New York Law Review

Tag: S. T. Grand, Inc. v. City of New York

  • S. T. Grand, Inc. v. City of New York, 32 N.Y.2d 300 (1973): Criminal Conviction as Collateral Estoppel in Subsequent Civil Action

    S. T. Grand, Inc. v. City of New York, 32 N.Y.2d 300 (1973)

    A criminal conviction is conclusive proof of the underlying facts in a subsequent civil action, provided there was an identity of issue and a full and fair opportunity to contest the prior decision.

    Summary

    S. T. Grand, Inc. sued New York City for the unpaid balance on a cleaning contract. The City counterclaimed, alleging the contract was illegal due to bribery, relying on S. T. Grand’s prior criminal conviction for bribing a city official to secure the contract. The New York Court of Appeals held that the criminal conviction conclusively established the bribery, barring S. T. Grand from recovering on the contract and requiring them to return payments already received. The court distinguished this case from *Gerzof v. Sweeney*, emphasizing the severity of the corruption at the contract’s inception and the difficulty in determining damages.

    Facts

    In 1966, S. T. Grand, Inc. contracted with New York City to clean the Jerome Park Reservoir, a contract awarded by Commissioner Marcus without competitive bidding under a “public emergency” exception. S. T. Grand completed the cleaning work. Subsequently, S. T. Grand and its president were convicted in federal court of conspiracy related to bribing Commissioner Marcus to obtain the cleaning contract. When S. T. Grand sued the city for the unpaid balance ($148,735), the city argued the contract was illegal due to the bribery and counterclaimed for the $689,500 already paid.

    Procedural History

    The City moved for summary judgment on S. T. Grand’s claim and its own counterclaim. Special Term denied the motion, citing *Gerzof v. Sweeney*. The Appellate Division modified, directing judgment for the City on both claims, finding no factual issues and distinguishing *Gerzof*. S. T. Grand appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a criminal conviction is conclusive proof of its underlying facts in a subsequent civil action.
    2. Whether the equitable remedy fashioned in *Gerzof v. Sweeney* is available to S. T. Grand, Inc., thus allowing them to recover at least the value of the services rendered.

    Holding

    1. Yes, because the doctrine of collateral estoppel applies when there is an identity of issues necessarily decided in the prior action and a full and fair opportunity to contest the prior decision.
    2. No, because the circumstances of this case do not warrant the equitable exception created in *Gerzof v. Sweeney* due to the corruption at the inception of the contract and the difficulty in calculating damages.

    Court’s Reasoning

    The court overturned its prior precedent in *Schindler v. Royal Ins. Co.*, which held that a criminal conviction was only prima facie evidence in a subsequent civil suit. The court reasoned that the abolition of the mutuality requirement for collateral estoppel necessitates a change. The court applied the modern doctrine of collateral estoppel, as articulated in *Schwartz v. Public Administrator*, requiring identity of issue and a full and fair opportunity to litigate. The court found both requirements met, as the bribery conviction was based on the same facts at issue in the civil suit, and the criminal trial afforded S. T. Grand ample opportunity to contest the bribery allegations.

    Regarding the remedy, the court acknowledged the general rule that no recovery is permitted for work done under an illegal municipal contract, aiming to deter violations of bidding statutes. While *Gerzof v. Sweeney* created an exception, allowing partial recovery based on unique equitable considerations, the court found that the circumstances in *S. T. Grand* differed significantly. In *Gerzof*, there was a fair idea of damages suffered because the village had already determined its need for a generator and had conducted one round of legitimate bidding. Here, there was no untainted determination that the reservoir needed cleaning, nor any competitive bidding. Further, the illegality in *Gerzof* only affected the final stages of the contracting process, whereas in this case, the bribery permeated the entire process from the outset.

    Therefore, the Court held that the policy of deterring corruption outweighs any equitable concerns for S. T. Grand. As the court stated, “If we are to effectively deter the unscrupulous practice of fraudulent and collusive bidding on public contracts, we cannot look alone to existing penal sanctions. The nature of the wrong is such that it is not easily discovered but, when it is, we make it quite clear that courts of this State will decline to lend their aid to the fraudulent bidder who seeks recovery.”