City of New York v. Lead Industries Ass'n, Inc.

• Decision Date: 27 June 1996
• Citation: 644 N.Y.S.2d 919,222 A.D.2d 119
• Parties: The CITY OF NEW YORK, et al., Plaintiffs-Appellants-Respondents, v. LEAD INDUSTRIES ASSOCIATION, INC., et al., Defendants-Respondents, and Fuller-O'Brien Corporation, Defendant-Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 919

644 N.Y.S.2d 919

222 A.D.2d 119

The CITY OF NEW YORK, et al., Plaintiffs-Appellants-Respondents, v. LEAD INDUSTRIES ASSOCIATION, INC., et al., Defendants-Respondents and Fuller-O'Brien Corporation, Defendant-Respondent-Appellant.

Supreme Court, Appellate Division First Department.

June 27, 1996.

George Gutwirth, of counsel (Francis F. Caputo, Alan H. Kleinman and John R. Low-Beer on the brief, Jeffrey D. Friedlander, attorney) for plaintiffs-appellants-respondents.

Philip H. Curtis and Michael T. Nilan, of counsel (Arnold & Porter; Dean M. Harris; Haythe & Curley; Popham, Haik, Schnobrich & Kaufman, Ltd.; Kronstein, Veisz & Wexler; Kirkland & Ellis; Bartlit Beck Herman Palenchar & Scott; Gilbert, Segall & Young; Sullivan, Sullivan & Pinta, and Jones Day Reavis & Pogue, attorneys) for defendants-respondents Lead Industries, NL Industries, Eagle-Picher Industries, Atlantic Richfield Company, Sherwin Williams, SCM Corporation and The Glidden Company.

Daniel J. Thomasch, of counsel (Lauren J. Elliot on the brief, Donovan Leisure Newton & Irvine, attorneys) for defendant-respondent American Cyanamid.

Mitchell D. Bernstein, of counsel (Wade R. Joyner, on the brief, Moses & Singer and Crowley Barret & Karaba, attorneys) for defendant-respondent-appellant Fuller-O'Brien Corporation.

Before SULLIVAN, J.P., and ROSENBERGER, ELLERIN, RUBIN and MAZZARELLI, JJ.

PER CURIAM.

In this action against various lead paint manufacturers and their trade association the issue before us is whether the City plaintiffs have sufficiently pleaded causes of action for indemnity and restitution.

In order to put the issues in proper perspective a brief history of this litigation is necessary. The City plaintiffs (the City of New York, the New York City Housing Authority and the New York City Health and Hospitals Corporation) originally commenced this action against five major manufacturers of lead based paint and their trade association, Lead Industries Association Inc., in June 1989, to recover damages alleged to have been incurred by plaintiffs by reason of the use of such paint in various buildings owned by them. The complaint asserted causes of action based on negligence, products liability, and fraud and also included claims for restitution and indemnity as well as allegations that defendants were jointly and severally liable on several theories including concert of action and enterprise liability. The underlying factual allegations charged defendants with fraudulently misrepresenting the safety of their product and thereafter concealing their knowledge of the health hazards of the product, particularly to children, as a result of which plaintiffs were obliged to expend considerable sums of money in inspecting, testing, monitoring and abating the hazards arising from the use of the lead paint, in testing children at risk of lead poisoning and in treating the child victims of such poisoning, for which restitution was sought.

On a motion by the original defendants to dismiss, the IAS Court (Dontzin, J.), in a decision entered on December 26, 1991, granted dismissal of the tort and products liability causes of action on statute of limitations grounds, but upheld the fraud and restitution claims. No challenge to the indemnity or joint and several liability claims had been raised by defendants on that motion.

Upon appeal to this court, we affirmed Justice Dontzin's denial of the motion to dismiss the fraud and restitution claims (City of New York v. Lead Industries Assn., 190 A.D.2d 173, 597 N.Y.S.2d 698), expressly holding (in an opinion by Wallach, J.) that the allegations of defendants' knowing misrepresentation of the safety of the product to the public for the purpose of marketing the product known to be defective and a health hazard, and their engaging in a scheme that concealed this knowledge from the public, gave rise to a timely cause of action for fraud and, similarly, that the allegations seeking recovery for plaintiffs' expenditures in abating the hazard set forth a viable cause of action for restitution.

In September 1993, subsequent to the aforenoted affirmance, plaintiffs served an amended complaint, substantially similar to the original pleading, that added two additional defendants, American Cyanamid Company, as successor-in-interest to the John R. McGregor Lead Company, and Fuller-O'Brien Corporation.

In January 1994 all of the defendants moved for dismissal of the indemnity and restitution claims, with the newly added defendants American Cyanamid and Fuller-O'Brien also moving, on untimeliness grounds, for dismissal of the fraud claims against them and Fuller-O'Brien additionally moving for dismissal on lack of jurisdiction grounds. It is important to note at this juncture that the primary basis relied upon by the various defendants for the dismissal of the indemnity and restitution claims was this court's decision, in December 1993, affirming the trial court's dismissal of such claims in the case of 888 7th Ave. Assocs. Ltd. Partnership v. AAER Sprayed Insulations, 199 A.D.2d 50, 605 N.Y.S.2d 25, lv. dismissed in part, denied in part 84 N.Y.2d 841, 617 N.Y.S.2d 129, 641 N.E.2d 150, in which all other causes of action, including fraud, had been held time-barred. Viewing our decision in that case as dispositive, the IAS court granted the motions to dismiss of all the defendants with respect to the indemnity and contribution claims on that basis. As to the two later-added defendants, American Cyanamid and Fuller-O'Brien, the court also found the fraud claims to be time-barred and dismissed the entire complaint as to each of them without reaching the specific issue of jurisdiction raised by Fuller-O'Brien. With respect to the six original defendants, against whom viable fraud claims still remained, the Court noted that the equitable claims of indemnity and restitution would be essentially duplicative and add nothing because they provided no basis for a broader remedy than the fraud claims.

The City plaintiffs now appeal the order, and judgments based thereon, which granted dismissal of the indemnity and restitution claims against the six original defendants and the entire complaint with respect to American Cyanamid and Fuller-O'Brien. Fuller-O'Brien cross-appeals from that part of the Court's order which denied its motion to dismiss for lack of personal jurisdiction.

We must now determine whether plaintiffs have sufficiently set forth viable causes of action for indemnity and/or restitution against the various defendants.

The factual thrust of plaintiffs' complaint in support of these claims is that hazardous conditions arose in plaintiffs' buildings from the use of lead paint manufactured and marketed by defendants, that plaintiffs incurred substantial expenditures to monitor and remediate the hazards caused by these lead pigments including abatement and clean-up costs and costs for treating and testing children at risk of and suffering from lead poisoning, that in undertaking such expenditures plaintiffs discharged a duty which, although imposed upon plaintiffs by statute and regulation, should properly have been borne by defendants who were responsible for having created this danger to public health and safety and that plaintiffs should therefore be reimbursed for such expenditures both by way of indemnification and restitution.

Whether these allegations are enough to withstand dismissal requires an examination of the nature of each of these causes of action. While the parties frequently refer to and discuss these claims in the conjunctive, indemnity and restitution are separate and discrete causes of action with different essential elements although both are permeated by underlying equitable concerns involving unjust enrichment. (See, e.g., McDermott v. City of N.Y., 50 N.Y.2d 211, 428 N.Y.S.2d 643, 406 N.E.2d 460; State v. Ford Motor Co., 136 A.D.2d 154, 526 N.Y.S.2d 637, aff'd 74 N.Y.2d 495, 549 N.Y.S.2d 368, 548 N.E.2d 906.)

We turn first to the cause of action for indemnity. The following discussion of the genesis and character of that remedy is set forth in McDermott v. City of N.Y., supra, at 217, 428 N.Y.S.2d 643, 406 N.E.2d 460, in terms particularly relevant to the instant case:

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". (Restatement, Restitution, Sect. 76). To prevent unjust enrichment, courts have assumed the duty of placing the obligation where in equity it belongs (citations omitted).

The Court also makes clear at the very outset (id. at 215, 428 N.Y.S.2d 643, 406 N.E.2d 460) that a "cause of action for indemnification interposed against the manufacturer of an allegedly defective product is independent of the underlying wrong and for the purpose of the Statute of Limitations accrues when the loss is suffered by the party seeking indemnity", and subsequently emphasizes that "[b]ecause the indemnity claim is a separate substantive cause of action, independent of the underlying wrong, this accrual rule remains the same, whatever the underlying breach of duty for which indemnification is sought" (id., at 218, 428 N.Y.S.2d 643, 406 N.E.2d 460). Significantly, in McDermott, after the City had settled the claim of a sanitation worker injured by a malfunctioning sanitation truck, it was permitted to pursue an indemnity claim against the manufacturer of the truck to recover the payment the City had made on account of the manufacturer's breach of duty to the injured worker in products liability, notwithstanding that both the worker's and the City's direct claims against the manufacturer for products liability were time-barred (see, id., n. 5, at 218-219, 428 N.Y.S.2d 643, 406 N.E.2d 460). Indeed, defendants, in their brief, acknowledge that an indemnity claim is not barred...