United States District Court, S.D. New York
November 17, 2004.
SOUTHERN BOSTON MANAGEMENT CORP., Plaintiff,
BP PRODUCTS NORTH AMERICA INC., et al., Defendants.
The opinion of the court was delivered by: RONALD ELLIS, Magistrate Judge
MEMORANDUM OPINION AND ORDER
Southern Boston Management Corporation ("Southern Boston"),
owner of real property located at 1776 Southern Boulevard, Bronx,
New York (the "Premises"), filed this complaint alleging trespass
and conversion against BP Products North America ("BP Products"),
the former lessee of a service station on the premises, and
against the agent/contractor for BP Products, Delta Environmental
Consultants ("Delta"). Defendants seek leave to amend the answer,
assert counterclaims, and file a third-party complaint. For the
reasons discussed below, defendants' motion is GRANTED.
In September 1986, BP Products, formerly known as Amoco Oil
Company ("Amoco"), leased the premises from then-owner Boston &
Southern Gas Corporation ("B&S") for purposes of operating a
gasoline service station. See Notice of Motion for Leave to
Amend the Answer, Assert Counterclaims, and File a Third-Party
Complaint ("Mot. to Amend"), "Exhibit A" (Proposed Amended
Answer), ¶ 9. With B&S's consent, BP Products installed
Underground Storage Tanks ("USTs") on the premises along with other equipment
necessary to the operation of the service station. See id at
¶ 17. Furthermore, BP Products hired Delta to test, monitor, and
report on the condition of the soil and USTs in order to assist
BP Products in meeting environmental and regulatory standards
under federal, state, and local laws. BP Products operated a gas
station on the premises from 1986 until the termination of the
lease on April 30, 2003. See Plaintiff's Memorandum of Law in
Opposition to Motion to File Amended Answer With Counterclaims
and Third Party Complaint ("Mem. in Opposition") at 2.
In May 2003, Southern Boston and Slavik Gofman, the president
of Southern Boston, purchased the premises from B&S. See
Declaration of Wendy M. Cortez in Opposition to Defendants'
Motion to File an Amended Answer With Counterclaims and a Third
Party Complaint, "Exhibit A" (Contract of Sale). At that time,
the USTs and fixtures that defendant BP Products installed were
on the premises. See Mem. in Opposition at 2. After BP
Products's lease terminated, it reentered the premises and
removed the USTs and other fixtures. See Memorandum of Law in
Support of Defendants' Motion for Leave to Amend the Answer,
Assert Counterclaims, and File a Third-Party Complaint ("Mem. in
Support of Def.") at 2.
Central to the case before us is the issue of ownership of the
USTs and fixtures on the premises after the lease between B&S and
BP Products terminated. Both Southern Boston and BP Products
assert ownership rights to these items. Southern Boston's claim
for trespass and conversion is based on the assertion that since
defendant BP Products abandoned the USTs and other fixtures after
the lease ended, BP Products had no right to reenter the premises
and retrieve these items at that time. See Mem. in Opposition
at 1. Conversely, defendants assert that BP Products did not
relinquish ownership of the items. Rather defendants claim that
B&S induced BP Products to leave the USTs and fixtures on the premises after
the lease ended in order to increase the value of the premises
with respect to its subsequent sale to Southern Boston. See
Defendants' Supplemental Memorandum in Further Support of Their
Motion for Leave to Amend Their Answer, Assert Counterclaims, and
File a Third-Party Complaint ("Def. Supp. Mem.") at 2.
Accordingly, defendants assert three proposed counterclaims for:
1) declaratory judgment that BP Products is owner of the USTs and
fixtures; 2) indemnification and contribution for environmental
damage and testing/monitoring costs caused by the USTs after the
lease term ended, if BP Products is not found to be the owner of
the USTs and fixtures at that time; and 3) alter ego liability
against Gofman for allegedly causing Southern Boston to erect
fences that impeded BP Products' and Delta's ability to retrieve
and test the USTs. Defendants' Brief in Further Support of
Defendants' Motion for Leave to Amend the Answer, Assert
Counterclaims, and File a Third-Party Complaint ("Brief in
Further Support of Def."). Moreover, defendants' include in their
motion a request for leave to file a third-party complaint
A. Motion To Amend Answer And To Assert Counterclaims
Leave to amend an answer "shall be freely given when justice so
requires." FED. R. CIV. P. 15(a); see also Monahan v. New York
City Dept. of Corrections, 214 F.3d 275, 283 (2d Cir. 2000)
(pleadings provide notice to the opposing party "of the claim or
defense to be litigated . . . `mere technicalities' should not
prevent cases from being decided on the merits"). The Court has
broad discretion to determine whether to grant a motion to amend.
Kreinik v. Showbran Photo, Inc., 2003 WL 22339268, at *2
(S.D.N.Y. Oct. 14, 2003). The Court will typically allow the amendment if the movant has demonstrated "at least colorable
grounds for relief" absent a showing of "undue delay, bad faith
or dilatory motive . . ., undue prejudice to the opposing party
by virtue of the allowance of the amendment, [or] futility of
amendment." Id. at *2 (citations omitted); see also Anthony
v. City of New York, 339 F.3d 129, 138 (2d Cir. 2003).
Plaintiff Southern Boston opposes defendants BP Products's and
Delta's motion for leave to amend the answer and to assert
counterclaims on the grounds that defendants' proposed
counterclaims for declaratory judgment, indemnification and
contribution, and alter ego are futile. Mem. in Opposition. When
the motion to amend is opposed on futility grounds, the Court
will review the proposed amended pleading for adequacy as defined
by Federal Rule of Civil Procedure 12(b)(6). Kreinik, 2003 WL
22339268, at *2; Nettis v. Levitt, 241 F.3d 186, 194 (2d Cir.
2001). Accordingly, the motion to amend will be granted unless,
in reviewing the factual allegations set forth in the pleadings,
"it appears beyond a doubt that the [movant] can prove no set of
facts in support of [its] claim which would entitle [it] to
relief." Barrett, 806 F. Supp. at 1098; see also Schwimmer
v. Guardian Life Ins. Co., 1996 WL 146004, at *3 (S.D.N.Y. Apr.
1, 1996) (motion to amend granted where "it is not so frivolous
or outlandish to render it futile"). Review of the motion
requires that the Court "merely . . . access the legal
feasibility of the complaint, not [assay] the weight of the
evidence which might be offered in support thereof." Ryder
Energy Distribution Corp. v. Merrill Lynch Commodities Corp, et
al., 748 F.2d 774, 779 (2d Cir. 1984).
"[I]n a case of actual controversy within its jurisdiction" the
Court "may declare the rights of . . . any interested party
seeking such declaration, whether or not further relief is or
could be sought." 28 U.S.C.A. § 2201(a); Dow Jones & Co., Inc.
v. Harrods, Ltd., 237 F. Supp.2d 394, 407 (S.D.N.Y. 2002). Declaratory judgment is proper in this case
because the Court must resolve a bona fide and justiciable
dispute amongst the parties; namely, whether BP Products or
Southern Boston owned the USTs and fixtures at issue in this case
after the expiration of the lease between B&S and BP Products.
Moreover, a judgment in this matter would help resolve pending
claims regarding liability stemming from ownership of the USTs,
such as liability for environmental damages and UST testing and
monitoring costs. See Brief in Further Support of Def. at 2-4.
Defendants' proposed counterclaims for indemnification and
contribution establish colorable grounds for relief because a
determination of UST ownership after the expiration of the lease
would affect the Court's liability assessment with respect to
environmental and other harms and costs stemming from such
ownership after the lease term.
Finally, to demonstrate alter ego liability the movant must
show that "(1) [the owner] ha[s] exercised such control that the
[corporation] `has become a mere instrumentality' of the [owner],
which is the real actor; (2) such control has been used to commit
fraud or other wrong; and (3) the fraud or wrong results in an
unjust loss or injury to plaintiff." WM. Passalacqua Builders,
Inc., v. Resnick Developers South, Inc., et al., 933 F.2d 131,
138 (2d Cir. 1991); see also Miramax Film Corp. v. Abraham,
2003 WL 22832384, at *7 (S.D.N.Y. Nov. 25, 2003) (Movant need not
demonstrate actual fraud so long as there is "[a] showing that
the control over the corporation was used as a means to
perpetuate a wrongful or unjust act upon the [injured party].").
Granting leave to include a counterclaim of alter ego is proper
in this case because defendants set forth colorable grounds for
relief. Defendants assert that Gofman, as president of Southern
Boston, caused plaintiff Southern Boston to erect a fence which
interfered with their ability to access the USTs as they were
entitled to do; hindered their ability to conduct necessary testing on the USTs, which resulted in environmental and other
damages; and subjected them to civil liability. See Brief in
Further Support of Def. at 5.
Accordingly, defendants' request for leave to amend the answer
and to assert counterclaims is GRANTED.
B. Motion To File A Third-Party Complaint Against B&S
Rule 14(a) permits a defending party to implead a person not a
party to the action who is or may be liable to the defending
party for any part of the plaintiff's claims. The underlying
principle behind impleader is to promote judicial efficiency by
permitting the adjudication of several claims in a single action,
and thus to eliminate circuitous, duplicative actions. Mueller
v. Long Island R.R. Co., 1997 WL 189123, at *6 (S.D.N.Y. Apr.
17, 1997). Leave of court is required if the motion is sought
more than ten days after serving the original answer. FED. R.
CIV. P. 14(a).
The decision to permit a defending party to implead a
third-party defendant rests in the trial court's discretion.
Nova Products, Inc., v. Kisma Video, Inc., et al.,
220 F.R.D. 238, 240 (S.D.N.Y. 2004) citing Kenneth Leventhal & Co. v.
Joyner Wholesale Co., 736 F.2d 29, 31 (2d Cir. 1984). However,
as a general matter, motions to implead third parties should be
freely granted "unless to do so would prejudice the plaintiff,
unduly complicate the trial, or would foster an obviously
unmeritorious claim." Shafarman, 100 F.R.D. at 459. "Relevant
factors in determining whether to grant leave to implead include:
(i) whether the movant deliberately delayed or was derelict in
filing the motion; (ii) whether impleading would unduly delay or
complicate the trial; (iii) whether impleading would prejudice
the third-party defendant; and (iv) whether the third-party
complaint states a claim upon which relief can be granted."
Nova Products, Inc,. 220 F.R.D. at 240 (citing Too, Inc. v.
Kohl's Dep't Stores, Inc., et al., 213 F.R.D. 138, 140 (S.D.N.Y.
Allowing the third-party complaint against B&S would avoid
duplicative litigation and would not unduly delay the case.
Defendants' proposed third-party claims against B&S arise
principally from the same core facts that ground plaintiff's
claims: 1) the lease of the premises; 2) the duties that arose
out of the lease; and 3) the representations that B&S made to
defendant BP Products regarding ownership of the USTs. Therefore,
impleader would promote judicial economy concerns. Moreover,
examining B&S's lease with BP Products and certain
representations made to Southern Boston and BP Products regarding
the ownership of the USTs and other fixtures after the lease
expired could affect defendants' liability with respect to
Southern Boston's claim against defendants for trespass and
conversion. Additionally, allowing impleader would not unduly
delay the proceeding because discovery is ongoing in this matter,
particularly since plaintiff has not produced documents to
defendants and the parties have not taken depositions. See
Brief in Further Support of Def. at 6.
Accordingly, defendants' request for leave to file a
third-party complaint against B&S is GRANTED.
For these reasons, defendants' motion for leave to amend the
answer, assert counterclaims, and file a third-party complaint is
GRANTED. SO ORDERED.
© 1992-2004 VersusLaw Inc.