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Travelers Casualty and Surety Co. v. Dormitory Authority - State of New York

April 25, 2008

TRAVELERS CASUALTY AND SURETY COMPANY AS ADMINISTRATOR FOR RELIANCE INSURANCE COMPANY, PLAINTIFF,
v.
DORMITORY AUTHORITY - STATE OF NEW YORK, TDX CONSTRUCTION CORP. AND KOHN PEDERSEN FOX ASSOCIATES, P.C., DEFENDANTS.
DORMITORY AUTHORITY OF THE STATE OF NEW YORK AND TDX CONSTRUCTION CORP., THIRD-PARTY PLAINTIFFS,
v.
TRATAROS CONSTRUCTION, INC., THIRD-PARTY DEFENDANT.
TRATAROS CONSTRUCTION, INC. AND TRAVELERS CASUALTY AND SURETY COMPANY, FOURTH-PARTY PLAINTIFFS,
v.
CAROLINA CASUALTY INSURANCE COMPANY; BARTEC INDUSTRIES, INC.; DAYTON SUPERIOR SPECIALTY CHEMICAL CORP. A/K/A DAYTON SUPERIOR CORPORATION; SPECIALTY CONSTRUCTION BRANDS, INC. T/A TEC; KEMPER CASUALTY INSURANCE COMPANY D/B/A KEMPER INSURANCE COMPANY; GREAT AMERICAN INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.; UNITED STATES FIRE INSURANCE COMPANY; ALLIED WORLD ASSURANCE COMPANY (U.S.) INC. F/K/A COMMERCIAL UNDERWRITERS INSURANCE COMPANY; ZURICH AMERICAN INSURANCE COMPANY D/B/A ZURICH INSURANCE COMPANY; OHIO CASUALTY INSURANCE COMPANY D/B/A OHIO CASUALTY GROUP; HARLEYSVILLE MUTUAL INSURANCE COMPANY (A/K/A HARLEYSVILLE INSURANCE COMPANY); JOHN DOES 1-20 AND XYZ CORPS. 1-20, FOURTH-PARTY DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION AND ORDER

On August 1, 2007, plaintiff Travelers Casualty and Surety Company ("Travelers"), acting as administrator for Reliance Insurance Company ("Reliance") and asserting claims assigned to Travelers by Trataros Construction, Inc. ("Trataros"), commenced this action against defendants Dormitory Authority - State of New York ("DASNY"), TDX Construction Corp. ("TDX"), and Kohn Pedersen Fox Associates, P.C. ("KPF"). On September 28, 2007, DASNY and TDX filed their answer to the complaint, and asserted various affirmative defenses, counterclaims against Trataros, and cross-claims against KPF. A third-party complaint asserting these counterclaims was also filed by DASNY and TDX on that date. Trataros filed an answer to the third-party complaint on November 13, 2007, which included a cross-claim against KPF and a counterclaim against TDX, both seeking indemnification, contribution, and exoneration. On that date, Trataros and Travelers also filed a fourth-party complaint against a subcontractor, two material suppliers, and twelve insurance companies. Two of those insurance companies -- Allied World Assurance Company (U.S.) Inc. ("Allied World") and United States Fire Insurance Company ("U.S. Fire") -- and one of the material suppliers -- Specialty Construction Brands, Inc. (known as "TEC") -- moved to dismiss the fourth-party claims against them. Allied World's motion was denied in an Order dated April 2, 2008. The instant opinion addresses the motion filed by TEC. A separate Opinion will address U.S. Fire's motion. For the following reasons, TEC's motion to dismiss is granted.*fn1

BACKGROUND

The parties to this action were each involved, directly or indirectly, with the design or construction of a 785,000 square-foot structure for the use of Baruch College (part of the City University of New York ("CUNY")) located between 24th and 25th Streets and Lexington and Third Avenues in Manhattan (the "Project"). According to Travelers's initial complaint, the Project was architecturally ambitious, and included interlocking atria, a complex curvilinear façade, and aluminum paneling. DASNY acted as the "owner" of the Project on behalf of CUNY and Baruch College. Defendant KPF was retained by DASNY to act as the architect of record for the Project; TDX was hired to act as the construction manager.

DASNY entered into more than a dozen co-prime contracts for the Project's construction work, two of which -- referred to by the parties as Contract No. 15 and Contract No. 16 -- were awarded to Trataros (the "Trataros Contracts").*fn2 The work called for under the Trataros Contracts included the construction or installation of, inter alia, exterior paneling, windows, the "curtainwall," elevators and escalators, roofing systems, a swimming pool, and, most relevant here, an epoxy terrazzo flooring system that, according to the third-party compliant filed by DASNY and TDX, was to cover "thousands of square feet of public space in the Project."

As alleged in the fourth-party complaint, Trataros entered into subcontracts with several entities, including G.M. Crocetti Inc. ("Crocetti"). Under the terms of their subcontract, Crocetti was responsible for, among other things, the installation of some portion of the epoxy terrazzo flooring system. The fourth-party complaint alleges upon information and belief that "in connection with the work subcontracted to it by Trataros, Crocetti used materials manufactured and/or supplied by TEC," which were then "incorporated into the project's epoxy terrazzo flooring system."*fn3 The fourth-party complaint also alleges upon information and belief that the concrete floor slabs over which the epoxy terrazzo flooring was laid were installed by a "separate co-prime contractor other than Trataros."

DASNY and TDX's third-party complaint against Trataros alleges that

[t]he epoxy terrazzo that Trataros and Crocetti installed in the Project is deteriorating and is otherwise defective. Among other things, the epoxy terrazzo is cracking and crumbling at the perimeter of the poured area at the zinc divider strips over substantial areas of the epoxy terrazzo installation. The epoxy terrazzo is also delaminating and "blistering" in increasingly larger areas.

These defects are alleged to have been "caused by defective workmanship and inappropriate materials provided by Trataros and its subcontractors and suppliers, who, among other things, failed to properly prepare and install the material." The third-party complaint asserts that "remediation" of this defective flooring will cost at least $13 million, and contains a $20 million breach of contract claim against Trataros based primarily on the problems identified in the epoxy terrazzo flooring system.

The fourth-party complaint filed by Trataros and Travelers, in turn, asserts negligence, breach of contract, breach of warranty, indemnification, contribution, and exoneration claims against TEC, each contingent upon a finding that Trataros or Travelers is liable to DASNY and TDX for the alleged defects in the epoxy terrazzo flooring. The fourth-party complaint recites DASNY and TDX's claims regarding the flooring and adds, "upon information and belief," that those allegations relate to allegations of purported defects in the Project's epoxy terrazzo flooring system that have allegedly caused and/or allegedly will cause physical damage to, and/or impair the use of, the Project including but not limited to alleged physical damage and/or impairment to work performed and/or installed by separate co-prime contractors other than Trataros.

TEC has now moved to dismiss Trataros and Travelers's fourth-party claims under Rule 12(b)(6), Fed. R. Civ. P.

DISCUSSION

When considering a motion to dismiss under Rule 12(b)(6), a trial court must "accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the non-moving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007) (citation omitted). At the same time, "conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a motion to dismiss." Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 337 (2d Cir. 2006) (citation omitted). A court must apply a "flexible plausibility standard, which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) (citation omitted). "To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient to raise a right to relief above the speculative level." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). In deciding the motion, a court may consider "any written instrument attached to [the complaint] as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are integral to the complaint." Sira v. Morton, 380 F.3d 57, 67 (2d Cir. 2004) (citation omitted).

The parties focus most intently on the question of whether Trataros and Travelers can maintain a negligence action against TEC arising out of the alleged defects in the epoxy terrazzo flooring. Based upon a review of the allegations of the ...


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