Abiele Contracting, Inc. v. New York City School Construction Authority

InAbiele Contracting, Inc. v New York City School Construction Authority, (91 NY2d 1 [1997]) the petitioner had been notified that its contract with the respondent had been terminated for cause and that it would be barred from participating in such contracts for three years. The Court of Appeals recognized in that case that " 'there are circumstances in which the same governmental action may constitute a violation of a contract and also be of a character that would support a claim for article 78 relief' ... However, the issues presented in a contract action differ significantly from those presented in an article 78 proceeding. When the damage allegedly sustained arises from a breach of the contract by a public official or governmental body, then the claim must be resolved through the application of traditional rules of contract law. On the other hand, when a petitioner asserts that the determination of a governmental body or public official is 'in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion' and seeks nullification of same, then an article 78 proceeding is the appropriate vehicle through which the claim may be addressed" (id. at 7-8 ). The Court rejected the Authority's motion to dismiss and held plaintiff could maintain a plenary action for breach of contract, but specifically noted that Its decision was based on the fact that "the municipal agency had neither statutory nor contractual authority to render a quasi-judicial determination" and, as such, "it was not empowered to issue a final and binding determination of default reviewable only In an article 78 proceeding." (91 NY2d 1, 5-6, 689 N.E.2d 864, 666 N.Y.S.2d 970). In discussing the careful analysis In which the Court must engage to determine whether a plenary action or special proceeding is appropriate, the Abiele court stated: "When the damage allegedly sustained arises from a breach of the contract by a public official or governmental body, then the claim must be resolved through the application of traditional rules of contract law. On the other hand, when a petitioner asserts that the determination of a governmental body or public official is "'in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" and seeks nullification of same, then an article 78 proceeding Is the appropriate vehicle through which the claim may be addressed. (CPLR 7803). ... [W]here the focus of the controversy Is on an agency's breach of an express contractual right, or on the agency's violation of the implied obligations of good faith, fair dealing and cooperation, a contract action is the recommended remedy." (91 NY2d 1, 7-8).