ADELHARDT CONSTRUCTION CORP v. CITICORP NORTH AMERICA INC (2020)

Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered on or about June 24, 2019, which, to the extent appealed from, denied defendants' motion to dismiss the breach of contract claims, unanimously affirmed, without costs.

Plaintiff allegedly was an authorized contractor performing work for defendants over the course of more than 60 years.  The complaint alleges that between 2012 and 2014, defendants' director of global construction, John Cassisi, demanded that plaintiff perform work at his home and facilitate construction work for defendants by unapproved contractors by falsifying records, while threatening to withhold or delay payments for work already performed and to not award future projects to plaintiff.  Following an investigation, Cassisi was charged with, and pleaded guilty to, third-degree money laundering and first-degree commercial bribe receiving for his conduct vis-à-vis various contracting companies.  Plaintiff and its corporate president were later charged with, and pleaded guilty to, first-degree falsifying business records, in furtherance of a scheme whereby Cassisi requested and received benefits in exchange for using his position to maintain plaintiff as an approved vendor. Defendants moved to dismiss the breach of contract claims on the ground of “gravely immoral and illegal conduct” in plaintiff's performance of its contracts (see McConnell v. Commonwealth Pictures Corp., 7 N.Y.2d 465, 471, 199 N.Y.S.2d 483, 166 N.E.2d 494 [1960];  Prote Contr. Co. v. Board of Educ. of City of N.Y., 230 A.D.2d 32, 40, 657 N.Y.S.2d 158 [1st Dept. 1997] ).  The motion was correctly denied, as Cassisi's alleged threats, if proved, would be sufficient to establish extortion (People v. Kacer, 113 Misc.2d 338, 346–347, 448 N.Y.S.2d 1002 [Sup. Ct., N.Y. County 1982] ), which precludes dismissal (see Kraft Gen. Foods, Inc. v. Cattell, 18 F. Supp. 2d 280, 285 [S.D. N.Y.1998];  J.M. Deutsch, Inc. v. Robert Paper Co., 13 A.D.2d 768, 215 N.Y.S.2d 939 [1st Dept. 1961] ).  The plea agreements relied upon do not utterly refute plaintiff's allegations of extortion so as to establish bribery conclusively (see Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 [2002] ).  At this early stage of the litigation, it is unclear whether there is “a direct connection between the illegal transaction and the obligation sued upon” (McConnell, 7 N.Y.2d at 471, 199 N.Y.S.2d 483, 166 N.E.2d 494).

Defendants also failed to establish conclusively that Cassisi's actions cannot be imputed to them because he “totally abandoned his principal's interests and [was] acting entirely for his own or another's purposes” (Kirschner v. KPMG LLP, 15 N.Y.3d 446, 466, 912 N.Y.S.2d 508, 938 N.E.2d 941 [2010] [internal quotation marks omitted] ).  Not every bribe satisfies this standard, as an errant employee may also have been promoting his employer's interests (see id. at 466–467, 912 N.Y.S.2d 508, 938 N.E.2d 941;  Prudential–Bache Sec. v. Citibank, 73 N.Y.2d 263, 277, 539 N.Y.S.2d 699, 536 N.E.2d 1118 [1989] ).  Whether or not Cassisi induced plaintiff's actions by improper threats, and whether or not his actions may be imputed to defendants so that the parties cannot be considered in pari delicto, can only be determined upon the full development of the facts.

Motion to enlarge the record denied.