Plaintiff State of New York ("State") sues to recover $12.5 million in funds advanced to defendant Please Me LLC d/b/a Wizard Research Laboratories ("Please Me") for the purchase of 1,000 ventilators with compressors in the early days of the COVID-19 outbreak, together with a 22% collection fee under State Finance Law § 18 and pre-award interest.

Issue has been joined, and the State moves for summary judgment on its complaint. The motion is based primarily on a decision of the Court of Claims dismissing Please Me's claim for [*2]breach of contract against the State on the ground that Please Me breached the contract by failing to timely deliver the ventilators.

Following the outbreak of COVID-19 in March 2020, the New York State Department of Health ("DOH") "sought to purchase hospital grade ventilators, which were necessary for use in its hospitals in treating seriously ill COVID-19 patients" (NYSCEF Doc No. 1 ["Complaint"], ¶¶ 4-7; see also NYSCEF Doc No. 5 ["Answer"], ¶ 7). "As part of the State's disaster emergency declaration, certain requirements for State purchases were suspended to facilitate the expeditious acquisition of necessary medical equipment, including hospital grade ventilators, and personal protective equipment ['PPE']" (Complaint, ¶ 8; see Answer, ¶ 8).

The State was approached on March 22, 2020 by Please Me's chief executive officer, Eddie Sitt, "offering to sell various types of medical equipment, including ventilators, and [PPE] that were needed to combat the COVID-19 pandemic" (Complaint, ¶ 9; see Answer, ¶ 9). Later that day, Sitt emailed the State a proposal to sell 1,000 Model 1200 ventilators, including air compressors, humidifiers and trolley stands, for a total price of $25 million, with "delivery dates as follows: 100 Friday March 27, 2020; 500 Tuesday March 31, 2020; and 400 Thursday April 2, 2020" (Complaint, Ex. A ["Proposal"]; see also Complaint, ¶ 11; Answer, ¶ 11).

On March 23, 2020, the State issued a purchase order to Please Me for 1,000 Model 1200 ventilators, to be delivered in accordance with the schedule proposed by Please Me: 100 on March 27, 2020; 500 on March 31, 2020; and 400 on April 2, 2020 (see Complaint, ¶ 12 & Ex. B ["Purchase Order"]).

The Purchase Order incorporated by reference Appendix A, entitled "Standard Clauses for New York State Contracts" (Purchase Order, p. 2; see Complaint, Ex. C), and the State alleges that the "Proposal, the . . . Purchase Order and Appendix A together form a contract between Plaintiff and Defendant for the emergency purchase of 1000 Model 1200 ventilators for which the stated dates of delivery, starting March 27, 2020 and completed by April 2, 2020, were vitally important to the health and safety of the people of the State (the 'Contract')" (Complaint, ¶ 14). "With respect to completion of delivery by April 2, 2020, time was of the essence" (id., ¶ 17).

At Please Me's request, the State advanced $12.5 million in funds for the ventilator purchase on March 24, 2020 (see id., ¶¶ 15-16; see also Answer, ¶ 16).

"On April 5, 2020, [Please Me] advised [the State] that the delivery of the ventilators pursuant to the Contract was delayed and would not be completed until July 8, 2020, a material change in the Contract" (Complaint, ¶ 18). "On April 6, 2020, [Please Me] proposed . . . to provide the State with ventilators that were not the type contracted for" (id., ¶ 19). Please Me "failed to deliver any ventilators as required by the Contract" (id., ¶ 20).

By letter of June 8, 2020, the State terminated the Contract for cause and demanded the return of its $12.5 million (see id., ¶ 21 & Ex. D). However, Please Me "failed to refund [the] money" (Complaint, ¶ 22).

On March 23, 2021, Please Me filed a verified claim in the Court of Claims (see Index No. 136156 ["Court of Claims Case"]), seeking damages for the State's alleged breach of the Contract (see NYSCEF Doc No. 41 ["R-PSOMF"], ¶ 13). The gravamen of Please Me's claim was that the State wrongfully repudiated the Contact on or about April 20, 2020 and improperly refused delivery of ventilators in late October 2020 (see NYSCEF Claims Doc No. 1, ¶¶ 1, 74, 85-87, 113).

Following amendment of Please Me's claim, the State moved for dismissal, arguing that Please Me materially breached the Contract by failing to timely deliver the ventilators in accordance with the terms of the parties' agreement. The Court of Claims converted the State's motion into one for summary judgment pursuant to CPLR 3211 (c) and permitted the parties to submit "whatever proof they deem necessary to support their respective positions" (R-PSOMF, ¶ 16 [internal quotation marks omitted]).

By Decision & Order dated October 25, 2021, the Court of Claims (Collins, J.) dismissed [*3]the amended claim on summary judgment (see NYSCEF Doc No. 26 ["Court of Claims Decision"]). The Court of Claims determined that: the parties had a valid contract for the sale of goods that was "comprised of the Purchase Order and Proposal" (id., p. 10); "time was of the essence" (id., p. 12); and "Please Me's failure to deliver the ventilators by the dates set forth in the Purchase Order . . . constituted a material breach" (id.). Please Me appealed the dismissal of its amended claim to the Appellate Division, Third Department.

The State then commenced this action on February 25, 2022 (see Complaint), alleging five causes of action: (1) breach of contract; (2) unjust enrichment; (3) misappropriation of public funds; (4) monies had and received; and (5) recovery of a 22% collection fee under State Finance Law § 18. Please Me joined issue on April 14, 2022 (see Answer).

The State now moves for summary judgment on its claims for breach of contract and recovery of the 22% collection fee, arguing principally that Please Me's liability for breach of contract has been established by the Court of Claims Decision, which is entitled to preclusive effect under the doctrine of collateral estoppel.

"To prevail on a motion for summary judgment, the moving party must establish prima facie entitlement to judgment as a matter of law by adducing sufficient competent evidence to show that there are no issues of material fact" (Staunton v Brooks, 129 AD3d 1371, 1372 [3d Dept 2015] [citations omitted]; see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

If the movant fails to satisfy this burden, the motion must be denied, "regardless of the sufficiency of the opposing papers" (Alvarez, 68 NY2d at 324). But if the movant establishes a prima facie case, the burden shifts to the opponent of the motion to demonstrate that material issues of fact or legal defenses to the claims exist (see id.). All evidence must be viewed in the light most favorable to the opponent (see Vega v Restani Const. Corp., 18 NY3d 499, 503 [2012]), but "mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to defeat the motion (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

"To recover for a breach of contract, a party must establish the existence of a contract, the party's own performance under the contract, the other party's breach of its contractual obligations, and damages resulting from the breach" (Adirondack Classic Design, Inc. v Farrell, 182 AD3d 809, 811 [3d Dept 2020] [citations omitted]).

"Collateral estoppel is an equitable doctrine that 'precludes a party from relitigating in a subsequent action or proceeding an issue . . . [that was] decided against that party or [one] in privity' with that party in a prior action or proceeding" (State of New York v Zurich Am. Ins. Co., 106 AD3d 1222, 1223 [3d Dept 2013], quoting Buechel v Bain, 97 NY2d 295, 303 [2001], cert denied 535 US 1096 [2002]). "'The doctrine applies if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action,' and where the party against whom estoppel is sought 'had a full and fair opportunity to litigate the issue in the earlier action'" (Matter of Frontier Ins. Co., 73 AD3d 36, 41 [3d Dept 2010], quoting Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 349 [1999]). "The party seeking to invoke collateral estoppel has the burden to show the identity of the issues, while the party trying to avoid application of the doctrine must establish the lack of a full and fair opportunity to litigate" (Matter of Dunn, 24 NY3d 699, 704 [2015] [citation omitted]).

As observed by the State, both this action and the Court of Claims Case involve the same contract: Please Me's agreement to supply the State with 1,000 ventilators with compressors by April 2, 2020 (see R-PSOMF, ¶ 13). Further, a pivotal issue in the Court of Claims Case was whether Please Me's claim for breach of contract was barred by its failure to timely deliver the promised ventilators (see Court of Claims Decision, p. 6).

The Court of Claims determined that the contract between the parties consisted of the Proposal and Purchase Order, by which Please Me agreed to deliver 1,000 Model 1200 [*4]ventilators with compressors, for a total price of $25 million (with an advance partial payment of $12.5 million), in specified quantities from March 27, 2020 through April 2, 2020 (see id., pp. 10, 12). In finding that a valid contract had been formed, the Court of Claims rejected Please Me's argument that proof of the agreement was barred by the Statute of Frauds (see id., p. 10).

The Court of Claims next concluded that the "dates of delivery set forth in the Purchase Order were obviously material terms since the utility of the entire transaction rested on the prompt delivery of the ventilator machines. Accordingly, the circumstances of the order clearly indicate that time was of the essence in this contract, thereby requiring strict adherence to the delivery dates set forth therein" (id., p. 12). As such, "Please Me's failure to deliver the ventilators by the dates set forth in the Purchase Order . . . constituted a material breach" (id.).^[FN1]

The Court of Claims further held that the State had not waived strict adherence to the terms of the contract governing delivery dates and the type of ventilators to be supplied. "Here, a review of the correspondence between the parties reflect[ed] no more than the [State's] willingness to consider alternative model ventilators if delivery could be made by a date certain. None of the email correspondence or text messages . . . establish[ed] a mutual departure from the terms of the [parties' contract]" (id., p. 13). Further, to the extent that there was any waiver by the State, it was timely retracted (see id., pp. 13-14).

The Court of Claims therefore determined on summary judgment — "the procedural equivalent of a trial" (S.J. Capelin Assoc. v Globe Mfg. Corp., 34 NY2d 338, 341 [1974] [internal quotation marks and citation omitted]) — that there was a valid Contract between the parties for which the State had advanced $12.5 million in funds, and Please Me materially breached the Contract by failing to timely deliver the specified model of ventilators.

Please Me argues that there is no identity of issues because the Court of Claims had a different contract before it, one that did not include Appendix A (see NYSCEF Doc No. 40 ["Opp Mem"], pp. 17-19). This argument lacks merit. Although the Court of Claims did not expressly refer to Appendix A (see Court of Claims Decision, p. 10), both cases plainly involve the same Purchase Order, which incorporates the same Appendix A (see Purchase Order, p. 2; NYSCEF Claims Doc No. 8). As such, Appendix A was part of the contract analyzed by the Court of Claims (see Matter of Level Export Corp. [Wolz, Aiken & Co.], 305 NY 82, 87 [1953]; Liberty Mgt. & Constr. v Fifth Ave. & Sixty-Sixth St. Corp., 208 AD2d 73, 78 [1st Dept 1995]; Peter Scalamandre & Sons v Village Dock, 187 AD2d 496, 497 [2d Dept 1992], lv denied 81 NY2d 710 [1993]), even if its terms were not germane to the issues before the Court of Claims.

Further, by dismissing the claim on account of Please Me's own material breach/non-performance, the Court of Claims necessarily found that the State had demonstrated its own performance and was not already in material breach (see Galusha & Sons, LLC v Champlain Stone, Ltd., 130 AD3d 1348, 1349-1350 [3d Dept 2015]; see also Albany Med. Coll. v Lobel, 296 AD2d 701, 702 [3d Dept 2002]). "It is not necessary to the conclusiveness of a former judgment that issue should have been taken on the precise point controverted in the second action. Whatever is necessarily implied in the former decision, is for the purpose of the estoppel deemed to have been actually decided" (Walentas v Johnes, 126 AD2d 417, 420-421 [1st Dept 1987] [internal quotation marks and citations omitted]).

The Court therefore concludes that the State has established an identity of issues between the Court of Claims Case and this action.

The record further demonstrates that Please Me had a full and fair opportunity to litigate the pertinent issues in the Court of Claims. Following conversion of the State's motion into one for summary judgment, both parties availed themselves of the opportunity to submit additional proof (see NYSCEF Claims Doc Nos. 49-62), and Please Me proffered numerous arguments and [*5]contentions bearing on contract formation, the materiality of terms, contract modification, waiver, and enforceability (including the Statute of Frauds) — all of which were carefully examined (see Court of Claims Decision, pp. 7-15). "The fact that [Please Me] may not have put forth in the Court of Claims all of the proof available on the matter . . . does not mandate that [it] be afforded a second opportunity to do so" here (Wheeler v Village of Saugerties, 216 AD2d 733, 735 [3d Dept 1995] [citation omitted]).

Please Me argues that the Court of Claims was unable to consider the State's bad faith in their business dealings (see Opp Mem, pp. 28-29, 40-41), but any claim of bad faith is, at this point, merely "an invalid substitute [for Please Me's] nonviable breach of contract claim" (El-Ad 250 W. LLC v 30 Hubert St. LLC, 67 AD3d 520, 521 [1st Dept 2009] [internal quotation marks and citation omitted]). Moreover, by dismissing Please Me's claim, the Court of Claims necessarily determined that the State had not first breached the implied covenant of good faith and fair dealing (see Court of Claims Decision, pp. 10-15).

Please Me also contends that the Court of Claims Decision is erroneous, and it would be inappropriate to apply collateral estoppel given its appeal to the Third Department (see Opp Mem, pp. 23-28; R-PSOMF, ¶ 18). However, on April 20, 2023, the Third Department affirmed the Court of Claims Decision in all material respects (see Please Me, LLC v State of New York, — AD3d —, 2023 NY Slip Op 02043 [3d Dept 2023] ["Please Me"]).

The Third Department agreed that the Purchase Order "constituted a valid contract," and the State "complied with the contract, did not modify its terms and terminated the contract for cause" (id. at *1-2). Further, the Court of Claims "did not err in finding that time was of the essence," but the Third Department agreed with Please Me that, by "not terminating the contract immediately or at least shortly after April 2, 2020, and continuing to communicate with [Please Me] for delivery of the ventilators," the State "effectively converted the contract . . . to a contract demanding performance within a reasonable period of time" (id. at *3). Nonetheless, Please Me's failure to deliver "any ventilators until October 29, 2020" constituted a breach of its duty "to perform within a reasonable time" as a matter of law, and the State was justified in terminating the contract for cause on June 8, 2020 (id.).^[FN2]

For all of the foregoing reasons, the State has established its entitlement to summary judgment as to Please Me's liability for breach of contract through the application of the doctrine of collateral estoppel.^[FN3]

Please Me alleges 21 affirmative defenses in its Answer. However, the vast majority of these defenses necessarily were rejected by the Court of Claims in dismissing Please Me's claim, including the defenses of failure to state a claim (1st defense), the State's own breach of the [*6]Contract (6th defense), the Statute of Frauds (7th defense), estoppel (8th defense), repudiation (10th defense), impossibility/modification (11th defense), mutual mistake (14th defense), performance (15th defense), waiver/modification (17th defense), failure to produce the parties' complete agreement (19th defense), modification (20th defense) and waiver (21st defense).

Please Me's second, third and ninth affirmative defenses allege, in essence, that this action is barred because the State received federal funding under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The State submits competent proof, however, that it did not receive federal funds for the purchase of the ventilators (see NYSCEF Doc No. 28 ["Massaroni Aff."], ¶ 9). Rather, the $12.5 million prepayment to Please Me came from the State's general fund, and the State is not eligible to receive reimbursement from CARES Act funds (see id., ¶¶ 7-10). Please Me's opposition fails to raise a triable issue of fact or legal defense to this branch of the State's motion.^[FN4]

Please Me's remaining defenses to liability are conclusory and insufficient to defeat summary judgment. Indeed, the only two affirmative defenses specifically invoked by Please Me in opposition to the State's motion are lack of good faith, discussed supra, and failure to mitigate damages, discussed infra (see Opp Mem, pp. 4, 40-44).

Please Me argues that genuine issues of material fact remain as to whether the State was ready, willing and able to pay for the ventilators it ordered and whether Please Me's purported failure to timely deliver the ventilators was the "proximate cause" of the State's damages (id., p. 33).

"To prevail on a cause of action alleging breach of contract, the plaintiff must demonstrate that it sustained 'actual damages as a natural and probable consequence' of the defendant's breach" (Family Operating Corp. v Young Cab Corp., 129 AD3d 1016, 1017 [2d Dept 2015], quoting Rakylar v Washington Mut. Bank, 51 AD3d 995, 996 [2d Dept 2008]).

"Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance," the buyer may recover "so much of the price as has been paid," in addition to other damages (UCC 2-711 [1]; see MMI Trading, Inc. v American Waste Mgt. & Recycling, LLC, 98 AD3d 604, 605 [2d Dept 2012]; Toto We're Home v Beaverhome.Com, 301 AD2d 643, 644 [2d Dept 2003]).

It is undisputed that the State advanced Please Me the sum of $12.5 million for ventilators that were not delivered (see Court of Claims Decision, p. 12), these funds were received by Please Me (see Answer, ¶ 16; R-PSOMF, ¶ 10; Please Me, 2023 NY Slip Op 02043, *2), and Please Me refused to return the funds following termination of the Contract for cause (see Complaint, ¶¶ 15-22 & Ex. D; Massaroni Aff., ¶ 8; R-PSOMF, ¶ 12; Court of Claims Decision, pp. 12, 14).^[FN5]

In opposition, Please Me has failed to raise a triable issue of fact. Please Me alleges as an affirmative defense that the State had an obligation to mitigate damages, but the State only seeks to recover funds advanced for goods that were not delivered, without any claim for incidental or consequential damages (see UCC 2-711 [1]; cf. UCC 2-715).

Please Me suggests that the State should have purchased replacement ventilators, but "the rule concerning cover makes it permissive (see UCC 2-712 [1]) and not mandatory (see UCC 2-712 [3])" (Mil-Spec Indus. Corp. v Expansion Indus., LLC, 201 AD3d 651, 656 [2d Dept 2022] [internal quotation marks and citation omitted]). And while Please Me asserts that "there are 500 ventilators, all of which have been tested by a competent and professional testing firm and are available for immediate use, located in a warehouse near the delivery address [Please Me] was provided by the State" (NYSCEF Doc No. 89, ¶ 52), the Court of Claims Decision establishes that the State properly rejected Please Me's attempted delivery of alternate ventilators after the Contract was cancelled for cause and after the urgent need for the ventilators had passed (see Court of Claims Decision, pp. 8, 13, 15-16). That ruling, affirmed on appeal (see Please Me, 2023 NY Slip Op 02043, *3), cannot be relitigated herein.

Likewise, there is no merit to Please Me's causation argument that, "even if ventilators were delivered in April 2020 (as the State claims was required), the State would not have accepted or paid for them" (Opp Mem, p. 33). The argument is wholly speculative and, in any event, the Court of Claims rejected Please Me's claim of repudiation and determined that Please Me was not in the position to timely ship conforming goods (see Court of Claims Decision, pp. 12-15; see also Please Me, 2023 NY Slip Op 02043, *1 n 1).

Accordingly, the State is entitled to the damages in the amount of $12.5 million, representing the funds advanced to Please Me under the Contract (see generally MMI Trading, 98 AD3d at 605; cf. Peak v Northway Travel Trailers, 260 AD2d 840, 843 [3d Dept 1999]).^[FN6]

Finally, the State is entitled to pre-judgment interest at the statutory rate of nine percent (9%) per annum, from the date of the breach (see CPLR 5001 [a], [b]; 5004; Gizzi v Hall, 309 AD2d 1140, 1142 [3d Dept 2003]). Although the State waived the April 2, 2020 "time is of essence" deadline, the Third Department's decision establishes that Please Me was in material breach by June 8, 2020, when the State terminated the Contract for cause (see Please Me, 2023 NY Slip Op 02043, *2-3). Accordingly, interest shall accrue as of June 8, 2020.

The State also seeks to recover a collection fee equaling 22% of the "outstanding debt" of $12.5 million ($2.75 million) under State Finance Law § 18 (Complaint, ¶¶ 39-41).

State Finance Law § 18 authorizes a collection fee, not to exceed 22% of the outstanding debt, "to cover the cost of processing, handling and collecting" the debt where the debtor failed to remit payment within 90 days of the submission of a billing invoice (id. § 18 [5]). The statute defines a "debt" as a "liquidated sum due and owing any state agency," and the term "liquidated" is defined as "an amount which is fixed or certain or capable of being readily calculated, whether or not the underlying liability or amount of the debt is disputed" (id. § 18 [1] [b], [d]).

By letter dated March 1, 2021, the State demanded repayment of its $12.5 million [*7]advance and informed Please Me that it would seek to recover the statutory collection fee of 22% if the funds were not returned within 90 days (see Complaint, ¶ 40; NYSCEF Doc No. 27). Please Me is presumed to have received the letter by March 6, 2021 (see State Finance Law § 18 [2]), and the statutory 90-day period expired on June 5, 2021 without repayment.

Please Me does not challenge the reasonableness of the 22% fee sought by the State. It simply argues that the "the State Finance Law claim fails for all of the reasons discussed below," referring to its arguments in opposition to the State's breach of contract claim (Opp Mem, p. 15 n 1). Having rejected these arguments (see Parts A-C, supra), the Court concludes that the $12.5 million advanced to Please Me for ventilators that were not delivered is "an amount which is fixed or certain or capable of being readily calculated, whether or not the underlying liability . . . is disputed" (State Finance Law § 18 [1]).

Accordingly, the State is entitled to recover a collection fee of $2.75 million (see Commissioners of State Ins. Fund v Hallmark Operating, Inc., 61 AD3d 1212, 1213-1214 [3d Dept 2009]; see also State of New York v Oren-Pines, 2023 NY Slip Op 50333[U], *6-7 [Sup Ct, Albany County 2023]).

Based on the foregoing,^[FN7] it is

ORDERED that plaintiff's motion for summary judgment is granted; and it is further

ORDERED that plaintiff State of New York shall have judgment against defendant Please Me LLC in the amount of $12,500,000, with interest thereon at the rate of nine percent (9%) per annum from June 8, 2020 pursuant to CPLR 5004, plus a 22% collection fee pursuant to State Finance Law § 18 in the amount of $2,750,000.

This constitutes the Decision & Order of the Court, the original of which is being uploaded to NYSCEF for entry by the Albany County Clerk. Upon such entry, counsel for plaintiff shall promptly serve notice of entry on all parties entitled to such notice.