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noting as an alternative grounds for imposing a duty to defend that the indemnitor "was required under the [contract] to obtain insurance"
Summary of this case from Dresser-Rand Co. v. Ingersoll Rand Co.Opinion
02 Civ. 2406 (GWG)
December 27, 2002
OPINION AND ORDER
Defendant Union Bank of Switzerland ("UBS") has moved for reconsideration of the Opinion and Order, filed June 25, 2002, denying in part its motion to dismiss the complaint in this matter, brought by plaintiff Travelers Property Casualty Corporation as subrogor to The Fisher Park-Lane Company ("Park-Lane") and Richard C. Fisher ("Fisher") (collectively "Travelers"). See Travelers Prop. Cas. Corp., v. Winterthur Int'l., 2002 WL 1391920 (S.D.N.Y. June 25, 2002) (Scheindlin, J.) ("June 25 Dec."). Subsequent to that decision, the parties agreed to disposition of this matter by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). For the reasons stated below, the motion to reconsider is denied.
I. BACKGROUND A. Factual History
As reflected in the June 25 Decision, UBS leased several floors at 299 Park Avenue in New York City from Park-Lane in 1981. June 25 Dec. at *2. The lease contained a clause stating The tenant shall indemnify, defend, and save Landlord harmless from and against
any liability or expense which is not the result of Landlord's negligence, willful act or willful omission, and which arises from the use or occupation of the demised premises by Tenant or anyone in the demised premises with Tenant's permission, or any breach of this Lease by Tenant.
Id. (citing 11/25/81 Agreement of Lease between the Fisher 299 Realty Company and Union Bank of Switzerland, New York Branch ("the Lease"), § 35.01: Indemnity ("the Lease Provision")).
On April 2, 1998, Donna Martin, an employee of a food service company that provided services to UBS, was allegedly injured by a cash register while working on the 27th floor of 299 Park Avenue — one of the floors leased by UBS. June 25 Dec. at *2. Martin brought a personal injury lawsuit alleging negligence against UBS, Park-Lane, and Fisher on June 19, 2000, in New York Supreme Court, Kings County. Id. In the state lawsuit, which is still pending, Park-Lane and Fisher cross-claimed against UBS for indemnity based on the Lease Provision. Id. Park-Lane and Fisher did not assert a duty to defend against UBS, however. Id. at *2, *6. Instead, Travelers brought the instant action in New York state court, whereupon the defendants removed it to this Court based on diversity of citizenship. Id. at *3.
B. The Instant Lawsuit
In this action, Travelers seeks a declaratory judgment that UBS and its insurance company, Winterthur International ("Winterthur"), are required to defend the state lawsuit and indemnify Travelers for any judgment. Id. at *1. Travelers also seeks damages from UBS and Winterthur for a failure to defend in the underlying state lawsuit. Id. In the June 25 Decision, familiarity with which is assumed, the Court granted Winterthur's motion to dismiss. See June 25 Dec. at *3-*5. As to UBS, the Court dismissed Travelers' claims for indemnity as not ripe because liability in the underlying state lawsuit had not been established. See id. at *6-*7.
The Court declined to dismiss, however, Travelers' claim against UBS for the duty to defend. See id. at *5-*6. The decision noted that the lease provision requiring UBS to defend and indemnify Park-Lane is one that is commonly used in insurance contracts. See id. at *5 n. 6. Because case law construing such contracts holds that the "`duty to defend is broader than the duty to indemnify,'" Id. at *5 (quoting Town of Oyster Bay v. Employers Ins. of Wausau, 269 A.D.2d 387, 388 (2d Dep't 2000)), the decision concluded that a single allegation in the underlying complaint that is covered by a promise to defend requires the promisor to defend the entire action. See id. at *6 (citing Physicians' Reciprocal Insurers v. Loeb, 291 A.D.2d 541, 542 (2d Dep't 2002)). Because Martin's complaint alleged negligence on the part of UBS and Travelers' complaint alleged damages arising from UBS' failure to defend, the decision denied Travelers' motion to dismiss with respect to the duty to defend. Id. at *6.
UBS seeks reconsideration of this part of the June 25 Decision.
II. DISCUSSION A. Standard for Motion to Reconsider
The standard for a motion to reconsider is "strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995) (citations omitted); see Local Civil Rule 6.3. In addition, the party seeking reconsideration may not present any "facts, issues or arguments" that were not presented to the Court in the original motion. Xiao v. Continuum Health Partners, Inc., 2002 WL 31760213, at *3 (S.D.N.Y. Dec. 9, 2002). The decision whether to grant a motion for reconsideration rests within the sound discretion of the district court. See Scholastic, Inc. v. Stouffer, 2002 WL 31465816, *1 (S.D. N.Y. Nov. 1, 2002); accord Ursa Minor Ltd. v. Aon Financial Products, Inc., 2000 WL 1279783, at *1 (S.D.N.Y. Sept. 8, 2000), aff'd, 2001 WL 363515 (2d Cir. Apr. 11, 2001). "[R]econsideration of a previous order is an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." In re Health Mgmt. Sys. Inc. Sec. Litig., 113 F. Supp.2d 613, 614 (S.D.N.Y. 2000) (citations omitted).
B. Raising of New Matters
UBS admits that the argument made in its motion to reconsider was not presented during the original briefing on the motion. See Memorandum of Law, dated October 21, 2002 ("Def. Mem."), at 1 n. 1. UBS seeks to excuse this failure on the ground that Travelers failed to raise the issue in response to its original motion. See id. However, UBS fails to explain why it was Travelers' responsibility to have raised this argument when it is UBS that seeks to raise it now. Accordingly, the motion could be denied on this ground alone.
In any event, as described below, the arguments presented by UBS do not reflect that the Court overlooked "controlling" precedent requiring a change in the prior decision.
C. Controlling Authority
The June 25 Decision derived the expansive duty-to-defend obligation from cases interpreting insurance contracts. UBS now argues that its duty to defend is in fact not more expansive than its duty to indemnify because there is a difference between obligations imposed by insurance contracts and those imposed by indemnity clauses in leases. See Def. Mem. at 2. In support of this argument, UBS cites to two cases, Cannavale v. County of Westchester, 158 A.D.2d 645, 646 (2d Dep't 1990), and Bermudez v. New York City Housing Auth., 199 A.D.2d 356, 358 (2d Dep't 1993), which have held that the duty to defend, outside of the context of insurance contracts, is not broader than the duty to indemnify. UBS also cites to New York General Obligations Law § 5-321 for the proposition that the Lease Provision is unenforceable and thus UBS cannot be required to defend Travelers at all.
This section states:
Every covenant, agreement or understanding in or in connection with or collateral to any lease of real property exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor, his agents, servants or employees, in the operation or maintenance of the demised premises or the real property containing the demised premises shall be deemed void as against public policy and wholly unenforceable.
N.Y. Gen. Oblig. L. § 5-321.
As for Cannavale, it does not govern this case because it relied on an inapplicable provision of the General Obligations Law, § 5-322.1(1), which renders void any agreement in a construction contract that mandates a party to indemnify the contractor for its own negligence. See 158 A.D.2d at 646-47. While Bermudez states in dictum that the duty of a party that is "not an insurer" to defend is not broader than its duty to indemnify, 199 A.D.2d at 358, Bermudez too is a construction contract case that relies on section 5-322.1 (as well as on Cannavale). Thus neither Cannavale nor Bermudez controls the instant matter. Notably, in Brasch v. Yonkers Const. Co., 2002 WL 31246698 (2d Dep't Oct. 7, 2002), the same court held that a third-party defendant, which was not an insurance company but a construction contractor, owed a duty to defend a third-party plaintiff based on a contractual indemnification clause. See id. at *2. The court held that, even in this context, "the duty to defend is broader than the duty to indemnify, and allegations herein give rise to a reasonable possibility of coverage." Id. (citations omitted).
As for section 5-321, the New York Court of Appeals in Hogeland v. Sibley, Lindsay Curr Co., 42 N.Y.2d 153 (1977), made clear that section 5-321 does not necessarily render unenforceable a duty to defend under a commercial lease. See id. at 160-61. Hogeland noted a number of features of the lease at issue in that case that made it clear the landlord was not seeking to place the burden of its own negligence on the tenant. For example, the lease was "negotiated at arm's length between . . . two sophisticated business entities." Id. at 158. In addition, the lease did not exempt the landlord from all liability in the event that the tenant was liable for any damage (except to the extent the tenant recovered from its insurer). See id. at 159-60. The court also noted that the lease required the tenant to carry insurance to cover claims against both the landlord and the tenant. See id. at 160. The court concluded that the landlord was "not exempting itself from liability to the victim for its own negligence. Rather the parties are allocating the risk to third parties between themselves." Id. at 161. Thus, Hogeland held that section 5-321 did not bar the landlord from recouping defense costs from the tenant incurred in defending a lawsuit.
Courts within this district have also held that indemnity clauses in commercial leases establishing a duty to defend are not necessarily rendered unenforceable by section 5-321. In Di Giovanni v. New York University, 1995 WL 428724 (S.D.N.Y. July 19, 1995), the court found a tenant liable for defense costs incurred by a landlord in defending an underlying lawsuit for personal injuries. Id. at *1. "[S]ince attorneys' fees were included in the contract's terms, they are recoverable." Id. (citation omitted). In addition, the court held that section 5-321 did not bar enforcement of the indemnification clause that contained a duty to defend. Id. at *2 n. 2 (citation omitted). Similarly, in Park v. Auto. Realty Corp., 1997 WL 529009 (S.D.N.Y. Aug. 26, 1997), the court held a lessee was required to defend and indemnify its lessor. Id. at *6. The court found the obligation included a duty to reimburse the lessor attorney's fees to the extent they were not covered by insurance. Id. at *6 n. 15 (citation omitted).
Drawing all inferences in favor of Travelers, the lease at issue here meets the factors that Hogeland found relevant. First, the parties in this case are "two sophisticated business entities" who presumably "negotiated at arm's length." Hogeland, 42 N.Y.2d at 158. The Lease Provision does not exempt the landlord from liability if it is found to be at fault. See id. at 159-60; see also Lease Provision ("The tenant shall . . . defend . . . Landlord . . . from and against any liability or expense which is not the result of Landlord's negligence, willful act or willful omission . . ."). Finally, Travelers asserts that UBS was required under the lease to obtain insurance. See Pl. Mem. at 5-6. Accordingly, the complaint is sufficient to permit Travelers to proceed on its cause of action for the duty to defend.
A party seeking reconsideration bears a "difficult burden" to gain reconsideration of a previous decision. Bell Sports, Inc. v. System Software Associates, Inc., 71 F. Supp.2d 121, 125 (E.D.N.Y. 1999). UBS has not met that burden because it has not established that there were any "controlling decisions" that were overlooked in the June 25 Decision. See Local Civil Rule 6.3.
Conclusion
For the foregoing reasons, UBS's motion for reconsideration is denied. The parties shall appear for a conference on January 31, 2003, at 10:30 a.m. in Courtroom 228, 40 Centre Street, New York, New York.