New York SMSA Limited Partnership v. The City of Rye

Background

New York SMSA Limited Partnership, doing business as Verizon Wireless, sued the City of Rye, the City of Rye City Council, and Kerry Lenihan, in his official capacity as the City of Rye’s Building Inspector. Verizon alleged that the defendants violated the Telecommunications Act of 1996 by denying special-use permits for a proposed rooftop wireless telecommunications facility.

The parties later settled all claims. Under their November 18, 2020 Consent Order, Verizon would lease city-owned property and build an 80-foot freestanding telecommunications structure called a Unipole. The Consent Order required the defendants to issue a building permit within 30 days after receiving a complete application. It also incorporated a separate Lease Agreement, which allowed Verizon to survey the property and provided that the survey would replace the original site plans and estimates.

The original plans estimated the property’s elevation at approximately 95 feet above mean sea level. A later survey placed the elevation at approximately 57 feet above mean sea level and identified the property boundaries more precisely. Verizon submitted a building-permit application using the survey and revised drawings. The defendants deemed the application complete but did not issue the permit by the deadline.

Motions and arguments

Verizon asked the court to enforce the settlement agreement and to hold the defendants in civil contempt under Federal Rule of Civil Procedure 70(e). The defendants did not dispute that they had not issued the permit within 30 days. Instead, they argued that the settlement should be rescinded because both sides had mistakenly believed that the Unipole could be located near the elevation of an adjacent railroad parking lot. They also argued that their conduct did not warrant contempt because they had diligently reviewed and processed the application.

Court’s authority and settlement enforcement

The court held that it had authority to enforce the settlement after the case was dismissed. The Consent Order expressly allowed a party to seek enforcement and set out the settlement’s terms. The court also held that it had authority over the Lease Agreement because the Consent Order incorporated that agreement by reference.

The court rejected the defendants’ mutual-mistake argument. Under the applicable contract principles, rescission may be available when both parties share an erroneous belief about a material fact that goes to the heart of their agreement. But the Lease Agreement expressly stated that Verizon could survey the property and that the completed survey would replace the original exhibit. The court concluded that the parties knowingly accepted the possibility that a survey would reveal inaccurate initial estimates and agreed that the survey’s estimates would govern construction. The court therefore found no mutual mistake warranting rescission and held that the defendants could not undo their settlement merely because their assessment of its consequences was incorrect.

Civil contempt

The court denied the contempt request. To obtain civil contempt, Verizon had to prove by clear and convincing evidence that the order was clear and unambiguous, that the defendants failed to comply, and that they did not diligently attempt to comply in a reasonable manner.

The court concluded that Verizon clearly established only the defendants’ noncompliance. It did not establish that the Consent Order clearly and unambiguously required the survey to replace the specific exhibit attached to that order, rather than only the corresponding exhibit to the Lease Agreement. The court also found that Verizon had not shown that the defendants failed to act diligently: the record showed that the defendants reviewed the application and deemed it complete. No evidentiary hearing was required because the parties identified no material factual dispute.

Disposition

The court granted Verizon’s request to enforce the settlement agreement and specifically compelled the defendants to comply with all its provisions, including issuing a building permit in accordance with the settlement’s terms. The court denied Verizon’s request to hold the defendants in civil contempt and directed the Clerk of Court to enter judgment in Verizon’s favor accordingly.