PATELEY ASSOCIATES I, LLC v. PITNEY BOWES, INC. Civil No. 3:08cv1607 (JBA).
704 F.Supp.2d 140 (2010)
PATELEY ASSOCIATES I, LLC and Pateley Associates, LP, Plaintiffs, v. PITNEY BOWES, INC., Defendant.
United States District Court, D. Connecticut.
March 31, 2010.
Barry J. Waters, Marilyn Beth Fagelson, Murtha Cullina LLP, New Haven, CT, Francis J. Brady, Mark R. Susman, Sarah P. Kowalczyk, Murtha Cullina LLP, Loni S. Gardner, Murtha Cullina, Hartford, CT, for Plaintiffs.
Gustavo Membiela, Marty Steinberg, Rafael R. Ribeiro, Hunton & Williams LLP, Miami, FL, Jonathan M. Shapiro, Richard P. Colbert, Sarah Frances Depanfilis, Day Pitney LLP, Terence J. Gallagher, III, Jones Garneau LLP, Stamford, CT, for Defendant.
RULING ON DEFENDANT'S MOTION TO DISMISS AND PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
JANET BOND ARTERTON, District Judge.
Defendant Pitney Bowes, Inc. ("PBI") has moved to dismiss the nine-count Third Amended Complaint filed by Plaintiffs Pateley Associates LP ("Pateley LP" or the "LP") and Pateley Associates I, LLC ("Pateley LLC" or the "LLC"), and Plaintiffs have moved for summary judgment on their claim of breach of contract alleging PBI's failure to defend them in a lawsuit brought against them by the Innis Arden Golf Club ("IAGC"). For the reasons that follow, PBI's motion to dismiss will be denied, PBI's motion to seal an exhibit will be granted, and Plaintiffs' motion for partial summary judgment will be granted.
Between 1967 and 1978, PBI held in fee simple the land located at 23 Barry Place in Stamford, Connecticut ("Barry Place"), and owned and occupied the land as well as its buildings and structures. Around December 13, 1978, it conveyed an estate for years until January 1, 2004 in the land to Pateley LP with a remainder interest to Hirey Realty Corporation ("Hirey") and sold the buildings, structures, and improvements to Pateley LP. Hirey and Pateley LP entered into an option agreement that would allow Pateley LP to lease Barry Place after its estate for years in the property expired in 2004. Also around December 13, 1978, after obtaining its estate for years, Pateley LP entered into a "hell and high water bond net lease" agreement with PBI (the "Lease"), under which it leased Barry Place back to PBI. Subject to an option agreement, PBI could continue to lease Barry Place past the expiration of the Lease, but pursuant to the same terms.
On March 21, 2001, pursuant to the "Limited Liability Company Agreement of Pateley Associates LLC" (the "LLC Agreement"), Pateley LP created Pateley LLC and assigned to the LLC its ownership
Plaintiffs allege that PBI was the sole occupant of Barry Place between 1967 and 2009. During that period, PBI was allegedly tasked with
In 2005, while PBI occupied Barry Place under a sublease with the LLC (which itself had leased Barry Place from Whisper), sediment impacted with polychlorinated biphenyls ("PCBs") was discovered in a pond at Innis Arden, which is adjacent to Barry Place. Plaintiffs further allege that contamination has been detected in soil samples from Barry Place (id. at ¶ 22) and that up to 62,000 milligrams per kilogram of total petroleum hydrocarbons were detected in one soil sample at or near the site of a former UST at Barry Place (id. at ¶ 23).
In August 2006, Innis Arden filed suit against both PBI and Pateley LLC under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9607, seeking remedy for the alleged release of PCBs from the Barry Place property onto its property. See Innis Arden Golf Club v. Pitney Bowes, Inc., Civ. No. 3:06cv1352 (JBA) (D.Conn.) (the "Innis Arden Action"). PBI undertook to defend and to indemnify Pateley LLC against any or all liabilities in the Innis Arden Action beginning in June 2007, paying the law firm Pullman & Comley LLC to jointly defend them. (Rosen Aff. [Doc. # 58].) On September 12, 2008 the law firm Murtha Cullina LLP ("Murtha Cullina") contacted representatives from Whisper and Pateley LLC to discuss their representation as "co-plaintiffs in a lawsuit that may be filed against" PBI "in connection with environmental contamination at the Barry Place property." (Sept. 12, 2008 Letter from Mark S. Sussman, Ex. 2 to Pl.'s Suppl. Rule 56(a)1 Submission [Doc. # 171], at 1.)
On December 1, 2008, Murtha Cullina began billing Pateley LP for its defense of Pateley LLC. (Invoices from Murtha Cullina to Pateley LP, Ex. 3 to Pl.'s Suppl. Rule 56(a)1 Submission [Doc. # 171], at 1.) Plaintiffs proffer ten invoices from Murtha Cullina to the LP for fees and costs totaling $277,505.26, all of which has been paid by the LP. (Sussman Aff. Supp. Pl.'s Suppl. Rule 56(a)1 Submission [Doc. # 171-1] at ¶ 4.)
II. Defendant's Motion to Dismiss
Pursuant to Federal Rule of Civil Procedure 12(b) (6), PBI moves to dismiss all nine counts of the Third Amended Complaint in its entirety for failure to state a claim upon which relief may be granted. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Even without detailed allegations, a claim will be found facially plausible so long as "the plaintiff pleads non-conclusory factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.
1. Count One: CERCLA Cost Recovery
Plaintiffs seek declaratory judgment that Defendant is liable under CERCLA for such costs and expenses as have been or will be incurred for the investigation, remediation, and monitoring of hazardous substance contamination at Barry Place and an order requiring PBI to investigate, remediate, and monitor such contamination there. Plaintiffs' CERCLA claim against PBI alleges that PBI is both an owner and operator
CERCLA imposes strict liability for environmental contamination upon entities including the "owner and operator of a vessel or a facility"
a. Owner liability
It is undisputed that PBI was not record owner of Barry Place after December 13, 1978. Pateley LP held an estate for years in Barry Place from 1978 until 2001, after which it assigned all rights and interests it had in the property to the newly formed Pateley LLC. Hirey (and then Whisper) maintained a remainder interest in the land. Thus, PBI contends that Plaintiffs cannot allege sufficient facts to demonstrate that it was a "de facto owner" and strictly liable for contamination costs as a PRP under Section 9607(a) (1).
For purposes of CERCLA, a lessee may be held liable as an "owner" pursuant to a de facto ownership theory even if it does not hold title to the property in question. Under this theory, "certain lessees may have the requisite indicia of ownership vis-a-vis the record owner to be de facto owners and therefore strictly liable." Commander Oil Corp. v. Barlo Equip. Corp., 215 F.3d 321, 330 (2d Cir.2000). The Second Circuit has set forth a non-exhaustive list of criteria to assess whether such non-record de facto ownership exists.
The inquiry focuses on obligations associated with ownership, including
Id. at 330-31. As examples of arrangements in which lessee have de facto ownership status that would give rise to strict liability, the Second Circuit referred to 99-year leases and sale-leasebacks, and explicitly that may not "serve to insulate the former-owner/lessee from owner liability if the lessee actually retains most rights of ownership with respect to the new record owner." Id. at 331.
The Third Amended Complaint claims that PBI had a de facto ownership interest in Barry Place because the lease created by PBI's sale-leaseback "imposes upon Defendant all costs and obligations of every kind relating to [Barry Place] as though it were the sole owner" and "generally puts the burdens of ownership on the Lessee." (3d Am. Compl. at ¶¶ 31, 32.) Pateley has further alleged that the lease was for a term of 25 years and contained renewal options extending the term (id. at ¶ 34); is not subject to termination by
PBI argues that the Commander Oil standard requires allegations of ultra-hazardous activities during occupancy of property for that occupancy to amount to de facto ownership, which Pateley has not alleged. However, the Second Circuit in Commander Oil merely drew a parallel between the reasons underlying strict liability in the CERCLA context and in the ultra-hazardous activity context, as guided by the court's analysis of ultra-hazardous activity in United States v. FMC Corp., in which it held that "[w]hen one enters into a business or activity for his own benefit, and that benefit results in harm to others, the party should bear the responsibility for that harm." 572 F.2d 902, 907 (2d Cir. 1978). Neither FMC Corp. nor Commander Oil suggest that ultra-hazardous activity is a required indicium of de facto ownership. Thus, Plaintiffs' allegations that PBI functionally acted as owner of the property, even though it was not record owner, are legally sufficient under Rule 12(b)(6).
b. Operator Liability
PBI also moves to dismiss Plaintiffs' claim that it is liable for remediation costs under Section 9607(a) as an operator, arguing that Plaintiffs' claim invites "expan[sion of] CERCLA operator liability to any entity that leases a contaminated property and monitors compliance with general environmental regulations during the period of the lease." (Def.'s Reply Mem. Supp. Mot. Dismiss [Doc. # 73] at 3 (emphases in original).) PBI suggests that the Court should look to whether PBI had "authority to control the cause of the contamination at the time the hazardous substances were released into the environment." (Def.'s Mem. Supp. Mot. Dismiss [Doc. # 54] at 9 (quoting Geraghty & Miller, Inc. v. Conoco Inc., 234 F.3d 917, 928 (5th Cir.2000)).) In United States v. Bestfoods, 524 U.S. 51, 52, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998), the Supreme Court clarified that "an operator must manage, direct, or conduct operations specifically related to the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations."
Plaintiffs' complaint alleges that from 1967 through the present, PBI has been solely responsible for applying for an EPA hazardous waste identification permit; generating waste at Barry Place; storing that waste at Barry Place; developing an underground tank and piping system at Barry Place to hold petroleum and hazardous substances; using hazardous substances; "managing the use of electrical transformers at the facility, including the handling of PCB-contaminated dielectric fluids;" responding to a release of those fluids from leaky valves; and notifying the Connecticut Department of Environmental Protection that of the presence of elevated levels of PCBs at Barry Place; and in 1988 or 1989, "removed Underground Storage Tanks (`USTs') at the Facility that previously contained gasoline, alcohol, nail polish remover and fuel oil" and in the process, "failed to comply with
2. Counts Two and Three: Breach of Contract
Counts Two and Three of the complaint charge PBI with breaching its contractual obligations to indemnify Pateley LLC for costs associated with environmental contamination evaluation and remediation. PBI contends that those claims for indemnification based on CERCLA liability must be dismissed because CERCLA had not been enacted when the lease was signed, and the lease was not intended to cover costs incurred for violations of future regulatory schemes. PBI further argues that the contractual provision at issue, "strictly construed, does not require PBI to indemnify Pateley for the damages sought in Count Two, or for the indemnity sought in Count Three, because the indemnity provision does not contemplate indemnification for costs pertaining to environmental remediation." (Def.'s Mem. Supp. Mot. Dismiss at 14.) The Lease provides that
(Lease Agreement, Ex. C to Pl.'s Rev. 56(a)1 Statement [Doc. # 99], § 8.)
The Second Circuit has found an indemnification clause in a pre-CERCLA contract to include prospective obligations if its terms are "either specific enough to include CERCLA liability or general enough to include any and all environmental liability." Olin Corp. v. Consol. Aluminum Corp., 5 F.3d 10, 15 (2d Cir.1993). Olin involved a pre-CERCLA agreement for the sale of an aluminum business with an explicit requirement that the purchaser indemnify Olin for all liabilities "as they exist on the Closing Date or arise thereafter," which was held to encompass CERCLA liability. Id. Conversely, courts applying the Olin standard to pre-CERCLA indemnification clauses that are expressly limited to circumstances that exist at the time closing, or to specific types of liabilities or disputes, have excluded coverage for CERCLA liability. See, e.g., Georgia-Pacific Consumer Prods., LP v. Int'l Paper Co., 566 F.Supp.2d 246, 251 (S.D.N.Y. 2008) (where indemnification clause in pre-CERCLA lease provided that lessee would assume "debts and liabilities of every time. . . as the same exist on the date hereof" there was no liability for CERCLA-related costs); Buffalo Color Corp. v. Alliedsignal, Inc., 139 F.Supp.2d 409, 419 (W.D.N.Y. 2001) (indemnification provision limiting purchaser's liability to "losses or liabilities, including attorneys fees, suffered or incurred by Seller for reason of . . . all obligations and liabilities relating to the [purchaser's] [b]usiness arising out of claims made, or suits brought by employees or third parties for injury, sickness, disease or death of any person, or any damage to any property, on or after the Closing Date, in either case which resulted from . . .
Construing the Lease's terms to carry their ordinary meaning, see B & D Assoc., Inc. v. Russell, 73 Conn.App. 66, 70, 807 A.2d 1001 (2002) ("the language must be given its ordinary meaning unless a technical or special meaning is clearly intended"), the indemnification clause here requires PBI to indemnify Pateley LLC for any costs arising from PBI's estate in the premises or "any act or omission" of PBI or its licensees, sub-lessees, invitees, without regard to timing or type of liability-producing conduct.
3. Counts Four, Five, and Six: Failure to Defend or Indemnify
In Counts Four, Five, and Six, Plaintiffs claim that PBI breached its lease contract with Plaintiffs by failing to defend or indemnify them for costs associated with defense of the Innis Arden Action. PBI moves to dismiss these three counts because Section 8 of the lease agreement with Plaintiffs did not create an obligation to defend or indemnify Plaintiffs in the Innis Arden Action because Plaintiffs were not a party to the Innis Arden Action because of their estate in the Premises. At issue then is whether IAGC's action against Pateley LLC arises out of Plaintiffs' "estate in the Premises" including Plaintiffs' estate for years in the land and ownership of the buildings and facilities.
PBI reads "estate in the Premises" as a term of art that refers only to estates created by leases, and thus, only the relationships between lessor and lessee or landlord and tenant. (Def.'s Mem. Supp. Mot. Dismiss at 7, 16.) PBI's reliance on Town of Newington v. Young, 47 Conn.Sup. 65, 92, 777 A.2d 219 (Conn.Super.2000), is misplaced. Young explained that a lease "creates an interest or estate in the premises," it does not thereby suggest that estates in premises are only created through leases. In other words, although leases are contracts that create estates in the premises, other transactions can create such estates as well.
"Estate" is defined in Black's Law Dictionary as "[t]he amount, degree, nature and quality of a person's interest in land or other property; esp., a real-estate interest that may become possessory, the ownership being measured in terms of duration." Id. at 626 (9th Ed.2009). Richard Burke's treatise on property law in Connecticut provides historical context for the present-day definition, explaining that the term is derived from feudal England in which only free men could own or hold real estate, thus giving rise to the term "freehold estate." Connecticut Real Property Law 266 (Richard C. Burke, ed., 1984). From the term estate, "many classifications, such as possessory vs. nonposessory rights, present or future interests and several other legal incidents of ownership evolved." Id. Additionally, the term "Premises," capitalized in both Section 8 of the lease agreement and the definitional Section 1, is defined as those "premises. . . consisting of (i) the land . . . (ii) all buildings and other improvements . . . now or hereafter located on the Land . . . and (iii) the respective easements, rights and appurtenances relating to the Land and the Improvements."
Therefore, Plaintiffs' "estate in the Premises" is their respective interest, possessory or non-possessory, in the land, buildings, improvements, and easements at Barry Place, specifically an estate for years followed by a leasehold estate in the land, and ownership in fee simple of the buildings, structures, and improvements located on the land. (3d Am. Compl. at ¶ 3.) These interests do not grow out of the LP's lease of Barry Place to PBI; instead, the LLC's "estate in the Premises" was derived first from the LLC Agreement in which the LP gave to the LLC its "ownership interest" in Barry Place, and thereafter from its execution of the option to lease Barry Place from Whisper, which the LLC exercised in 2001. See Young, 47 Conn. Supp. at 92, 777 A.2d 219 ("A lease is a contract which creates an interest or estate in the premises." (citations omitted)). These interests are what exposed the LLC to liability in the Innis Arden Action. It is irrelevant whether IAGC was mistaken about the nature of Plaintiffs' actual ownership or control of the Barry Place land.
Moreover, Section 8 of the Lease calls for indemnification of the LP (and the LLC after assignment) if sued because of its estate in the Premises or because of other actions or omissions for which PBI is responsible. Because of the use of the disjunctive "or," what matters in determining whether PBI is liable to Plaintiffs is whether the LLC was sued because of its interests in the Barry Place land, buildings or improvements upon it, and easements or rights attached to it—regardless of PBI's actions or omissions. Whether the LLC would have been sued in PBI's absence has no bearing on that determination. PBI's alarm that Plaintiffs' interpretation would "require PBI to defend or indemnify Pateley for any lawsuit that would have been commenced" (Def.'s Mem. Supp. Mot. Dismiss at 16) is unfounded, as Section 8 only requires PBI to indemnify or save harmless Plaintiffs against liabilities that arise because of their specific interests in Barry Place, which are sufficiently alleged in the present matter.
Plaintiffs have alleged that the LLC was sued because of its interest in Barry Place. Section 8 of the Lease calls for PBI to indemnify Plaintiffs for costs arising out of the Plaintiffs' respective estates in the Premises. Plaintiffs allege that PBI has failed to do so. This states a claim for breach of contract, so Defendant's motion to dismiss Counts Four, Five, and Six is denied.
4. Count Seven
PBI moves to dismiss Count Seven of the Third Amended Complaint, which seeks declaratory and injunctive relief under Connecticut's Environmental Protection Act ("CEPA"), Conn. Gen.Stat. § 22a-16. PBI argues that Plaintiffs should have brought this claim in state court and that the relief Plaintiffs seek exceeds what is statutorily authorized. PBI points to the statutory text, which provides in pertinent part:
Conn. Gen.Stat. § 22a-16.
Plaintiffs note that the statute grants a party discretion to file in Superior Court and that federal courts have exercised subject-matter jurisdiction over CEPA claims not initiated in state court. See, e.g., Durham Mfg. Co. v. Merriam Mfg. Co., 294 F.Supp.2d 251 (D.Conn.2003); Albahary v. City & Town of Bristol, 963 F.Supp. 150 (D.Conn.1997).
PBI argues that this count should be dismissed because the relief requested
Finally, relying on Pestey v. Cushman, No. 07cv9470091, 2000 WL 157920 (Conn.Super. Jan. 28, 2000), PBI argues that Count Seven should be dismissed because Plaintiffs seek only the vindication of a private right. In Pestey, the Superior Court held that "[t]he purpose of General Statutes § 22a-16 is not to create a vehicle for the vindication of private rights, but rather to enlist the assistance of citizens to protect the public trust in the air, water, and other natural resources of the state." Id. at *3. However, Pestey also explained that "[n]owhere does the legislation suggest that litigants who may incidentally benefit from the granting of equitable relief are not entitled to seek such relief against pollution on behalf of the citizenry." Id. Count Seven does not seek to vindicate private rights only; rather, it states that "the soil, groundwater and/or surface water at, under and around the Facility are the natural resources of the State of Connecticut" (3d Am. Compl. at ¶ 112), and PBI's "activities have or are reasonably likely to cause the unreasonable pollution of the state" (id. at ¶ 114). While Plaintiffs allege that they will suffer irreparable harm in the absence of an injunction, they reference the damage to Connecticut's resources caused by or likely to be caused by Defendant, concerns that are covered by CEPA. Because Plaintiffs have alleged a violation of CEPA, can bring such a claim in federal court, and have requested relief that this Court has discretion to provide, Defendant's motion to dismiss Count Seven is denied.
5. Count Eight
In Count Eight, Plaintiffs request declaratory relief related to its CERCLA, contract, and CEPA claims. Plaintiffs allege that "[a]bsent judicial determination setting forth the parties' rights and obligations with respect to these costs and legal liabilities, a multiplicity of actions may result." (3d Am. Compl. at ¶ 121.) PBI moves to dismiss on the grounds that their other counts would provide Pateley with adequate relief, rendering declaratory relief unnecessary. Under Federal Rule of Civil Procedure 57, "[t]he existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate." Nonetheless, "[a]lthough the availability of alternative remedies is not a bar to declaratory relief,
6. Count Nine
Finally, Plaintiffs request attorneys fees in Count Nine, and PBI moves to dismiss only on the grounds that no independent cause of action exists for attorneys' fees under Connecticut law. Connecticut adheres to "the general rule of law known as the `American Rule,'" which holds that "a prevailing litigant ordinarily is not entitled to collect a reasonable attorney's fees from the opposing party as part of his or her damages or costs." Town of Brookfield v. Candlewood Shores Estates, Inc. 201 Conn. 1, 14, 513 A.2d 1218 (1986). There are, however, exceptions to this rule, including when the claim is "based upon statutory or contract provisions authorizing the recovery of attorney's fees by a prevailing litigant." Id. at 15, 513 A.2d 1218.
Plaintiffs' claim is based in contract, specifically on Sections 8 and 19(c)of the Lease. Section 19(c) provides that "[i]f Lessee shall be in default in the performance of any of its obligations hereunder, Lessee shall pay to Lessor on demand, all expenses incurred by Lessor as a result thereof, including reasonable attorneys' fees and expenses." (3d Am. Compl. at ¶ 126.) Rather than bringing Count Nine as a stand-alone cause of action for attorneys fees, Plaintiffs bring this claim on a breach-of-contract theory. Therefore, this claim falls within the exception to the American Rule, and the Motion to Dismiss will be denied as to this count.
III. Plaintiffs' Motion for Summary Judgment 9
Plaintiffs move under Federal Rule of Civil Procedure 56 for summary judgment on Count Four, alleging that PBI breached Section 8 of the Lease by failing to defend the LLC in the Innis Arden Action. Plaintiffs contend that "the [Innis Arden Action] against Pateley [LLC] is an action based solely on Pateley's interest in the Barry Place property," thus triggering PBI's indemnification obligations under the Lease. (Pl.'s Mem. Supp. Mot. Partial Summ. J. [Doc. #56] at 7.) PBI argues that neither the LP nor the LLC has standing to raise a claim under Section 8 of the Lease because the LLC has not actually paid for legal expenses in the Innis Arden Action and the LP was not sued and has no rights under the Lease, which was assigned to the LLC in 2001.
A. The LLC
As the Court concluded above in denying PBI's motion to dismiss, PBI's
PBI contends that it owes the LLC nothing because the LLC has incurred neither costs associated with the Innis Arden Action nor liability to reimburse the LP for attorneys fees and costs that the LP paid to Murtha Cullina for representation of the LLC in the Innis Arden Action. Plaintiffs respond that the LLC has incurred liability because it is obligated to indemnify the LP for attorneys fees the LP paid to Murtha Cullina for its representation.
Under Connecticut law,
Amoco Oil Co. v. Liberty Auto & Elec. Co., 262 Conn. 142, 149, 810 A.2d 259 (2002) (citing 24 Leggett St. Ltd. P'ship v. Beacon Indus., Inc., 239 Conn. 284, 306, 685 A.2d 305 (1996) (indemnification clause, which obligated seller-defendant to indemnify, defend, and hold harmless land purchaser-plaintiff for any "liabilities, losses, damages, costs or expenses (including reasonable attorneys' fees) of any nature arising from the environmental condition of or problem with the Property, which condition or problem arose prior to Closing," covered indemnification of both loss and liability, requiring seller to indemnify purchaser for purchaser's liability for future costs not yet paid for remediation of land contaminated with "special wastes," that violated Connecticut regulations)). Under an agreement to indemnify against loss only, "it is theoretically impossible for an
Although PBI argued
The LLC Agreement, which created the LLC in accordance with the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., establishes the LP as the sole equity member and Member Manager of the LLC. Section 17 of the LLC Agreement, entitled "Exculpation and Indemnification," states that
Covered persons are defined to include members and managers of the LLC, such as the LP. (LLC Agreement, Ex. G to Rev. Stmt., at § 17.2.) Section 8.2(ii) authorizes the Member Manager, which is the LP, to "bring and defend on behalf of the [LLC] actions and proceedings at law or in equity" "at the expense of the [LLC]" (id. § 8.2(ii)), and Section 17.2 requires that the LLC indemnify the LP for any expenses it incurs in such a defense, taken in good faith. In accordance with Sections 8.2(ii) and 17.2 of the LLC Agreement, after December 2008, the LP paid for the defense of the LLC, which was an "act ... performed ... by [a] Covered person" that resulted in a "loss."
PBI also points to several provisions in Section 8.8(ii) of the LLC Agreement that limit the LLC's activities.
PBI also argues that during the Innis Arden Action, the LLC intentionally "manipulat[ed]... the pleadings," hiding the fact that it never owned the Barry Place property in order to shield Whisper Capital, which was not protected by an indemnification agreement. (Def.'s Reply Mem. [Doc. #179] at 6.) PBI contends that "[t]he LLC, as a putative indemnitee, had an obligation to proceed in good faith when it sought indemnification from PBI," and the LLC's purported "failure to cooperate with the other party's performance" by not disclosing that Whisper Capital was the actual owner of the real property at Barry Place "is not only a breach of the implied covenant of good faith ... but also is a defense to a claim of nonperformance" (Def.'s Suppl. Mem. Opp'n Summ. J. at 17), implicating both the covenant of good faith and fair dealing and the doctrine of prevention. Therefore, PBI argues, it is exempted from indemnification of the LLC. (Id.)
In its answer to the Second Amended Complaint in the Innis Arden Action, the LLC responded "Denied" to the allegation by IAGC that the LLC is "the current owner of the property know[n] as 23 and 50 Barry Place." (Answer, Innis Arden Golf Club v. Pitney Bowes, Inc., No. 3:06cv1352 (JBA) (D.Conn. Nov. 2, 2007).) In response to IAGC's allegation in the Innis Arden Action that the LLC "at times relevant to this complaint either owned and controlled or controlled" Barry Place, the LLC responded "Pateley admits ... that it once owned the real property known as 23 and 50 Barry Place in Stamford." (Id.) PBI argues that the latter answer, confirming ownership of Barry Place at one point, was intentionally misleading.
Breach of the covenant of good faith and fair dealing is a cause of action that does not in and of itself excuse nonperformance of contractual obligations,
Since the LLC incurred liability under Section 17.2 of the LLC Agreement to the LP, which paid for its defense in the Innis Arden Action once PBI abandoned its defense of the LLC, and because PBI never defended or indemnified the LLC thereafter, PBI violated its obligations to the LLC under Section 8 of the Lease and is in breach of that contract. Therefore, summary judgment is granted to Pateley LLC on Count Four in the amount of $277,505.26, the undisputed amount of fees and costs charged by Murtha Cullina and paid by Pateley LP for Murtha Cullina's defense of Pateley LLC in the Innis Arden Action.
B. The LP
Having assigned to the LLC all of its rights under the Lease, and not having been a party in the Innis Arden Action, the LP does not have standing to enforce an indemnification obligation under Section 8 of the Lease. During oral argument, Plaintiffs' counsel recognized that the LP had no rights under the Lease and had not been sued by IAGC and suggested that the LP has standing under a subrogation theory. (Nov. 6, 2009 Oral Arg. Tr. at 59:5-11.) Because there was no subrogation agreement between the LP and the LLC, any right of subrogation here would be equitable, which "does not arise from any contractual relationship between the parties, but takes place as a matter of equity, with or without an agreement to that effect." Wasko v. Manella, 269 Conn. 527, 532, 849 A.2d 777 (2004). "The object of [legal or equitable] subrogation is the prevention of injustice. It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one
For the foregoing reasons, Defendant's Motion to Dismiss [Doc. # 54] is DENIED as to all counts; Defendant's Motion to Seal Exhibit B to its Memorandum in Opposition to Summary Judgment [Doc. # 71] is GRANTED; and Plaintiff's Motion for Partial Summary Judgment as to Count Four [Doc. # 55] is GRANTED IN PART and DENIED IN PART. The Motion for Partial Summary Judgment is denied as to Pateley Associates, LP, and is granted as to Pateley Associates I, LLC, in the amount of $277,505.26.
IT IS SO ORDERED.
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