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Decision No. 12,619

Appeal of RHETA PERCY and JANICE ROSS from action of the Board of Education of the Auburn Enlarged City School District and Sheila Tucker, Board President, regarding legal expenses.

Decision No. 12,619

(December 20, 1991)

Cuddy, Durgala and Timian, Esqs., attorneys for respondents, Milan M. Durgala, Esq., of counsel

SOBOL, Commissioner.--Petitioners appeal from an action by the board of education of the Auburn Enlarged City School District authorizing the payment of legal expenses incurred by its president, Sheila Tucker, in the defense of a defamation action brought against her in the Supreme Court, Cayuga County. The appeal must be dismissed.

Respondent Sheila Tucker has been a member of respondent board for more than nine years. On January 15, 1990, she testified at an examination before trial in an action pending between a former superintendent and respondent board. On that same day, she learned from the board's trial counsel that Michael Barile, the business administrator and clerk of respondent district, had testified in a prior deposition that he had been discharged from his previous position as business manager at the Ilion Central School District.

Several months later, on April 17, 1990, Mr. Barile commenced an action for defamation against respondent Tucker for allegedly slanderous remarks made by her on January 15, 1990, to the president of the Auburn Teachers Association and to an education reporter for a local newspaper. According to the amended verified complaint, respondent Tucker said that Mr. Barile was "fired from his last job, with another school district, for stealing, misappropriating, or embezzling money." The amended verified complaint dated May 15, 1990, identifies Mr. Barile as the business administrator and clerk of respondent district, identifies respondent Tucker as a member of the board of education, but alleges that her statements were made outside the scope of her duties as a board member.

According to the affidavit of respondents' attorney, Mr. Durgala, respondent Tucker delivered the summons and original complaint on April 18, 1990 to him, as required in Public Officers Law '18(5). Mr. Durgala forwarded the papers to the district's liability carrier, requested coverage, and requested a defense on her behalf. In the meantime, upon the advice of Mr. Durgala, respondent Tucker retained private counsel. On April 20, 1990, respondent Tucker's private counsel gave written notice to Mr. Durgala that service had been made. On May 4, 1990, the liability carrier disclaimed coverage, on the ground that respondent Tucker's "actions . . . did not arise with respect to her duties as a member of the school board." Consequently, the carrier said that respondent Tucker was not insured under the applicable provisions of the policy. The terms of that policy are not part of the record before me.

At the board's meeting on August 13, 1990, a resolution was offered that the law firm already selected by respondent Tucker be retained by the board at district expense to represent her at a fixed hourly rate. After an extensive discussion, the board (consisting of nine members, all of whom were present) voted to adopt the resolution by a vote of five in favor, one against, and three abstentions. Respondent Tucker, who had been elected president of the board at its most recent organizational meeting, voted in favor of the resolution.

Petitioners contend that the determination of the board to pay respondent Tucker's legal expenses was improper for several reasons. They contend that she did not comply with the procedural requirements of Education Law '3811, that her vote in favor of the resolution was improper because of a conflict of interest, and that the use of public funds to pay her attorney was improper. They contend that the defamation action brought against respondent Tucker was brought against her only as an individual, and allege actions by her that were not within the scope of her authority as a board member. Finally, they contend that the district's insurance carrier determined that the actions alleged on the part of respondent Tucker were outside the scope of her duties as a board member, thereby negating coverage.

Respondents contend that on May 23, 1983, respondent board adopted a resolution pursuant to Public Officers Law '18(2), and that all the requirements of that section were complied with. Respondents argue that the petition is defective because it asks for no remedy other than a stay, which has already been denied. Respondents also claim that the actions complained of in the verified amended complaint of Mr. Barile were within the scope of Tucker's duties as a board member and that her vote in favor of the indemnification resolution was not a conflict of interest. Finally, respondents argue that the matter is moot, because the parties to the defamation action have discontinued the case and exchanged general releases.

I will not treat this appeal as moot, even though the record contains a stipulation discontinuing the defamation action and general releases executed by both parties to that action. Although the record is not specific on this point, it seems clear that legal fees on behalf of respondent Tucker were incurred prior to the date the defamation action was terminated. Consequently, the appeal is not moot in that respect.

In my judgment, both parties have made errors in their analysis of the applicable law. It seems to be petitioners' position that Education Law '3811 is applicable to this case. Under that provision, respondent Tucker is entitled to the reasonable costs and expenses of a legal defense and reimbursement for any costs and damages assessed against her, if she complies with certain procedural steps and the matter arises out of the exercise of her powers or performance of her duties as a board member. Pursuant to that section, she must (a) give written notice to the board within five days after service of process; (b) if the board does not appoint counsel within the next ten days, she may select her own counsel; and (c) either a court or the Commissioner must certify that she appeared to have acted in good faith with respect to the exercise of her powers or performance of her duties. It is the Commissioner's duty to determine both the appearance of good faith and whether or not the alleged conduct falls within the scope of a board member's duties. Keeley, et. al. v. Pappas, et al., 14 Ed Dept Rep 396, Pappas v. Nyquist, 85 Misc. 2d 114; Application of Ackerberg, 25 Ed Dept Rep 232.

Respondents' position is that only Public Officers Law '18 applies, because it was adopted by the board in 1983. That section requires that a board provide a defense to a board member at public expense, through private counsel if a conflict of interest is present, and that the board indemnify and save the board member harmless against any judgment, if the board member complies with certain procedural steps which are different from those found in Education Law '3811, and if the alleged wrongdoing is within the scope of his or her public duties. Under Public Officers Law '18(5), the board member must deliver a written request for a defense to the board or its chief legal or administrative officer within ten days after service of papers, together with the papers served, and must cooperate fully in his or her defense.

Once adopted by a public entity or board, Public Officers Law '18 normally becomes the exclusive source of an employee or board member's defense and indemnification rights, but not if the governing body adopts it as only supplemental to other statutory protection, as set forth in Public Officers Law '18(12). In this appeal, the resolution of respondent board dated May 23, 1983, contains this language: "Be it further resolved, that the benefits provided pursuant to section 18 of the New York Public Officers Law shall supplement and be available in addition to defense or indemnification protection conferred by other enactments." As a result, I conclude that respondent Tucker may have rights under both Education Law '3811, as a primary source, and Public Officers Law '18, as a secondary source.

I am satisfied that respondent Tucker took procedural steps which satisfied the requirements of both sections. She placed the papers served on her in Mr. Durgala's hands only one day after service, her attorney gave written notice only three days after service, and there is no suggestion that she did not cooperate fully in her defense. The record indicates that Mr. Durgala promptly advised her to seek counsel and that as board attorney he "could not represent her personally." Under Education Law '3811, the board had ten days to appoint counsel of its choice for her, but the record indicates that it only sought to obtain representation from the liability carrier, which did not disclaim until May 4. In the meantime, her right to select counsel of her own choice (which she had already done) at public expense had come into existence on April 28. Under Public Officers Law '18(3), the board should have provided a defense to her in a timely manner, so as to prevent a default ('18[3][d]). If the defamation action was commenced on April 17, respondent Tucker had only until May 7, i.e., 20 days, to make an appearance and avoid a default. The record does not indicate that any defense was actually provided by that date. Pursuant to Public Officers Law '18(3), the right to private counsel depends on the existence of a conflict of interest. Pursuant to Education Law '3811(1), the right to private counsel depends on the board's failure to designate counsel in a timely way, which the board failed to do. The right to select private counsel arises in this case whether or not the board has purchased liability coverage. Even if the board had tentatively designated its insurance carrier's attorney to represent respondent Tucker (which it does not seem to have done), the carrier's disclaimer of coverage would give rise to her right to select counsel.

The board resolution of August 13, 1990, to retain and pay respondent Tucker's personal counsel, without any mention of indemnification should a judgment result, is not a significant point in this appeal. I conclude that Education Law '3811 governs, and that respondent Tucker's statutory rights under that section had already arisen months earlier, as long as her alleged conduct was in the exercise of her powers or performance of her duties as a board member, and appeared to be in good faith. It is, therefore, unnecessary for the decision of this appeal to determine whether or not respondent Tucker's vote in favor of using district funds to pay her counsel amounted to a conflict of interest.

If Public Officers Law '18 applied exclusively, rather than as a supplement, it would be the duty of the board to make a determination as to whether the alleged conduct was "within the scope of his public . . . duties" ('18[2][a]). It has been said that, where the complaint in an action makes a specific allegation that an employee (or board member) was not acting within the scope of his duties, the reviewing entity must "look behind the pleading to the facts underlying the occurrence," and that a refusal to defend under these circumstances "is equivalent to a finding that there is no reasonable basis upon which a jury could find that the employee was acting within the scope of his employment" (Op. State Compt. 90-47, p. 107). Whether an employee (or board member) is sued as an individual or as an official is not controlling for purposes of Public Officers Law '18. "A contrary construction would lead to a patently absurd result, namely, that defense and indemnification rests upon the whims of a plaintiff when drawing up the complaint" (Op. State Compt. 82-243, p. 304). The "whim" of a plaintiff could include an intent to deprive a defendant of his or her benefits under Public Officers Law '18 by alleging that the defendant acted outside his scope. For that reason, mere allegation of acting outside the scope of one's duties cannot be controlling.

I find no evidence that respondent Tucker did not act in good faith with respect to her actions on January 15, 1990. She states that she had conversations on that date with the board's trial counsel, with the superintendent, with the person who then held the office of board president, and with other board members, regarding Mr. Barile, but denies discussing him with either of the persons named in the amended complaint. She claims that she was prompted to make inquiries by trial counsel, and that she believed these were legitimate activities for a board member. Petitioners, who claim no personal knowledge of those activities and have not served a reply, have not shown otherwise.

I also conclude that the alleged defamation, if it occurred, and respondent Tucker denies it, could have arisen out of the exercise of Tucker's powers or the performance of her duties as a board member. In a case decided under Public Officers Law '17, it was held that the denial of a defense on the ground that conduct is outside the scope of one's official duties can only be made where "the facts are so clear-cut that reasonable minds could reach no other conclusion." Mathis v. State, 140 Misc. 2d 333, at 339. Only respondent Tucker's version of the facts is before me. Had she not been a board member on January 15, 1990, she would not have been in contact with the board's trial counsel, nor would she have had occasion to talk to the superintendent, board president, or other board members that day. I cannot definitively say that, even if she did have the other conversations alleged in the defamation complaint, she was acting outside the scope of her duties as a board member. I, therefore, conclude that she was entitled to the benefits of Education Law '3811.

In making my determination, I am acting independently of respondents' insurance carrier, which was interpreting the language of an insurance policy which is not before me. That is an entirely separate matter, and I am in no way bound by the carrier's decision.

I have considered the other contentions of the parties, and find them to be without merit.