New York Municipal Power Agency v. Town of Massena
| Decision Date | 22 April 2020 |
| Docket Number | Index EFCV-2018-0154434 |
| Citation | 2020 NY Slip Op 34532 (U) |
| Parties | NEW YORK MUNICIPAL POWER AGENCY, Plaintiff, v. TOWN OF MASSENA, MASSENA ELECTRIC UTILITY BOARD, MASSENA ELECTRIC DEPARTMENT, JAMES SHAW, RENE HART, RICHARD MAGINN, JOHN BOGOSIAN, CHARLES RAITI, and ANDREW J. MCMAHON, Defendants. IAS #44-1-2019-0003 |
| Court | New York Supreme Court |
Unpublished Opinion
Appearances: Costello, Cooney & Fearon, PLLC (Kevin P Ryan, Esq., of counsel), attorneys for Plaintiffs;
Hancock Estabrook, LLC (Matthew W. O'Neil, Esq., of counsel) attorneys for Defendants.
DANIEL B. BERMAN, ESQ.
HANCOCK ESTABROOK, PLLC Attorneys for Defendants,
TOWN OF MASSENA, MASSENA ELECTRIC UTILITY BOARD, MASSENA ELECTRIC DEPARTMENT and ANDREW J. McMAHON
DECISION & ORDER
By Decision and Order dated February 7, 2019 ("Decision and Order") (Doc. 73), this Court denied the motion of Plaintiff New York Municipal Power Agency {'Agency" or "NYMPA") seeking a preliminary injunction enjoining Defendants Town of Massena, Massena Electric Department, and Massena Electric Utility Board (collectively "Massena") from withdrawing from the Agency. In finding that NYMPA failed to show likelihood of success on the merits, the Decision and Order noted the "very real possibility the record, when fully developed, will show: (1) that [an April 7, 1996 Agreement made pursuant to General Municipal Law ("GML") § 119-0 ("Agreement") (Docs. 6, 90) and the Agency's Constitution and By-Laws ("By-Laws") (Docs. 2, 86)] are not fully capable of being reconciled; (2) the By-Law [relied upon by NYMPA] does not have the force of the Agreement; and (3) the Agreement alone governs [ ]." Decision and Order at 16. This Court further recognized that the signatories to the Agreement and By-Laws "have the greatest experience with the complex terms and operation of both the Agreement and By-Laws, which they may well be able to elucidate for the Court on a more fully developed record." Id.
Thereafter, Massena moved to dismiss NYMPA's Amended Complaint (Doc. 84), and NYMPA cross-moved for leave to file a Second Amended Complaint ("Second Amended Complaint") (Doc. 99). By Order dated August 1, 2019, with stenographic minutes attached ("Order") (Doc. 96), the Court: (1) denied Massena's motion to dismiss; and, (2) granted leave to NYMPA to file the Second Amended Complaint. In those attached stenographic minutes, the Court stated: (1) "the fact that there was not one document in which everyone decided contained the same understanding of all the parties [ ] requires [the Court] to deny [Massena's] Motion to Dismiss [ ] on a documentary basis"; and (2) the parties "need some discovery." Minutes at pg. 19. NYMPA then filed and served its Second Amended Complaint, to which Massena interposed its Answer to Second Amended Complaint ("Answer") (Doc. 108), including seven (7) affirmative defenses and four (4) counterclaims.
NYMPA now moves to dismiss both the third and fourth counterclaims on two grounds: (1) documentary evidence (N.Y. C.P.L.R. 3211 [(a] [1]); and, (2) failure to state causes of action [C.P.L.R. 3211 [a] [7]). More specifically, NYMPA argues that General Municipal Law ("GML") Article 5G, and, more specifically GML § 119-o - upon which the third counterclaim (Answer at ¶¶ 74-78) is premised - do not require the Agreement and/or By-Laws direct NYMPA to distribute a member's pro rata share of cash and other assets at the time of withdrawal, and, in any event, do not support a private cause of action. See Docs. 112 (Smith aff.) at ¶¶ 8-25 & 114 (NYMPA Memorandum of Law) at pp. 6-11. As a result, NYMPA argues the third counterclaim must be dismissed. NYMPA argues that the fourth counterclaim (Answer at ¶¶ 79-81) --unjust enrichment -- must be dismissed because the Agreement and/or By-Laws govern the subject matter concerning distribution of a member's cash and other assets, thereby precluding any unjust enrichment cause of action. See Smith aff. at ¶¶ 26-34 & NNYMPA Memorandum at pp. 11-12. After reviewing the extensive written submissions of the parties and hearing oral argument (transcribed on the stenographic record) of counsel on December 6, 2019, the Court now renders its Decision. For the reasons which follow, the Court: (1) grants NYMPA's motion in part, dismissing the third counterclaim; and, (2) denies NYMPA's motion in part, declining to dismiss the fourth counterclaim.
NYMPA is a joint action agency, formed in 1996 pursuant to GML § 119-0 to supply electric power to its thirty-six (36) members, all of which are municipal electric power utilities. Decision and Order at 2; Second Amended Complaint at ¶ 2; Answer at ¶ 2. Massena is a signatory to the Agreement, which both NYMPA and Massena acknowledge "constitutes a valid and binding contract by and between the parties." Second Amended Complaint at ¶¶ 3, 18-19; Answer at ¶¶ 3, 18-19. On November 26, 2018, Massena notified NYMPA it was withdrawing from the Agency. Decision and Order at 1, 3; Second Amended Complaint at U 10; Answer at U 10. The Agency commenced this action on December 21, 2018.
NYMPA's Second Amended Complaint asserts a single cause of action: NYMPA's "purported withdrawal" from the Agency prior to December 31, 2020, constituted a breach of contract. Second Amended Complaint at ¶ 12. As a result, NYMPA claims the following items of money damages: (1) loss of monthly membership fees totaling $ 12, 000.00; (2) "$ 96, 211.00 in general and administrative costs applied to the energy it has arranged to procure"; (3) "$ 838, 821.00 on the energy that [NYMPA] had agreed to purchase for [Massena's] use through December 2020"; and, (4) future amounts "in an amount that cannot [now] be determined." Id. ¶¶ 29, 32. The Second Amended Complaint further avers that Massena has "demanded a payment of $ 2, 977, 777.00 from [NYMPA] as a distribution of Agency assets." Id. at ¶ 26. In its Answer, both Massena's third and fourth counterclaims aver: (1) "at the time of its withdrawal [from NYMPA], Massena's pro-rata share of [NYMPA's] assets consisting of cash and other assets was $ 2, 977, 779.00"; (2) GML § 119-o "requires that the Agreement equitably allocate [NYMPA's] revenues and financing for its capital and operating costs"; and, (3), as a result, Massena is entitled to judgment for $ 2, 977, 779.00. Answer at ¶¶ 76-78, 81.
Massena asserts the Agreement allows a member to withdraw from membership when:
(i) the Member or its Representative shall have filed with the [Agency] Board of Directors a certified copy of a resolution by the Member's local governing body expressing its intention to withdraw; and (ii) the withdrawing Member shall have paid, or made arrangements satisfactory to the [Agency] Board of Directors to pay, to the Agency its pro rata portion of any outstanding financial obligations of the Agency at the time of the Member's withdrawal, including any financial obligation of the Agency pursuant to any and all power and energy supply contracts, related transmission arrangements and any and all other agreements entered into by the Agency. Answer at U 58 (quoting Agreement Art. Ill. § 4); see NYMPA Memorandum at 2.
Citing Article X, 1 of the Agreement, Massena argues that a member is relieved from liability for a proposed assessment when it votes against the annual operating budget, providing the member withdraws within "'sixty (60) days of the adoption of the annual operating budget."' Answer at H 60 (quoting Agreement). Massena posits: (1) its withdrawal was "effective December 23, 2018" (Id. at ¶¶ 62, 68); (2) it "did not owe any monies for any portion of [NYMPA's] outstanding financial obligations" (id_, at ¶ 64); and, (3) at the time of withdrawal, its "pro-rata share of [NYMPA's] accrued assets, including cash, was in excess of $ 2.9 million" (Id. at ¶ 65).
In seeking dismissal of Massena's third and fourth counterclaims, NYMPA challenges Massena's assertion that it had no outstanding financial obligations to NYMPA at the time of its purported withdrawal, averring Massena owed certain fees and payments to the Agency. NYMPA Memorandum at pp. 2-4 (quoting Agreement and By Laws). NYMPA asserts the only provision in the Agreement which addresses distribution of assets to Members appears in Article XIII, titled "Termination", which provides:
This Agreement may be terminated by the vote of two-thirds of the [Members] at a regular meeting or a meeting specifically called for that purpose, but not until after all debts of the Agency have been paid [ ]. Thereafter, the [NYMPA] Board of Directors shall liquidate the business of the Agency as expeditiously as possible, and distribute the net proceeds to the Members in the ratio that the total assessment, rate or charge made against each of them bears the sum of the total assessment made against all of them. Agreement at pg. 18; see NYMPA Memorandum at pg. 2.
Because the only provision of either the Agreement or By-Laws which mentions "distribution" appears in the section of the Agreement (Article XIII) concerning NYMPA's "termination", and NYMPA itself was not "terminated" when Massena withdrew (or thereafter), NYMPA argues Massena is not now entitled to any distribution. Significantly, Massena does not dispute that Article XIII is the sole provision in either the Agreement or By-Laws which expressly addresses distribution of net proceeds to NYMPA's members.
NYMPA'S motion does not address Massena's first or second counterclaims. See Answer at ¶¶ 56-68 (first counterclaim -declaratory judgment) & ¶¶ 69-73 (). Instead, its motion concerns the third and fourth counterclaims, asserting both must be dismissed...
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