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In re Mission Construction Litigation

United States District Court, Second Circuit

August 30, 2013



HENRY PITMAN, Magistrate Judge.

I. Introduction

This is a construction damage case arising out of renovations done on a building in midtown Manhattan that was to serve as the Permanent Mission of the Republic of Namibia to the United Nations. Like many buildings in Manhattan, the building that was being renovated abuts the adjacent building. While concrete was being poured to construct a wall in the building that was being renovated, the concrete broke through the party wall shared with the adjacent building causing extensive damage to that building and its contents. The parties to these actions include the owners of both properties, the general contractor, the subcontractor, the architect and several insurance companies.

Several motions are currently pending for leave to amend the various pleadings in these three consolidated actions: (1) plaintiff USAA Casualty Insurance Company ("USAA"), as subrogee of Robert Adelman, moves pursuant to Fed.R.Civ.P. 15 and 20 to join LMW Engineering Group, LLC ("LMW") as a defendant and to file a second amended complaint in 10 Civ. 4262 (Docket Item 108 in 10 Civ. 4262, Docket Item 39 in 10 Civ. 9344, Docket Item 35 in 11 Civ. 1565); (2) defendant Ryback Development and Construction Corp. ("Ryback") moves pursuant to Fed.R.Civ.P. 14 for leave to file a third party complaint against LMW, Robert Silman Associates, P.C. ("Silman") and David Smotrich & Partners, LLP Architects/Planners ("Smotrich") in 10 Civ. 4262 (Docket Item 113 in 10 Civ. 4262) and (3) defendant the Permanent Mission of the Republic of Namibia ("the Mission") moves for leave to amend its answers in all three actions (10 Civ. 4262, 10 Civ. 9344 and 11 Civ. 1565) to assert negligence and nuisance counterclaims as a set-off against plaintiffs Robert Adelman ("Adelman"), Rag Jaw LLC ("Rag Jaw"), USAA and National Union Fire Insurance Co. of Pittsburgh ("National Union"), as subrogee of Rag Jaw (Docket Item 118 in 10 Civ. 4262).[1]

For the reasons explained below, USAA's motion is denied, Ryback's motion is granted and the Mission's motion is granted in part and denied in part.

II. Background

The facts giving rise to these actions are set forth in the decision of the Court of Appeals for the Second Circuit, affirming the denial of the Mission's motion to dismiss for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act ("FSIA"):

At some point before the events that gave rise to this action, the Republic of Namibia made the decision to house the chancery, or base of operations, of its Permanent Mission to the United Nations in a Manhattan townhouse located at 135 E. 36th Street (the "Building"). The Mission commissioned extensive interior construction in order to render the Building suitable for a diplomatic mission. To perform the proposed construction, the Mission hired an independent general contractor, Federation Development Corporation ("Federation"), which in turn hired a subcontractor, Ryback Development, Inc. ("Ryback") (together with Federation, the "Contractors").
The townhouse adjoining the Building, 133 E. 36th Street, was then owned by Robert Adelman and insured by USAA Casulty Insurance Co. ("USAA"). The Building was separated from the Adelman townhouse by a brick and mortar party wall, upon which the support beams of the Adelman townhouse rested.
In early December 2008, Ryback employees began pouring a reinforced concrete wall in the interior of the Building, alongside the existing party wall. On December 15, as the concrete wall was being poured, the party wall collapsed, causing substantial damage to Adelman's property. Adelman filed an insurance claim with USAA, which paid Adelman $397, 730 for his damages.

USAA Cas. Ins. Co. v. Permanent Mission of Republic of Namibia , 681 F.3d 103, 105 (2d Cir. 2012).

Three separate actions were commenced arising out of this construction accident (the "Accident"). First, in an action originally commenced in New York State Court on April 21, 2010, and then removed to this court on May 26, 2010, USAA, as subrogee of Adelman, sued the Mission, Federation and Ryback (the "USAA Action"). Second, in an action commenced on December 15, 2010, National Union, as subrogee of Rag Jaw, [2] sued the Mission, Federation, Ryback, LMW, Silman and Smotrich (the "National Union Action"). Finally, in an action commenced on March 8, 2011, Rag Jaw and Adelman sued the Mission, Federation, Ryback, LMW, Silman, Smotrich and John Doe 1-10 (the "Rag Jaw Action").

In the USAA Action, the Mission moved to dismiss the claims against it on various grounds, including failure to state a claim and lack of subject matter jurisdiction under the FSIA.[3] By Memorandum Order dated November 17, 2010, Judge Swain denied the motion to dismiss the action for lack of subject matter jurisdiction, but granted the motion to dismiss the claims for trespass and injury from ultrahazardous activity for failure to state a claim. USAA Cas. Ins. Co. v. Permanent Mission of Republic of Namibia, 10 Civ. 4262 (LTS), 2010 WL 4739945 at *3, *4 (S.D.N.Y. Nov. 17, 2010). As noted above, the Court of Appeals affirmed Judge Swain's denial of the motion to dismiss the action for lack of subject matter jurisdiction under the FSIA. USAA Cas. Ins. Co. v. Permanent Mission of Republic of Namibia, supra , 681 F.3d at 113-14. No issue was raised on that appeal with respect to Judge Swain's dismissal of the trespass and injury from an ultrahazardous activity. USAA Cas. Ins. Co. v. Permanent Mission of Republic of Namibia, supra , 681 F.3d at 106.

While the Mission's interlocutory appeal was pending, Judge Swain, by an Order dated January 31, 2011, stayed all proceedings in the USAA Action (Docket Item 71). On October 18, 2011, the National Union and Rag Jaw Actions were consolidated with the USAA Action; the proceedings in those actions were also stayed (Docket Item 76). The stay was lifted on July 18, 2012 (Docket Item 82). After adjourning a scheduling conference several times at the request of counsel, Judge Swain issued a pre-trial scheduling Order on December 13, 2012, which set February 1, 2013 as the deadline for any applications to amend pleadings or join parties (Docket Item 99).

III. Analysis

A. USAA's Motion to Amend

USAA seeks leave to file a second amended complaint[4] that adds LMW as a defendant and asserts claims against it for negligence, nuisance and res ipsa loquitor[5] (Declaration of Robert W. Phelan, Esq. in Support of Motion for Leave to Join a Defendant and File Plaintiff's Second Amended Complaint (Docket Item 109) ("Phelan Decl.") Ex. 10 ("Proposed Compl.")).

As alleged in the Proposed Complaint, USAA insured Adelman against certain losses, including additional living expenditures, resulting from any damage to Adelman's townhouse (Proposed Compl. ¶ 16). After the Accident, USAA paid Adelman $397, 730 for alternative living expenditures he incurred as a result of the Accident (Proposed Compl. ¶¶ 22, 28). As relevant here, USAA alleges that the Accident was caused by the negligence of LMW, which served as the supervising or field engineer for the Mission's construction project (Proposed Compl. ¶¶ 15, 18, 23-28). USAA, as subrogee of Adelman, seeks to recover from LMW the payment it made to Adelman.

1. Applicable Law: Motion to Amend under Rule 15

The standards applicable to a motion to amend a pleading are well settled and require only brief review. In general, a motion to amend is governed by Fed.R.Civ.P. 15(a), which provides that leave to amend should be freely granted when justice so requires. Fed.R.Civ.P. 15(a); Foman v. Davis , 371 U.S. 178, 182 (1962); McCarthy v. Dun & Bradstreet Corp. , 482 F.3d 184, 200 (2d Cir. 2007); Aetna Cas. & Sur. Co. v. Aniero Concrete Co. , 404 F.3d 566, 603 (2d Cir. 2005); Dluhos v. Floating & Abandoned Vessel, Known as "New York" , 162 F.3d 63, 69 (2d Cir. 1998); Satchell v. Dilworth , 745 F.2d 781, 785 (2d Cir. 1984); Gumer v. Shearson, Hammill & Co. , 516 F.2d 283, 287 (2d Cir. 1974). "Nonetheless, the Court may deny leave if the amendment (1) has been delayed unduly, (2) is sought for dilatory purposes or is made in bad faith, (3) the opposing party would be prejudiced, or (4) would be futile." Lee v. Regal Cruises, Ltd. , 916 F.Supp. 300, 303 (S.D.N.Y. 1996) (Kaplan, D.J.), aff'd, 116 F.3d 465 (2d Cir. 1997); see McCarthy v. Dun & Bradstreet Corp., supra , 482 F.3d at 200; Ellis v. Chao , 336 F.3d 114, 126-27 (2d Cir. 2003); Montefiore Med. Ctr. v. Am. Prot. Ins. Co., 00 Civ. 3235 (LTS)(MHD), 2003 WL 21108261 at *1 (S.D.N.Y. May 14, 2003) (Swain, D.J.); Am. Home Assur. Co. v. Jacky Maeder (Hong Kong) Ltd. , 969 F.Supp. 184, 187-88 (S.D.N.Y. 1997) (Kaplan, D.J.).[6]

A proposed amendment is futile when it fails to state a claim. Health-Chem Corp. v. Baker , 915 F.2d 805, 810 (2d Cir. 1990); Mina Inv. Holdings Ltd. v. Lefkowitz , 184 F.R.D. 245, 257 (S.D.N.Y. 1999) (Sweet, D.J.); Parker v. Sony Pictures Entm't, Inc. , 19 F.Supp.2d 141, 156 (S.D.N.Y. 1998) (Kaplan, D.J.), aff'd in pertinent part, vacated in part on other grounds sub nom., Parker v. Columbia Pictures Indus. , 204 F.3d 326 (2d Cir. 2000); Yaba v. Cadwalader, Wickersham & Taft , 931 F.Supp. 271, 274 (S.D.N.Y. 1996) (Koeltl, D.J.); Prudential Ins. Co. v. BMC Indus. , 655 F.Supp. 710, 711 (S.D.N.Y. 1987) (Sweet, D.J.); see generally Dluhos v. Floating & Abandoned Vessel Known as "New York", supra , 162 F.3d at 69-70. The party opposing the amendment has the burden of demonstrating that a proposed amendment would be futile. Staskowski v. Cnty. of Nassau , 05 Civ. 5984 (SJF)(WDW), 2007 WL 4198341 at *4 (E.D.N.Y. Nov. 21, 2007); see also Lugosch v. Congel, 00 Civ. 784 (RFT), 2002 WL 1001003 at *1 (N.D.N.Y. May 14, 2002).

"Amendment would likely be futile if, for example, the claims the plaintiff sought to add would be barred by the applicable statute of limitations." Grace v. Rosenstock , 228 F.3d 40, 53 (2d Cir. 2000); accord In re WorldCom, Inc. Sec. Litig. , 303 F.Supp.2d 385, 390-91 (S.D.N.Y. 2004) (Cote, D.J.). In addition, a proposed amendment may be denied as futile "where the claim or defense proposed to be added has no colorable merit." Oliver v. DeMarinis & Co. , 90 Civ. 7950 (SS), 1993 WL 33421 at *2 (S.D.N.Y. Jan. 29, 1993) (Lee, M.J.) (internal quotations omitted); see also Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities, Inc. , 748 F.2d 774, 783 (2d Cir. 1984) (if the movant has "colorable grounds for relief, " justice requires that leave to amend be granted in the absence of undue delay, bad faith, or prejudice). The "colorable grounds' requirement mandates that a district court may not deny a motion for leave to amend a pleading [on futility grounds] when said pleading is sufficient to withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)." Children First Found. Inc. v. Martinez, 04 Civ. 0927 (NPM), 2007 WL 4618524 at *5 (N.D.N.Y. Dec. 27, 2007), citing in part Kassner v. 2nd Ave. Delicatessen, Inc. , 496 F.3d 229, 244 (2d Cir. 2007); see also Estate of Ratcliffe v. Pradera Realty Co. , 05 Civ. 10272 (JFK), 2007 WL 3084977 at *4 (S.D.N.Y. Oct. 19, 2007) (Keenan, D.J.); Journal Publ'g Co. v. Am. Home Assur. Co. , 771 F.Supp. 632, 635 (S.D.N.Y. 1991) (Leisure, D.J.); Prudential Ins. Co. v. BMC Indus., Inc., supra , 655 F.Supp. at 711. In assessing whether a proposed amended pleading is futile, the court must assume the truth of the factual allegations set forth in the proposed amended pleading. Edwards v. City of N.Y., 07-CV-5286 (CPS)(RML), 2009 WL 1910740 at *1 (E.D.N.Y. June 29, 2009); Da Cruz v. Towmasters of N.J. , 217 F.R.D. 126, 128 n.1 (E.D.N.Y. 2003); Binder v. Nat'l Life of Vt. , 02 Civ. 6411 (GEL), 2003 WL 21180417 at *2 (S.D.N.Y. May 20, 2003) (Lynch, then D.J., now Cir. J.); Gabourel v. Bouchard Transp. Co. , 901 F.Supp. 142, 144 (S.D.N.Y. 1995) (Chin, then D.J., now Cir. J.).

In evaluating a motion under Rule 12(b)(6), the court must determine whether the plaintiff has alleged any facially plausible claims. See Virgil v. Town of Gates , 455 F.Appx. 36, 37 (2d Cir. 2012); Smith v. NYCHA , 410 F.Appx. 404, 405-06 (2d Cir. 2011). A claim is plausible when its factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (citations omitted). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Ashcroft v. Iqbal, supra , 556 U.S. at 696 (internal quotations omitted). Accordingly, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not show[n]' - that the pleader is entitled to relief.'" Ashcroft v. Iqbal, supra , 556 U.S. at 679, quoting Fed.R.Civ.P. 8(a)(2).

The Court of Appeals has also repeatedly noted that the trial court has broad discretion in ruling on a motion to amend. See, e.g., Gurary v. Winehouse , 235 F.3d 792, 801 (2d Cir. 2000); Local 802, Associated Musicians of Greater N.Y. v. Parker Meridien Hotel , 145 F.3d 85, 89 (2d Cir. 1998); Guzman v. Bevona , 90 F.3d 641, 649 (2d Cir. 1996); see generally Grace v. Rosenstock, supra , 228 F.3d at 53-54.

2. Application of the Foregoing Legal Principles

USAA contends that joinder of LMW as a new defendant in the USAA Action is appropriate because its proposed claims against LMW (1) arise out of the same transaction and occurrence as the claims asserted in its original complaint and (2) relate back to its original complaint and are, therefore, timely. LMW opposes the motion, arguing that the claims are barred by the statute of limitations because they do not relate back and that USAA unduly delayed in bringing this motion.

a. Timeliness of Proposed Claims

New York law provides a three-year statute of limitations for claims of nuisance and negligence. N.Y. C.P.L.R. § 214(4). "A negligence claim accrues on the date of injury, that is, when the cause of action is complete' and a plaintiff may plead all the required elements." Coleman & Co. Sec., Inc. v. Giaquinto Family Trust , 236 F.Supp.2d 288, 299 (S.D.N.Y. 2002) (Chin, then D.J., now Cir. J.), citing Brooklyn Union Gas Co. v. Hunter Turbo Corp. , 241 A.D.2d 505, 506, 660 N.Y.S.2d 877, 878 (2d Dep't 1997). When a claim for nuisance accrues under New York law is not so clear.[7]

New York recognizes that some nuisance claims give rise to a continuing tort that accrues anew on each day the nuisance continues. Unfortunately, it is difficult to discern from New York case law when a nuisance will be deemed continuing and when it will not. For example, in Covington v. Walker , 3 N.Y.3d 287, 292, 819 N.E.2d 1025, 1027-28, 786 N.Y.S.2d 409, 411-12 (2004), the New York Court of Appeals explained that courts have applied the continuing tort doctrine

in certain cases such as nuisance or continuing trespass where the harm sustained by the complaining party is not exclusively traced to the day when the original objectionable act was committed. The rule is based on the principle that continuous injuries create separate causes of action barred only by the running of the statute of limitations against each successive trespass. The repeated offenses are ...

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