Sue/Perior Concrete & Paving, Inc. v. Lewiston Golf Course Corp.

• Decision Date: 14 June 2013
• Court: New York Supreme Court — Appellate Division
• Parties: SUE/PERIOR CONCRETE & PAVING, INC., Plaintiff–Respondent, v. LEWISTON GOLF COURSE CORPORATION, Seneca Niagara Falls Gaming Corporation, Seneca Gaming Corporation, Jeffrey L. Gill, Mark I. Halftown, Gloria Heron, Maurice A. John, Sr., Michael L. John, Karen Karsten, Ina K. Locke, Robert E. Mele, Richard K. Nephew, Maribel Printup, Cochise N. Redeye, Gary Sanden, Kevin W. Seneca, Barry E. Snyder, Sr., and Steve Tome, Defendants–Appellants, Niagara County Industrial Development Agency, Defendant–Respondent, et al., Defendants.

109 A.D.3d 80

968 N.Y.S.2d 271

2013 N.Y. Slip Op. 04471

SUE/PERIOR CONCRETE & PAVING, INC., Plaintiff–Respondent,

v. LEWISTON GOLF COURSE CORPORATION, Seneca Niagara Falls Gaming Corporation, Seneca Gaming Corporation, Jeffrey L. Gill, Mark I. Halftown, Gloria Heron, Maurice A. John, Sr., Michael L. John, Karen Karsten, Ina K. Locke, Robert E. Mele, Richard K. Nephew, Maribel Printup, Cochise N. Redeye, Gary Sanden, Kevin W. Seneca, Barry E. Snyder, Sr., and Steve Tome, Defendants–Appellants,Niagara County Industrial Development Agency, Defendant–Respondent, et al., Defendants.

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

June 14, 2013.

Phillips Lytle LLP, Buffalo (Michael Brian Powers of Counsel), and Hobbs Straus Dean & Walker LLP, Portland, Oregon (Edmund C. Goodman, of the Oregon and Washington Bars, Admitted Pro Hac Vice, of Counsel), for Defendants–Appellants.

Duke, Holzman, Photiadis & Gresens LLP, Buffalo (Gregory P. Photiadis of Counsel), for Plaintiff–Respondent.

PRESENT: PERADOTTO, J.P., LINDLEY, VALENTINO, AND WHALEN, JJ.

Opinion by PERADOTTO, J.

The central question on this appeal is whether defendant Lewiston Golf Course Corporation (LGCC), a corporation formed under the laws of the Seneca Nation of Indians (Nation or SNI), is protected by the Nation's sovereign immunity. Contrary to the contention of defendants-appellants, we conclude that Supreme Court properly denied that part of their motion seeking to dismiss the first amended complaint against LGCC on sovereign immunity grounds inasmuch as LGCC is not an “arm of the tribe” for purposes of sovereign immunity. We conclude, however, that the court should have granted that part of their motion seeking to dismiss the third cause of action, and thus that the order should be modified accordingly.

I

This matter arises out of the construction of the Hickory Stick Golf Course on a parcel of vacant land in the Town of Lewiston, New York. Defendant Seneca Niagara Falls Gaming Corporation (SNFGC) purchased the 250–acre parcel in 2006 from a private party on the open market for $2.1 million. SNFGC is a wholly-owned subsidiary of defendant Seneca Gaming Corporation (SGC), which, in turn, is wholly owned by the Nation. In July 2007, SNFGC conveyed the parcel to LGCC, a wholly-owned subsidiary of SNFGC created for the purpose of developing and operating a golf course on the property. SGC, SNFGC, and LGCC are all “corporation[s] ... duly formed under the laws of [SNI].” The Nation's legislative body, the Council, appoints the members of SGC's board of directors, and the boards of SNFGC and LGCC are comprised “solely of the members of the board of directors of [SGC].”

In August 2007, LGCC contracted with plaintiff to construct an “18–hole championship golf course with an associated driving range, club house and pro shop” on the Lewiston property for the sum of $12.7 million. In connection with the project, LGCC applied for and received over $1 million in tax breaks through agreements with defendant Niagara County Industrial Development Agency (NCIDA). The project had a substantial completion date of November 30, 2008, but it was not completed until December 2, 2009. Upon the completion of construction, plaintiff claimed that LGCC owed it $4.1 million for extra work performed by plaintiff and for delay-related damages. LGCC disputed the sums sought by plaintiff and refused to pay. As a result, plaintiff filed a mechanic's lien against the property in February 2010 and thereafter commenced this action asserting causes of action for foreclosure of the mechanic's lien, breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, promissory estoppel, and fraud. LGCC, SNFGC, SGC, NCIDA, the Niagara Mohawk Power Corporation, and various individuals were named as defendants in the first amended complaint.

Defendants-appellants, i.e., LGCC, SNFGC, SGC, and the individual directors and/or officers thereof (hereafter, defendants), moved to dismiss the first amended complaint against them on sovereign immunity grounds, asserting that they are “entitled to the full protection of the Nation's sovereign immunity, which prevents the [c]ourt from exercising jurisdiction over [them].” They further moved to dismiss the third cause of action, for breach of the implied covenant of good faith and fair dealing, and the sixth cause of action, for fraud, as duplicative of the breach of contract cause of action. In support of the motion, defendants submitted, inter alia, LGCC's bylaws; minutes from an August 2002 Council session enacting the charters of SNFGC and SGC; minutes from a June 2007 Council session approving the creation of the LGCC; certificates of existence for SNFGC, SGC and LGCC; and LGCC's Charter.

In approving the creation of LGCC, the Council declared that the “economic success of the Nation's gaming operations is vitally important to the economy of the Nation and the general welfare of its members” and that, “in furtherance of the economic success of the Nation's gaming operations, [SNFGC] has commenced development of a ... golf course located in the Town of Lewiston, New York, including related clubhouse, retail and food and beverage operations, at a total projected cost of up to $20 million.”

According to the Council:

“[T]he Lewiston Golf Course will be developed and operated as an amenity to the SNFGC's casino operations, together with the casino's lodging, dining, retail and entertainment amenities, the purpose of which amenities is to enhance the overall success and profitability of the casino's operations consistent with the powers described in SNFGC's charter and the purposes for which SNFGC was formed ... [T]he use of a separate corporation or legal entity to own and operate the Lewiston Golf Course is advisable due to various legal and accounting considerations, including the status of the Lewiston Golf Course as an off-territory business venture of the Nation, subject to legal, tax and other requirements that are not applicable to the Nation's on-territory business ... [T]he Nation desires to establish [LGCC] as a separate legal entity, governmental instrumentality of the Nation, and wholly-owned subsidiary of SNFGC, for the purpose of developing and operating the Lewiston Golf Course in the Town of Lewiston, New York, and legally doing business in such jurisdictions.”

The Council therefore authorized and directed SNFGC and LGCC “to develop and implement legitimate tax strategies to minimize any tax obligations of [LGCC], including, but not limited to, maximizing the tax savings benefits offered by [NCIDA].”

LGCC's Charter states that it was “organized for the purpose of developing, constructing, owning, leasing, operating, managing, maintaining, promoting and financing the Lewiston Golf Course on land (currently owned by SNFGC as of the date of this Charter) in the Town of Lewiston, New York.” According to the Charter, LGCC is “indirectly owned by the Nation through [SGC] and its wholly-owned subsidiary, SNFGC, and shall constitute a governmental instrumentality of the Nation, having autonomous existence separate and distinct from the Nation.” The Charter further provides that “the Nation shall not be liable for the debts or obligations of [LGCC], and [LGCC] shall have no power to pledge or encumber the assets of the Nation.”

Plaintiff opposed the motion, contending, inter alia, that LGCC was not entitled to sovereign immunity. In opposition to the motion, plaintiff submitted, inter alia, an October 2007 agent agreement between NCIDA and LGCC; a Payment–in–Lieu of Taxes (PILOT) agreement between NCIDA and LGCC; and a November 2007 lease and leaseback agreement between NCIDA and LGCC. The agreements between NCIDA and LGCC specify that they are governed by and enforced in accordance with the laws of New York State, and that the parties agree to submit to the personal jurisdiction of federal or state courts located in Niagara County, New York. The PILOT agreement provides that “[t]he parties hereto recognize that the purpose of the Project is to create or retain permanent private sector jobs in Niagara County,” and that LGCC would be obligated to pay only a portion of its normal tax burden during the five-year term of the agreement.

NCIDA supported that part of defendants' motion seeking to dismiss the third and sixth cause of actions as duplicative of the second cause of action, but opposed the motion insofar as it sought dismissal of the first amended complaint against defendants on sovereign immunity grounds. NCIDA asserted that LGCC, through its predecessor Seneca Management Development Corporation (SMDC), “consistently held [itself] out as a profit making corporation, separate and independent from the [Nation].” According to NCIDA, in applying for tax exemptions and deferrals relative to the golf course project, LGCC did not “imply that it is an arm of the [Nation's] government or that it is entitled to the protections of sovereign immunity. To the contrary, the application shows that the LGCC and the SMDC are separate and independent for[-]profit corporations intended to construct and operate a championship level golf course on non[-] native land to support tourism in the Niagara Region.” NCIDA thus contended that “LGCC is not entitled to the protections of sovereign immunity afforded to the [Nation].”

NCIDA submitted, inter alia, an affidavit of its former assistant director, and LGCC's application for assistance in connection with the project. The former assistant director averred that, when SMDC representatives approached NCIDA to secure tax breaks for the golf course project, they indicated “ that the land and project would not be considered part of the native territory, but instead would remain on the tax rolls under the jurisdiction of the State of New York.” SMDC “also indicated that the land would be owned, and the golf course would be operated, by a for[-]profit...