This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 143
John Tipaldo,
Respondent,
v.
Christopher Lynn, &c., et al.,
Appellants.
Marta Ross, for appellants.
Lewis Rosenberg, for respondent.
ABDUS-SALAAM, J.:
In this whistleblower action, we are faced with two
issues: First, whether plaintiff John Tipaldo made a good faith
effort to comply with the reporting requirements of Civil Service
Law § 75-b (2) (b); and second, whether prejudgment interest is
available under Civil Service Law § 75-b and Labor Law § 740 (5).
For the reasons that follow, we hold that plaintiff made a good
faith effort to comply with the statute, and that prejudgment
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interest is available in actions of this kind.
I.
Plaintiff was employed by New York City's Department of
Transportation (DOT) and served as the DOT's Acting Assistant
Commissioner for Planning and Engineering. He was apparently
promised that at some point that position would become permanent
and be accompanied by a significant pay increase. While he held
that position plaintiff supervised the Queensborough Bridge
Project which involved procuring a variety of street signs,
including "don't honk" signs to advise motorists of possible
fines. Plaintiff discovered an alleged scheme by his superiors,
defendants Christopher Lynn, then-Commissioner of the DOT, and
Richard Malchow, then-First Deputy Commissioner of the DOT, to
award a signage contract to Lynn's acquaintance in violation of
the City's public bidding rules. The day after placing an order
for the signs from Lynn's acquaintance on November 6, 1996, a
meeting was held informing DOT employees, including Tipaldo, that
the signs had been purchased. According to plaintiff, he and
other employees questioned the legality of the process and the
DOT employees whose signatures were required to authorize the
purchase refused to sign the authorization. The following day,
November 8, Lynn and Malchow then solicited bids from the public.
Following the delivery and installment of the signs, the DOT
received several lower bids compared to the $6,000 paid to Lynn's
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acquaintance. Defendants thereafter allegedly created a
backdated memorandum stating that the need for the signs was
"urgent" and that the order must be placed immediately, rather
than go through the bidding process.
Plaintiff informed his immediate supervisors about
defendants' alleged misconduct. One or two business days later,
plaintiff reported defendants' alleged actions to the Office of
the Inspector General for the DOT and requested an investigation.
Plaintiff claims that shortly after filing his report with the
Inspector General, Lynn and Malchow retaliated against him by
excluding him from meetings, removing him from supervising and
managing several projects, and publicly making negative comments
about him. Eventually, plaintiff was removed from his position
and demoted.
Plaintiff then commenced this action in 1997 pursuant
to Civil Service Law § 75-b. He alleged that he was retaliated
against for reporting improper governmental activity and sought a
permanent injunction, reinstatement, all lost compensation,
punitive damages, attorney's fees, and costs. Defendants moved
for summary judgment dismissing the complaint, arguing that
plaintiff failed to comply with Civil Service Law § 75-b by not
reporting the allegedly wrongful actions to the appointing
authority (which under these facts were defendants) before
contacting the Inspector General's office. Plaintiff cross-moved
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for summary judgment on liability.1
Supreme Court granted defendants' motion for summary
judgment, denied plaintiff's cross motion, and dismissed the
complaint. The court agreed with defendants that plaintiff
failed to state a cause of action by not reporting the
defendants' alleged misconduct to an appointing authority. On
appeal, the Appellate Division reversed, and granted plaintiff's
motion for summary judgment, stating, "[t]here is no dispute that
retaliatory actions were taken against plaintiff, and although a
cause of action pursuant to the subject statute requires
plaintiff to have first reported the alleged violation to the
internal [DOT] 'appointing authority,' here, that was defendants"
(48 AD3d 361, 361-362 [1st Dept 2008] [internal citation
omitted]). The court determined that "plaintiff's good faith
efforts in the manner and filing of his reporting, first
informally to his immediate supervisors, and then soon thereafter
to the [DOI], satisfactorily met the requirements of Civil
Service Law § 75-b (2)" (id. at 362).
1
Meanwhile, following an investigation, the Inspector
General issued his determination, concluding that plaintiff
"suffered an adverse personnel action taken in retaliation for
his having reported to the [DOI] information concerning conduct
which he knew or reasonably believed to involve an abuse of
authority on the part of another City official." The report
recommended that plaintiff be reinstated to his former position
or a comparable position. Defendants initially declined to
reinstate plaintiff, but later issued an order of compromise,
pursuant to CPLR 3221, offering to reinstate him to a comparable
position with back pay and benefits, which plaintiff rejected.
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Thereafter, a bench trial on damages was conducted.
Plaintiff's expert Dr. Anne Bynoe testified, concluding that if
plaintiff had not been demoted, he would have been permanently
appointed to Assistant Commissioner for Planning, receiving a
$25,000 raise, amounting to an $81,000 salary at the time of
demotion. Using the salary information of two comparators (DOT
managers that Dr. Bynoe determined were similarly situated to
plaintiff in experience and job responsibilities), Dr. Bynoe
concluded that over the 10 years since plaintiff's demotion,
plaintiff lost approximately $388,243 in earnings, or $662,721
with 9% statutory interest. Defendants did not present any
evidence to refute Dr. Bynoe's conclusions.
Supreme Court then directed judgment to be entered in
favor of plaintiff. However, the court denied plaintiff's claim
for interest, stating that "neither C[ivil] S[ervice] L[aw] §
75-b nor Labor Law § 740 makes any provision for interest." The
court directed that defendants pay plaintiff $175,000, rather
than the amount computed by Dr. Bynoe.
The Appellate Division modified the judgment and, as so
modified, affirmed (76 AD3d at 477 [1st Dept 2010]). The court
determined that Supreme Court failed to explain how it calculated
the award and did not address plaintiff's requests for
consequential damages or reinstatement to an equivalent position.
The court determined that the only expert opinion before it was
plaintiff's, and it saw no reason to disturb Dr. Bynoe's
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conclusions on the back pay owed to plaintiff based upon the
raise he was to receive with the anticipated promotion. The
court determined that Labor Law § 740 (5) allows whistleblower
plaintiffs who sue under Civil Service Law § 75-b to seek
prejudgment interest, because the purpose of Civil Service Law §
75-b is to "remediat[e] adverse employment actions which, if
allowed, would undermine an important public policy, that is,
encouraging public employees to expose fraud, waste and other
squandering of the public fisc" (id. at 482). Additionally, the
court ordered defendants to reinstate plaintiff to the same or
equivalent position he held before the retaliatory personnel
action.
Supreme Court then entered a judgment awarding
plaintiff $388,243.00 in back pay, $274,478.00 in interest,
$152,521.81 in attorney's fees, and $985.00 in costs. The
judgment also directed defendants to promote plaintiff to an
Assistant Commissioner position, with a salary of $157,000,
effective August 24, 2010. This Court granted defendants' motion
for leave to appeal from the judgment, bringing up for review the
prior non-final 2008 and 2010 Appellate Division orders. We now
affirm.
II.
The first issue is whether plaintiff complied with
Civil Service Law § 75-b, the State whistleblower statute.
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Civil Service Law § 75-b provides that adverse
employment action may not be taken against a public employee
based upon his or her disclosure of information "which the
employee reasonably believes to be true and reasonably believes
constitutes an improper governmental action." "Improper
governmental action" is defined as:
"any action by a public employer or employee,
or an agent of such employer or employee,
which is undertaken in the performance of
such agent's official duties, whether or not
such action is within the scope of his
employment, and which is in violation of any
federal, state or local law, rule or
regulation"
(Civil Service Law § 75-b [2] [a]). Prior to reporting what may
be "improper governmental action," an employee is to make "a good
faith effort to provide the appointing authority or his or her
designee the information to be disclosed and shall provide the
appointing authority or designee a reasonable time to take
appropriate action unless there is serious or imminent danger to
the public health or safety" (Civil Service Law § 75-b [2] [b]).
An "appointing authority" is the "officer, commission or body
having the power of appointment to subordinate positions" (Civil
Service Law § 2 [9]). Based upon the legislative history, the
purpose of the reporting requirement was to allow the employer
the opportunity to cease the violations by providing internal
notice prior to disclosing misconduct to an outside agency (see
Budget Report, Bill Jacket, L 1984, ch 660, at 7). Following the
report of a complaint to the appointing authority, pursuant to a
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New York City Mayoral Executive Order, it is the authority's
obligation to report the alleged improper governmental action to
the Department of Investigation (see Executive Order § 16 [3]
[d]). The Executive Order also requires an employee to
immediately report misconduct or face disciplinary action,
including possible termination.
Because plaintiff's appointing authorities were Lynn
and Malchow, he understandably did not report their alleged
misconduct to them. The scheme in which Lynn and Malchow
purportedly engaged was quite deliberate. After entering into a
contract with Lynn's acquaintance for the signs, they allegedly
attempted to cover their tracks by publishing a notice seeking
public bids and later releasing a memorandum stating that an
immediate need for the signs required bypassing the normal
bidding process. Thus, Lynn and Malchow would not likely have
been receptive to plaintiff's complaints or reported themselves
to the Department of Investigation. Notably, defendants concede
that there was no duly designated individual to whom plaintiff
could have reported his claims.
Under these particular circumstances, strict compliance
with the reporting requirements of Civil Service Law § 75-b would
not serve the purpose of the statute. Rather, courts should use
their discretion in determining whether the overall actions of
the plaintiff constitute a good faith effort to report the
misconduct. In cases such as this -- where the appointing
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authority is the one engaging in the alleged misconduct -- an
employee's good faith effort to report the misconduct should be
evaluated with attention to the employee's practical inability to
report to the appointing authority. The "good faith" provision
in the statute affords courts the discretion to determine whether
a plaintiff has met its requirements and appears to adequately
account for situations like the one presented here.
Here, we hold that plaintiff complied with the
statutory reporting requirement by informing his immediate
supervisors of the misconduct and thereafter reporting the
misconduct to the DOT Inspector General. Whistleblowing is
encouraged to prevent employer misconduct and provide appropriate
remedies when it occurs. Employees in situations like
plaintiff's should not be required to report to the appointing
authority where such a report would prove impractical and
possibly impede prompt resolution of the matter. Notably, here,
plaintiff believed the appointing authority was on notice of the
alleged improper governmental action, based on plaintiff and
other employees' expression of concern after a DOT meeting, DOT
employees' refusal to approve the appointing authority's
purchase, and the appointing authority's subsequent solicitation
of bids followed by the issuance of a backdated memorandum
claiming that the process needed to be expedited. Additionally,
in view of the requirement, set forth in both Executive Law No.
16 and the DOT employee handbook, that employees such as
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plaintiff disclose misconduct to the DOT Inspector General
directly and without undue haste or face possible termination of
their employment, we cannot say that plaintiff lacked "good
faith" in reporting to his immediate supervisors only one or two
business days before he reported his allegations to the DOT
Inspector General. Therefore, given the conditions plaintiff was
facing, an overall view of his actions demonstrates good faith
compliance with Civil Service Law § 75-b.
III.
The second issue is whether the 2010 Appellate Division
order properly determined that plaintiff is entitled to
prejudgment interest.
The Civil Service Law provides that a public employee
not subject to an arbitration agreement or a collective
bargaining agreement is entitled to commence his or her action
"under the same terms and conditions as set forth in article
twenty-C of the labor law" (Civil Service Law § 75-b [3] [c]).
The "terms and conditions" in that section incorporate the
remedies in Labor Law § 740 (5). That section states that the
remedies available to employees who bring claims for retaliation
include:
"(a) an injunction to restrain continued
violation of this section; (b) the
reinstatement of the employee to the same
position held before the retaliatory
personnel action, or to an equivalent
position; (c) the reinstatement of full
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fringe benefits and seniority rights; (d) the
compensation for lost wages, benefits and
other remuneration; and (e) the payment by
the employer of reasonable costs,
disbursements, and attorney's fees"
(Labor Law § 740 [5]). The terms "compensation" and
"remuneration" are not defined by the statute (see Civil Service
Law § 75-b).
This Court has held that where a statute does not
specifically list interest as recoverable, interest may be
available where a statute's legislative intent is to make its
victims whole and its language does not limit the recovery
available. In Matter of Aurecchione, we concluded that
"[a]lthough the Human Rights Law, like [T]itle VII, makes no
specific reference to pre-determination interest, a liberal
reading of the statute is explicitly mandated to effectuate the
statute's intent" (98 NY2d 21, 26 [2002]). Thus, because the
Human Rights Law permits individuals subject to employment
discrimination to recover "compensatory damages," we concluded
that allowing for prejudgment interest was consistent with the
"central concern" of the statute, which was "to make such victims
'whole'" (id.). In Matter of Greenberg, we held that although
Workers' Compensation Law § 120 did not provide for prejudgement
interest, such interest was permissible because, like the Human
Rights Law, section 120 was an antidiscrimination statute with an
intent to fully compensate those discriminated against (see 7
NY3d 139, 142 [2006]). That section states that an employee
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"shall be compensated by his or her employer for any loss of
compensation," which we concluded provided for a "general right
to compensation," especially since its language that an employee
is "to be restored to the position or privileges [he or she]
would have had but for the discrimination" showed a "generalized
intention to undo harm done" (id. at 142-143).
Conversely, in Matter of Bello we held that no
prejudgment interest was available because Civil Service Law § 77
did not provide for a "general right to compensation" (5 NY3d
170, 173 [2005]). The section provided that an employee subject
to unlawful removal:
"shall be entitled to receive . . . salary or
compensation which he [or she] would have
been entitled by law to have received in such
position but for such unlawful removal, from
the date of such unlawful removal to the date
of such restoration, less the amount of any
unemployment insurance benefits he [or she]
may have received during such period"
(id. at 172-173; see also Civil Service Law § 77). This Court
concluded that this language restricted recovery to salary or
compensation and that, in this context, compensation "refers to
bonuses or other nonsalary forms of payment" (see id. at 173).
Additionally, we "hesitate[d]" in reading prejudgment interest
into the statute because Civil Service Law § 77, which allows for
monetary recovery against the State or its civil divisions,
"waives the State's sovereign immunity" and "[s]uch waivers are
to be strictly construed, [with] 'waiver of immunity by inference
being disfavored'" (id. at 173).
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Here, an overall view of the comprehensive package of
remedies listed in Labor Law § 740 (5), including undefined
"compensation" and "remuneration," demonstrates that the
Legislature sought to make a whistleblowing plaintiff whole,
which would include an award of prejudgment interest. The
remedies in Labor Law § 740 (5) are not as limited as Civil
Service Law § 77, the statute evaluated in Matter of Bello.
There was no room under Civil Service Law § 77 to consider
whether prejudgment interest may be included. In contrast, Labor
Law § 740 (5), provides courts with discretion to determine what
is considered "compensation" and "remuneration." Further,
because the remedies listed in the statute appear to seek to make
a whistleblowing plaintiff whole, awarding prejudgment interest
would serve that purpose. By demoting plaintiff rather than
awarding him a planned promotion and significant raise,
defendants deprived plaintiff of access to what would have been a
higher salary for a period of over 10 years. Awarding back pay
with interest would serve to make plaintiff whole; thus, he is
entitled to such a recovery.
With respect to the amount of prejudgment interest
awarded, plaintiff's expert Dr. Anne Bynoe testified during the
damages trial and described the damages owed to plaintiff based
upon his position and the promotion he was to receive using two
comparators. Dr. Bynoe took into consideration inflation and
interest when making her determination, and defendants failed to
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refute her conclusions. Therefore, as plaintiff is entitled to
recover prejudgment interest and his expert's testimony
concerning the amount of back pay, consequential damages and
interest he is owed was unrefuted, the denial of prejudgment
interest was an abuse of discretion.
Additionally, because reinstatement to the same or
equivalent position is a remedy specifically provided by Labor
Law § 740 (5), the Appellate Division did not err in providing
that remedy given the liability determination that plaintiff was
retaliated against for reporting Lynn and Malchow's misconduct.
IV.
Under the circumstances of this case, namely that
plaintiff's appointing authorities were the individuals whom he
alleged engaged in misconduct, plaintiff's overall conduct
demonstrates good faith compliance with Civil Service Law § 75-b
(2) (b). Additionally, because Labor Law § 740 (5) indicates an
intention to make a whistleblowing plaintiff whole, prejudgment
interest was properly awarded. Thus, the judgment appealed from
and orders of the Appellate Division sought to be reviewed should
be affirmed, with costs.
* * * * * * * * * * * * * * * * *
Judgment appealed from and orders of the Appellate Division
sought to be reviewed affirmed, with costs. Opinion by Judge
Abdus-Salaam. Judges Pigott, Rivera, Stein and Fahey concur.
Chief Judge Lippman took no part.
Decided October 22, 2015
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