Opinion
No. 03 Civ. 6845 (RMB) (RLE).
November 17, 2004
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Southern Boston Management Corporation ("Southern Boston"), owner of real property located at 1776 Southern Boulevard, Bronx, New York (the "Premises"), filed this complaint alleging trespass and conversion against BP Products North America ("BP Products"), the former lessee of a service station on the premises, and against the agent/contractor for BP Products, Delta Environmental Consultants ("Delta"). Defendants seek leave to amend the answer, assert counterclaims, and file a third-party complaint. For the reasons discussed below, defendants' motion is GRANTED.
II. BACKGROUND
In September 1986, BP Products, formerly known as Amoco Oil Company ("Amoco"), leased the premises from then-owner Boston Southern Gas Corporation ("BS") for purposes of operating a gasoline service station. See Notice of Motion for Leave to Amend the Answer, Assert Counterclaims, and File a Third-Party Complaint ("Mot. to Amend"), "Exhibit A" (Proposed Amended Answer), ¶ 9. With BS's consent, BP Products installed Underground Storage Tanks ("USTs") on the premises along with other equipment necessary to the operation of the service station. See id at ¶ 17. Furthermore, BP Products hired Delta to test, monitor, and report on the condition of the soil and USTs in order to assist BP Products in meeting environmental and regulatory standards under federal, state, and local laws. BP Products operated a gas station on the premises from 1986 until the termination of the lease on April 30, 2003. See Plaintiff's Memorandum of Law in Opposition to Motion to File Amended Answer With Counterclaims and Third Party Complaint ("Mem. in Opposition") at 2.In May 2003, Southern Boston and Slavik Gofman, the president of Southern Boston, purchased the premises from BS. See Declaration of Wendy M. Cortez in Opposition to Defendants' Motion to File an Amended Answer With Counterclaims and a Third Party Complaint, "Exhibit A" (Contract of Sale). At that time, the USTs and fixtures that defendant BP Products installed were on the premises. See Mem. in Opposition at 2. After BP Products's lease terminated, it reentered the premises and removed the USTs and other fixtures. See Memorandum of Law in Support of Defendants' Motion for Leave to Amend the Answer, Assert Counterclaims, and File a Third-Party Complaint ("Mem. in Support of Def.") at 2.
Central to the case before us is the issue of ownership of the USTs and fixtures on the premises after the lease between BS and BP Products terminated. Both Southern Boston and BP Products assert ownership rights to these items. Southern Boston's claim for trespass and conversion is based on the assertion that since defendant BP Products abandoned the USTs and other fixtures after the lease ended, BP Products had no right to reenter the premises and retrieve these items at that time. See Mem. in Opposition at 1. Conversely, defendants assert that BP Products did not relinquish ownership of the items. Rather defendants claim that BS induced BP Products to leave the USTs and fixtures on the premises after the lease ended in order to increase the value of the premises with respect to its subsequent sale to Southern Boston. See Defendants' Supplemental Memorandum in Further Support of Their Motion for Leave to Amend Their Answer, Assert Counterclaims, and File a Third-Party Complaint ("Def. Supp. Mem.") at 2. Accordingly, defendants assert three proposed counterclaims for: 1) declaratory judgment that BP Products is owner of the USTs and fixtures; 2) indemnification and contribution for environmental damage and testing/monitoring costs caused by the USTs after the lease term ended, if BP Products is not found to be the owner of the USTs and fixtures at that time; and 3) alter ego liability against Gofman for allegedly causing Southern Boston to erect fences that impeded BP Products' and Delta's ability to retrieve and test the USTs. Defendants' Brief in Further Support of Defendants' Motion for Leave to Amend the Answer, Assert Counterclaims, and File a Third-Party Complaint ("Brief in Further Support of Def."). Moreover, defendants' include in their motion a request for leave to file a third-party complaint against Gofman.
III. DISCUSSION
A. Motion To Amend Answer And To Assert Counterclaims
Leave to amend an answer "shall be freely given when justice so requires." FED. R. CIV. P. 15(a); see also Monahan v. New York City Dept. of Corrections, 214 F.3d 275, 283 (2d Cir. 2000) (pleadings provide notice to the opposing party "of the claim or defense to be litigated . . . `mere technicalities' should not prevent cases from being decided on the merits"). The Court has broad discretion to determine whether to grant a motion to amend. Kreinik v. Showbran Photo, Inc., 2003 WL 22339268, at *2 (S.D.N.Y. Oct. 14, 2003). The Court will typically allow the amendment if the movant has demonstrated "at least colorable grounds for relief" absent a showing of "undue delay, bad faith or dilatory motive . . ., undue prejudice to the opposing party by virtue of the allowance of the amendment, [or] futility of amendment." Id. at *2 (citations omitted); see also Anthony v. City of New York, 339 F.3d 129, 138 (2d Cir. 2003).
Plaintiff Southern Boston opposes defendants BP Products's and Delta's motion for leave to amend the answer and to assert counterclaims on the grounds that defendants' proposed counterclaims for declaratory judgment, indemnification and contribution, and alter ego are futile. Mem. in Opposition. When the motion to amend is opposed on futility grounds, the Court will review the proposed amended pleading for adequacy as defined by Federal Rule of Civil Procedure 12(b)(6). Kreinik, 2003 WL 22339268, at *2; Nettis v. Levitt, 241 F.3d 186, 194 (2d Cir. 2001). Accordingly, the motion to amend will be granted unless, in reviewing the factual allegations set forth in the pleadings, "it appears beyond a doubt that the [movant] can prove no set of facts in support of [its] claim which would entitle [it] to relief." Barrett, 806 F. Supp. at 1098; see also Schwimmer v. Guardian Life Ins. Co., 1996 WL 146004, at *3 (S.D.N.Y. Apr. 1, 1996) (motion to amend granted where "it is not so frivolous or outlandish to render it futile"). Review of the motion requires that the Court "merely . . . access the legal feasibility of the complaint, not [assay] the weight of the evidence which might be offered in support thereof." Ryder Energy Distribution Corp. v. Merrill Lynch Commodities Corp, et al., 748 F.2d 774, 779 (2d Cir. 1984).
"[I]n a case of actual controversy within its jurisdiction" the Court "may declare the rights of . . . any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C.A. § 2201(a); Dow Jones Co., Inc. v. Harrods, Ltd., 237 F. Supp.2d 394, 407 (S.D.N.Y. 2002). Declaratory judgment is proper in this case because the Court must resolve a bona fide and justiciable dispute amongst the parties; namely, whether BP Products or Southern Boston owned the USTs and fixtures at issue in this case after the expiration of the lease between BS and BP Products. Moreover, a judgment in this matter would help resolve pending claims regarding liability stemming from ownership of the USTs, such as liability for environmental damages and UST testing and monitoring costs. See Brief in Further Support of Def. at 2-4. Defendants' proposed counterclaims for indemnification and contribution establish colorable grounds for relief because a determination of UST ownership after the expiration of the lease would affect the Court's liability assessment with respect to environmental and other harms and costs stemming from such ownership after the lease term.
Finally, to demonstrate alter ego liability the movant must show that "(1) [the owner] ha[s] exercised such control that the [corporation] `has become a mere instrumentality' of the [owner], which is the real actor; (2) such control has been used to commit fraud or other wrong; and (3) the fraud or wrong results in an unjust loss or injury to plaintiff." WM. Passalacqua Builders, Inc., v. Resnick Developers South, Inc., et al., 933 F.2d 131, 138 (2d Cir. 1991); see also Miramax Film Corp. v. Abraham, 2003 WL 22832384, at *7 (S.D.N.Y. Nov. 25, 2003) (Movant need not demonstrate actual fraud so long as there is "[a] showing that the control over the corporation was used as a means to perpetuate a wrongful or unjust act upon the [injured party]."). Granting leave to include a counterclaim of alter ego is proper in this case because defendants set forth colorable grounds for relief. Defendants assert that Gofman, as president of Southern Boston, caused plaintiff Southern Boston to erect a fence which interfered with their ability to access the USTs as they were entitled to do; hindered their ability to conduct necessary testing on the USTs, which resulted in environmental and other damages; and subjected them to civil liability. See Brief in Further Support of Def. at 5.
Accordingly, defendants' request for leave to amend the answer and to assert counterclaims is GRANTED.
B. Motion To File A Third-Party Complaint Against BS
Rule 14(a) permits a defending party to implead a person not a party to the action who is or may be liable to the defending party for any part of the plaintiff's claims. The underlying principle behind impleader is to promote judicial efficiency by permitting the adjudication of several claims in a single action, and thus to eliminate circuitous, duplicative actions. Mueller v. Long Island R.R. Co., 1997 WL 189123, at *6 (S.D.N.Y. Apr. 17, 1997). Leave of court is required if the motion is sought more than ten days after serving the original answer. FED. R. CIV. P. 14(a).
The decision to permit a defending party to implead a third-party defendant rests in the trial court's discretion. Nova Products, Inc., v. Kisma Video, Inc., et al., 220 F.R.D. 238, 240 (S.D.N.Y. 2004) citing Kenneth Leventhal Co. v. Joyner Wholesale Co., 736 F.2d 29, 31 (2d Cir. 1984). However, as a general matter, motions to implead third parties should be freely granted "unless to do so would prejudice the plaintiff, unduly complicate the trial, or would foster an obviously unmeritorious claim." Shafarman, 100 F.R.D. at 459. "Relevant factors in determining whether to grant leave to implead include: (i) whether the movant deliberately delayed or was derelict in filing the motion; (ii) whether impleading would unduly delay or complicate the trial; (iii) whether impleading would prejudice the third-party defendant; and (iv) whether the third-party complaint states a claim upon which relief can be granted." Nova Products, Inc,. 220 F.R.D. at 240 ( citing Too, Inc. v. Kohl's Dep't Stores, Inc., et al., 213 F.R.D. 138, 140 (S.D.N.Y. 2003)).
Allowing the third-party complaint against BS would avoid duplicative litigation and would not unduly delay the case. Defendants' proposed third-party claims against BS arise principally from the same core facts that ground plaintiff's claims: 1) the lease of the premises; 2) the duties that arose out of the lease; and 3) the representations that BS made to defendant BP Products regarding ownership of the USTs. Therefore, impleader would promote judicial economy concerns. Moreover, examining BS's lease with BP Products and certain representations made to Southern Boston and BP Products regarding the ownership of the USTs and other fixtures after the lease expired could affect defendants' liability with respect to Southern Boston's claim against defendants for trespass and conversion. Additionally, allowing impleader would not unduly delay the proceeding because discovery is ongoing in this matter, particularly since plaintiff has not produced documents to defendants and the parties have not taken depositions. See Brief in Further Support of Def. at 6.
Accordingly, defendants' request for leave to file a third-party complaint against BS is GRANTED.
IV. CONCLUSION
For these reasons, defendants' motion for leave to amend the answer, assert counterclaims, and file a third-party complaint is GRANTED.SO ORDERED.