United States District Court, Northern District of New York
February 3, 2003
CITY OF KINGSTON WATER DEPT., PLAINTIFF,
CHARLES A. MANGANARO CONSULTING ENGINEERS, P.C.,DEFENDANT. CHARLES A. MANGANARO CONSULTING ENGINEERS, P.C., THIRD-PARTY PLAINTIFF V. METCALF & EDDY, THIRD-PARTY DEFENDANT.
The opinion of the court was delivered by: Lawrence E. Kahn, United States District Judge
MEMORANDUM-DECISION AND ORDER
Presently before the Court is Third-Party Defendant Metcalf & Eddy's ("M & E") Motion to Dismiss, pursuant to Federal Rules of Civil Procedure 12(b)(6), the Third-Party Complaint brought by Third-Party Plaintiff Charles A. Manganaro Consulting Engineers, P.C. ("Manganaro") on the grounds that Manganaro has not stated a proper claim for contribution and/or indemnification from M & E.
On July 17, 2001, Plaintiff City of Kingston Water Department ("Kingston") filed a Complaint in New York Supreme Court, Ulster County, asserting four causes of action against Manganaro. On August 22, 2001, Manganaro removed the action to this Court on diversity grounds. In its Complaint, Kingston alleges that it retained Manganaro to provide design services in connection with the renovation of a filter plant in Ulster County and that it renovated the filter plant in accordance with the plans submitted by Manganaro. (Complaint, attached as Exhibit 1 to Notice of Removal, Docket No. 1). Kingston further alleges that the filters do not operate properly.
The first cause of action asserted in Kingston's Complaint alleges that Manganaro negligently prepared and submitted faulty designs and specifications. The second cause of action claims that Manganaro breached its contract with Kingston. The third cause of action alleges that Manganaro breached its warranty to Kingston that the plans and specifications were appropriate for Kingston's needs. Finally, in its fourth cause of action, Kingston alleges that Manganaro committed malpractice by failing to use "proper engineering abilities and deviat[ing] from generally accepted engineering practices and standards." (Complaint ¶ 43.)
On September 6, 2001, Manganaro filed a Third-Party Complaint against M & E alleging that "M & E was performing or was contractually required to perform work at the plaintiff's water treatment plant including design and construction at all times alleged in the complaint." (Third-Party Complaint ¶ 7, Docket No. 3). Manganaro asserts a single cause of action for contribution and/or indemnification from M & E for damages for which Manganaro is found liable. M & E moved to dismiss the Third-Party Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6).
A. Standard for Motion to Dismiss
A motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) must be denied "`unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In assessing the sufficiency of a pleading, the Court must "assume all well-pleaded factual allegations to be true, and . . . view all reasonable inferences that can be drawn from such allegations in the light most favorable to the plaintiff." Dangler v. New York City Off Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999). Consideration is limited to the complaint, written instruments that are attached to the complaint as exhibits, statements or documents that are incorporated in the complaint by reference, and documents on which the complaint heavily relies. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002) (citations omitted).
In support of its motion, M & E refers the Court to affidavits and a copy of its contract with Kingston. Likewise, Manganaro submitted an affidavit with its Memorandum of Law. The Court may not rely on this material when deciding M & E's 12(b)(6) motion. See Friedl v. City of New York, 210 F.3d 79, 83 (2d Cir. 2000) ("[A] district court errs when it `considers affidavits and exhibits submitted by' defendants. . . . in ruling on a 12(b)(6) motion.") (quoting Kopec v. Coughlin, 922 F.2d 152, 155 (2d Cir. 1991)). Rather, the Court must either "`exclude the additional material and decide the motion on the complaint alone' or `convert the motion to one for summary judgment under Fed.R.Civ.P. 56 and afford all parties the opportunity to present supporting material.'" Id. (quoting Fonte v. Board of Managers of Continental Towers Condominium, 848 F.2d 24, 25 (2d Cir. 1988)). The Court elects the former option and will not consider the affidavits and exhibits submitted by the parties.
B. Manganaro's Contribution Claim
The New York State contribution statute provides that "two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought." N.Y. C.P.L.R. 1401; Board of Education v. Sargent, Webster, Crenshaw & Folley, 71 N.Y.2d 21, 23 (1987) ("Sargent"). CPLR 1401 may not be invoked to apportion liability arising solely from breach of contract. Sargent, 71 N.Y.2d at 28. Rather, "the existence of some form of tort liability is a prerequisite to application of the statute." Id. Manganaro's contribution claim is therefore proper only if Manganaro is potentially liable to Kingston for a claim sounding in tort. Kingston's second and third causes of action-breach of contract and breach of warranty, respectively-are contract claims.*fn1 The Court will therefore limit its discussion of potential tort liability to Kingston's first and fourth causes of action.
Seizing on Kingston's assertion that Manganaro acted "negligently," Manganaro argues that "[t]he plain language of the first cause of action establishes beyond question that Kingston's claims against Manganaro are negligence claims." (Manganaro's Memorandum of Law in Opposition to M & E's Motion to Dismiss at 10.) However, Kingston may not transform a contract action into a tort action by simply claiming that Manganaro acted negligently. See Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 390 (1987) ("Merely charging a breach of a `duty of due care', employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim."); Dormitory Authority v. Caudill Rowlett Scott, 160 A.D.2d 179, 180 (1st Dept. 1990) ("Although [plaintiff's] second cause of action claims negligence in performing the design services and a failure to `exercise reasonable care in designing the project', it does not transform a breach of contract into a tort.") (citation omitted); Niagra Mohawk Power Corp. v. Stone & Webster Engineering Corp., 725 F. Supp. 656, 664 (N.D.N.Y. 1989) (holding that under New York law plaintiff cannot bring a tort claim that merely uses tort language to describe a breach of contract claim).
The plaintiff in Clark-Fitzpatrick Inc. was awarded a construction contract by the defendant, Long Island Rail Road ("LIRR"). The plaintiff claimed that after it began construction it learned that the engineering design was flawed and that LIRR had failed to obtain the necessary property rights and move utility lines that interfered with the project. Clark-Fitzpatrick, Inc., 70 N.Y.2d at 385. The plaintiff nevertheless completed the construction project and sued LIRR for damages arising from the various problems it encountered in the course of construction, alleging breach of contract, quasi contract, fraud, gross negligence, and negligence. Id. at 385-6. LIRR moved to dismiss, inter alia, the negligence causes of action. Id. at 386. The New York Court of Appeals stated that "[i]t is a well-established principle that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated." Id. at 389 (citations omitted). Because the plaintiff failed to allege a violation of a legal duty independent of the contract, the Court of Appeals affirmed the dismissal of the negligence claims. Id. at 390.
A similar result was reached in Dormitory Authority. The defendant, Caudill Rowlett Scott (CRS), contracted with the City University of New York to perform architectural and engineering services in connection with the design of Manhattan Community College. Dormitory Authority, 160 A.D.2d at 179. CRS then contracted with plaintiff, Dormitory Authority of the State of New York (DASNY), to perform certain services related to the construction of the college. Id. When New York City's fiscal crisis forced the suspension of construction, DASNY sued CRS, alleging breach of contract and negligent performance of design and construction services. Id. CRS then filed third-party complaints against two subcontractors, seeking, inter alia, "contribution to the extent that the subcontractor's negligence and breach of contract caused plaintiff's damages." Id. The New York Supreme Court granted the subcontractors' motion to dismiss the contribution claim and the Appellate Division affirmed. Id. at 180. In so holding, the First Department noted that DASNY did not claim that CRS had a duty independent of its contractual obligations. Id. Because CRS could only be found liable for breach of contract, CRS could not seek contribution from its subcontractors. Id.
As in Clark-Fitzpatrick and Dormitory Authority, Manganaro has failed to identify a legal duty that it owed to Kingston independent of its contractual obligations (the subject of Kingston's second cause of action) and its professional obligations (the subject of Kingston's fourth cause of action). Kingston's first cause of action is simply a contract claim masquerading as a tort claim. Accordingly, it may not provide the basis for Manganaro's contribution claim.
However, Kingston's fourth cause of action-that Manganaro committed professional engineering malpractice-properly sounds in tort. Whereas parties may not create a negligence claim simply by alleging that a contracting party was negligent, New York courts have allowed parties to assert professional malpractice claims together with breach of contract claims. See 17 Vista Fee Assoc. v. Teachers Ins. & Annuity Assoc. of Am., 259 A.D.2d 75, 83 (1st Dept. 1999) ("[I]n claims against professionals, `[a] legal duty independent of contractual obligations may be imposed by law as an incident to the parties' relationship. Professionals . . . may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties.'") (quoting Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 551 (1992)); Robinson Redevelopment Co. v. Anderson, 155 A.D.2d 755, 757 (3rd Dept. 1989) (holding that "the contractual and professional relationship of plaintiff and defendant gave rise to two distinct wrongs, one contractual and the other grounded in professional malpractice, recoverable at law"). Manganaro has therefore established that Kingston has asserted a proper tort claim.
M & E argues that irrespective of Kingston's theory of liability Manganaro cannot seek contribution because it is potentially liable to Kingston only for economic loss. In Sargent, the New York Court of Appeals held that "purely economic loss resulting from a breach of contract does not constitute `injury to property' within the meaning of New York's contribution statute." Sargent, 71 N.Y.2d at 25. The question presented here is whether purely economic loss resulting from tortious conduct constitutes "injury to property" within the meaning of the contribution statute.*fn2 The New York Court of Appeals has not addressed this issue. "Absent law from a state's highest court, a federal court sitting in diversity has to predict how the state court would resolve an ambiguity in state law." Michalski v. Home Deopt, Inc., 225 F.3d 113, 116 (2d Cir. 2000). When determining how the Court of Appeals would rule, courts should look to decisions of New York State's Appellate Division, relevant decisions of other jurisdictions, scholarly writing, and any other resources available to the Court of Appeals. Id.
New York State's Appellate Division has reached conflicting conclusions on this question, often without a full analysis. In Robinson Redevelopment Co., the Third Department affirmed the New York Supreme Court's denial of the third-party defendants' motions for summary judgment dismissing the third-party contribution claim against them. The Court found that the plaintiff could assert a breach of contract claim together with a malpractice claim and that the malpractice claim provided a basis for defendants to seek contribution from third-party defendants pursuant to CPLR 1401. See Robinson Redevelopment Co., 155 A.D.2d at 757. Similarly, in Facilities Devel. Corp., the Third Department stated that "when an architect is sued in both breach of contract and malpractice, he can seek contribution from other architects and engineers involved in the project if the economic loss was caused by the professionals' breach of legal duties independent of their contractual obligations." Facilities Dev. Corp. v. Miletta, 180 A.D.2d 97, 102 (3rd Dept. 1992) (citations omitted). In these cases, the Third Department did not expressly address whether a malpractice claim for economic loss could constitute injury to property.
In a more recent case, the Third Department stated that "`the determining factor as to the availability of contribution is not the theory behind the underlying claim but the measure of damages sought.'" Rothberg v. Reichelt, 270 A.D.2d 760, 762 (3rd Dept. 2000) (quoting Rockfeller Univ. v. Tishman Constr. Corp., 240 A.D.2d 341, 343 (1st Dept. 1996)). In Rothberg, the Third Department held that while the plaintiff's complaint set forth a cause of action for professional malpractice, the plaintiff was seeking to recover "the cost of repairs and the difference in value between what defendants were contractually obligated to provide and what plaintiff actually received." Id. at 762 (citation omitted). Because the plaintiff was seeking the benefit of her contractual bargain, the defendant could not assert a contribution claim against a third party. Id. The Rothberg Court dis not distinguish Robinson Redevelopment Co. or Facilities Dev. Corp.
The Fourth Department has held that where plaintiffs seek damages only for economic loss, even on a theory of professional malpractice, defendants may not assert a third-party claim for contribution. See Scalp & Blade, Inc. v. Advest, Inc., 2002 WL 31888512, at *1 (N.Y.A.D. 4th Dept. Dec. 30, 2002). However, the First Department has allowed a fourth-party plaintiff in a malpractice action to assert a contribution claim against a fourth-party defendant. See Tower Building Restoration, Inc. v. 20 East 9th Street Apartment Corp., 295 A.D.2d 229, 230 (1st Dept. 2002). In Tower Building Restoration, Inc., the Court did not indicate whether the fourth-party plaintiff was potentially liable only for economic damages. However, its holding that "insofar as any liability on [the fourth-party plaintiff's] part is based in tort, he may seek contribution from [the third-party defendant] under the theory that [the third-party defendant] is a successive tortfeasor" suggests that the theory of liability rather than the measure of damages determines whether contribution is available. Id.
The policies underlying New York's contribution statute offer clearer guidance than these decisions. As the Court of Appeals noted in Sargent, "CPLR 1401 had its genesis in tort law and in the complications surrounding the apportionment of liability among joint tort-feasors." Sargent, 71 N.Y.2d at 27. Under an earlier contribution statute, defendants could seek contribution only from fellow defendants. Id. at 26. "To ameliorate the harshness of this contribution rule upon those tort-feasors who happened to be sued by an injured plaintiff" courts employed a theory of "implied indemnification." Under this theory, an adjudicated tortfeasor could be indemnified by a party who was responsible for all of the plaintiff's damages, even if the party was not a defendant in the action. Id. at 27. This rule was liberalized in Dole v. Dow Chem. Co., 30 N.Y.2d 143 (1972). In Dole, the Court of Appeals held that a party seeking contribution did not have to show that another tortfeasor was wholly liable for the plaintiff's damages. Rather, courts could apportion liability based on the tortfeasors' relative degree of fault. Sargent, 71 N.Y.2d at 27.
CPLR 1401 was intended as a codification of Dole. Id. at 26. As such, it is rooted in "the need to liberalize the inequitable and harsh rules that once governed contribution among joint tort-feasors." Id. at 29. The prior contribution rules were harsh because they prevented the equitable distribution of tort liability. Courts now recognize that it is unfair to hold a tortfeasor liable for damages irrespective of the degree to which he was at fault. The inflexible imposition of tort liability was what made prior contribution rules inequitable and harsh, not the measure of damages. If Manganaro is barred from asserting a contribution claim based on its potential tort liability, the inequities of past contribution rules will be revived. These inequities are not lessened simply because Kingston's tort claim seeks to recover economic loss. The Court finds that the New York Court of Appeals would allow a defendant in a malpractice action which is potentially liable for economic damage suffered by the plaintiff to assert a claim for contribution against a party whose alleged tortious actions contributed to the plaintiff's loss. Manganaro may seek contribution under CPLR 1401 from M & E if it alleges that M & E's tortious actions contributed to Kingston's loss. Manganaro's Third-Party Complaint seeks contribution from M & E on the grounds that M & E's "carelessness, recklessness, fault, negligence and/or acts of, omission or commission and/or breached warranty and/or breach of contract . . . and/or strict liability" caused Kingston's damage. (Complaint ¶ 10.) Despite the assertion that M & E was careless, reckless, and negligent, the only action that Manganaro alleges that M & E undertook was the performance of its contractual duties. Thus, Manganaro's Complaint improperly employs tort language to argue that M & E breached its contract with Kingston.*fn3
As noted above, "purely economic loss resulting from breach of contract does not constitute `injury to property' with the meaning of New York's contribution statute." Sargent, 71 N.Y.2d at 26. Manganaro has not properly alleged that M & E's tortious actions caused Kingston damage for which Manganaro may be held liable. Rather, its claim for contribution rests on its allegation that M & E breached its contract with Kingston. As a result, M & E is not subject to liability for "injury to property" as that term is used in CPLR 1401. Accordingly, Manganaro's contribution claim must be dismissed.
C. Manganaro's Indemnification Claim
M & E also seeks dismissal of Manganaro's claim for common-law, or implied, indemnification.*fn4 "Historically, common-law indemnity had its roots in principles of equity and fairness recognizing that one who was compelled to pay for the wrong of another should be allowed to recover from the actual wrongdoer the damages paid to the injured party." Trs. of Columbia University v. Mitchell/Giurgola Assocs., 109 A.D.2d 449, 452 (1st Dept. 1988) (citations omitted). Manganaro fails to explain how it may be found liable for breach of contract, breach of warranty, or malpractice if M & E is the actual wrongdoer. Accordingly, Manganaro may not seek indemnification from M & E. See Trs. of Columbia University, 109 A.D.2d 449, 453 ("[A] party who has itself actually participated in the wrongdoing cannot receive the benefit of the [common-law indemnification] doctrine.") (citation omitted); Campers World Int'l Inc. v. Perris Ellis Int'l Inc., No. 02-Civ.-453, 2002 WL 1870243, at *6 (S.D.N.Y. Aug. 13, 2002) (holding that defendant could not assert counterclaim for indemnification where plaintiff's claims against defendant were for intentional torts which require a finding of actual fault by the defendant); Sabater v. Lead Indus. Ass'n., Inc., No. 00-Civ.-8026, 2001 WL 1111505, at *6 (S.D.N.Y. Sept. 21, 2001) (dismissing third-party plaintiffs' indemnification claim because it "fail[ed] to adequately state how [plaintiffs] are merely vicariously liable and how [the third-party defendant] is wholly responsible for [plaintiffs'] alleged wrongdoing").
For the reasons stated above, it is hereby:
ORDERED that Third-Party Defendant M & E's Motion to Dismiss Third-Party Plaintiff Manganaro's Third-Party Complaint is GRANTED; and it is further
ORDERED, that Manganaro's Third-Party Complaint is DISMISSED in its entirety; and it is further
ORDERED that the Clerk of the Court shall serve copies of this order by regular mail upon the parties to this action.
IT IS SO ORDERED.