N.Y. Wheel Owner LLC v. Mammoet Holding B.V.

• Decision Date: 21 August 2020
• Docket Number: 17-CV-4026 (JMF)
• Parties: NEW YORK WHEEL OWNER LLC et al., Plaintiffs, v. MAMMOET HOLDING B.V. et al., Defendants. Mammoet USA North Inc., Third-Party Plaintiff, v. The City of New York, Third-Party Defendant.
• Court: U.S. District Court — Southern District of New York

481 F.Supp.3d 216

NEW YORK WHEEL OWNER LLC et al., Plaintiffs,

v.MAMMOET HOLDING B.V. et al., Defendants.

Mammoet USA North Inc., Third-Party Plaintiff,

v.The City of New York, Third-Party Defendant.

17-CV-4026 (JMF)

United States District Court, S.D. New York.

Signed August 21, 2020

John Jeffrey Eichmann, Gregory Scott Dovel, Jonas Bram Jacobson, Dovel & Luner, LLP, Santa Monica, CA, Christopher Mario Colorado, Hunter B. Mims, Friedman Kaplan Seiler & Adelman LLP, New York, NY, for Plaintiff New York Wheel Owner LLC.

John Jeffrey Eichmann, Jonas Bram Jacobson, Dovel & Luner, LLP, Santa Monica, CA, for Plaintiff New York Metropolitan Regional Center, L.P. II.

Anthony B. Ullman, Philip R. White, Dentons US LLP, Mark Steven Olinsky, Joseph Bruce Shumofsky, Sills Cummis & Gross, P.C., New York, NY, Jonathan Scott Jemison, Dentons US LLP, Short Hills, NJ, Michael John Pisko, Sills Cummis & Gross, P.C., Newark, NJ, for Plaintiff Mammoet-Starneth LLC.

Philip R. White, Dentons US LLP, New York, NY, Jonathan Scott Jemison, Dentons US LLP, Short Hills, NJ, for Plaintiff Mammoet USA North Inc.

Anthony B. Ullman, Philip R. White, Dentons US LLP, Mark Steven Olinsky, Joseph Bruce Shumofsky, Sills Cummis & Gross, P.C., New York, NY, Jonathan Scott Jemison, Dentons US LLP, Short Hills, NJ, Michael John Pisko, Sills Cummis & Gross, P.C., Newark, NJ, for Defendant Mammoet-Starneth LLC.

Philip R. White, Dentons US LLP, New York, NY, Jonathan Scott Jemison, Dentons US LLP, Short Hills, NJ, for Defendants Mammoet USA North Inc., Starneth LLC, Mammoet Holding B.V., Starneth B.V., Mammoet USA Holding, Inc.

Jonas Bram Jacobson, Dovel & Luner, LLP, Santa Monica, CA, for Defendant New York Wheel Mezz, LLC.

William Beecher Scoville, Jr., Gregory Charles Johnson, New York City Law Department, Lewis R. Lear, NYC Law Dept., New York, NY, for Defendant The City Of New York.

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

This case arises from a project to design and build the largest "observation wheel" in the Western Hemisphere. The New York Wheel ("Wheel"), similar to the famous London Eye, was to be the centerpiece of a revitalization plan for the Staten Island waterfront, looming over Richmond County Bank Ballpark, home of the Staten Island Yankees, and visible all the way from lower Manhattan. Each pod of the Wheel was to hold forty people, and each rotation of the massive Wheel was to transport up to 1,440 people in total.

But it was not meant to be. The project ran into problems not long after it started in 2014 and, in 2017, it fell apart altogether. This complex litigation followed. When the litigation started, Plaintiff New York Wheel Owner LLC ("New York Wheel"), the project's developer, asserted claims against Mammoet-Starneth LLC (the "Design-Build Team" or "DBT"), the company hired to design and build the Wheel. See ECF No. 149, ¶¶ 457-559, 571-602, 635-71. But the DBT soon declared bankruptcy, see ECF No. 162, and New York Wheel later settled with it, see ECF No. 214 ("Third Amended Complaint" or "TAC"), ¶ 9 n.1. In the wake of that settlement (and an aborted global settlement), New York Wheel and Plaintiff New York Metropolitan Regional Center, L.P. II ("NY Regional") asserts claims against the DBT's members and associated companies: Defendants Mammoet Holding B.V. ("Mammoet"), Mammoet USA Holding, Inc. ("Mammoet Holding"), Mammoet USA North, Inc. ("Mammoet North"), Starneth LLC ("Starneth"), and Starneth B.V. (which has since declared bankruptcy as well, see ECF No. 245). Mammoet North, as assignee of the DBT's claims, asserts counterclaims against New York Wheel, see ECF No. 251 ("Amended Third-Party Complaint and Counterclaims" or "ACC"), ¶¶ 146-229, as well as a claim against the City of New York (the "City"), which owns the land on which the Wheel was to be built, see id. ¶¶ 146-54.

Now before the Court are four motions: (1) Defendants’ motions to dismiss claims asserted by New York Wheel and NY Regional, see ECF No. 230 ("Defs.’ MTD Br"); (2) New York Wheel's motion to dismiss several of Mammoet North's counterclaims, see ECF No. 263 ("NYW MTD Br."); (3) the City's motion to dismiss Mammoet North's claim against it, see ECF No. 258; and (4) Mammoet North's motion to amend its third-party complaint and to join New York Wheel Mezz, LLC ("New York Wheel Mezz") as an additional third-party defendant, see ECF No. 266. For the reasons that follow, the City's motion and Mammoet North's motion to amend are granted in their entirety; the other motions to dismiss are granted in part and denied in part.

BACKGROUND

The following facts — taken from the pleadings and documents that are attached to, integral to, or incorporated by reference the pleadings — are assumed to be true for purposes of this motion. See DiFolco v. MSNBC Cable L.L.C. , 622 F.3d 104, 111 (2d Cir. 2010).¹

The City planned a substantial development on the Staten Island waterfront, and the Wheel was to be the main attraction. See TAC ¶ 1. The City leased the land on which the Wheel was to be built to New York Wheel, see ACC ¶¶ 1, 41, which would act as the developer on the project, see TAC ¶ 2. New York Wheel approached Starneth B.V. about serving as the designer of the Wheel. See TAC ¶ 152. At some point, Mammoet entered the negotiations as a potential builder. See id. (alleging that Mammoet and Starneth B.V. negotiated the contract); id. ¶ 172 (alleging that "Mammoet entities were primarily responsible for the procurement, fabrication, manufacturing, and erection" of the Wheel). Mammoet and Starneth B.V. formed a new entity, Mammoet-Starneth LLC, referred to as the "Design-Build Team" or "DBT," whose members are Mammoet North and Starneth. See id. ¶ 18. The DBT's executives were also executives of Mammoet and Starneth B.V., see id. ¶¶ 154-55, and the DBT, Mammoet, and Starneth B.V. shared offices and email addresses, see id. ¶ 153.

On March 5, 2014, only a few days after the DBT was formed, New York Wheel and the DBT entered the Design Build Agreement, or "DBA," relating to the design and construction of the Wheel and related structures. See id. ¶¶ 37-40, 152; ACC ¶¶ 7-8; see also ECF No. 231-1 ("DBA"). Generally speaking, the DBA required the DBT to perform "all design, engineering, labor, material, equipment, tools, temporary utilities, supervision and management services required for the timely, lien-free, completion of the Project." DBA at 1. More specifically, the DBT agreed to "complete the design of the Wheel and prepare Construction Documents [consisting of Drawings and Specifications] consistent with the Project Criteria." DBA § 1.2. Once the design plans were approved by New York Wheel, the DBT was required "to construct the Wheel," but its obligations were "limited to the Work set forth in and reasonably inferable from the Drawings and Specifications ... conditioned to the extent necessary upon [New York Wheel and its contractors] performing their respective obligations." DBA § 1.3. Generally speaking, New York Wheel's obligations under the DBA (other than making payments) related not to the Wheel itself, but rather to the foundation on which the Wheel would sit, a terminal, a parking structure, and other supporting facilities. See TAC ¶¶ 3-4; ACC ¶ 8; DBA §§ 1.2-1.3. The DBT was expected to substantially complete its work by October 1, 2016. See TAC ¶ 105.

In exchange for the DBT's work, New York Wheel agreed to pay "a lump sum, fixed-price" of $145 million — the "Contract Sum." DBA § 6.1. The funds were to be paid in progress payments, pursuant to a complex process set forth in the DBA. Included as an exhibit to the DBA was a "Schedule of Values," which allocated portions of the Contract Sum to the various tasks that the DBT was required to complete. See TAC ¶¶ 44-45. In order to be paid, the DBT was required to estimate the completion percentage of each task and submit its estimate and supporting documentation to New York Wheel in an "Application for Payment," or "AFP," on a monthly basis. See id. ¶ 46; DBA §§ 10.2, 10.7, 10.7.1. The precise procedure by which the DBT was required to submit AFPs, and by which New York Wheel could contest or approve the claimed amounts, does not matter here. What matters, though, is that at the end of the process, the DBA contemplated that New York Wheel would pay the DBT a progress payment in an amount equal to the completion percentage multiplied by the value in the Schedule of Values, less any payments already made. See id. § 10.7. Progress payments were critical to the DBT's ability to fulfil its obligations under the DBA, as neither the DBT's members nor other Mammoet and Starneth-related entities "provide[d] the DBT with any of its own assets or funds to cover its expenses." TAC ¶ 128. That is, the DBT relied entirely on the progress payments to fund the project and cover its costs. Id.

The DBA also provided that the parties could increase the Contract Sum through a "change order" procedure. The parties could invoke this procedure in response to either a "change[ ] in the Work" ordered by New York Wheel or in response to an "Unavoidable Delay," id. § 9.1, which was defined to include "any act, failure to act, direction, directive, order, delay or default" of New York Wheel; "use or occupation by [New York Wheel] of any part of the Site or the Work contrary to the terms of th[e DBA]"; "design of any part of the Work or the Development by [New York Wheel]"; "untimely completion of or defective design or construction of the Balance of the Development that demonstrably impacts the Work"; and "fire, windstorm, flood, storms hurricane, lightning, earthquake, enemy action, [and] terrorist action." Id. § 5.2.2. In the event of an Unavoidable Delay, the DBT was entitled to an extension of time and an adjustment of the Contract Sum equivalent to any resulting "additional Project related costs." Id. The DBA further provided that "[a]ll such extensions of the Contract Time and such adjustments in the Contract Sum...