Industrial Risk v. Port Authority of Ny and Nj
| Decision Date | 26 January 2005 |
| Docket Number | No. 02 Civ. 7170(AKH).,02 Civ. 7170(AKH). |
| Citation | 387 F.Supp.2d 299 |
| Parties | INDUSTRIAL RISK INSURERS, v. The PORT AUTHORITY OF NEW YORK AND NEW JERSEY, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Douglas J. Pepe, Gregory P. Joseph, Gregory P. Joseph Law Offices LLC, Peter Neil Wang, Friedman, Wang & Bleiberg, P.C., New York City, Robert A. Clifford, Timothy Tomasik, Clifford Law Offices, P.C., Chicago, IL, for Plaintiff.
Beth D. Jacob, Schiff Hardin & White, John L. Castelly, Schiff Hardin LLP, New York City, for Defendants.
The raging, unquenchable fires of September 11, 2001, brought down, not only the Twin Towers of the World Trade Center, buildings One and Two, but building Seven as well, an adjacent 47-story office tower. The terrorists flew the airplanes they hijacked directly into buildings One and Two, and the resulting fires consumed the two 102-story structures, causing them to collapse. Chunks of the collapsing buildings fell onto Seven, causing the fires to spread to that building, where they created another inferno, causing a collapse also of that building.
The plaintiff, Industrial Risk Insurers ("IRI"), insured the lessee of Seven World Trade Center ("7 WTC"), Silverstein Properties Inc. ("Silverstein"). Claiming rights as a subrogee to the extent of its payments to Silverstein, IRI sued the parties whose fault, it alleges, contributed to, or proximately caused, the collapse of 7WTC. IRI sued the airlines, the airport security companies, and the airplane manufacturer for allowing the terrorists to board and hijack the airplanes (04 Civ. 7231). And IRI sued the Port Authority of New York and New Jersey ("PANYNJ" or the "Port Authority"), the owner of 7WTC, and Citigroup Inc. and Citigroup Global Market Holdings Inc. ("Citigroup"), the sublessee from Silverstein of portions of floors one through five, and of floors 28 through 47 of 7WTC (02 Civ. 7170), for gross negligence in maintaining, or allowing Citigroup to maintain, large stocks of diesel fuel in 7 WTC that intensified the fires that engulfed building number seven and made them impossible to extinguish.
IRI's action against the airlines, the airport security companies, and the airplane manufacture will be progressing on a separate track, with other property claims arising from the terrorist-related aircraft crashes of September 11, 2001. The other defendants in this case, The Port Authority and Citigroup, have moved to dismiss the complaint against them for failing to state a legally sufficient claim for relief. Fed.R.Civ.P. 12(b)(6). I held, at the argument of the motion on November 30, 2004, that, as to the Port Authority, there were issues of fact outside the complaint that required limited discovery, and I denied its motion without prejudice to renewal following such discovery. This Opinion treats the motion of Citigroup.
I hold that the covenants of Citigroup's lease with Silverstein and IRI's insurance agreement of Silverstein are to be incorporated into and read with the complaint, and that they bar IRI from proceeding as Silverstein's subrogee against Citigroup. Accordingly, IRI's complaint against Citigroup, Inc. and Citigroup Global Markets Holdings, Inc. is dismissed.
As Silverstein's subrogee, and to the extent it paid Silverstein for its insured losses with respect to 7WTC, IRI sues the Port Authority, as owner of 7WTC, and Citigroup, as sublessee of Silverstein, claiming that their gross negligence proximately caused the destruction of 7WTC.
IRI alleges that Silverstein acquired the land and air space rights to 7WTC in 1980 from the Port Authority and, in 1987, constructed a 47-story office tower. Salomon Inc. (later acquired by Citigroup) leased floors 28-47 and portions of floors 1-5, largely to operate a trading floor and sustain its trading operations, and built a pressurized diesel fuel system and nine high powered emergency generators, served by two 6,000 gallon fuel tanks and piping always filled with fuel, to ensure that a power outage would not interrupt its trading activities. IRI alleges that Citigroup "designed, constructed, installed and used an emergency generator system that utilized an unreasonable amount of diesel fuel and that continuously pumped that fuel unreasonably close to critical structural supports in the building without proper safeguards," (Pl.'s Am. Compl. ¶ 55) and that the Port Authority had design control and allowed the construction in violation of City ordinances, that the fuel tanks contributed to the intensity of the fires and inability to bring them under control and proximately caused the collapse of 7WTC in the afternoon of 9/11, and that both Citigroup and the Port Authority were guilty of gross negligence with respect to that design. The complaint cites a report of the United States Emergency Management Agency, "World Trade Center, Building Performance Study," finding that the building collapsed due to the failure of critical, non-redundant transfer trusses that were subjected to significant and prolonged fire heating fed by the diesel fuel stored in the tanks in the building. IRI alleges that its loss exceeded $75 million.
In considering a motion to dismiss, a district court should construe the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor. Gregory v. Daly, 243 F.3d 687, 691 (2d Cir.2001). "Dismissal is inappropriate unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him or her to relief." Sweet v. Sheahan, 235 F.3d 80, 83 (2d Cir.2000).
In connection with this motion, the parties have submitted documents including lease and insurance agreements. For purposes of Rule 12(b), "`the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.'" See Fed.R.Civ.P. 10(c) (); Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir.1995) (per curiam) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir.1991)). Even where a document is not incorporated by reference, a court may nevertheless consider it where the complaint `relies heavily upon its terms and effect,' which renders the document `integral' to the complaint. Int'l Audiotext, 62 F.3d at 72. Chambers v. Time Warner, Inc. 282 F.3d 147, 152-53 (2d Cir.2002). IRI's complaint is based on its insurance agreement with Silverstein, and Silverstein's lease agreement with Citigroup. Thus, I have considered these documents in reaching my decision to grant Citigroup's motion, without objection by the parties.
The lease agreement between Silverstein and Salomon Inc., effective November 23, 1988, provided specifically for Salomon's emergency generator system, with its two 6,000 gallon, diesel fuel tanks. Annexes to the lease described the design of the system, and subjected it to approvals of engineers of both Silverstein and the Port Authority. The parties also mutually released one another from liability. And, the parties involved the insurer, IRI, with regard to such risks, and negotiated provisions that allocated the risk of loss to IRI. The parties largely accept the clarity of this intent, and present arguments, not as to the proper interpretation of the lease and insurance agreements, but as to the public policy that should be applied. As will become clear, there is nothing in the public policy of the Air Transportation Safety and System Stabilization Act, 49 U.S.C. § 40101 (2005) and New York law that should enable IRI to recover from Citigroup for losses from the risks that it knowingly agreed to assume.
The lease agreement gave Salomon the "exclusive right to install on the fifth floor ... up to eleven 1750 KVA diesel emergency power generators ...," and promised to "facilitate Tenant's exclusive access to emergency power generator diesel fuel capacity of not less than 12,000 gallons...." Lease § 4.01, Exhibit C.V.D.3. Silverstein retained the right, within a ten-day period after submission of detailed plans, to disapprov[e] such Alterations. Lease § 14.03(c)(i). One stated ground for withholding approval was the potential for the alteration to "jeopardize the structural integrity of the Building." Id. Furthermore, the installation and placement of the fuel risers and fuel lines were to be made "subject to the Landlord's approval." Lease Exhibit C.V.D.5. The plans for alterations were to be reviewed by Silverstein's "architects, engineers or other consultants" § 14.03(d), and the lease required Salmon to reimburse Silverstein for the costs of such review. Id.1
In view of the intimacy they acquired with respect to the emergency generator and fuel tank system, the parties mutually released each other to the extent each was insured under a policy containing permission to grant such release. Section 12.06(d) of the lease provided:
Each party hereby releases the other party with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damage, or destruction with respect to its real or personal property... occurring ... with respect and to the extent to which it is insured under a policy or policies containing ... permission to release liability.
This policy issued by IRI explicitly recognized this right of release. The insurance agreement provided, "[t]his insurance shall not be invalidated should the Insured waive by express agreement prior to a loss any or all right of recovery against any party for loss or damage insured against by this policy." And, further...
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