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AM. TEL. & TEL. v. NYC DEPT. OF H.R.

May 2, 1990

AMERICAN TELEPHONE AND TELEGRAPH CO., PLAINTIFF,
v.
THE NEW YORK CITY DEPARTMENT OF HUMAN RESOURCES AND THE CITY OF NEW YORK, DEFENDANTS.



The opinion of the court was delivered by: Leisure, District Judge:

ORDER & OPINION

Plaintiff American Telephone and Telegraph Company ("AT & T") brought suit against defendants New York City Human Resources Administration ("HRA") and the City of New York (the "City") under the Federal Communications Act, 47 U.S.C. § 151 et seq. (the "Communications Act"), for long-distance telephone charges allegedly incurred by telephone numbers subscribed to by HRA. Plaintiff AT & T claims that it is owed approximately $529,000 from HRA for Long Distance Message Telecommunications Services ("LDMTS") provided by AT & T. Defendants have filed a motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6), or, in the alternative, for summary judgment pursuant to Fed.R.Civ.P. 56. Defendants claim that HRA lacks the legal capacity to be sued. Defendants also argue that AT & T has not fulfilled the notice of claim requirements set out in the New York Administrative Code § 7-201. AT & T has filed a cross-motion to amend its complaint in order to come into compliance with § 7-201 of the Administrative Code.

BACKGROUND.

During the period from July through September 1987, approximately $529,000 in LDMTS charges were incurred by telephone numbers subscribed to by HRA. These charges were billed to HRA during August and September 1987 by New York Telephone Company on behalf of AT & T. The calls were primarily placed to foreign countries such as Pakistan, Colombia and the Dominican Republic. HRA refused to pay the amount, and New York Telephone Company referred the claim to AT & T for collection. In August 1988, HRA filed a formal complaint before the Federal Communications Commission ("FCC") in an attempt to obtain a credit for the allegedly fraudulent use of its telephone accounts. See Ex. B to the Affidavit of John P. Deveney, Esq., sworn to on November 3, 1989 ("Deveney Aff."). In early 1989, over the objection of AT & T, HRA withdrew its complaint without prejudice, stating that "it would be preferable to attempt to resolve this matter without litigation." See Ex. F and G to Deveney Aff.

On June 30, 1989, AT & T filed the pending action against HRA. By letter dated July 31, 1989, the Corporation Counsel notified AT & T that in its opinion, HRA lacked the legal capacity to be sued, and suggesting that the City be added as a defendant in the action. Ex. H to Deveney Aff. On August 9, 1989, AT & T filed an amended complaint adding the City as a defendant. On October 13, 1989, defendants filed their motion to dismiss or for summary judgment, alleging that a notice of claim had not been properly filed by AT & T. On November 3, 1989, AT & T filed a formal notice of claim with the Comptroller of the City and the Corporation Counsel. AT & T subsequently filed a cross-motion to amend the complaint to reflect the formal filing of a notice of claim.

DISCUSSION

A. HRA as a Suable Entity

Defendants argue that the complaint should be dismissed against HRA, as HRA is a subdivision of the New York City government and lacks the capacity to be sued. The parties do not present, nor can the Court find, any caselaw or other authority specifically ruling on this question. The parties do not dispute that government agencies and subdivisions possess only the powers conferred on them by legislative or executive grant. See Yonkers Commission on Human Rights v. City of Yonkers, 654 F. Supp. 544, 551-52 (S.D.N.Y. 1987); 26 N.Y.Jur.2d Counties, Towns, and Municipal Corporations § 630, at 304. Similarly, the parties do not dispute that Executive Order No. 82, dated April 26, 1985, which created HRA, does not grant HRA either the power to sue or to be sued. See Ex. C to Affidavit of Barbara L. Yessel, Esq., sworn to on October 12, 1989 ("Yessel Aff."). Plaintiff argues, however, that HRA's appearance in past state court litigations, and its filing of a formal complaint before the FCC in the pending dispute and subsequent participation in settlement negotiations on its own behalf, prevent it from raising a lack of capacity defense at this time under the doctrine of equitable estoppel.

The New York Court of Appeals has "frequently reiterated that estoppel is unavailable against a public agency." Granada Buildings, Inc. v. City of Kingston, 58 N.Y.2d 705, 708, 458 N.Y.S.2d 906, 907, 444 N.E.2d 1325, 1326 (1982) (citing Public Improvements, Inc. v. Board of Education of the City of New York, 56 N.Y.2d 850, 852, 453 N.Y.S.2d 170, 171, 438 N.E.2d 876, 877 (1982)). "The doctrine of estoppel is not applicable to the State acting in a governmental capacity." Hamptons Hospital & Medical Center v. Moore, 52 N.Y.2d 88, 93, 436 N.Y.S.2d 239, 241, 417 N.E.2d 533, 535 (1981) (citing 21 N YJur. Estoppel § 76, at 110).*fn1 For this reason, the Court rules that HRA's participation in past litigations, and its participation in administrative proceedings before the FCC, should not prevent it from successfully moving for dismissal based on its lack of capacity to be sued. HRA's past appearances in courts are insubstantial and do not mandate a finding that HRA now possesses the capacity to be sued.*fn2

B. Applicability of Notice of Claim Statute

The central dispute in the pending motion is whether the notice of claim requirement of the New York Administrative Code § 7-201 applies in actions brought solely pursuant to a federal statute, the Communications Act, 47 U.S.C. § 151 et seq. The City*fn3 claims that the Communications Act has not preempted state law in its entirety, and that since the notice of claim requirement does not unduly interfere with a uniquely federal right, AT & T should be required to file a notice of claim prior to commencing a federal court action against the City or one of its agencies. AT & T contests the City's legal analysis, arguing that the question is not one of preemption of state law, but rather whether a federal court should adopt a state law due to a perceived deficiency in the federal statutory framework.

Section 7-201 of the New York Administrative Code provides in part as follows:

Actions against the City.

  a) In every action or special proceeding
  prosecuted or maintained against the city, the
  complaint or necessary moving papers shall
  contain an allegation that at least thirty days
  have elapsed since the demand, claim or claims,
  upon which such action or special proceeding is
  founded, were presented to the comptroller for
  adjustment, and that the comptroller has
  neglected or ...

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