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Wang v. Paterson

December 18, 2008

LAN LAN WANG; PRINCIPAL CONNECTIONS, LTD., D/B/A MLX.COM, PLAINTIFFS,
v.
DAVID PATERSON, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF NEW YORK; LORRAINE CORTES-VAZQUEZ, IN HER OFFICIAL CAPACITY AS SECRETARY OF STATE OF THE STATE OF NEW YORK; THE STATE OF NEW YORK; RANDY DANIELS, INDIVIDUALLY AND AS FORMER SECRETARY OF STATE OF THE STATE OF NEW YORK; FRANK MILANO, INDIVIDUALLY AND AS FORMER SECRETARY OF STATE OF THE STATE OF NEW YORK; BRUCE STUART, INDIVIDUALLY AND AS FORMER EMPLOYEE OF THE DEPARTMENT OF STATE OF THE STATE OF NEW YORK; WHITNEY CLARK, INDIVIDUALLY AND AS EMPLOYEE OF THE DEPARTMENT OF STATE OF THE STATE OF NEW YORK, DEFENDANTS.



The opinion of the court was delivered by: Laura Taylor Swain, United States District Judge

OPINION AND ORDER

Plaintiffs Lan Lan Wang and Principal Connections, Ltd. ("PCL"), a New York corporation doing business as MLX.com and founded by Ms. Wang to provide real estate marketing and brokerage services, brought suit against New York State and six current or former state officials*fn1 asserting claims and seeking damages based upon 42 U.S.C. § 1983 and various New York state law causes of action. The Court has federal question jurisdiction of Plaintiffs' § 1983 claims and supplemental jurisdiction of Plaintiffs' state law claims.*fn2 28 U.S.C.A. §§ 1331, 1367 (West 2006).

The case is now before the Court on Defendants' motion pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the amended complaint ("Am. Compl."). Defendants New York State and all persons named in their official capacity seek dismissal on the grounds that the Eleventh Amendment renders them immune to Plaintiffs' claims. Defendants also move for dismissal with respect to all of the other claims on the grounds of the affirmative defense of release, asserting that a Stipulation of Settlement previously entered into by Plaintiffs precludes their claims in the instant case. The Court has carefully considered all of the parties' submissions. For the following reasons, the Court grants Defendants' motion in its entirety.

BACKGROUND

This case arises out of a long-running dispute between Plaintiffs and the Department of State of the State of New York ("DOS"), and its officials and employees, regarding Plaintiffs' real estate broker's license ("REB license") and Apartment Information Vendor license ("AIV license"), or lack thereof.*fn3 Plaintiff PCL provides real estate marketing and brokerage services to property renters and buyers in New York City through both traditional brokerage services and an online electronic bulletin board. (Am. Compl. ¶¶ 22-25.) New York's Apartment Information Vendor Law ("AIV law") defines the business of an "apartment information vendor" and requires any person or corporation to acquire an AIV license from DOS before engaging in that business. N.Y. Real Prop. Law § 446a-b (McKinney 2006). Similarly, New York law requires a real estate broker, as defined by statute, to obtain an REB license, and allows DOS to revoke the REB license of any licensee that has "demonstrated untrustworthiness or incompetency." N.Y. Real Prop. Law §§ 440-441 (McKinney 2006). Plaintiffs obtained an REB license but did not obtain an AIV license for PCL, on the belief that PCL did not fall under the AIV law. (Am. Compl. ¶ 27.)

On January 31, 2000, New York State Administrative Law Judge Roger Schneier suspended Plaintiffs' REB license on the grounds that Wang's operation of PCL constituted the unlawful operation of an Apartment Information Vendor business without the requisite license, thereby demonstrating "untrustworthiness and incompetence as a real estate broker." (Am. Compl. ¶ 64.) A protracted series of state administrative proceedings and federal court litigation ensued, including a lawsuit initiated by Plaintiffs in this court in December 2000 in which Plaintiffs challenged the constitutionality of the AIV law ("Wang I"). (Am. Compl. ¶¶ 48-129.)

In Wang I, Plaintiffs named as defendants, in their official capacities, the Governor of New York (as to whom all claims were subsequently dismissed in October 2001) and the Attorney General of New York. In November 2004, Plaintiffs amended their complaint to add as a defendant Randy Daniels, Secretary of State of New York, and to allege additional constitutional violations. The court subsequently dismissed four of Plaintiffs' five causes of action and all claims against the Attorney General. Wang v. Pataki, 396 F. Supp. 2d 446 (S.D.N.Y. 2005). Familiarity with that proceeding is assumed.

In June 2006, Plaintiffs and DOS entered into a Stipulation and Order of Settlement and Discontinuance ("Stipulation") in Wang I. The Stipulation recited the procedural history of Wang I, which involved the same time period, actors, and basic disputes as those involved in the litigation now before the Court.*fn4 (Polishook Decl., Exh. C, pp. 1-4.) In the Stipulation, DOS pledged to issue Wang an REB license and to withdraw any opposition to her application for an AIV license, in exchange for which Plaintiffs agreed to "release and discharge [defendant] and any of [its] current, former, or future officials, officers, employees, heirs, devisees, agents . . . and the State of New York and/or its agencies from any and all claims, liabilities, causes of action, or defenses that any party asserted, or could have asserted, in this action." (Polishook Decl., Exh. C, ¶ 11.) The court so-ordered the Stipulation on June 30, 2006, concluding Wang I. Although no material factual developments related to Plaintiffs' dispute with DOS subsequently transpired, Plaintiffs initiated the instant case on March 9, 2007.

DISCUSSION

Sovereign Immunity and the Eleventh Amendment

The Court must address the parties' sovereign immunity arguments before turning to the question of release. See Rhulen Agency, Inc. v. Alabama Ins. Guaranty Ass'n, 896 F.2d 674, 678 (2d Cir. 1990). The Eleventh Amendment to the Constitution of the United States provides that: "[t]he judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state." U.S. Const. amend. XI. As explained below, Eleventh Amendment sovereign immunity precludes all of Plaintiffs' claims, with the exception of the claims asserted against state officials in their individual capacities.

Plaintiffs' amended complaint names as defendants the State of New York; the Governor of New York, in his official capacity; the DOS Secretary, in her official capacity; two former DOS Secretaries (Randy Daniels and Frank Milano) in their individual capacities; and one current and one former DOS employee (Bruce Stuart and Whitney Clark, respectively), in their individual capacities.*fn5 The Amended Complaint seeks only money damages. Defendants correctly argue that Plaintiffs' claims alleging violations of their federal civil rights under 42 U.S.C. § 1983 can be asserted only against officials in their individual capacities because States and their officials, when acting in their official capacities, are not "persons" subject to liability under § 1983. Will v. Michigan Dep't of State Police, 491 U.S. 58, 71 (1989). Accordingly, the Eleventh Amendment sovereign immunity of States and of their officials, when acting in their official capacities, has not been abrogated by § 1983, and they enjoy immunity from suits seeking money damages. Id. Plaintiffs' state law claims against Defendants in their official capacities are also barred by the Eleventh Amendment, which prohibits federal courts from exercising supplemental jurisdiction to adjudicate state law claims against state officers when acting in their official capacities. Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 121 (1981); Bad Frog Brewery, Inc. v. New York State Liquor Auth., 134 F.3d 87, 102 (2d Cir. 1998).

Plaintiffs do not contest these principles but, rather, claim that the State has waived its sovereign immunity and thus cannot invoke the Eleventh Amendment as a defense in this case. A State can waive its sovereign immunity in certain instances, see Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241 (1985), and Plaintiffs have advanced three theories of waiver here. Plaintiffs argue that Defendants waived their sovereign immunity by placing the affirmative defense of release as Point I in their motion to dismiss and relegating their sovereign immunity defense to Point II. Plaintiffs have proffered no authority for the proposition that a defendant should be deemed to have waived sovereign immunity -- a result that would require a finding of conduct that "unequivocally evidence[s] the state's intention to subject itself to the jurisdiction of the federal court," Hill v. Blind Indus. & Servs., 179 F.3d 754, 758 (9th Cir. 2002) (citing Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241 (1985)) -- merely on the basis of the order in which the defendant presented its arguments in a brief. As "the Supreme Court and [the Second Circuit] have repeatedly held that a state may assert Eleventh Amendment sovereign immunity at any time during the course of proceedings," McGinty v. New York, 251 F.3d 84, 94 (2d Cir. 2001), Defendants can certainly raise sovereign immunity at any point within their motion papers.

Plaintiffs also argue that Defendants' statement that Plaintiffs' claims "could have been asserted" in Wang I constitutes a waiver. This argument similarly fails to identify the necessary "unequivocal[] evidence [of] the state's intention to subject itself to the jurisdiction of the federal court." See Hill, 179 F.3d at 758. Defendants' statement merely implies that the facts at issue in this case were known to Plaintiffs when they entered into the Stipulation that concluded the previous federal action. The statement in no way suggests that, had ...


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