Ferris v. Lustgarten Found.

• Decision Date: 09 December 2020
• Docket Number: 2017–01721,2017–01723,2020–02030,Index No. 606353/16
• Citation: 189 A.D.3d 1002,138 N.Y.S.3d 517
• Parties: Diane C. FERRIS, appellant, v. LUSTGARTEN FOUNDATION, et al., respondents.
• Court: New York Supreme Court — Appellate Division

189 A.D.3d 1002

138 N.Y.S.3d 517

Diane C. FERRIS, appellant,

v.LUSTGARTEN FOUNDATION, et al., respondents.

2017–01721

2017–01723

2020–02030

Index No. 606353/16

Supreme Court, Appellate Division, Second Department, New York.

Argued—October 7, 2019

December 9, 2020

Ellenoff Grossman & Schole LLP, New York, N.Y. (Paul P. Rooney of counsel), for appellant.

Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains, N.Y. (Eric J. Sauter and Richard L. Reiter of counsel), for respondent Lustgarten Foundation.

Kelley Drye & Warren LLP, New York, N.Y. (Barbara E. Hoey of counsel), for respondent Cablevision Systems Corporation.

MARK C. DILLON, J.P., JEFFREY A. COHEN, ROBERT J. MILLER, ANGELA G. IANNACCI, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for a violation of Not–For–Profit Corporation Law § 715–b, the plaintiff appeals from (1) an order of the Supreme Court, Nassau County (Stephen A. Bucaria, J.), entered January 20, 2017, (2) an order of the same court entered February 10, 2017, and (3) a judgment of the same court entered May 22, 2017. The order entered January 20, 2017, granted the motion of the defendant Lustgarten Foundation pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against it. The order entered February 10, 2017, directed dismissal of the complaint insofar as asserted against the defendant Cablevision Systems Corporation "without the necessity of a formal motion to dismiss, on the same grounds as those cited in the January 20, 2017 Order." The judgment, upon the orders entered January 20, 2017, and February 10, 2017, is in favor of the defendants and against the plaintiff dismissing the complaint. The notice of appeal from the order entered January 20, 2017, is deemed also to be a notice of appeal from so much of the judgment as, upon that order, is in favor of the defendant Lustgarten Foundation and against the plaintiff dismissing the complaint insofar as asserted against that defendant (see CPLR 5501[c] ).

ORDERED that the appeal from the order entered January 20, 2017, is dismissed (see Matter of Aho , 39 N.Y.2d 241, 248, 383 N.Y.S.2d 285, 347 N.E.2d 647 ); and it is further,

ORDERED that on the Court's own motion, the notice of appeal from the order entered February 10, 2017, is deemed to be a premature notice of appeal from so much of the judgment as, upon that order, is in favor of the defendant Cablevision Systems Corporation and against the plaintiff dismissing the complaint insofar as asserted against that defendant (see CPLR 5520[c] ); the appeal will be prosecuted under Appellate Division Docket No. 2020–02030 and not under Appellate Division Docket No. 2017–01723; and it is further,

ORDERED that the judgment is modified, on the law, by deleting the provision thereof dismissing the first cause of action; as so modified, the judgment is affirmed, that branch of the motion of the defendant Lustgarten Foundation which was pursuant to CPLR 3211(a) to dismiss the first cause of action insofar as asserted against it is denied, the order entered January 20, 2017, is modified accordingly, so much of the order entered February 10, 2017, as directed dismissal of the first cause of action insofar as asserted against the defendant Cablevision Systems Corporation is vacated, the first cause of action is reinstated, and the matter is remitted to the Supreme Court, Nassau County, for severance of that cause of action and further proceedings on that cause of action; and it is further,

ORDERED that one bill of costs is awarded to the plaintiff.

The issues raised on the appeals from the orders are being reviewed and considered on the appeal from the judgment (see CPLR 5501[a][1] ; 5520[c]).

The plaintiff was an employee of the defendant Lustgarten Foundation (hereinafter Lustgarten), a not-for-profit corporation, for almost 10 years when her employment was terminated on December 7, 2015. According to the complaint, the defendant Cablevision Systems Corporation (hereafter Cablevision), a for-profit corporation, provides all of Lustgarten's funding and administrative support, including human resources, legal, and finance, and together with Lustgarten, comprise a single employer or joint employer with more than 20 employees. The plaintiff alleges that the defendants retaliated against her by, among other things, giving her a negative evaluation that was false and pretextual, disciplining her twice for minor mistakes on her timecards, changing her work schedule knowing that it conflicted with her second job, and ultimately terminating her employment because she reported two instances of improper fundraising conduct by calling Cablevision's anonymous "hotline" used for reporting questionable business practices.

The plaintiff commenced this action, seeking, in the first cause of action, to recover damages for a violation of Not–For–Profit Corporation Law § 715–b, and in the second cause of action, to recover damages for breach of an implied employment contract. Prior to answering the complaint, Lustgarten moved pursuant to CPLR 3211(a)(1), (3), and (7) to dismiss the complaint insofar as asserted against it. Lustgarten argued that Not–For–Profit Corporation Law § 715–b does not imply a private right of action and that, assuming it does, Lustgarten did not violate that statute because it employs fewer than 20 employees. Lustgarten also argued that the complaint failed to state a cause of action to recover damages for breach of an implied employment contract because the plaintiff was an at-will employee. In an order entered January 20, 2017, the Supreme Court granted Lustgarten's motion. In an order entered February 10, 2017, the court directed dismissal of the complaint insofar as asserted against Cablevision "without the necessity of a formal motion to dismiss, on the same grounds as those cited in the January 20, 2017 Order." A judgment was thereafter entered dismissing the complaint. The plaintiff appeals.

Where, as here, a statute does not explicitly provide for a private right of action, recovery may only be had under the statute if a legislative intent to create such a right of action may "fairly be implied" in the statutory provisions and their legislative history ( Sheehy v. Big Flats Community Day , 73 N.Y.2d 629, 633, 543 N.Y.S.2d 18, 541 N.E.2d 18 ; see Brian Hoxie's Painting Co. v. Cato–Meridian Cent. School Dist. , 76 N.Y.2d 207, 211, 557 N.Y.S.2d 280, 556 N.E.2d 1087 ; Ader v. Guzman , 135 A.D.3d 671, 672, 23 N.Y.S.3d 292 ). This inquiry involves three factors: " ‘(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme’ " ( Maimonides Med. Ctr. v. First United Am. Life Ins. Co. , 116 A.D.3d 207, 211, 981 N.Y.S.2d 739, quoting Carrier v. Salvation Army , 88 N.Y.2d 298, 302, 644 N.Y.S.2d 678, 667 N.E.2d 328 ; see Kamins v. United Healthcare Ins. Co. of N.Y., Inc. , 171 A.D.3d 715, 716, 98 N.Y.S.3d 96 ).

We agree with the Supreme Court's determination that the first and second factors were satisfied here. Not–For–Profit Corporation Law § 715–b is intended to protect, among others, employees who in good faith report any action or suspected action taken by or within the corporation that is illegal, fraudulent, or in violation of any adopted policy of the corporation from retaliation or adverse employment consequences. Here, the plaintiff is one of the class for whose particular benefit the statute was enacted (see Not–For–Profit Corporation Law § 715–b[a] ). Moreover, the legislative purpose is promoted by holding corporations accountable by allowing whistleblowers to commence civil actions to recover damages for retaliation or adverse employment consequences (see Sheehy v. Big Flats Community Day , 73 N.Y.2d at 633, 543 N.Y.S.2d 18, 541 N.E.2d 18 ; see also Della Pietra v. Poly Prep Country Day Sch. , 2016 N.Y. Slip Op. 32916[U], 2016 WL 11432581 [Sup. Ct., Kings County] ; Joshi v. Trustees of Columbia Univ. in City of N.Y. , 2018 WL 2417846, 2018 U.S. Dist. LEXIS 89280 [S.D. N.Y., No. 17–CV–4112 (JGK) ]).

However, we disagree with the Supreme Court's determination that the third factor, requiring that a private right of action under a statute be consistent with the legislative scheme, was not also satisfied. "The third factor is often noted to be the ‘most important’ " ( Ader v. Guzman , 135 A.D.3d 671, 673, 23 N.Y.S.3d 292, quoting Cruz v. TD Bank, N.A. , 22 N.Y.3d 61, 70, 979 N.Y.S.2d 257, 2 N.E.3d 221 ). In that regard, the Court of Appeals has held that " ‘regardless of its consistency with the basic legislative goal, a private right of action should not be judicially sanctioned if it is incompatible with the enforcement mechanism chosen by the Legislature or with some other aspect of the over-all statutory scheme’ " ( Cruz v. TD Bank, N.A. , 22 N.Y.3d at 70–71, 979 N.Y.S.2d 257, 2 N.E.3d 221, quoting Sheehy v. Big Flats Community Day , 73 N.Y.2d at 634–635, 543 N.Y.S.2d 18, 541 N.E.2d 18 ; see Goldman v. Simon Prop. Group, Inc. , 58 A.D.3d 208, 215, 869 N.Y.S.2d 125 ). Thus, where "the legislature clearly contemplated administrative enforcement of the statute, ‘ "[t]he question then becomes whether, in addition to administrative enforcement, an implied private right of action would be consistent with the legislative scheme" ’...