Laurence University v. State

• Decision Date: 24 November 1971
• Docket Number: No. 53349,53349
• Citation: 68 Misc.2d 408,326 N.Y.S.2d 617
• Parties: LAURENCE UNIVERSITY, Claimant, v. The STATE of New York et al., Defendants. Claim
• Court: New York Court of Claims

Page 617

326 N.Y.S.2d 617

68 Misc.2d 408

LAURENCE UNIVERSITY, Claimant, v. The STATE of New York et al., Defendants.

Claim No. 53349.

Court of Claims of New York.

Nov. 24, 1971.

Cunningham, Cole, Sorrentino & Cavanaugh by William J. Cunningham, Jr., Buffalo, for claimant.

Louis J. Lefkowitz, Atty. Gen. by Grace K. Banoff, Albany, of counsel, for the State.

DECISION

JAMES H. GLAVIN, Jr., Judge.

Claimant, a private business corporation incorporated in the State of Florida, seeks $20,000,000 in damages for alleged slander and libel perpetrated upon it by Officers of the State of New York. The Claimant alleges damages to its reputation, business and credit. It is claimed that the statements were uttered intentionally and maliciously.

The State moved to dismiss the Claim on the grounds that the Claimant lacks capacity to sue because it is a foreign corporation doing business in this State without authority; that the publication of the libel is absolutely privileged; and that the statements made are true. These assertions are contested by the Claimant.

The Claim was filed January 15, 1971. On February 4, 1971 the State served a Notice of Examination Before Trial upon the Claimant. On May 21, 1971 Claimant served, pursuant to demand, a Verified Bill of Particulars on the State. On July 6, 1971 the Claimant filed a Notice of Motion for Disclosure, the State to appear by the 'Commissioner of Education of the Department of Education of the State of New York and by the Director of Education of the Department of Education of the State of New York and such other state employees having personal knowledge of the facts pertaining to the subject matter of the Examination'. Also in the latter motion the Defendants were to have and produce upon the aforesaid examination 'all records, books, papers, correspondence and other things in their possession, custody or control which relate to the matters upon which they are to be examined'.

If the motion to dismiss is denied, the State asked that the examination of its Officers follow the State's examination of the Claimant, that the State select which Officers are to appear for examination and that the subject matter of the examination be limited to the specific libels alleged in the Claim.

Laurence University is a profit making corporation founded in the State of Florida. The curriculum which it offers consists of a program leading to either the Doctor of Philosophy Degree in Education or the Doctor of Education Degree. During its first year of operation in 1970, 109 students were graduated. Students must complete a four week summer session and at least two consecutive semesters of dissertation guidance. The summer session, a four week formal work course, is conducted on campus in Florida. The fall and spring semesters are for dissertation guidance under the direction of an approved advisor, and may be conducted anywhere off campus. Candidates for either degree must hold the baccalaureate and masters The Claimant has neither sought nor received consent of the Commissioner of Education to incorporate in the State of New York, a charter or any form of consent to carry on its work in the State of New York from the Regents of the University of the State of New York, or the right to use, advertise or transact business under the name 'University' from the Regents of the University of the State of New York.

degrees. [68 Misc.2d 410] Tuition for the summer session is $750.00. Tuition for the fall and spring semesters totals $1,250.00.

Approximately fifty students at the Claimant's institution are New York State residents and some twenty-five dissertation advisors are also New York State residents. The Claimant pays the advisors for dissertation guidance given to its students.

According to the Bill of Particulars the perpetrators of the alleged slander and the substance threof were unknown by the Claimant. The libelous material was contained in three memoranda as follows: (A) On October 19, 1970 Edward F. Carr, Director, Division of Higher Education, wrote to Richard Couper, Deputy Commissioner for Higher and Professional Education, and characterized the Claimant as a 'degree mill', a 'fraudulent operation', referred to the Claimant in quotations as 'Laurence University', stated that the practice of reviewing doctoral dissertations engaged in by the Claimant would not be 'tolerated in any legitimate institution', and that educators 'may be facing a cynical disregard of educational standards'. Copies of the memorandum were sent to Alvin P. Lierheimer, Assistant Commissioner for Higher Education, Lawrence E. Gray, Chief, Bureau of Two Year College Programs and Donald Tritschler, Acting Chief, Bureau of College Evaluation. (B) On October 20, 1970 Edward F. Carr sent a memorandum to Ewald B. Nyquist, Commissioner of Education, in which again the Claimant is referred to in quotes as 'Laurence University', characterization of the Claimant as a 'degree mill' is repeated, the Education Department is admonished not to take seriously the 'shabby claims of outfits like 'Laurence University", it is stated that 'the cost of promotion will leave a handsome profit in the hands of these idealistic educational innovators', and in closing 'Ever since I have been in the Department, it has been like pulling impacted teeth to get any legal action against fraudulent outfits in New York State (although obviously, education businesses in other States are their affairs)'. A copy of the memorandum was sent to Mr. Couper. (C) On October 27, 1970 Commissioner Nyquist sent a memorandum to Mr. Carr thanking him for the October 20 memorandum and noting his agreement therewith. Copies of the memorandum were sent to Harry Kershen, Head of the Office of Employer-Employee Relations, and to Mr. Couper. Mr. Kershen is a teacher and a student at Claimant.

The motion made by the State to dismiss the Claim is in all respects denied. The Claimant's motion for disclosure is granted with certain limitations hereinafter set forth.

MOTION TO DISMISS

A. JURISDICTION

In support of its assertion that the Claimant lacks capacity to sue because it is a foreign corporation doing business in this State without authority, the State cited two cases. Matter of New York County Lawyers Association, 3 N.Y.2d 224, 165 N.Y.S.2d 31, 144 N.E.2d 24 (1957), was a case dealing with a Mexican lawyer who maintained offices in New York City, advertised the availability of his legal advice, counseled the public on Mexican law and prepared various legal documents. The Court held that the Mexican lawyer was practicing law in violation of the Penal Law and Judiciary Law. Obviously, that case is readily distinguishable from the situation involving the Claimant. The State also cited Marion Laboratories v. Wollins Pharmacal Corp., 28 N.Y.2d 884, 322 N.Y.S.2d 720, 271 N.E.2d 554 (1971). That case concerned a Delaware pharmaceutical corporation which employed a District Manager and twenty-one full time detail representatives in New York State for the purpose of informing doctors, hospitals and pharmacies about its products and promoting goodwill. The Defendant distributed literature and samples, made purchase recommendations after reviewing inventories, forwarded purchase orders from retail druggist wholesalers, supplied cars to its representatives and reimbursed their Mexican lawyer who maintained with thirty-six wholesale pharmacists and twenty-seven hospitals, sold directly to one retail pharmacist and purchased large quantities of raw materials from suppliers in New York. The product involved in the suit was manufactured in New York. The Court of Appeals held that the Plaintiff was conducting such local activity on a regular and continuous basis that it was conducting business in New York State without proper authority. Obviously, the nature of the activity conducted by Marion Laboratories was in no respect similar or comparable to the 'activity' engaged in by the Claimant in the instant case.

The phrase 'doing business' has been variously construed and defined. The burden of proof was upon the State to show that the Claimant was in fact doing business in New York State without proper authority. 'Doing business' is not to be given a strict and literal construction applicable to any corporate dealing whatsoever. It implies a continuous, systematic, and regular activity on the part of a corporation constituting a substantial part of its main business.

No cases were cited to indicate that the phrase 'doing business' has been applied to a foreign educational institution. The fourtuitous circumstance that students from the Claimant resided in New York State is not enough to characterize the activity of the Claimant as conducting a business in this State. Neither is the fact that students in this State sought dissertation guidance from local advisors a sufficient additional circumstance to characterize the activity of the Claimant as 'doing business'. The fact that students could prepare their dissertations at home in this State rather than in Florida does not change the result.

It has been held that the point that a corporation has customers in New York State is not controlling in determining whether it is 'doing business' here. See for example Robins v. Universal Airplane Salvage Corporation, Sup., 88 N.Y.S.2d 123 (1949). It has also been held that a foreign corporation may employ the services of resident employees in New York State without 'doing business' in the State of New York. See also for example, Perry Greenberg v. Lamson Brothers Company, 273 App.Div. 57, 75 N.Y.S.2d 233 (1947).

Perhaps in future years the Claimant will have few or no New York State students, in which event student advisors would presumably be idle. If it were held that the Claimant was 'doing business' in this State because its students were writing their dissertations with guidance from resident advisors, then every foreign university with enrollments in New...