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S-P Associates, Lp F/K/A v. United Cleaners & Launderers

September 13, 2011


The opinion of the court was delivered by: Charles J. Siragusa United States District Judge



This matter is before the Court on Plaintiff's motion for default judgment. (Doc. No. 17.) On October 18, 2007, S-P Associates, LP ("Plaintiff"), owners of property located at 2199 East Henrietta Road, Suburban Plaza, Town of Brighton, State of New York, commenced this action against United Cleaners and Launderers, Inc., also known as United Dry Cleaning Rochester Corporation doing business as United Cleaners, Hanif Suleman, Nasrullah Suleman, Ali Sha Mithani, and Amir Mithani ("Defendants"). (Doc. No. 1.) Plaintiff seeks compensation for environmental contamination caused by releases of contaminants from a dry cleaning facility operated by Defendants. (Id. ¶¶ 1, 2) Plaintiff's action is pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 41 U.S.C. § 9601, et seq., state statutory and common law theories, including Article 37 of the New York Environmental Conservation Law ("ECL"). (Id. ¶ 3) On January 18, 2011, Plaintiff filed the present motion for default judgment under Rule 55 of the Federal Rules of Civil Procedure seeking compensation in the sum of $401,038.10. (Doc. No. 17.) For the reasons discussed hereinafter, Plaintiff's motion is granted in part and denied in part. The Court will schedule an inquest regarding the amount of damages to be awarded to Plaintiff.


Unless otherwise noted the following facts are taken from the complaint and are assumed to be true for purposes of this motion. (Doc. No. 1.) In or about April, 1993, Defendants entered into a Lease Agreement with Plaintiff for the purposes of operating a pick-up dry cleaning service at 2199 East Henrietta Road. (Id. ¶ 13) Defendants had previously entered into two other Lease Agreements for the same property with Plaintiff dating back to 1984. (Id. ¶ 15) During Defendant's tenancy at 2199 East Henrietta Road, tetrachloroethylene ("TCE") and chlorinated volatile organic compounds ("CVOCs") were disposed of or otherwise released from the dry cleaning facility, causing soil and groundwater contamination. (Id. ¶¶ 26, 27)

On March 6, 2007, Plaintiff reported the contamination to the New York State Department of Environmental Conservation. (Id. ¶ 29) Also on March 6, 2007, Plaintiff made a written demand to Defendants, requesting that they assume the indemnification responsibilities pursuant to the current Lease Agreement. (Id. ¶ 30) Plaintiff asserts that Defendant is liable for damages sustained by Plaintiff pursuant to the following legal claims: 1) strict liability pursuant to Section 107(a) of CERCLA, 2) piercing the corporate veil of United Cleaners, 3) strict liability under Article 37 of the ECL, 4) negligence, 5) breach of contract based on Defendant's failure to investigate and remediate the contamination existing at the site, 6) breach of contract based on Defendant's failure to indemnify Plaintiff pursuant to the terms of the Lease Agreement, 7) common law strict liability based on Defendant's abnormally hazardous activities, 8) private nuisance, and 9) common law indemnity. (Doc. No. 1.)

On October 18, 2007, Plaintiff filed this action and on October 24, 2007, Defendants were served with a summons and a copy of the complaint. (Doc. Nos. 2, 3, 4, 5, 6.) Pursuant to Rule 12(a)(1)(A) of the Federal Rules of Civil Procedure, Defendants were required to serve an answer to the summons and complaint by November 13, 2007. Plaintiff agreed to three separate extensions of time for Defendants to answer the summons and complaint. (Doc. Nos. 7, 8.) The final extension of time required Defendants to answer by April 8, 2008. (Doc. No. 17.) Defendants failed to answer and a default was entered by the Clerk on April 22, 2008. (Doc. No. 11.)

In the fall of 2008, Plaintiff began preparing a motion for default judgment based on Defendant's failure to answer. (Doc. No. 15.) At the same time, Plaintiff and Defendant began discussing the possibility of settlement of this action. (Id. ¶ 9) However, Defendants were unwilling to negotiate settlement and indicated that they would file for bankruptcy if Plaintiff filed a motion for default judgment. (Id. ¶ 10) Because of these threats, Plaintiff decided to delay filing a motion for default judgment in order to engage in further discussions regarding the possibility of settlement. (Id. ¶ 13) Plaintiff and Defendant continued discussions about potential settlement options. Defendants repeatedly expressed an interest in settling, but did not reach an agreement. (Id. ¶ 13) In the summer of 2010, almost two years after Plaintiff began preparing a motion for default judgment, Defendants ceased all communication with Plaintiff. (Id. ¶14) Thereafter, neither party took any further action in the lawsuit until the Court issued an Order to Show Cause on December 2, 2010. (Doc. No. 12.) Pursuant to Western District of N.Y., Local Rule of Civil Procedure 41.2, that order required Plaintiff to make a written statement as to why the case should not be dismissed for failure to prosecute. (Id.) On January 18, 2011, Plaintiff filed a timely affidavit in response explaining the reasons for its failure to prosecute, and the Court was satisfied that Plaintiff had not abandoned this prosecution. Based on the affidavit in response to the Order to Show Cause (Doc. No. 15.), the Court ruled that it would not dismiss the action. (Doc. No. 23.)

On January 18, 2011, when Plaintiff filed its affidavit in response to the Order to Show Cause, Plaintiff also filed a motion for entry of a default judgment. Defendants United Cleaners, Hanif Suleman, Nasrullah Suleman, Ali Sha Mithani, and Amir Mithani did not appear in this action.*fn1


Rule 55 of the Federal Rules of Civil Procedure -- Default and Default Judgment "Rule 55 of the Federal Rules of Civil Procedure provides a two-step process for obtaining a default judgment." New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). If a party has failed to plead or otherwise defend an action the opposing party may bring this to the court's attention. First "Rule 55(a) empowers the clerk of the court to enter a default against a party that has not appeared or defended. Having obtained a default from the clerk of the court, a plaintiff must next seek a judgment by default under Rule 55(b)." Id. In this case, because the Clerk of the Court has already entered a default and the Plaintiff's claim is not a sum certain, Rule 55(b)(2) applies. Pursuant to Rule 55(b)(2), the non-defaulting party must apply to the court to request default judgment, but only when the defaulting party has appeared in the action must the non-defaulting party provide advance notice of its motion for default judgment. Fed. R. Civ. P. 55(b)(2). In this case, because the Defendants never appeared in the action, Plaintiff is not required to give advance written notice of its motion for default judgment.

In addition to considering whether the defaulting party has appeared, the Court must also consider, "whether the facts alleged in the complaint are sufficient to state a claim for relief as to each cause of action for which the plaintiff seeks default judgment." Garden City Boxing Club, Inc. v. Giambra, No. 02-CV-839S, 2004 U.S. Dist. LEXIS 14995, 2004 WL 1698633 at *1 (W.D.N.Y. Jul. 27, 2004). If the Court determines that the complaint is sufficient, a default judgment is entered and the allegations of the complaint which establish a defendant's liability are accepted as true, except for those relating to damages. Greyhound Exhibitgroup, Inc., v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992).

Complaint must be Sufficient to State a Claim for Relief

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 U.S. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Federal Rule of Civil Procedure 8(a)(2) requires only a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the claim is and the grounds upon which it rests. Fed. R. Civ. P. 8(a)(2). "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Ashcroft, 129 U.S. at 1950. The Court does "not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp., 550 U.S. at 570. When applying this standard, a district court must accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party. Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir. 1999). In order to grant relief, this standard is applied to each of Plaintiff's claims to determine whether a sufficient claim was stated. Appearance

"Ordinarily, an appearance in an action requires a formal submission to the Court." Green, 420 F.3d at 105.

Circuits are divided on whether anything less than a formal appearance is necessary to actuate the notice requirement of Rule 55(b)(2). The prevailing view is that "the notice requirement contained in Rule 55(b)(2)" applies not only to parties who have formally appeared, but also to those parties who, although delaying in a formal sense by failing to file pleadings within the twenty-day period, have otherwise indicated to the moving party a clear purpose to defend the suit.

Id. "[I]n certain circumstances courts have been willing to find that a party had informally appeared in an action based on settlement discussions, in each of those cases the defendant clearly indicated to the plaintiff that if settlement negotiations ...

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