State of New York et al v. The Monfort Trust et al

Filing 147

ORDER ADOPTING REPORT AND RECOMMENDATIONS: For the reasons set forth PLEASE SEE ORDER FOR FURTHER DETAILS, the Court adopts Judge Lockes Report and Recommendation in its entirety. The motions for summary judgment are both granted in part and denied in part. So Ordered by Judge Joan M. Azrack on 9/30/2016. (Ortiz, Grisel)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------------------X
STATE OF NEW YORK and THE NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL
CONSERVATION,
Plaintiffs,

ORDER
12–CV–3755 (JMA)(SIL)

-againstTHE MONFORT TRUST, KENNETH ANSCHUTZ,
Individually and as Trustee of the Monfort Trust,
TOWNSEND ANSHUTZ, Individually and as Trustee of
the Monfort Trust, PAMELA J. MONFORT, Individually
and as Trustee of the Monfort Trust, NANCY
FAMIGLIETTI, as Trustee of the Monfort Trust,
JAMES C. TITUS, as Trustee of the Monfort Trust,
DEBORAH FIREBAUGH, and JOHN L. BRADLEY, JR.,
Defendants.
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JOHN L. BRADLEY, JR.,
Defendant and Third-Party Plaintiff,
-againstO.J.V. REALTY CORP., MUSSO 3636 LLC, MUSSO
PROPERTIES, LLC and VICTOR A. MUSSO, Individually,
Third-Party Defendants.
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THE MONFORT TRUST, TOWNSEND AUSHUTZ,
Individually and as Trustee of the Monfort Trusts,
PAMELA J. MONFORT, Individually and as Trustee of
The Monfort Trusts, NANCY FAMIGLIETTI, Individually
and as Trustee of the Monfort Trusts, and JAMES C.
TITUS, Individually and as Trustee of the Monfort Trusts,
Defendant and Third-Party Plaintiffs,
-againstMUSSO 3636 LLC and VICTOR MUSSO,
Third-Party Defendants.
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FILED 
CLERK 

9/30/2016 1:17 pm

U.S. DISTRICT COURT 
EASTERN DISTRICT OF NEW YORK 
LONG ISLAND OFFICE 

AZRACK, United States District Judge:
Before the Court are the objections to Magistrate Judge Locke’s Report and
Recommendation, in which Judge Locke recommended that the cross-motions for summary
judgment both be granted in part and denied in part. Objections from each side were timely filed.
Having conducted a review of the full record and the applicable law, for the following reasons, the
Court adopts Judge Locke’s Report and Recommendation in its entirety.
I. BACKGROUND
In July 2012, the State of New York and the New York State Department of Environmental
Conservation (the “DEC”) sued several defendants pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601, et seq., and New
York common law to recover costs associated with a dry cleaning business’s release of hazardous
substances, which occurred over several decades. Several defendants in the main action are the
third-party plaintiffs herein.
In February 2013, John L. Bradley, Jr. (“Third Party Plaintiff Bradley” or “Bradley”) filed
a third party complaint for indemnification against O.J.V. Realty Corp., Musso 3636, LLC, Musso
Properties, LLC, and Victor A. Musso (collectively, the “third party defendants”). The Monfort
Trust and its trustees, Townsend Anschutz, Pamela J. Monfort, Nancy Famiglietti, James C. Titus,
(the “Monfort Trust Third Party Plaintiffs”) also filed a third party complaint against only Musso
3636, LLC and Victor A. Musso.
All of the third party defendants moved for summary judgment against all of the third party
plaintiffs. The Monfort Trust Third Party Plaintiffs cross-moved for summary judgment against
Victor A. Musso and Musso 3636 LLC. On January 8, 2016, I referred the cross-motions for
summary judgment to Judge Locke for a Report and Recommendation. On June 27, 2016, Judge
Locke issued a Report and Recommendation, recommending that both motions for summary
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judgment be granted in part and denied in part. (ECF No. 137.) The Monfort Trust Third Party
Plaintiffs and the third party defendants timely filed objections. (ECF Nos. 143, 144.) Although
Third Party Plaintiff Bradley did not move for summary judgment, he did file a response to the
third party defendants’ objections to Judge Locke’s Report and Recommendation. (ECF No. 145.)
Although familiarity with the record, the motions, the Report and Recommendation, and the
objections is assumed, I describe several documents at the outset, as they are referenced
throughout.
The parties’ cross-motions involve the interpretation of two indemnification agreements,
which are identical except for their signatories and dates of execution. In September 2003, prior
to the closing on the property, the Monfort Trust Third Party Plaintiffs entered into an
Indemnification Agreement with Victor Musso and O.J.V. Realty Corp. (Ex. J to Goldberg Decl.,
ECF No. 131-12.) Bradley entered into his own identical Indemnification Agreement with Victor
Musso and O.J.V. Realty Corp. (Ex. I to Goldberg Decl., ECF No. 131-11.) These agreements
are collectively referred to as a single “Indemnification Agreement” throughout.
There is also a Handwritten Indemnification Agreement between the third party plaintiffs
and Musso 3636 LLC, executed on November 5, 2003. On that same day, the sale of the property
was finalized and O.J.V. Realty Corp. assigned its rights under the Contract of Sale to Musso 3636
LLC. This Handwritten Indemnification Agreement provides that, inter alia, the “seller shall
indemnify purchaser for any and all costs and expenses incurred by DEC through November 4,
2003.” (Handwritten Indemnification Agreement, Ex. P to Goldberg Decl., ECF No. 131-18.)
II. STANDARD OF REVIEW
In reviewing a magistrate judge’s report and recommendation, the court must “make a de
novo determination of those portions of the report or . . . recommendations to which
objection[s][are] made.” 28 U.S.C. § 636(b)(1)(C); see also Brown v. Ebert, No. 05–CV–5579,
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2006 WL 3851152, at *2 (S.D.N.Y. Dec. 29, 2006). The court “may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate judge.”
28 U.S.C. § 636(b)(1)(C). Those portions of the Report and Recommendation to which there is
no specific reasoned objection are reviewed for clear error. See Pall Corp. v. Entegris, Inc., 249
F.R.D. 48, 51 (E.D.N.Y. 2008).
III. DISCUSSION
The Court has reviewed Judge Locke’s recommendations to which the parties did not
specifically object. After review, I find that these portions contain no clear error, and I adopt those
findings. Upon a de novo review of the record and Judge Locke’s Report and Recommendation,
the Court affirms and adopts the Report and Recommendation in its entirety as the opinion of the
Court.
A. Liability of Musso 3636 LLC and Musso Properties, LLC
Third Party Defendants Musso 3636 LLC and Musso Properties, LLC moved for summary
judgment dismissing them from the third party actions, arguing that they were not signatories to
the Indemnification Agreement. The Monfort Trust Third Party Plaintiffs cross-moved for
summary judgment against Third Party Defendant Musso 3636 LLC, claiming that it has a duty to
indemnify, even though it is not a signatory.
1. Musso 3636 LLC
Judge Locke recommended that both parties’ motions for summary judgment be denied
because there is a triable question of fact as to whether the parties intended for Musso 3636 LLC
to be bound by the Indemnification Agreement.
After review, I agree with Judge Locke that there are questions of fact as to whether the
parties’ intended for Musso 3636 LLC to be bound by the Indemnification Agreement, such that
it was an essential basis for entering into the agreement. See Commander Oil Corp. v. Advance
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Food Serv. Equip., 991 F.2d 49, 53 (2d Cir. 1993).
2. Musso Properties, LLC
Judge Locke recommended that the third party defendants’ motion for summary judgment
dismissing Musso Properties, LLC from Bradley’s third party complaint be denied, without
prejudice. Neither party has objected to this portion of the Report and Recommendation.
In October 2014, Bradley filed a pre-motion conference letter to amend his third party
complaint against Musso Properties, LLC to assert additional causes of action against third party
defendants. (ECF No. 106.) Because Bradley’s application has not been decided, I agree that the
third party defendants’ motion for summary judgment should be denied, with leave to renew after
a decision on Bradley’s application to amend his third party complaint.
B. The Indemnification Agreement
The third party defendants moved for summary judgment, arguing that, as a matter of law,
they have no duty to indemnify third party plaintiffs for specific costs.
1. Costs Incurred in the Remediation of Off-Site Premises
Judge Locke recommended that both motions for summary judgment be denied regarding
third party defendants’ liability to indemnify for off-Site costs. The relevant language in the
agreement provides an obligation to indemnify for costs “arising out of and/or by reason of the
environmental condition existing at the subject premises identified by the New York State
Department of Environmental Conservation as Case No. 1-30-081.”

(Indemnification

Agreement.)
Judge Locke found that the phrase “arising out of and/or by reason of the environmental
condition existing at the subject premises” is ambiguous. Specifically, it is unclear whether the
parties intended the word “existing” to provide a limitation, which would exclude costs related to
costs for off-Site contamination that pre-existed the closing. Judge Locke held that extrinsic
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evidence did not confirm whether third party defendants had an unequivocal duty to indemnify
third party plaintiffs for all off-Site contamination, whether it migrated from on-Site either before
or after the closing.
In their objection, third party defendants argue that Judge Locke improperly considered
extrinsic evidence to create an ambiguity and that he should not have looked beyond the four
corners of the Indemnification Agreement to define the term “subject premises.” They argue that,
instead, under the plain meaning rule, the dictionary definition controls. Therefore, “subject
premises” refers to “at the site” or “on site.” However, this interpretation ignores that the
Indemnification Agreement specifically referred to the term “subject premises” as “the subject
premises identified by the New York State Department of Environmental Conversation as Case
No. 1-30-081.” Under New York law, a contract “should be construed so as to give full meaning
and effect to all of its provisions.” LaSalle Bank Nat. Ass’n v. Nomura Asset Capital Corp., 424
F.3d 195, 206 (2d Cir. 2005). To provide a definition for “subject premises” outside of the term
specifically defined in the agreement would render the agreement’s definition “superfluous.” See
id.
Third party defendants also object that various other contract principles limit the scope of
indemnification. However, I find that Judge Locke properly considered the conflicting evidence
regarding who drafted the agreement as well as the other tenants of contract interpretation.
Therefore, I agree with Judge Locke that there are issues of fact precluding summary judgment
regarding the costs of off-Site contamination.
2. Costs Incurred Prior to November 5, 2003
Judge Locke recommended that summary judgment be denied regarding third party
defendants’ obligation to indemnify for pre-sale costs. The Indemnification Agreement created an
obligation for “all liability, losses and damages whether present or future.” Judge Locke found
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that it is ambiguous whether the word “present” included (1) costs that were incurred prior to and
presently due on November 5, 2003, or (2) costs that began accruing as of November 5, 2003.
Judge Locke also found that extrinsic evidence, in the form of the Handwritten Indemnification
Agreement did not help resolve the ambiguity. Specifically, the Handwritten Indemnification
Agreement between third party plaintiffs and Musso 3636 LLC provides that “seller shall
indemnify purchaser for any and all costs and expenses incurred by DEC through November 4,
2003.” (Handwritten Indemnification Agreement.) However, only Musso and O.J.V. Realty Corp.
were signatories to the Indemnification Agreement, not Musso 3636 LLC.
In their objection, third party defendants argue that the plain meaning of the
Indemnification Agreement supports their motion for summary judgment. However, for the same
reasons as Judge Locke, I find that material issues of fact remain as to whether the Indemnification
Agreement excludes costs incurred prior to November 5, 2003.
3. Attorneys’ Fees and Costs
i. Costs Incurred in Defending the Original Action
Judge Locke found that the Monfort Trust Third Party Plaintiffs were entitled to summary
judgment on the duty to indemnify for costs and attorneys’ fees incurred in defending the original
action. The relevant language of the agreement provides that there is a duty to indemnify for “any
and all claims, demands, suits, actions, proceedings, debts, costs, charges, expenses and judgments,
including court costs and attorney’s fees . . . arising out of/or by reason of the environmental
condition existing at the subject premises.” (Indemnification Agreement.)
I agree with Judge Locke that the Indemnification Agreement unambiguously provides that
Musso and O.J.V. Realty Corp. were obligated to indemnify the Monfort Trust Third Party
Plaintiffs for “court costs and attorney’s fees” incurred in defending the main action. Although
third party defendants reiterate their arguments distinguishing between off-Site and on-Site costs,
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I find that the agreement clearly provides for costs and attorney’s fees incurred in defending against
the claims in the main action.
ii. Costs Incurred in Connection with Enforcing the Indemnification Agreement
Judge Locke found that the Monfort Trust Third Party Plaintiffs were entitled to summary
judgment on the obligation to indemnify them for attorney’s fees and costs in connection with
enforcing the Indemnification Agreement. The Indemnification Agreement provides:
Should it become necessary for Indemnitee, or someone on Indemnitee’s behalf, to
incur costs and expenses, including, but not limited to, attorney’s fees, to enforce
this Agreement, or any portion thereof, Indemnitor, its successors or assigns, agrees
to pay Indemnitee reasonable costs and attorney’s fees thereby expended, or for
which liability is incurred.
(Indemnification Agreement.)
Third party defendants objected to this portion of the Report and Recommendation, arguing
that they have no obligation to indemnify in this action because third party plaintiffs are suing to
extend the terms of the Indemnification Agreement, rather than enforce its terms. This argument
has no merit, as the relevant provision clearly states that third party plaintiffs may recover costs,
including attorney’s fees, “should it become necessary” to sue to enforce the Agreement “or any
portion thereof.” (Indemnification Agreement.) Third party defendants’ proposed limitations are
contrary to the plain meaning of the agreement. Therefore, summary judgment should be granted
to the Monfort Trust Third Party Plaintiffs and denied as to third party defendants.
C. Declaratory Judgment
Judge Locke found that although there is a sufficient controversy to support a declaratory
judgment action, there is a question of fact as to whether third party defendants have an obligation
to indemnify third party plaintiffs for pre-sale and all off-Site costs. Third party defendants
requested that the Court grant them summary judgment if the Court should find in the original
action that the amount owed to plaintiffs is capped at $30,000. Alternatively, if the amount owed
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to plaintiffs is not capped at $30,000, third party defendants sought a judgment that they were
liable for an amount that excludes the off-Site and pre-sale costs, as described in its motion.
Neither party filed a specific objection to this portion of the Report and Recommendation.
Having reviewed the record, I agree that summary judgment as to the request for a declaratory
judgment should be denied.
D. Bradley’s Claim for Promissory Estoppel
Judge Locke recommending granting summary judgment to third party defendants on
Bradley’s cause of action based on promissory estoppel. Judge Locke found that Bradley’s cause
of action for promissory estoppel is duplicative of his cause of action for breach of contract. In
third party plaintiffs’ papers, Bradley consented to the dismissal of this claim if the Court denied
third party defendants’ motion for summary judgment. Under these circumstances, and given that
no objections were filed to this portion of the Report and Recommendation, I agree that summary
judgment should be granted and Bradley’s promissory estoppel claim should be dismissed.
III. CONCLUSION
For the reasons set forth above, the Court adopts Judge Locke’s Report and
Recommendation in its entirety. The motions for summary judgment are both granted in part and
denied in part.
SO ORDERED.
Dated: September 30, 2016
Central Islip, New York
/s/ (JMA) ______________
JOAN M. AZRACK
UNITED STATES DISTRICT JUDGE

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