NY Appellate Court Dismisses Challenge Against Town’s Payment of Development Consultant Fees

This post was authored by Amy Lavine, Esq.

A New York appellate court held in May that a lawsuit involving a town’s payment of development consulting fees was properly dismissed.

The Town of Middletown entered into a one-year consulting contract in 2013 with a rural development not-for-profit. The $5,000 contract was renewed in 2014 and 2015, but a ministerial error prevented the contract from being formally renewed in 2016. The town board nevertheless approved payments for the consulting services rendered in 2016, and the plaintiff then commenced this lawsuit in order to compel repayment of the allegedly illegal 2016 consulting fees.

The court first dismissed the claim that the 2016 payments were an illegal use of public funds because they were not paid pursuant to a valid contract. The cause of action was rendered moot, the court explained, by the town’s adoption of a resolution that ratified and approved the 2016 renewal of the consulting contract. Moreover, the court noted that the plaintiff failed to make sufficient allegations of fraud or illegality to establish taxpayer standing under New York law.

The court found that the plaintiff’s remaining causes of action were properly dismissed for failure to state a claim. The plaintiff’s second and fourth claims alleged that the consulting company failed to comply with disclosure rules regarding conflicts of interest, but these rules did not apply to the consulting company, which was not a “municipal officer or employee.” The only interest that the plaintiff claimed was not disclosed, moreover, was the consulting agreement itself, and the court agreed with the trial court’s finding that it would have been “absurd” to require the consulting company to disclose the same contract that it was entering into with the town. As to the plaintiff’s third cause of action, which alleged fraud and intentional misrepresentation, the court concluded that there was no evidence that the consulting company intentionally misrepresented the validity of its 2016 contract. To the contrary, the plaintiff’s own affidavit showed that the town was aware that the contract had expired when it approved the payments for the 2016 consulting fees.

As a final matter, the court affirmed the denial of the plaintiff’s motion to reargue and/or renew. The court noted that the denial of a motion to reargue is not appealable, and it found that there was no basis for renewal because the plaintiff had not alleged any new facts or changes in the law that would have required a different result.

Budin v. Davis, 2019 NY Slip Op 03866 (3d Dept. 5/16/19).