bidders. The Memorandum also included the following disclaimer:

“The seller reserves the right, at their sole and absolute discretion, to withdraw any or all of the assets from the loan sale, at any time. . . . Only those representations and warranties that are made by the seller to a prospective bidder in a definitive, executed loan sale agreement shall have any legal effect” (capitalization modified).

After Stonehill expressed an interest in the Goett Loan, Mission forwarded a proposed asset sale agreement, referred to as the “Loan Sale Agreement” (LSA). Two days later, on April 18, Stonehill submitted to Mission a $2,363,142 final bid on the Goett Loan. The same day, by separate correspondence, Stone-hill informed Mission that the LSA was not the proper document to effectuate a syndicated loan transfer, and offered to “either make the minor modifications required to that document to account for the agent’s approval process, etc, or use an LSTA syndicated loan document, whichever the Seller prefers.”

Mission notified Stonehill by telephone on April 20 that it had submitted the winning bid for the Goett Loan. On April 23, Stonehill sent Mission a modified redlined version of the proposed LSA, purportedly at Mission’s request, containing what Stonehill considered to be the necessary technical changes that would enable the LSA to effectuate the sale and assignment of the Goett syndicated loan. Mission’s representative replied that it was “a substantially larger markup than I was expecting to see. I can’t actually say that our lawyer is going to use it.” Then, on April 24, BOTW’s counsel sent Mission an email stating that if the Goett Loan was a syndicated credit “the LSTA form agreement is actually pretty good,” to which Mission’s representative responded that he was “99.9% certain that [Stonehill is] right about this being a syndicated credit.”

On Friday, April 27, Mission emailed Stonehill written confirmation that BOTW agreed to the Stonehill bid. The correspondence stated:

“Subject to mutual execution of an acceptable [LSA], [BOTW] has agreed to the Stonehill. . . bid of:
“Mixed Portfolio - $8,787,141 UPB
“Purchase Price - $2,363,142
“As discussed, counsel representing [BOTW] . . . will be sending you an executable [LSA] ... by Tuesday, May 1st. An executed signature page and 10% non-refundable deposit is expected no later than 2:00 pm EDT on Wednesday, May 2nd” (emphasis omitted).

The email also included wiring instructions for the deposit and closing.

That same day, BOTW’s counsel sent Stonehill an email in which counsel explained that he was previously unaware that the Goett Loan was syndicated and that he “prefer [red] to use LSTA documentation for syndicated credits.” He pushed for an early May closing on the loan transfer because “[m]ost trade agents won’t approve trades at the end of the month” and said that he would send the trade agreements the following week.

On Friday, May 4, BOTW’s counsel was still preparing the documents and initiated a series of email exchanges to move the deal ahead. Counsel first informed Stonehill that he was working on sending the documents by Monday and requested that, “[i]n the meantime,” Stonehill send him the term sheet from a previous trade specified by counsel. Stonehill wrote back that the requested term sheet was confidential but that Stonehill would provide an LSTA form reflecting the terms of the Goett Loan transaction, stressing, “[w]e hope that this arrangement will be acceptable to you and will enable us to move forward to close quickly.” BOTW’s counsel responded that he “assumed as much” and it was “fine to proceed as [Stonehill] indicated.”

As promised, two days later Stonehill sent the LSTA form to BOTW’s counsel with the terms for the loan transaction and related documents. In this same correspondence, Stonehill informed counsel that it was forwarding the credit agreement transfer forms to Wells Fargo, the credit agreement agent, ánd this was a necessary step to complete and record the transfer of the Goett Loan to Stonehill.

On May 8, Stonehill informed BOTW’s counsel that Wells Fargo approved the credit transfer forms. Under the credit agreement, Stonehill needed the promissory note endorsed in order to close on the Goett Loan, so Stonehill also sent counsel a standard allonge form for the promissory note on the Goett Loan issued to BOTW.

Around this time, BOTW learned that Stonehill was refinancing the Goett Loan. This would apparently increase the value of the loan, which led BOTW to consider its options with respect to the loan sale. An internal BOTW memorandum circulated on May 10 detailed both the refinancing and the auction sale to Stonehill. The memorandum explained that

“there is a question as to the direction [BOTW] should take; sale or not to sale [sic], given that no formal written commitments are executed between [BOTWl/Mission Capital arid Stonehill that would obligate [BOTW] to sale [sic] the Goett Note. Fact remains that [BOTW] acted in good faith and has verbally committed to the Goett Note sale to Stone-hill.”

It further stated that Stonehill had proceeded with various steps to finalize the refinancing and Stonehill funding was highly likely.

On May 14, Stonehill contacted BOTW’s counsel for an update. Counsel, apparently surprised by Stonehill’s inquiry, forwarded the email to Mission. Then on May 16, Mission informed Stonehill by telephone that BOTW would not proceed with the trade. Over a week later, on May 25, Mission forwarded to Stonehill a May 18 email from BOTW to Mission declaring that it would not sell to Stonehill:

“[BOTW] will not proceed with this trade because it has no obligation to do so. There are no agreements (oral or written) between [BOTW] and Stone-hill Capital. The Offering Memorandum specifically permits [BOTW] to withdraw any loan from the auction at any time. Specifically, it states ‘The Seller reserve [s] the right, at their sole and absolute discretion, to withdraw any or all of the assets from the loan sale, at any time.’ In addition, Mission Capital’s bid response e-mail to Stonehill conditioned [BOTW’s] response upon the execution of a definitive loan sale agreement.”

As a consequence of the refinancing and the cancellation of the sale to Stonehill, on June 21 BOTW received $4,197,441 on the Goett Loan, an excess of approximately $1.8 million over Stone-hill’s bid.

Stonehill commenced the present action against BOTW and Mission, alleging breach of contract and breach of the implied covenant of good faith and fair dealing, and seeking indemnification. In its amended complaint, Stonehill added a cause of action for unjust enrichment and demanded $1.5 million in damages.

Supreme Court denied BOTW’s motion to dismiss and cross motion for summary judgment, and granted Stonehill’s motion for summary judgment on the breach of contract cause of action (Stonehill Capital Mgt., LLC v Bank of the W., 2014 NY Slip Op 30751[U] [Sup Ct, NY County 2014]). Supreme Court held that because the purchase and sale agreement was pre-negotiated, BOTW’s acceptance of Stonehill’s bid created a binding contract. BOTW appealed and the Appellate Division reversed, granted BOTW’s cross motion for summary judgment and dismissed the complaint as against BOTW, holding that Stonehill had failed to establish a valid acceptance (Stonehill Capital Mgt., LLC v Bank of the W., 127 AD3d 429 [1st Dept 2015]). We granted Stonehill leave to appeal (Stonehill Capital Mgt., LLC v Bank of the W., 26 NY3d 909 [2015]).

II.

A. Summary Judgment Standard

It iwell established that “the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; see also William, J. Jenack Estate Appraisers & Auctioneers, Inc. v Rabizadeh, 22 NY3d 470, 475-476 [2013]; CPLR 3212 [b]). Once the mov-ant makes the proper showing, “the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action” (Alvarez, 68 NY2d at 324). The “facts must be viewed in the light most favorable to the non-moving party” (Vega v Res-tani Constr. Corp., 18 NY3d 499, 503 [2012] [internal quotation marks omitted]). However, bald, conclusory assertions or speculation and “[a] shadowy semblance of an issue” are insufficient to defeat summary judgment (S.J. Capelin Assoc, v Globe Mfg. Corp., 34 NY2d 338, 341 [1974]), as are merely con-clusory claims (Putrino v Buffalo Athletic Club, 82 NY2d 779, 781 [1993]).

B. Breach of Contract Claim

To establish a prima facie breach of contract, Stonehill must show that BOTW breached a binding agreement between the parties, which damaged Stonehill (see Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 806 [2d Dept 2011]; Fischer & Mandell, LLP v Citibank, N.A., 632 F3d 793, 799 [2d Cir 2011]). To form a binding contract there must be a “meeting of the minds” (Farago v Burke, 262 NY 229, 231 [1933]), such that there is “a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms” (Matter of Express Indus. & Term. Corp. v New York State Dept. of Transp., 93 NY2d 584, 589 [1999]). In determining whether the parties intended to enter a contract, and the nature of the contract’s material terms, we look to the “objective manifestations of the intent of the parties as gathered by their expressed words and deeds” (Brown Bros. Elec. Contrs. v Beam Constr. Corp., 41 NY2d 397, 399 [1977]). “[D]isproportionate emphasis is not to be put on any single act, phrase or other expression, but, instead, on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain” (id. at 399-400). With respect to auctions, the general rule is that a seller’s acceptance of an auction bid forms a binding contract, unless the bid is contingent on future conduct (City of New York v Union News Co., 222 NY 263, 270 [1918]). While an auction can be conditional, meaning property can be withdrawn after the close of bidding, it will not be deemed conditional absent explicit terms (see Slukina v 409 Edgecombe Ave. Hous. Dev. Fund Corp., 2013 NY Slip Op 31966[U], *8 [Sup Ct, NY County 2013]).

Stonehill maintains that BOTW’s acceptance of its bid constitutes a contract to sell the Goett Loan. In response, BOTW asserts it conditioned the sale on the parties’ execution of a written agreement and Stonehill’s submission of a 10% deposit, neither of which was satisfied prior to BOTW’s withdrawal from the transaction. We conclude, based on the totality of the parties’ actions and communications, that they agreed to an enforceable contract, with express material terms and post-formation requirements.

BOTW, through Mission as its auctioneer, solicited bids on a loan portfolio and its component parts. The Offering Memorandum stated that the bids were non-contingent final offers that, if accepted by the seller, required execution by the bidder of a pre-negotiated asset sale agreement and an accompanying 10% deposit. The Memorandum additionally informed prospective bidders that the loans sold at auction were “subject only to those representations and warranties explicitly stated in the Asset Sale Agreement,” which was included with the Memorandum. Thus, the terms of the sale were preset.

In response, Stonehill submitted a bid and separately informed Mission that the LSA included with the Memorandum was inappropriate for the type of asset that was the subject of the auction, specifically a syndicated credit facility. Stonehill offered to make the necessary modifications or use LSTA documents instead. When BOTW accepted Stonehill’s offer it confirmed the bid in a correspondence setting forth the sale price, the specific loan to be sold, the timing of the closing, and the manner of payment and wire transfer instructions—terms material to the agreement. BOTW in no way indicated that the LSTA form or any modifications were unacceptable. At no time during the period between when BOTW accepted Stonehill’s bid and when it withdrew from the transaction did BOTW communicate its objection to the LSTA form that Stonehill had sent to BOTW’s counsel or indicate that the proposed modifications were “deal breakers.” In fact, counsel emailed Stonehill that once he became aware that the asset was a syndicated loan, he too preferred to use the LSTA documentation.

In future correspondence counsel did not mention any problems with the LSTA form that Stonehill had sent, but instead requested documentation from Stonehill to move the transaction along towards a mid-May closing date. Specifically, in the Friday, May 4th email thread, BOTW’s counsel said he was working on getting the documents to Stonehill the following Monday and requested a term sheet to further the process. After Stonehill responded that it could not return the specific term sheet requested because of confidentiality provisions, offering instead to send an LSTA form for the Goett Loan transaction, BOTW’s counsel informed Stonehill that it could proceed as described.

The totality of the parties’ conduct and the “objective manifestations” of their intent are evidenced by BOTW’s inclusion of pre-negotiated auction terms in the Offering Memorandum, BOTW’s acceptance of Stonehill’s bid in correspondence that communicated the terms of the purchase and the date and instructions for the closing, the email exchanges between BOTW’s counsel and Stonehill which indicated the sale was moving ahead and included references to documents necessary for closing the transaction, and BOTW’s utter failure to identify or explain any objections to the LSTA form prior to the May 18th correspondence announcing its withdrawal from the sale. This established the parties’ intent to enter a binding agreement in which BOTW would sell the Goett Loan to Stonehill at the accepted final price.

BOTW argues that an executed signed agreement and a 10% deposit were preconditions to the contract which were never fulfilled and so BOTW was not bound to sell the Goett Loan to Stonehill. It claims that, at best, the parties had an unenforceable agreement to agree. BOTW relies on the April 27th email to Stonehill, which provides that “[sjubject to mutual execution of an acceptable Loan Sale Agreement, [BOTW] has agreed to the Stonehill . . . bid” and which also set a due date for the executed signature page and the 10% deposit. BOTW argues the “subject to” language made the sale contingent on satisfaction of these two unmet conditions. This argument is unsupported by the record.

“[I]f the parties to an agreement do not intend it to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it has been written out and signed” (Scheck v Francis, 26 NY2d 466, 469-470 [1970]). Certainly, “when a party gives forthright, reasonable signals that it means to be bound only by a written agreement, courts should not frustrate that intent” (R.G. Group, Inc. v Horn & Hardart Co., 751 F2d 69, 75 [2d Cir 1984] [applying New York contract law]).

Such a forthright, reasonable signal is not obvious from the mere inclusion in an auction bid form of such formulaic language that the parties are “subject to” some future act or event. Less ambiguous and more certain language is necessary to remove any doubt of the parties’ intent not to be bound absent a writing (see e.g. Emigrant Bank v UBS Real Estate Sec., Inc., 49 AD3d 382, 383 [1st Dept 2008] [“ ‘Subject to’ in the bid form did not unmistakably condition assent on the execution of a definitive agreement at some later juncture”]; Bed Bath & Beyond Inc. v IBEX Constr., LLC, 52 AD3d 413, 414 [1st Dept 2008] [“use of the language ‘subject to’ in the (letter of intent), and reference to the execution of a construction agreement as a ‘qualification,’ do not amount to an express reservation of the right not to be bound”]; cf. Eastern Consol. Props., Inc. v Morrie Golick Living Trust, 83 AD3d 534, 534 [1st Dept 2011] [“deal memorandum entered into by the parties, which expressly stated, ‘This memo shall memorialize the terms of the deal that have been accepted, subject to the signing of a mutually acceptable Contract of Sale,’ is a classic example of an ‘agreement to agree’ ”]).

We disagree with BOTW that the “subject to” language in the April 27th email clearly expresses an intent not to be bound to the sale of the Goett Loan. This email stated that closure of the transaction required execution of a signed document and Stonehill’s tender of the 10% deposit. That, however, is not the same as a clear expression that the parties were not bound to consummate the sale and that BOTW could withdraw at any time, for any reason. Nor did BOTW make known its desire for an unrestricted exit from the deal before accepting Stonehill’s bid or anytime before it withdrew from the transaction.

This was never made explicit before the bid was accepted either. There is a difference between conditions precedent to performance and those prefatory to the formation of a binding agreement. In IDT Corp. v Tyco Group, S.A.R.L. the Court explained the legal distinction:

“[A] condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises. Most conditions precedent describe acts or events which must occur before a party is obliged to perform a promise made pursuant to an existing contract, a situation to be distinguished conceptually from a condition precedent to the formation or existence of the contract itself” (IDT Corp. v Tyco Group, S.A.R.L., 13 NY3d 209, 214 [2009] [internal quotation marks and citations omitted]).

Here, the signed writing and deposit were post-agreement requirements necessary for the consummation of the transfer, as established by the continued exchange of documents necessary to the asset transfer. To adopt BOTW’s argument would mean that the auction was neither final nor binding—in direct contravention of the auction sale terms and the usual manner in which reserve auctions proceed.

Truman Capital Advisors LP v Nationstar Mtge., LLC (2014 WL 4188090, 2014 US Dist LEXIS 118246 [SD NY, Aug. 25, 2014, No. 13 Civ 5945 (NRB)], affd 599 Fed Appx 6 [2d Cir 2015]), cited by BOTW, is distinguishable. In that breach of contract action, Truman bid on loans put up for auction by Na-tionstar. Nationstar reneged, relying on language in the auction terms that “[n]o obligation to sell shall be binding on Seller unless and until a written contract of sale or loan sale agreement is signed and delivered by Seller” (2014 WL 4188090, *3, 2014 US Dist LEXIS 118246, *7). The court held that Nation-star’s “right to reject the winning bid was implicitly reserved through the inclusion of the term requiring that Nationstar return a signed contract of sale or loan sale agreement in order for the transaction to be consummated” (2014 WL 4188090, *5, 2014 US Dist LEXIS 118246, *13). The Second Circuit affirmed, reiterating that the clause in the auction terms prevented Na-tionstar from being forced to sell even after Truman was determined to be the winning bidder (Truman Capital Advisors LP v Nationstar Mtge., LLC, 599 Fed Appx 6, 7 [2d Cir 2015]).

By comparison, the Memorandum and the April 27th email are not affirmative declarations foreclosing a sale “unless and until a written contract ... is signed and delivered.” Instead, the language in these documents requires that the sale be completed upon the execution of a signed writing and the tender of the 10% deposit—post-agreement requirements the parties were obliged to perform pursuant to an existing agreement. The fact that the parties anticipate and identify future events necessary to close the sale is not the legal equivalent of an intent to delay formation of a binding contract absent the passage of those events.

Furthermore, there is no indication that these events were an actual obstacle to the sale. BOTW proffered no evidence to suggest that Stonehill refused to enter a signed agreement or to submit the deposit. Quite the opposite. Stonehill was responsive to all of BOTW’s requests for documentation, expressed its eagerness to close the deal, took necessary steps to achieve that end (including securing approval of the credit agreement from Wells Fargo), and never implied its inability or unwillingness to turn over the deposit.

BOTWs withdrawal was not without consequences for Stone-hill, which suffered losses totaling over $1.8 million, reflecting the difference between the refinanced Discounted Payoff proceeds on account of the loan received by BOTW ($4,197,441) and the accepted bid sale price ($2,363,142). In other words, BOTW’s breach of contract resulted in Stonehill not being able to realize the increased valuation of the Goett Loan.

We conclude therefore that Stonehill met its prima facie burden on summary judgment by showing that BOTW accepted Stonehill’s bid to purchase the Goett Loan and the parties entered a binding agreement to complete the sale, BOTW breached that agreement, and the breach caused Stonehill to suffer monetary damages. Moreover, Stonehill asserted—and BOTW did not dispute—that Stonehill was ready, willing and able to close.

In response, BOTW failed to establish the existence of material issues of fact. This is not a case where the parties’ intentions present a question of fact that prevents summary judgment (see Darmento v Pacific Molasses Co., 81 NY2d 985, 988 [1993]; Hopfan v Harris, 54 NY2d 843, 845 [1981]). Here the “totality of the parties’ conduct,” and the objective manifestations of the parties’ intent as evidenced by their expressed words and deeds, establishes as a matter of law the existence of the agreement. In addition to the acceptance, the correspondence, and the LSTA form exchange, the clear objective of both parties upon the acceptance of the offer was to sell the Goett Loan to Stonehill for the bid amount. While that objective remained unchanged for Stonehill, BOTW reconsidered the sale—not because of the failure to execute a written agreement or because Stonehill had not tendered the 10% deposit, but because BOTW concluded it would make more money by reneging on the sale. That choice was a breach of its agreement with Stonehill.

1—H HH J—I

Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed, with costs, and the judgment of Supreme Court in favor of the Stonehill plaintiffs on their breach of contract claim against BOTW reinstated.

Chief Judge DiFiore and Judges Pigott, Abdus-Salaam, Stein, Fahey and Garcia concur.

Order, insofar as appealed from, reversed, with costs, and judgment of Supreme Court, New York County, in favor of plaintiffs on their breach of contract claim against defendant Bank of the West reinstated.

      . LSTA (Loan Syndications and Trading Association) is a trade association that publishes standardized forms for syndicated loan agreements.

      . The amount of damages is not at issue in this appeal.

      . Additionally, BOTW’s internal memorandum acknowledged that it had “verbally committed to the Goett Note sale to Stonehill” and suggests the reason the sale did not go through was BOTW’s desire to increase its revenue from the sale, not failure to comply with the preconditions.

      . We reject any argument by BOTW that it is not bound to its agreement with Stonehill based on the Memorandum disclaimer that BOTW reserved the right at its sole discretion to withdraw any or all assets from the sale at any time. Read in context, the disclaimer concerns BOTW’s ability to withdraw assets from the “sale,” and not whether it may withdraw an acceptance of an offer.


author: Chief Judge DiFiore.

text:
    [68 NE3d 714, 45 NYS3d 895]
    In the Matter of Raymond Newcomb et al., Appellants, v Middle Country Central School District, Respondent.
    Argued November 15, 2016;
    decided December 22, 2016

      POINTS OF COUNSEL

      Law Offices of Paul A. Montuori, P.C., Mineóla {Paul A. Mon-tuori of counsel), for appellants.

      Congdon, Flaherty, O’Callaghan, Reid, Donlon, Travis & Fishlinger, Uniondale (Christine Gasser of counsel), for respondent.

      Michaels & Smolak, P.C., Auburn (Michael G. Bersani of counsel), for New York State Academy of Trial Lawyers, amicus curiae.

      Edward H. Gersowitz, New York State Trial Lawyers Association, New York City, and Pollack Pollack Isaac & De Cicco, LLP, New York City (Brian J. Isaac of counsel), for New York State Trial Lawyers Association, amicus curiae.
   OPINION OF THE COURT

Chief Judge DiFiore.

The issue in this appeal is whether the lower courts abused their discretion in denying petitioner’s motion for leave to serve a late notice of claim. We conclude that it is an abuse of discretion as a matter of law when, as here, a court determines, in the absence of any record evidence to support such determination, that a respondent will be substantially prejudiced in its defense by a late notice of claim. Here, the lower courts also improperly placed the burden of proving substantial prejudice solely on petitioner. We therefore reverse.

L

Pursuant to General Municipal Law § 50-e (1) (a), a party seeking to sue a public corporation, which includes a school district, must serve a notice of claim on the prospective defendant “within ninety days after the claim arises.” General Municipal Law § 50-e (5) permits a court, in its discretion, to extend the time for a petitioner to serve a notice of claim. The statute requires the court to consider whether the public corporation “acquired actual knowledge of the essential facts constituting the claim within [90 days after the accrual of the claim] or within a reasonable time thereafter” (General Municipal Law § 50-e [5]). Additionally, the statute requires the court to consider “all other relevant facts and circumstances” and provides a “nonexhaustive list of factors that the court should weigh” (Williams v Nassau County Med. Ctr., 6 NY3d 531, 538-539 [2006]). One factor the court must consider is “whether the delay in serving the notice of claim substantially prejudiced the public corporation in maintaining its defense on the merits” (General Municipal Law § 50-e [5]).

Turning to the specific facts of this case, on March 23, 2013, petitioner’s son, who was 16 at the time, was hit by a car while attempting to cross an intersection and sustained what Supreme Court described as “devastating injuries” (2014 NY Slip Op 31320 [U], *1 [Sup Ct, Suffolk County 2014]). The driver fled the scene but was subsequently arrested. Within days, petitioner reported details of the accident, including the location and the nature of his son’s injuries, to his son’s high school, which is located within respondent Middle Country Central School District (the School District). Less than one month later, petitioner’s counsel asked the police for the accident file, but the police told him that the record could not be supplied until the police investigation of the hit-and-run driver was closed. Unable to obtain the police file, petitioner had his own investigator photograph the accident site within 90 days of the accident. Petitioner timely served notices of claim on the State, Town, and County.

Over the next several months, petitioner and his counsel repeatedly asked the police department and district attorney for access to the police accident file. In September 2013, six months after the accident, petitioner’s counsel finally received the file. Unlike the photographs taken by petitioner’s investigator, the photographs in the file revealed that, at the time of the accident, there was a large sign at the corner of the intersection where petitioner's son was struck. This sign had been removed sometime after the accident, and it did not appear in the photographs taken by petitioner’s investigator during the 90-day statutory period. Although the sign appeared in the police photographs, due to the size of the photographs, the lettering on the sign was illegible, even with magnification. Petitioner’s counsel promptly requested an enlargement or the negative of the photographs. In November 2013, petitioner’s counsel received the enlarged photographs, which revealed that the sign advertised a play at another high school located within the School District.

In late November 2013, five months after the 90-day statutory period for serving a notice of claim had expired, petitioner served a notice of claim on the School District by certified mail. The notice alleged that the School District’s sign “obstruct [ed] the view of the corner and pedestrians thereupon,” “creat[ed] a distraction for drivers,” “obstruct[ed] the view of drivers upon the roadway,” and “creat[ed] a dangerous and hazardous condition.” Petitioner simultaneously filed an order to show cause for leave to serve a late notice of claim pursuant to General Municipal Law § 50-e (5) or to deem the notice timely served nunc pro tunc.

In the submissions accompanying his order to show cause, petitioner argued, as he does before this Court, that the School District had actual knowledge of the essential facts constituting petitioner’s claim within a reasonable time after the accident both because petitioner reported the details of the accident, including its location, to his son’s high school within days of its occurrence, and because the School District or its agents removed the sign from the accident scene within the 90-day statutory period. Petitioner further argued that he had a reasonable excuse for the late notice due to the delay caused by the ongoing criminal investigation into the hit-and-run driver which, despite petitioner and his counsel’s diligent efforts, prevented them from obtaining legible photographs of the accident scene for nearly five months after expiration of the statutory period.

Lastly, petitioner argued that the School District was not substantially prejudiced by the late notice for several reasons. These included that the School District or its agents had placed the sign at the intersection and subsequently removed it during the 90-day statutory period; that the School District knew about the accident within a few days of its occurrence because petitioner had notified his son’s high school; that the School District had access to the police report and photographs from the police file that would permit the School District to reconstruct the scene and to interview witnesses; and that, except for removal of the sign by the School District, the accident scene was unchanged, and could be inspected and investigated by the School District.

The School District’s opposition consisted solely of an affirmation of counsel. The School District argued that it did not have actual knowledge of the essential facts because notice of the accident failed to connect the accident to the sign and the police accident report made no mention of the sign. The School District did not rebut petitioner’s showing of lack of substantial prejudice other than to argue that petitioner bore the burden of establishing such lack of prejudice and had failed to do so. Additionally, the School District argued that, when a notice of claim is not served within 90 days or a reasonable time thereafter, the court should infer that the passage of time has created substantial prejudice due to fading witness memories.

In reply, petitioner noted that the School District had failed to submit affidavits or other evidence from a person with personal knowledge of how the School District would be substantially prejudiced by the late notice. Petitioner also argued that the School District’s conclusory assertions that the passage of time creates an inference of prejudice were insufficient to meet the School District’s burden of overcoming petitioner’s showing of no substantial prejudice.

II.

Supreme Court, in determining whether petitioner should be permitted to serve the late notice of claim, considered four of the factors specified in General Municipal Law § 50-e (5): whether there was (1) a nexus between petitioner’s son’s infancy and the delay in service, (2) a reasonable excuse for the delay, (3) actual knowledge on the part of the School District of the essential facts constituting the claim within the 90-day statutory period or within a reasonable time thereafter, and (4) substantial prejudice to the School District due to the delay. Regarding factors one and two, Supreme Court concluded that there was no nexus between petitioner’s son’s infancy and the delay, but that the delay was justified due to “the severity and continuing nature of [petitioner’s son’s] injuries” as well as petitioner’s inability to obtain photographs of the scene due to the police investigation (2014 NY Slip Op 31320[U], *3). As to the third factor, Supreme Court concluded that the School District did not have actual knowledge of the essential facts within the statutory period or within a reasonable time thereafter because the School District had no actual notice that the sign may have contributed to the accident, and the police report did not mention the sign.

With respect to the fourth factor, substantial prejudice, Supreme Court placed the burden on petitioner to demonstrate that the School District was not substantially prejudiced by the delay in service. The court concluded that the matriculation and graduation of students in the interim, as well as personnel changes, “presumably hinder[ed]” the School District’s ability to collect information about the sign (2014 NY Slip Op 31320 [U], *4). Additionally, Supreme Court reasoned that prejudice could be “inferred” because “the mere passage of time creates prejudice with respect to fading memories of witnesses” (id.). Thus, Supreme Court held that the School District was substantially prejudiced by the late notice.

The Appellate Division affirmed, referencing the same four factors discussed by Supreme Court. As relevant here, the Court concluded that petitioner failed to establish that the School District had actual knowledge within 90 days or a reasonable time thereafter that petitioner would contend that the placement of the sign was connected to the accident (128 AD3d 701, 702 [2d Dept 2015]). The Court further concluded that petitioner had failed to demonstrate that the late notice “would not substantially prejudice the School District’s ability to defend against the claim” (id. at 703). Accordingly, the Appellate Division held that Supreme Court had not abused its discretion in denying the motion and dismissing the proceeding (id.).

This Court granted petitioner leave to appeal (26 NY3d 905 [2015]), and we now reverse.

HH I—I h—I

As we have previously observed, a court’s decision to grant or deny a motion to serve a late notice of claim is “purely a discretionary one” (Cohen v Pearl Riv. Union Free School Dist., 51 NY2d 256, 265 [1980]; see Wally G. v New York City Health & Hosps. Corp. [Metro. Hosp.], 27 NY3d 672, 675 [2016]). The lower courts have broad discretion to evaluate the factors set forth in General Municipal Law § 50-e (5). At the same time, a lower court’s determinations must be supported by record evidence (see Plummer v New York City Health & Hosps. Corp., 98 NY2d 263, 268 [2002] [reversing Appellate Division where record evidence did not support conclusion reached]; see also Wally G., 27 NY3d at 677 [medical records will not establish actual knowledge unless records “evince” that medical provider inflicted injury]; Williams, 6 NY3d at 537 [same]). Here, there was support in the record for the lower courts’ determinations regarding factors one through three—that there was no nexus between petitioner’s son’s infancy and the delay, that there was a reasonable excuse for the delay, and that the School District did not have actual knowledge of the essential facts constituting the claim within the 90-day statutory period or a reasonable time thereafter.

The same cannot be said for the lower courts’ determinations concerning substantial prejudice. In examining whether the School District would be substantially prejudiced in its defense by the late notice, Supreme Court presumed that the matriculation and graduation of students and personnel changes hindered the School District’s ability to gather information. This argument, however, was not made by the School District and there was no record evidence to support it. Additionally, Supreme Court inferred that the passage of time would prejudice the School District because of fading memories of potential witnesses. The Appellate Division adopted these determinations without discussion.

While this Court has previously instructed that lack of actual knowledge and lengthy delays are “important factor [s] in determining whether the defendant is substantially prejudiced” (Williams, 6 NY3d at 539), mere inferences cannot support a finding of substantial prejudice where, as here, there is no record evidence to support them. We hold that a finding that a public corporation is substantially prejudiced by a late notice of claim cannot be based solely on speculation and inference; rather, a determination of substantial prejudice must be based on evidence in the record.

In another context, we have held that “the mere passage of time normally will not constitute substantial prejudice in the absence of some showing of actual injury” (Matter of Sarkisian Bros. v State Div. of Human Rights, 48 NY2d 816, 818 [1979]; cf. Leader v Maroney, Ponzini & Spencer, 97 NY2d 95, 107 [2001] [lengthy delays that extend after statute of limitations has expired can lead a court to infer prejudice]). Although changes in personnel and the fading memories of witnesses may, in fact, be “prejudicial,” a court must consider whether record evidence indicates that substantial prejudice does in fact exist. Providing proof of substantial prejudice on the record is qualitatively and quantitatively different from a mere inference of prejudice. Generic arguments and inferences will not establish “substantial prejudice” in the absence of facts in the record to support such a finding.

There is a split in Appellate Division authority regarding which party has the burden of proof to demonstrate that a late notice of claim substantially prejudices the public corporation. While there are decisions in all four departments that place the burden on the petitioner to show a lack of substantial prejudice, there are also decisions in all four departments that either place the burden on the public corporation or shift the burden to the corporation after the petitioner has made an initial showing of a lack of prejudice.

We hold that the burden initially rests on the petitioner to show that the late notice will not substantially prejudice the public corporation. Such a showing need not be extensive, but the petitioner must present some evidence or plausible argument that supports a finding of no substantial prejudice.

Here, for example, the petitioner argued, among other things, that the photographs from the police file, which documented the size and placement of the sign, would permit the School District to reconstruct the conditions on the date of the incident. Once this initial showing has been made, the public corporation must respond with a particularized evidentiary showing that the corporation will be substantially prejudiced if the late notice is allowed. Here, the lower courts applied the incorrect legal standard by placing the burden solely on petitioner to establish lack of substantial prejudice and by failing to consider whether petitioner’s initial showing shifted the burden to the School District. Moreover, even if the lower courts had applied the proper standard, speculation and inference do not satisfy the requirement of a particularized showing of substantial prejudice by the School District.

Plainly, a determination of “substantial prejudice” does not occur in a vacuum. As we determined in Williams, both the length of delay in service (which in Williams was 10 years) and lack of actual knowledge of the facts underlying the claim certainly can affect whether the late notice substantially prejudices the public corporation in defending the claim (6 NY3d at 538-539). Nonetheless, whether the public corporation is substantially prejudiced remains a separate inquiry under the statute (see id.). Indeed, there may be scenarios where, despite a finding that the public corporation lacked actual knowledge during the statutory period or a reasonable time thereafter, the public corporation nonetheless is not substantially prejudiced by the late notice (see e.g. Hubbard, 71 AD3d at 1315-1316).

The rule we endorse today—requiring a petitioner to make an initial showing that the public corporation will not be substantially prejudiced and then requiring the public corporation to rebut that showing with particularized evidence— strikes a fair balance. We recognize that a petitioner seeking to excuse the failure to timely comply with the notice requirement should have the initial burden to show that the public corporation will not be substantially prejudiced by the delay. The public corporation, however, is in the best position to know and demonstrate whether it has been substantially prejudiced by the late notice. We have long held in other contexts that where “the facts are within the defendant’s peculiar knowledge, ... he [or she] should, therefore, prove them” (Collins v Bennett, 46 NY 490, 494 [1871]; see Art Masters Assoc. v United Parcel Serv., 77 NY2d 200, 215 [1990, Titone, J., dissenting] [noting that “(i)t is a legal commonplace that ‘if a fact lies peculiarly within the knowledge of a party, that party has the burden of proof with respect to it’ ” (citation omitted)]; see also Terranova v Emil, 20 NY2d 493, 497 [1967] [denying summary judgment where knowledge of facts was “peculiarly in the possession of the defendants”]). Requiring the public corporation to come forward with a particularized showing is appropriate in this context given that the public corporation is in the best position to provide evidence as to whether the late notice has substantially prejudiced its ability to defend the claim on the merits.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court for further proceedings in accordance with this opinion.

Judges Pigott, Rivera, Abdus-Salaam, Stein, Fahey and Garcia concur.

Order reversed, with costs, and matter remitted to Supreme Court, Suffolk County, for further proceedings in accordance with the opinion herein.

      . Raymond Newcomb, individually, and as father and natural guardian of Austin Newcomb, will be referred to throughout this opinion as “petitioner.”

      . General Municipal Law § 50-e applies to a “public corporation” as that term is defined in the General Construction Law (General Municipal Law § 50-e [1] [a]). The General Construction Law defines a “public corporation” as “includfing] a municipal corporation, a district corporation, or a public benefit corporation” (General Construction Law § 66 [1]). A “municipal corporation” is in turn defined as “including] a county, city, town, village and school district” (id. § 66 [2]).

      . The late notice of claim in this case was also brought pursuant to Education Law § 3813 (2-a), which contains a provision equivalent to section 50-e (5), and applies to “any school district, board of education, [and] board of cooperative educational services” (Education Law § 3813 [1]).

      . Supreme Court initially stated that it was respondent’s burden to show “no prejudice” (2014 NY Slip Op 31320[U], *4). However, it is clear that Supreme Court meant to say that it was petitioner’s burden to show “no prejudice” because a respondent would want to show that there was prejudice, not that there was a lack of prejudice. Moreover, all three cases cited by Supreme Court for this proposition placed the burden for substantial prejudice on the petitioner.

      . See e.g. Matter of Hubbard v County of Madison, 71 AD3d 1313, 1315 (3d Dept 2010); Matter of Lauray v City of New York, 62 AD3d 467, 467 (1st Dept 2009); Matter of Felice v Eastport/South Manor Cent. School Dist., 50 AD3d 138, 152 (2d Dept 2008); Baehre v County of Erie, 94 AD2d 943, 943 (4th Dept 1983).

      . See e.g. Casale v Liverpool Cent. Sch. Dist., 99 AD3d 1246, 1247 (4th Dept 2012); Matter of Apgar v Waverly Cent. School Dist., 36 AD3d 1113, 1115 (3d Dept 2007); Gibbs v City of New York, 22 AD3d 717, 720 (2d Dept 2005); Matter of Ansong v City of New York, 308 AD2d 333, 334 (1st Dept 2003).

      . Any suggestion in Williams that substantial prejudice may be inferred from the passage of time (see Williams, 6 NY3d at 539 n 3) must be read in the particular context of that case, where the delay in serving a notice of claim was 10 years. We also stated in Williams that the length of the delay may be “influential” to the determination of substantial prejudice, but it is not “dispositive” (id. at 538-539). As we make clear in this decision, substantial prejudice may not be inferred solely from the delay in serving a notice of claim.