United States District Court, N.D. New York
February 18, 2004.
J.C. PENNY CORPORATION, INC., Plaintiff,
CAROUSEL CENTER COMPANY, E.P., Defendant
The opinion of the court was delivered by: HOWARD MUNSON, Senior District Judge
Carousel is a limited partnership, its limited partner is Pyramid
Company of Onondaga ("Pyramid"), which owns 98% of Carousel. Carousel's
general partner is Carousel General Company, L.L.C., which owns 2% of
Carousel. The center of this lawsuit is the Carousel Mall
("the Mall"), which is operated by Carousel under a 1995 assignment
from Pyramid, the Mall's builder. Pyramid, either directly or through
affiliates, owns or controls Carousel Center Company, L.P.
On January 10, 1990, plaintiff entered into a lease agreement with
Pyramid. This agreement went through amendments and/or supplements
evolved into a Second Amended Lease dated August 30, 1995. Subsequently,
Carousel became the successor-in-interest to the rights and obligations
of Pyramid under the lease. This lease contained Consent Provisions
whereby the Mall was not to be changed or altered without plaintiffs
In May 2000, Pyramid requested the Syracuse Industrial Development
Agency's ("SIDA") assistance in constructing the Destiny USA project
("Destiny USA" or "the Project"). On April 30, 2002, SIDA adopted its
Resolution pursuant to the § 204 of the New York State Eminent Domain
Procedure Law ("EDPL"), making the determinations and findings required
to authorize the acquisition of certain interests in the Mall for the
construction of the Project, including any provision of a tenant's lease
which might restrict or impede the development of the Project. The
provision states that "the Company [Pyramid] has requested that the
Agency [SIDA] acquire certain real property interests in or effecting
Existing Center Land within the existing Carousel Center to the extent
necessary or appropriate to construct the proposed modifications to
Carousel Center necessary or appropriate to transform it into the Destiny
USA Project (`Carousel Center Interests'). Exhibit 1 of the Resolution
defines "Carousel Center Interests" to include, "among others, interests
of some or all of the tenants in varying degrees created by leases or
agreements that may establish restrictions on: the use of the lands
surrounding the mall building; the use of space within the mall building
inconsistent with Destiny USA Project designs; the use of common interior
areas within the mall building; visibility and/or signage; the name of the
project; and any other applicable interests that may exist."
The Resolution further provides that "the Company [Pyramid] agrees to
indemnify, defend and hold harmless . . . the Agency [SIDA]. . . from any
Claims (as defined in the Agency Agreement) imposed . . . or incurred .
. . or asserted . . . by reason of or arising from the institution,
prosecution or abandonment of any eminent domain proceedings . . . with
respect to any of the Land or the Public Improvement Land (including the
Existing Center Land) . . ."
In May 2002, plaintiff instituted an original proceeding in the
Appellate Division (4th Dept.) under EDPL § 207, that SIDA's Resolution
and Determinations and Findings be rejected. This type of action is a
limited special proceeding that can only be brought originally in the
Appellate Division. It is not brought as a plenary action in a court of
At the hearing before the Appellate Division, Carousel maintained that
unless and until the Consent Provisions were condemned by the SIDA,
plaintiff could effectively stop Destiny USA by virtue thereof, and that
the Consent Provisions were "real property" interests subject to
commendation. Plaintiff contended that the Consent Provisions of the
Lease were not "real property" within the meaning of the EDPL. On
November 15, 2002, the Appellate Division confirmed SIDA's Resolution and
Determination and Findings holding that the Consent Provisions were
interests in real property subject to condemnation by the SIDA, and
dismissed plaintiffs petition. Plaintiff appealed this decision to the
New York Court of Appeals where it dismissed it sua sponte upon its
finding that no substantial constitutional question was directly
SIDA will not obtain any real property, including the Consent
Provisions in plaintiffs lease, until under EDPL § 402: (1) it has filed
an acquisition map; (2) it has served and filed a notice of petition and
petition to confirm such a map; (3) a hearing has been held on such
petition; and (4) an order is issued granting the petition by the Supreme
Court, Onondaga County.
EDPL § 402(B)(5) states that "[u]pon the filing of the order and
acquisition map, the acquisition of the property, the acquisition of the
property in such map shall be complete and title to such property shall
then be vested in the condemnor." Since neither of these statutory steps
have yet to be undertaken by SIDA, it has not acquired any of the Consent
Provisions of the lease and they remain in force.
If the EDPL § 402 proceeding is initiated and completed, EDPL §
501 through § 514 sets forth the procedures used to determine the
compensation to be paid for the taking.
Between October 2002 and December 2002, defendant's workmen drove steel
piling into a portion of the Mall's parking lot near plaintiffs location
in that structure. On or about October 15, 2002, Carousel announced that
it was going to hold a groundbreaking ceremony for Destiny USA on October
24, 2002. On or about October 24, 2002, Carousel announced that "once the
groundbreaking ceremony" took place, construction was to be started on a
proposed 1300 room hotel and parking deck. Before making these
announcements, Carousel had said it was conducting only "test pilings"
and that it had not actually commenced construction. However, the renewed
activity on the sites could have been associated with the start of a
On November 8, 2002, plaintiff voluntarily agreed upon measures to
complete the piling
work under certain conditions. The Amended Complaint alleges that
"Carousel continued with construction activities at the Mall site until
early December 2002, at which time it stopped all activity. Plaintiff
does not allege that any construction activities have occurred since
December 2002. All pilings were driven below grade, paved over, and all
construction equipment was removed from the site.
Based on this series of incidents, plaintiff commenced this law suit on
October 24, 2002. The parties then entered into negotiations to discuss
an interim stipulation to deal with the then current situation, alleviate
impacts on plaintiffs store, and avoid a motion for a preliminary
injunction. On November 14, 2002, the parties agreed to a Stipulation and
Order that directed the parties to hold settlement discussions, limit the
Mall area in which Carousel could conduct construction activities, and
provided a mechanism for enforcement. The document further provided that
it shall not be deemed consent by plaintiff to any construction activity
or the expansion of the Mall. By its terms, the Stipulation and Order
expired on January 10, 2003.
When settlement discussions proved unfruitful, plaintiff served
Carousel with an Amended Complaint in April 2002. Jurisdiction is founded
on diversity and the amended complaint set forth two causes of action
sounding in breach of contract. The first seeks specific performance and
injunctive relief, requesting that Carousel be compelled to honor its
contractual obligations and prohibited it from engaging in any further
violation of it expressed and implied obligations under the lease. It
also seeks to enjoin Carousel from continuing to breach its implied
covenant of good faith and fair dealing. The second cause of action seeks
monetary damages for injuries which have already been incurred due to
Carousel's breach of its expressed and implied obligations under the
lease, and from Carousel's construction activities; injunctions
enjoining Carousel from proceeding with the proposed construction of
Destiny USA; and procuring, assisting or paying SIDA for the condemnation
of the Consent Provisions; and for attorneys fees plaintiff expended in
defending its rights in the EDPL Article 2 proceeding and in the instant
Currently before the court are defendant Carousel's motion to dismiss
the Amended Complaint either on the pleadings pursuant to Fed.R.Civ.P.
12(c), or for summary judgment pursuant to Fed.R.Civ.P. 56, and,
alternatively, staying any further proceedings pending the conclusion of
the Article 4 and 5 proceedings in state court under New York State
Eminent Domain Proceedings Law, and staying discovery in this case
pending (a) determination of this motion; and (b) the conclusion of the
EDPL, Article 5 proceeding in state court.
Plaintiff has entered opposition to defendant's motions and stay
Defendant Carousel has moved for judgment on the pleadings pursuant to
Fed.R.Civ.P. 12(c) and summary judgment pursuant to Fed.R.Civ.P. 56.
Rule 12(c) provides that "[i]f, on a motion for judgment on the pleadings,
matters outside of the pleadings are presented to and not excluded by the
court, the motion will be treated as one for summary judgment and
disposed of as provided in Rule 56. Since the parties in this action have
presented extensive matters outside the pleadings which the court will
consider, defendant Carousel's motion will be treated as one for summary
judgment and disposed of as provided in Rule 56.
Rule 56 of the Federal Rules of Civil Procedure permits summary
judgment where the
evidence demonstrates that "there is no genuine issue of any material
fact and the moving party is entitled to judgment as a matter of law."
Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 247, 106 S. Ct 2505,
2509, 91 L.Ed.2d 202 (1986). More than a "disfavored shortcut," summary
judgment is an important procedure regarded as an integral part of the
Federal Rules as a whole, which are designed to "secure the just, speedy
and inexpensive determination of every action." Celotex Corp. v.
Catreet, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L. Ed.2d (1991) (quoting
Federal Rule of Civil Procedure 1). In determining whether there is a
genuine issue of material fact, a court must resolve all ambiguities and
draw inferences against the moving party. United States v. Diebold,
369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1976) (per curiam).
"The non-movant cannot escape summary judgment by merely vaguely
asserting the existence of some unspecified disputed facts, or defeat the
motion through mere speculation or conjecture." Western World Insurance
Company v. Stack Oil Co., Inc., 922 F.2d 118, 121 (2d Cir. 1990). An
issue of credibility is insufficient to preclude the granting of summary
judgment. Neither side can rely on conclusory allegations or statements
in affidavits. The disputed issue of fact must be supported by evidence
that would allow a "rational trier of fact to find for the non-moving
party." Mashusita Electric Industries Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
Unsupported allegations will not suffice to create a triable issue of
fact. Goenga v. March of Dimes Birth Defects Foundation, 51 F.3d 14, 18
(2d Cir. 1995). "Supposition does not create a genuine issue of material
fact, instead it creates a false issue, the demolition of which is the
primary goal of summary judgment." Hedberg v. Indiana Bell Telephone
Company. Inc., 47 F.3d 928, 929 (7th Cir. 1995). Nor will factual
disputes that are irrelevant to the disposition of the suit under
governing law preclude any
entry of summary judgment. Anderson, 477 U.S. at 247, 106 S.Ct. 2509.
Defendant Carousel contends that this action should be dismissed
because plaintiffs claims are barred by the doctrine of res judicata and
related doctrines of issue preclusion, or the court should dismiss them
under Younger v. Harris, 401 U.S. 37, 91 So. Ct. 746, 27 L.Ed.2d 669
(1971), and related abstention doctrines.
Plaintiff's action is not barred by the doctrine of res judicata or
related doctrines of issue preclusion. The clear language of EDPL § 207
and § 208 prohibited plaintiff from asserting its breach of lease
counterclaims against Carousel in the Appellate Division because it
lacked jurisdiction to hear such claims. Brody v. Village of Port
Chester, 345 F.3d 103 (2d Cir. 2003).
Federal courts have a tireless responsibility to adjudicate cases
brought within their jurisdiction. It is now black-letter law that
abstention from federal jurisdiction is the narrow exception not the
rule. Moses S. Cone Memorial Hospital v. Mercury Construction
Corporation, 460 U.S. 1, 4, 103 S.Ct. 927, 936, 74 L.Ed.2d 765 (1983).
The traditional requirements for application of the Younger abstention
doctrines requires that three conditions be met: (1) there is an ongoing
state proceeding; (2) an important state interest is implicated in the
proceeding; and (3) the state proceeding affords the federal plaintiff an
adequate opportunity for judicial review of the federal constitutional
claims. Grieve v. Tamerin, 269 F.3d 149, 152 (2d Cir. 2001).
A recent Second Circuit decision, however, held that a court may decide
a case on Younger abstention without confirming the existence of
constitutional standing. Federal courts have the inherent flexibility "to
chose among threshold grounds for disposing of a case without reaching
the merits. Accordingly, we may decide that abstention is proper under
without deciding whether plaintiffs have demonstrated Article III
injury-in-fact. Spargo v. New York State Commission on Judicial
Coinduct, 351 F.3d 65 (2d Cir. 2003).
The first Younger requirement has not been met in this case because
there is no ongoing state court proceeding. The EDPL § 207 proceeding has
been fully concluded, and there is nothing further currently pending in
the state court, and whether there ever will be, is problematic.
On April 30, 2002, SIDA held a public hearing pursuant to EDPL Article
2. Upon commencement of the hearing, SIDA's lawyer remarked that SIDA had
concluded that the proposed expansion of the Carousel Center constitutes
a project that would serve public purposes, "including, without
limitation, advancing job opportunities, general prosperity and public
welfare of the People of the State of New York and the City of Syracuse
. . . advancing economic development and promoting tourism."
In general, the power of eminent domain may be exercised to take
property as long as there is a legitimate public purpose for the taking.
Matter of East Thirteenth Street Community Association v. New York State
Urban Development Corporation, 84 N.Y.2d 287, 617 N.Y.S.2d 706 (1994); 51
N.Y. Jur 2d, Eminent Domain, § 19. The terms "public use" or "public
purpose" are broadly defined as encompassing virtually any project that
may further the public benefit, utility or advantage. (51 N.Y. Jur 2d
Eminent Domain § 22). Projects may have a public purpose notwithstanding
that private entities may directly benefit. Matter of Waldo's v. Village
of Johnson City, 74 N.Y.2d 718, 544 N.Y.S.2d 809 (1989); Matter of Duryea
v. Town of East Hampton, 172 A.D.2d 752, 569 N.Y.S.2d 139 (2d Dept 1991);
51 N.Y. Jur 2d, Eminent Domain § 25. If it is found that a new business
project may create jobs, provide infrastructure, and
stimulate the local economy, those are legitimate public purposes which
justify the use of the power of eminent domain. Sunrise Properties v.
Jamestown Urban Renewal Agency, 206 A.D.2d 913, 614 N.Y.S.2d 841 (4th
Dept. 1994); leave to appeal denied, 621 N.Y.2d 518 (1994).
Regarding benefits to private entities in condemnations, the New York
Court of Appeals has held that it does not undercut the public purpose of
condemnation of land that private entities motives are to serve their own
interests. "There is nothing malevolent about that." Yonkers Community
Development Agency v. Morris, 37 N.Y.S.2d 478, 373 N.Y.S.2d 112 (1975).
Most sponsors are, as may be expected in our private enterprise economy,
nonpublic and, at least in large part, profit motivated. Indeed, that may
even be desirable, unless there is such a reliable projection of
profitability, the soundness and stability of the sponsor's project may
come into question. Id.
Plaintiff claims that the taking of the property here would not be for
the public use, but for the benefit of defendant Carousel. The record
clearly indicates that the SIDA found several purposes that would be
served, including advancing the general prosperity and economic welfare
of both the residents of the City and the general population of the
State, promoting tourism and attracting visitors from outside the
economic development region, promoting employment in the City, and
increasing the tax base as well as tax revenues. Matter of Kaufmann's
Carousel. Inc. v. City of Syracuse Industrial Development Agency,
301 A.D.2d 292, 296, 750 N.Y.S.2d 212 (4th Dept. 2002); leave to appeal
denied, 99 N.Y.2d 508 (2003). Carousel's contribution to the project does
not convert the public purpose into a private one. Rodrigues v. Town of
Beekman, 120 A.D.2d 724, 502 N.Y.S.2d 778 (2d Dept. 1986), appeal
dismissed, 69 N.Y.2d 822 (1987).
"[T]he duty of good faith and fair dealing between the parties to a
contract is well recognized" under New York law. Mark Patterson. Inc. v.
Bowie, 237 A.D.2d 308, 318 (1st Dept. 1997)(citing New York University
v. Continential Insurance Company, 87 N.Y.2d 308, 318, 639 N.Y.S.2d 283
(1995)("implicit in every contract is a covenant of good faith and fair
dealing.")). There is, however, ample authority that "a breach of that
duty will be dismissed as redundant where the conduct allegedly violating
the implied covenant is also the predicate for a claim for breach of
covenant of an express provision of the underlying contract." Houbigant.
Inc. v. ABC Mercantile. Inc., 914 F. Supp. 964, 989 (S.D.N.Y.
1995)(citing Geler v. National Westminister Bank USA.770 F. Supp. 210,
215 (S.D.N.Y.1991); New York University, 87 N.Y.2d at 319, 639 N.Y.S.2d 283
("The cause of action [for breach of an implied covenant of good faith
and fair dealing] is duplicative of the first cause of action for breach
of contract and should have been dismissed.") accord Englehard Corp. v.
Research Corp. 268 A.D.2d 358, 702 N.Y.S.2d 256 (1st Dept. 2000); Odingo
v. Allstate Insurance Company, 251 A.D.2d 81, 672 N.Y.S.2d 727 (1st
Dept.), leave to appeal denied, 92 N.Y.2d 452, 453, 680 N.Y.S.2d 55
(1998). In fact, in 1996, a district court in this Circuit stated that in
every case it had found in which the plaintiff alleged both a breach of
contract and breach of an implied covenant of good faith and fair
dealing, the court had dismissed the latter claim as duplicative. See >
W.S.A. Inc. v. ACA Corp., 1996 Wl 551599 at * 9 (S.D.N.Y. Sept. 27,
1996), See also > Murphy v. American Home Products Corp., 58 N.Y.2d 293,
461 N.Y.S.2d 232 (1983) (implied obligation is simply "in aid and
furtherance of other terms of the agreement of the parties); N.Y.U.CC
SI-203 Official Comment, ("This section does not support an independent
cause of action for failure to perform or enforce in good faith . .
.[T]he doctrine of good faith merely directs a court towards
interpreting contracts within the commercial context in which they
are created, performed and enforced, and does not create a separate duty
of fairness and reasonableness which can be independently breached.").
In the case at bar, no difference is apparent in the factual
underpinnings of plaintiffs breach of contract claims and its claim for
breach of the implied covenant of good faith and fair dealing. The court
finds that this claim is duplicative of plaintiff's breach of contract
claim, and wholly subsumed within those claims.
It is uncontested that the consent terms of plaintiff's lease agreement
are still in full force and effect and will remain so until defendant
institutes a proceeding under EDPL § 402. Thus it is possible that
any of the lease's terms, including, of course, the consent provisions,
can be, or could have been breached.
Plaintiff claims Carousel has breached the lease's consent terms, and
consequently, is entitled to damages for monetary losses incurred, and
injunctive relief to prevent further construction. Plaintiffs demands
stem from the time Carousel and others started planning for the Mall's
alteration without plaintiffs knowledge or consent, then had piles driven
into the Mall's parking lot prior to the ceremony marking the start of
the alteration construction. These demands will continue until the matter
is resolved, or the Consent Provisions are acquired by defendant after a
successful EDPL § 402 proceeding.
Plaintiff does not have to wait for Carousel to bring further
condemnation proceedings, the case may continue to proceed along its
procedural course."A federal court need not stay its jurisdictional hand
when there is a state action pending at the time the federal suit is
filed, even though there is a substantial likelihood that a state
proceeding will be instituted in the future."
CECOS International. Inc. v. Jorling, 895 F.2d 66, 72 (2d Cir. 1990).
Accordingly, Defendant's motion for summary judgment dismissing the
Amended Complaint is DENIED; those portions of the same motion requesting
that this action or discovery be stayed pending the re-institution and
completion of the condemnation proceeding in state court are DENIED; the
portion of this motion requesting that discovery be stayed pending this
motion's disposition is DENIED as MOOT,
IT IS SO ORDERED.
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