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SOLOW BUILDING COMPANY v. ATC ASSOCIATES INC.
November 28, 2001
SOLOW BUILDING COMPANY, LLC AND SOLOVIEFF REALTY CO., LLC, PLAINTIFFS,
ATC ASSOCIATES INC. AND SAFEWAY ENVIRONMENTAL CORP., DEFENDANTS.
The opinion of the court was delivered by: David G. Trager, United States District Judge.
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
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,
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.
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
"Where . . . a party advocates exercise of pendent venue over an
additional federal claim which is subject to its own specific venue
provisions, courts have generally taken one of two approaches. First,
some courts have found that the more specific venue provisions control,
and have required that the case be brought in a
venue which satisfies the
more specific statute. Second, following an approach developed by courts
in the District of Columbia Circuit and adopted by the District Court in
the Southern District of New York, some courts determine which of the two
federal claims is the `primary' claim, and apply the venue statute
applicable to that claim." Hsin Ten Enter. USA, Inc. v. Clark Enters.,
138 F. Supp.2d 449, 462-463 (S.D.N.Y. 2000) (quoting Garrel v. NYLCare
Health Plans, Inc., No. 98 Civ. 9077, 1999 WL 459925, at *5 (S.D.N.Y.
1999)). I adopt the second approach followed by the Southern District of
New York as the proper method to analyze pendent federal venue claims.
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.
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. § 1141(d)(1) (1993). In order to establish a ...