FITCHBURG MUTUAL INSURANCE COMPANY et al v. PALMIRO FERRARO, INC. et al
Filing
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LETTER OPINION & ORDER granting 26 Motion to Amend/Correct Complaint. Signed by Magistrate Judge Cathy L. Waldor on 8/26/15. (cm )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MARTIN LUTHER KING COURTHOUSE
50 WALNUT ST.
ROOM 4040
NEWARK, NJ 07101
973-776-7862
CHAMBERS OF
CATHY L. WALDOR
UNITED STATES MAGISTRATE JUDGE
ALL COUNSEL VIA CM/ECF
LETTER OPINION
Re:
Fitchburg Mutual Ins. Co., et al. v. Palmiro Ferraro, Inc., et al.
Civil Action No. 2:14-cv-0063 (KSH)(CLW)
Dear Counsel:
This matter is before the Court upon the application of Fitchburg Mutual Insurance
Company and Valley Forge Insurance Company (together “Plaintiffs”) for an Order permitting
them to file a Second Amended Complaint that asserts a cause of action against Ferraro’s
Restaurant Group (“Ferraro’s”) sounding in vicarious liability for the alleged negligent acts by
its independent contractor, Architect Robert Algarin, in the design and expansion of the
restaurant. Ferraro’s opposes this motion arguing that well settled New Jersey law renders the
proposed cause of action futile. The Court decides this application without oral argument
pursuant to Fed. R. Civ. P. 78. For the reasons that follow, the Court will GRANT Plaintiffs’
motion.
Background
This diversity subrogation action arises out of Fitchburg Mutual Insurance Company and
Valley Forge Insurance Company’s claims for sums paid to its respective insureds, Anthology,
Inc. and Bavint Corporation (“Bavint”), as a result of property damage and loss of business
caused by a fire originating at Ferraro’s Restaurant in Westfield, New Jersey on May 5, 2011.
See Am. Compl., ECF No. 17, at ¶¶ 3, 6, 31. Ferraro’s restaurant was configured so that it
occupied the first floor space of three different adjoining buildings, denoted as buildings one,
two, and three. The Complaint alleges on or about July 15, 2007, Palmiro Ferraro, Inc. (“PFI”),
leased additional space in building three from Bavint, owner of building three, which had
previously been occupied by an electric supply store, for the purpose of expanding and enlarging
Ferraro’s Restaurant. Id. at ¶ 21. Prior to that date, PFI, the owner of buildings one and two, had
subleased the first floor of both buildings to Ferraro’s and an interior passageway had been
constructed to connect the buildings and restaurant. Id. at ¶¶ 11–12, 14. PFI also possessed
lease rights to numbers 18–21 in building three and had previously subleased that space to
Ferraro’s which had likewise expanded the restaurant with a similar interior passageway
connecting buildings two and three. Id. at ¶ 14–17. After July 15, 2007, once PFI and Ferraro’s
obtained lease rights to numbers 22–24 in building three and the electric supply store vacated the
space, Ferraro’s sought to renovate so as to expand and enlarge the restaurant even more. Id. at ¶
20, 23. In order to accomplish this renovation, Ferraro’s contracted with Architect Robert
Algarin (“Algarin”). See Ferraro’s Ans., Cross-Claims, and Third Party Compl., ECF No. 23, at
pp. 11–12.
Upon completion, the renovation would bring the size of the restaurant to
approximately 11,000 square feet, and importantly, according to Plaintiffs, changed the fire
hazard use classification of numbers 22–24 of building three from an M rating to an A-2
classification. See Am. Compl., at ¶¶ 19–27, 29. Plaintiffs’ allege this change in use required
Ferraro’s to bring the entire 11,000 square foot restaurant into compliance with the New Jersey
Rehabilitation Code which requires any restaurant in excess of 5,000 square feet to install a
sprinkler system in the entire area of the restaurant and install fire doors or other fire separations.
Id. at 28–30; see N.J.A.C. § 5:23-6.13A.1 Plaintiffs argue that because Ferraro’s did not install
the appropriate sprinkler system or fire barriers, on or about May 5, 2011, the fire that originated
in building two grew unabated destroying building two and causing significant property damage
to buildings one and three. Am. Compl., at ¶¶ 31, 32.
Arguments
Plaintiffs request leave to file a Second Amended Complaint to assert a cause of action
against Ferraro’s sounding in vicarious liability for the alleged negligent acts by its independent
contractor, Algarin, in the design and expansion of the restaurant. Proposed Second Am. Compl.
“Proposed Amended Complaint”, ECF No. 29-1, at ¶¶ 61–67. Plaintiffs base their request on the
Restatement (Second) of Torts, Section 422 (“Section 422”), which creates a cause of action
1
The New Jersey Rehabilitation Subcode fire hazard classification divides the A-2 classification
into two categories, Nightclubs and those structures “other than Nightclubs.” The Uniform
Construction Code—within which the Rehabilitation Subcode is found—defines Nightclubs as:
“All buildings and places of public assembly designed for use as dance halls, eating and/or
drinking establishments, and similar occupancies, in which the established maximum permitted
occupant load exceeds the number of seats provided by more than 30 percent or which affords
less than 12 square feet net area per occupant.” N.J.A.C. § 5.23-3.14 (emphasis added). A
cursory review of the code reveals that the 5,000 square foot threshold for sprinkler systems
appearing in N.J.A.C. § 5:23-6.13A(a) applies to A-2 Nightclubs. Structures “other than
Nightclubs” follow the parameters of N.J.A.C. § 5:23-6.14A(a) which indicates a threshold of
12,000 square feet for the sprinkler system requirements to apply. It is unclear to this Court, but
indeed unnecessary for the Court to determine at this juncture, what the renovated restaurants
obligations were under the code, and whether they were classified as an A-2 Nightclub or A-2
“other than Nightclub.” The Court also notes that the obligation to install a sprinkler system can
arise under a different subsection of these codes, such as the occupant load, so the obligation to
install sprinklers and other fire protection devices is not entirely dependent upon this one
question. See e.g., N.J.A.C. § 5:23-6.14A(a)(2)–(3); see also N.J.S.A. § 52:27D-198(b) (New
Jersey’s Uniform Fire Safety Act requires the administrative adoption of regulations that would
require the use of fire detection and suppression systems).
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against the employer of a carefully selected independent contractor, arguing that Ferraro’s cannot
escape liability for the alleged negligence in failing to install sprinklers and fire doors by arguing
that fault for such an omission rests on their independent contractor Algarin. Id. In support of
this position, the Plaintiffs rely on Justice Schreiber’s concurrence in part and dissent in part in
Brown v. Racquet Club of Bricktown wherein he stated that a possessor of land could not escape
liability for a contractor’s negligence on the theory that a defect was not reasonably discoverable.
95 N.J. 280, 299 (1984).
Ferraro’s opposes the request, arguing that well-settled New Jersey law has established
that such a cause of action does not exist in this jurisdiction, and indeed, no New Jersey court has
ever expressly adopted Section 422 thus rendering the Proposed Second Amended Complaint
futile. Ferraro’s Br. in Opp. (“Opposition”), ECF No. 28 at 5. Ferraro’s argues it is long-settled
in New Jersey that “ordinarily one who engages a contractor, who conducts an independent
business by means of his own employees, is not liable for the wrongful conduct of that contractor
in the performance of its duties and services.” Opposition, at 7 (citing Bharle v. Exxon Corp.,
145 N.J. 156 (1996)). Thus, Ferraro’s concludes that any claim of liability pursuant to Section
422 fails as a matter of law, and the leave to amend should be denied. Id. at 9.
Plaintiffs’ reply2 disputes Ferraro’s belief that New Jersey law is inconsistent with the
Section 422 arguing that Ferraro’s is vicariously liable because of its status as a possessor of
land, which imposes unto them a non-delegable duty to abide by the requirements of the fire and
building codes. See Pls.’ Reply (“Reply”), ECF No. 30, at 3. This status, Plaintiffs argue,
justifies holding Ferraro’s liable for the negligence of their subcontractor despite whichever legal
relationship exists between Ferraro’s and Algarin. Id. Further, Plaintiffs argue even if New
Jersey has not yet adopted the cause of action embodied in Section 422, the New Jersey Supreme
Court would adopt it if given the opportunity because prior case law and public policy lends
itself to the conclusion that New Jersey should hold property owners liable for the negligence of
their subcontractors in circumstances such as those at issue here. Id. at 9 (citing Mayer v.
Fairlawn Jewish Center, 38 N.J. 549 (1962), and Majestic Realty Assoc. Inc. v. Toti Contracting
Co., 30 N.J. 425 (1959)).
Discussion
Fed. R. Civ. P. 15(a)(2) provides that “a party may amend its pleading only with the
opposing party’s written consent or the court’s leave. The court should freely give leave when
justice so requires.” Granting or denying leave to amend a pleading is within the Court’s
discretion. Foman v. Davis, 371 U.S. 178, 182 (1968). The Court may deny leave to amend a
The Court notes that Plaintiffs’ reply exceeds the page limitations of L. Civ. R. 7.2(d) which
sets a page limit of 11.25 pages when a proportional 12-point font is used. However, the Court
has reviewed the submission in its entirety, and in deciding this application has considered those
pages in excess of the limit.
2
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pleading if it finds “undue delay, bad faith or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of amendment, etc.” Foman, 371 U.S. at
18. Here, the primary opposition to the amendment is the alleged futility of the proposed cause
of action.
With respect to futility, leave to amend may be denied if "the complaint, as amended,
would fail to state a claim upon which relief could be granted.” Hayden v. Westfield Ins. Co.,
586 Fed. Appx. 835, 841 (3d Cir. 2014) (citing Shane v. Fauver, 213 F.3d 113, 115 (3d Cir.
2000); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997)). Thus, the
standard for reviewing a proposed amendment for futility is the same standard of review as a
motion to dismiss under Fed. R. Civ. P. 12(b)(6). See In re Burlington Coat Factory, 114 F.3d at
1434; Parson v. Home Depot USA, Inc., 2013 U.S. Dist. LEXIS 175185, at *4–5 (D.N.J. Dec.
13, 2013). When faced with a motion to dismiss for failure to state a claim, the court conducts a
two-step analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the
factual elements are separated from the legal elements of the claim. Fowler, 578 F.3d at 210–11.
The court must accept the factual elements alleged in the well-pleaded complaint as true, but
may disregard any legal conclusions. Id. Second, the court must determine if the facts alleged
are sufficient to show a "plausible claim for relief." Fowler, 578 F.3d at 210 (quoting Ashcroft
v. Iqbal, 556 U.S. 662 (2009)). A plausible claim is one which "allows the Court to draw the
reasonable inference that the defendant is liable for the misconduct alleged." Fowler, 578 F.3d at
210–11 (quoting Iqbal, 556 U.S. at 678). "Ultimately, this two-part analysis is 'context-specific'
and requires the court to draw on 'its judicial experience and common sense' to determine if the
facts pled in the complaint have 'nudged [plaintiff's] claims' over the line from '[merely]
conceivable or [possible] to plausible.'" Hobson v. St. Luke's Hospital and Health Network, 735
F. Supp. 2d 206, 211 (E.D. Pa. 2010) (quoting Fowler, 578 F.3d at 211–12).
This application presents a series of interesting questions that can be distilled to the
following: whether a property owner can be liable for property damage to adjoining properties
caused by a fire that originated within its premises and which, but for violations of building and
fire codes could have been abated, by arguing that the builders and architects who negligently
omitted the fire suppression devices were independent contractors?
In viewing the Proposed Second Amended Complaint within the Fowler framework, the
factual basis for the claim is, to summarize, that during the course of its expansion Ferraro’s did
not install a fire suppression system, or have fire barriers installed between buildings one and
two or two and three, and as a result of the fire, Plaintiffs’ subrogees sustained property damage.
See Proposed Second Am. Compl., ¶¶ 23, 31, 32, 34. The added complication here is the
assertion by Ferraro’s that Algarin was retained as an independent contractor, and in that role he
appears to have omitted the fire suppression devices from his plans. See Ferraro’s Ans., CrossClaims, and Third Party Compl., ECF No. 23, at pp. 11–12.
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Legally, the claim sounds in negligence. The test of negligence is whether the reasonably
prudent person at the time and place should recognize and foresee an unusual risk or likelihood
of harm or danger to others. See Scully v. Fitzgerald, 179 N.J. 114, 126 (2004). In cases like the
one currently before the Court, the standard of care applied to a defendant is shaped by its status
as the proprietor of a commercial premises and its relationship to plaintiffs at the time of the
accident. See Brown, 95 N.J. at 290. And there have been multiple cases in which the New
Jersey Supreme Court has emphasized that a property owner can be liable to adjoining property
owners in certain instances where the property was kept in an unsafe and dangerous condition
and the landowner did not take reasonable precautions to prevent the start or spread of the fire.
See e.g., B.W. King Inc., v. Town of West New York, 49 N.J. 318 (1967); Menth v. Breeze
Corp., 4 N.J. 428 (1950).
But, principals are generally not liable for the negligence of their independent
contractors. Bharle v. Exxon Corp., 145 N.J. at 156; Basil v. Wolf, 193 N.J. 38, 47 (2007). As
Ferraro’s notes in its memorandum in opposition there are three recognized exceptions to the
general rule that a principal is not liable for the wrongful conduct of its independent contractors.
Opposition at 8 (citing Majestic Realty Associates, 30 N.J. at 436 (1959) The three exceptions
are: (1) when the principal retains control over the manner and means of doing the work the
contractor provided; (2) when the principal has engaged an incompetent contractor, or (3) where
the services provided by the contractor are a nuisance per se. Id. Those exceptions would
require a fact-based inquiry into the circumstances of the principal and independent contractor’s
relationship. Section 422 envisions another scenario in which a principal is liable for the torts of
the independent contractor, that in which:
A possessor of land who entrusts to an independent contractor
construction, repair, or other work on the land, or on a building or
other structure upon it, is subject to the same liability as though he
had retained the work in his own hands to others on or outside of
the land for physical harm caused to them by the unsafe condition
of the structure (a) while the possessor has retained possession of
the land during the progress of the work, or (b) after he has
resumed possession of the land upon its completion.
Restatement (2d) of Torts § 422. Insofar as Section 422 appears to impose strict liability upon
the principal for all acts of the independent contractor, the Court would not support such an
interpretation, and indeed such a construction would go against established law. See Majestic
Realty, 30 N.J. at 438 (stating that even where a duty is absolute, the liability is not).
However, another way of interpreting Section 422 would be to mirror the recognized and
accepted principles of non-delegable duties. The purpose for imposing a non-delegable duty on
the principal is that the duty is of extraordinary importance to the public. Id. at 439 (noting duty
may be non-delegable where its social value "to the community is so significant that the law
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cannot allow it to be transferred to another"). There have been multiple cases finding that a nondelegable duty was owed to an adjoining landowner. See e.g., Id. at 436 (finding landowner had
non-delegable duty to exercise reasonable care to members of the public or adjoining property
owners in razing building); Great Northern Ins. Co. v. Leontarakis, 387 N.J. Super. 583, 592
(App. Div. 2006) (finding adjoining landowner has non-delegable duty to maintain lateral
support for the structure). Thus, if the Court were to determine that compliance with building
safety and fire codes were a non-delegable duty, then Ferraro’s would have the same liability for
Algarin’s omission as if Ferraro’s had done the renovation itself. This interpretation would
reconcile Section 422 with existing law.
Although the parties disagree on the weight this Court should afford Justice Schreiber’s
opinion in Brown, his argument is a compelling one. The Court need only examine an analogous
situation. Suppose instead of damaging an adjoining property, the injury caused by this fire was
a bodily injury to a patron of Ferraro’s. The argument in that case would be that the restaurant
had a non-delegable duty to exercise reasonable care for the safety of persons using the premises
at its invitation, an ongoing and continuous responsibility. See e.g., Mayer, 38 N.J. at 555. This
is because the "proprietor of premises, to which the public is invited for business purposes of the
proprietor, owes a duty to exercise reasonable care to see that one who enters his premises upon
that invitation has a reasonably safe place to do that which is within the scope of the invitation."
Brown, 95 N.J. at 290 (quoting Brody v. Albert Lifson & Sons, Inc., 17 N.J. 383, 389 (1955)).
And in that case “it would be immaterial whether the construction work was being performed by
[the business’s] own employees or by an independent contractor.” See Mayer, 38 N.J. at 555.
Assuming, arguendo, the failure to install fire suppression devices created a dangerous situation
or was a non-delegable duty, the difference here would be that the status of the injured party visà-vis the restaurant is an adjoining property rather than an invitee. The analysis in that scenario
shifts away from questions of who constructed the premises to questions of knowledge or notice
of defects. See Brown, 95 N.J. at 290 (stating that “a proprietor generally is not liable for
injuries caused by defects of which he had no actual or implied knowledge or notice”). Indeed
for purposes of this motion it is therefore clear to this Court that the mere assertion that an
independent contractor performed the renovation work for Ferraro’s is not sufficient to render
the proposed claim futile.
The Court clarifies though, in some ways, the proposed claim may be redundant insofar
as it asserts a basis of liability for Ferraro’s own negligence in failing to make itself aware of
prevailing regulations related to renovating the space. Indeed, the claim may be direct rather
than vicarious. As the Court has stated, it does not intend to create a new exception to the
general rule that a principal is generally not liable for the negligence of its independent
contractor. Nor does the Court adopt Section 422. Rather, the Court has determined that the
proposed claim may be asserted insofar as it is consistent with existing law. And since the
proposed claim seeks to impose liability on the principal for the negligence of the independent
contractor, Plaintiffs must do so through recognized means; establishing one of the three
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exceptions recognized in Majestic Realty, supra at 5, or establishing that a non-delegable duty
existed such that the duty could not “be put aside and immunity gained through the agency of an
independent contract.” Majestic Realty, 30 N.J. at 438.
Conclusion
The Court concludes that Plaintiffs’ proposed pleading is not futile, that a plausible cause
of action exists to hold Ferraro’s liable for the omissions of its independent contractor that
warrants further inquiry. Therefore For the foregoing reasons; and for other good cause shown,
IT IS on this 26th day of August, 2015,
ORDERED that the application seeking leave to file the Proposed Second Amended
Complaint [ECF No. 26] is GRANTED; and it is further
ORDERED that Plaintiffs are to file the Proposed Second Amended Complaint within ten
(10) days of the date hereof; and it is further
ORDERED that the Clerk shall terminate docket entry number 26.
/s/Cathy L. Waldor
HON. CATHY L. WALDOR
United States Magistrate Judge
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