Supreme Court, Albany County, December 12, 2018

Barbara D. Underwood, Attorney General (Christopher J. Hummel of counsel), for respondent.

Baker & Hostetler, LLP for petitioners.

Petitioners seek a judgment declaring that the New York State Joint Commission on Public Ethics (hereinafter JCOPE or the Commission) violated lawful procedure and acted without or in excess of its jurisdiction when it voted to commence an investigation of the petitioners; annulling the Commission's vote; and an order directing the Commission to close its investigation and expunge all of its records related thereto. Respondent moves to dismiss the [*2]petition. (CPLR 3211 [a] [2], [7]; 7804 [f].) The court heard oral argument on October 10, 2018.

On December 21, 2016, Emily Logue, Esq., Deputy Director of Investigations and Enforcement at JCOPE, sent an email to counsel for the petitioners which included a nonparty subpoena duces tecum. The subpoena requested documents and information in connection with JCOPE Investigation 15-083 concerning monetary donations petitioner had made to Campaign for One New York (CONY) and meetings sought and held between petitioners and New York City Mayor Bill de Blasio and other New York City officials between January 2014 and December 2014. This investigation originated in June of 2015, and involved the review of over 100 individuals and organizations that had donated to CONY.

On March 19, 2018, Pei Pei Cheng-de Castro, Esq., Director of Investigations and Enforcement at JCOPE, and Ms. Logue contacted counsel for the petitioners to discuss petitioners' lobbying activities and possible violations of the restrictions on gifts to public officials. Ms. Cheng-de Castro asked whether petitioners would be "open to settling" with the Commission. Counsel for the petitioners responded that the Commission had never before communicated that petitioners had committed any violations and requested more information. Ms. Cheng-de Castro stated that the Commission would discuss internally and get back to counsel for the petitioner.

On April 30, 2018, Ms. Logue sent an email to counsel for the petitioners, with an attached letter addressed to petitioners. That letter indicated that JCOPE had information concerning petitioners' alleged violations of article 1-A of the Legislative Law (Lobbying Act) in connection with CONY, Mayor de Blasio, and other New York City officials between January{**62 Misc 3d at 712}2014 and December 2014. The letter explained that Executive Law § 94 (13) (a) provided petitioners with a 15 day period to submit a written response. Finally, the letter itself did not serve to commence a full investigation, which had to be voted on by the Commission.

On May 2, 2018, Ms. Logue sent an email to petitioners' counsel, indicating that the April 30, 2018 letter was sent directly to the petitioners, as the Commission had not received a response from petitioners' counsel. Ms. Logue called counsel for the petitioners that same day, indicating that the Commission was going to meet on May 22, 2018, to vote on whether to commence a full investigation.

On May 15, 2018, petitioners submitted a response to the April 30 letter, denying the allegations as untimely, legally and factually baseless, without evidentiary support, politically motivated, and made in an effort to chill free speech.

On May 22, 2018, the Commission voted to commence a substantial basis investigation into the allegations outlined in the April 30, 2018 letter.

The Commission is charged with receiving, investigating and taking action against [*3]lobbyists or clients of lobbyists who have violated article 1-A of the Legislative Law. (Executive Law § 94 [9] [g]; [13], [14].)

Executive Law § 94 (13) (a) states, inter alia, that if the Commission determines on its own initiative to investigate a possible violation, the Commission shall notify the individual in writing, describe the possible or alleged violation of such laws, provide a description of the allegations and the evidence supporting such allegations. The letter shall inform the individual of a 15 day period in which to submit a written response.

"The commission shall, within sixty calendar days after a complaint or a referral is received or an investigation is initiated on the commission's own initiative, vote on whether to commence a full investigation of the matter under consideration to determine whether a substantial basis exists to conclude that a violation of law has occurred." (Id.)

Executive Law § 94 (9-a) (b) states that

"testimony received or any other information obtained by a commissioner or staff of the commission shall not be disclosed by any such individual to any person or entity outside the commission during the pendency of any matter. Any confidential{**62 Misc 3d at 713} communication to any person or entity outside the commission related to the matters before the commission may occur only as authorized by the commission."

Executive Law § 94 (13) (b) provides that all proceedings prior to issuing a substantial basis investigation report, including the vote to commence a substantial basis investigation, "shall be confidential."

The Commission is exempted from both the Open Meetings Law and the Freedom of Information Law. (Executive Law § 94 [18]-[19].)

Petitioners argue that the Commission failed to comply with Executive Law § 94 (13) (a) in that the May 22, 2018 vote took place more than 500 days after the Commission disclosed the December 2016 subpoena, and 64 days after the March 19, 2018 phone call. Specifically, the Commission was under a 60 day time frame to vote from the point it had initiated an investigation. Petitioners argue that the Commission would not have drafted the December 2016 subpoena if it had not initiated an investigation of the allegations against the petitioners. Petitioners note that the December 2016 subpoena and the JCOPE April 30 letter were assigned the same investigation number, both ending in "083." Petitioners contend that the vote should have occurred by February 19, 2017 (60 days from the receipt of the December 21, 2016 email) or in the alternative, by May 18, 2018 (60 days from the March 19, 2018 phone call). As such, petitioners contend that the Commission had no statutory authority to undertake the May 22, 2018 vote, which constituted a determination in violation of lawful procedure and without or in excess of jurisdiction.

The Commission moves to dismiss the petition on several grounds. First, that a writ of prohibition is improper where the determination is not final and where the petitioners have an adequate remedy at law. However, the court agrees with petitioners that the May 22 vote was [*4]final with "respect to the matter involved" (Matter of Civil Serv. Empls. Assn. v Helsby, 31 AD2d 325, 329 [3d Dept 1969]) because it resulted in the commencement of the substantial basis investigation. In commencing a substantial basis investigation, the Commission had the right to exercise powers including the ability to administer oaths, subpoena witnesses, compel their attendance and require the production of books and records. (Executive Law § 94 [17] [c].) There are no further administrative steps{**62 Misc 3d at 714} petitioners can utilize to prevent or challenge the substantial basis investigation. Finally, as acknowledged by the respondents, finality is not necessarily required for the court to issue a writ of prohibition. (Matter of Civil Serv. Empls. Assn. v Helsby, 31 AD2d 325 [3d Dept 1969].) The motion to dismiss on these grounds is denied.

Next, respondents argue that a writ of prohibition is only available in judicial and quasi-judicial context, and not here, where the Commission was acting in an investigatory capacity. Again, the court agrees with petitioners that when an agency, such as the Commission, exercises discretion to reach a determination, it is acting in a quasi-judicial capacity, and its conduct is subject to this CPLR article 78 review. (Verizon N.Y., Inc. v Village of Athens, 43 AD3d 526, 528 [3d Dept 2007] ["the general rule is that 'discretionary or quasi-judicial acts involve the exercise of reasoned judgment which could typically produce different acceptable results whereas a ministerial act envisions direct adherence to a governing rule or standard with a compulsory result' "], citing Tango v Tulevech, 61 NY2d 34, 41 [1983].) The motion to dismiss on these grounds is also denied.

The Commission next argues that petitioners cannot demonstrate that the vote was, in fact, untimely. The Commission notes that in the case of a complaint or a referral, the 60 day time frame runs from the date of the receipt of the complaint or referral. However, the statute does not specify the date upon which the Commission "initiates an investigation on its own initiative." The Commission argues that since its inception in 2011, the Commission has determined that the date of its determination to initiate an investigation to be the date that the 15 day letter is issued. The Commission also argues that if this interpretation is not accepted, the court would be required to engage in a fact intensive inquiry into the respondent's inner workings, which are protected by statutory confidentiality.

Petitioners argue that the Commission's interpretation must be rejected because the issue here is one of pure statutory construction, and that the respondent's interpretation is therefore not entitled to deference. Further, the Commission's interpretation is contrary to the clear language of the statute, which states that the trigger for the 60 day time frame runs from when the Commission initiates its own investigation. In this case, petitioners identify "three independent instances where respondent demonstrated through objective conduct that{**62 Misc 3d at 715} it was investigating petitioners," specifically: (1) when the Commission first made contact in December 2016 via subpoena; (2) when the Commission admittedly concluded its review of thousands of documents in May 2017 and turned its attention to certain JCOPE donors to consider their liability; and (3) on March 19, 2018, when respondent asked petitioner's counsel whether it would be open to settling. Petitioners argue that it would be "nonsensical" to conclude that respondent did not "initiate its investigation" until April 30, 2018. Petitioners also note that the court need not engage in any [*5]inquiry into the confidential workings of the Commission when it has, as in this case, communicated to the petitioners that it has initiated its own investigation.

In reply, the Commission notes that the petitioners have construed every informal contact and all activity by the Commission as the "initiation" of an investigation within the meaning of section 94 (13) (a). At oral argument, counsel for the respondent reiterated that in December 2016, petitioners were served with a nonparty subpoena, and that petitioners were not the target of the Commission's investigation at that time. Additionally, the Commission will often reach out to a potential target of an investigation in an attempt to settle before expending time and resources on an investigation.

This court will "defer to the governmental agency responsible for the administration of a statute when interpretation of the language at issue requires the agency's expertise in the matters covered by the statute." (Matter of Kent v Cuomo, 124 AD3d 1185, 1186 [3d Dept 2015].) However, "[w]here . . . the question is one of pure statutory interpretation," the court "need not accord any deference to the agency's determination and can undertake its function of statutory [interpretation]" (Matter of Albano v Board of Trustees of N.Y. City Fire Dept., Art. II Pension Fund, 98 NY2d 548, 553 [2002] [internal quotation marks omitted]).

As noted above, the statutory language at issue here states that

"[t]he commission shall, within sixty calendar days after a complaint or a referral is received or an investigation is initiated on the commission's own initiative, vote on whether to commence a full investigation of the matter under consideration to determine whether a substantial basis exists to conclude that a violation of law has occurred." (Executive Law § 94 [13] [a] [emphasis added].)

{**62 Misc 3d at 716}The date on which an investigation is initiated on the commission's own initiative is simply not discernable from plain language of the statute, and therefore, this is not a case of pure statutory construction. This is wholly confirmed by the petitioners' advancement of three plausible dates from which it might infer that the Commission had initiated an investigation into the petitioners' activities. However, as all of the proceedings prior to the issuing a substantial basis investigation report are confidential (Executive Law § 94 [13] [b]), neither petitioners nor this court has any way of knowing when the Commission initiated an investigation into the petitioners in this case. At oral argument, respondent gave a generalized description of how the Commission functions without providing any specific or confidential information with respect to these petitioners, except to note that petitioners were not the Commission's target in December 2016. Nonetheless, it is clear that the decision to initiate an investigation is based on the Commission's confidential proceedings, which in turn relates to the date on which an investigation is initiated. These are matters within the Commission's expertise based on its confidential proceedings. Therefore, its interpretation of the statute is entitled to deference.

As an alternative basis of dismissal, the court also agrees with the Commission that the petitioners cannot demonstrate a clear legal right to either a writ of prohibition or mandamus as petitioners cannot demonstrate that the alleged untimely vote divested the Commission of jurisdiction. As noted by the respondent, while the Executive Law imposes some express [*6]limitations on the Commission's jurisdiction, none turn on whether the Commission holds a timely vote.

The court agrees with the Commission that a case relied upon by the petitioners, Matter of Trump v New York State Joint Commn. On Pub. Ethics (47 Misc 3d 993 [Sup Ct, Albany County 2015, Zwack, J.]), is distinguishable from the instant matter. In Trump, petitioner sought mandamus to compel the Commission to vote to commence a substantial basis investigation within 45 days^[FN*] of receiving the sworn complaint of alleged violations. The court found that

"the statute's plain language, which required the Commission to vote within 45 days of the filing of{**62 Misc 3d at 717} the Trump parties' complaint, is incapable of any other understanding. Understanding that the legislature is presumed to have acted intentionally in setting a specific timeline, it cannot be said that it otherwise remained within the discretion of the Commission to adhere to any other timetable. Any contrary view, in effect allowing the Commission to either ignore the timeline or substitute a confidential process is simply inconsistent with the purpose and spirit of [the] statute and is thus incapable of being an 'accurate apprehension of legislative intent.' " (Id. at 997 [citations omitted].)

The court held that "[t]he requirement that a vote be held within 45 days from receipt of a complaint is a purely ministerial act—which must be carried out in accordance with the clear statutory language" (id. at 997) and therefore, the court ordered respondent "to comply with Executive Law § 94 by conducting a vote within 30 days from the date of this order as to whether to conduct an investigation into the subject complaint" (id. at 998). The Commission is correct that Trump is distinguishable because the petitioner in that case sought to compel a ministerial act; the petitioner did not ask the court to decide the consequences of failing to act. Moreover, the court's direction to the Commission to vote in Trump occurred more than a year after the proceeding was commenced in December 2013, well after the 45 day deadline in the statute. Therefore, the court agrees with respondent that Trump actually undercuts petitioners' claim that an untimely vote divests the Commission of jurisdiction.

Petitioners acknowledge that Trump does not hold that the failure to vote in the statutory time frame divests the Commission of jurisdiction; however, they contend that the Commission's failure to act in a timely manner is without consequences. Petitioners further argue that the legislature specifically amended the time frame for the Commission to vote from 45 days to 60 days, and did not grant respondent any discretion regarding the mandatory nature of the time within which it must vote. However, the court notes that there is also nothing in the statute which indicates that the penalty for the failure to vote in a timely manner should result in the complete divestiture of the Commission's jurisdiction. In fact, there is no penalty or consequence mentioned in the statute at all. The relief requested by the petitioners is inconsistent with well established case law concerning the designation of time in a{**62 Misc 3d at 718} statute and whether such designation [*7]is intended as a limitation on an agency's power.

As an example, in Matter of Maria PP. v Commissioner of NYS Off. of Children & Family Servs. (162 AD3d 1297 [3d Dept 2018]), the Third Department reviewed a determination of the Office of Children and Family Services partially denying petitioner's application to have reports maintained by the Central Register of Child Abuse and Maltreatment amended to be unfounded and expunged. It was uncontested that the Department of Social Services (DSS) failed to determine whether the reports were indicated or unfounded within 60 days as required by Social Services Law § 424 (7). The Court held,

"The statute does state that DSS 'shall' render its determination within 60 days . . . but that language is insufficient to show 'that the designation of time was intended as a limitation on the [agency's] power' (Matter of Grossman v Rankin, 43 NY2d 493, 501 [1977]; see Matter of Pena v New York State Gaming Commn., 127 AD3d 1287, 1289 [2015], appeal dismissed 25 NY3d 1059 [2015], lv denied 26 NY3d 903 [2015]). There must instead be language creating a 'specific consequence to flow from the administrative agency's failure to act' in violation of the time limit, language that is entirely absent here (Matter of Janus Petroleum v New York State Tax Appeals Trib., 180 AD2d 53, 55 [1992]; see Matter of Grossman v Rankin, 43 NY2d at 501; Matter of Meyers v Maul, 249 AD2d 796, 797 [1998], lv denied 92 NY2d 807 [1998]). The time limit imposed is accordingly directory, not mandatory, in nature, and 'petitioner is not entitled to have [the] determination vacated on this basis' absent a showing of substantial prejudice that has not been made here (Matter of Meyers v Maul, 249 AD2d at 797; see Matter of Pena v New York State Gaming Commn., 127 AD3d at 1289; see also Matter of Skye B., 185 AD2d 880, 881 [1992])." (Matter of Maria PP., 162 AD3d at 1298-1299; see also Matter of Pena v New York State Gaming Commn., 127 AD3d 1287, 1289 [3d Dept 2015] ["Where, as here, an agency fails to follow a procedural provision that is merely directory, the subsequent determination should only be judicially annulled when the challenger can show that substantial prejudice resulted from the{**62 Misc 3d at 719} agency's noncompliance" (internal quotation marks omitted)]; Matter of Peterson Petroleum of N.H. v Tax Appeals Trib. of State of N.Y., 236 AD2d 752, 754 [3d Dept 1997] ["unless petitioner can show substantial prejudice, the noncompliance with the time limitations will have no consequences"]; Matter of Kurey v New York State School for Deaf, 227 AD2d 829, 832 [3d Dept 1996] [respondent's determination affirmed because dates were directory rather than mandatory, and petitioner failed to show that substantial prejudice resulted from the delay]; Matter of McMillian v Lempke, 149 AD3d 1492, 1493 [4th Dept 2017] ["(I)t is well settled that, (a)bsent a showing that substantial prejudice resulted from the delay, the regulatory time limits are construed to be directory rather than mandatory" (internal quotation marks omitted)].)

Executive Law § 94 (13) (a) also contains the word "shall" in connection with the time frame in which the Commission must vote. However, the statute contains no specific consequence which flows from the agency's failure to vote in that time frame. Therefore, the time limits outlined in these governing provisions are directory, not mandatory. Petitioners argue that they [*8]will be prejudiced if a substantial basis investigation proceeds, as the Commission can then issue third-party subpoenas, which would publicize the matter and could create a stigma that may affect petitioners' reputation and business. However, these claims do not amount to "substantial prejudice" as that term is defined in this context, as none of petitioners' claims are the result of the delay. Rather, they are claims of potential prejudice which may occur should the investigation continue. Petitioners do not suggest in any way that the delay has handicapped them in answering the charges or mounting a defense. Any stigma attached to petitioners as a result of the charges would have existed regardless of any delay in rendering the decision.

Accordingly, even if the Commission failed to abide by the time frames contained in the statute, petitioners would still not be entitled to have the determination vacated on this basis, or to any of the relief requested in the petition.

All prior court records herein were filed under seal, pursuant to Supreme Court's order dated June 15, 2018 (O'Connor, J.). Considering the interests of the public as well as of the parties, whose names have been redacted, the court does not find good{**62 Misc 3d at 720} cause to seal this decision and order. (22 NYCRR 216.1.) However, all prior court records shall remain under seal pursuant to the June 15, 2018 order.

Accordingly, it is hereby ordered and adjudged that the petition is dismissed and the relief requested therein is in all respects denied.