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Feb 22, 2011 4:50 PMPublication: The East Hampton Press

EH School District Lawsuit Against Construction Firm Dismissed; Suit Against District Continues

Editor's Note: View a video of the oral arguments before the State Court of Appeals here:
 http://www.courts.state.ny.us/CTAPPS/arguments/2011/Jan11/011211-No22.asx
Court of Appeals Decision (PDF)
Feb 22, 2011 4:50 PM

New York State’s highest appeals court has rejected a lawsuit filed by East Hampton School District officials against Victor Canseco, the owner of Sandpebble Builders, over the school’s contract with Sandpebble for the multimillion-dollar renovation of its high school campus, effectively resolving one element of the ongoing dispute.

In a decision on Tuesday, the State Court of Appeals ruled that the school district could not sue Mr. Canseco personally over the conflict with Sandpebble. The seven-judge panel determined that in order for a company to separate out an agent of an incorporated company, known as “piercing the corporate veil,” a plaintiff must show that the individual held complete control over the company and abused the personal protections incorporation provides to “perpetrate a wrong or injustice.”

“In this case, plaintiff failed to allege any facts indicating that [Mr.] Canseco engaged in acts amounting to an abuse or perversion of the corporate form,” the court’s decision reads, “much less that the school district was harmed as a result of such actions.”

The district’s lawyer, Manhattan attorney Bernard J. Garbutt, did not return a phone call to his office seeking comment on Tuesday.

Sandpebble’s suit against the district is still pending. Attorneys for the two sides agreed to hold settlement discussions late last year, but no settlement has been reached yet and neither side has been willing to comment on the status or tenor of negotiations. Both sides are scheduled to appear in state court on April 12.

Mr. Canseco’s company sued the school district for $3.75 million in 2006 when the district hired a new contractor to oversee the nearly $80 million expansion work at East Hampton High School, despite having signed a contract with Sandpebble years earlier to do the work.

The district counter-sued Mr. Canseco in early 2007. A State Supreme Court justice denied a motion by Mr. Canseco’s lawyers to dismiss the case, but a state appellate court agreed with the builder and dismissed the case in 2009 on the basis that the school had not proven that Mr. Canseco had personally done anything to warrant the suit against him. The school appealed to the Court of Appeals, which effectively ended the jousting with this week’s decision.

“When you form a corporation, the general rule is that the owner of the company is not liable for something that happens in the course of the company’s business,” Mr. Canseco’s attorney, Theodore Sklar, said on Tuesday. “Exceptions to that are very limited. You basically have to show that the company is just a shell company, which clearly Sandpebble isn’t.”

The school district has taken heat from taxpayers in recent months for spending nearly $2 million fighting with Mr. Canseco and Sandpebble in court. The recent ruling will add to that: the district was ordered to pay Mr. Canseco’s costs stemming from the suit, an amount Mr. Sklar said is not yet determined.

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It sounds from this article like a slam dunk against the school board. So much for their high priced law firm.
By zaz (197), East Hampton on Feb 22, 11 4:55 PM
Here's what you do.. take pictures and hand deliver to code enforcement with copies to all Board members. Include the name of the landlord. That info can be learned at town assessor's office.

Someone should start a website showing the images, addresses and landlord's name.
By harbor (415), East Hampton on Feb 23, 11 12:43 PM
Public officials should be personally liable for their actions. It would certainly help cut down on these kinds of abuses ...
By Noah Way (450), Southampton on Feb 23, 11 10:51 PM