Furman v. Rich

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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JOHN FURMAN,

Plaintiff,

-against- MEMORANDUM AND ORDER

19-cv-2748(EK)(JO)

SANFORD RICH, et al.,

Defendants.

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ERIC KOMITEE, United States District Judge:

Plaintiff John Furman brings this action against the

City of New York, the Board of Education Retirement System of

the City of New York (BERS), the Board of Trustees (a/k/a the

Retirement Board) of BERS (BOT), each member of the BOT

individually, and the Executive Director of BERS, Mr. Sanford

Rich (collectively, the Defendants). Plaintiff’s Second Amended

Complaint (SAC) alleges 42 U.S.C. § 1983 and state-law claims

arising from Defendants’ rejection of Plaintiff’s application

for accidental disability retirement benefits. Defendants now

move to dismiss the SAC under Rule 12(b)(6). The Court grants

the motion to dismiss Plaintiff’s federal claims but denies the

motion with respect to two of Plaintiff’s state-law claims. In

light of Plaintiff’s pending Article 78 action, the Court will

stay proceedings on the remaining state-law claims until the

Article 78 court issues its decision.

I. Factual Background

Plaintiff worked as a custodian engineer at the New

York City Department of Education (DOE) from July 25, 2001 until

approximately July 29, 2010. See SAC at ¶ 30, ECF No. 44;

Plaintiff’s Memorandum of Law in Opposition to Defendants’

Motion to Dismiss the Second Amended Complaint at 2, ECF No. 61

(Opp.). Through his employment, Plaintiff became a member of

the New York City Employees’ Retirement System. See N.Y.C.

Admin. Code § 13-104. Members of this system were eligible for

two types of disability benefits: occupational disability

retirement benefits (ODR) and accidental disability retirement

benefits (ADR). See id. at § 13-167 (ODR); id. at § 13-168

(ADR). ADR benefits are more generous. Compare id. at § 13-174

(ODR) with id. at § 13-175 (ADR). Qualifying for them, however,

is harder to do. While ODR benefits are available to any

employee who becomes disabled after spending ten years in the

retirement system, see N.Y. Retire. & Soc. Sec. Law

§ 605(b)(1) & (c), ADR benefits are reserved only for applicants

whose disability was “the natural and proximate result of an

accident . . . sustained in the performance of his duties,”

regardless of the employee’s tenure in the system, see id. at

§ 605(b)(3).

The ADR-application process involves several steps.

First, an applicant submits an application to BERS’ “medical

board” (the “Medical Board”). See N.Y.C. Admin. Code

§ 13-168(a). After conducting a “[m]edical examination” and

“investigation,” the Medical Board issues a certification to the

BOT as to whether the applicant qualifies for ADR benefits. Id.

The Medical Board’s findings are conclusive with respect to

whether the applicant is “physically or mentally incapacitated,”

but the BOT has final say as to whether the applicant’s

incapacitation was caused by an “accident” in the course of

employment. Id. The BOT then renders a decision approving or

rejecting the ADR application. Id. The applicant may appeal an

adverse determination.

This litigation arises from Defendants’ denial of

Plaintiff’s ADR application. Plaintiff claims he is entitled to

ADR benefits because his disability was caused by an on-the-job

accident that he sustained in 2003 when he fell down a set of

stairs at work. Defendants, however, have consistently found

that Plaintiff’s disability was caused by another injury. This

disagreement has inspired years of litigation.

Plaintiff filed for ADR benefits in August 2009. SAC

at ¶ 41. BERS rejected Plaintiff’s application. Id. at ¶ 47.

It then denied his appeal without explanation. Id. at

¶¶ 48, 51; Ex. A at ¶ 45, ECF No. 44-1 (2012 Article 78

Petition). At BERS’ invitation, Plaintiff filed a second

administrative appeal, which BERS again denied. SAC at

¶¶ 51-52, 57. Having exhausted his administrative remedies,

Plaintiff brought an Article 78 proceeding in Kings County

Supreme Court seeking judicial review of BERS’ decision,

claiming the procedures BERS employed were unlawful and that the

BOT and Medical Board failed to meaningfully review the record.

2012 Article 78 Petition at ¶¶ 55-72. As defendants, Plaintiff

named BERS, the BOT, and BERS’ then-current Executive Director

and members of the BOT. Id. at 1-2. The Supreme Court denied

the Article 78 claim in January 2015. SAC at ¶ 63. Plaintiff

then appealed that decision to the Appellate Division – Second

Department. Id. at ¶¶ 64-65.

While that appeal was ongoing, the parties to the 2012

Article 78 proceeding agreed on a temporary cessation of

hostilities. On June 1, 2016, they entered into a stipulation

whereby Plaintiff agreed to withdraw his appeal in exchange for

BERS submitting his application to de novo review by the Medical

Board and the BOT (the “Stipulation”). Id. at ¶¶ 67-68. This

time the only two questions would be whether the 2003 incident

(1) was an “accident” that (2) “caused” Plaintiff’s disability.

Id. at ¶ 68.

The Stipulation allowed Plaintiff to submit additional

evidence, which he completed on September 16, 2016. Id. at

¶¶ 75, 80. On August 1, 2017, approximately eleven months

later, BERS informed Plaintiff that his application was denied.

Id. at ¶ 83. BERS’ rejection letter attached a Medical Board

report finding that Plaintiff’s 2003 injury did not cause his

disability because he remained fit to work until 2009 (the “2017

Report”). Trotter Declaration, Ex. C at 3, 6, ECF No. 58-3.

Portions of the 2017 Report claimed to be based on evidence

Plaintiff submitted, see id. at 3, but the report did not

explicitly address that evidence.

In response, Plaintiff threatened to bring yet another

Article 78 proceeding unless BERS submitted his application to

additional review. SAC at ¶¶ 84-85, 89. Plaintiff argued that

the “conclusory nature” of the 2017 Report “[gave] rise to a

legitimate doubt as to whether” BERS “simply had the [BOT]

formally adopt the same findings” as before. Id. at ¶ 88. On

October 3, 2017, BERS rescinded its decision and returned

Plaintiff’s application to the Medical Board for further review.

Id. at ¶ 91.

Plaintiff submitted another round of evidence,

concluding on January 31, 2018. Id. at ¶ 96. On May 10, 2018,

the Medical Board issued a new report and recommendation (the

“2018 Report”). Trotter Declaration, Ex. I, ECF No. 58-6. The

2018 Report reached the question of whether the 2003 fall

constituted an accident, finding that it did; but the report

reached the same conclusion on causation as the 2017 Report —

namely, that the 2003 incident was not the cause of the

Plaintiff’s ultimate inability to continue working. Id. The

BOT, however, remanded the recommendation back to the Medical

Board as “inconsistent with the terms of the [Stipulation],” see

Defendants’ Memorandum of Law in Support of Its Motion to

Dismiss the Second Amended Complaint at 6, ECF No. 59, perhaps

because the 2018 Report was ten sentences long and devoid of any

medical analysis or reference to Plaintiff’s evidence.

Neither the BOT nor the Medical Board took further

action on Plaintiff’s application for over a year. It was not

until the initial conference in this action (on August 20, 2019)

that Defendants confirmed Plaintiff’s application had been

denied. SAC at ¶ 103. Shortly thereafter, Plaintiff received a

denial letter attaching a Medical Board report dated July 10,

2019 (the “2019 Report”). Trotter Declaration, Ex. J, ECF

No. 58-10. Citing the same reasons as before, the 2019 Report

found that Plaintiff’s 2003 incident was not the “cause” of his

injuries but reversed — without explanation — the Medical

Board’s prior finding that the 2003 fall was an accident. Id.

at 6. Like its predecessors, the 2019 Report did not address

explicitly any evidence that Plaintiff submitted. Id. at 5-6.

Following BERS’ final decision, Plaintiff amended his

complaint to allege the decision violated the Stipulation. He

also returned to state court, commencing an Article 78

proceeding in November 2019 challenging Defendants’ final

decision as arbitrary and capricious and violative of due

process. SAC at ¶ 124-25; Ex C, 2019 Article 78 Proceeding at

¶¶ 101-28, ECF No. 44-3. Defendants then moved this Court to

dismiss Plaintiff’s SAC under Rule 12(b)(6).

II. Discussion

In analyzing a 12(b)(6) motion, “the court’s task is

to assess the legal feasibility of the complaint.” See Lynch v.

City of New York, 952 F.3d 67, 75 (2d Cir. 2020). In doing so,

the Court “must take the facts alleged in the complaint as true,

drawing all reasonable inferences in [Plaintiff’s] favor.” See

In re NYSE Specialists Sec. Litig., 503 F.3d 89, 91 (2d Cir.

2007).

A. Timeliness of Defendants’ Motion

Plaintiff first contends that Defendants’ motion to

dismiss the SAC is untimely. This argument is predicated on

Defendants’ decision to file an answer in response to the

initial complaint, see Answer, ECF No. 28, rather than a motion

to dismiss, and then only later to move to dismiss the SAC —

despite the SAC claims in question being substantially identical

to those in the initial complaint. As Plaintiff acknowledges,

this argument finds no support in binding case law. See Letter

at 2, ECF No. 68. That is because failure to bring a 12(b)(6)

motion against an initial complaint does not waive the defense.

See Fed. R. Civ. P 12(h)(2) (“Failure to state a claim upon

which relief can be granted . . . may be raised: . . . in any

pleading . . . [or] by a motion under Rule 12(c).”). Because

pleadings on the SAC remain open, Defendants’ 12(b)(6) motion is

timely.1 The Court will proceed to the merits of Defendants’

motion.

B. Section 1983 Claims

Plaintiff brings claims under 42 U.S.C. § 1983 for

violations of procedural due process, substantive due process,

and equal protection under the Fourteenth Amendment. To assert

a claim under Section 1983, a plaintiff must establish that a

person acting under color of state law deprived them of rights,

privileges, or immunities guaranteed by the Constitution or

federal law. See, e.g., Parratt v. Taylor, 451 U.S. 527, 535

(1981).

1. Procedural Due Process

Plaintiff first argues that the procedure Defendants

employed to determine his ADR application violated the Due

Process Clause of the Fourteenth Amendment. In evaluating this

claim, the Court is guided by two principles: First, its task

is to evaluate the processes that the state employed, not the

merits of its decision. See Kuck v. Danaher, 600 F.3d 159, 165

1 Even if pleadings on the SAC were closed, the Court would convert the

motion into a Rule 12(c) motion for judgment on the pleadings, which involves

an identical analysis to a 12(b)(6) motion. See Ubakanma v. Midwood Chayin

Aruchim, 09-cv-2647(DLI)(RLM), 2010 WL 1206500, at *2 n.3 (E.D.N.Y. Mar. 29,

2010) (“[T]he standards under Rule 12(b)(6) and 12(c) are identical.”).

(2d Cir. 2010) (“The viability of [the plaintiff’s] due process

claim does not turn on the merits of his initial challenge;

rather, it concerns whether he received the process he was

due.”). And second, those processes are ultimately to be

measured, for purposes of the due-process claim, against the

U.S. Constitution — not state law, the Stipulation between the

parties, or another standard. See, e.g., Russell v. Coughlin,

910 F.2d 75, 78 n.1 (2d Cir. 1990) (“Federal constitutional

standards rather than state law define the requirements of

procedural due process.”)

Because there is no dispute that Plaintiff was

deprived of his property interest in ADR benefits, the only

question is whether “the procedures followed . . . were

constitutionally sufficient.” Swarthout v. Cooke, 562 U.S. 216,

219 (2011). In analyzing this question, courts weigh the three

factors set forth in Mathews v. Eldridge, 424 U.S. 319 (1976).

Those factors are “(1) the private interest that will be

affected by the official action; (2) the risk of an erroneous

deprivation of such interest through the procedures used and the

probable value of additional or substitute procedural

safeguards; and (3) the fiscal and administrative burdens that

the additional or substitute procedures entail.” Isaacs v.

Bowen, 865 F.2d 468, 476 (2d Cir. 1989) (citing Mathews, 424

U.S. at 335).

Defendants must concede that the review process in

this case could have been handled better. At various times and

over many years, they acted to dispose of Plaintiff’s claim

without adequate explanation; reversed themselves, again without

explanation; and delayed perhaps longer than ideal. But the

fact that these deliberative bodies faltered — even repeatedly —

is not dispositive. Plaintiff must identify specific procedural

shortcomings that trip constitutional thresholds.

Plaintiff alleges that the procedures employed here

were inadequate in two ways. First, he claims he was entitled

to an oral hearing before his application was denied. Second,

he argues that the twenty-nine-month delay2 in processing his

application violated due process. The Court disagrees that

these alleged deficiencies violated Plaintiff’s due-process

rights in either way, taken separately or together.

Both of the claimed procedural shortcomings are

alleged to have ended in the same deprivation (of ADR benefits).

Thus, the first Mathews factor — the nature of the private

interest affected — applies equally to both allegations. A

plaintiff’s private interest in ADR benefits, while undoubtedly

2 The Court finds that the maximum amount of delay attributable to

Defendants is twenty-nine months, reflecting (1) the ten-and-one-half months

between receipt of Plaintiff’s evidentiary submission on September 16, 2016

and issuing the decision on August 1, 2017; and (2) the eighteen-and-one-half

months between receiving Plaintiff’s evidentiary submission on January 31,

2018 and issuing the final decision on August 19, 2019.

significant, has been held to be less compelling than interests

in entitlements specifically based on financial need. See

Basciano v. Herkimer, 605 F.2d 605, 609-10 (2d Cir. 1978)

(finding that interests in disability benefits are “less

compelling” because they do not “turn on financial need”);

Isaacs, 865 F.2d at 476 (stating that private interests in

obtaining Medicare benefits are “considerable, but they are

hardly as significant, for example, as an individual’s right to

receive welfare” (internal quotation marks omitted)).

Accordingly, the first Mathews factor does not require process

commensurate with, for instance, applications for welfare

benefits.

Because application of the second and third Mathews

factors depends on the nature of the claimed violation, these

factors are analyzed separately by claim.

a. Pre-Deprivation Hearing

Plaintiff claims Defendants violated his due-process

rights by failing to afford him a hearing at which he could

“offer testimonial and documentary evidence (including expert

testimony) before a hearing officer.” SAC at ¶ 194. This

challenge must overcome numerous precedents upholding these

procedures against similar attacks. See Basciano, 605 F.2d at

611 (finding that the ADR procedure satisfies due process

without an oral hearing); see also McDarby v. Dinkins, 907 F.2d

1334, 1337 (2d Cir. 1990) (same); Flannelly v. Bd. of Trustees,

6 F. Supp. 2d 266, 268-69 (S.D.N.Y. 1998) (rejecting claim that

due process requires an oral hearing on ADR applications,

because in this context “appearance at a hearing is not

necessary for an opportunity to be heard”); Calzerano v. Bd. of

Trustees, 877 F. Supp. 161, 164 (S.D.N.Y. 1995) (rejecting

similar claim because “Plaintiff was given the opportunity to

present his case . . . in writing”). Indeed, the Second Circuit

has expressly rejected the need for oral hearings in processing

ADR benefits applications, explaining in Basciano that the City

had a “very substantial interest in avoiding the administrative

cost of setting up a procedure for trial-type hearings which we

are satisfied ultimately would contribute very little to the

accuracy and reliability of eligibility determinations.” 605

F.2d at 611.

The Second Circuit’s holding in Basciano applies

squarely to these facts. The critical question before

Defendants was whether Plaintiff’s 2003 injury caused his

disability. That determination required analysis of medical

evidence that could be “as effectively presented in writing as

orally.” See id. Moreover, Plaintiff availed himself of ample

opportunities to submit written evidence both before and after

entering the Stipulation. Weighing the Mathews factors

together, the Court concludes that due process did not require

an oral hearing, and Defendants’ motion to dismiss this claim is

therefore granted. The Court need not reach Defendants’ other

bases for dismissal.3

b. Administrative Delay

Plaintiff next claims that Defendants violated his

due-process rights by taking twenty-nine months to finally

resolve his application. Administrative delay, however,

generally violates due process “only where it renders the

prescribed procedures meaningless in relation to the private

interest at stake.” Kuck v. Danaher, 600 F.3d 159, 163 (2d Cir.

2010).4

Applying this standard, courts in this Circuit have

rejected challenges predicated only on lengthy administrative

delays. See Isaacs, 865 F.2d. at 475-77. Where procedural due

3 Defendants contend that Plaintiff’s challenge to the absence of a pre-

deprivation hearing is time-barred, even though the SAC alleges violations

occurring after the Stipulation took effect in July 2016. These alleged

violations transpired within three years of Plaintiff’s bringing this suit

(on May 9, 2019) and therefore are not time-barred.

Defendants next argue that Plaintiff’s claim fails because the

Stipulation did not obligate them to afford Plaintiff a pre-deprivation

hearing. Plaintiff’s claim of entitlement to a hearing, however, is not

based on the Stipulation but rather on the Due Process Clause, and nothing in

the record suggests Plaintiff intended to waive his due-process rights by

entering the Stipulation. See Morris v. N.Y.C. Emps. Ret. Sys., 129 F. Supp.

2d 599, 609 (S.D.N.Y. 2001) (“In the civil context, a party waiving

constitutionally protected rights — even when doing so through the execution

of a contract — must also be made aware of the significance of the waiver.”).

4 It is undisputed that Plaintiff had an interest in receiving timely

resolution of his application. See Kraebel v. N.Y.C. Dep’t of Hous. Pres. &

Dev., 959 F.2d 395, 405 (2d Cir. 1992) (“[I]mplicit in the conferral of an

entitlement is a further entitlement, to receive the entitlement within a

reasonable time.”) (internal quotation marks omitted).

process challenges to delayed processes have succeeded, the

delays were typically caused by specified administrative

procedures or policies, rather than mere negligence or inaction.

See, e.g., Kuck, 600 F.3d at 163 (state agency had a policy of

erroneously declining firearm licenses for the purpose of

delay); Kraebel, 959 F.2d at 398-99, 405 (eighteen-month delay

in recovering tax abatement was partly caused by agency’s

excessive procedural requirements).

Unlike these cases, Plaintiff does not allege that

Defendants’ delay was the product of any specific policy or

procedures. Instead, Plaintiff claims he was the victim of an

idiosyncratic process that consumed twenty-nine months. This

Court is not aware of any case in this Circuit upholding a

procedural due process claim based purely on administrative

delay, and Plaintiff has identified none. To the contrary,

courts in this Circuit regularly deem administrative delays of

roughly two years constitutional. See Isaacs, 865 F.2d at 477

(finding that a nineteen-month delay in processing Medicare

benefits did not violate due process because such delay was not

“remarkable in the Medicare, Social Security and employment

benefits systems”); Liberty Cable Co. v. City of New York, 60

F.3d 961, 964 (2d Cir. 1995) (collecting cases upholding

administrative delays of up to two years in processing benefits

applications); see also Dukes v. N.Y.C. Emps. Ret. Sys., 361 F.

Supp. 3d 358, 374 (S.D.N.Y. 2019) (finding that a two-year delay

in processing an ADR application was “not so great as to

automatically constitute a due process violation”).

And here the delay stemmed at least in part from

Defendants’ efforts at error-correction, sometimes at

Plaintiff’s request. These extra efforts are to be commended,

even if the idiosyncrasies that gave rise to the initial errors

are not. Moreover, it bears mention that some of the delay

emanated from the unique facts surrounding the Stipulation,

which required Defendants to engage in a bespoke process for

this case. For all these reasons, the Court concludes that

Defendants’ delay in processing Plaintiff’s application did not

violate due process.

c. Other Violations

To the extent Plaintiff asserts due-process violations

arising from Defendants’ failure to adequately review his

evidence or explain their decision-making, these claims must be

dismissed under Rule 12(b)(6). These complaints are not about

BERS’ process per se, but rather about the unusual execution of

that process in this case.

“When reviewing alleged procedural due process

violations, the Supreme Court has distinguished between

(a) claims based on established state procedures and (b) claims

based on random, unauthorized acts by state employees.”

Hellenic Am. Neighborhood Action Comm. v. City of New York, 101

F.3d 877, 880 (2d Cir. 1996). “Where a deprivation at the hands

of a government actor is random and unauthorized, hence

rendering it impossible for the government to provide a pre-

deprivation hearing, due process requires only a post-

deprivation proceeding.” DiBlasio v. Novello, 344 F.3d 292, 302

(2d Cir. 2003) (internal quotation marks omitted). In these

instances, “a postdeprivation hearing, such as an Article 78

proceeding, is the only form of due process that can be made

available.” King v. N.Y.C. Emps. Ret. Sys., 212 F. Supp. 3d

371, 400 (E.D.N.Y. 2016).

There is no indication that BERS has an “established

state procedure” of ignoring evidence or providing conclusory

explanations for its decisions. Instead, the BOT and Medical

Board’s alleged failure to properly consider evidence or explain

their reasoning are akin to “random and unauthorized” acts that

no pre-deprivation process could prevent. See Dukes, 361 F.

Supp. 3d at 372-73 (finding that BERS’ alleged failure to review

evidence is a “random and unauthorized” act). Post-deprivation

Article 78 review was not only available to address Plaintiff’s

claims, but Plaintiff in fact availed himself of that process

both before and after entering the Stipulation. Accordingly,

these allegations do not establish a procedural due process

violation.

2. Substantive Due Process

Plaintiff’s second Section 1983 claim asserts that the

events giving rise to his procedural due process claim also

violated his right to substantive due process. To establish a

substantive due process violation, a plaintiff must allege they

had “(1) a valid property interest or fundamental right; and

(2) that the defendant infringed on that right by conduct that

shocks the conscience or suggests a gross abuse of government

authority.” King, 212 F. Supp. 3d at 401 (internal quotation

marks omitted); Natale v. Town of Ridgefield, 170 F.3d 258, 263

(2d Cir. 1999) (“Substantive due process standards are violated

only by conduct that is so outrageously arbitrary as to

constitute a gross abuse of governmental authority.”).

Although Plaintiff had a “valid property interest” in

his disability benefits, nothing in the SAC suggests Defendants’

actions were “so egregious, so outrageous, that it may fairly be

said to shock the contemporary conscience.” See County of

Sacramento v. Lewis, 523 U.S. 833, 847 n.8 (1998). Plaintiff’s

allegations sound in the language of arbitrary administrative

action, but do not plausibly describe the kind of shocking

government misconduct required to make out a substantive due

process allegation. See Natale, 170 F.3d at 263 (holding that

substantive due process does not “forbid governmental actions

that might fairly be deemed arbitrary or capricious and for that

reason correctable in a state court lawsuit seeking review of

administrative action”).5 Defendants’ motion to dismiss this

claim is therefore granted.

3. Equal Protection

Plaintiff’s final Section 1983 claim asserts that the

Defendants violated his rights under the equal protection clause

by treating Plaintiff differently than other applicants. In

effect, Plaintiff asserts a “class of one” discrimination claim.

See Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000)

(“Our cases have recognized successful equal protection claims

brought by a ‘class of one,’ where the plaintiff alleges that

she has been intentionally treated differently than others

similarly situated and that there is no rational basis for the

difference in treatment.”). To prevail on this theory, a

plaintiff must show that:

(i) no rational person could regard the

circumstances of the plaintiff to differ

from those of a comparator to a degree that

would justify the differential treatment on

the basis of a legitimate government policy;

and (ii) the similarity in circumstances and

difference in treatment are sufficient to

5 In support of his substantive due process claim, Plaintiff argues that

“discovery has yielded evidence” which “could form the basis for a finding by

a trier of fact that defendants deliberately and maliciously stacked the

Disability Committee as part of an effort to secure an unfavorable

recommendation by the committee on plaintiff’s application.” Opp. at 19-20.

Because these allegations were raised for the first time in Plaintiff’s

opposition brief, the Court does not consider them in deciding this motion to

dismiss. See Wright v. Ernst & Young LLP, 152 F.3d 169, 178 (2d Cir. 1998);

Muhammad v. Bonner, 05-cv-1851(RJD)(LB), 2008 WL 926574, at *4 n.5 (E.D.N.Y.

Mar. 31, 2008) (noting that courts “should not consider” allegations raised

“for the first time in [a plaintiff’s] opposition to defendants’ motion”).

exclude the possibility that the defendant

acted on the basis of a mistake.

Neilson v. D’Angelis, 409 F.3d 100, 104 (2d Cir. 2005); see also

Clubside, Inc. v. Valentin, 468 F.3d 144, 159 (2d Cir. 2006)

(“[C]lass-of-one plaintiffs must show an extremely high degree

of similarity between themselves and the persons to whom they

compare themselves.”). Here, Plaintiff’s equal-protection claim

fails because the SAC does not identify any comparators

whatsoever, let alone similar ones. Accordingly, Defendants’

motion to dismiss this claim is granted.

C. State-Law Claims

Plaintiff asserts three breach-of-contract claims

under state law. Two of these claims allege breaches of the

Stipulation. The third claim asserts a breach of the contract

described in Article 5, Section 7 of the New York State

Constitution, which grants members of retirement systems a

contractual right to certain pension benefits.

1. Breach of the Stipulation

Plaintiff claims Defendants violated both the express

terms of the Stipulation and the implied covenant of good faith

and fair dealing. To sustain a claim for breach of contract, a

plaintiff must allege “(1) the existence of a contract between

itself and [the defendant], (2) performance of the plaintiff’s

obligations under the contract, (3) breach of the contract, and

(4) damages to the plaintiff caused by [the] defendant’s

breach.” Diesel Props S.r.l. v. Greystone Bus. Credit II LLC,

631 F.3d 42, 51 (2d Cir. 2011). There is no dispute that the

Stipulation is a binding contract, or that Plaintiff performed

his obligations thereunder by withdrawing his Article 78 appeal.

The only question is whether Defendants breached the agreement.6

It is clear from the face of the SAC that Defendants

did not violate the express terms of the Stipulation. The

Stipulation imposed three obligations on BERS:

(A) “[T]he Medical Board . . . shall report

in writing to the [BOT] its conclusions and

recommendations upon petitioner’s

application;” (B) “[t]he [BOT] shall, by a

resolution adopted by a majority vote of the

Board as a whole, render a determination: 1)

adopting the conclusion of the Medical Board

as to disability; 2) adopting or rejecting

the recommendations of the Medical Board as

to whether that disability was caused by an

injury received in education service; and 3)

adopting or rejecting the recommendations of

the Medical Board as to whether the incident

that resulted in any such injury constituted

an ‘accident’, as provided by law”; and (C)

“the [BOT] shall send, by first class mail

to petitioner . . . a written determination

reflecting the decision of the Board.”

6 Defendants first argue that Plaintiff is not entitled to seek relief

from this Court for breach of the Stipulation because the Stipulation limited

Plaintiff’s recourse for breach to an Article 78 proceeding. This argument

fails because nothing in the Stipulation required Plaintiff to bring claims

for breach of the Stipulation in an Article 78 proceeding.

Trotter Declaration, Ex. B at ¶¶ 6-7, 9, ECF No. 58-2.

Plaintiff’s claim for breach of the Stipulation’s express terms

is therefore dismissed.

Nevertheless, parties to a contract must do more than

comply with its express terms. “Implicit in all contracts is a

covenant of good faith and fair dealing in the course of

contract performance.” Dalton v. Educ. Testing Serv., 87 N.Y.2d

384, 389 (1995). This covenant encompasses “any promises which

a reasonable person in the position of the promisee would be

justified in understanding were included” in the contract. 511

W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153

(2002) (internal quotation marks omitted). Where, as here, “the

contract contemplates the exercise of discretion, this pledge

includes a promise not to act arbitrarily or irrationally in

exercising that discretion.” Dalton, 87 N.Y.2d at 389; see also

Sec. Plans, Inc. v. CUNA Mut. Ins. Soc’y, 769 F.3d 807, 819 (2d

Cir. 2014) (noting that Dalton requires “that discretion be

exercised in a non-arbitrary manner”).

Plaintiff’s SAC adequately pleads a breach of this

covenant. The Stipulation gave BERS discretion to decide

Plaintiff’s ADR application. BERS was obligated to exercise

that discretion in a rational and non-arbitrary way, and

Plaintiff plausibly alleges that it failed to do so. Most

notably, Plaintiff alleges that BERS ignored the evidence

Plaintiff submitted, even though the Stipulation explicitly

referenced that evidence and invited Plaintiff to submit

additional documentation. See Dalton, 87 N.Y.2d at 390 (holding

that defendant testing service breached the implied covenant by

ignoring evidence it invited the plaintiff to submit).

Moreover, Plaintiff alleges other potential defects in

BERS’ process that could suggest a degree of irregularity. As

described in the SAC, BERS’ first post-Stipulation decision was

concededly inadequate. After BERS withdrew that decision, the

Medical Board issued another recommendation, which the BOT also

appears to have recognized as deficient (with its remand order).

Defendants then took no action on Plaintiff’s application for

over a year. Plaintiff next heard about the status of his

application at the initial conference in this case, when

Defendants announced his application was denied. This decision,

it is alleged, contradicted the finding the Medical Board made

in a prior report concerning whether the 2003 incident was an

accident, and Plaintiff alleges that Defendants rushed the

decision after Plaintiff commenced this action. See, e.g., SAC

at ¶¶ 161, 209.

Given these allegations, the Court cannot conclude —

at this preliminary stage of the proceedings and as a matter of

law — that BERS performed its contractual obligations in good

faith. BERS’ (and the BOT’s) motion to dismiss Plaintiff’s

claims for breach of the Stipulation is therefore denied.

However, the motion is granted as to the individual defendants,7

because they were neither parties to the Stipulation nor the

2012 Article 78 proceeding (or appeal) which the Stipulation

settled.

2. Breach of Article V, Section 7 of the New

York State Constitution

Plaintiff’s final contract claim alleges that

Defendants violated Article V, Section 7 of the New York State

Constitution. That section provides that “membership in any

pension or retirement system of the state or of a civil division

thereof shall be a contractual relationship, the benefits of

which shall not be diminished or impaired.” N.Y. Const. Art. V,

§ 7.

Plaintiff states a claim for breach of contract under

this provision. The SAC alleges (1) that a contract was formed

when Plaintiff joined the City’s retirement system as a

custodian engineer in 2001; (2) that Plaintiff performed his

side of the bargain by working for the City; (3) that Defendants

breached the contract by refusing to award Plaintiff ADR

benefits to which he was entitled; and (4) that this breach

7 The individual defendants are Sanford Rich (the Executive Director of

BERS) and the members of the BOT: Peter J. Calandrella, Richard Carranza,

Isaac Carmignani, Geneal Chacon, April Chapman, Jose Davila, Deborah

Dillingham, Natalie Green Giles, Michael Kraft, Vanessa Leung, Gary Linnen,

John Maderich, Donald Nesbit, Lindsey Oates, Lori Podvesker, Shannon Waite,

and Miguelina Zorrilla-Aristy.

caused Plaintiff to sustain damages. See Dukes, 361 F. Supp. 3d

at 370-71 (finding that plaintiff stated a claim for breach of

Article V, Section 7 by alleging BERS wrongly denied her

application for accidental death benefits). The parties dispute

whether Plaintiff’s 2003 injury caused his disability, and thus

whether Defendants’ denial of Plaintiff’s ADR application

impaired his entitlement to disability benefits. Because this

is a mixed question of law and fact, the Court cannot resolve

this claim at this stage. Accordingly, Defendants’ motion to

dismiss this claim is denied.

III. Disposition of This Litigation

Because no federal claims remain, the Court must

consider whether to stay this action in favor of Plaintiff’s

Article 78 proceeding. A court may, “in the exercise of its

discretion, . . . stay proceedings in the action before it

pending a decision by the state court, with a view to avoiding

wasteful duplication of judicial resources and having the

benefit of the state court’s views.” Giulini v. Blessing, 654

F.2d 189, 193 (2d Cir. 1981). In deciding whether to issue a

stay, courts consider:

(1) considerations of comity; (2) promotion

of judicial efficiency; (3) adequacy and

extent of relief available in the

alternative forum; (4) identity of parties

and issues in both actions; (5) likelihood

of prompt disposition in the alternative

forum; (6) convenience of the parties,

counsel and witnesses; and (7) possibility

of prejudice to a party as a result of the

stay.

De Carvalhosa v. Lindgren, 546 F. Supp. 228, 230 (S.D.N.Y. 1982)

(internal quotation marks omitted).

The Court finds that a stay is proper. Plaintiff’s

Article 78 proceeding involves the same parties and raises

substantially the same fundamental question — whether Defendants

issued a sound, non-arbitrary decision on Plaintiff’s

application — despite the differing theories of law. Indeed,

portions of Plaintiff’s Article 78 petition appear to have been

lifted directly from the SAC in this case. Concerns of judicial

efficiency thus favor staying one of the two proceedings. Even

if the Article 78 proceeding may afford Plaintiff more limited

relief, the state court should resolve the issues underlying

Plaintiff’s New York State Constitution claim in the first

instance, given that issues of state law are in dispute.

Moreover, there is no reason to believe that the Article 78

court is a less convenient forum or would otherwise prejudice

either party’s rights.

This Court therefore stays proceedings on Plaintiff’s

breach-of-contract claims pending resolution of his Article 78

action. Plaintiff’s claims for declaratory relief, however,

shall be dismissed in light of the concurrent state action. See

Fay v. Fitzgerald, 478 F.2d 181, 182-83 (2d Cir. 1973) (“[A]

federal district court should in the exercise of discretion,

decline to exercise [diversity] jurisdiction over a [declaratory

judgment] action raising issues of state law when those same

issues are being presented contemporaneously in state courts.”

(internal quotation marks omitted)).

IV. Conclusion

For the reasons stated above, Defendants’ motion to

dismiss Plaintiff’s Second Amended Complaint is granted with

respect to all claims except Plaintiff’s claims for breach of

the contract described in Article V, Section 7 of the New York

State Constitution and — as against all but the individual

defendants — for breach of the implied covenant of good faith

and fair dealing. Proceedings on the remaining claims shall be

stayed pending resolution of Plaintiff’s Article 78 action. The

parties shall notify the Court within ten days of the resolution

of the Article 78 proceeding.

SO ORDERED.

_____/s Eric Komitee________

ERIC KOMITEE

United States District Judge

Dated: Brooklyn, New York

July 14, 2020