Baroni v. The Port Authority of New York and New Jersey

Background

William E. Baroni Jr. sued the Port Authority of New York and New Jersey for reimbursement of attorney’s fees and costs incurred while defending criminal charges related to conduct he undertook while employed by the Port Authority. He relied on Article XI of the Port Authority’s by-laws, which contains provisions concerning defense and indemnification.

The by-laws state that the Port Authority may provide a defense when criminal charges are asserted against an eligible individual for conduct within the scope of Port Authority employment. They also state that the Port Authority shall reimburse defense costs upon acquittal or dismissal of the criminal charges. The by-laws condition their benefits on delivering an original or copy of specified documents to the Port Authority’s general counsel within five days after receiving or being served with the document.

Baroni was indicted in 2015 and convicted on all counts at trial. The Third Circuit reversed his civil-rights convictions but affirmed his fraud convictions. The Supreme Court later reversed the judgment affirming the fraud convictions. On remand, the conviction judgment was vacated and the indictment was dismissed.

Earlier dismissal and proposed amendment

The court had previously dismissed Baroni’s complaint under Federal Rule of Civil Procedure 12(b)(1), which addresses the court’s subject-matter jurisdiction. The court concluded that the Port Authority had not waived its sovereign immunity because Baroni had not plausibly alleged that he satisfied the required notice and timing conditions. Without satisfying those conditions, his claim had not accrued, meaning the alleged legal obligation to pay had not yet become enforceable for jurisdictional purposes.

After judgment was entered, Baroni sought relief from the judgment and permission to amend his complaint under Rules 59(e), 60(b), and 15. His proposed amended complaint alleged that the Port Authority’s general counsel received a copy of the indictment within five days of its issuance; that Baroni repeatedly requested indemnification during the investigation and prosecution; and that the general counsel told his attorney that Baroni had done everything necessary and should stop repeating his requests.

The Port Authority opposed amendment. It argued that the proposed complaint still did not allege timely delivery of the judgment of acquittal or other document that would trigger mandatory reimbursement after the criminal charges ended.

Court’s analysis

Because Baroni sought amendment after judgment, the court applied a more demanding standard than it ordinarily would before judgment. The court could deny leave to amend if the proposed amendment was futile—that is, if the amended complaint still could not survive a motion to dismiss.

The court concluded that Baroni’s claim for mandatory reimbursement could accrue only after the criminal charges were dismissed or he was acquitted, because that event was the basis for his asserted entitlement under the mandatory reimbursement provision. Therefore, timely delivery of the indictment could not satisfy the relevant notice condition: delivery of the indictment occurred before the event that allegedly created the right to reimbursement and could not notify the Port Authority that Baroni would later seek mandatory reimbursement based on dismissal of the charges.

The court also rejected reliance on Baroni’s earlier indemnification requests. Those requests were made while the investigation and prosecution were ongoing and therefore concerned the by-law provision allowing the Port Authority, in its discretion, to provide a defense. They did not satisfy the requirements for mandatory reimbursement after dismissal of the charges. The court noted that the proposed amended complaint did not allege a request for reimbursement made within five days after Baroni received the judgment ending the criminal case.

The court rejected Baroni’s waiver and estoppel arguments. It reasoned that the Port Authority could not waive a condition before that condition became enforceable. It also held that the Port Authority could not be prevented from asserting the requirement based on alleged statements by its general counsel, because governmental entities generally are not subject to estoppel on the same terms as private litigants, particularly when jurisdictional conditions and sovereign immunity are involved.

The court also found that New Jersey’s agreement to reimburse Baroni’s co-defendant, Bridget Anne Kelly, did not change the result. According to the court, that payment involved a different indemnification provision and did not show that the Port Authority had waived its immunity or that Baroni had satisfied the required jurisdictional conditions.

Disposition

The court held that the proposed amended complaint did not plausibly allege timely delivery of the judgment of acquittal within five days. Because the proposed amendment could not survive a Rule 12(b)(1) motion, amendment would be futile. Judge Laura Taylor Swain therefore denied Baroni’s motion to alter and obtain relief from the judgment and for leave to amend the complaint.