Supreme Court, New York County, May 11, 2022

Smith Buss & Jacobs, LLP, Yonkers (Jeffrey Buss of counsel), for defendant.

Press Koral, LLP, New York City (Matthew Press of counsel), for plaintiff.

Defendant moves to dismiss the verified complaint's first claim for breach of a contract and second claim for retaliation, based on plaintiff's failure to state a cause of action and to state plaintiff's claims with sufficient particularity. (CPLR 3013, 3211 [a] [7].) Defendant also moves to dismiss a claim for violation of the New York False Claims Act (NYFCA), State Finance Law § 191, but the verified complaint does not plead such a claim, which plaintiff confirmed at oral argument. Finally, defendant seeks attorneys' fees and expenses. For the reasons explained below, the court grants defendant's motion to dismiss plaintiff's retaliation claim, but otherwise denies defendant's motion, including its request for attorneys' fees and expenses.{**76 Misc 3d at 783}

I. The Alleged Facts

Upon a motion to dismiss a complaint pursuant to CPLR 3211 (a) (7), the court considers the facts alleged in the complaint and presumes them to be true. (Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v Matthew Bender & Co., Inc., 37 NY3d 169, 175 [2021]; Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, 141 [2017]; Seaman v [*2]Schulte Roth & Zabel LLP, 176 AD3d 538, 538 [1st Dept 2019].) According to the verified complaint, defendant owns Co-op City, a cooperative housing development publicly subsidized under the Mitchell-Lama Program, in Bronx County. (Private Housing Finance Law §§ 10-37.) Defendant and plaintiff entered a contract dated November 5, 2013, for plaintiff to perform both an American Society of Heating, Refrigerating, and Air-Conditioning Engineers Level II energy audit and a retro-commissioning audit of Co-op City's common areas. During plaintiff's work, plaintiff uncovered structural deficiencies throughout Co-op City, which plaintiff believed would violate both Private Housing Finance Law § 32-a (7) and Administrative Code of the City of New York §§ 28-308.2, 28-308.3.1, and 28-308.4.1, if not ameliorated by the end of 2021. After plaintiff reported its preliminary findings to defendant, it terminated the contract and refused to pay plaintiff for its further services.

Defendant continued to ignore the deficiencies after it terminated the contract. Plaintiff contends that defendant purposely concealed the deficiencies and, by doing so, falsely certified defendant's compliance with Private Housing Finance Law § 32-a (7) and Administrative Code §§ 28-308.2, 28-308.3.1, and 28-308.4.1 to its supervising agency, New York State Homes and Community Renewal (HCR), so that defendant would continue to receive tax benefits and subsidies under the Mitchell-Lama Program. Plaintiff now sues for breach of the contract, to recover payment for its work, and for retaliation under the NYFCA.

II. Defendant's Motion to Dismiss the Verified Complaint

Defendant bears the burden to establish that plaintiff's verified complaint "fails to state a viable cause of action." (Connolly v Long Is. Power Auth., 30 NY3d 719, 728 [2018].) In evaluating defendant's motion, the court must accept plaintiff's allegations as true, liberally construe the verified complaint, and draw all reasonable inferences in plaintiff's favor. (Doe v Bloomberg L.P., 36 NY3d 450, 454 [2021]; Connolly v Long Is. Power Auth., 30 NY3d at 728; JF Capital Advisors, LLC v{**76 Misc 3d at 784} Lightstone Group, LLC, 25 NY3d 759, 764 [2015]; M & E 73-75 LLC v 57 Fusion LLC, 189 AD3d 1, 5 [1st Dept 2020].)

The court will not give such consideration, however, to allegations that consist of only bare legal conclusions. (Myers v Schneiderman, 30 NY3d 1, 14 [2017]; Simkin v Blank, 19 NY3d 46, 52 [2012]; M & E 73-75 LLC v 57 Fusion LLC, 189 AD3d at 5.) Instead, the court accepts as true only plaintiff's factual allegations that set forth the elements of a legally cognizable claim and from them draws all reasonable inferences in plaintiff's favor. Dismissal is warranted if the verified complaint fails to allege facts that fit within any cognizable legal theory against defendant. (Sassi v Mobile Life Support Servs., Inc., 37 NY3d 236, 239 [2021]; Faison v Lewis, 25 NY3d 220, 224 [2015].)

A. Plaintiff's First Claim for Breach of the Contract

Defendant insists that plaintiff fails to plead breach of a contract, but plaintiff alleges a binding contract that plaintiff performed and defendant breached when it failed to pay plaintiff the balance due. (Magliocco v MKB Family, LLC, 199 AD3d 576, 576 [1st Dept 2021]; Pavich v Pavich, 189 AD3d 548, 549 [1st Dept 2020]; Meer Enters., LLC v Kocak, 173 AD3d 629, 630-631 [1st Dept 2019]; Second Source Funding, LLC v Yellowstone Capital, LLC, 144 AD3d 445, 445-446 [1st Dept 2016].) These allegations provide defendant "sufficient[ ] . . . notice of the transactions" and claims that plaintiff intends to prove at trial. (CPLR 3013; Second Source Funding, LLC v Yellowstone Capital, LLC, 144 AD3d at 446.) Therefore the court denies [*3]defendant's motion to dismiss plaintiff's breach of contract claim.

B. Plaintiff's Second Claim for Retaliation

The NYFCA authorizes two private rights of action. Under State Finance Law § 190 (2) (a), "[a]ny person may bring a qui tam civil action for a violation of [State Finance Law § 189] on behalf of the person and the people of the state of New York or a local government." A plaintiff that brings a qui tam claim must follow procedural requirements delineated under the statute, including filing under seal for at least 60 days and not serving the complaint on the defendant until so ordered. (State Finance Law § 190.) State Finance Law § 191 provides an aggrieved employee a separate cause of action for retaliation. This section prevents employers from engaging in retaliatory conduct against an employee for the employee's efforts to stop a violation of the NYFCA.{**76 Misc 3d at 785}

[1] Defendant maintains that plaintiff's retaliation claim fails on procedural grounds, since plaintiff did not comply with the NYFCA's requirements for filing a qui tam claim before commencing this action. Yet defendant points to no authority to support this position. Federal courts, applying the parallel Federal False Claims Act (31 USC §§ 3729-3733 [FCA]), provide guidance in interpreting the NYFCA, since it tracks the FCA. (Comptroller of the City of N.Y. v Bank of N.Y. Mellon Corp., 200 AD3d 58, 60 [1st Dept 2021]; Weiner v City of New York, 190 AD3d 517, 518 [1st Dept 2021]; State of N.Y. ex rel. Willcox v Credit Suisse Sec. [USA] LLC, 140 AD3d 622, 623 n 2 [1st Dept 2016]; State of New York ex rel. Seiden v Utica First Ins. Co., 96 AD3d 67, 71 [1st Dept 2012].) The federal courts have held that a claim for retaliation under the FCA is not subject to the qui tam procedural requirements. (E.g. Parris v New York City Hous. Auth., 364 F Supp 3d 284, 289-290 [SD NY 2019]; Ping Chen ex rel. U.S. v EMSL Analytical, Inc., 966 F Supp 2d 282, 305 [SD NY 2013].) No court has held to the contrary. Therefore the court denies defendant's motion to dismiss plaintiff's retaliation claim on procedural grounds.

Defendant also contends that plaintiff fails to state a claim for retaliation because plaintiff does not allege an underlying NYFCA violation. Plaintiff insists that the verified complaint states a claim for retaliation, since plaintiff alleges that defendant discharged plaintiff and terminated their contract because plaintiff prepared a draft report that revealed Co-op City's deficiencies and potential violations of Private Housing Finance Law § 32-a (7) and Administrative Code §§ 28-308.2, 28-308.3.1, and 28-308.4.1.

[2] To state a claim for retaliation under the NYFCA, plaintiff must show that (1) it engaged in conduct protected under State Finance Law § 191 to prevent a violation of the NYFCA, (2) defendant knew about plaintiff's conduct, and (3) defendant discharged plaintiff on that basis. (Landfield v Tamares Real Estate Holdings, Inc., 112 AD3d 487, 487-488 [1st Dept 2013]; see Anonymous v Anonymous, 165 AD3d 19, 30 [1st Dept 2018].) Since plaintiff entered a contract to audit and report on Co-op City's common areas, plaintiff also must show that its complaints of defendant's noncompliance with the law exceeded the scope of plaintiff's contractual duties, to overcome the presumption that plaintiff merely performed the contract. (Landfield v Tamares Real Estate Holdings, Inc., 112 AD3d at 488.){**76 Misc 3d at 786}

Plaintiff fails "to adequately plead actionable retaliatory activity." (State of N.Y. ex rel. Solomon v Siemens Elec., LLC, 202 AD3d 454, 455 [1st Dept 2022].) Although plaintiff claims that its draft report amounts to protected conduct under the NYFCA, [*4]plaintiff fails to distinguish its disclosures through its draft report from its contractual obligations to defendant. (Landfield v Tamares Real Estate Holdings, Inc., 112 AD3d at 488.) Absent any additional alleged conduct or efforts by plaintiff to stop a violation of the NYFCA, plaintiff's failure to distinguish its report to defendant from performance of the parties' contract is grounds alone to dismiss the retaliation claim.

Even if the court considered plaintiff's report apart from its contractual obligations, plaintiff still fails to identify a violation of the NYFCA. (State of N.Y. ex rel. Solomon v Siemens Elec., LLC, 202 AD3d at 455.) Although plaintiff insists that defendant is liable under the NYFCA because, by concealing Co-op City's deficiencies, defendant falsely certified its compliance with Private Housing Finance Law § 32-a (7) and Administrative Code §§ 28-308.2, 28-308.3.1, and 28-308.4.1 to HCR, plaintiff fails to specify when or how defendant so certified or how its alleged conduct violated the NYFCA. First, Private Housing Finance Law § 32-a (7) is inapplicable to the circumstances alleged in the complaint. This statutory provision required defendant in 1984 to certify to the supervising state agency, then the Division of Housing and Community Renewal, that defendant had implemented energy conservation measures identified in an earlier energy audit report. Administrative Code § 28-308.4.1 did require an energy report in 2021 as alleged in the complaint, but to the New York City Department of Buildings (DOB), not to HCR.

A violation of the NYFCA, moreover, requires that defendant present "a false or fraudulent claim for payment or approval." (State Finance Law § 189 [1] [a].) State Finance Law § 188 (1) (a) defines a "claim" as a "request or demand . . . for money or property that (i) is presented to . . . the state or a local government." Plaintiff simply fails to point to any such request by defendant or even that it received payment, benefits, or approval as a participant in the Mitchell-Lama Program by making a false claim to HCR, DOB, or any other governmental agency. Although plaintiff maintains that Private Housing Finance Law § 32-a (7) and the Administrative Code provisions required defendant to submit an audit and report to HCR, plaintiff alleges{**76 Misc 3d at 787} neither that defendant failed to submit these documents nor that it submitted a false audit or report. (See State of N.Y. ex rel. Willcox v Credit Suisse Sec. [USA] LLC, 140 AD3d at 623.) Nor does plaintiff allege that either document included a "request or demand . . . for money" (State Finance Law § 188 [1] [a]), or that defendant submitted either document in exchange for payment, benefits, or approval as a Mitchell-Lama Program participant. (See Total Asset Recovery Servs. LLC v Metlife, Inc., 189 AD3d 519, 521 [1st Dept 2020]; Anonymous v Anonymous, 165 AD3d at 27; State of New York ex rel. Seiden v Utica First Ins. Co., 96 AD3d at 71-72.)

Plaintiff emphasizes that defendant's false certification was in the form of an omission of information defendant was required to disclose to HCR or another governmental agency: the structural deficiencies that plaintiff had uncovered and consequent deficiencies in energy conservation. Again, plaintiff fails to specify when, where, or how defendant omitted to disclose that information; whether to HCR, DOB, or another governmental agency; or what law or contract required defendant to convey that information, which defendant violated by its omission. (See State of N.Y. ex rel. Willcox v Credit Suisse Sec. [USA] LLC, 140 AD3d at 623.) The only energy audit or report required by the Administrative Code provisions was to DOB after plaintiff filed this action. (Administrative Code § 28-308.4.1.) [*5]

Private Housing Finance Law § 32 (2) requires defendant to file an annual report with HCR, but plaintiff similarly fails to specify what defendant was required to disclose that it omitted in an annual report. Plaintiff implies that defendant was required to certify its compliance with all laws and contractual obligations, but points to no source for such a requirement and, in any event, nowhere indicates what law or contractual obligation defendant falsely certified it complied with. Defendant concedes that HCR required defendant to disclose to HCR defendant's contract with a new entity, instead of plaintiff, for energy services and to obtain HCR's approval, but again plaintiff alleges nothing about defendant's noncompliance with any requirement to disclose structural deficiencies or energy inefficiencies in connection with that approval. Thus, drawing every inference in plaintiff's favor, its conclusory allegations fail to state a claim of retaliation. (State of N.Y. ex rel. Solomon v Siemens Elec., LLC, 202 AD3d at 455.)

Finally, were the court to consider plaintiff's conclusory allegations, they are premised on the fact that defendant "was {**76 Misc 3d at 788}required to both disclose and implement the repairs by the end of year in 2021." (Aff of Jeffrey D. Buss, exhibit A at 8-9.) Defendant terminated the contract on January 31, 2020, however, almost two years before defendant's time to cure any deficiencies was to expire. Therefore plaintiff fails to show how defendant's termination of the contract qualified as retaliation, since plaintiff's draft report, at best, revealed only prospective violations, not an actual violation of the NYFCA when defendant terminated plaintiff's services.

III. Defendant's Request for Attorneys' Fees

Defendant also seeks an award of attorneys' fees and expenses. Attorneys' fees and expense are recoverable only when a statute, regulation, or the parties' written contract authorizes them. (Mount Vernon City School Dist. v Nova Cas. Co., 19 NY3d 28, 39 [2012]; Flemming v Barnwell Nursing Home & Health Facilities, Inc., 15 NY3d 375, 379 [2010]; Reif v Nagy, 175 AD3d 107, 131 [1st Dept 2019]; Matter of URS Corp.-N.Y. v Expert Elec., Inc., 151 AD3d 520, 521 [1st Dept 2017].) Defendant points to no authority supporting an award of attorneys' fees and expenses in this action. Even if the parties' contract provides for attorneys' fees to defendant, it did not present the contract in support of this motion. Therefore the court denies defendant's request for attorneys' fees and expenses.

IV. Conclusion

For the reasons explained above, the court grants defendant's motion to dismiss the verified complaint's second claim for retaliation without prejudice, but denies the motion to dismiss the first claim for breach of the parties' contract. (CPLR 3013, 3211 [a] [7].) Although defendant seeks a dismissal with prejudice, plaintiff's failure to state a retaliation claim does not preclude plaintiff from bringing a timely and adequately supported retaliation claim again, based on an adequately supported false claim under the NYFCA, via an amended complaint or a separate action. (175 E. 74th Corp. v Hartford Acc. & Indem. Co., 51 NY2d 585, 590 n 1 [1980]; Little Rest Twelve, Inc. v Zajic, 137 AD3d 540, 540 [1st Dept 2016]; Jacobson Dev. Group, LLC v Grossman, 198 AD3d 956, 957 [2d Dept 2021]; Matter of Blum v Pathstone Corp., 172 AD3d 1679, 1681-1682 [3d Dept 2019].) The court further denies defendant's request for attorneys' fees and expenses.