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Vornado Realty Trust, Alexander's Inc., Alexander's of Brooklyn, Inc v. Castlton Environmental Contractors

September 30, 2011

VORNADO REALTY TRUST, ALEXANDER'S INC., ALEXANDER'S OF BROOKLYN, INC., ALEXANDER'S KINGS PLAZA CENTER, INC., ALEXANDER'S KINGS PLAZA, LLC, PLAINTIFFS,
v.
CASTLTON ENVIRONMENTAL CONTRACTORS, LLC, IVI ENVIRONMENTAL, INC., ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge:

OPINION & ORDER

Plaintiffs Vornado Realty Trust ("Vornado"), Alexander's Inc., Alexander's of Brooklyn, Inc., Alexander's Kings Plaza Center, Inc. ("AKPC"), and Alexander's Kings Plaza, LLC ("AKP"), (collectively, "Plaintiffs"), initiated this action for damages against the above-captioned defendants, from an oil leak discovered on July 6, 2006 at the Kings Plaza Shopping Center (the "Site") in Brooklyn, New York. Plaintiffs seek indemnification, reimbursement and/or contribution for environmental response costs, compensation for future environmental investigation and remedial costs, and property damage, as well as declaratory and injunctive relief requiring further investigation and cleanup of the Site by Defendants. Before the court are motions for Summary Judgment pursuant to Federal Rule of Civil Procedure 56(c), from defendant IVI Environmental, Inc. ("IVI") and defendant Castlton Environmental Contractors, LLC ("CEC"), (collectively, "Defendants"). Defendants both move to dismiss all claims and cross-claims against them. The court also will address the motions for summary judgment as to the cross-claims Defendants have indicated that they still wish to challenge, as set forth in their respective letters filed in response to the court's May 6, 2011 order to show cause. (See Docket Entries Nos. 205, 206.) For the reasons set forth below, the motions for summary judgment as to the claims brought by Plaintiffs are denied, and the motions for summary judgment brought by Defendants as to the cross-claims are denied in part and granted in part.

BACKGROUND

I.State Court Action and the Release

Pursuant to a Master Agreement dated June 4, 1998 between Vornado, as agent for plaintiffs AKPC, and IVI, IVI performed site investigation and remediation services at the Site, including removal and replacement of existing underground oil storage tanks ("USTs") and the installation of new USTs. (IVI Local Rule 56.1 Statement ("IVI 56.1") ¶¶ 3-4; Plaintiffs' Local Rule 56.1 Statement of Disputed Material Facts ("Pl. 56.1 Regarding IVI") ¶¶ 3-4.) Disputes arose between IVI and Vornado concerning the work IVI was performing, as well as payment for that work, which led to Vornado's termination of the Master Agreement on May 3, 2002. (IVI 56.1 ¶ 6; Pl. 56.1 Regarding IVI ¶ 6.) IVI did not perform any further services at the Site after that date. (IVI 56.1 ¶ 6; Pl. 56.1 Regarding IVI ¶ 6.)

On July 23, 2002, IVI brought an action in the Supreme Court of the State of New York, Kings County ("state court action"), seeking to recover damages against Vornado and AKPC for breach of contract, unjust enrichment and to foreclose its mechanic's lien against the Site. (IVI 56.1 ¶ 18; Pl. 56.1 Regarding IVI ¶ 18; IVI Mot. Ex. 1.) The state court dismissed the action on the grounds that Vornado was acting as the agent of AKPC and did not own the Site. (IVI 56.1 ¶ 19; Pl. 56.1 Regarding IVI ¶ 19.) IVI then filed a Second Amended Complaint in the state court action against AKPC and AKP. (IVI 56.1 ¶ 20; Pl. 56.1 Regarding IVI ¶ 20.) AKPC and AKP filed counterclaims alleging negligence and breach of the Master Agreement against IVI, based in part on IVI's defective design of the UST system, and IVI's defective design and installation of the ground water treatment system. (IVI 56.1 ¶ 21; Pl. 56.1 Regarding IVI ¶ 21.)

On September 11, 2003, AKPC and AKP signed a "Settlement Agreement and Mutual Releases," (the "Release"), and paid $90,000 to IVI, thereby settling the claims and counterclaims in the state court action. (IVI 56.1 ¶ 22, Ex. 1; Pl. 56.1 Regarding IVI ¶ 22.) A "Stipulation of Discontinuance With Prejudice" was filed in the Kings County Clerk's office on September 30, 2003. (IVI 56.1 ¶ 23; Pl. 56.1 Regarding IVI ¶ 23.)

II.Existence of a Slow Leak

IVI alleges that in April 2002, before the Release was signed, Vornado hired Excel Environmental Resources, Inc. ("Excel"), an environmental consulting and engineering firm, to continue the Site remediation work started by IVI. (See Mario de Stefanis Affidavit ("De Stefanis Aff.") ¶ 16; Affidavit of Lawra J. Dodge ("Dodge Aff.") ¶ 4; IVI 56.1 ¶ 7; Pl. 56.1 Regarding IVI ¶ 7.) IVI further alleges that, between May 2002 and September 2003, Excel reported to Vornado that "they were recovering fresh oil in the vicinity of the Pump Room, and that there was a possibility that the oil feed pressure line running from the Pump Room to the generators on the roof of [the Site] had a slow leak." (Memorandum of Law Submitted in Support of IVI Environmental, Inc.'s Motion for Summary Judgment ("IVI Mem.") at 3 (citing de Stefanis Aff. ¶¶ 17-28, Ex. 8); see also Pl. 56.1 Regarding IVI ¶ 9-11.) IVI asserts that this oil feed pressure line is the line that Plaintiffs allege to be the source of the 2006 leak. (IVI Mem. at 3-4 (citing Affidavit of Lester Gulitz ("Gulitz Aff.") ¶¶ 5-7).) In contrast, Plaintiffs allege that they conducted the appropriate due diligence in response to Excel's report regarding a possible slow leak, and that due diligence "showed that the UST piping system was not leaking." (See Pl. 56.1 Regarding IVI ¶ 13.)

III.CEC Involvement and Bankruptcy Action

IVI alleges that it subcontracted the removal and replacement work rendered in connection with the Kings Plaza Shopping Center to Castlton Excavating, Inc., d/b/a Castlton Environmental Contractors, Inc. ("Old Castlton"). (See IVI's Rule 56.1 ¶ 4.) Old Castlton was at that time owned and operated by its parent company, Invatech, Inc. ("Invatech"). (See Declaration of William Jacobsen ("Jacobsen Decl.") ¶ 5.) On or about September 30, 2003, Invatech filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York ("Bankruptcy Court"), and the board of directors filed an application for Chapter 11 bankruptcy protection for Old Castlton and Geo-Con, Inc., which was another company controlled and/or owned by Invatech. (See Jacobsen Decl. ¶ 15.)

CEC's current president, William Jacobsen, was an at-will employee of Old Castlton and, at the time Invatech and Old Castlton filed for bankruptcy protection, Jacobsen held the title of President of the Residential Division of Old Castlton. (See Jacobsen Decl. ¶ 1, 8, 9, 10.) Jacobsen claims that he "was not consulted nor advised of the bankruptcy petitions prior to filing by Invatech's management." (Memorandum of Law Submitted in Support of Castlton Environmental Contractors, LLC's Motion for Summary Judgment ("CEC Mem.") at 4 (citing Jacobsen Decl. ¶ 16).) Jacobsen also states that, after learning of the bankruptcy proceedings, he formed Environmental Acquisition Company, LLC ("EAC") for the purpose of submitting a bid to purchase some of the assets from the bankruptcy estate of Old Castlton for use in his new company. (See Jacobsen Decl. ¶¶ 4, 10, 16, 18, 19.)

On April 16, 2004, the Bankruptcy Court issued an Order (the "Sale Order"), approving the sale of certain assets bid on by EAC. (See Jacobsen Decl. ¶ 24; Declaration of Keith Hemming, Esq. in Support of CEC's Motion for Summary Judgment ("Hemming Decl. in Support") Ex. C ("Sale Order").) On or about July 15, 2004, the Bankruptcy Court granted a motion to dismiss the debtor's Chapter 11 case and specified that all prior orders shall survive the dismissal of the bankruptcy case. (See Hemming Decl. in Support Ex. D.) Jacobsen claims that, in reliance on the Sale Order and order of dismissal, he "transferred the assets purchased by EAC to the newly formed [CEC], whose operations consist of residential UST removals and emergency roadside spill clean-ups." (See CEC Mem. at 5 (citing Jacobsen Decl. ¶ 28).)

LEGAL STANDARD

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The court must view all facts in the light most favorable to the nonmoving party, but "only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380 (2007). "When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Id. 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).

DISCUSSION

I.IVI's Motion for Summary Judgment Regarding Plaintiff's Claims

The parties dispute whether the Release signed by the parties in 2003 should apply to the instant action, thereby barring any further recovery by Plaintiffs here. Specifically, the parties dispute whether the Release is clear and unambiguous, which, if it were, would prohibit the court from looking outside the four corners of the Release to determine the intent of the parties when signing the Release. Defendants argue that the court should analyze the clear and unambiguous Release only by the language used in the Release and, thus, dismiss Plaintiffs' claims in this action. (See IVI Mem. at 4-5; CEC Mem. at 15-17.) In contrast, Plaintiffs argue that the language in the Release is not clear and unambiguous and, therefore, the court must look at external evidence to determine the actual intent of the parties when entering into the Release. (See Plaintiffs' Memorandum of Law in Opposition to IVI's Motion for Summary Judgment ("Pl. Opp. to IVI") at 6-8; Plaintiffs' Opposition to CEC's Motion for Summary Judgment ("Pl. Opp. to CEC") at 16.)

If the court finds that the Release is not clear and unambiguous, and, thus, looks to external evidence to determine the intent of the parties, then the parties disagree on their respective intent when signing the Release. In particular, the parties dispute whether they intended the Release to govern services related only to improper design, and not improper installation, of the UST system, and whether the parties were aware of the existence of a "slow leak" at the time they signed the Release in 2003. Plaintiffs argue that the external evidence reveals material issues of fact, making the determination of intent regarding the Release inappropriate for resolution on summary judgment.

A.Standard of Law Regarding Interpretation of the Release

A release is a type of contract governed by principles of contract law. See Golden Pac. Bancorp v. Fed. Deposit Ins. Corp., 273 F. 3d 509, 514 (2d Cir. 2001); Zilinskas v. Westinghouse Elec. Corp., 248 A.D. 2d 777, 778-79 (1998). The court should apply state law to determine the scope and validity of the release, and there is no dispute that New York law applies here.

See Olin Corp. v. Consol. Aluminum Corp., 5 F. 3d 10, 14-15 (2d Cir. 1993). Under New York law, a release must be construed in accordance with the executing parties' intent at the time they executed it. See Golden Pac. Bancorp, 273 F. 3d at 515.

"Where a contract is clear and unambiguous on its face, the intent of the parties must be gleaned from within the four corners of the instrument, and not from extrinsic evidence." RJE Corp. v. Northville Indus. Corp., 329 F. 3d 310, 314 (2d Cir. 2003)(citations and internal quotations omitted); see also Appel v. Ford Motor Co., 111 A.D. 2d 731, 732 (2d Dep't 1985) (where a valid release "is clear and unambiguous on its face" and is "knowingly and voluntarily entered into," it "will be enforced as a private agreement between [the] parties"). "Whether a contract is ambiguous is a question of law . . . ." RJE Corp., 329 F. 3d at 314. The terms of a contract are not ambiguous if they "have a definite and precise meaning and are not reasonably susceptible to differing interpretations." Id. (citations and internal quotation marks omitted). If the court determines that an agreement is ambiguous, it "may resort to extrinsic evidence to determine the parties' intent[,] . . . so long as the evidence is not inconsistent with the express terms of the contract." Golden Pac. Bancorp, 273 F. 3d at 517 (internal citations omitted).

While general releases are governed by principles of contract law, "[their] interpretation and limitation by the parol evidence rule are subject to special rules . . . based on a realistic recognition that releases contain standardized, even ritualistic[] language . . . ." Mangini v. McClurg, 24 N.Y. 2d 556, 562 (1969). Thus, courts have avoided general releases with respect to uncontemplated transactions, even where the language in the release form provides general coverage, where the parties are "looking no further than the precise matter in dispute that is being settled." Id.; see also Interpool Ltd. v. Patterson, 1993 WL 410465, at *11 (S.D.N.Y. Oct. 8, 1993) ("It is well recognized in New York that where 'form' releases are used, the 'standardized, ...


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