In Matter of O'Brien v. Spitzer, 2006 NY Slip Op 05158, the New York Court of Appeals considered the issue of whether a private attorney appointed as a referee in a mortgage foreclosure proceeding was entitled to defense and indemnification from the State in a lawsuit brought against him.
Attorney O'Brien relied upon Public Officer's Law s. 17 as the basis for his claim that the State was required to defend and indemnify him. From the decision:
Public Officers Law § 17 (2) (a) requires the State to "provide for the defense" of an "employee" in an action arising out of his or her public duties. "Employee" is defined in Public Officers Law § 17 (1) (a), which provides in relevant part:
"As used in this section, unless the context otherwise requires the term employee shall mean any person holding a position by election, appointment or employment in the service of the state . . ., but shall not include an independent contractor . . . ."
The Court noted that the main issue to be determined was "whether petitioner was an 'employee' or an 'independent contractor' within the meaning of this section.
The Court of Appeals concluded that it was obligated to give deference to the Attorney General's resolution of the issue and thus held that it agreed with the Attorney General conclusion that O'Brien was an independent contractor:
Here, there was ample basis for the Attorney General's determination...Petitioner worked without day-to-day supervision and chose his own hours of work; it was he who selected the date for the foreclosure sale. He performed his duties on a part-time basis, while also working for clients of his private law practice. His compensation did not come from State funds, but from the sale proceeds. The State did not withhold income tax or provide workers' compensation. Petitioner furnished whatever materials he needed for his work, and paid his own expenses, subject to reimbursement from the sale proceeds. He deposited the proceeds in a special bank account bearing his own name, as required by CPLR 2609. He was, in short, substantially more independent from State control over his activities than a typical State employee. Beyond this, public policy supports the Attorney General's decision: The purpose of Public Officers Law § 17 is, in essence, to provide insurance against litigation. Private lawyers like petitioner ordinarily have malpractice coverage, and the Legislature is unlikely to have intended to substitute the State for lawyers' malpractice carriers.
Public policy rears its ugly head once again! And, quite coincidentally, it supports the Court's holding. Imagine that!