Speyer v. Kieselstein-Cord et al

Filing 67

OPINION AND ORDER: The third-party defendants' November 22, 2010 motion to dismiss the Third Party Complaint is granted. (Signed by Judge Denise L. Cote on 5/24/2011) (jfe)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
IVA P. SPEYER,
:
Plaintiff,
:
-v:
:
KAREN KIESELSTEIN-CORD, KAREN CORD,
:
BARRY KIESELSTEIN-CORD, BARRY CORD,
:
KIESELSTEIN CORD IMPERIAL, LLC,
:
KIESELSTEIN CORD RETAIL, INC., FRANKLIN :
BONILLA, and KIESELSTEIN ENTERPRISES,
:
INC.,
:
Defendants.
:
--------------------------------------- :
BARRY CORD and KIESELSTEIN ENTERPRISES, :
INC.,
:
Third-Party
:
Plaintiffs,
:
-v:
:
NATHANIEL L. HYMAN and THE HYMAN
:
COMPANIES, INC.,
:
Third-Party
:
Defendants.
:
----------------------------------------X
Appearances:

09 Civ. 3032 (DLC)
OPINION & ORDER

For Plaintiff:
David Seth Halsband
Halsband Law Offices
Court Plaza South, 21 Main Street
East Wing, 3rd Floor, Suite 304
Hackensack, NJ 07601
For Defendants Karen Kieselstein-Cord, Karen Cord, Barry
Kieselstein-Cord, Barry Cord, Kieselstein Cord Imperial, LLC,
Kieselstein Cord Retail, Inc., and Kieselstein Enterprises,
Inc.:
Rebecca Walker Embry
Robert James Anderson
Landman Corsi Ballaine & Ford PC
120 Broadway, 27th Floor
New York, NY 10271

For Defendant Franklin Bonilla:
Scott M. Schweber
Law Office of Scott Schweber, P.C.
250 West 57th Street, Suite 1216
New York, NY 10107
For Third-Party Defendants:
Joseph A. Vogel
1040 Avenue of the Americas, Suite 1101
New York, NY 10018

DENISE COTE, District Judge:
Plaintiff Iva P. Speyer (“Speyer”) brings this action for
employment discrimination against jewelry designer and
manufacturer Kieselstein Enterprises, Inc., its owner, Barry
Cord (collectively “Kieselstein”),1 and the manager of the
jewelry store where Speyer worked, Franklin Bonilla (“Bonilla”).
Kieselstein seeks indemnification from The Hyman Companies, Inc.
(“Hyman Co.”), a chain of costume jewelry stores through which
Kieselstein sold its jewelry, and Hyman Co.’s principal, Nat L.
Hyman (“Nat Hyman”)2.

For the following reasons, the third-party

defendants’ motion to dismiss is granted.

1

The Kieselstein defendants allege that they were incorrectly
sued by Speyer under the names “Karen Kieselstein-Cord,” “Karen
Cord,” “Barry Kieselstein-Cord,” “Kieselstein Cord Imperial,
LLC,” and “Kieselstein Cord Retail, Inc.”
2

The third-party defendants allege that Nat Hyman was
incorrectly sued as “Nathaniel L. Hyman.”
2

BACKGROUND
Speyer filed her original complaint for employment
discrimination in violation of the New York State and City human
rights laws on March 27, 2009.

The original complaint named Nat

Hyman as a defendant in addition to Kieselstein and Bonilla.
Speyer alleged that she was employed by Kieselstein at a jewelry
retail store at 1058 Madison Avenue, New York, New York (the
“Madison Avenue Store”) from November 2006 through March 10,
2009, and that she was sexually harassed by her manager,
Bonilla.

Speyer further alleged that she was fired in

retaliation after she complained of Bonilla’s harassment.
Hyman Co. filed for bankruptcy under Chapter 11 on March 3,
2009, shortly before Speyer filed her original complaint in this
Court.

On July 14, 2009, the Bankruptcy Court issued a

preliminary injunction barring Speyer from pursuing any action
against Hyman Co. and Nat Hyman.

Speyer subsequently entered

into a settlement agreement with Hyman Co. and Nat Hyman
releasing all her claims against both entities.

The settlement

agreement was approved by the Bankruptcy Court on June 24, 2010.
On July 7, 2010, Speyer amended her complaint to remove Hyman
Co. and Nat Hyman as defendants.
Kieselstein filed a third-party complaint (the “Third Party
Complaint”) against Hyman Co. and Nat Hyman on September 30,
2010.

The Third Party Complaint alleges that Kieselstein is

3

entitled to “indemnification or contribution” from Hyman Co. and
Nat Hyman in the event that Kieselstein is found liable to
Speyer in this action.
According to the Third Party Complaint, Kieselstein entered
into an agreement (the “2006 Agreement”) with Hyman Co. and Nat
Hyman, the president and Chief Executive Officer of Hyman Co.,
in July of 2006.

The 2006 Agreement provided that Hyman Co.

would sell Kieselstein’s jewelry on consignment at the Madison
Avenue Store.

As the owner and operator of the Madison Avenue

Store, Hyman Co. was solely responsible for the hiring and
management of the Madison Avenue Store’s employees, including
Bonilla and Speyer.

Kieselstein therefore disclaims all

responsibility for any discrimination or harassment experienced
by Speyer during her career at the Madison Avenue Store.
The Bankruptcy Court’s Order of December 29, 2010
confirming the reorganization plan for Hyman Co. (the
“Confirmation Order”) provides that
Except as provided herein or the Plan, as of the
Effective Date, all Entities that have held, currently
hold or may hold a claim against the Debtor are
permanently enjoined from taking any of the following
actions: (a) commencing or continuing in any manner
any action or other proceeding against the Debtor or
its property, including the employment of process, or
an act, to collect, recover or offset any such Claim
as a personal liability of the Debtor; (b) enforcing,
attaching, collecting or recovering in any manner any
judgment, award, decree or order against the Debtor or
its property; [and] (c) attempting to assert claims
against the Released Parties for any claims which

4

arose prior to the Effective Date to the extent that
the claim is a claim for which the Debtor is also
liable and only if no Event of Default under the Plan
or documents provided for in Article X of the Plan has
occurred . . . .
(Emphasis supplied.)
include Hyman Co.

The Confirmation Order defines “Debtor” to

It includes Nat Hyman in the definition of

“Released Parties.”

The reorganization plan defines “Effective

Date” as “the fifteenth (15th) Business Day immediately
following the date on which the Confirmation Order becomes a
Final Order.”

The Effective Date is therefore February 3, 2011.

On November 22, 2010, Nat Hyman and Hyman Co. filed a
motion to dismiss the Third Party Complaint.

An Order of

December 7 provided notice to Kieselstein and an opportunity to
amend the Third Party Complaint.

The motion to dismiss stated

that the Bankruptcy Court was scheduled to confirm the plan of
reorganization for Hyman Co. on December 29.

Therefore, the

Court ordered the parties to provide a report on the status of
the reorganization on February 7; the third-party defendants
responded by submitting a copy of the Confirmation Order.

On

February 9, the Court ordered Kieselstein to show cause why the
reorganization plan did not discharge the claim for
indemnification against the Hyman defendants.

By letter of

February 16, Kieselstein disputed the third-party defendants’
assertion that the reorganization plan discharged its claim of
indemnification; the Court therefore ordered the third-party

5

defendants to make any motion to dismiss the Third Party
Complaint on the basis of the entry of the reorganization plan
by March 11, 2011.

The motion was fully submitted on April 1.

DISCUSSION
The third-party defendants primarily contend that
Kieselstein’s claim for indemnification or contribution was
discharged and permanently enjoined by the Confirmation Order.
The third-party defendants also assert that Kieselstein’s claim
for indemnification is actually a claim for contribution, which
is barred by New York General Obligations Law § 15-108(b).
Finally, the third-party defendants argue that the filing of the
Third Party Complaint was a violation of the preliminary
injunction orders issued by the Bankruptcy Court and of the
automatic stay that applies under 11 U.S.C. § 362(a).
The express terms of the Bankruptcy Court’s Confirmation
Order permanently enjoin any action by Kieselstein against Hyman
Co.

The Confirmation Order unequivocally provides that “all

Entities that have held, currently hold or may hold a claim
against the Debtor are permanently enjoined from . . .
commencing or continuing in any manner any action or other
proceeding against the Debtor or its property . . . .”

The

broad language of the Confirmation Order enjoins both current
and future claims against the Debtor, Hyman Co.

6

Thus, any claim

by Kieselstein for indemnification from Hyman Co. which may
arise out of this litigation is barred by the Confirmation
Order.
Kieselstein argues in its supplemental briefing on the
reorganization plan that even if the Court finds that the claims
against Hyman Co. have been discharged by the reorganization
plan, it should nevertheless allow Kieselstein to pursue any
insurance proceeds from Hyman Co.’s bankruptcy estate.
Kieselstein would only be entitled to insurance proceeds,
however, if it was able to establish its claim for
indemnification.

Since any claim for indemnification was

discharged by the Bankruptcy Court’s Confirmation Order,
Kieselstein has no basis on which to pursue proceeds from any
insurance policy held by Hyman Co.
Kieselstein’s claim for contribution against Nat Hyman is
barred by New York General Obligations Law § 15-108(b), as
Kieselstein concedes.

Section 15-108(b) provides that a

“release given in good faith by the injured person to one
tortfeasor . . . relieves him from liability to any other person
for contribution.”

Because Speyer entered into a settlement

agreement with both Hyman Co. and Nat Hyman, Nat Hyman is
relieved of liability to Kieselstein for contribution by the
terms of § 15-108(b).

7

Kieselstein further fails to allege facts giving rise to a
claim for indemnification against Nat Hyman.

3

Kieselstein has

not alleged that the 2006 Agreement contained an indemnification
provision; rather, it asserts a common-law claim for
indemnification.

The New York Court of Appeals has held that

the concept of duty is central to a finding of implied
indemnification:
Conceptually, implied indemnification finds its
roots in the principles of equity. It is nothing
short of simple fairness to recognize that (a)
person who, in whole or in part, has discharged a
duty which is owed by him but which as between
himself and another should have been discharged
by the other, is entitled to indemnity. To
prevent unjust enrichment, courts have assumed
the duty of placing the obligation where in
equity it belongs.
McDermott, 50 N.Y.2d at 216-17 (citation omitted).

Kieselstein

has not identified any duty owed by Nat Hyman to Speyer; indeed,
its argument concerning indemnification is based solely on the
3

The third-party defendants argue that any claim by Kieselstein
against Nat Hyman is enjoined by the Confirmation Order. The
Confirmation Order, however, only bars claims against Hyman
which arose prior to the Effective Date of the reorganization
plan. The Second Circuit has held that “the time a claim arises
is determined under relevant non-bankruptcy law.” In re
Manville Forest Products Corp., 209 F.3d 125, 128 (2d Cir.
2000). Under New York law, claims for indemnification accrue
“upon payment by the party seeking indemnity.” McDermott v.
City of New York, 50 N.Y.2d 211, 217 (1980). Any claim for
indemnification by Kieselstein would therefore “arise” under New
York law sometime in the future, in the event that Kieselstein
is found to be liable to Speyer. Because any claim for
indemnification or contribution against Nat Hyman does not arise
prior to the Effective Date of the reorganization plan, it is
not discharged by the Confirmation Order.
8