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LOSEY v. ROBERTS

September 26, 1986

STEVEN J. LOSEY, Plaintiff,
v.
LILLIAN ROBERTS, as Industrial Commissioner of the State of New York, Defendant



The opinion of the court was delivered by: MCCURN

MEMORANDUM-DECISION AND ORDER

NEAL P. McCURN, D.J.

 Plaintiff Steven Losey brings this action to challenge the defendant New York State Commissioner of Labor's determination to withhold plaintiff's currently due unemployment benefits as an offset to a prior overpayment that resulted from plaintiff's fraudulent statements concerning his unemployment status. Plaintiff contends that the setoff practice as employed by the defendant violates federal statutory provisions and the Due Process Clause of the Fourteenth Amendment. This matter is before the court on cross motions for summary judgment. For the reasons discussed below, the court grants defendant's motion for summary judgment.

 BACKGROUND

 The plaintiff, Steven J. Losey, an employee at Ithaca Gun Company, Ithaca, New York, experienced periodic layoffs whenever company business slowed. Plaintiff applied for and received unemployment benefits from March 8, 1976 - January 23, 1977, September 19, 1977 - February 12, 1978, and October 30, 1978 - May 6, 1979. On January 28, 1980, the department's local claims examiner determined that plaintiff had been overpaid $8,995 in connection therewith which he was obligated to repay the state. The claims examiner found that plaintiff's TV repair hobby held a money earing potential and that plaintiff's negative assertions on his original and successive applications for benefits constituted a wilful misrepresentation that he was unemployed.

 On March 21, 1980, after a hearing at which full opportunity to present witnesses and written evidence was afforded plaintiff, the Administrative Law Judge (ALJ) upheld the local examiner's initial determination as to ineligibility to receive benefits. The ALJ found, however, that plaintiff was not guilty of wilful misrepresentation. *fn1"

 On appeal of the ALJ's decision, the Unemployment Insurance Appeals Board held in an opinion dated August 19, 1980, that: (1) the plaintiff was actively engaged in the purchase, repair, and sale of television sets; (2) plaintiff invested over $400 in his business and had a tax number under the name of "Steve's T.V."; (3) plaintiff had been guilty of wilful misrepresentation when he indicated on his claim form that he was not engaged in activity that may bring in income; and (4) plaintiff had been overpaid $8,995 in benefits which were recoverable because of plaintiff's false certifications.

 The New York Supreme Court, Appellate Division, Third Department on June 18, 1981, affirmed the Appeals Board decision without opinion.

 In December of 1981, the plaintiff was again laid off and subsequently filed a new claim for unemployment benefits. Because of the prior overpayment, the Commissioner of Labor ruled that the plaintiff, although otherwise eligible, could not receive benefits until the overpayment was repaid through the setoff procedure. This decision was appealed to the ALJ, who on February 1, 1982, sustained the determination below. On appeal the Unemployment Insurance Appeals Board found no errors of fact or law and adopted the findings of the ALJ as the findings of the Board.

 On May 12, 1982, the plaintiff filed the present action claiming that the setoff practice as employed by the defendant (1) conflicts with the federal statutory requirements that each state, before it receives federal funding for its unemployment insurance program, demonstrate to the Secretary of Labor that its form of administration of the program is "reasonably calculated to insure full payment of unemployment compensation when due," 42 U.S.C. § 503(a)(1); (2) violates the prohibition of any encumbrances on unemployment insurance pursuant to 26 U.S.C. § 3304(a)(4); (3) violates the Due Process Clause of the Fourteenth Amendment; *fn2" and (4) contravenes the purpose of the statutory unemployment scheme in that the setoff was applied without inquiry into the individual circumstances of the plaintiff.

 Defendant now moves for summary judgment on the grounds that the prior administrative decisions which were affirmed by the New York state court conclusively establish her counterclaim for the amount of the overpayment, and that the statutory and constitutional claims of the plaintiff are meritless entitling her to a summary dismissal of the complaint.

 The plaintiff has cross-moved for summary judgment on the grounds that none of the material allegations in the complaint have been controverted by the defendant and that they conclusively establish his right to recover. Furthermore, plaintiff contends that the defendant is not entitled to summary judgment on her counterclaim alleging a factual question as to whether benefits were obtained fraudulently, and he claims a Seventh Amendment entitlement to a jury trial as to money damages.

 DISCUSSION

 Pursuant to Federal Rule of Civil Procedure 56(c), a party is entitled to summary judgment when it has demonstrated "the absence of any material factual issue genuinely in dispute" and that it is entitled to judgment "as a matter of law." See Universal City Studios, Inc. v. Nintendo Co., 746 F.2d 112, 115 (2d Cir. 1984); Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir. 1983). The court must resolve all ambiguities and draw all reasonable inferences against the moving party. Eastway Construction Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985); Katz v. Goodyear Tire and Rubber Co., 737 F.2d 238, 244 (2d Cir. 1984). However, "the mere existence of factual issues - where those issues are not material to the claims before the court - will not suffice to defeat a motion for summary judgment." Eastway Construction Corp., 762 F.2d at 249. When a motion for summary judgment is supported by evidentiary material, the nonmoving party may not rest his opposition on mere conclusory allegations or denials. Rule 56(e) of the Federal Rules of Civil Procedure requires the party opposing summary judgment to set forth particular evidentiary matters which disclose the presence of genuine issues of material fact which require a trial. Id.; Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir. 1980); Applegate v. Top Associates, Inc., 425 F.2d 92, 96 (2d Cir. 1970).

 Plaintiff contends that the defendant is not entitled to summary judgment on her counterclaim. Plaintiff controverts the defendant's claim that benefits were obtained fraudulently, the amount of overpayment and the allegation that he was not totally unemployed. Plaintiff also alleges that he has a constitutional right to a jury trial before a money judgment can be granted against him.

 Defendant counters by stating that the prior administrative determination that plaintiff had been overpaid $8,995 and that the overpayment was recoverable because of plaintiff's wilful misstatements precludes this court from reexamining those questions. Defendant points out that plaintiff had a full and fair opportunity to litigate the question of whether there was fraud and the amount of the overpayment. Furthermore, the administrative determination was affirmed by the New York Supreme Court, Appellate Division, Third Department.

 A federal court must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered. 28 U.S.C. § 1738; Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 104 S. Ct. 892, 896, 79 L. Ed. 2d 56 (1984); Bottini v. Sadore Management Corp., 764 F.2d 116 (2d Cir. 1985). Therefore, the preclusive effect in federal court of the prior administrative determination affirmed by the New York state court must be determined under New York law. See Allen v. McCurry, 449 U.S. ...


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