Regalado v 635 Riverside Dr. NY LLC

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Regalado v 635 Riverside Dr. NY LLC 2018 NY Slip Op 31102(U) June 4, 2018 Supreme Court, New York County Docket Number: 151907/15 Judge: Nancy M. Bannon Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 1] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 42 -----------------------------------------x MARTIN REGALADO Plaintiff Index No. 151907/15 v DECISION AND ORDER 635 RIVERSIDE DRIVE NY LLC, and DHNY APT V LLC MOT SEQ 005, 007 Defendant. -----------------------------------------x -----------------------------------------x 635 RIVERSIDE DRIVE NY, LLC Plaintiff v BLUESTAR PROPERTIES INC., BLUESTAR PROPERTIES LLC, JEFFREY PIKUS, OGANDO CONSTRUCTION CORP., STRATHMORE CONSTRUCTION MANAGEMENT LLC, ARCHITECTURAL DESIGN SOLUTIONS, ASHRAF ALI, DG UWS SUB V LLC, and HERITAGE REAL ESTATE PARTNERS Defendant. -----------------------------------------x NANCY M. BANNON, J.: I. INTRODUCTION In this action to recover damages for 'personal injuries arising from a construction accident, the third-party defendants Bluestar Properties, Inc. (Bluestar), and Jeffrey Pikus move 1' 2 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 2] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 pursuant to CPLR 3025(b) for leave to amend their answer to assert additional affirmative defenses, and pursuant to CPLR 3211(a) (5) to dismiss the third-party complaint with prejudice, or, in the alternative, for summary judgment in favor of the third-party defendants pursuant to CPLR 3211(c) and 3212 [SEQ 005]. By a separate motion, the third-party defendant DG UWS Sub V, LLC (DG), moves for identical relief [SEQ 007]. Bluestar, Jeffrey Pikus, and DG also move for an award of attorneys' fees, costs 1 and expenses pursuant to 22 NYCCRR 130-1.1 [SEQ 005 and SEQ 007]. The motions are granted to the extent that leave to amend is granted, the third-party complaint is dismissed as against Bluestar and DG, and the motions are otherwise denied. II. BACKGROUND This action arises out of personal injuries allegedly sustained by Martin Regalado on August 20, 2012, while working at a construction project at a residential building located at either 635 Riverside Drive or 635 West 141st Street in Manhattan. He brought claims pursuant to the Labor Law and for common-law negligence against 635 Riverside Drive NY, LLC (Riverside). Thereafter, Riverside commenced a third-party action against Bluestar, Pikus, and DG, alleging causes of action for contribution, common-law indemnification, contractual indemnification, and breach of contract for failure to procure 2 3 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 3] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 insurance. Riverside asserted an additional cause of action to recover for breach of fiduciary duty only as against Bluestar and Pikus. Bluestar, Pikus, and DG filed their answers to the third- party complaint and have begun discovery. Bluestar, Pikus, and DG now seek to amend their answers to assert the affirmative defense of release. See CPLR 3211(a) (5). They allege that, on or about May 29, 2012, Hon. Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York (the bankruptcy judge) issued an order for the joint administration of Chapter 11 bankruptcy cases filed by the owners of approximately 33 buildings, including Riverside bankruptcy proceeding) (the In connection with the bankruptcy proceeding, Riverside, together with the other debtors, second amended reorganization plan (the plan) . filed a The plan, submitted with each of the motions here, contains a release and an injunction that Bluestar, Pikus, and DG argue is directly applicable to Riverside's claims. The relevant language in the plan provides as follows: ... effective as of the Effective Date, the Released Parties and the Released Debto~ Parties are deemed released and discharged by the Debtors and their Estates from any and all direct, indirect or derivative claims, obligations, rights, suits, judgments, Liens, damages, causes of actions, remedies, liabilities, claims or rights of contribution and indemnification, and· all of the claims, causes of action, controver~ies of every type, kind, nature, description or character whatsoever, including any derivative claims asserted on behalf of the estates, whether 3 4 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 4] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 known or unknown, foreseen or unforeseen, liquidated or 'unliquidated, contingent or fixed, currently existing or hereinafter arising, in law, at equity, whether for tort, fraud, contract or otherwise that any Debtor would have legally been entitled to assert, including but not limited to, any claim or cause of action arising from or relating to Debtors, the Chapter 11 case; this Plan, the subject matter of the transactions or events giving rise to any claim or interest of the Released Parties and the Released Debtor parties that is treated in this Plan, the business or contractual arrangements between any Debtor on the one hand, and any Released Parties or Released Debtor Party on the other hand ... Elsewhere in the plan, the term "Debtorsu is defined to include Riverside and the teim "Released Partiesu is defined to include Bluestar, Pikus, and DG. The plan further provides that each Debtor shall be permanently enjoined from commencing, conducting or continuing in any manner, directly or indirectly any suit, action or other proceeding of any kind, including asserting any set off, right of subrogation, contribution, indemnificat~on or recoupment of any kind, directly or indirectly, or proceed~ng in any manner in any place inconsistent with the releases. granted by the Debtors and their Estates to the · Released Parties and the Released Debtor Parties pursuant to this Plari. On or about August 7, 2012, the bankr\iptcy judge issued findings of fact, conclusions of law, and an order (the confirmation order) approving the plan. The confirmation order found that the plan was proposed in good faith and confirmed the plan under section 1129 of the Bankruptcy Code, declaring the 4 5 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 5] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 provisions of the plan, except as provided in the confirmation order, binding on the Debtors. The confirmation order contained a release identical in substance to the release contained in the plan, and further provided that: ... nothing in this paragraph or in the Second Amended Plan shall be deemed to release any Released Party or any Released Debtor Party from liability for acts or omissions that are the result of actual fraud, gross negligence, willful misconduct, ultra vires acts, criminal conduct, disclosure of confidential information that causes damages, or willful violation of the securities laws or the Internal Revenue Code, or, in the case of an attorney professional and as required und~r Rul l.B(h) (1) of the New York State Rules of Professional Conduct, malpractice The confirmation order also included an injunction identical in substance to the injunction ih the plan. On September 13, 2012, a statement was filed setting forth that the effective date referenced in the plan was August 30, 2012~ Proof of such statement is annexed to the motion of Bluestar and Pikus. Bluestar, Pikus, and DG argue that the above facts provide a complete de£ense to the third-party action. In addition to- requesting leave to amend their answers, Bluestar, Pikus, and DG move to dismiss the third-party complaint, or, 'in the alternative, pursuant to CPLR 3212 for summary judgment dismissing the third-party complaint. 5 6 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 6] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 III. DISCUSSION A. Third-Party Defendant Pikus As a preliminary matter, the court notes that, by order dated June 6, 2017, the third-party action against Jeff~ey Pikus was discontinued, and the third-party complaint dismissed insofar as asserted against him, without prejudice and without costs to any party. Accordingly, the instant motion is denied as academic insofar as it requests relief on behalf of Pikus. B. Amendment of Third-Party Answers Leave to amend a pleading is to be freely given absent prejudice or surprise resulting from the amendment, provided that the evidence submitted in support of the motion indicates that the proposed amendment may have merit. See CPLR 3025(b); Mccaskey, Davies and Assocs., Inc v New York City Health & Hospitals Corp., 59 NY2d 755 (1983); 360 West 11th LLC v ACG Credit Co. II, LLC, 90 AD3d 552 (1st Dept 2011); Smith-Hoy v AMC prop. Evaluations, Inc., 52 AD3d 809 (1st Dept 2008). The motion court must examine the sufficiency of the proposed amendment since leave to amend should not be granted where the proposed amended pleading is "palpably insufficient or clearly devoid of merit." MBIA Ins. Corp. v Greystone & Co., Inc., 74 AD3d 499, 500 (1st Dept 2010); see Hill v 2016 Realty Associates, (2nd Dept 2007). 42 AD3d 432 The court also "should consider how long the 6 7 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 7] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 amending party was aware of the facts upon which the motion was predicated [and] whether a reasonable excuse for the delay was offered." Haller v Lopane, 305 AD2d 370, 371 (2~ Dept 2003) The proposed amended answers of both Bluestar and DG, setting forth an additional affirmative defense based on release, as annexed to each of the motions, meet these standards. It is plain that the amendments have merit, as demonstrated by the bankruptcy court documents submitted in support of each of the motions. Moreover, Riverside had the bankruptcy court documents in its possession and knew of the release language now invoked by Bluestar and DG since the inception of the third-party action, and there is thus no prejudice resulting from the amendments. Accordingly, those branches of Bluestar and DG's motions which are to amend their answers are granted. C. Dismissal Bluestone and DG seek, upon the amendment of their thirdparty answers, to dismiss the third-party complaint as against them on the ground of release. "Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release." Centro Empresarial Cempresa S.A. v America M6vil, S.A.B. de C.V., 17 NY3d 269, 276 (2011). Riverside's third-party causes of action for contribution, common-law indemnification, contractual indemnification, and to 7 8 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 8] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 recover for breach of contract-for failure to procure insurance are thus barred by virtue of the release set forth in the plan, as approved by the bankruptcy judge. See CPLR 3211 (a) ( 5) ; Centro Empresarial Cempresa S.A. v America M6vil, S.A.B. de C.V., supra; Allen v Riese Orq., Inc., 106 AD3d 514 (1st Dept. 2013). This disposes of all of Riverside's causes of action against DG, as well as the contribution, indemnification, and breach of contract causes of action against Bluestar. As for its cause of action to recover for breach of fiduciary duty as against Bluestar, designated in the third-party complaint as the fifth cause of action against Bluestar, Riverside asserts in its opposition papers that Bluestar, "through a breach of [its] fiduciary obligations to the parties by [its] failure to adequately secure any insurance for the work being done to protect 635 Riverside along with [its] knowledge that no one was apparently paying attention to what was going on at this location can clearly be seen as deception through inaction or silence as well as fraud." Riverside thus argues that Bluestar's conduct fell within the exemptions from release for "actual fraud, gross negligence, [and] willful misconduct," as set forth in the plan. This argument is unpersuasive, as Riverside's allegations that Bluestar did not secure insurance and did not "pay[] attention to what was going on" are clearly insufficient to support the elevation of these claims to the level of either actual fraud, gross negl~gence, or willful misconduct. 8 9 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 9] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 Based on the clear and unambiguous language. of the plan's rel~ase and injunction, the third-party complaint must be dismissed as against both DG and Bluestar. D. Attorneys' Fees In each of their motions, Bluestar and DG seek to recover an award of attorneys' fees, costs, and expenses pursuant to 22 NYCCRR 130-1.l(a). 22 NYCCRR 130-1.l(a) provides that a court may award a party in any civil action costs, in the form of reimbursement for actual expenses reas~nably incurred and reasonable attorneys' fees resulting from the frivolous conduct of another party. "Conduct is frivolous if (1) it is completely without merit in law and cannot be sup~orted by a reasonable argument for an extension, modification or reversal of existing law; (2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or (3) it asserts material factual statements that are false." 22 NYCCRR 130-1.l(c). In determining whether the conduct undertaken was frivolous, the court is required to consider, among other issues, "the circumstances under which the conduct took place, including the time available for investigating the legal or factual basis of the conduct, and whether or not the conduct was continued when its lack of-legal or factual basis was apparent, should have been apparent, or was brought to the 9 10 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 10] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 attention of counsel or the party." 22 NYCCRR 130-1.l(c). Bluestar and DG each allege that Riverside repeatedly failed to provide them with the bankruptcy court filings, including the plan and the confirmation order, in spite of their requests, until well over one year after commencement of the third-party action. They further allege that counsel for Riverside. represented throughout this litigation that he was in possession of the relevant bankruptcy court documents, that he had reviewed them, and that they were the basis for Riverside's third-party causes of action. Counsel for both Bluestar and DG allege that, upon receipt of the bankruptcy court documents, they contacted Riverside's counsel to advise him of the relevant provisions and to demand that he discontinue the third-party ~ction as against Bluestar and DG, but that Riverside has not discontinued it. Bluestar and DG thus argue that Riverside knew that it was explicitly barred from commencing the third-party action here, yet chose to do so anyway, and that Riverside withheld documents from Bluestar and DG in order to delay the resolution of this case. The court recognizes Riverside's failure to comply with ·discovery requests. However, the court also notes, as Riverside points out, that the relevant bankruptcy documents were all publicly available, and that the attorney for DG was, in fact, actively involved in the Chapter 11 proceedings, and therefore already had or should have had the bankruptcy documents in his 10 11 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 11] NYSCEF DOC. NO. 175 possession. INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 The third-party defendant do not deny that the documents were accessible in this made a good-faith argument that manner~ som~ Moreover, as Riverside of its third-party claims fell within an exemption from the plan's release, the court cannot conclude that Riverside proceeded with the third-party action in spite of having full knowledge that its claims-were definitively barred. attorneys' Accordingly, the.court declines to award fees in this case. IV. CONCLUSION In light of the foregoing, it is ORDERED that.the. motion of Bluestar Properties, Inc., and Jeffrey Pikus is granted to the extent that BlueStar Properties, Inc., is granted leave to amend its answer to add an affirmative ·defense of releas~, the amended answer, in the form annexed to the motion papers of Bluestar Properties, Inc. ahd Jeffrey Pikus, is deemed served upon the third-party plaintiff, and the thirdparty complaint is dismissed. as against Bluestar Properties, Ince., and the motion is otherwise denied; and it is further, ORDERED that the motion of DG UWS Sub V, LLC, is granted to the extent that DG UWS Sub V, LLC, is grante~ leave to amend its answer to add an affirmative defense of ·release, the amended answer, in the form annexed to the motion papers of DG UWS Sub V, LLC, is deemed served upon the third~party plaintiff, the third- 11 12 of 13 [*FILED: NEW YORK COUNTY CLERK 06/06/2018 10:39 AM 12] NYSCEF DOC. NO. 175 INDEX NO. 151907/2015 RECEIVED NYSCEF: 06/06/2018 party compliint is dismissed as against DG UWS Sub V, LLC, and that the motion is otherwise.denied; and it is further, ORDERED that Bluestar Properties, Inc., and DG UWS Sub V, LLC, shall each serve a copy of this order with notice of entry upon the plaintiff and the defendant third-party plaintiff within 20 days of this order. This constitutes the Decision and Order of the court. Dated: June 4, 2018 ENTER: HON. NANCY rii. BANNON 12 13 of 13

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