## Facts

- Edward C. Ryan was employed by New York Telephone Company.
- Company security investigators observed Ryan removing what appeared to be company property from the workplace.
- The investigators stopped Ryan, summoned police, and Ryan was arrested and charged with petit larceny and criminal possession of stolen property.
- New York Telephone discharged Ryan for theft of company property.
- Ryan sought unemployment insurance benefits; a claims examiner denied benefits for misconduct.
- At an unemployment hearing before an Administrative Law Judge (ALJ), Ryan was advised of the right to counsel but appeared with a union representative; witnesses testified and were examined and cross-examined.
- The ALJ found Ryan removed company property without authorization and concluded he lost employment due to misconduct; the Appeal Board affirmed, and the Appellate Division upheld the denial of benefits.
- The criminal charges were ultimately dismissed in the interest of justice.
- Ryan and his wife then sued the employer and investigators for false arrest, malicious prosecution, slander, and wrongful discharge; defendants asserted collateral estoppel based on the unemployment determination.

## Issues

1. Whether an unemployment insurance administrative determination, made after a quasi-judicial hearing, collaterally estops relitigation of employee misconduct in subsequent civil tort and discharge claims.
2. Whether Ryan had a full and fair opportunity to litigate misconduct in the unemployment proceeding despite appearing with a union representative rather than retained counsel.
3. Whether dismissal of the criminal charges in the interest of justice defeats or diminishes the preclusive effect of the administrative finding.

## Decision

- The Court of Appeals reversed the Appellate Division and answered the certified question in the negative.
- The court held collateral estoppel applied to the unemployment determination’s finding that Ryan engaged in misconduct involving unauthorized removal of company property.
- The court granted defendants’ cross-motion to dismiss the causes of action for false arrest, malicious prosecution, slander, and the wrongful discharge claims dependent on lack of misconduct.
- The court denied plaintiffs’ motion to strike the collateral estoppel defense.

## Legal Principles

- Collateral estoppel applies when (1) the issue in the later action is identical to an issue necessarily decided earlier and decisive of the later action, and (2) the party to be bound had a full and fair opportunity to contest the issue.
- Administrative agency determinations may have issue-preclusive effect when rendered in a quasi-judicial setting with adequate procedural safeguards, including sworn testimony and adversarial testing of evidence.
- Choosing nonlawyer representation, after notice of the right to counsel, does not by itself defeat a finding that the party had a full and fair opportunity to litigate.
- A criminal dismissal in the interest of justice is not a merits determination of innocence and does not negate an administrative finding of misconduct for collateral estoppel purposes.

## Conclusion

Because the unemployment insurance proceeding necessarily determined that Ryan was discharged for theft-related misconduct after a fair adversarial hearing and review, Ryan was barred from relitigating that misconduct in later tort and discharge claims, requiring dismissal of claims that depended on denying the misconduct.


Ryan v. N.Y. Tel. Co., 62 N.Y.2d 494 (1984)