Petitioner operates a business in which it assists individuals and institutions in locating and recovering abandoned property held by, among others, the State of New York. In New York, the State Comptroller is charged with maintaining a record of the names and last known [*2]addresses of persons appearing to be entitled to abandoned property (Abandoned Property Law §1401). The Comptroller is also required to periodically publish a statement of abandoned property paid to and held by the State (Abandoned Property Law §1402) and is authorized to make such rules and regulations as are deem necessary to enforce the statutory provisions governing claims for abandoned property (Abandoned Property Law §1414). Claims for abandoned property are filed with the Comptroller who has full and complete authority to determine all such claims (Abandoned Property Law §1406). A person whose claim has been denied may apply for a hearing and redetermination of the claim (Abandoned Property Law §1406[b]). The final determination of the Comptroller is reviewable by application to Supreme Court, Albany County (Abandoned Property Law §1406[b]).

The Abandoned Property Law impliedly authorizes third-parties, "finders", to become involved in the claim process on behalf of individuals and institutions attempting to locate and claim abandoned property. The statute provides that agreements to locate property held by the Comptroller are valid if they are in writing, signed by the property owner and disclose the nature of the property as well as the name and address of the holder (Abandoned Property Law §1416). Any such agreement that provides for payment of a fee in excess of fifteen percent of the value of recoverable property is invalid (Abandoned Property Law §1416[2]).

In February 2005, a dispute arose between the parties regarding the acceptability of certain forms submitted by petitioner in attempting to locate and claim abandoned property on behalf of its clients. Previously, petitioner had submitted notarized finder agreements in which petitioner was authorized to act as the signer's sole and exclusive agent in connection with finding and recovering assets held by the New York State Office of the State Comptroller. Sometime around August 2004, petitioner began submitting unnotarized finder agreements with the claim form. Petitioner claims that respondent had pre-approved the form while respondent maintains that it did not and has always required that all finder agreements be notarized. After some discussion between the parties, respondent offered to begin processing claims accompanied by unnotarized finder agreements with the understanding that a notarized finder agreement would be provided before a claim was paid. Respondent also advised petitioner that if any claim was received with an unnotarized finder agreement after February 25, 2005, a finder agreement reject letter would be sent and processing of the claim would be suspended pending the receipt of an acceptable finder agreement. Petitioner objected to the requirement that the finder agreement contain a notarized signature and maintains that respondent agreed to extend the February 2005 cutoff date but later reneged. Respondent asserts that petitioner was advised that the request for an extension of the cutoff would be reviewed but that no extension was ever granted.

At the same time that the parties were discussing the finder agreements, respondent informed petitioner that the form used by petitioner in claims in which the abandoned property was a security was unacceptable. Respondent required that the refund request form for such claims show that the claimant had made an informed choice as to the form of the refund: return of the security or cash value. Petitioner was advised that they could use the form prepared by the Office of the State Comptroller or an alternate form that had been approved in writing by the respondent. The form petitioner began to submit in 2005 for claims involving a request for refund of a security was an alternate form composed by petitioner. The top half of the form was essentially the form prepared by the Office of Unclaimed Funds for claims. The top of the form [*3]included the letterhead for the Office of the State Comptroller followed by checkoff spaces for the claimant to indicate the form of the refund. The bottom half of the form contained a detachable finder's agreement designating petitioner as the claimant's representative. In addition, respondent had been informed that petitioner was sending the form to claimants with the "sell the security" box pre-selected thereby effectively ruling out other options available to the claimant. Respondent was concerned that in some instances a claimant would be better served by choosing another option because of the tax consequences of having the Comptroller sell the security. More importantly, respondent objected to the form because it believed that use of the letterhead of the Office of Unclaimed Funds may mislead claimants to believe that petitioner was an agent of the Office of the State Comptroller. Respondent also objected to use of the Seal of the State of New York as a violation of General Business Law §136 which prohibits use of the seal for commercial purposes.

Petitioner had also requested and received permission to incorporate into its finder's agreement language prepared by respondent for use in a hold harmless statement routinely required as part of any claim submission. The hold harmless statement provided that, if funds were erroneously paid, the claimant would reimburse respondent the amount due the actual owner. Sometime in late 2005, respondent began to receive a form composed by petitioner which contained the hold harmless statement and the finder's agreement on one sheet. The top of the form contained the State Comptroller's identifying material, including the Seal of the State of New York, with the contact information removed. The heading was followed by the standard hold harmless statement. The bottom of the form again contained a detachable finder's agreement designating petitioner as the claimant's representative. Respondent objected to the form because again, it believed that use of the letterhead of the Office of Unclaimed Funds may mislead claimants and because of the use of the Seal of the State of New York.

In February 2006, respondent advised petitioner in writing that claims submitted by petitioner would not be processed pending completion of an inquiry by the Division of Investigations. The inquiry involved complaints and concerns raised by claimants as well as staff of the Office of Unclaimed Funds regarding certain aspects of petitioners' practices. In April 2006, after commencement of this litigation, respondent again wrote to petitioner. In a letter dated April 4, 2006 the Division of Investigations advised petitioner that it had completed much of its inquiry and outlined the practices utilized by petitioners which had been found objectionable. Petitioner was advised that absent a court order the Office of Unclaimed Funds would not process claims submitted through petitioner where so-called altered forms were used as doing so would condone potentially illegal activity. Petitioner was also told that the Office of Unclaimed Funds would communicate directly with claimants on files where unauthorized forms were used and would mail payments directly to the claimant. On those files where unaltered forms were used and a notarized finder's agreement was submitted, the Office of Unclaimed Funds would continuing processing those claims and would communicate directly with petitioner.

Petitioner brought this proceeding pursuant to CPLR article 78 to challenge the Comptroller's authority to refuse to process claims unless a notarized finder's agreement is provided or where petitioner submits so-called altered forms. Petitioner contends that a notarized finder's agreement is not required by the statute and that the requirement for notarized [*4]agreements is a rule that has not been implemented in the manner required by the State Administrative Procedure Act (see generally State Administrative Procedure Act § 202). In addition, petitioner argues that the forms it uses do not violate any laws and that the refusal to process claims in which the so-called altered forms are used is arbitrary and capricious.

The Comptroller has the authority to make rules and regulations he deems necessary to enforce the provisions of the statute governing the return of abandoned property (Abandoned Property Law §1414). A "rule" under the State Administrative Procedure Act involves "a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers" (Matter of Cordero v Corbisiero, 80 NY2d 771, quoting Matter of Roman Catholic Diocese v New York State Dept. of Health, 66 NY2d 948, 951).

The Comptroller contends that the requirement that all finder's agreements be notarized was implemented to satisfy its statutory obligation to withhold confidential information regarding abandoned property except as to a person who has "presented satisfactory proof of an interest in or title to such property." (Abandoned Property Law §1401). Respondent maintains that its satisfactory proof standard is excluded from the definition of a rule as it involves the "internal management of the agency which do not directly and significantly affect the rights of or procedures or practices available to the public" (State Administrative Procedures Act §102 [2][b][i]).

The requirement that a finder's agreement be notarized is, by respondent's own admission, applied to all claims submitted by a third-party and is applied without exception. As a mandatory procedure applied across the board without discretion, the requirement fits the definition of a rule (see Matter of Pallette Stone Corp. v State of NY Off. of Gen. Servs., 245 AD2d 756 [1997]). Contrary to respondent's argument the standard does not fall within one of the statutory exceptions involving the internal management of the agency because it directly imposes a significant requirement on those who choose to use finders to pursue a claim. Thus, despite the reasonable explanation offered for the requirement, the satisfactory proof standard adopted by respondent is subject to the rule-making procedures set forth in the State Administrative Procedure Act. As an unpromulgated rule, the notarization requirement is invalid and petitioner is entitled to a determination of claims for which it has provided a finder's agreement that satisfies the criteria in Abandoned Property Law §1416 (see Matter of Schwartfigure v Hartnett, 83 NY2d 296 [1994]).

The determination by the Office of the State Comptroller not to process claims accompanied by the so-called altered forms is subject to the same analysis. Here, however, the result is different. The Office of the State Comptroller has not established a standard prescribing the precise content of forms to be used in asserting a claim to abandoned property. Rather, respondent has chosen to allow claimants and finders to use any form of their choosing so long as it contains the appropriate information. In reviewing the so-called altered forms used by petitioner, the Office of the State Comptroller did not reject the form because it lacked some required information. Rather, the forms were rejected as misleading. The refusal to allow the use of forms deemed misleading is a statement of general policy which is exempt from the rule making requirement (State Administrative Procedures Act §102 [2][b][iv]). Furthermore, the review undertaken by the Office of the State Comptroller to determine whether the form is [*5]misleading involves an exercise of discretion as opposed to a hard-and-fast standard which defines a rule.^[FN1] Inasmuch as the Comptroller was not required to promulgate a rule prohibiting the use of misleading forms, the determination to refuse to process claims accompanied by the so-called altered forms is valid unless it is arbitrary and capricious or lacks a reasonable basis.

As noted, after receiving permission to incorporate the language of the hold harmless statement drafted by the Office of the State Comptroller into its finder's agreement, petitioner used not only the statement language but also the header of the form with the contact information removed. As composed, the form creates a connection between petitioner, the finder, and the Office of the State Comptroller. Moreover, petitioner has not offered any explanation as to why the header was retained nor has it provided any authority to use the Seal of the State of New York on a form it holds out as its own. Sound bases exist for respondent's refusal to accept the form.

For the same reasons, respondent's refusal to accept the form utilized by petitioner in claims involving recovery of a security is valid. To the extent that a claimant is aggrieved by respondent's refusal to accept any claim involving a security because the manner of refund was found to have been selected by the finder and not the claimant, that decision can be treated as a refusal of the claim and a hearing can be requested (Abandoned Property Law §1406[b]).^[FN2] Inasmuch as that administrative remedy has not been pursued, the issue is not ripe for determination by the court.

The claim for tortious interference with a contract is subject to dismissal for lack of subject matter jurisdiction. The remedy for the asserted cause of action is an award of money damages (Town of Liberty Volunteer Ambulance Corp. v. Catskill Regional Med. Ctr., 30 AD3d 739 [2006]) and as the action is one against the State of New York, exclusive jurisdiction resides with the Court of Claim (Court of Claims Act §9; see e.g. Franbilt Inc. v New York State Thruway Auth., 290 AD2d 705 [2002]).

The policy of requiring a claimant's signature on all finder's agreements to be notarized is subject to the rule-making procedures set forth in the State Administrative Procedure Act and as respondent has not properly promulgated the rule, the requirement is invalid and may not be enforced.

Respondent's policy of refusing to process claims accompanied by the so-called altered forms is not subject to the rule-making procedure in the State Administrative Procedure Act and is not arbitrary and capricious. Consequently, respondent is entitled to judgment dismissing the portion of the petition addressed to this practice.

The cause of action for tortious interference with a contract is dismissed for lack of subject matter jurisdiction.

The application for attorney's fees is denied.

All papers including this Decision and Order are returned to respondent's attorneys. The [*6]signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of this rule with regard to filing, entry and Notice of Entry.

This memorandum shall constitute both the Decision and Order of this Court.

SO ORDERED.

ENTER.

Dated:Saratoga Springs, New York

January 16, 2007

_________________________________________

Thomas J. McNamara

Acting Supreme Court Justice