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concluding that the state court "necessarily rejected" the plaintiff's due process claim because "the underlying and controlling factual issues are identical to those fully litigated in the Article 78 proceeding," even if the plaintiff styled the argument differently in federal court
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No. 08 Civ. 3810 (RJS)
06-01-2011
LINDEN AIRPORT MANAGEMENT CORPORATION, ET AL., Plaintiffs, v. NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION, ET AL., Defendants.
Plaintiffs are represented by Robert J. Hantman, Hantman & Associates, 1515 Broadway, 11th Floor, New York, NY 10036. Defendants are represented by Michael A. Cardozo, Corporation Counsel of the City of New York, and Terri Feinstein Sasanow, Assistant Corporation Counsel of the City of New York, 100 Church Street, New York, NY 10007.
MEMORANDUM AND ORDER :
This action arises from the bidding and selection process for a concession contract to operate the Downtown Manhattan Heliport ("DMH"). Plaintiffs Linden Airport Management Corporation ("Linden") and Paul Dudley ("Dudley") allege that Defendants New York City Economic Development Corporation ("EDC"), New York City Franchise and Concession Review Committee ("FCRC"), and New York City Department of Small Business Services ("SBS") made an arbitrary and capricious decision to award the heliport contract to a competing bidder rather than to Linden. Now before the Court are Plaintiffs' motion to further amend the pleadings and Defendants' cross-motion to dismiss the pleadings pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and the doctrines of res judicata and collateral estoppel. For the reasons that follow, Plaintiffs' motion is denied and Defendants' motion is granted.
I. BACKGROUND
A. Facts
Except where otherwise noted, the recitation of facts below derives from the Amended Complaint. In ruling on the instant motion, the Court has also considered Plaintiffs' Memorandum of Law in Support of the Motion to Amend (Pls.' Mem.); Defendants' Memorandum of Law in Support of the Motion to Dismiss and in Opposition to Plaintiffs' Motion to Amend (Defs.' Opp'n); and Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Dismiss and in Further Support of the Motion to Amend (Pls.' Reply); as well as the various exhibits accompanying these documents.
The Court will briefly recite the allegations pertaining to the DMH concession and selection process, accepting as true all well-pleaded facts asserted in the Amended Complaint. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 572 (2007).
1. The Parties
Plaintiff Linden, the largest helicopter base operator in the New York area, is a New Jersey corporation with its principal place of business in New Jersey. (Am. Compl. ¶¶ 40-41.) Linden has operated an airport in Linden, New Jersey since 1989. (Id. ¶ 41.) Plaintiff Dudley is the president and sole shareholder of Linden. (Id. ¶¶ 1, 40.)
Defendant EDC is a non-profit New York corporation that performs a wide variety of economic development services and functions as the "primary vehicle for promoting economic growth" in New York City (the "City"). (Id. ¶¶ 43-45.) The EDC website contains an "Equal Contracting Opportunity Statement" that announces a policy "to provide equal opportunity for any business to compete for contracts using public funds|] sourced, administered or authorized by the City of New York." (Id. ¶ 53.) EDC maintains its principal place of business at 110 William Street, New York, New York. (Id. ¶ 43.)
Defendant FCRC is a City agency committee established pursuant to the City Charter and comprised of six members. FCRC maintains its principal place of business in New York. (Id. ¶ 46.)
Defendant SBS is a mayoral agency established pursuant to the City Charter in order to facilitate business formation in the City, provide direct assistance to business owners, foster neighborhood development in commercial districts, and link employers to a skilled and qualified work force. (Id. ¶ 47.) SBS maintains its principal place of business at 110 William Street, 7th Floor, New York, New York. (Id.)
Although the Amended Complaint does not specify the institutional structure of the organization, Defendants' opposition papers identify SBS as a mayoral agency established pursuant to the City Charter. (Defs.' Opp'n 5.)
2. The Heliport Contract
The DMH is a public heliport owned by the City and located at the South Street Seaport on Pier 6, where it serves sightseeing, corporate, charter and government helicopter operations. (Id. ¶¶ 8, 12-13.) On November 5, 2007, the EDC issued a Request for Proposals ("RFP") for a Fixed Base Operator to enter a 10-year concession agreement to operate the DMH. (Id. ¶¶ 54-55.) The RFP outlined a procedure whereby a committee would analyze the submitted proposals and utilize a scoring system to evaluate the fee offer, operating experience, capital investment and design, planned operations, and financial capacity of the proposer. (Id. ¶ 58.) A disclaimer on page 14 of the RFP stated that only proposals satisfying the specified criteria would be considered. (Id. ¶ 60.)
Linden submitted a DMH proposal on January 4, 2008, which included letters of recommendation from major helicopter operators and various Linden, New Jersey city officials. (Id. ¶ 66.) On January 7, 2008, Linden requested information in writing regarding the responses to the RFP. (Id. ¶ 72.) When that request was denied, Linden reiterated its request for an update on the status of the RFP and further requested that the EDC team visit and inspect the Linden facility. (Id. ¶¶ 73-74.) Linden thereafter received an e-mail stating that the RFP responses and score sheets would be made available after the selection was made. (Id. ¶ 75.) On January 17, 2008, EDC asked Linden for additional financial information, which Linden provided on January 21, 2008. (Id. ¶ 76.)
On January 24, 2008, Linden was informed by a third party that some proposals had received a request for a "best and final proposal." (Id. ¶ 77.) In light of this information, Linden requested clarification regarding the RFP process and insisted that if there was a second round of proposals, Linden should be allowed to participate. (Id. ¶¶ 78-79.) Linden then learned that FirstFlight, Inc. ("First Flight"), an entity believed to be controlled by Air Pegasus Heliport, Inc. ("APH") or the owners of APH, was vying for the contract. (Id. ¶ 80.) By letter dated February 6, 2008, Linden requested information regarding the second round of proposals and reiterated its desire to participate in the next round. (Id. ¶ 82.) When no response was forthcoming, Linden sent a follow-up e-mail on February 12, 2008. (Id. ¶¶ 83-84.) On February 13, 2008, RFP Project Manager Patricia Ornst sent an e-mail on behalf of EDC, indicating that they would inform Linden of the RFP results as soon as possible. (Id. ¶ 85.)
In a letter dated February 22, 2008, Linden's attorney sent a letter to EDC voicing concerns about the RFP selection process and requesting a fair and transparent opportunity to be awarded the concession. (Id. ¶ 88.) The February 22, 2008 letter also informed EDC about irregularities and discrimination allegedly occurring at the West 30th Street heliport, which is operated by APH. (Id. ¶ 89.) Linden's attorney sent an additional letter on March 11, 2008, formally requesting that EDC "cease and desist" from awarding the DMH contract to First Flight, APH, or any related entity or other bidder, until a formal investigation regarding the RFP selection process was completed. (Id. ¶ 93.) EDC did not respond. (Id. ¶ 94.)
B. Procedural History
Plaintiffs commenced this action by filing a Complaint on April 22, 2008, seeking, inter alia, to enjoin the EDC from awarding the concession contract to First Flight. Following the final decision to award the concession to First Flight, Plaintiffs filed an Amended Complaint on October 1, 2008, alleging that Defendants made a "fraudulent, arbitrary and capricious decision" to award the concession to First Flight despite the more lucrative Linden proposal. (Id. ¶ 1.) The Amended Complaint includes causes of action for violation of the Due Process Clause, violation of the Equal Protection Clause, breach of duty, fraud, promissory estoppel, declaratory relief, breach of public trust, and declaratory judgment.
By Order dated October 16, 2008, the Court stayed this action pending resolution of the state court proceedings instituted by Plaintiffs pursuant to Article 78 of the New York Civil Practice Laws and Rules. See N.Y. C.P.L.R. § 7801 et seq. Plaintiffs filed an Amended Petition (the "Article 78 Petition") seeking to challenge the concession award on November 20, 2008. On April 21, 2009, the Honorable Eileen A. Rakower, New York State Supreme Court Justice, dismissed the Article 78 Petition in an opinion read into the record following oral argument. The First Department unanimously affirmed the dismissal on March 16, 2010. Linden Airport Mgmt. Corp. v. N.Y.C. Econ. Dev. Corp., 896 N.Y.S.2d 344 (App. Div. 2010). Leave to reargue or appeal was denied on July 20, 2010.
"Article 78 provides the mechanism for challenging a specific decision of a state administrative agency." Campo v. N.Y.C. Emps.' Ret. Sys., 843 F.3d 96, 101 (2d Cir. 1988) (internal citation and quotation marks omitted).
Following the exhaustion of their state remedies, Plaintiffs filed a motion to further amend the pleadings on September 15, 2010. The motion to amend included a motion to join First Flight and Saker Aviation Services, Inc. as defendants in this action. Defendants filed a cross-motion to dismiss in conjunction with their opposition papers on October 22, 2010. The motions were fully submitted as of November 15, 2010.
According to the proposed Second Amended Complaint, First Flight is now doing business as Saker Aviation Services, Inc. (SAC ¶ 1.)
II. LEGAL STANDARDS
A. Motion to Dismiss
In reviewing a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff. ATSI Commc'ns v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). To survive a Rule 12(b)(6) motion to dismiss, a complaint must allege "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility where the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). By contrast, a pleading that only "offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Id. (quoting Twombly, 550 U.S. at 570). If the plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Twombly, 550 U.S. at 570.
Moreover, "it is well settled that a court may dismiss a claim on res judicata or collateral estoppel grounds on a Rule 12(b)(6) motion." Sassower v. Abrams, 833 F. Supp. 253, 264 n.18 (S.D.N.Y. 1993). When a defendant raises res judicata or collateral estoppel as an affirmative defense and "it is clear from the face of the complaint, and consideration of matters which the court may take judicial notice of, that the plaintiff's claims are barred as a matter of law," dismissal under Rule 12(b)(6) is appropriate. Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86 (2d Cir. 2000); see Day v. Moscow, 955 F.2d 807, 811 (2d Cir. 1992) (claim barred by res judicata).
B. Motion to Amend
Where a party is not entitled to amend as a matter of right, the Federal Rules of Civil Procedure provide that the "Court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). Nevertheless, the Court has broad discretion in deciding whether or not to grant such a request. See Local 802, Associated Musicians of Greater N.Y. v. Parker Meridien Hotel, 145 F.3d 85, 89 (2d Cir. 1998). Factors relevant to the exercise of the Court's discretion include (1) the presence of bad faith, dilatory motives, or undue delay on the part of the movant; (2) the potential for prejudice to an opposing party; and (3) whether the proposed amendment would be futile. See, e.g., In re PXRE Group, Ltd., Sec. Litig., 600 F. Supp. 2d 510, 523-24 (S.D.N.Y. 2009). "An amendment to a pleading is futile if the proposed claim could not withstand a motion to dismiss pursuant to [Rule] 12(b)(6)." Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2002).
III. DISCUSSION
A. Motion to Dismiss
Defendants move to dismiss the Amended Complaint pursuant to Rule 12(b)(6), arguing that all claims are barred either by res judicata or collateral estoppel because they arise out of the same issues and claims previously litigated in the Article 78 proceeding. (Defs.' Opp'n 3.) These "related but distinct" common law doctrines "operate to prevent parties from contesting matters that they have had a full and fair opportunity to litigate, thereby conserving judicial resources and protecting parties from the expense and vexation of multiple lawsuits." Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002). The Court will analyze each of these doctrines with respect to the existing pleadings before considering Plaintiffs' motion to amend.
1. Res Judicata
Of the eight causes of action enumerated in the Amended Complaint, Defendants argue that the three equitable claims - declaratory relief under Article 78, breach of public trust, and declaratory judgment - are barred by res judicata. "Under both New York law and federal law, the doctrine of res judicata, or claim preclusion, provides that a final judgment on the merits of an action precludes the parties from relitigating issues that were or could have been raised in that action." Duane Reade, Inc. v. St. Paul Fire & Marine Ins., Co., 600 F.3d 190, 195 (2d Cir. 2010) (internal citations and alterations omitted). The doctrine "prevents litigation of a matter that could have been raised in a previous suit," whether or not it was actually raised in that suit. Id. at 196 (citation omitted). In New York, res judicata bars the successive litigation of all claims based upon the same transaction or series of transactions if: "(i) there is a judgment on the merits rendered by a court of competent jurisdiction, and (ii) the party against whom the doctrine is invoked was a party to the previous action, or in privity with a party who was." People ex rel Spitzer v. Applied Card Sys., Inc., 11 N.Y.3d 105, 122 (2008).
Although New York law applies in determining the preclusive effect of a New York state court judgment, "there is no discernible difference between federal and New York law concerning res judicata and collateral estoppel." Marvel Characters, 310 F.3d at 286.
In this case, there is no dispute that Plaintiffs were involved in both the state and federal actions, and that the state court order was a final judgment. Plaintiffs instead argue that res judicata does not bar their federal claims because "the only judgment below was the one in the limited Article 78 proceeding." (Pls.' Reply 5.) "Under New York law, the doctrine of res judicata has no application where the initial forum did not have the authority to award the full measure of relief sought in the subsequent litigation." Giakoumelos v. Coughlin, 88 F.3d 56, 61 (2d Cir. 1996). In the Article 78 proceedings at issue, any damages awarded "must be incidental to the primary relief sought by petitioner." N.Y. C.P.L.R. § 7806. However, Plaintiffs explicitly demand "compensatory and punitive damages in an amount to be determined at trial" with respect to the first five claims that appear in the Amended Complaint. (Am Compl. ¶ 312.) Since the Article 78 court did not have power to award monetary damages, Plaintiffs contend that "the doctrine of res judicata does not apply to the claims included in the Plaintiffs' current complaint and/or proposed amended complaint." (Pls.' Reply 6.)
But Defendants preemptively concede this very point, acknowledging that the claims for money damages are "not barred by res judicata in this action because plaintiffs could not have obtained money damages under the theories alleged" before the Article 78 court. (Defs.' Opp'n 12-13); see Mitchell v. Fishbein, 377 F.3d 157, 171 (2d Cir. 2004) ("Because in the usual civil rights action the damages requested cannot be characterized as incidental, such damages could not be obtained in an Article 78 proceeding."). For that reason, Defendants confine their res judicata argument to the three equitable claims asserted in the Amended Complaint. Thus, the statutory limitation on Article 78 relief does not rescue the equitable claims allegedly barred by res judicata.
Because Defendants properly circumscribe their res judicata challenge, the real crux of the inquiry is whether the equitable claims raised in this action are "based upon the same transaction or series of connected transactions" presented in the Article 78 proceeding. Applied Card Sys., 11 N.Y.3d at 122. New York courts apply a "pragmatic" test to determine whether claims are part of the same transaction, examining "whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage." Chen v. Fischer, 6 N.Y.3d 94, 100-01 (2005).
Here, the sixth, seventh, and eighth claims of the Amended Complaint challenge the award of the heliport concession to First Flight on the grounds that the decision was fraudulent, arbitrary and capricious. (See Am. Compl. ¶¶ 1, 298-312.) The Article 78 Petition also challenged the award of the heliport concession to First Flight on the grounds that the decision was arbitrary and capricious. (Am. Pet. ¶¶ 1, 208-15.) Based on the related facts that give rise to both pleadings, the Court finds that the "pragmatic" indicia are satisfied and that res judicata bars the three equitable claims that appear in the Amended Complaint.
2. Collateral Estoppel
Defendants next argue that the remaining damages claims are barred by collateral estoppel. Under New York law, collateral estoppel "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party . . . whether or not the tribunals or causes of action are the same." Parker v. Blauvelt Volunteer Fire Co., Inc., 93 N.Y.2d 343, 349 (1999) (internal citation and quotation marks omitted). The doctrine applies when "(1) the identical issue necessarily was decided in the prior action and is decisive of the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to litigate the issue in the prior action." In re Hyman, 502 F.3d 61, 65 (2d Cir. 2007) (citing Kaufman v. Eli Lilly & Co., 65 N.Y.2d 449, 455-56 (1985)).
"The burden of demonstrating the identity of issues between the two proceedings lies with the party seeking the benefit of collateral estoppel, whereas the burden of establishing the absence of a full and fair opportunity to litigate the issue in the prior proceeding lies with the opposing party." Broich v. Inc. Vill. of Southampton, No. 08 Civ. 0553 (SJF) (ARL), 2011 WL 284484, at *17 (E.D.N.Y. Jan. 25, 2011) (citing Evans v. Ottimo, 469 F.3d 278, 281-82 (2d Cir. 2006)). However, New York courts have consistently emphasized that collateral estoppel is a "flexible doctrine" which defies rigid or mechanical application. Jeffreys v. Griffin, 1 N.Y.3d 34, 41 (2003) (quoting People v. Roselle, 84 N.Y.2d 350, 357 (1994)). Thus, whether to apply collateral estoppel in a particular case "depends on 'general notions of fairness involving a practical inquiry into the realities of the litigation.'" In re Hyman, 502 F.3d at 65-66 (quoting Jeffreys, 1 N.Y.3d at 41)).
a. Identical Issue
As a general matter, "collateral estoppel effect will only be given to matters actually litigated and determined in a prior action, because if an issue has not been litigated, there is no identity of issues." Evans, 469 F.3d at 282 (citing Kaufman, 65 N.Y.2d at 456). However, "[i]t is not necessary that the issue have been 'actually litigated' in the sense that evidence have been offered on the point." Schuh v. Druckman & Sinel, LLP, 602 F. Supp. 2d 454, 468 (S.D.N.Y. 2009). "'[F]or a question to have been actually litigated so as to satisfy the identity requirement, it must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding.'" Evans, 469 F.3d at 282 (quoting D'Arata v. N.Y. Cent. Mut. Fire Ins. Co., 76 N.Y.2d 659, 667 (1990)).
The central issue here is whether Plaintiffs' damages claims raise identical issues that were actually determined in the Article 78 proceeding. A comparison of the Article 78 Petition and the Amended Complaint makes clear that identical issues are "properly raised by the pleadings." Evans, 469 F.3d at 282. The Article 78 Petition describes the RFP selection process (see Am. Pet. ¶¶ 34-79) and challenges the concession award to First Flight as unfair, arbitrary and capricious, and marred by favoritism and corruption. (see, e.g., id. ¶¶ 1, 3, 209-10, 212, 217). The Amended Complaint includes a substantially verbatim description of the RFP selection process (see Am. Compl. ¶¶ 55-98) and challenges the concession award to First Flight as unfair, discriminatory, and arbitrary and capricious. (see, e.g., id. ¶¶ 1, 265, 267-68, 272, 277).
Plaintiffs argue that irrespective of the pleadings, the Article 78 proceeding did not actually decide whether the concession decision was arbitrary and capricious because "neither [Justice] Rakower nor the Appellate Division ever reviewed the majority of the facts and/or claims included in the Plaintiffs' Article 78 petition." (Pls.' Reply 8.) In her oral ruling, however, Justice Rakower recounted the RFP selection criteria and procedures before holding that "the Committee followed it[s] own procedures in evaluating and revising the scores and . . . ultimately determined that FirstFlight presented the best overall proposal." (Def.'s Opp'n, Ex. J at 48.) For that reason, Justice Rakower concluded that "the Committee had a rational basis for the selection." (Id.) The First Department affirmed, holding that the record before the Commissioner "provides a rational basis for concluding that FirstFlight offered the best proposal, and that Linden's proposal was deficient in significant respects." Linden Airport Mgmt. Corp., 896 N.Y.S.2d at 345.
Contrary to Plaintiffs' assertion, the fact that neither state court explicitly rejected the claim that the concession award was arbitrary and capricious does not preclude a finding of identity. Plaintiffs first allege that the concession award violated the Due Process Clause of the Fourteenth Amendment because Defendants abused their discretion "by arbitrarily and capriciously selecting and approving" First Flight as the DMH Fixed Base Operator. (Am. Compl. ¶ 253.) On appeal, the First Department clearly considered this precise issue, holding that "[i]n reviewing the City's decision to award a concession, the standard is whether the decision was arbitrary and capricious, lacked a rational basis, or was otherwise dishonest or unlawful." Linden Airport Mgmt. Corp., 896 N.Y.S.2d at 345. Thus, by finding a rational basis for the concession award, the First Department necessarily rejected the claim that the decision was arbitrary and capricious. See id. Although Plaintiffs now style their claim in constitutional terms, the underlying and controlling factual issues are identical to those fully litigated in the Article 78 proceeding. See Perry v. Met. Suburban Bus Auth., 390 F. Supp. 2d 251, 266 (E.D.N.Y. 2005) ("It is of no consequence that the issue of whether there was a constitutional violation was not before the [state tribunal].").
Plaintiffs' second cause of action, which claims that Defendants "biased the entire RFP process to discriminate against out-of-state proposers" in violation of the Equal Protection Clause of the Fourteenth Amendment, fares no better. (Am. Compl. ¶ 265.) Plaintiffs do not allege that they were subject to a suspect classification or that any of their fundamental rights have been impaired. As a result, the concession award "must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification." Heller v. Doe, 509 U.S. 312, 320 (1993) (internal citation and quotation marks omitted). In this case, both Justice Rakower and the First Department explicitly held that the Commission had a rational basis for awarding the concession to First Flight. Therefore, the second cause of action would also require the Court to decide an issue that was previously decided adversely to Plaintiffs.
A similar analysis applies to Plaintiffs' claims for breach of duty and fraud. With respect to the breach of duty claim, Plaintiffs allege that "Defendants violated their duty to hold a fair adjudication process by violating the terms of the RFP that they themselves set out in advance." (Am. Compl. ¶ 272.) But Plaintiffs are collaterally estopped from asserting such a claim because the First Department made an explicit finding that the Commission complied with concession rules in issuing the RFP and evaluating the proposals submitted in response. Linden Airport Mgmt. Corp., 896 N.Y.S.2d at 345. With respect to the fraud claim, Plaintiffs further allege that Defendants "conducted a sham adjudication process as part of a scheme to deceive Plaintiffs and other proposers." (Am. Compl. ¶ 284.) But the First Department also precluded further litigation on the fraud issue by holding that Plaintiffs "failed to meet their burden to demonstrate actual impropriety, unfair dealing or some other violation of statutory requirements in the award of the concession." Linden Airport Mgmt. Corp., 896 N.Y.S.2d at 345.
In the final cause of action at issue, the promissory estoppel claim, Plaintiffs allege that Defendants "clearly and unambiguously promised . . . that the evaluation of the RFP would be fair and that the winner would be chosen in accordance with the publicly announced rules," and that Plaintiffs relied on these statements to their detriment. (Am. Compl. ¶¶ 295-96.) To prevail on a promissory estoppel claim under New York law, a plaintiff must satisfy four elements: "(1) a promise, (2) reliance on the promise, (3) injury caused by the reliance, and (4) an injustice if the promise is not enforced." Weinreb v. Hosp. for Joint Diseases Orthopaedic Inst., 404 F.3d 167, 172 (2d Cir. 2005) (internal citation and quotation marks omitted). Although the promissory estoppel claim is less facially analogous to the issues adjudicated in the Article 78 proceeding than Plaintiffs' other claims, the First Department opinion once again reflects the overlap. As previously noted, the First Department both recognized the rational basis for the concession award and rejected the allegation of "actual impropriety, unfair dealing or some other violation of statutory requirements." Linden Airport Mgmt. Corp., 896 N.Y.S.2d at 345. By upholding the dismissal, the First Department decided that the concession award was not improper, unfair, or "otherwise dishonest or unlawful." Id. In other words, injustice did not result. Because a determination on the promissory estoppel claim would require the Court to revisit this conclusion, collateral estoppel bars relitigation as to the alleged injustice of the concession award as well. See Latino Officers Ass'n v. City of N.Y., 253 F. Supp. 2d 771, 787 (holding that plaintiff was barred by collateral estoppel from relitigating the "factual findings . . . essential to the state court's decision").
Plaintiffs dispute the identity of the foregoing issues based on Resource N.E. v. Town of Babylon, 28 F. Supp. 2d 786 (E.D.N.Y. 1998), in which the court held that a previous Article 78 proceeding did not bar subsequent federal suit. (Pls.' Reply 9.) Although that decision did not address collateral estoppel with respect to the Article 78 proceeding, Plaintiffs argue that "[c]learly Judge Spatt was well aware of the doctrine of collateral estoppel and nevertheless determined that the plaintiff's fraud claims were not precluded by the earlier Article 78 proceeding." (Id.) Plaintiffs correctly observe that the Resource N.E. decision elsewhere analyzes the collateral estoppel effect of a stipulation entered by the plaintiffs. See 28 F. Supp. 2d at 793. But the discussion of preclusion with respect to the Article 78 proceeding rests on the res judicata analysis and remains conspicuously silent on the issue of collateral estoppel. Id. at 792. In the absence of substantive analysis to the contrary, the Court rejects the argument that the instant Article 78 proceedings are somehow exempt from the operation of collateral estoppel. See LaFleur v. Whitman, 300 F.3d 256, 275 (2d Cir. 2002) (finding that collateral estoppel barred review of a previous Article 78 proceeding). Accordingly, the Court finds that Defendants have satisfied their burden to establish that issues central to all five damages claims were actually and necessarily decided adversely to Plaintiffs in the Article 78 proceeding.
b. Full and Fair Opportunity
The second prong of the collateral estoppel test is whether Plaintiffs had a full and fair opportunity to litigate in the Article 78 proceeding. See Moccio, 95 F.3d at 201. "Factors to be considered when determining whether there was a full and fair opportunity to litigate the issue in the prior action include 'the size of the claim, the forum of the prior litigation, the use of initiative, the extent of the litigation, the competence and experience of counsel, the availability of new evidence, indications of a compromise verdict, differences in the applicable law and foreseeability of future litigation.'" King v. Fox, 418 F.3d 121, 130 (2d Cir. 2005) (quoting Gilberg v. Barbieri, 53 N.Y.2d 285, 292 (1981)).
In this case, Plaintiffs were represented by counsel in the Article 78 proceedings, where they engaged in motion practice and pursued their appeals to final adjudication. Plaintiffs nonetheless argue that they were denied a full and fair opportunity to litigate because the Article 78 proceedings did not afford them the opportunity to engage in discovery in support of their claims. (Pls.' Reply 10.) But as the Article 78 Petition makes clear, Plaintiffs availed themselves of the opportunity to obtain documents pursuant to the New York Freedom of Information Law, N.Y. Pub. Off. Law § 87. (See Am. Pet. ¶¶ 91, 97.) On appeal, the First Department held that "the [trial] court did not abuse its 'considerable discretion' in denying petitioners' application for discovery from parties and non-parties," since Plaintiffs had already sought and received "extensive disclosure through freedom of information law requests." Linden Airport Mgmt. Corp., 896 N.Y.S.2d at 346 (quoting L & M Bus. Corp. v. N.Y.C. Dep't of Educ., 892 N.Y.S.2d 60, 67 (App. Div. 2009)).
Moreover, the law of the Second Circuit does not support the proposition that Article 78 proceedings are insufficient for purposes of the collateral estoppel inquiry. Although Plaintiffs cite Davidson v. Capuano, 792 F.2d 275, 280 (2d Cir. 1986), to demonstrate the summary nature of Article 78 proceedings (see Pls.' Reply 10), that decision rested on res judicata grounds and did not consider whether Article 78 proceedings afforded a "full and fair opportunity" to litigate. The Second Circuit has since held that "the general inability to obtain in the Article 78 proceeding all the discovery [the petitioner] might be entitled to in federal court" does not "diminish the full and fair opportunity [the petitioner] had to litigate . . . in the Article 78 proceeding." Moccio, 95 F.3d at 202. Because the Article 78 proceeding afforded Plaintiffs ample opportunity to litigate the issues identified above, the Court finds that collateral estoppel bars the remaining damages claims that appear in the Amended Complaint.
B. Motion to Amend
As previously noted, the Court has broad discretion in deciding whether to grant leave to amend. See Local 802, 145 F.3d at 89. Leave to amend may be denied as futile "if the proposed changes fail to state a claim on which relief can be granted." Holt v. Katy Indus., Inc., 71 F.R.D. 424, 427 (S.D.N.Y. 1976). In this case, Plaintiffs propose to further amend the pleadings "to reduce the number of claims contained in the current complaint, while clarifying and narrowing the factual basis for those claims." (Pls.' Mem. 3.) The proposed Second Amended Complaint contains only four causes of action: fraud, aiding and abetting fraud, violation of the Equal Protection Clause, and promissory estoppel. These remaining claims are clearly barred by collateral estoppel for the reasons identified above. Indeed, Plaintiffs themselves acknowledge that the proposed Second Amended Complaint "does not even attempt to add any new claims or facts to the current complaint." (Id.) Because claims barred by collateral estoppel cannot withstand a motion to dismiss pursuant to Rule 12(b)(6), the Court denies Plaintiffs' motion to amend as futile. See Lucente, 310 F.3d at 258.
Although the proposed Second Amended Complaint adds a claim for aiding and abetting fraud, the existence of underlying fraud is an essential element of such a claim under New York law. See Kottler v. Deutsche Bank AG, 607 F. Supp. 2d 447, 464 (S.D.N.Y. 2009). Because Plaintiffs' fraud claim is barred by collateral estoppel, see Part III.A.2.a, their proposed aiding and abetting fraud claim is similarly precluded.
IV. CONCLUSION
For the foregoing reasons, Defendants' motion to dismiss the pleadings pursuant to Rule 12(b)(6) and the doctrines of res judicata and collateral estoppel is HEREBY GRANTED, and Plaintiffs' motion to further amend the pleadings is HEREBY DENIED. The Clerk of the Court is respectfully directed to terminate the motions located at Doc. Nos. 36 and 42 and to close this case. SO ORDERED.
/s/_________
RICHARD J. SULLIVAN
United States District Judge Dated: June 1, 2011
New York, New York
* * *
Plaintiffs are represented by Robert J. Hantman, Hantman & Associates, 1515 Broadway, 11th Floor, New York, NY 10036. Defendants are represented by Michael A. Cardozo, Corporation Counsel of the City of New York, and Terri Feinstein Sasanow, Assistant Corporation Counsel of the City of New York, 100 Church Street, New York, NY 10007.