The opinion of the court was delivered by: Alvin K. Hellerstein, U.S.D.J.
OPINION AND ORDER GRANTING PARTIAL JUDGMENT FOR PLAINTIFFS AND DISMISSING REMAINDER OF COMPLAINT
In 1968, the Port Authority of New York and New Jersey ("the Port Authority") leased a parcel of land at Washington and Barclay Streets in lower Manhattan for fifty years to the Consolidated Edison Company of New York, Inc. ("Con Edison"). The Port Authority built an electrical power substation on the land for Con Edison to operate to supply electricity to the new World Trade Center complex and the surrounding area. In the 1980s, as anticipated by the lease, the Port Authority had an office tower built above the substation, 7 World Trade Center ("7WTC"), which it leased for ninety-nine years to developer Larry Silverstein.
On September 11, 2001, at 5:20 p.m., 7WTC collapsed, brought down by the raging fires created by the terrorist-related crashes of fuel-laden jumbo jets into Towers One and Two of the World Trade Center complex. The collapse of 7WTC utterly destroyed the Con Edison substation beneath it. Since then, Con Edison has built a new substation, as required by the 1968 lease, and Silverstein has built a new office tower above it.
In this case, Con Edison argues that the destruction of the substation triggered two contractual obligations of the Port Authority under the 1968 lease. First, Con Edison argues that the Port Authority, having insured the substation at Con Edison's expense, must now turn over to Con Edison the proceeds of that insurance coverage. Second, Con Edison argues that the Port Authority must pay Con Edison the cost of rebuilding the substation, over and above, and independently of, insurance coverage. Con Edison's argument is that the lease requires the Port Authority to "reimburse" Con Edison for any damage "caused by the acts or omissions of the Port Authority . . . in connection with the construction or maintenance" of 7WTC. The Port Authority acknowledges that Con Edison is owed insurance proceeds, but denies Con Edison's claim to reimbursement.
Con Edison's current complaint, the Second Amended Complaint, also includes two tort claims. First, Con Edison argues that the Port Authority negligently designed, constructed, and maintained 7WTC, causing the tower to collapse and destroy the substation. Second, Con Edison argues that the same negligence was negligence per se, because the Port Authority violated New York State and New York City fire and safety standards in designing, constructing, and maintaining 7WTC. The Port Authority denies both claims.
After the bulk of discovery, Con Edison moved for summary judgment on its two contract claims, Counts Three and Four of the Second Amended Complaint. For the reasons stated in this Opinion and Order, I grant judgment to Con Edison on Count Three, the insurance claim, in the amount of $17,580,750, the balance remaining, plus pre-judgment interest in an amount to be determined, and dismiss the remainder of the Second Amended Complaint-Count Four, the reimbursement claim, and Counts One and Two, the tort claims.
In the late 1960s, the Port Authority, after conducting surveys and evaluating choices, engaged Con Edison to furnish electrical power to the planned World Trade Center complex. On May 29, 1968, the Port Authority and Con Edison entered into a lease and an electricity supply contract. The lease allowed Con Edison to occupy a trapezoidal parcel of land just north of the complex, known as the "keystone site," for fifty years. In 1970, the Port Authority built an electrical power substation on the land for Con Edison to operate, to perform the electricity supply contract.
The terms of the lease reflected the parties' entwined relationship. The Port Authority covenanted, in Section 17 of the lease, to "insure and keep insured the Substation Building to the extent of 100% of the replacement value thereof," and Con Edison covenanted to "pay the Port Authority annually an amount equal to the insurance premium or premiums paid by the Port Authority" for that coverage. In Section 18 of the lease, Con Edison covenanted to repair or rebuild the substation if it were ever damaged or destroyed, and the Port Authority covenanted to make the proceeds of the insurance coverage "available to [Con Edison] for such purpose." See In re Sept. 11 Prop. Damage & Bus. Loss Litig., 468 F. Supp. 2d 508, 521 (S.D.N.Y. 2006).
Sections 8 and 16 of the lease provided for the Port Authority's right to build above the substation, and limited its liability to Con Edison should its "acts or omissions . . . in connection with the construction or maintenance" of the new structure or improvements cause "expense" to Con Edison, which, under Sections 15 and 18, was responsible for "maintaining, repairing, replacing, or rebuilding the Substation Building . . . or Substation Equipment." In Section 8(a), Con Edison recognized and agreed that "the Port Authority may construct wholly or partially on, above or about the Substation Building additional stories, structures, buildings or improvements of whatever design, size and purpose as the Port Authority . . . determine[s]," and, in Section 8(b), that it would make no claim for constructive eviction or abatement of rent, or "any claim or demand for damages, consequential or otherwise," in connection with the Port Authority's exercise of its Section 8(a) rights. Section 16 defined the Port Authority's liability. In that section, the Port Authority agreed to reimburse [Con Edison] for any expense incurred by [Con Edison] in maintaining, repairing, replacing or rebuilding the Substation Building or . . . Substation Equipment where such expenses are incurred by reason of damage to the Substation Building or . . .
Substation Equipment caused by the acts or omissions of the Port Authority or its agents, contractors or employees in connection with the construction or maintenance of the stores, structures, buildings or improvements described in Section 8 hereof.
In other words, the Port Authority could build above the substation, and, if it did, it would reimburse Con Edison for any expenses that it caused by its "acts or omissions . . . in connection with the construction or maintenance" of that which it built or improved, but it would not be liable for damages, and Con Edison could not quit the substation. See In re Sept. 11 Prop. Damage & Bus. Loss Litig., 468 F. Supp. 2d at 520-21.
In 1980, the Port Authority exercised its Section 8(a) rights by contracting with 7 World Trade Company, L.P. ("7WTCo.") to build 7 World Trade Center above the substation. Under the contract, Silverstein Properties, Inc., the agent of 7WTCo., was to design, construct, and operate the forty-seven-story office tower, which the Port Authority was to own, and lease for ninety-nine years to 7WTCo. 7WTCo. agreed in the contract to submit its plans for the building to the Port Authority for approval. Con Edison also acquired a power of review. By a 1982 consent agreement, Silverstein Development Corp., the general partner of 7WTCo., agreed to give blueprints of 7WTC to Con Edison, and to stop work if, in Con Edison's "sound judgment," the tower's construction threatened the substation. See Jacob Decl. Exh. 11.
7WTC opened in 1987. Its primary tenant was Salomon Brothers, a large investment banking company that later merged into Citigroup. Salomon Brothers installed diesel fuel tanks and generators in the building to supply emergency back-up power to its continuously operating trading floor. Later, the City of New York leased space in 7WTC to house the command center of its Office of Emergency Management, and installed another diesel fuel tank and generator to supply emergency power to the command center.
At 8:46 a.m. and 9:03 a.m. on September 11, 2001, terrorists flew two "767" jumbo jets into Towers One and Two of the World Trade Center complex. The Twin Towers fell, streaming fire and debris over the complex and over 7WTC. 7WTC burned throughout the day. An adjacent water main had burst, vital firefighters had died inside the Twin Towers, and the building's own diesel fuel tanks appeared to feed its fires. 7WTC collapsed at 5:20 p.m., destroying Con Edison's substation but taking no lives.
In June 2004, Con Edison erected a new substation, as Sections 15 and 18 of the 1968 lease required it to do, and restored permanent electrical services to lower Manhattan. The Port Authority gave Con Edison $20 million of insurance proceeds as a "construction advance." See Jacob Decl. Exh. 47. In 2006, Silverstein Properties, Inc. completed a new, forty-two-story 7WTC above the substation, which became the first tower of a new World Trade Center complex.
Con Edison and its subrogated insurers*fn1 brought this action (02 Civ. 7188) against the Port Authority and the City of New York, alleging claims sounding in negligence but encompassing breach of contract. See, e.g., Compl. ¶ 28 ("The collapse of 7 World Trade Center and the destruction and damage to the substation . . . were caused by negligence, carelessness, recklessness and breach of contract."). Also with its subrogated insurers, Con Edison brought a separate action (04 Civ. 7272) against 7WTCo., Silverstein Properties, Citigroup, and the contractors, engineers, and architects that designed and built 7WTC and its diesel fuel tanks and emergency generator system, as well as against various airlines and aviation security companies. On January 12, 2006, I dismissed the claims against the City of New York in 02 Civ. 7188 and the claims against the contractors, engineers, and architects in 04 Civ. 7272, but denied motions to dismiss by the Port Authority in 02 Civ. 7188, and by 7WTCo., Silverstein Properties, and Citigroup in 04 Civ. 7272. See In re Sept. 11 Prop. Damage & Bus. Loss Litig., 468 F. Supp. 2d at 511. On June 26, 2008, I allowed Con Edison to amend its complaint against the Port Authority in 02 Civ. 7188 to separate its tort claims from its contract claims, and to specify the lease provisions under which it seeks relief.
Con Edison filed a Second Amended Complaint against the Port Authority on July 11, 2008, alleging two tort claims and two contract claims. On October 29, 2008, Con Edison moved for summary judgment on its contract claims, Counts Three and Four. In opposition, the Port Authority argued, inter alia, that Con Edison's motion was premature because the parties had not completed discovery as to the meaning of the 1968 lease. As I discuss later in this Opinion and Order, the outstanding discovery, as described by the parties, will not create or help resolve any triable issues.
I heard oral argument on the motion on February 23, 2009. After indicating potential rulings, I allowed the parties to file two sets of supplemental papers on issues that they considered important, including their respective interpretations of the "acts or omissions" language of Section 16 of their lease, and the viability of Con Edison's tort claims alongside its contract claims. On May 21, 2009, at Con Edison's request, I allowed the parties to file additional supplemental papers, suggesting that I considered that summary judgment may be appropriate on all counts of the Second Amended Complaint. I am now in a position to rule on the entire record created by the parties, after extensive presentation of the legal issues.
To succeed on a motion for summary judgment, the moving party must show that "there is no genuine issue as to any material fact and that [it] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A "genuine issue" of "material fact" exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court must "resolve all ambiguities, and credit all factual inferences that could rationally be drawn, in favor of the party opposing summary judgment." Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir. 2008) (citations omitted). However, "[m]ere speculation and conjecture is insufficient to preclude the granting of the motion." Harlen Assocs. v. Vill. of Mineola, 273 F.3d 494, 499 (2d Cir. 2001).
On a motion for summary judgment, the court may search the record and give complete relief, and may even grant judgment for the nonmoving party if "no factual dispute exists and the non-movant is entitled to summary judgment as a matter of law." Ramsey v. Coughlin, 94 F.3d 71, 73 (2d Cir. 1996) (internal citation omitted); see, e.g., Island Park, LLC v. CSX Transp., 559 F.3d 96, 100 (2d Cir. 2009). "[A] district court's independent raising and granting of summary judgment in favor of the nonmoving party is 'an accepted method of expediting litigation.'" Ramsey, 94 F.3d at 74 (quoting Coach Leatherware Co. v. Ann Taylor, Inc., 933 F.2d 162, 167 (2d Cir. 1991)). However, "summary judgment should not be granted . . . unless the losing party has been given an opportunity to demonstrate that there are genuine material issues for trial." Id. (quoting Hispanics for Fair & Equitable Reapportionment v. Griffin, 958 F.2d 24, 25 (2d Cir. 1992)). Thus, the losing party must have submitted ...