Gibbs-Alfano v. Burton
| Decision Date | 31 January 2002 |
| Docket Number | Docket No. 00-9553. |
| Parties | Kathleen GIBBS-ALFANO and Thomas Alfano, Plaintiffs, The Ossining Boat & Canoe Club, Inc., Defendant-Appellee, Raymond Perron, John J. D'Emidio, Peter Gendron, Elizabeth Feldman, Andrew Brown, Gary Schere and Michael Scarduzio, Defendants, v. William BURTON, Edward Wheeler, Sue Poverman, Michael O'Connor and Geoffrey Harter, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
Milton Thurm, Thurm & Heller, LLP, New York, NY, (Angelo Rios, of counsel), for Defendants-Appellants.
Clifford L. Davis, White Plains, NY, for Defendant-Appellee.
Before: MINER, McLAUGHLIN, and STRAUB, Circuit Judges.
This case presents the thorny issue whether New York and federal law permit town council members to obtain indemnification under a license agreement. They allegedly failed to investigate charges of racial discrimination levied against the town's licensee, a private "boat and canoe" club. Both the council members and the club, separately and without admitting liability, settled the claims against them in the underlying civil rights action. Although we affirm the district court's interpretation of the license agreement, we rule that the district court erred in dismissing the council members' cross-claim for indemnification and in denying their motion for summary judgment.
The history of this case is set forth in great detail by the district court in three opinions. Gibbs-Alfano v. Ossining Boat & Canoe Club, Inc., 47 F.Supp.2d 506 (S.D.N.Y.1999) ("Gibbs-Alfano I"); Gibbs-Alfano v. Ossining Boat & Canoe Club, Inc., 86 F.Supp.2d 382 (S.D.N.Y. 2000) ("Gibbs-Alfano II"); Gibbs-Alfano v. Ossining Boat & Canoe Club, Inc., No. 98 CIV. 1069, 2000 WL 1677949 (S.D.N.Y. Nov. 3, 2000) ("Gibbs-Alfano III"). We assume familiarity with these opinions and restate here only the facts pertinent to this appeal.
The Ossining Boat & Canoe Club (the "Boat Club") is a private club that has operated since 1979 on property owned by the Town of Ossining, New York (the "Town"), pursuant to several license agreements granted by the Town. The license agreement in effect at the relevant time was granted in 1991 and was extended by resolution of the Ossining Town Council in 1995 for a five-year period covering January 1, 1996 to December 31, 2001 (the "License Agreement").
Under the License Agreement, the Boat Club must "accept a total membership as it is able to accommodate subject to the physical space limitations of its facilities." The Boat Club reserved the right to deny or terminate the membership of any individual who "is a danger to the health, safety, or welfare of the `Club' or of any of its members." The License Agreement also states, however, that the Boat Club may not terminate any member based on considerations of "race, creed, color, national origin or sex" and prohibits the Boat Club from discriminating against any employee, applicant or member in any way.
For its part, the Town retains the right to terminate the License Agreement if the Boat Club fails to comply with any federal, state or local law affecting the License Agreement, or if, in its sole judgment, it finds the Boat Club is not operating in a "satisfactory manner."
The License Agreement also contains a broad indemnification clause (the "Indemnification Clause"), which provides, in relevant part, that the Boat Club:
agrees to protect, defend, indemnify and hold the "TOWN" and its officers, employees and agents free and harmless from and against any and all losses, fees, or other expenses or liabilities of every kind and character arising out of or relating to any and all claims, liens, demands, obligations, actions, proceedings, or causes of action of every kind and character in connection with or arising directly or indirectly out of the performance of this Agreement by the "LICENSEE". Without limiting the generality of the foregoing, any and all such claims, etc., relating to ... any ... tangible or intangible personal or property right, or any actual or alleged violation of any applicable statute, ordinance, administrative order, rule or regulation, or decree of any court, shall be included in the indemnity hereunder. The "LICENSEE" further agrees to investigate, handle, respond to, provide defense for and defend any such claims, etc., at its sole expense and agrees to bear all other costs and expenses related thereto including attorney's fees, even if it (claims, etc.,) is groundless, false [or] fraudulent.
In 1998, Kathleen Gibbs-Alfano, who is African-American, and her husband Thomas Alfano, who is Caucasian, brought an action in the United States District Court for the Southern District of New York (McMahon, J.), against the Boat Club and its Trustees (collectively, the "Boat Club Defendants"), and members of the Town Council-Town Supervisor William Burton, Edward Wheeler, Sue Poverman, Michael O'Connor and Geoffrey Harter (collectively, the "Town Defendants"). The Alfanos alleged that Mrs. Gibbs-Alfano was twice suspended and both she and her husband were "effectively" expelled from the Boat Club because of her "race and skin color" and their status as an interracial couple.
According to the plaintiffs, the Boat Club suspended Mrs. Gibbs-Alfano in 1994 on the pretext that she used foul language at the Boat Club, when in truth she was suspended because of her race. They allege that the Boat Club tolerated its white members' habitual use of foul language and that the Boat Club took action only against her, despite her claim that the incident giving rise to her suspension was incited by "hostile and racially discriminatory conduct directed at [her]" by white Boat Club members.
A year later, Mrs. Gibbs-Alfano was again suspended from the Boat Club after yet another incident that allegedly was "incited by racially hostile conduct" directed at her by other white members of the Boat Club. According to the Alfanos, she was thereafter denied access to the Boat Club and, as such, was "in essence deemed expelled" by the Boat Club.
Two years later, Mr. Alfano was expelled from the Boat Club. The Alfanos allege that the Boat Club did not proffer written charges against Mr. Alfano, or give him advance notice of or an opportunity to defend against his expulsion.
On the basis of the foregoing, the Alfanos alleged claims against the Boat Club Defendants under: 42 U.S.C. § 1981, which prohibits race-based discrimination in the making and enforcing of contracts; 42 U.S.C. § 1983, which prohibits persons acting under color of state law from depriving individuals of rights, privileges and immunities secured by the United States Constitution and statutes; 42 U.S.C. § 1985, which prohibits persons from conspiring to deprive individuals of equal protection of the laws or of equal privileges and immunities under the laws; 42 U.S.C. § 2000a, which guarantees individuals full and equal enjoyment of places of public accommodation without race-based discrimination; and, finally, N.Y. Exec. Law § 296, New York State's analogue to § 2000a.1
After Mrs. Gibbs-Alfano was de facto expelled from the Boat Club (but before Mr. Alfano was expelled therefrom), she complained in writing to William Burton, the Town's Supervisor, about the "discriminatory and illegal behavior of the Boat Club." According to the Alfanos, the Town Council "intentionally chose not to investigate" her charges, despite Council Member O'Connor's oral representation to her that the Town's attorneys were "reviewing it." Piqued by this alleged nonfeasance, the Alfanos brought claims against the Town Defendants identical to the claims they brought against the Boat Club Defendants, asserting that: "By virtue of their knowing and willful disregard of the unlawful and discriminatory activities taking place on the Town property being used by the Boat Club, the Town Defendants in effect ratified and adopted as their own the actions of the Boat Club Defendants." (emphasis added).
Soon after the Alfanos started the lawsuit, the Town demanded that the Boat Club Defendants "undertake to defend and indemnify the Town of Ossining and its officials" in connection with the lawsuit. However, the Boat Club declined to defend or indemnify the Town Defendants. The Town Defendants, under protest, retained their own counsel and assumed the cost of their defense. They later asserted a cross-claim for indemnification against the Boat Club in their answer to the complaint, seeking recovery of "any judgment that may be recovered by plaintiff against [the Town Defendants] ... together with the [Town Defendants'] expenses of investigation and attorneys' fees."
Before they filed their answers to the complaint, the Boat Club Defendants and Town Defendants each filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Gibbs-Alfano I, 47 F.Supp.2d at 508. The district court denied these motions with respect to the Alfanos' §§ 1981, 1983 and 2000a claims and New York State Executive Law claim, but granted the motions with respect to the Alfanos's § 1985 claim. Gibbs-Alfano, I, 47 F.Supp.2d at 510-14.
In ruling on the Town Defendants' motion to dismiss the Alfanos' § 1981 claim, the district court noted that "[a]s against the Town [D]efendants, the allegations in the complaint are less than detailed." Id. at 512. Nevertheless, the district court let the § 1981 claim stand, largely because the Town Defendants challenged only whether plaintiffs had a contract that was impaired, and "it has long been recognized that § 1981 forbids discrimination in club privileges and memberships." Id. (...
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