Opinion
03 Civ. 374 (SAS).
June 17, 2004
James A. Abate, Esq., Clausen Miller, P.C., New York, New York, for Plaintiffs.
Gail M. Kelly, Esq., Conway, Farrell, Curtin Kelly, P.C., New York, New York, for Defendants.
OPINION AND ORDER
I. INTRODUCTION
Two insurance companies, American Motorist Insurance Company and Chubb Custom Insurance Company (collectively "Insurers") bring this action against Jodamo International, Ltd.'s ("Jodamo") landlord, Morris Goldman Real Estate Corp. ("Goldman"), to recover amounts paid to Jodamo, notwithstanding a waiver of subrogation clause found in Jodamo's Lease Agreement for property located at 321 Grand Street. The plaintiffs allege that Jodamo suffered property damage as a result of Goldman's grossly negligent conduct. Both parties now move for summary judgment. For the reasons stated below, summary judgment is granted in favor of the Insurers.
II. BACKGROUND
This Court has jurisdiction based on diversity of citizenship. American Motorist, Chubb, and Goldman are citizens of Illinois, Delaware, and New York, respectively.
See Complaint ("Compl.") ¶¶ 1, 2, 5.
Jodamo is a designer menswear store located at 321 Grand Street in Manhattan, on property leased from Goldman since 1995. On January 8, 1996, a portion of the store's wet pipe sprinkler system froze and ruptured, flooding the store, and largely ruining Jodamo's inventory.
See 12/29/95 Lease Agreement ("Lease Agreement"), Ex. C to 3/15/04 Affirmation of James A. Abate, counsel for plaintiff, in Support of Plaintiff's Motion for Summary Judgment ("Abate Aff."), at 1.
See 2/1/96 Letter from Ingemar Asp, Fire Protection Engineer and expert witness for plaintiff Atlantic Mutual in Atl. Mutual Ins. Co. v. Morris Goldman Real Estate Corp., 736 N.Y.S.2d 875 (2002) (" Jodamo I"), to Mark Mullen, counsel for plaintiff Atlantic Mutual ("Asp Letter"), Ex. F to Abate Aff., at 2.
See Testimony of Delores Durant, Claims Adjuster and expert witness for plaintiff Atlantic Mutual, Transcript of Trial for Atl. Mutual Ins. Co. a/s/o Jodamo Int'l, Ltd. v. Morris Goldman Real Estate Corp., N.Y. Sup. Ct., 4/25/00 ("Jodamo I Trial Tr."), Ex. G to Abate Aff., at 36.
At that time, Jodamo was insured by Atlantic Mutual Insurance Company ("Atlantic Mutual"), which compensated Jodamo for its losses. Atlantic Mutual then sued Goldman to recover the monies it paid to cover Jodamo's losses. The case was tried on April 25, 2000, and the jury ultimately determined that Goldman's negligent failure to provide adequate heat to Jodamo had caused the sprinkler pipe to freeze and burst.
See Jodamo I Trial Tr. at 1.
See Jodamo I.
See id.
The jury awarded Atlantic Mutual more than one million dollars, a figure that represented the full amount that Atlantic Mutual had paid to cover Jodamo's losses. The amount paid by Atlantic Mutual represented the total retail price of each damaged item in the Jodamo inventory. Goldman moved to set aside the jury verdict, but the motion was denied as untimely filed. The denial of Goldman's motion was upheld on appeal.
See 5/30/00 Letter from William C. Van Thunen, General Adjuster, to Chubb Custom ("Van Thunen Letter"), Ex. E to Abate Aff., at 2. Compare Jodamo I Trial Tr. at 399.
See id.
See Jodamo I.
See id.
On January 23, 2000, before the Jodamo I jury reached a verdict, Jodamo's wet pipe sprinkler system froze again and burst again, flooding the store for a second time. Jodamo's inventory was again damaged, and Jodamo collected an amount exceeding $450,000 from American Motorist and Chubb, which were now its insurers. This figure was again based on the retail price of each damaged item. The Insurers now seek recovery from Goldman for this second sprinkler system failure.
See Compl. ¶¶ 18, 19, 20, 21, 22.
See Plaintiff's Memorandum of Law in Support of Motion for Summary Judgment ("Pl. Mem.") at 8.
See Proposed Adjustment, Ex. E to Abate Aff. at 2.
For its defense, Goldman relies on a waiver of subrogation clause contained in the Lease Agreement. Clause 9(e) of the Lease provides, in pertinent part, that each party "hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise."
No party has informed this Court as to whether the waiver of subrogation clause in the Lease was raised in Jodamo I.
See Lease Agreement, Ex. C to Abate Aff. at 2.
On August 6, 2003, this Court held that the waiver of subrogation clause would not bar this action if Goldman acted recklessly or was grossly negligent. As the Insurers' initial complaint failed to allege gross negligence, the complaint was dismissed with leave to amend the complaint to include such a claim. That amended complaint is now before the Court, together with cross motions for summary judgment.
See Am. Motorist Ins. Co. v. Morris Goldman Real Estate Corp., 277 F. Supp.2d 304, 309 (S.D.N.Y. 2003).
III. SUMMARY JUDGMENT
A. Legal Standard
Summary judgment is permissible "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "An issue of fact is genuine if the evidence is such that a jury could return a verdict for the nonmoving party." A fact is material when "it might affect the outcome of the suit under the governing law."
Gayle v. Gonyea, 313 F.3d 677, 682 (2d Cir. 2002) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)).
Id. (quoting Anderson, 477 U.S. at 248).
The party seeking summary judgment has the burden of demonstrating that no genuine issue of material fact exists. Accordingly, the non-moving party can defeat summary judgment by raising a genuine issue of material fact. However, she "must do more than simply show that there is some metaphysical doubt as to the material facts," and she "may not rely on conclusory allegations or unsubstantiated speculation."
See Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002) (citing Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970)).
Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).
Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 428 (2d Cir. 2001) (quoting Scotto v. Almenas, 143 F.3d at 105, 114 (2d Cir. 1998)). See also Gayle, 313 F.3d at 682.
Rather, the non-moving party must produce admissible evidence that supports her pleadings. In this regard, "[t]he mere existence of a scintilla of evidence supporting the non-movant's case is also insufficient to defeat summary judgment."
See First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289-90 (1968).
Niagara Mohawk Power Corp. v. Jones Chem., Inc., 315 F.3d 171, 175 (2d Cir. 2003) (quoting Anderson, 477 U.S. at 252).
In accordance with Rule 56.1 of the Local Civil Rules of the United States District Courts for the Southern and Eastern Districts of New York ("Local Rule 56.1"), a party moving for summary judgment must submit "a separate, short and concise statement," which lists facts undisputed by either party. Similarly, a party opposing summary judgment must submit a statement that either disputes or admits the facts listed by the moving party. "The facts set forth in a moving party's statement will be deemed to be admitted unless controverted by the opposing party's statement."
Local Rule 56.1(a)
Local Rule 56.1(b).
Holtz v. Rockefeller Co., 258 F.3d 62, 72 (2d Cir. 2001) (quoting Local Rule 56.1(c)).
While it is obviously preferable for parties to comply with local court rules, district courts may overlook a party's failure to do so. Local Rule 56.1 is not "a vehicle for making factual assertions that are otherwise unsupported in the record." A non-moving party's failure to file a proper statement will not automatically establish as fact each and every allegation made by the moving party. Even if the party opposing summary judgment fails to dispute the facts asserted by the moving party, the moving party's "unsupported assertions must nonetheless be disregarded and the record independently reviewed."
See id. at 73.
Id. at 74.
Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003).
B. Discussion
While the Insurers have filed a proper statement asserting undisputed facts in support of their motion for summary judgment, Goldman has failed to file a statement that clearly and concisely lists the facts that it wishes to dispute. The Insurers argue that Goldman's failure to contest the allegations set forth in the Insurers' statement effectively establishes those facts as uncontested. Because it would be less than fair to Goldman for this Court to credit everything that the Insurers allege based on Goldman's procedural error, this Court has reviewed the record independently, and has reached the following conclusions.
Goldman did file a Local Rule 56.1(a) statement in support of its own motion for summary judgment. Even if this Court were to treat Goldman's 56.1 statement as its counter-statement, Goldman still does not controvert the material facts asserted by the Insurers that are necessary to decide this motion for summary judgment. Accordingly, I shall proceed with an independent review of the record.
See Plaintiff's Counter Statement Pursuant to Local Civ. R. 56.1(b) at 1.
It is clear that the water in the sprinkler pipe froze because there was inadequate heating in the Jodamo store. In Jodamo I, Ingemar Asp, Atlantic Mutual's expert witness, testified that heat had escaped the store through holes in the building's exterior walls, causing the pipe to freeze and burst. The Insurers here assert that the second wet pipe burst occurred for the same reasons that it occurred the first time. Vincent Valetutti, Goldman's expert witness in this action, has reported that the second wet pipe burst was caused by insufficient heat in the building, and has suggested that the heat again left the building through holes in the exterior walls.
See Compl. ¶ 18. Compare 12/3/03 Letter from Vincent Valetutti to Gail M. Kelly, defendant's counsel ("Valetutti Letter"), Ex. B to Affirmation of Gail M. Kelly in Support of Defendant's Motion for Summary Judgment ("Kelly Aff."), at 3.
See Testimony of Ingemar Asp ("Asp Test."), Jodamo I Trial Tr. at 202. See also Asp Letter.
See Pl. Mem. at 3.
See Valetutti Letter at 3.
As both parties agree on the cause of the wet pipe sprinkler burst, and the manner in which it occurred, there is no issue of material fact for a jury to decide. Goldman simply asserts that the waiver of subrogation clause bars the Insurers' claim because they have failed to show that Goldman was grossly negligent. As "the pleadings, depositions, answers to interrogatories, and admissions on file . . . show that there is no issue as to any material fact," summary judgment must be granted to one party as a matter of law. For the following reasons, summary judgment is granted in favor of the Insurers.
See Memorandum of Law of Defendant Morris Goldman Real Estate Corp. ("Def. Mem.") at 13.
IV. COLLATERAL ESTOPPEL
A. Legal Standard
The doctrine of res judicata consists of two distinct preclusion concepts: "claim preclusion" and "issue preclusion." Issue preclusion, also known as collateral estoppel, refers to the effect of a judgment in foreclosing litigation of a matter that has been litigated and decided. It is well-settled under New York law that collateral estoppel "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party . . . whether or not the tribunals or causes of action are the same."
Claim preclusion embodies the concept that a judgment resolves all other claims arising out of the same transaction and involving the same parties.
See Migra v. Warren City Sch. Dist. Bd. Of Educ., 465 U.S. 75, 77 n. 1 (1984).
Id.
Burgos v. Hopkins, 14 F.3d 787, 792 (2d Cir. 1994) (quoting Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500 (1984)).
Collateral estoppel does not require that the parties be the same in both actions. However, four requirements must be met before issue preclusion can be applied. "A party is collaterally estopped from raising an issue in a proceeding if: (1) the identical issue was raised in a previous proceeding; (2) the issue was actually litigated and decided in the previous proceeding; (3) the party had a full and fair opportunity to litigate the issue; and (4) the resolution of the issues was necessary to support a valid and final judgment on the merits."
See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979) (permitting non-mutual offensive collateral estoppel).
Interoceanica Corp. v. Sound Pilots, Inc., 107 F.3d 86, 91 (2d Cir. 1997).
B. Discussion
The Insurers invoke collateral estoppel to preclude litigation of two issues: (1) Goldman's responsibility for the second pipe burst; and (2) the calculation of damages that Goldman must pay. As the Insurers have sufficiently demonstrated that the issues necessary to adjudicate this case were fully and fairly litigated in Jodamo I, Goldman may not litigate them now.
See Pl. Mem. at 6-7.
First, Goldman is barred from disputing the cause of the pipe burst because the issue was already litigated in Jodamo I, and the Insurers have demonstrated that the second wet pipe burst occurred in the same manner as the first. As previously discussed, it is undisputed that the pipe burst was caused by water freezing inside the pipes as a result of inadequate heating in the building. Goldman only disputes that it was responsible for such lack of heating.
See Asp Letter. Compare Valetutti Letter.
However, Goldman is collaterally estopped from arguing that Jodamo was negligent in causing the pipe to freeze and burst. The jury in Jodamo I did not accept Goldman's defense that Jodamo was responsible for the heating problem because Jodamo had installed an HVAC system. Goldman is thus precluded from raising this affirmative defense unless it can show that the pipe burst of 2000 occurred in a different fashion, or that Jodamo made some unauthorized alteration to the HVAC system between 1996 and 2000. Goldman has demonstrated neither. Clearly, Goldman had a full and fair opportunity to litigate the identical issue of causation in a previous proceeding, which was necessary to support the final judgment in Jodamo I. Second, Goldman is precluded from re-litigating the methodology for calculating damages. Goldman argues that the damages in Jodamo I were calculated incorrectly, and seeks to calculate damages in this action differently. The Insurers, on the other hand, argue that they are entitled to recover the full amount paid to Jodamo because the issue was raised and decided in Jodamo I. Because the method for calculating damages was conclusively resolved in Jodamo I, it will not be revisited here. In the first Jodamo action, the court instructed the jury on the issue of damages, and Goldman had the opportunity to object at that time. In fact, Goldman had every incentive to object since the damage caused by the 1996 pipe burst was greater than the damage caused by the 2000 burst. However, Goldman failed to contest the court's instruction until after judgment was entered. Once a judgment becomes final, collateral estoppel makes that judgment conclusive of all issues resolved in that action. Therefore, the Insurers in this action are justified in seeking damages based on the total retail value of Jodamo's damaged inventory. As the jury awarded full recovery to Atlantic Mutual in Jodamo I, collateral estoppel dictates that the same measure of damages applies here.
See Jodamo I Trial Tr. at 399.
See Van Thunen Letter at 2. Compare Jodamo I Trial Tr. at 399.
Goldman argues that damages should be based on the wholesale price of the damaged inventory, rather than the retail price, as that is all Jodamo needs to be made whole. See Def Mem. at 15.
See Pl. Mem. at 7.
See Jodamo I Trial Tr. at 397.
See Van Thunen Letter at 2.
See Grieve v. Tamerin, 269 F.3d 149, 154 (2d Cir. 2001) (explaining that failure to appeal from a judgment gives that judgment collateral estoppel effect).
V. GROSS NEGLIGENCE
A. Legal Standard
When gross negligence is invoked by a business entity seeking an exception to a waiver of subrogation clause, that party must show that the other has acted with negligence that "differs in kind, not only degree, from . . . ordinary negligence." Gross negligence is "conduct that evinces a reckless disregard for the rights of others or `smacks' of intentional wrongdoing." "Failure to use even slight care" can indicate the total indifference toward the "rights and safety of others," that constitutes gross negligence.
Colnaghi, U.S.A., Ltd. v. Jewelers Protection Services, Ltd., 81 N.Y.2d 821, 823 (1993).
Id. See also Anunziatta v. Orkin Exterminating Co., 180 F. Supp.2d 353, 361 (N.D.N.Y. 2001).
Gentile v. Garden City Alarm Co., 147 A.D.2d 124, 131 (1989) (quoting the New York Pattern Jury Instructions, PJI 2:10A (1998 Supp.)).
Whether or not particular conduct constitutes gross negligence is usually construed as a question of fact for a jury to decide. However, a court may opt to avoid subjecting the litigants to the added expense and time of bringing a case before a jury if, based on the evidence presented, the outcome is clear. A court may find gross negligence alone when no reasonable jury could possibly find that the defendant did not act in a grossly negligent manner.
See Charter Oak Fire Ins. Co. v. Trio Realty Co., No. 99 Civ. 10827, 2002 WL 123506, at *5 (S.D.N.Y. Jan. 31, 2002).
See id.
B. Discussion
Goldman's conduct constitutes gross negligence. When Jodamo experienced its first sprinkler system failure in 1996, Goldman immediately knew that the wet pipe burst was caused by water that had frozen inside the pipe. Goldman testified in Jodamo I that he visited Jodamo on the day after the first pipe burst. When asked what he thought had happened, Goldman responded that he "could not understand how a sprinkler in that particular position of the premises . . . could freeze (emphasis added)." In addition, Vito Colangelo, Goldman's expert witness in Jodamo I, testified that he investigated the 1996 incident before the pipe burst again in 2000, and concluded that the first sprinkler burst because water had frozen in the pipe. Therefore, Goldman cannot credibly claim it did not have actual notice of the cause of Jodamo's damages. Whether Goldman's boiler, the holes in the exterior walls, or Jodamo's HVAC system was responsible, one thing was certain: Jodamo had heating problems.
Goldman Test. at 235.
Testimony of Vito Colangelo, Jodamo I Trial Tr. at 262.
Goldman urges the Court to accept that it believed, until the jury rendered its verdict, that Jodamo was ultimately responsible for the lack of heat in the store. Even were the Court to accept this position, Goldman knew that Jodamo had no access to the building's boiler, could not control the heat, and thus could not investigate the cause of the heating failure without Goldman's assistance. When the pipe burst in 1996, Goldman was effectively alerted to a very serious problem with the heating at 321 Grand Street, which could lead to disastrous consequences for its tenants unless Goldman took precautionary steps.
See Goldman Test. at 250.
Nonetheless, Goldman admits that it did not take any action at all to remedy the heating failure. Goldman responded to Jodamo's pipe burst by patching up the broken section of pipe. Goldman did not take any steps to provide Jodamo with access to the boiler, nor did Goldman order Jodamo to remove the HVAC system, an action that would have been consistent with Goldman's position that the HVAC system had caused the problem.
See Defendant's Response to Plaintiff's First Set of Interrogatories, Ex. J to Abate Aff., ¶¶ 6, 7.
See id., ¶ 5.
See id.
Goldman claims that there was no need to take action until it knew for certain whether it or Jodamo was responsible for the damage. This position is untenable, and evinces a reckless disregard for tenants' safety and property. Even absent a lawsuit, Goldman should have taken at least minimal steps to ensure that the temperatures in its buildings did not drop below freezing, that heat did not escape through holes in the building, and that the sprinkler systems were in working order. Goldman's failure to maintain the property at 321 Grand Street rises to the level of gross negligence because Goldman had actual notice of a severe heating problem that could cause sprinkler system failure, and did not take one single step to remedy that problem.
See Def. Mem. at 4.
It is negligent for a landlord to ignore a tenant's repeated complaints of inadequate heating. It is gross negligence when that landlord continues to do nothing even after the inadequate heating results in a devastating loss for the tenant. This second pipe burst was not only foreseeable from Goldman's perspective; it became certain and inevitable when Goldman failed to take any remedial action whatsoever. This is a negligence different in kind, not just in scope, from ordinary negligence; it is recklessly indifferent behavior that surely amounts to gross negligence.
See Testimony of Moises Masri, owner of Jodamo, Jodamo, I Trial Tr. at 81.
VI. CONCLUSION
For the reasons set forth above, the Insurers' motion for summary judgment is granted. The Insurers are entitled to full recovery of the amount paid to their insured, $478,483.88. Each insurance company is entitled to the amount that they paid to Jodamo; American Motorist paid $397,881.88 and Chubb paid $80,602.00. The Insurers are also entitled to pre-judgment interest at a rate of nine percent per annum from the date on which the Insurers compensated Jodamo, September 28, 2000.
The Insurers suggest that they might also be entitled to punitive damages because Goldman was grossly negligent. See Pl. Mem. at 10. While New York courts have awarded punitive damages to victims of gross negligence in some instances, see, e.g., Walker v. Sheldon, 10 N.Y.2d 401, 404 (1961), they have done so only in "singularly rare cases" that involve "extreme aggravating factors such as improper state of mind or malice or wrongdoing to the public." Rand Paseka Mfg. Co. v. Holmes Protection, Inc., 130 A.D.2d 429, 431 (1st Dep't 1987). This is not a case where the harm is "aimed at the public generally," nor does it involve excessive moral culpability. Walker, 10 N.Y.2d at 405. Punitive damages are not warranted in this action.
See 9/28/00 General Adjusters Final Report, Ex. E to Abate Aff. at l.
See N.Y.C.P.L.R. § 5001 (McKinney 1962).
SO ORDERED.