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In re September 11 Property Damage and Business Loss Litigation

March 9, 2007

IN RE SEPTEMBER 11 PROPERTY DAMAGE AND BUSINESS LOSS LITIGATION
AEGIS INSURANCE SERVICES, INC.; LIBERTY INSURANCE UNDERWRITERS, INC.; NATIONAL UNION INSURANCE COMPANY OF PITTSBURGH; NUCLEAR ELECTRIC INSURANCE LIMITED; UNDERWRITERS AT LLOYDS, (SYNDICATES 1225 AND 1511); A/S/O CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., PLAINTIFFS,
v.
SEVEN WORLD TRADE CENTER COMPANY L.P.; SILVERSTEIN PROPERTIES, INC.; CITIGROUP, INC.; CITIGROUP GLOBAL MARKETS HOLDINGS, INC.; SALOMON SMITH BARNEY HOLDINGS, INC.; SALOMON, INC.; SWANKE HAYDEN CONNELL ARCHITECTS; AMBASSADOR CONSTRUCTION CO., INC.; CONSENTINI ASSOCIATES, INC.; CANTOR SEINUK GROUP, P.C.; FLACK & KURTZ, INC; SKIDMORE OWINGS & MERRILL, LLP; OFFICE OF IRWIN G. CANTOR, P.C.; SYSKA & HENNESSY, INC.; AMEC CONSTRUCTION MANAGEMENT, INC.; CENTRIFUGAL ASSOCIATES, INC.; DIC/UNDERHILL, A JOINT VENTURE; H.O. PENN MACHINERY CO., INC.; KABACK ENTERPRISES; PREFERRED UTILITIES MANUFACTURING CORP.; ELECTRIC POWER SYSTEMS, INC.; AMERICAN POWER TECHNOLOGIES, INC.; G.C. ENGINEERING & ASSOCIATES, P.C.; TISHMAN CONSTRUCTION CORPORATION; FIRECOM INC.; GRACE CONSTRUCTION PRODUCTS; FIBERLOCK TECHNOLOGIES, INC.; ROSENWACH TANK CO., INC.; ALL FIRE SYSTEMS, INC.; EMERY ROTH & SON, P.C.; ABCO PEERLESS SPRINKLER CORPORATION; AMR CORPORATION; AMERICAN AIRLINES, INC.; UAL CORPORATION; UNITED AIRLINES, INC.; COLGAN AIR, INC.; U.S. AIRWAYS GROUP, INC.; US AIRWAYS, INC.; HUNTLEIGH USA CORPORATION; ICTS INTERNATIONAL V; GLOBE AVIATION SERVICES CORPORATION; BURNS INTERNATIONAL SECURITY SERVICES CORPORATION; PINKERTON'S INC.; SECURITAS AB; AND BOEING CO., DEFENDANTS.
SEVEN WORLD TRADE COMPANY, L.P. AND SILVERSTEIN PROPERTIES, INC., THIRD-PARTY PLAINTIFFS,
v.
SWANKE HAYDEN CONNELL ARCHITECTS; AMBASSADOR CONSTRUCTION CO., INC.; : CONSENTINI ASSOCIATES, INC.; CANTOR SEINUK GROUP, P.C.; FLACK & KURTZ, INC; SKIDMORE OWINGS & MERRILL, LLP; OFFICE OF IRWIN G. CANTOR, P.C.; SYSKA & HENNESSY, INC.; AMEC CONSTRUCTION MANAGEMENT, INC.; AND CENTRIFUGAL ASSOCIATES, INC., THIRD-PARTY DEFENDANTS



The opinion of the court was delivered by: Alvin K. Hellerstein, U.S.D.J.

21 MC 101

OPINION AND ORDER GRANTING THIRD-PARTY DEFENDANTS' CERTAIN MOTIONS TO DISMISS

I discuss in this decision the legal sufficiency of a third-party action filed by Seven World Trade Company, L.P. and Silverstein Properties, Inc. (together, "Silverstein"). Silverstein was the owner of the leasehold to, and the developer of, a 47-story office tower that was destroyed by fire and debris following the terrorist-related aircraft crashes of September 11, 2001. As a result of the events of that day, Silverstein became both a plaintiff and a defendant, suing to recover damages for loss he suffered, and defending against suits alleging that his negligence caused the losses that others suffered. I discuss here Silverstein's third-party action, by which he seeks indemnification and contribution to the extent he is held liable in lawsuits against him.

The background is recounted in two earlier decisions: Aegis Ins. Serv. v. Port Auth., No. 21 MC 101, 04 Civ. 7272, __ F. Supp. 2d __, 2006 WL 62019 (S.D.N.Y. Jan. 12, 2006) ("Aegis"); and Indus. Risk Ins. v. Port Auth. of N.Y. & N.J., 387 F. Supp. 2d 299 (S.D.N.Y. Jan. 26, 2005) ("IRI"). In short summary, Silverstein purchased a long term leasehold interest in the land and air space of Seven World Trade Center ("7WTC") in 1980. Beneath and next to his property, Consolidated Edison Company of New York, Inc. ("ConEdison"), pursuant to agreements made with the Port Authority in 1968, built and maintained a power substation serving the entire World Trade Center complex then proposed to be developed. When, in 1987 and 1988, Silverstein developed and leased the 47-story office tower that became Building Seven, ConEdison serviced that building as well.

In 1988, Silverstein leased portions of floors one through five, and floors 28 through 47 of 7WTC to Salomon Inc., a predecessor of defendant Citigroup Inc. and Citigroup Global Market Holdings Inc. (together, "Citigroup"). In 1998, Silverstein leased portions of the basement and the seventh floor, and the 23rd floor to New York City's Office of Emergency Management ("OEM"). Both leases authorized the respective tenants to design and build emergency generator and fuel supply systems, to enable them to have independent sources of energy. Salomon negotiated for that right in order to maintain a trading floor capable of operating without power interruptions 24 hours per day, seven days per week. OEM negotiated for that right in order to maintain an emergency command center capable of communicating within and without the City at all and any time of the day, night, or week. A key purpose in both leases was to design and build an independent source of emergency power to function if regular sources of power supply were contracted or cut. As a result, Salomon (and Citigroup, its successor) and the OEM maintained large stocks of diesel fuel in the lower floors of the building which, allegedly, "intensified the fires that engulfed building number seven and made them impossible to extinguish." IRI, 387 F. Supp. 2d at 302.

The collapse of 7WTC caused substantial loss to Silverstein. Industrial Risk Insurers ("IRI") paid his claim, became subrogated to his rights, and sued Citigroup, among others, for causing the loss, alleging that Citigroup was negligent for maintaining large stocks of diesel fuel in 7WTC. I granted Citigroup's motion to dismiss, holding that, pursuant to the lease agreement between Silverstein and Citigroup, Silverstein had assumed the risks posed by Citigroup's backup generator system and related fuel tanks, barring IRI's suit. See id. at 308--10.

The collapse of 7WTC also destroyed the ConEdison substation and valuable transformers and other equipment that had been housed in the substation. Aegis Insurance Services, Inc. and other insurers paid the loss, became subrogated to ConEdison's rights, and filed suit against the Port Authority (the owner of the property), Silverstein (the owner and manager of the leasehold), and those who designed, built, maintained, and used the large stocks of diesel fuel and the emergency generator system that allegedly caused the fires to become uncontrollable-Citigroup, the City, and the contractors, engineers and architects who designed and built the system for Citigroup and the City. I held in Aegis, supra, (a) that the City of New York was entitled to immunity under the New York State Defense Emergency Act ("SDEA"), N.Y. Unconsol. Law § 9101 et seq. (McKinney 2006), that no triable issues were presented and summary judgment could be granted, and I dismissed the claims against it; (b) that the case was not ripe for decision with respect to the claims against the Port Authority, and I denied the Port Authority's motion to dismiss the complaint against it; (c) that a legally sufficient claim had been stated against Citigroup, and I denied its motion to dismiss the complaint against it (with one exception not here relevant); (d) that a legally sufficient claim had been stated against Silverstein, and I denied his motion to dismiss the complaint against him; and (e) that the architects and contractors who were engaged by the City and Citigroup to design and build their respective backup generator systems did not owe a duty of care to ConEdison, and I granted their motions to dismiss the complaint against them.

Following my holding in Aegis that ConEdison's subrogated insurer had stated a legally sufficient claim against Silverstein, Silverstein amended his answer to assert third-party claims for indemnification and contribution against parties that had been dismissed in the lawsuit. Silverstein alleged that the several design and construction defendants-Swanke Hayden Connell Architects; Ambassador Construction Co.; Consentini Associates, Inc.; and the Cantor-Seinuk Group, which were engaged by the City (collectively, the "OEM Design and Construction Defendants"), and AMEC Construction Management, Inc., f/k/a Morse/Diesel International, Inc. ("AMEC"); Centrifugal Associates, Inc. ("Centrifugal"); Flack & Kurtz, Inc. ("Flack & Kurtz"); Skidmore, Owings, & Merrill, LLP ("Skidmore"); and the Office of Irwin G. Cantor, P.C. ("Irwin Cantor") which were engaged by Citigroup (collectively, the "Citigroup Design and Construction Defendants")-were negligent and otherwise at fault, and thus owed a duty to indemnify and contribute to any judgment that Silverstein might suffer. See Amended Answer ¶¶ 269--77. Silverstein also asserted third-party claims against Irwin Cantor and Syska & Hennessy, Inc. ("Syska"), contractors which provided engineering services for the construction of the 7WTC tower directly to Silverstein. See Third-Party Complaint ¶¶ 12--13. All third-party defendants now move pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the third-party claims against them.

The motions to dismiss are granted. As I discuss below, the OEM Design and Construction Defendants are entitled to the same grant of immunity under the SDEA as is the City, and the third-party complaint fails to allege any basis of liability beyond having designed and built the emergency generator system that the City engaged them to design and build. Also, as I discuss below, the Citigroup Design and Construction Defendants cannot be sued by Silverstein for designing and building the backup generator system that Silverstein had authorized Citigroup's predecessor to design and build, and the third-party complaint alleges no basis of liability that defeats that authorization. And, as I discuss below, the third-party complaint fails to meet the heightened pleading standard that applies to suits against licensed design professionals under N.Y. C.P.L.R. § 3211(h).

Discussion

I. Standard of Review

A. Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6)

A Rule 12(b)(6) motion requires the court to determine whether a plaintiff has stated a legally sufficient claim. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) may be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45--46 (1957); Branum v. Clark, 927 F.2d 698, 705 (2d Cir. 1991). The court's function is "not to assay the weight of the evidence which might be offered in support" of the complaint, but "merely to assess the legal feasibility" of the complaint. Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980). In evaluating whether a plaintiff may ultimately prevail, the court must take the ...


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