Bernard v. Brookfield Properties Corp.
| Decision Date | 07 June 2011 |
| Docket Number | 107211/08 |
| Parties | Lawrence Bernard and MARILYN BERNARD as Co-Executors of the Estate of SHELLY BERNARD, Plaintiffs, v. Brookfield Properties Corp., et al., Defendants. |
| Court | New York Supreme Court |
Christine Chung, Esq. - Quinn Emanuel William Smith, Esq. - Faust Goetz Schenker Blee John F. Olson, Esq.
Defendants Brookfield Properties Corporation ("Brookfield"), New Water Street Corporation ("NWSC"), and Retirement Systems of Alabama ("RSA"), having moved, pursuant to CPLR § 3212, respectively, for summary judgment dismissing the complaint and all other claims against them; and defendant RSA having also moved, pursuant to CPLR § 3211(a)(8), to dismiss the action against it for lack of personal jurisdiction; and co-defendant Colgate Palmolive Corporation ("Colgate"), having opposed such applications on the grounds that movants are successors-in-interest to Olympia & York ("O & Y"), the previous owner of the building of which plaintiffs complain, by orders dated August 13, 2010 in motion sequence No.'s 002 and 004, this court referred the issues whether this court had personal jurisdiction over RSA, whether Brookfield and NWSC and/or RSA are successors-in-interest to O & Y, and whether a de facto merger occurred between NWSC and O & Y to a Special Referee of this court to hear and report with recommendations. Decision on these motions was held in abeyance pending receipt of the Special Referee's report and a motion pursuant to CPLR § 4403.
A hearing was held before the court's designee, the Hon. Stanley Sklar, as Judicial Hearing Officer, on November 9, 2010. JHO Sklar issued his report on December 3, 2010 ("Report"). The Report, exhibits, and transcripts of the testimony were filed with the County Clerk of New York County on December 8, 2010. Pursuant to CPLR § 4403, the parties had fifteen days from such filing date within which to move to confirm or reject JHO Sklar's Report. On April 7, 2011, Colgate moved by Order to Show Cause for an order adopting JHO Sklar's recommendation that both motions for summary judgment and RSA's motion to dismiss bedenied without prejudice to renew at the close of discovery. Neither Brookfield, nor RSA, nor NWSC submitted papers in opposition. In accordance with CPLR § 4403 and 22 NYCRR § 202.44, this court hereby confirms the Report and grants Colgate's motion as set forth herein.
In or about May 2008, Shelly Bernard, now deceased, brought this asbestos-related personal injury action against defendants NWSC, RSA, and Brookfield, among others. Ms. Bernard was deposed on June 5, 2008. Among other things, she testified that she was exposed to asbestos dust while working as a consultant for Salomon Brothers on the 28th floor of 55 Water Street, a commercial office building in Manhattan ("the Building"), from 1985 to 1988. Ms. Bernard testified that renovations and construction on the 28th floor of the Building generated dust and debris to which she and her fellow workers were exposed. She testified that she saw dust all over her clothing and in her food, and described wading through streamers of unfettered loose material, which she believed to be asbestos insulation, while moving from one part of the Building to another. In or about 1993, O & Y, then the owners of the Building, filed for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York.
According to the Third Amended Joint Plan of Reorganization in the bankruptcy proceeding, dated September 12, 1996 (attached to Brookfield's Notice of Motion as exhibit F ("Joint Plan"))1 , O & Y, an international real estate conglomerate, owned the Building through its New York entities, Olympia & York Water Street Finance ("O & Y Finance") and Olympia & York Water Street Credit Corp. ("O & Y Credit"). When O & Y collapsed in 1993, O & Y Finance and O & Y Credit filed for protection under the U.S. Bankruptcy Code. In furtherance of the Joint Plan, O & Y Credit transferred ownership of the Building to O & Y Finance by deed in lieu of foreclosure.2 O & Y Finance in turn transferred the Building to NWSC, a New York stock corporation newly formed for that purpose.3 The O & Y Finance bondholders were issued shares of stock in NWSC commensurate with their O & Y Finance holdings. RSA became the majority shareholder of NWSC, which to this day owns the Building.
Brookfield's position is that it never possessed any ownership or proprietary interest in the Building prior to, during, or after the period that Ms. Bernard claims she was exposed, nor is it a successor-in-interest to any of the entities that are alleged to have owned the Building. Brookfield further asserted that all potential claims against O & Y's successors-in-interest were discharged by the bankruptcy court's Confirmation Order 4 , by reason of which there can be no successor liability.
NWSC and RSA's position is that they are not responsible to plaintiffs because NWSC's ownership of the Building did not come into existence until September 1993, five years after Ms. Bernard's alleged exposure. Like Brookfield, both NWSC and RSA asserted that pursuant to the Confirmation Order there is no successor liability.
RSA further posits that it is not related to O & Y and did not become so when RSA became the majority stockholder in NWSC, nor is it subject to personal jurisdiction in New York because it never had a presence in New York and has never transacted any business here. See CPLR 301, 302.
By decisions and orders in motion sequence #'s 002 and 004, each dated August 13, 2010, this court held that plaintiffs' claims were not discharged by reason of the bankruptcy proceedings. The August 13, 2010 orders also referred each matter to a Special Referee to hear and report on the following issues: (1) whether Brookfield is a successor-in-interest to O & Y; (2) whether NWSC or RSA, or either of them, are successors-in-interest to O & Y or whether a defacto merger occurred; and (3) whether RSA is subject to the personal jurisdiction of this court pursuant to CPLR 301 or 302. The August 13, 2010 orders are incorporated herein by reference and made a part hereof.
A hearing was held before JHO Sklar on November 9, 2010. JHO Sklar issued his Report on December 3, 2010. The Report informs that almost no new evidence was submitted by any party in terms of Brookfield's, RSA's, or NWSC's status as successors-in-interest to O & Y. No person was offered to provide any sworn testimony on these issues. Brookfield declined to offer any additional evidence whatsoever, either oral or written. Defendants RSA and NWSC submitted an affidavit from their attorney John Olsen, sworn to November 8, 2010 ("Olsen Affidavit"), which sets forth as an exhibit, among other things, O & Y's First Amended Disclosure Statement, dated June 18, 1993 ("Disclosure Statement") which these defendants had failed to produce with their underlying summary judgment motion.5 The Olsen Affidavit provides that there can be no successor liability, both because Judge Garrity had said so and because the Disclosure Statement so indicates. The Olsen Affidavit also provides that O & Y remained in existence after it filed for bankruptcy because it was named in several premises liability cases. JHO Sklar concluded that the Olsen Affidavit and attached exhibits did not add anything to what had already been before this court on NWSC's and RSA's underlying motions. His Report essentially recommends that both applications for summary judgement be denied because all three defendants failed to meet their respective burdens of proof.
On the issue of whether there was a de facto merger between NWSC and O & Y, Colgate argued to JHO Sklar that the transfer of ownership from O & Y to NWSC included a transfer of all of O & Y's assets and liabilities. NWSC argued that § 5(c) of the Disclosure Statement advises of the injunction against O & Y and its successors. JHO Sklar also found that NWSC had not met its burden on the de facto merger issue and recommended denial of that branch of NWSC's motion.
On the issue of New York's jurisdiction over RSA, Colgate introduced RSA's 2002 annual report. The document reads, in pertinent part, that JHO Sklar determined that nothing in that report infers that RSA owns the building, either directly or through NWSC. Nevertheless he recommended that RSA's motion to dismiss for lack of personal jurisdiction be denied because RSA had not met its burden of proof.
To obtain summary judgment, the movant must establish its cause of action or defense sufficiently to warrant a court's directing judgment in its favor as a matter of law, and must tender sufficient evidence to demonstrate the absence of any material issues of fact. See, e.g., Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; CPLR § 3212[b]. Where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action. Vermette v Kenworth Truck Co., 68 NY2d 714, 717 [1986].
Generally, the U.S. Bankruptcy Code (11 USC § 1141, et seq.) provides that a creditor loses its pre-petition claims after the debtor's bankruptcy reorganization plan is confirmed, even if it was not notified of the bankruptcy. In Waterman Steamship Corporation v Aguilar, 141 BR 552 [1992], vacated on other grounds 157 BR 220 [1993], however, the court found that the due process considerations of the Fifth Amendment should take precedence over the discharge provisions of § 1141:[N]o future Asbestosis Claimant who, by...
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