N. Elec. Power Co. v. Hudson River-Black River Regulating Dist.
| Decision Date | 26 November 2014 |
| Docket Number | 518129 |
| Citation | 122 A.D.3d 1185,997 N.Y.S.2d 793,2014 N.Y. Slip Op. 08280 |
| Parties | NORTHERN ELECTRIC POWER COMPANY, L.P., et al., Respondents, v. HUDSON RIVER–BLACK RIVER REGULATING DISTRICT, Appellant. |
| Court | New York Supreme Court — Appellate Division |
Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), for appellant.
K & L Gates, LLP, New York City (Brian D. Koosed of counsel) and Goldberg Segalla, LLP, Albany (William J. Greagan of counsel), for respondents.
Before: PETERS, P.J., STEIN, ROSE, EGAN JR. and CLARK, JJ.
Appeal from an order of the Supreme Court (Teresi, J.), entered February 5, 2013 in Albany County, which, among other things, denied defendant's cross motion for summary judgment dismissing the complaint.
Plaintiffs are the owners and operators of hydroelectric power plants (hereinafter hydros
) that are located downstream from the Conklingville Dam (hereinafter the Dam). Defendant is a New York public benefit corporation that maintains and operates dams—including the Dam—reservoirs and appurtenant facilities in the Hudson River and Black River districts for the purpose of regulating the rivers' flow (see ECL 15–2103, 15–2137 ). Because of the headwater benefits1 resulting from the Dam, defendant has, since the 1920s, levied annual assessments upon hydros
such as plaintiffs to recover capital, maintenance and operating costs with respect to the Dam (see ECL 15–2121[2] ; 15–2123, 15–2125).
In 2002, defendant received a license from the Federal Energy Regulatory Commission (hereinafter FERC), after which it continued to levy assessments. In 2006, Albany Engineering Corporation (hereinafter AEC)—another hydro
—filed a complaint with FERC challenging the assessments levied by defendant since it became a FERC licensee. FERC concluded that certain costs assessed by defendant were preempted by the Federal Power Act (see 16 U.S.C. § 803 [f] ), but that it was unauthorized to direct defendant to issue refunds for assessments paid. AEC appealed that decision arguing, among other things, that all costs assessed by defendant were preempted and that FERC should have issued refunds. In 2008, the U.S. Court of Appeals for the District of Columbia found in favor of AEC, holding that, because the Federal Power Act preempted state law, defendant did not have the authority to assess hydros for headwater benefits pursuant to ECL 15–2121, and remitted the matter to FERC to determine the appropriate remedy (see Albany Eng'g Corp. v. Federal Energy Regulatory Commn., 548 F.3d 1071, 1079 [2008] ).2
Plaintiffs commenced this action in June 2012, seeking a refund of the assessments they paid to defendant between 2002 and 2008 on the basis that such assessments were unauthorized and, therefore, that defendant had been unjustly enriched. After issue was joined, plaintiffs moved for summary judgment in their favor and defendant cross-moved for summary judgment dismissing the complaint, this time asserting, among other things, that the action was untimely. Supreme Court found that the action was timely commenced, that defendant was collaterally estopped by its decision in the AEC action from raising certain defenses, and that plaintiffs were entitled to summary judgment in their favor. Defendant now appeals.
Inasmuch as we find merit to defendant's assertion that plaintiffs' claims are time-barred, we reverse. The basis for Supreme Court's determination that the action was timely was that it was brought on a theory of unjust enrichment, for which the appropriate statute of limitations is six years (see CPLR 213 [1 ] ).3 However, for the reasons that follow, we agree with defendant's contention that Supreme Court erred in applying a six-year statute of limitations because, even though plaintiffs have now labeled their cause of action as one for unjust enrichment, they could have raised their claim for refunds in a CPLR article 78 proceeding challenging each annual assessment, for which the applicable statute of limitations is four months (see CPLR 217[1] ).
“Where, as here, governmental activity is being challenged, the immediate inquiry is whether the challenge could have been advanced in a CPLR article 78 proceeding” (Matter of Adirondack Med. Center–Uihlein v. Daines, 119 A.D.3d 1175, 1176, 990 N.Y.S.2d 325 [2014] [emphasis added; internal quotation marks omitted]; accord Thrun v. Cuomo, 112 A.D.3d 1038, 1040, 976 N.Y.S.2d 320 [2013], lv. denied 22 N.Y.3d 865, 2014 WL 1316287 [2014] ; Spinney at Pond View, LLC v. Town Bd. of the Town of Schodack, 99 A.D.3d 1088, 1089, 953 N.Y.S.2d 314 [2012] ; see Bango v. Gouverneur Volunteer Rescue Squad, Inc., 101 A.D.3d 1556, 1557, 957 N.Y.S.2d 769 [2012] ). Thus, whether plaintiffs' “claims are subject to the four-month statute of limitations period under CPLR article 78 ... turns on whether the parties' rights could have been resolved in an article 78 proceeding” (Walton v. New York State Dept. of Correctional Servs., 8 N.Y.3d 186, 194, 831 N.Y.S.2d 749, 863 N.E.2d 1001 [2007] ; accord New York Coalition for Quality Assisted Living, Inc. v. Novello, 53 A.D.3d 914, 916, 861 N.Y.S.2d 857 [2008], lv. denied 11 N.Y.3d 715, 873 N.Y.S.2d 533, 901 N.E.2d 1287 [2009] ). Indeed, the analysis does not depend upon how plaintiffs label their claims but, rather, we “must look to the underlying claim and the nature of the relief sought and determine whether such claim could have been properly made in another form” (Thrun v. Cuomo, 112 A.D.3d at 1040, 976 N.Y.S.2d 320 [internal quotation marks and citation omitted] ). The purpose of this rule, which results in the imposition of a short statute of limitations to governmental action, is to ensure “that the operation of government [will] not be trammeled by stale litigation and stale determinations” (New York City Health & Hosps. Corp. v. McBarnette, 84 N.Y.2d 194, 206, 616 N.Y.S.2d 1, 639 N.E.2d 740 [1994] [internal quotation marks and citations omitted]; see Mundy v. Nassau County Civ. Serv. Commn., 44 N.Y.2d 352, 359, 405 N.Y.S.2d 660, 376 N.E.2d 1305 [1978] [Breitel, Ch. J., dissenting]; Matter of Terrace HealthCare Ctr., Inc. v. Novello, 54 A.D.3d 643, 647, 865 N.Y.S.2d 37 [2008], lv. denied 12 N.Y.3d 712, 2009 WL 1545536 [2009] ; Rosenthal v. City of New York, 283 A.D.2d 156, 159, 725 N.Y.S.2d 20 [2001], lv. dismissed 97 N.Y.2d 654, 737 N.Y.S.2d 54, 762 N.E.2d 932 [2001] ).
Here, in concluding that a six-year statute of limitations applied because plaintiffs characterized their claim as being based on unjust enrichment, Supreme Court failed to recognize that, inasmuch as the relief sought was premised upon defendant's lack of authority to levy the annual assessments—as opposed to a challenge to the constitutionality of the statute pursuant to which the assessments were made (see Thrun v. Cuomo, 112 A.D.3d at 1040, 976 N.Y.S.2d 320 ; compare Matter of First Natl. City Bank v. City of N.Y. Fin. Admin., 36 N.Y.2d 87, 93, 365 N.Y.S.2d 493, 324 N.E.2d 861 [1975] )—plaintiffs could have raised the claim of federal preemption in one or more CPLR article 78 proceedings contesting each levied assessment (see ECL 15–2125[3] ; Matter of Disney Enters., Inc. v. Tax Appeals Trib. of State of N.Y., 10 N.Y.3d 392, 402–405, 859 N.Y.S.2d 87, 888 N.E.2d 1029 [2008] ; Matter of Holtzman v. Oliensis, 91 N.Y.2d 488, 497, 673 N.Y.S.2d 23, 695 N.E.2d 1104 [1998] ; Matter of Consolidated Edison Co. of N.Y. v. Public Serv. Commn., 63 N.Y.2d 424, 433–441, 483 N.Y.S.2d 153, 472 N.E.2d 981 [1984], appeal dismissed 470 U.S. 1075, 105 S.Ct. 1831, 85 L.Ed.2d 132 [1985] ; compare Mary K. v. Levy, 109 A.D.3d 587, 588, 970 N.Y.S.2d 616 [2013] ). Moreover, the refunds that plaintiffs now seek would have been available as incidental relief in such proceedings (see CPLR 7806 ; Whitmer v. New York State Dept. of Taxation & Fin., 120 A.D.3d 1590, 1592, 992 N.Y.S.2d 818 [2014] ).
We are unpersuaded by plaintiffs' assertion that a CPLR article 78 proceeding would not lie because their claims are for damages only. Although plaintiffs are not now seeking a determination with respect to the validity of defendant's administrative conduct, this is so only because the challenged conduct of defendant—the levy of assessments—was contested in the FERC proceeding and the federal AEC action and was determined therein to be unauthorized because the assessments were preempted by federal law. However, such determination is not relevant to whether plaintiffs could have challenged defendant's conduct in a CPLR article 78 proceeding in the first instance.
We also reject plaintiffs' argument that, because defendant was a licensee of FERC, proceedings before that agency provided the exclusive forum for their preemption challenge. Plaintiffs challenged defendant's authority as a state public benefit corporation to issue assessments under state law; defendant's status as a FERC licensee was relevant only because it resulted in federal preemption of its authority under the state statute. Unlike plaintiffs, we do not read FERC's decision as holding that a federal challenge was the only forum in which the issue of preemption could have been raised.4
Nor are we convinced that, under these circumstances, plaintiffs are entitled to avoid the shortened limitations period by bringing a collateral attack on the assessments (compare Regional Economic Community Action Program, Inc. v. Enlarged City School Dist. of Middletown, 18 N.Y.3d 474, 476, 941 N.Y.S.2d 25, 964 N.E.2d 396 [2012] ; Matter of First Natl. City Bank v. City of N.Y. Fin. Admin., 36 N.Y.2d at 93, 365 N.Y.S.2d 493, 324 N.E.2d 861 ). Here, plaintiffs failed to bring a CPLR article 78 proceeding—although they could have—or provide other prompt notice to defendant that the assessments were being challenged. In this regard, we also note that, from 2002 to 2006, plaintiffs paid the assessments without any indication that they were doing so under protest or otherwise providing notice to defendant that the assessments...
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