Opinion
16564-04.
Decided September 18, 2006.
Steven G. Rubin Assocs., P.C., Melville, New York, Counsel for Plaintiff.
Ingerman Smith, LLP, Northport, New York, Counsel for Defendant.
The following papers were read on the motions of Third-party Defendant Caretsky and Associates Consulting Engineers, LLP; and Third-party Defendants' Spector to dismiss its third-party complaint as asserted against them:
Motion Sequence No. 1
Notice of Motion dated March 16, 2006;
Affirmation of Emanuel Starakis, Esq. dated March 16, 2006;
Third-party Defendant's Memorandum of Law;
Motion Sequence No. 2
Notice of Motion dated April 10, 2006;
Affirmation of Marie Ann Hoenings, Esq. dated April 10, 2006;
Third-party Defendant's Memorandum of Law;
Motion Sequence No. 3
Notice of Motion dated June 16, 2006;
Affirmation of Lee J. Sacket, Esq. dated June 14, 2006;
Affidavit of Michael Spector sworn to on June 14, 2006;
Affidavit of James Wojcik sworn to on May 18, 2006;
Affidavit of James Wojcik sworn to on May 17, 2006;
Affidavit of Steven G. Rubin sworn to on June 19, 2006;
Affirmation of Marie Ann Hoenings, Esq. dated June 21, 2006;
Affirmation of Lee J. Sacket, Esq. dated June 5, 2006;
Plaintiff's Memorandum of Law dated May 17, 2006;
Plaintiff's Memorandum of Law dated May 18, 2006.
Third-party Defendant Caretsky and Associates Consulting Engineers, LLP ("Caretsky") moves for an order dismissing the third party complaint insofar as interposed against it pursuant to CPLR 3211 (a)(7).
Third-party Defendants Michael H. Spector, P.C. d/b/a The Spector Group s/h/a Michael H. Spector and Michael H. Spector A.I.A, P.C. (collectively "Spector") moves for an order dismissing the third party complaint insofar as interposed against them pursuant to CPLR 3211 (a)(7).
Third-party Defendant Spector Associates, LLP ("Associates") cross-moves for an order dismissing the third-party complaint insofar as interposed against it pursuant to CPLR 3211 (a)(7).
BACKGROUND
In August 2001, Defendant East Meadow Union Free School District (the "District"), and Plaintiff Park East Construction Corp ("Park East") entered into an agreement pursuant to which Park East was to act as construction manager in connection with a school construction project valued at an estimated $20 million.
At approximately the same time, Spector entered into a contract with the District pursuant to which it performed certain architectural services in connection with the project. Thereafter, Caretsky entered into a separate contract with Spector to perform mechanical, plumbing and electrical services.
Park East subsequently completed the job, but claims that it performed additional and extra construction management services; that it demanded payment from the District for those additional services valued at approximately $112,500.00; and that the District has, to date, failed and refused to remit the payment demanded.
Based upon these factual assertions, Park East commenced this action against the District, interposing three causes of action sounding in breach of contract and quantum meruit.
The District answered and interposed two counterclaims against Park East to wit: (1) breach of its contractual duty to the District by "failing to review and verify the drawings, specification, and contract documents for conflicts, errors and/or omissions"; and (2) negligently failing "to perform its duties with such care as should be exercised by a reasonably competent construction manager." The District alleges that, by virtue of Park East's conduct, it sustained damages of approximately $500,00.00.
By summons and third-party complaint dated January 2006, Park East commenced a third-party action against, among others, Caretsky and Spector.
According to Park East, Spector and Caretsky, worked "directly and indirectly" with Park East on the project and both provided services, project plans and specifications with the express knowledge that Park East, as construction manager, would rely on them.
Park East claims that it thereby "became a third-party beneficiary of the both the Spector-District architectural contract and the Caretsky-Spector engineering agreement or, alternatively, that it was in "near privity" with both Caretsky and Spector.
Notably, the third-party complaint also contains separate causes of action interposed against both Spector and Caretsky for contribution and common law indemnity in the first five causes of action.
Caretsky, and Spector entities now each move for dismissal of the third-party complaint pursuant to CPLR 3211(a)(7). Associates separately cross-moves for dismissal on the ground that it is a distinct legal entity which was not involved in the project and not affiliated with the other Spector entities named in the action.
In support of their respective applications, the movants argue that (1) there was neither contractual privity nor a relationship functionally resembling privity between the parties; and (2) the common law indemnity and/or contribution claims are defective as a matter of law.
DISCUSSION
A. Dismissal Motions
"When assessing the adequacy of a complaint in light of a CPLR 3211(a)(7) motion to dismiss, the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true and provide plaintiff [here Third-party Plaintiff] the benefit of every possible favorable inference." AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., 5 NY3d 582, 591 (2005), quoting, Leon v. Martinez, 84 NY2d 83, 87 (1994). Moreover, "[w]hether a [third-party] plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss.'" AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., supra, quoting, EBC I, Inc. v. Goldman, Sachs Co., 5 NY3d 11, 19 (2005).
B. Third-Party Beneficiary/Near-Privity — First Third Causes of Action
1. Third-Party Beneficiary Preliminarily, the Court agrees that the relevant materials submitted in support of the motions have established that Park East cannot be viewed as a third party beneficiary of either the Spector-District or the Caretsky-Spector agreements.
"[T]he best evidence of whether contracting parties intended their contract to benefit third parties remains the language of the contract itself." Nepco Forged Products, Inc. v. Consolidated Edison Co. of New York, Inc., 99 AD2d 508 (2nd Dept. 1984). See also, Mendel v. Henry Phipps Plaza West, Inc., 16 AD3d 112, 113 (1st Dept. 2005). Therefore, "[w]hen a contract expressly negates enforcement by third parties, that provision is controlling'." Treeline Garden City Plaza, LLC v. Berkley-Arm, Inc., 12 Misc 3d 1182 (A), (Sup.Ct. Nassau Co. 2006), quoting, Morse/Diesel, Inc. v. Trinity Industries, Inc., 859 F.2d 242, 249 (2nd Cir. 1988). See also, Board of Managers of Alexandria Condominium v. Broadway/72nd Assoc., 285 AD2d 422, 424-5 (1st Dept. 2001).
Here, both contracts contain determinative language expressly negating any intent to create or confer third-party beneficiary rights. Accordingly, Park East's claim that it is a third-party beneficiary under the subject agreements is lacking in merit. See, Aymes v. Gateway Demolition Inc., 30 AD3d 196 (1st Dept. 2006).
2. Near-Privity
Favorably viewing the facts alleged as amplified and supplemented by Park East's opposing submissions ( Ossining Union Free School Dist. v. Anderson LaRocca, 73 NY2d 417, 419 [1989]), the Court finds that at this pre-answer juncture, the complaint makes out a near-privity relationship, thereby warranting denial of Third-party Defendants' motions to dismiss the third-party causes of action.
Where formal contractual privity is lacking, the "functional equivalent of contractual privity" must be demonstrated. Id. Such near-privity exists when there is an: "(1) awareness that the reports were to be used for a particular purpose or purposes; (2) reliance by a known party or parties in furtherance of that purpose; and (3) some conduct by the defendants linking them to the party or parties and evincing defendant's understanding of their reliance." Id. at 425. See also, Securities Investor Protection Corp. v. BDO Seidman, L.L.P., 95 NY2d 702, 711 (2001); and Credit Alliance Corp. v. Andersen Co., 65 NY2d, 536, 551 (1985).
Here, upon affording Park East "the benefit of every possible favorable inference" ( AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., supra at 590), the third-party complaint alleges that both Caretsky and Spector agreed to provide design and engineering calculations; that both entities knew at the time that their calculations would be utilized for the "particular purpose" of performing the construction work; and that Park East relied upon the calculations in furtherance of that purpose in discharge of its duties as construction manager on the project.Moreover, a review of the parties' respective agreements which collectively require communication, cooperation and a coordinated effort in performance of the project adequately establishes, at this early juncture; (1) the requisite link between the Third-party Defendants and Park East; and (2) the movants' understanding and knowledge that Park East would be relying upon their plans, specifications and drawings in performing its contract duties. Ossining Union Free School Dist. v. Anderson LaRocca, supra at 424-5. See, Halmar Corp. Defoe Corp. v. Hudson Foundations, Inc., 212 AD2d 505, 506 (2nd Dept. 1995); and Reliance Ins. Co. v. Morris Assoc., P.C., 200 AD2d 728, 729 (2nd Dept. 1994). Accordingly, the motions to dismiss the first and third causes of action should be denied.
C. Common Law Indemnity — Second Fourth Causes of Action
"[W]here one is held liable solely on account of the negligence of another, indemnification, not contribution, principles apply to shift the entire liability to the one who was negligent'." Glaser v. M. Fortunoff of Westbury Corp., 71 NY2d 643, 646 (1988), quoting, D'Ambrosio v. City of New York, 55 NY2d 454, 462 (1982). See, McDermott v. City of New York, 50 NY2d 211, 216-7 (1980).
The predicate of common law indemnity is vicarious liability without actual fault on the part of the proposed indemnitee. Thus, it follows that a party who has itself actually participated to some degree in the wrongdoing cannot receive the benefit of the doctrine. Trustees of Columbia University in City of NY v. Mitchell/Giurgola Associates, 109 AD2d 449, 453 (1st Dept. 1985). See also, Arlington Cent. School Dist. v. Horizon Roofing, 27 AD3d 676 (2nd Dept. 2006); Edenwald Contracting Co., Inc. v. Northern Ins. Co. of New York, 289 AD2d 370 (2nd Dept. 2001); and SSDW Co. v. Feldman-Misthopoulos Assoc., 151 AD2d 293, 295-6 (1st Dept. 1989).
Here, the District's counterclaims against Park East as pleaded effectively derive from and are based upon, breach of Park East's independently applicable duty to review and verify "drawings, specifications and contract documents for conflicts errors and/or omissions."
Accordingly, even assuming that there were errors in the plans or specifications submitted by Caretsky and Spector which Park East later reviewed and allegedly failed to detect the ensuing injury sustained by the District would still be attributable in part, to Park East's own, alleged errors or active negligence, thereby foreclosing the ability to succeed with a claim for implied indemnification. See, e.g., Edge Mgt. Consulting, Inc. v. Blank, 25 AD3d 364 (1st Dept. 2006); Davis v. Isaacson, Robustelli, Fox, Fine, Greco Fogelgaren, P.C., 283 AD2d 349, 350 (1st Dept. 2001).
Thus, the motion to dismiss the second and fourth causes of action should be granted.
D. Contribution — Fifth Cause of Action
Contribution is inapplicable as "between two contracting parties whose only potential liability to the plaintiff is for the contractual benefit of the bargain." Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw Folley, 71 NY2d 21, 28 (1987).
Stated another way, even where the language of tort has been utilized "a defendant may not seek contribution from other defendants where the alleged tort' is essentially a breach of contract claim." Rothberg v. Reichelt, 270 AD2d 760, 762 (3rd Dept. 2000); Trump Village Section 3, Inc. v. New York State Housing Finance Agency, 307 AD2d 891, 897 (1st Dept. 2003); Rockefeller Univ. v. Tishman Const. Corp. of New York, 240 AD2d 341, 343 (1st Dept. 1997); and Tempforce, Inc. v. Municipal Housing Auth. of the City of Schenectady, 222 AD2d 778, 779 (3rd Dept. 1995).
Here, while the District's counterclaims include both a contract-based claim, and a second claim which appears to rely on a negligence theory, for which the identical recovery has been sought, "the crucial point here is that the damages sought by * * * [the District] on all of its causes of action are merely for economic loss" and/or "contractual benefit of the bargain" damages in respect to which contribution is unavailable. Trump Village Section 3, Inc. v. New York State Housing Finance Agency, supra. See, Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw Folley, supra at 29-30; N S Supply, Inc. v. Simmons, 305 AD2d 648, 650 (2nd Dept. 2003); and Wecker v. Quaderer, 237 AD2d 512 (2nd Dept. 1997).
Accordingly, Park East's fifth cause of action sounding in contribution must be dismissed insofar as it is interposed against Caretsky and Spector.
E. Spector Associates LLP
Lastly, the motion by Spector Associates, LLP for dismissal of the third-party complaint insofar as asserted against it, must be granted.
In support of the motion, Associates has submitted the affidavit of Michael H. Spector, who asserts that Spector Associates, LLP is not affiliated with the other Spector entities and was not a party to the subject construction agreement. In response, Park East's opposing papers contain largely speculative and inconclusive allegations which fail to raise an issue of fact as to whether Spector Associates, LLP was an entity involved in the subject project. Such opposition is wholly insufficient to defeat dismissal of the action as to Associates.
Accordingly, it is,
ORDERED, that the motions of third-party Caretsky and Associates Consulting Engineers LLP and Michael H. Spector, P.C. d/b/a The Spector Group s/h/a Michael H. Spector and Michael H. Spector, A.I.A., P.C. to dismiss the third-party complaint is granted to the extent that the second, fourth and fifth causes of action are dismissed and is denied with regard to the first and third causes of action; and it is further,
ORDERED, that the cross-motion of third-party Defendant Spector Associates, LLP for an order dismissing the third-party complaint insofar as asserted against it is granted; and it is further,
ORDERED, that counsel for all remaining parties shall appear for a certification conference on October 20, 2006 at 9:30 a.m.
This constitutes the decision and Order of the Court.