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HERTZOG v. PRUDENTIAL INS. CO. OF AMERICA

March 21, 1996

HERTZOG, CALAMARI & GLEASON, Plaintiff, against THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.


The opinion of the court was delivered by: HAIGHT

 HAIGHT, Senior District Judge:

 This diversity action arises out of a dispute as to the proper interpretation of a real estate lease between plaintiff law firm Hertzog, Calamari & Gleason ("HC&G")--the tenant--and defendant Prudential Insurance Company ("Prudential")--the owner and landlord of the property.

 Plaintiff moves the Court for summary judgment on its first cause of action for a declaratory judgment (1) establishing the maximum liability of HC&G and of its individual partners, and (2) ruling that HC&G may cancel or terminate the lease by vacating the property and paying the stipulated damages set forth in the lease modification. For the reasons stated below, the motion is granted in part and denied in part.

 FACTS

 HC&G is a New York City law firm with offices at 100 Park Avenue, a building owned by Prudential. On May 16, 1989, HC&G and Prudential entered into a ten-year lease for portions of three floors of 100 Park Avenue. Included among the lease's provisions was a section articulating the liability of individual HC&G partners:

 
the liability of each of the partners of Partnership Tenant shall be several and limited to, and in no event exceed, their individual per capita share of One Million Dollars ($ 1,000,000), as determined by the number of partners listed on the latest schedule of partners in Partnership Tenant, which schedule shall be provided to Landlord by Tenant annually (by way of example, if the latest schedule of partners lists ten (10) partners of Partnership Tenant, then each partner's liability under the lease shall be limited to One Hundred Thousand Dollars ($ 100,000) . . . .

 Paccione Aff., Exh. A at § 55.

 In the spring of 1990, HC&G lost two partners from its law firm and sought to modify the lease to alter the proportionally greater personal liability resting upon the shoulders of the remaining individual partners of HC&G. In a letter dated May 2, 1990, HC&G wrote to Prudential's agent requesting a lease modification to stabilize and cap the potential individual liability faced by its partners. Paccione Aff., Exh. C. Prudential refused to modify the lease at that time.

 A third, quite senior, partner left HC&G in the summer of 1990, again raising concerns among the firm's remaining partners as to their potential individual liability. HC&G again approached Prudential about modifying the lease, spelling out its proposal to alter Section 55 to allow "a reduction in the liability of Partnership Tenant" in a letter dated July 31, 1990. Paccione Aff., Exh. L at 1.

 Lease modification negotiations began between the parties, and a Modification was formally executed on May 6, 1991. Neither party disputes the validity or binding nature of this Modification. The Modification provided that:

 
1. Notwithstanding any provision of the Lease to the contrary, in the event of any cancellation or termination of the Lease, the liability of Partnership Tenant and the partners of Partnership Tenant under the lease shall be as set forth below:
 
(i) the liability of Partnership Tenant shall not exceed One Million Dollars ($ 1,000,000) (the "Aggregate Liability"). The liability of each of the partners of Partnership Tenant for the Aggregate Liability shall be several and shall be limited to, and in no event exceed, their individual per capita share of the Aggregate Liability, as determined by the number of partners listed on the latest schedule of partners in the Partnership Tenant, which schedule shall be provide to Landlord by Tenant annually (by way of example, if the latest schedule of partners lists ten (10) partners of Partnership Tenant, then each partner's liability under the Lease shall be limited to One Hundred Thousand Dollars ($ 100,000) during the first Lease Year (as defined herein);
 
(ii) the Aggregate Liability of Partnership Tenant and the partners of Partnership Tenant shall be reduced by $ 100,000 for each of the first five consecutive Lease Years of the Lease such that the Aggregate Liability shall be $ 500,000 at the end of the fifth Lease Year under said Lease . . . .
 
(iii) in the event the schedule of partners submitted by Partnership Tenant reflects a number of partners such that the several liability of any one partner for his or her share of the Aggregate Liability equals or exceeds $ 125,000 (said amount being calculated by dividing the Aggregate Liability relevant at the time by the number of partners on the latest schedule of partners submitted by Partnership Tenant), then Landlord may look to the schedule of partners submitted immediately prior to the list in question and to prior schedules of partners in reverse chronological order until that schedule of partners is reached for whom the several liability of any one partner for his or her share of the Aggregate Liability is less than $ 125,000 per partner, and the partners listed on all such schedules shall be liable for their per capita share of the Aggregate Liability in the event of subsequent termination or cancellation of the Lease.
 
2. Except as otherwise amended hereby, all terms of the Lease shall remain in full force and effect.

 Paccione Aff., Exh. D at 1-2.

 In the summer of 1992, HC&G approached Prudential requesting a renegotiation of its rent. Prudential responded, by a September 8, 1992 letter from its agent Cushman and Wakefield, that although Prudential valued HC&G's tenancy, it was "unwilling at this time to change these lease provisions in return for a longer lease commitment." Penn. Aff., Exh. 12 at 1. HC&G then reached an agreement with the owners of another building, and wrote to Prudential on October 21, 1992 requesting a meeting "to discuss a mutually agreeable termination date" for the 100 Park Avenue lease. Paccione Aff., Exh. F at 1. HC&G alleges that "Prudential refused to recognize HC&G's exercise of its rights under the Modification, and instead of arranging for a turn over of possession as requested by HC&G, Prudential threatened to sue the firm for rent each month through the end of the maximum term of the Lease." Plaintiff's Memorandum of Law ("PM") at 10. HC&G thus seeks a declaratory judgment to resolve the interpretive dispute over Section 55.

 Prudential opposes this summary judgment motion on the ground that disputed material facts underlie plaintiff's claims. Additionally, Prudential asserts that since plaintiff

 
never actually attempted termination by serving defendant with a notice thereof or by vacating the premises . . . defendant has never faced the decision, as a fact, of whether or not to reject an "attempted termination" of where or not to "recognize the limitation of liability set forth in the Modification."

 Defendant's 3(g) Statement at P 8. Accordingly, Prudential argues that no "plaintiff presents no statutorily sanctioned 'actual controversy' within this Court's jurisdiction" as required by 28 U.S.C. § 2201. Id. at P 9.

 DISCUSSION

 1. Propriety of Declaratory Judgment

 As a first step, this Court will ascertain whether the parties are embroiled in an "actual controversy." I examine this question because I have an independent, constitutional obligation to protect the jurisdictional limits of the federal courts. I must note before beginning, however, that I pursue this inquiry in spite of defendant's efforts, not because of them. Defendant does not cross-move for summary judgment, nor does it move to dismiss the complaint, on the ground that plaintiff's allegations are jurisdictionally insufficient under 28 U.S.C. § 2201. Nor does defendant make more than a passing reference to such argument in its memorandum of law in response to plaintiff's motion for summary judgment. Rather, defendant articulates the claim, unsupported by any case citations, in its Local Civil Rule 3(g) statement.

 Local Civil Rule 3(g) requires the party opposing a summary judgment motion to provide the Court with a "short and concise statement of the material facts as to which it is contended that there exists a genuine issue to be tried." It is entirely inappropriate for a party to make lengthy, conclusory legal arguments in a 3(g) statement, and entirely unhelpful to the Court. Were I not bound by an independent duty to consider this jurisdictional question, I would refuse to consider the legal argument articulated primarily in Prudential's 3(g) statement.

 Nonetheless, I now turn to the analysis of whether plaintiff's complaint alleges a justiciable controversy. Judge Kram's recent decision in a case presenting a nearly identical factual situation simplifies the task significantly. Gilbert, Segall and Young v. Bank of Montreal, 785 F. Supp. 453 (S.D.N.Y. 1992). In Gilbert, the parties disputed the meaning of a modified lease term which provided for the annual reduction of the tenant's liability under the lease. Gilbert, 785 F. Supp. at 455. The plaintiff tenant, GSY, wished to default under the lease, vacate the premises, and pay what it alleged were the stipulated damages. Id. at 457. The defendant owner rejected GSY's interpretation of the lease and threatened to sue GSY if it vacated the leased premises. Id.

 Judge Kram held that this situation presented a justiciable "actual controversy." Id. at 461. According to Judge Kram,

 
It is of course beyond dispute that an "actual controversy" would exist if GSY abandoned the premises or made concrete plans to leave by entering into a lease agreement for space elsewhere. But, to require GSY to take such irrevocable actions as vacating the premises or entering a lease for space elsewhere--which would bind GSY simultaneously to two leases and create the possibility of dual liability--in order to adequately allege a justiciable controversy would ...

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