Church Ave. Merchants Block Ass'n, Inc. v. State

• Decision Date: 10 June 2011
• Docket Number: No. 114849.,114849.
• Citation: 953 N.Y.S.2d 549,2011 N.Y. Slip Op. 52512,35 Misc.3d 1231
• Parties: CHURCH AVENUE MERCHANTS BLOCK ASSOCIATION, INC., Claimant, v. STATE of New York, Defendant.
• Court: New York Court of Claims

35 Misc.3d 1231

953 N.Y.S.2d 549

2011 N.Y. Slip Op. 52512

CHURCH AVENUE MERCHANTS BLOCK ASSOCIATION, INC., Claimant,

v.STATE of New York, Defendant.

No. 114849.

Court of Claims of New York.

June 10, 2011.

Chadbourne & Parke, LLP by Thomas J. Hall, Esq., Robert E. Grossman, Esq., Kimberly N. Zafran, Esq., for Claimant.

Eric T. Schneiderman, Attorney General of the State of New York by Ellen S. Mendelson, Assistant Attorney General, for Defendant.

JAMES H. FERREIRA, J.

Claimant Church Avenue Merchants Block Association, Inc., (hereinafter CAMBA), filed a claim with the Clerk of the Court of Claims on February 19, 2008. The claim arises from a federal grant CAMBA received from the New York State Education Department (hereinafter SED or defendant) to serve as an Even Start Family Literacy Demonstration Site (hereinafter Demonstration Site). CAMBA alleges various legal theories, including breach of contract, quasi-contract and negligence, seeking damages for unreimbursed expenditures related to its operation of the Demonstration Site between September 2003 and August 2004. CAMBA further alleges causes of action in conversion and unjust enrichment relating to training modules developed during that time period. ¹ Issue was joined, discovery ensued and a bifurcated trial on the issue of liability was held on September 14 and 15, 2010. At trial, CAMBA called as witnesses Valerie Barton–Richardson, Thomas Dambakly and DeSylvia Dwyer. Defendant called Ms. Dwyer and Margaret Zollo. Numerous documents were also offered and received into evidence. Requests for extensions to submit post-trial memoranda were granted. Supplemental post-trial memoranda was also requested and received.

CAMBA, a not-for-profit organization formed in 1977, provides education, employment and youth services to low income residents in Brooklyn, New York. CAMBA receives funding for its programs from various sources, including state and federal grants. One of the programs CAMBA provides, the Even Start Family Literacy Local Program (hereinafter Local Program), seeks to improve literacy skills in low income families in the Brooklyn community. The Literacy Program is federally funded and has four components: Adult Education, Early Childhood Education, Parent Education and Interactive Literacy Activities (Tr. 263, 207). ²

SED awards grant funding to approximately 80 different Even Start Local Programs. The programmatic aspects of these programs are managed by an Even Start Coordinator working in SED's Program Office. The Even Start Coordinator reviews and approves the budgets for Even Start Local Programs to ensure that such programs are operating in compliance with the grant. After programmatic review and approval, the Program Office forwards the budget to SED's Grants Finance Office, which processes and approves both the final budget for Even Start Local Programs and the final expenditure reports submitted by Even Start Local Programs seeking reimbursement. Amendments to a budget may also be submitted to SED's Program Office and, once approved, are sent to Grants Finance for processing and approval. Project cycles ordinarily run from September 1 through August 31 of the following year.

In 2002, SED also solicited a Request for Proposals (RFP) from Even Start Local Programs to serve as statewide Even Start Family Literacy Demonstration Sites (claimant's exhibit 1). The Demonstration Sites, which would be funded by a federal grant, would provide training to the Local Programs and develop a literacy curriculum to be used across the State (Tr. 29, 73, 153, 208, 263–264). Susan Henry, the SED Even Start Coordinator, informed prospective applicants in a January 2002 memorandum that “[s]uccessful applicants will have the requirements set forth in Section 1208(b)(1) of Title 1, Part B of the Elementary and Secondary Education Act waived. A waiver of this section will allow the demonstration sites to be awarded a grant for an eight-year period beginning [in the] 2002 school year” (claimant's exhibit 1, at 5). Selection of the four Demonstration Sites was based on criteria including the Even Start Local Program's experience, the quality of its project services, personnel and management plan.

CAMBA submitted a proposal to serve as a Demonstration Site ( see claimant's exhibit 1). In a letter dated April 8, 2002, Henry informed CAMBA that its proposal had been accepted and that it had been approved to serve as a Demonstration Site until 2011 (Tr. 27–29; claimant's exhibit 2).³ CAMBA's selection allowed it “to act as a demonstration and resource center without requiring [it] to apply competitively for continuing funds for the next two cycles (2011)” (claimant's exhibit 2). CAMBA's obligations as a Demonstration Site included submitting to SED budgetary and fiscal information.

Valerie Barton–Richardson, CAMBA's Deputy Executive Director since 1993, testified that the CAMBA Demonstration Site focused on early childhood literacy (Tr. 29, 216). Thomas Dambakly, CAMBA's Chief Financial Officer since 1997, and Barton–Richardson were involved in CAMBA's budget submissions to SED for both the Local Program and the Demonstration Site. The budget submission process involves preparing a proposed budget on a fiscal document known as an FS–10 form and listing the various expenses and services to be provided over a 12–month fiscal period running from September 1 through August 31 of the following year (Tr. 74–76).⁴ The FS–10 form is submitted by the agency to the Program Office and, if approved by the Program Office, the FS–10 is signed and sent to Grants Finance for its approval (Tr. 78; claimant's exhibit 32 at 18). SED often edits the FS–10 originally submitted by the agency (Tr. 78, 269). After approval from Grants Finance, a copy of the FS–10 is returned to the grantee (Tr. 214).

Dambakly stated that in the ordinary course of business, when CAMBA was just operating the Local Program, only the Grants Finance Office at SED received the budget submission. After CAMBA was accepted as a Demonstration Site, CAMBA was directed to submit all correspondence and fiscal forms to Henry, the Even Start Coordinator, who would review CAMBA's submissions, and if she gave them programmatic approval, she would forward them to Grants Finance for processing and approval (Tr. 77–78). Ordinarily, CAMBA would submit budgets in July or August. CAMBA would then be notified of the approvals in late August or early September by mailings or faxes from Grants Finance of the approved budgets and budget amendments (Tr. 78–80, 160, 161).

A grant recipient must also submit an FS–10–F or final expenditure report by November 30, ninety days after August 31, the date the program grant year ends (Tr. 285, 289, 335). DeSylvia Dwyer, the Even Start Coordinator after Henry retired in October 2004, stated that where a grant has been issued, and a budget approved, if the grantee or agency submits an FS–10–F in a timely manner and under budget, SED would reimburse the agency for those expenses (Tr. 215–216). Dwyer stated that she did not have the authority to grant an extension of time to submit an FS–10–F (Tr. 243–244). She stated that if a grantee asked for more time to submit such a report, she would refer the grantee to Grants Finance (Tr. 244–245).

Margaret Zollo, the Grants Finance Office Manager since 1998, testified that her office manages grants (Tr. 265). She stated that after the Program Office approves a budget, an entry is made on a computer system and two copies of the budget are sent to Grants Finance (Tr. 271). The project number is used to ensure that project funding comes from the appropriate funding stream (Tr. 272–274). Zollo stated that a grantee receives written notification of approval from Grants Finance in two ways: a Grant Award Notice and a copy of the last page of the FS–10 form showing the various approvals (Tr. 275–276, 278; see also claimant's exhibit 4 [example of the Grants Award Notice] ). As for notifying a grantee that an FS–10–A had been approved, she stated that once two copies of the FS–10–A are received from the Program Office, records are updated to reflect the new budget amounts and a copy of the amendment is mailed back to the agency (Tr. 282–283). Zollo stated that an agency can also seek reimbursement before the project cycle is complete by submitting FS–25 forms, which are interim requests for reimbursement of expenditures by the agency for categories listed on the FS–10 form (Tr. 279–281, 334). She stated that copies of approved FS–10, FS–10–A and FS–25 forms are returned to the agency in windowed envelopes (Tr. 318, 333–334).

The 90–day deadline for the FS–10–F submission is set forth in SED guidelines, in the Grant Award Notice, and in an annual reminder letter sent to grantees mid-summer (Tr. 289). However, an FS–10–F can be accepted after the 90–day period closes (Tr. 335). In cases where the FS–10–F contains mistakes or inaccuracies, SED guidelines provide that where a project has been audited and closed, a local agency or grantee is allowed “90 days to reopen a project for further review” and that requests “should be submitted in writing” (defendant's exhibit E). SED also reserves the right “to reopen a project after it has been closed to either recover any unallowed costs or reimburse any additional costs that have been disclosed through separate audits or reviews” (defendant's exhibit E; Tr. 290–292, 335).

Zollo stated that “[i]t is possible for an agency to request from Grants Finance an extension” to file an FS–10–F, and that such requests, made by e-mail or letter, are “evaluated on a case-by-case basis” (Tr. 293–294). However, in her deposition testimony, Zollo acknowledged that a request for an extension of time can be granted through a verbal conversation (Tr. 336; claimant's exhibit 33 at 46). She added later that the only persons who can grant extensions verbally were herself and certain Grants Finance employees, including Maria Dos...