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SOLOW BUILDING COMPANY v. ATC ASSOCIATES INC.

November 28, 2001

SOLOW BUILDING COMPANY, LLC AND SOLOVIEFF REALTY CO., LLC, PLAINTIFFS,
v.
ATC ASSOCIATES INC. AND SAFEWAY ENVIRONMENTAL CORP., DEFENDANTS.



The opinion of the court was delivered by: David G. Trager, United States District Judge.

    MEMORANDUM AND ORDER
Plaintiffs Solow Building Company, LLC ("Solow") and Solovieff Realty Company, LLC brought this action pursuant to citizen-suit provision of the Clean Air Act, 42 U.S.C. § 7604(a)(1), and pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, against ATC Associates, Inc. ("ATC") and Safeway Environmental Corp. ("Safeway") alleging violations of the Clean Air Act, 42 U.S.C. § 7401, and seeking a judgment declaring that defendants must indemnify plaintiffs for any damages or penalties arising out of defendants' misconduct. ATC now moves to dismiss plaintiffs' complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("FRCP") contending that plaintiffs' claims were discharged in bankruptcy because they arose, if at all, prior to ATC's reorganization pursuant to Chapter 11 of the United States Bankruptcy Code. In the alternative, ATC moves to dismiss plaintiffs' complaint pursuant to Rule 12(b)(3) of the FRCP because of improper venue.

Background

Under Rule 12(b)(6) of the FRCP, all factual allegations must be taken as true and construed favorably to the plaintiff. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99 (1957); Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996). Accordingly, below are the relevant facts as plaintiffs allege them to be.
Solow is a leasehold owner and operator of an office building located at 9 West 57th Street, New York, New York. See Compl. ¶ 3. Solovieff is a fee owner of the land and building located at that address. See id. Morgan Guarantee Trust Company ("Morgan"), a leasee of floors 2 through 11 in plaintiffs' office building, hired ATC and Safeway to conduct asbestos-related abatement and monitoring work on the floors leased by Morgan. See id. ¶ 4. Defendants began renovations and related demolition without thoroughly inspecting the area for the presence of asbestos. See id. ¶ 13. Safeway, with the knowledge of ATC, attempted to create containment barriers by taping polyethylene sheeting directly to the asbestos fireproofing material. See id. ¶ 15. Subsequently, when the tape pulled away from the asbestos material, it pulled with it dry asbestos material away from the beams and deck. See id. As a result, asbestos was released into the air outside of the containment area. See id. The last act by ATC that allegedly contributed to violations of the Clean Air Act as well as state and local laws took place on January 5, 1999. See id. In addition, plaintiffs allege that defendants engaged in continuous and systematic efforts to hide their violations. See id. ¶¶ 17-25.
On July 26, 1999 (the "Petition Date"), ATC filed a voluntary petition in the United States Bankruptcy Court for the Southern District of New York, seeking relief under Chapter 11 of the United States Bankruptcy Code. See ATC Memo. in Support at 2. By order dated July 30, 1999, the date of September 17, 1999 was fixed as the deadline for filing all claims against ATC. See id. By order dated March 31, 2000 (the "Confirmation Order"), the Bankruptcy Court confirmed ATC's Fourth Amended Joint Consolidated Plan of Reorganization (the "Plan"). See id. The effective date of the Plan was April 27, 2000. See id.
The Confirmation Order and the Plan enjoin the commencement or continuance of any lawsuit against ATC, on and after the Effective Date, based on any claim, as such term is defined in Section 101(5) of the Bankruptcy Code, that existed as of the Petition Date or that could have been asserted against ATC during the bankruptcy proceedings. See id. at 2-3. In addition, the discharge provisions contained in the Confirmation Order and the Plan discharge any liability of ATC arising from ATC's pre-petition actions. See id. at 3.

Discussion

(1)

ATC moves to dismiss plaintiffs' complaint pursuant to Rule 12(b)(3) because of improper venue.*fn1 "[O]n a Rule 12(b)(3) motion to dismiss based on improper venue, the burden of showing that venue in the forum district is proper falls on the plaintiff." United States Envtl. Prot. Agency v. Port Auth. of New York and New Jersey, 162 F. Supp.2d 173, 183 (S.D.N.Y. 2001) (citing Blass v. Capital Int'l Sec. Group, No. 99-CV-5738, 2001 WL 301137, at *2 (E.D.N.Y. Mar. 23, 2001)). "In a case involving multiple claims, the plaintiff must show that venue is proper for each claim asserted, but dismissal of an improperly venued claim is not warranted if it is factually related to a properly venued claim and the claims could be considered `one cause of action with two grounds of relief.'" Id. (quoting 17 James W.M. Moore et al, Moore's Federal Practice § 110.05 (3d ed. 1997)). Plaintiffs do not dispute that their claim for relief for violations of the Clean Air Act is properly venued in the Southern District of New York. However, plaintiffs urge this court to exercise discretion to hear that claim under the pendent venue doctrine since the second count of the complaint, a claim for a declaratory judgment, is properly venued in the Eastern District of New York.

The Clean Air Act contains a venue provision that permits a citizen action to be commenced only in the judicial district in which the offending source of the standard or limitation is located. See 42 U.S.C. § 7604(c)(1). Since the source of alleged pollution in this case is located within the Southern District of New York, plaintiffs' claim for violations of the Clean Air Act is properly venued in that district. A declaratory judgment action, on the other hand, is governed by the general federal venue statute, 28 U.S.C. § 1391(b). See IMS Health, Inc. v. Vality Tech., Inc., 59 F. Supp.2d 454, 465 (E.D.Pa. 1999). As both defendants can be considered to reside in and are subject to personal jurisdiction in the Eastern District of New York,*fn2 plaintiffs second claim is properly venued in the Eastern District of New York. Because plaintiffs' principal purpose in bringing this action is not to pursue a Clean Air Act claim for damages sustained by them, but rather to obtain indemnification in the event plaintiffs are sued, the claim for declaratory judgment is properly characterized as the "primary" claim. Accordingly, venue in this District is proper.

(2)

ATC's principal ground to dismiss plaintiffs' complaint pursuant to Rule 12(b)(6) is that plaintiffs' claims were discharged in bankruptcy. The Bankruptcy Code provides that confirmation of a reorganization plan discharges all unsecured debts and liabilities incurred before the date of confirmation, regardless of whether proof of the debt is filed, the claim is disallowed, or the plan is accepted by the holder of the claim. See 11 U.S.C. ยง 1141(d)(1) (1993). In order to establish a ...

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