The opinion of the court was delivered by: LARIMER
Defendants include David Paul, who ran a business near the Lincoln at the times in question, and five "State defendants": the New York State Liquor Authority ("SLA"); Thomas A. Duffy, Jr.; Frank N. Cuomo; Paul Shibley; and John M. MacCallum. The four individual State defendants were all SLA officials at the relevant times, but are sued in their individual capacities only. The State defendants have moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.
The thirty-seven-page amended complaint relates a long-running feud between D'Agostino and David Paul, who at all relevant times ran a beauty parlor/barber shop, and rented apartments, in a building adjacent to the Lincoln. The history of this dispute is a tortuous one, but is relevant to the various roles played by defendants and hence to their potential liability.
Plaintiffs allege that beginning in 1988, Paul began making false accusations about the Lincoln and D'Agostino to Brockport residents, the local police, and the SLA. Paul allegedly falsely accused the Lincoln of being rat-infested, in violation of noise ordinances and in violation of laws prohibiting the sale of alcohol to minors, and so on. Paul's alleged motive was to force plaintiffs out of business so that Paul could buy the Lincoln for himself.
In April 1988, Paul, as "spokesperson" for the "Concerned Citizens of Brockport," submitted a petition signed by over 100 Brockport residents to the SLA complaining about noise and other problems relating to several bars in downtown Brockport. Complaint Ex. 21(b).
The cover letter, signed by Paul, stated that the "problems at the present time are mainly with the Lincoln Bar, on King Street."
In response to this petition, (Gary Bartikofsky, an SLA investigator, conducted an investigation of the complaints. The substance of his conclusions was that some neighborhood residents had complaints about the Lincoln (mostly noise-related); that some had concerns about the rowdy behavior of local college students in general, but no complaints about the Lincoln in particular; and that "many of the problems brought forth [in the investigation] could be attributed to an on-going dispute" between D'Agostino and Paul. Complaint Ex. 21(b),(c).
On September 19, 1988, the SLA served D'Agostino with a notice directing him to appear the following month in connection with proceedings to revoke his liquor license, and to plead to two charges: that he had committed an assault, and that noise or other disturbances occurred at the Lincoln in violation of SLA regulations. Affirmation of Kevin Bambury, Esq., Ex. B.
The assault charge related to an incident between D'Agostino and Paul on April 1, 1988. D'Agostino was arrested on that date and charged with assault. At trial in November 1988, he was acquitted of assault but found guilty of harassment. On June 13, 1990, that conviction was vacated by Sweden Town Justice Fremont Clow. Complaint Ex. 21(v).
The parties put on the record the terms of a plea agreement that they had worked out. Under that agreement, the assault charge would be withdrawn, and D'Agostino would plead no contest to the noise charge. The parties also agreed that the Lincoln's license would be suspended for no more than fifteen days.
On February 16, 1990, however, Bolm wrote to Lunn and advised him that the SLA Licensing Board ("the Board") had informed him that charges could only be withdrawn at the request of an SLA attorney, not a defense attorney, and then only on the ground that "a wrong charge was brought or that there is absolutely no evidence to support the charge." Complaint Ex. 21(o). Bolm stated that because D'Agostino had been convicted of harassment (that charge having not yet been vacated), the Board would not grant a request to withdraw it. He stated that D'Agostino could either go ahead with a hearing on both the assault and noise charges, or have a hearing on the former followed by an unconditional no contest plea to the latter.
Previous to this letter, on February 2, 1990, D'Agostino had applied to the SLA for permission to make various alterations to the Lincoln, including an expansion into an adjoining building. On March 28, 1990, defendant Paul E. Shibley, an SLA Deputy Commissioner, disapproved the application on the ground that "charges are pending against this licensee which may result in revocation or cancellation of this license." Complaint Ex. 21(q). Shibley stated that the pending charges "caused concern as to the licensee's ability to comply with the requirements of the ABC Law and the Rules and Regulations of the Authority." Those charges were the assault and noise charges.
Plaintiffs then commenced an Article 78 proceeding in state court challenging the disapproval. On May 22, 1990, plaintiffs' then-attorney Frank A. Aloi, Esq., wrote a letter to Bolm, apparently reflecting some prior negotiations between the two attorneys, stating in essence that plaintiffs would withdraw their Article 78 proceeding if the SLA withdrew its disapproval of the alteration application. Complaint Ex. 21(t). Two days later, Bolm sent a memorandum to defendant Frank N. Cuomo, an SLA Commissioner, advising him that "in [Bolm's] opinion, we will lose the Article 78," though he did not say why he thought so. Complaint Ex. 21(u).
The SLA did not agree to the proposed settlement. On June 13, 1990, Justice David O. Boehm of Supreme Court, Monroe County, rendered a decision holding that the disapproval of the alteration application was without rational basis, and, therefore, permitting plaintiff to go forward with the alterations. Complaint Ex. 21(w).
On July 18, 1990, the SLA went forward with the hearing on the assault and noise charges. Defendant MacCallum was the presiding ALJ. D'Agostino's attorney put on the record his opposition to the Board's decision that the withdrawal of the assault charge had been improper. He argued that the Board's stated conditions for withdrawal of a charge--a request by the SLA attorney based on a complete lack of evidence--had been met, since Bolm had joined in the request at the August 24, 1989 hearing, and because Paul, the alleged assault victim, had not appeared to testify.
On August 2, 1991, MacCallum issued his findings. He found that the assault charge was sustained by the evidence, but that the noise charge was not. MacCallum noted that D'Agostino had been acquitted of assault, but nevertheless concluded that the evidence (which included D'Agostino's admission that he struck Paul after Paul made a profane reference to D'Agostino's daughter) showed that D'Agostino had knocked Paul to the ground, and that "such behaviour [sic] on the part of the licensee is grossly improper and warrants administrative sanction." Defendants' Motion Ex. 2.
Plaintiffs contend that this decision was without a rational basis. Plaintiffs allege that the Board was simply retaliating against plaintiffs out of anger at the State Supreme Court's reversal of the Board's denial of plaintiffs' alteration application.
Plaintiffs then obtained a stay of the suspension from the State Supreme Court, and commenced another Article 78 proceeding to annul the Board's action and to compel the Board to abide by the August 1989 plea agreement. On April 28, 1992, Supreme Court Justice Edmund A. Calvaruso issued a decision vacating MacCallum's findings on the assault charge and ordering that the August 24, 1989 plea be reinstated. Noting Bolm's prior letter to D'Agostino's attorney stating that the Board had informed him that "defense attorneys are not allowed to request withdrawal of charges," Justice Calvaruso stated that the transcript from the August 24, 1989 proceeding "evidenced the State Liquor Authority presented the structured plea, not the reverse." Complaint Ex. 25. The court also stated that the sequence of events, in which the SLA suddenly revoked its withdrawal of the assault charge shortly after D'Agostino had applied for permission to expand the Lincoln, was "suspicious" and "disconcerting."
The SLA appealed Justice Calvaruso's decision. The Appellate Division, Fourth Department, unanimously affirmed on September 30, 1994. Bambury Affirmation Ex. N.
Plaintiff also alleges that in early 1992, defendants, acting in concert, "orchestrated a public relations campaign against plaintiffs" to convince the public that the Lincoln would soon go out of business because of its troubles with the SLA. Plaintiffs contend that these rumors so severely damaged plaintiffs' business that plaintiffs were forced to file a Chapter 11 bankruptcy petition in May ...