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Federal Insurance Co. v. Metropolitan Transportation Authority

United States District Court, S.D. New York

July 10, 2017


          OPINION & ORDER

          JOHN F. KEENAN, United States District Judge

         I. Background

         Federal is an Indiana corporation with its principal place of business in New Jersey. All defendants are New York corporations with their principal places of business in New York. Lanmark Group Inc. (“Lanmark”), who contracted to perform the work entailed in upgrading the elevator, roofing, and other portions of the NYCTA Headquarters, is not implicated in the instant application for injunctive relief.

         On December 5, 2014, Lanmark and NYCTA entered into a construction contract (the “Contract”) to upgrade the façade at the NYCTA Headquarters. (See Decl. of Derek Popeil [hereinafter “Popeil Decl.”] Ex. A, ECF No. 23-1 (filed June 20, 2017).) The original price of the Contract was $24, 517, 850. (Id.) On September 19, 2014, Federal, as surety, executed a performance bond (the “Bond”) in favor of MTA, acting by NYCTA, as obligee under the Bond. (Id. Ex. C, ECF No. 23-2.) The Bond incorporates the full amount of the Contract and states that the Contract “is annexed to and hereby made a part of this bond as though herein set forth in full[.]” (Id.) The Bond also provides:

The Surety, for value received, hereby stipulates and agrees, if requested to do so by the Authority, to fully perform and complete the Project to be performed under the Contract, pursuant to the terms, conditions, and covenants thereof, if for any cause, the Contractor fails or neglects to so fully perform and complete such Project.

(Id.) Lanmark paid Federal a premium in connection with executing the Bond.

         On November 22, 2016, NYCTA notified Lanmark and Federal of ten putative events of default under the Contract pertaining to Lanmark's allegedly negligent and delaying work at the NYCTA Headquarters. On April 19, 2017, NYCTA notified Lanmark by letter (the “Termination Letter”) of its decision to terminate Lanmark due to its various alleged failures. In May 2017, however, the Supreme Court of the State of New York, Kings County, temporarily enjoined NYCTA from enforcing its termination of Lanmark until September 6, 2017. (See Pl.'s Mem. of L. in Support of Appl. for Prelim. Inj. & TRO [hereinafter “Pl.'s Mem. of L.”] Ex. A, ECF No. 22 (filed June 20, 2017); see also Popeil Decl. Ex. J, ECF No. 23-8.) According to the parties, the dispute regarding NYCTA's termination of Lanmark is currently proceeding pursuant to the dispute resolution procedure set out in the Contract.

         In the Termination Letter, also sent to Federal, NYCTA demanded that Federal honor its obligations under the Bond to ensure completion of the work under the Contract. Federal has refused, claiming that it cannot be required to participate in the performance of Contract work because the NYCTA Headquarters allegedly has state and city code violations that pre-date the Contract.[1] (See Pl.'s Mem. of L. at 10-12, 14-15.) Federal further asserts that to complete the work now would require that it violate safety provisions in the New York Labor Law. (Id. at 9.)

         In the instant application, Federal seeks a preliminary injunction enjoining Defendants from enforcing its obligations under the Bond. Federal maintains that it will suffer irreparable harm unless an injunction issues and, further, that it is likely to succeed on the merits of this litigation. Defendants contend that Federal, as the surety, may satisfy its obligations under the Bond without actually participating in or performing the actual work. Thus, Defendants claim that Federal will not suffer irreparable injury without an injunction and that Federal will not succeed on the merits.

         II. Legal Standard

         Preliminary injunctive relief is “one of the most drastic tools in the arsenal of judicial remedies.” Hanson Trust PLC v. SCM Corp., 774 F.2d 47, 60 (2d Cir. 1985). In the Second Circuit, it is axiomatic that “[a] party seeking a preliminary injunction must show ‘(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.'” Park Irmat Drug Corp. v. Optumrx, Inc., 152 F.Supp.3d 127, 132 (S.D.N.Y. 2016) (quoting Citigroup Glob. Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 35 (2d Cir. 2010) (reciting standard in case where jurisdiction was premised on diversity of the parties)). “A moving party must show that the injury it will suffer is likely and imminent, not remote or speculative, and that such injury is not capable of being fully remedied by money damages.” NAACP v. Town of E. Haven, 70 F.3d 219, 224 (2d Cir. 1995).

         “In addition, the court must ensure that the public interest would not be disserved by the issuance of a preliminary injunction.” Park Irmat Drug Corp., 152 F.Supp.3d at 132. (internal quotation marks omitted). “In deciding a motion for preliminary injunction, a court may consider the entire record including affidavits and other hearsay evidence.” Id. (internal quotation marks omitted).

         III. Discussion

         The application for a preliminary injunction must be denied because Federal has not demonstrated that it will suffer irreparable harm in the absence of injunctive relief. A showing of irreparable harm is the sine qua non of a preliminary injunction. See REDF Organic Recovery, LLC v. Kafin, No. 12 Civ. 7973(JFK), 2012 WL 5844191, at *2 (S.D.N.Y. Nov. 19, 2012); see also Town of E. Haven, 70 F.3d at 224 (“[A] showing of irreparable harm [is] the most important prerequisite for the issuance of a preliminary injunction.”). Here, Federal's principal argument is that, without an injunction, it will suffer irreparable harm if required to participate in the performance of work that it contends is dangerous and does not correct alleged code violations. (See Pl.'s Mem. of L. at 10-12, 14-15.) ...

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