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United States District Court, S.D. New York

August 31, 2005.


The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge



The instant action was brought under the court's diversity jurisdiction. The plaintiffs Walter House and Debra House allege, inter alia, that the defendants designed, manufactured and distributed to third-party defendant Tesa Tape, Inc. ("TTI"), a defective machine, referred to as a "50 machine,"*fn1 whose function was to manufacture adhesive/pressure-sensitive tape. As a result of the defendants' conduct, it is alleged that plaintiff Walter House, while operating the 50 machine during the course of his employment by TTI, suffered serious, severe and grave permanent bodily injuries. As a consequence of that occurrence, plaintiff Debra House contends, among other things, that she suffered the loss of her husband's services and companionship. The plaintiffs seek to recover damages from the defendants through this action.*fn2

  Before the Court is an application by TTI made pursuant to Fed.R.Civ.P. 14(a), 16(e) and/or 12(b)(6) that the third-party complaint made against it in this action be stricken or dismissed because it is untimely and lacks merit and, further, that the complaint filed by plaintiffs Walter House and Debra House be dismissed because there is no basis upon which to find defendant and third-party plaintiff Krimsky, the only defendant participating in the litigation, personally liable to the plaintiffs for the damages they seek to recover in this action.

  The plaintiffs oppose TTI's motion, and Krimsky contends that he is constrained by an earlier ruling of the Court to oppose only so much of the motion as pertains to dismissal of the third-party complaint. TTI's motion is addressed below.


  After the plaintiffs and Krimsky had completed their pretrial discovery activities and had prepared a final pretrial order so that they might proceed to trial before your Honor, Krimsky sought and your Honor granted him an opportunity to initiate a third-party action against TTI. Krimsky had previously made a similar application to the undersigned magistrate judge. That application was denied because Krimsky had "failed to learn that a basis might exist upon which to commence a third-party action against [TTI] because he elected not to review pertinent material during the pretrial discovery phase of the litigation that was available for inspection at his adversary's office." The Court determined that, given the age of the case — which had been commenced approximately two years prior to Krimsky's application — and the posture of the case: the existence of a final pretrial order and the readiness of the parties to meet with your Honor so that a date for trial might be fixed, granting Krimsky's application would have been "inappropriate and would [have prejudiced] the plaintiffs as they [sought] to obtain a final resolution to this matter." Krimsky served and filed the third-party complaint, as permitted by your Honor; thereafter, the instant motion was made by TTI.

  In support of its motion, TTI maintains that the evidence educed by the plaintiffs, through their pretrial deposition of Krimsky, establishes that Krimsky was an officer and principal of the corporate defendants and that he did not personally design, manufacture, assemble, install or repair the 50 machine on which plaintiff Walter House alleges he was injured. Therefore, according to TTI, Krimsky cannot be held personally liable, under New York law, for any damages that the plaintiffs might recover in this action. Consequently, TTI contends that Fed.R.Civ.P. 12(b)(6) requires that the plaintiffs' complaint be dismissed.

  The plaintiffs claim that TTI is wrong. They contend that Krimsky's prior conviction for embezzling pension funds from an employee benefit plan, for which he served as the sole trustee, demonstrates that Krimsky so dominated the corporate defendants that it would be appropriate, in the circumstance of the instant case, to find that he was the corporations' alter ego and, accordingly, may be held liable for damages suffered by the plaintiffs.

  For his part, Krimsky alleges that TTI breached a contract it had with him by, inter alia, failing to: (a) repair and maintain the subject 50 machine in a safe manner; or (b) train its employees to operate the 50 machine properly. Therefore, Krimsky contends that TTI must hold him harmless against and indemnify him for any damages recovered by the plaintiffs in this action.

  TTI denies that it entered into a contract with Krimsky or that it is obligated to indemnify him. No copy of the contract Krimsky alleges he had with TTI has been provided to the Court and no mention of that document was made in the final pretrial order previously submitted to the court.

  TTI also contends that the factors noted above, that prompted the undersigned magistrate judge to deny Krimsky's original request to commence a third-party action, when considered with the following facts: (i) that the 50 machine is no longer available; (ii) that the TTI employees who are most knowledgeable about the 50 machine are no longer in TTI's employ; and (iii) that TTI's presence in the action will delay the trial, warrant the court in striking the third-party complaint, notwithstanding the fact that your Honor authorized its filing. Moreover, according to TTI, Krimsky's failure to demonstrate, as required by Fed.R.Civ.P. 16(e), that manifest injustice will attend if the court declines to permit the final pretrial order to be modified to account for impleaded claims, militates against allowing that document to be changed. III. DISCUSSION

  Fed.R.Civ.P. 14(a)

  In its most pertinent part, Fed.R.Civ.P. 14(a) provides the following:

At any time after commencement of the action, a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to this action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff.
  The Rule makes clear that unless the third-party complaint is filed not later than ten days after the original answer is served, a third-party plaintiff must obtain permission from the court to file the third-party complaint. The determination to grant an application to file a third-party complaint is a matter left to the court's discretion. See Leventhal v. Joyner Wholesale Co., 736 F.2d 29, 31-32 (2d Cir. 1984). Where a court has determined to allow a defendant to file a third-party complaint, the impleaded party may, pursuant to Fed.R.Civ.P. 14(a), challenge the "court's prior decision to allow the defendant to implead the third-party defendant." Murphy v. Keller Indus., Inc., 201 F.R.D. 317, 319 (S.D.N.Y. 2001). In addition, Fed.R.Civ.P. 14(a) permits a third-party defendant to "assert against the plaintiff any defense which the third-party plaintiff has to the plaintiff's claim."

  In the case at bar, TTI has alleged that the plaintiffs have failed to state a claim against Krimsky for which relief may be granted. See Fed.R.Civ.P. 12(b)(6). Krimsky maintains that the Court has barred him from asserting that claim against the plaintiffs. TTI has alleged further that Krimsky's third-party complaint is also subject to dismissal pursuant to Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) Motion to Dismiss

  A court may dismiss an action, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted, only if "it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief." Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997). In considering a motion made pursuant to this Rule, "the court must accept all factual allegations in the complaint as true and draw inferences from those allegations in the light most favorable to the plaintiff." Id. A court may also consider all papers and exhibits appended to the complaint as well as any matters of which judicial notice may be taken. See Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1092 (2d Cir. 1995). When considering a motion to dismiss, a court may take judicial notice of the orders of another court. See, e.g., Steinmetz v. Toyota Motor Credit Corp., 963 F. Supp. 1294, 1299 (E.D.N.Y. 1997).

  Where a motion has been made under Fed.R.Civ.P. 12(b)(6), and matters outside the pleadings are presented to and considered by a court, the motion is to be treated as one made pursuant to Fed.R.Civ.P. 56, and disposed of accordingly. In the instant case, matters outside the pleadings have been presented to the Court and have been considered. Therefore, TTI's motion will be analyzed in accordance with the standards applicable to a motion made pursuant to Fed.R.Civ.P. 56.

  As noted earlier in this writing, TTI contends that evidence uncovered by the plaintiffs, during the pretrial discovery phase of the litigation, demonstrates that Krimsky was an officer and principal of the defunct corporate entities that have been named as defendants in this action. TTI maintains that, under New York law, Krimsky, as an officer and principal of the corporate defendants, cannot be held personally liable for the damages the plaintiffs seek to recover. According to TTI, since Krimsky cannot be held personally liable to the plaintiffs for any damages arising out of tortious conduct attributed to the defunct corporate defendants, Krimsky's assertion, in the third-party complaint, that TTI must indemnify and hold him harmless should he be found liable to the plaintiffs for damages, is a baseless allegation and warrants the court in dismissing the third-party complaint.

  "A corporation is an entity that is created by law and endowed with a separate and distinct existence from that of its owners. Because a principal purpose for organizing a corporation is to permit its owners to limit their liability, there is a presumption of separateness between a corporation and its owners . . . which is entitled to substantial weight." American Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir. 1988); Joan Hansen & Co., Inc. v. Everlast World's Boxing Headquarters Corp., 296 A.D.2d 103, 109, 744 N.Y.S.2d 384, 390 (App.Div. 1st Dept. 2002). However, the wall that separates a corporate entity from its owners, as it relates to liability for damages, is not impenetrable. Under New York law, a court may disregard the corporate form and impose personal liability upon a corporate officer, director or owner to prevent fraud or to achieve equity. See Gartner v. Snyder, 607 F.2d 582, 586 (2d Cir. 1979).

  "New York courts disregard corporate form reluctantly, they do so only when the form has been used to achieve fraud, or when the corporation has been so dominated by an individual or another corporation (usually a parent corporation), and its separate identity so disregarded, that it primarily transacted the dominator's business rather than its own and can be called the other's alter ego." Gartner, 607 F.2d at 586. Therefore, to pierce the corporate veil and thereby ignore the corporate form and hold a corporation's officer, director or principal liable for damages, because that person is the corporation's alter ego, a plaintiff must show that: 1) the owner exercised complete domination of the corporation "in respect to the transaction attacked; and 2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury. . . ." Old Republic Nat'l Title Ins. Co. v. Moskowitz, 297 A.D.2d 724, 725, 747 N.Y.S.2d 556, 558 (App.Div. 2d Dep't 2002) (citation omitted).

  In the instant case, the plaintiffs allege that a question of fact exists with respect to whether Krimsky, based upon his embezzlement conviction, so dominated the corporate defendants that equity demands that he be: (a) deemed their alter ego; and (b) held personally liable to the plaintiffs for the damages they seek through this action. The Court disagrees.

  A simple reading of the appellate decision issued after Krimsky appealed his conviction (U.S. v. Krimsky, 230 F.3d 855 [6th Cir. 2000]) — to which the plaintiffs directed the Court's attention — makes clear that Krimsky's conviction stemmed from misconduct in which he engaged in his capacity as the sole trustee of an employee benefit plan. The record before the Court does not establish that any of the defendant corporations is an employee benefit plan. Furthermore, the fiduciary position Krimsky held with the relevant employee benefit plan is distinct from the officer and principal positions Krimsky held with the corporate defendants. Moreover, Krimsky's embezzlement conviction has no connection to the "transaction attacked" in this litigation: the alleged negligent design, manufacture, installation or repair of the 50 machine. The only competent evidence before the Court concerning Krimsky's role, if any, in these activities is his deposition testimony. Through that testimony, Krimsky denied that he had any involvement in the design, manufacture, installation, or repair of the 50 machine that plaintiff Walter House operated at the time he was injured. Krimsky explained that, typically, these tasks were either performed by other corporate employees or, in some instances, by others with whom the corporate defendants may have contracted. Krimsky also noted that machinery manufactured by the corporate defendants would be based upon specifications provided by the customer to whom the machinery, once fabricated, would be delivered. Nothing in the record before the Court contradicts the testimony Krimsky provided at his deposition. Therefore, the Court finds that the plaintiffs have not presented any evidence to the Court that rebuts the presumption of separateness that exists between a corporation and its owner(s). See American Protein Corp., 844 F.2d at 60. The Court is mindful that "the concept [of piercing the corporate veil] is equitable in nature and assumes that the corporation itself is liable for the obligation sought to be imposed . . . [As a consequence,] an attempt . . . to pierce the corporate veil does not constitute a cause of action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to impose the corporate obligation on its owners." Morris v. New York State Dept. of Taxation and Finance, 82 N.Y.2d 135, 141, 603 N.Y.S.2d 807, 810 (1993).

  Here, having considered the relevant facts and circumstances, the Court finds that the record does not contain competent evidence that establishes that Krimsky, an officer and principal of the defunct corporate defendants, exercised complete domination over those defendants "in respect to the transaction attacked," that is, in respect to the design, manufacture, distribution, installation or repair of the 50 machine that plaintiff Walter House was operating at the time he suffered injuries for which he seeks damages through this action. Therefore, the Court finds further that no basis exists for disregarding corporate form and imposing personal liability on Krimsky for tortious conduct in which the corporate defendants are alleged to have engaged. As a result, the application by TTI, that the plaintiffs' complaint be dismissed, pursuant to Fed.R.Civ.P. 12(b)(6), should be granted.

  In addition, since the Court finds that the plaintiffs' complaint against Krimsky should be dismissed because he cannot be held personally liable for the damages the plaintiffs seek to recover, the application by TTI, that the court dismiss the third-party complaint, should also be granted. This is so, in part, because the premise upon which Krimsky relied in initiating the third-party action, that TTI "is or may be liable" to him for all or part of the plaintiffs' claims against him, no longer provides Krimsky a basis for maintaining the third-party action, because the Court has determined that Krimsky cannot be held personally liable for the damages the plaintiffs seek to recover.

  Furthermore, even if Krimsky could be held personally liable to the plaintiffs, his allegation in the third-party complaint, that he would be entitled to be indemnified and held harmless by TTI, lacks evidentiary support. In a circumstance where there is no duty to indemnify imposed by law, a party to litigation has no right to be indemnified unless that right springs from a contractual obligation. See Haynes v. Kleinewefers and Lembo Corp., 921 F.2d 453, 456 (2d Cir. 1990). In the third-party complaint, Krimsky alleges that TTI "breached its contract with . . . [him] in failing to provide [TTI's] employees with the proper training, instruction and warnings necessary for the proper operation of the `50' machine." Krimsky also alleges that TTI breached its contract with him by failing to maintain and repair the 50 machine so that it might function safely. No evidence is before the Court that establishes the existence of any contract between Krimsky and TTI. Moreover, Krimsky has not pointed to any obligation TTI had to indemnify him that was imposed upon TTI by law. Since the instant motion is being analyzed in accordance with Fed.R.Civ.P. 56, Krimsky cannot merely rely upon the allegations contained in the pleadings to defeat TTI's motion. He must offer "concrete evidence in the record from which a reasonable juror could return a verdict in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505, 2514 (1986). In the absence of competent evidence in the record establishing either the existence of a contract, the provisions of which demonstrate that TTI unmistakenly intended to indemnify Krimsky as he alleges in the third-party complaint, or a governing law that imposes that duty on TTI, the Court finds that TTI is under no obligation to indemnify Krimsky as he alleged in the third-party complaint.

  Based upon the above findings, that the plaintiffs' complaint, as well as the third-party complaint, should be dismissed, it is not necessary for the Court to reach that branch of the instant motion premised upon Fed.R.Civ.P. 16(e).


  For the reasons set forth above, the motion made by third-party defendant TTI, pursuant to Fed.R.Civ.P. 12(b)(6), that the complaint filed by the plaintiffs Walter House and Debra House and the complaint filed by the defendant and third-party plaintiff Krimsky be dismissed, should be granted.


  Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Richard M. Berman, 40 Foley Square, Room 201, New York, New York, 10007, and to the chambers of the undersigned, 40 Foley Square, Room 540, New York, New York, 10007. Any requests for an extension of time for filing objections must be directed to Judge Berman. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).


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