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LEGAL AID SOCIETY v. CITY OF NEW YORK

September 18, 2000

THE LEGAL AID SOCIETY, PLAINTIFF,
V.
THE CITY OF NEW YORK, THE OFFICE OF THE CRIMINAL JUSTICE COORDINATOR OF THE CITY OF NEW YORK, RUDOLPH W. GIULIANI, AS MAYOR OF THE CITY OF NEW YORK, KATHERINE N. LAPP, AS THE CRIMINAL JUSTICE COORDINATOR OF THE CITY OF NEW YORK, STEVEN M. FISHNER, AS THE CURRENT CRIMINAL JUSTICE COORDINATOR OF THE CITY OF NEW YORK, QUEENS LAW ASSOCIATES, P.C., BROOKLYN DEFENDER SERVICES, NEW YORK COUNTY DEFENDER SERVICES, INC., BRONX DEFENDERS, BATTISTE, ARONOWSKY & SUCHOW, APPELLATE ADVOCATES, CENTER FOR APPELLATE LITIGATION, DEFENDANTS. ASSOCIATION OF LEGAL AID ATTORNEYS, LOCAL 2325, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW, AFL — CIO/CLC, 1199 NATIONAL HEALTH AND HUMAN SERVICES EMPLOYEES UNION, AFL — CIO/CLC, PLAINTIFFS, V. CITY OF NEW YORK, RUDOLPH GIULIANI, AS MAYOR OF THE CITY OF NEW YORK, KATHERINE N. LAPP, AS CRIMINAL JUSTICE COORDINATOR OF THE CITY OF NEW YORK, DEFENDANTS.



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

        OPINION

TABLE OF CONTENTS

INTRODUCTION .......................................................... 210

BACKGROUND ............................................................ 211

DISCUSSION ............................................................ 212

I. Applicable standard ............................................. 212 A. Judgment on the pleadings .................................... 212 B. Summary judgment ............................................. 213 II. Standing ........................................................ 213 A. Associational standing of the Unions to seek money damages on behalf of Union members ...................................... 213 B. Statutory standing of the Unions to seek relief on behalf of Legal Aid .................................................... 214 C. Contractual standing of the Unions ........................... 216 D. "Disappointed bidder" standing of Legal Aid .................. 216 III. Statute of limitations, joinder, and injunctive relief .......... 217 A. Statute of limitations ....................................... 218 B. Joinder ...................................................... 219 1. Necessary parties ......................................... 219 2. Indispensable parties ..................................... 220 C. Substantial performance ...................................... 221 IV. Exhaustion of administrative remedies ........................... 222 V. Waiver .......................................................... 223 A. Law of the case .............................................. 224 B. Duress and estoppel .......................................... 225 C. The Unions and their members ................................. 226 D. First Amendment rights ....................................... 226 E. National Labor Relations Act rights .......................... 228 F. New York rights .............................................. 229 VI. Section 1983 liability .......................................... 231 A. Legislative immunity ......................................... 231 B. Municipal liability .......................................... 231 1. Budgetary authority ....................................... 232 2. Contract procurement authority ............................ 233 VII. First Amendment claim ........................................... 234 VIII. National Labor Relations Act claim .............................. 234 A. Pre-strike interaction ....................................... 235 B. Post-strike interaction ...................................... 236

CONCLUSION ............................................................ 240

INTRODUCTION

These related actions, both brought pursuant to 42 U.S.C. § 1983, present a number of federal and pendent state claims arising from a dispute between the City of New York and the entities with whom it contracts to provide legal services to indigent criminal defendants. In the first action, the Legal Aid Society ("Legal Aid") alleges that the City of New York, the Criminal Justice Coordinator of the City of New York, Mayor Rudolph W. Giuliani, former Criminal Justice Coordinator Katherine N. Lapp, and current Criminal Justice Coordinator Steven M. Fishner (collectively, the "City" or the "municipal defendants") violated Legal Aid's state and federal rights by interfering with a labor dispute between Legal Aid and the unions that represent its employees and by subsequently transferring business from Legal Aid to Queens Law Associates, P.C., Brooklyn Defender Services, New York County Defender Services, Inc., Bronx Defenders, Battiste, Aranowsky & Suchow, Appellate Advocates, and the Center for Appellate Litigation (collectively, the "provider defendants").

Specifically, Legal Aid contends that the City interfered with federal labor rights protected by the National Labor Relations Act ("NLRA"), retaliated against Legal Aid and its agents for the exercise of their free speech rights pursuant to the First Amendment of the U.S. Constitution, breached the City's contract with Legal Aid, and violated state and local laws governing the distribution of municipal contracts. In the second action, premised on the same nucleus of facts, plaintiffs Association of Legal Aid Attorneys, Local 2325, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, AFL — CIO/CLC and 1199 National Health and Human Services Employees Union, AFL — CIO/CLC (collectively, the "Unions"), who respectively represent the staff attorneys and support staff employed by Legal Aid, allege that the actions of the City, the Mayor, and Ms. Lapp violated the Unions' and their members' rights pursuant to the NLRA and the First Amendment.

Following limited discovery proceedings, the City and the provider defendants have moved for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(b), or in the alternative for summary judgment pursuant to Fed.R.Civ.P. 56(c), dismissing the complaints in both actions. For the reasons set forth below, defendants' motions are granted in part and denied in part. In addition, certain portions of the motions are denied with leave to renew upon the completion of discovery in order that those motions may be decided with the benefit of a more complete record in both actions.

BACKGROUND

On September 30, 1994, the collective bargaining agreement between Legal Aid and the Association of Legal Aid Attorneys (the "union") expired. According to the complaints, Mayor Giuliani proposed to displace Legal Aid and to cancel its City-wide contract as the principal provider of legal services to the indigent if it negotiated a wage increase with the union, even if Legal Aid were able to fund the increase without recourse to additional funding from the City. Because of the risk of displacement, Legal Aid decided not to respond to the union's demand for a wage increase. As a result, the unionized attorneys walked off the job at 12:01 a.m. on Saturday, October 1, 1994. Despite the fact that Legal Aid attorneys had struck seven times previously in Legal Aid's 30-year contractual relationship with the City, on this occasion the Mayor directed the termination of all Legal Aid contracts with the City on the grounds that Legal Aid had violated its ethical obligation to provide legal representation to indigent persons since its attorneys were on strike.

Three days after the strike began, the Mayor stated that he would consider entering into a new contract with Legal Aid, but only if the contract included a no-strike provision, permitted the City to contract with other legal service providers, and barred attorneys who did not return to work from any further representation paid for by the City. The strike ended four days later, and the union signed a four-year contract with Legal Aid that included a no-strike provision. In late October, the Mayor gave formal 90-days' notice of the termination of the City's contract with Legal Aid. On February 3, 1995, the City and Legal Aid entered into a "Modification Agreement" that altered the terms of the previous contract by expressly granting the City the authority to "arrange for other entities to provide services to replace the services hereunder."

In October 1995, the City issued a Request for Proposals (the "First RFP") soliciting bids for municipal contracts for the provision of legal services to indigent persons. Addendum Four to this First RFP explicitly excluded Legal Aid from participation by providing that any "proposal submitted by the Legal Aid Society would be deemed not responsive." In June 1996, the City awarded contracts pursuant to the First RFP to defendants Queens Law Associates, P.C., Brooklyn Defender Services, and Appellate Advocates. In November 1996, the City issued a Second RFP, that also specifically excluded Legal Aid and that resulted in the award of contracts in May 1997 to defendants New York County Defender Services, Inc.; Bronx Defenders; Battiste, Aronowsky & Suchow; and the Center for Appellate Litigation. In March 1999, the City issued a Third RFP, that did not exclude Legal Aid and that resulted in the award of contracts to defendants Appellate Advocates and the Center for Appellate Litigation. (These defendants will be referred to collectively as the First, Second, and Third RFP providers, respectively.) Simultaneously, the City transferred cases from Legal Aid to these provider defendants and reduced Legal Aid's budget accordingly.

On July 9, 1996, Legal Aid filed action No. 96 Civ. 5141, alleging that the City had interfered with the collective bargaining process in violation of the NLRA, retaliated in order to punish protected speech in violation of the First Amendment, breached the City's contract with Legal Aid, and violated a number of state and local laws governing the solicitation and award of municipal contracts. Four months later, the Unions filed action No. 96 Civ. 8137, alleging identical federal claims but no state claims. Both complaints sought monetary damages and equitable remedies, including injunctive relief against all municipal contracts awarded pursuant to the RFPs. In an opinion dated October 8, 1997, this Court denied the Unions' request for a preliminary injunction against the Second RFP and any similar attempts to divert business from Legal Aid. See Association of Legal Aid Attorneys v. City of New York, No. 96 Civ. 8137, 1997 WL 620831, at *1 (S.D.N.Y. Oct. 8, 1997).

At approximately the same time Legal Aid commenced action No. 96 Civ. 5141 in this Court, it filed what it styled as an Article 78 "petition and complaint" in New York State Supreme Court challenging the First RFP on both state and federal grounds. One week after the action was commenced, New York State Supreme Court Justice David Saxe denied the petition and dismissed the proceedings on the grounds that the claims were barred by the applicable statute of limitations and were without merit. Legal Aid immediately filed an amended pleading that was similarly dismissed. This Court therefore dismissed the action in No. 96 Civ. 5141 on the grounds of res judicata and collateral estoppel. See Legal Aid Soc. v. City of New York, No. 96 Civ. 5141, 1997 WL 394609, at *6 (S.D.N.Y. July 11, 1997). Shortly thereafter, however, the state court's dismissal was reversed in part by the Appellate Division, First Department. See Legal Aid Soc. v. City of New York, 242 A.D.2d 423, 424, 662 N.Y.S.2d 303, 304 (1st Dep't 1997). Accordingly, this Court granted Legal Aid's motion to reopen action No. 96 Civ. 5141. The state proceeding was subsequently removed to federal court as No. 97 Civ. 7566. See Legal Aid Soc. v. City of New York, No. 97 Civ. 7566, 1998 WL 689950, at *1 (S.D.N.Y. Sept. 30, 1998). Although related to the other federal actions, that action is not the subject of the present motions.

Following the completion of certain discovery proceedings, defendants now move for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(b), or in the alternative for summary judgment pursuant to Fed. R.Civ.P. 56(c), dismissing the complaints. For the reasons set forth below, defendants'

DISCUSSION

I. Applicable standard

A. Judgment on the pleadings

When presented with a motion to dismiss pursuant to Fed.R.Civ.P. 12(b), a court must assume that the allegations set forth in the complaint are true, and the motion may be granted "`only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 234 (2d Cir. 1999) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984)), cert. denied, ___ U.S. ___, 120 S.Ct. 799, 145 L.Ed.2d 673 (2000). In deciding such a motion, however, a court may rely only on the factual allegations set forth in the complaint itself and not on additional matters asserted in affidavits, exhibits, or other papers submitted in conjunction with the motion. See Friedl v. City of New York, 210 F.3d 79, 83-84 (2d Cir. 2000). Both sides to this dispute have submitted a plethora of affidavits and exhibits for consideration by this Court. If a court relies upon such additional matters, then the motion must be converted to one for summary judgment and accordingly must be assessed instead under the standards applicable to Fed.R.Civ.P. 56. See id. Because "[t]his conversion requirement is strictly enforced," id. at 83, this Court will treat defendants' motion as one for summary judgment unless specifically noted otherwise.

B. Summary judgment

Summary judgment may be granted "only when the moving party demonstrates that `there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995) (quoting Fed.R.Civ.P. 56(c)); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The Court must "view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor, and may grant summary judgment only when `no reasonable trier of fact could find in favor of the nonmoving party.'" Allen, 64 F.3d at 79 (citation omitted) (quoting Lund's, Inc. v. Chemical Bank, 870 F.2d 840, 844 (2d Cir. 1989)).

Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the nonmoving party must come forward with specific facts to show there is a factual question that must be resolved at trial. See Fed. R.Civ.P. 56(e); see also Ali v. Bank of New York, 934 F. Supp. 87, 91 (S.D.N.Y. 1996). A nonmoving party must produce evidence in the record and "may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible." Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993). In short, a nonmoving party must "do more than simply show there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986).

II. Standing

The City first challenges the standing of the Unions as associations to seek monetary damages on behalf of their members, the statutory standing of the Unions to seek relief on the basis of harms suffered by Legal Aid, and the contractual standing of the Unions to seek relief flowing from the City's alleged breach of its contract with Legal Aid. In addition, the Third RFP providers challenge the standing of Legal Aid as a disappointed bidder to contest the award of contracts pursuant to the Third RFP.

A. Associational standing to seek money damages on behalf of Union members

The U.S. Supreme Court has "`recognized that an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.'" United Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544, 553-54, 116 S.Ct. 1529, 1534-35, 134 L.Ed.2d 758 (1996) (quoting Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 343, 97 S.Ct. 2434, 2441, 53 L.Ed.2d 383 (1977)). The third prong of this test, that neither the claim nor the relief require the participation of individual members, is a prudential limit on standing and is not necessary to the Article III standing of a plaintiff. See id. at 558, 116 S.Ct. at 1537.

Pursuant to this third prong, however, "no federal court has allowed an association standing to seek monetary relief on behalf of its members." United Union of Roofers, Waterproofers, & Allied Trades No. 40 v. Insurance Corp., 919 F.2d 1398, 1400 (9th Cir. 1990) (citing Telecommunications Research & Action Center v. Allnet Communication Servs., Inc., 806 F.2d 1093, 1095 (D.C.Cir. 1986)); accord Sanner v. Board of Trade, 62 F.3d 918, 923 (7th Cir. 1995). As the Supreme Court has explained, when an association seeks damages on behalf of its members:

whatever injury may have been suffered is peculiar to the individual member concerned, and both the fact and extent of injury would require individualized proof. Thus, to obtain relief in damages, each member . . . who claims injury as a result of respondents' practices must be a party to the suit, and [the association] has no standing to claim damages on his behalf.

Warth v. Seldin, 422 U.S. 490, 515-16, 95 S.Ct. 2197, 2213-14, 45 L.Ed.2d 343 (1975).

In response, the Unions contend that Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, authorizes them to seek monetary damages on behalf of their members. Section 301 generally grants unions standing to vindicate employee rights pursuant to a collective bargaining agreement negotiated by the union, even if the calculation of the damages suffered by individual employees is complicated. See International Union v. Hoosier, 383 U.S. 696, 699-700, 86 S.Ct. 1107, 1110, 16 L.Ed.2d 192 (1966). However, Section 301 applies only in cases where the claims asserted by a union arise out of a collective bargaining agreement. See United Auto., Aerospace and Agricultural Implement Workers of America v. R.E. Dietz Co., 996 F.2d 592, 595 (2d Cir. 1993). In the present case, the Unions are not seeking to vindicate rights pursuant to such an agreement but instead seek pursuant to 42 U.S.C. § 1983 to vindicate rights under to the NLRA and the First Amendment.

Indeed, to accept the Unions' argument would effectively eliminate the third prong of the associational standing test, contrary to the many cases that have applied this test to unions. See, e.g., United Union of Roofers, Waterproofers, & Allied Trades No. 40, 919 F.2d at 1400; Local 194, Retail, Wholesale & Dep't Store Union v. Standard Brands, Inc., 540 F.2d 864, 865-66 (7th Cir. 1976); Communications Workers of America v. Nynex Corp., No. 93 Civ. 3322, 1997 WL 122869, at *3 (S.D.N.Y. Mar. 18, 1997); Communications Workers of America v. Nynex Corp., No. 93 Civ. 5329, 1995 WL 590871, at *4 (S.D.N.Y. Oct. 5, 1995). Allee v. Medrano, 416 U.S. 802, 820 n. 13, 94 S.Ct. 2191, 2202 n. 13, 40 L.Ed.2d 566 (1974), cited by the Unions, is not to the contrary, since the union in that case sought only injunctive relief and not damages in vindication of its members' First Amendment rights, see id. at 804, 94 S.Ct. at 2195.

Accordingly, the Unions lack standing to seek monetary damages on behalf of their members.

B. Statutory standing of the Unions to seek relief on behalf of Legal Aid

The Second Circuit has recently explained the necessity of proximate causation to statutory standing pursuant to 42 U.S.C. § 1983:

Civil actions brought under § 1983 are analogous to state common law tort actions, serving primarily the tort objective of compensation. A § 1983 action, like its state tort analogs, employs the principle of proximate causation. Although proximate causation in the § 1983 context is a question of federal law, in determining the meaning of the concept we look to those state tort analogs, because the Supreme Court has made it crystal clear that principles of causation borrowed from tort law are relevant to civil rights actions brought under section 1983. Barnes v. Anderson, 202 F.3d 150, 158-59 (2d Cir. 1999) (collecting cases) (internal citations and quotation marks omitted).

In articulating the principle of proximate causation, the Second Circuit has instructed that:

one notion traditionally included in the concept of proximate causation is the requirement that there be "some direct relation between the injury asserted and the injurious conduct alleged." For this reason, "a plaintiff who complain[s] of harm flowing merely from the misfortunes visited upon a third person by the defendant's acts [is] generally said to stand at too remote a distance to recover."

Laborers Local 17 Health & Benefit Fund, 191 F.3d at 235 (quoting Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268-69, 112 S.Ct. 1311, 1318, 117 L.Ed.2d 532 (1992)). "Thus, the other traditional rules requiring that defendant's acts were a substantial cause of the injury, and that plaintiff's injury was reasonably foreseeable, are additional elements, not substitutes for alleging (and ultimately, showing) a direct injury." Id. at 235-36.

Moreover, three public policy factors guide the application of this "direct injury" test on a case-by-case basis:

First, the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff's damages attributable to the violation, as distinct from other, independent, factors. Second, quite apart from problems of proving factual causation, recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiff's removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries. And, finally, the need to grapple with these problems is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely.

Holmes, 503 U.S. at 269-70, 112 S.Ct. at 1318-19 (citations omitted); see Laborers Local 17 Health & Benefit Fund, 191 F.3d at 236-37.

In the present case, the direct injury test plainly bars the Unions from seeking monetary damages for injuries that are purely derivative of any harms suffered by Legal Aid. First, it would be unnecessarily difficult to isolate the many factors in the collective bargaining process that might have influenced the flow of damages between Legal Aid and the Unions. Second, and for similar reasons, it would be nearly impossible to prevent duplicative recovery by Legal Aid and the Unions. Third, and most obviously, Legal Aid itself has already brought suit in action No. 96 Civ. 5141 to redress the same harms by seeking essentially the same damages in its own right. See National Union of Hosp. & Health Care Employees v. Carey, 557 F.2d 278, 281-82 (2d Cir. 1977) ("In short, while union and employer, like the proverbial lion and lamb, may coexist in negotiated peace, we see nothing in this relationship which empowers the union to litigate with the State concerning the nature and extent of the employer's [federal] rights.").

However, the direct injury test need not bar the Unions from seeking injunctive relief in the present litigation. To begin with, the first two public policy factors under that test are crafted to address particular concerns with respect to the calculation and apportionment of damages, and by definition those concerns do not apply to a request for injunctive relief. Moreover, although Legal Aid seeks essentially the same injunctive relief, the relief sought by the Unions is not redundant, since the Unions seek such relief not as proxies asserting Legal Aid's federal rights but rather to remedy the indirect harms to their own rights pursuant to the First Amendment and the NLRA. See Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 64 n. 6, 83 S.Ct. 631, 636 n. 6, 9 L.Ed.2d 584 (1963).

Indeed, federal courts have been particularly willing to recognize standing to seek injunctive relief on the basis of indirect harms where those harms implicate a plaintiff's free speech rights pursuant to the First Amendment. For example, the Supreme Court has recognized the standing of a publisher to bring a First Amendment challenge to a state commission's alleged threats to prosecute distributors of the publisher's works for dissemination of purportedly obscene materials. See Bantam Books, 372 U.S. at 64 n. 6, 83 S.Ct. at 636 n. 6; see also LSO, Ltd. v. Stroh, 205 F.3d 1146, 1153-54 (9th Cir. 2000); Alameda Newspapers, Inc. v. City of Oakland, 95 F.3d 1406, 1411-12 (9th Cir. 1996); Penthouse Int'l Ltd. v. Putka, 436 F. Supp. 1220, 1225 (N.D.Ohio 1977).

More recently, the Third Circuit has reiterated that:

courts have been expansive in their view of a litigant's standing to bring legal action in situations in which free speech rights are implicated. Cases addressing issues of standing in the free speech labor context . . . have recognized that limitations on free speech rights can result in a `chilling effect' on others' exercise of those rights, and have taken a broad view of standing based on this prospect.
"Litigants, therefore, are permitted to challenge a statute not because their own rights of free expression are violated, but because of a judicial prediction or assumption that the statute's very existence may cause others not before the Court to refrain from constitutionally protected speech or expression."

Ruocchio v. United Transp. Union, 181 F.3d 376, 385 (3d Cir. 1999) (quoting Nelson v. International Ass'n of Bridge, Structural & Ornamental Iron Workers, 680 F. Supp. 16, 24 (D.D.C. 1988) (quoting Broadrick v. Oklahoma, 413 U.S. 601, 612, 93 S.Ct. 2908, 37 L.Ed.2d 830 (1973))), cert. denied, ___ U.S. ___, 120 S.Ct. 1158, 145 L.Ed.2d 1070 (2000). These same concerns apply with particular force in the present case.

Accordingly, the Unions lack standing to seek monetary damages for injuries that are purely derivative of harms suffered by Legal Aid. This includes transfers of funding from Legal Aid to the provider defendants, see Complaint, No. 96 Civ. 8137, ¶ E(3), punitive reductions in Legal Aid's funding, see id. ¶ E(6), as well as lost dues income resulting from these transfers and reductions, see id. ¶ E(7). However, the Unions do not lack standing to seek injunctive relief on the basis of the same underlying legal claims.

C. Contractual standing

The City relies on the general rule that only a party in privity with a contract has standing to assert claims arising out of that contract, see Ametex Fabrics, Inc. v. Just In Materials, Inc., 140 F.3d 101, 110 (2d Cir. 1998), to claim that the Unions lack standing to challenge any alleged breach of the City's contract with Legal Aid. However, the rights asserted and relief sought by the Unions arise out of the NLRA and the U.S. Constitution, and not out of a contract between the City and Legal Aid. Therefore, the City's argument must be rejected. See UP State Federal Credit Union v. Walker, 198 F.3d 372, 375-76 (2d Cir. 1999) (per curiam).

D. Disappointed bidder standing

In its complaint, Legal Aid contests the award of contracts pursuant to the Third RFP on the grounds that the award was arbitrary and capricious. See Second Amended Complaint, No. 96 Civ. 5141, ¶¶ 94-95. However, the Third RFP providers argue that Legal Aid was ineligible to compete for those contracts because the bid it submitted deviated materially and substantially from the specifications set forth in the Third RFP. In other words, because Legal Aid's bid allegedly was deficient, Legal Aid was ineligible to compete for the contracts issued pursuant to the Third RFP and it therefore suffered no injury even if illegal favoritism did enter into the City's decision to award the contracts to the Third RFP providers.

Pursuant to New York law, noncompliance with a public bid specification "is considered material only when it would impair the interests of the contracting authority or place some of the bidders at a competitive disadvantage." In re Varsity Transit, Inc. v. Board of Educ., 130 A.D.2d 581, 582, 515 N.Y.S.2d 520, 521 (2d Dep't), appeal denied, 70 N.Y.2d 605, 513 N.E.2d 1309, 519 N.Y.S.2d 1029 (1987). Allegations of noncompliance must be assessed in light of the "totality of the circumstances." In re Superior Hydraulic, Inc. v. Town Bd., 88 A.D.2d 404, 409, 453 N.Y.S.2d 711, 715 (2d Dep't 1982). In the present litigation, it is undisputed that the City did not reject Legal Aid's bid as deficient. Accordingly, the City's decision to waive any alleged deviation as immaterial "must be upheld . . . if supported by any rational basis." In re Varsity Transit, 130 A.D.2d at 582, 515 N YS.2d at 521 (citing In re C.K. Rehner, Inc., 106 A.D.2d 268, 483 N.Y.S.2d 1 (1st Dep't 1984)).

First, the provider defendants assert that Legal Aid's bid was deficient because it failed to specify a set fee to be paid by the City to Legal Aid for each appeal perfected under any contract awarded pursuant to the Third RFP. Here, however, M. Sue Wycoff, Attorney-in-Charge of the Criminal Appeals Bureau of Legal Aid, has testified that the bid was submitted in the mutual understanding with the City that Legal Aid would receive no compensation for cases that ultimately had to be reassigned to other providers because of conflicts of interest, which was the same manner of compensation as had operated pursuant to Legal Aid's earlier contracts with the City. See Supp.Aff. of M. Sue Wycoff, dated Aug. 2, 1999, at ¶ 21. In reply, the provider defendants argue that Legal Aid and the City could have shared no such understanding, since, according to these defendants, additional documentary evidence demonstrates that Legal Aid did in fact include reassigned cases in determining its budget under prior contracts. See Supp.Aff. of Lynn W.L. Fahey, dated Dec. 3, 1999, at ¶¶ 1-6. At best, however, these competing contentions indicate the existence of genuine disputes as to material issues of fact whose resolution is inappropriate on the present motions for summary judgment.

Second, the provider defendants maintain that Legal Aid's bid was noncompliant because it failed to specify the costs Legal Aid expected to incur during its second year of operations under any contract awarded pursuant to the Third RFP. Wycoff, however, has testified that Legal Aid failed to specify these costs because Section IV.G. of the bid specifications indicated only one-year cost proposals were required. See Wycoff Supp.Aff. ¶ 27. In addition, Wycoff notes that the page for specifying such costs was missing from the packet of application materials Legal Aid received, and that Legal Aid offered to supply any missing information. See id.; see also id. Ex. F & n. 1. Finally, Wycoff points out that the City may have decided to waive any noncompliance on the assumption that Legal Aid intended its second-year costs to be identical to the first-year figures that Legal Aid did include in its bid. See id. ¶ 29; see also In re Varsity Transit, Inc., 130 A.D.2d at 582, 515 N.Y.S.2d 520. In reply, the provider defendants argue that any such assumption would have been unrealistic given that the gradual phase-in of new staff would inevitably result in higher costs for the second year. Once again, such an assumption on the part of the City presents a disputed question of material fact.

Accordingly, summary judgment on the question of disappointed bidder standing should be denied without prejudice to the renewal of that question at a later date.

III. Statute of limitations, joinder, and injunctive relief

A. Statute of limitations

The Second RFP providers were first named as defendants in the Second Amended Complaint in action No. 96 Civ. 5141 on June 21, 1999. Moreover, the providers pleaded the statute of limitations as an affirmative defense in their answer. See Answer on Behalf of New York County Defender Services, Inc., et al., filed Aug. 9, 1999, at 17, ¶ 105. Therefore, these defendants have satisfied the requirement of Fed.R.Civ.P. 8(c) that an affirmative defense premised on a statute of limitations must be filed in the responsive pleadings in an action. See Kulzer v. Pittsburgh-Corning Corp., 942 F.2d 122, 125 (2d Cir. 1991); 2 James Wm. Moore, Moore's Federal Practice § 8.07[6] at 8-42 (Daniel R. Coquillette et al. eds., 2d ed. 2000); see also id. § 8.07[4], at 8-40 to -41 (federal procedural law governs assertion of affirmative defense provided by state law) (citing Santos v. District Council, 619 F.2d 963, 967 (2d Cir. 1980)).

Because "a federal court acts essentially as a state court in addressing pendent state law claims," the timeliness of Legal Aid's joinder of the Second RFP providers with respect to the state law claims is governed the statute of limitations applicable pursuant to state law. Baker v. Coughlin, 77 F.3d 12, 14 (2d Cir. 1996). Pursuant to New York law, a challenge to agency action is normally governed by the four-month statute of limitations applicable to Article 78 proceedings. See N YC.P.L.R. § 217(1) (McKinney 1999); accord Legal Aid Soc., 242 A.D.2d at 424, 662 N.Y.S.2d at 304. Therefore, joinder of the Second RFP providers was timely only as to state law claims accruing within the four months prior to June 21, 1999.

In the present case, Legal Aid challenges contracts awarded pursuant to the Second RFP on four grounds: first, that the City invited bids from entities and awarded contracts to entities outside the statutory categories of permissible legal services providers, see Second Amended Complaint, No. 96 Civ. 5141, ¶¶ 82-83; second, that the Second RFP was not adopted or ratified by the City Council as required by state law, see id. ¶¶ 84-86; third, that the Second RFP resulted in awards to multiple providers in violation of municipal law, see id. ¶¶ 89-91; and fourth, that the City improperly excluded Legal Aid from the bidding process even though it was objectively qualified to propose a bid, see id. ¶¶ 92-93. All of these claims accrued at the latest on or before July 1, 1997, when the City ...


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