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384 Bridge Street LLC v. RK&G Associates LLC

December 7, 2009

384 BRIDGE STREET LLC, PLAINTIFF,
v.
RK&G ASSOCIATES LLC, DEFENDANT.



The opinion of the court was delivered by: Glasser, United States District Judge

MEMORANDUM AND ORDER

INTRODUCTION

This action is derived from a landlord-tenant dispute over who shall bear the costs of investigating and cleaning up environmental contamination pursuant to the terms of a lease governed by New York law. Originally filed in the New York Supreme Court for Kings County, Defendant/Landlord RK&G Associates, LLC ("RK&G" or "the defendant"), asserting federal question jurisdiction, removed the case to this court contending that the complaint necessarily raises a substantial and disputed issue under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq. Pending before the Court is Plaintiff/Tenant 384 Bridge Street, LLC's ("384 Bridge" or "the plaintiff") motion to remand the case to state court and, pursuant to 28 U.S.C. § 1447(c), for costs and attorneys' fees. Its motion to remand is predicated on the ground that its state court complaint provides no basis for federal question jurisdiction and requires no construction of a federal statute. For the reasons stated below, the plaintiff's motion to remand is granted, and its motion for costs and attorneys' fees is denied.

PROCEDURAL HISTORY

I. 384 Bridge's State Court Complaint

On April 21, 2009, the plaintiff commenced this action in New York Supreme Court, Kings County. (Docket entry #1 (Notice of Removal) Ex. A) ("Complaint"). The Complaint alleges that, on February 7, 2006, it entered into a 99-year lease agreement with the defendant ("the Lease") for the purpose of developing a 50-story mixed-use building at 384-394 Bridge Street in Brooklyn. See Complaint ¶¶ 4-5. The Complaint further alleges that, in the course of preparing for construction, the plaintiff discovered that the site was contaminated with perchlorethylene ("PCE"), a dry-cleaning solvent.*fn1

See id. ¶ 20-23. It then halted further activity in order to investigate and abate the contamination. See id. ¶ 21-30.

In February 2009, the plaintiff sent the defendant a letter informing them of the PCE contamination and requesting reimbursement for the $1.2 million the plaintiff had already spent on investigation and cleanup. See id. ¶ 31-36; Declaration of Roberta G. Gordon ("Gordon Decl."), dated Oct. 26, 2009, Ex. B. The letter expressed the belief that the defendant, as owner of the site, was potentially responsible for the PCE cleanup pursuant to CERCLA. See Complaint ¶ 34. After receiving no response, the plaintiff sent a second letter on April 2, 2009, informing the defendant that it was exercising its right under the Lease to offset against rent payments the monies it had spent on investigation and cleanup. See id. ¶ 39; Gordon Decl. Ex. C. The plaintiff alleged that its rent offset rights under the Lease were "[a]part from CERCLA...." Id. ¶ 40. In a letter dated April 3, 2009 the defendant notified the plaintiff that it was in default for its failure to timely make a full rent payment for April 2009. See id. ¶ 43; Gordon Decl. Ex. D.

The Complaint asserts two causes of action. First, the plaintiff seeks a "Yellowstone injunction" preventing the defendant from terminating the Lease during the pendency of the action.*fn2 The plaintiff also seeks a declaratory judgment that it is entitled under the Lease to offset against rent the PCE cleanup costs and to obtain indemnification from the defendant for future costs. The provision of the Lease upon which the plaintiff bases its claim for the declaration it seeks is section 4.1 which in pertinent part provides as follows:

41.... Notwithstanding anything to the contrary in this Lease, Tenant need not pay, Tenant may offset against Rent any sums paid by Tenant on account of, and Landlord shall indemnify Tenant against payment of, the following items payable, accrued, or incurred by Landlord:.... (f) any Real Estate taxes, insurance premiums, Operating Expenses, or other costs related to the Property that accrued before the Commencement date;... (h) any costs or expenses arising as a result of the negligence or misconduct of Landlord or its agents, contractors, employees, invitees or licensees, or the default by Landlord under this Lease; and (i) all other costs or expenses that, by their nature, are personal to Landlord or Landlord's business of investing in real estate or ownership of the Fee Estate. Complaint ¶ 41 (emphasis added in Complaint). The declaratory judgment cause of action incorporates all of the previous allegations of the Complaint and further alleges:

59. Pursuant to Section 4.1 of the Lease, Plaintiff/Tenant has offset against rent payable for the month of April 2009 sums paid by Plaintiff/Tenant in connection with the investigation and remediation of the contamination.

60. Defendant/Landlord has alleged that "Section 4.1 of the Lease does not authorize Tenant to offset against rent, the costs that Tenant alleges it has incurred in connection with the investigation and remediation of the perchlorethylene contamination at or in the vicinity of the Property.

61. Therefore, there is an actual justiciable controversy between the parties regarding whether Plaintiff/Tenant has offset rights under Section 4.1 of the Lease.

Complaint ΒΆΒΆ 59-61. Based upon these allegations, the plaintiff seeks a declaration that: under Section 4.1 of the Lease (i) Plaintiff/Tenant is entitled to offset against rent otherwise due under the Lease the sums paid and to be paid by Plaintiff/Tenant in connection with the investigation and remediation of the contamination, and (ii) Defendant/Landlord must indemnify Plaintiff/Tenant ...


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