Opinion
Index No. E182634/2024
09-11-2024
Hedman Resources Limited, Plaintiff, v. Occidental Chemical Corporation, Defendant.
Unpublished Opinion
Raymond W. Walter, J.
The following papers were read on this motion by Defendant, OCCIDENTAL CHEMICAL CORPORATION ("OCC" or "Defendant") to dismiss the complaint:
NYSCEF Doc. Nos.
Summons and Complaint with Exhibits 1 - 9
Motion and Supporting Papers with Exhibits 10 - 30
Opposing Papers and Exhibits 32 - 38
Affirmation in Reply with Exhibits 40 - 42
Plaintiff, HEDMAN RESOURCES LIMITED ("Hedman" or "Plaintiff"), seeks a claim for common law indemnification and/or contribution stemming from a judgment in Viglietta v Asbestos Corp. Ltd., (Sup Ct, Niagara County, Dec. 21, 2022, Chimes, J., index No. E174717/2021) (Viglietta or the "Prior Action"). In Viglietta, the now deceased plaintiff was injured as a result of his exposure to asbestos while an employee of a predecessor-in interest of the defendant in the instant action, OCC. The result in Viglietta was a judgment against Hedman for $634,101.89.
In response to Hedman's complaint OCC filed this motion to dismiss pursuant to CPLR § 3211(a)(1), (3), (5), and (7) arguing that Hedman lacks the capacity to sue, General Obligations Law § 15-108(B) prohibits contribution claims against OCC, any cause of action for indemnification is not cognizable under the facts alleged, and Hedman's declaratory judgment claims lack merit.
As a threshold issue the Court must address Hedman's capacity to sue. It is undisputed that Hedman was incorporated under the laws of Ontario, Canada. In June 2016 Hedman's certificate of incorporation was cancelled, and the company was dissolved (NYSCEF Doc No 12). Pursuant to Ontario Business Corporation Law § 242 a dissolved corporation may continue an action pending at the time of dissolution, and it grants a dissolved corporation power to defend against lawsuits. The statute does not give a dissolved corporation capacity to initiate an action. It is well settled that New York applies the law of the place of the foreign corporation's creation when determining whether an action by or against a dissolved corporation is viable (see Brenon v Asbestos Corp. Ltd., 188 A.D.3d 1610, 1611 [4th Dept 2020]).
Plaintiff argues that Ontario and New York law are "in harmony in that both permit a dissolved corporation to defend itself and pursue derivative claims." To reach this conclusion Hedman asks this Court to ignore the fact that they commenced a new action and instead want this Court to consider this action a continuation of Viglietta. Hedman, however, commenced a new action when it filed a summons and complaint which is evidenced by a separate index number (see NYSCEF Doc Nos 1 and 2; CPLR § 304). Hedman is not continuing an action pending at the time of its dissolution, nor is it defending itself in an action.
Plaintiff argues that if they don't have the capacity to bring a new action under a separate index number then they would certainly have the capacity to bring a third-party complaint under the Prior Action's index number and that such a result would "exalt form over substance." In support of that proposition, they point to two Ontario court decisions, Malamas v Crear Properties Corp., (2009 CanLII 61427 [On SC]) and Sickinger v Krek, (2016 ONCA 459 [Can LII]). These cases, however, merely confirm what no one is denying, that Hedman has every right to actively defend itself whether in a primary action or a third-party action. What Plaintiff wants this Court to ignore is that in both Malamas and Sickinger the dissolved corporation was a defendant. In the instant case, or in a third-party action under the Prior Action, it is, or would, be the plaintiff, which it cannot be as a dissolved Ontario corporation. None of the Ontario cases cited by Plaintiff or Defendant lead to any other conclusion than Hedman does not have the capacity to sue and this case can be dismissed on this fact alone.
Turning to the merits, Plaintiff argues that Defendant repeatedly disputes Hedman's factual allegations and improperly asks the Court to resolve factual disputes in OCC's favor. The Court's only role at this stage, Hedman argues, is to determine whether Hedman has met the low threshold of sufficiently pleading cognizable claims.
It is true that "[u]nder modern pleading theory, a complaint should not be dismissed on a pleading motion so long as, when the plaintiff is given the benefit of every possible favorable inference, a cause of action exists" (Rovello v Orofino Realty Co., Inc., 40 N.Y.2d 633, 634 [1976]). The Court, however, "may also consider affidavits and other evidentiary material to establish conclusively that plaintiff has no cause of action" (Gerrish v Statte University of New York at Buffalo, 129 A.D.3d 1611, 1612 [4th Dept 2015], quoting Mantione v. Crazy Jakes, Inc., 101 A.D.3d 1719, 1720, [4th Dept 2012]). It is also "well settled that bare legal conclusions and factual claims [that] are flatly contradicted by the evidence are not presumed to be true on a motion to dismiss for failure to state a cause of action" (id., quoting Olszewski v. Waters of Orchard Park, 303 A.D.2d 995, 995 [4th Dept 2003] [internal quotation marks omitted]).
Defendant, in support of this CPLR § 3211 Motion to dismiss filed an affirmation of attorney Kevin M. Hogan, Esq., which included numerous exhibits containing previously filed documents and transcripts from the Prior Action. In addition, Plaintiff filed, as part of its complaint, exhibits from the Prior Action. To the extent these documents and transcripts were part of the record in the Prior Action the Court takes judicial notice of them, they are made part of the record herein, and are properly considered by this Court in determining the instant motion.
Plaintiff's causes of action are for indemnification and contribution and intertwined arguments for declaratory judgment for the same. Plaintiff argues that its obligation to pay the Viglietta judgment were through no fault of its own and that OCC owed a duty to Mr. Viglietta, they breached that duty, and they are entirely responsible for his injuries. "In order to succeed on a cause of action for indemnification, plaintiff would have to establish that defendants are completely liable for the injured parties' loss" (ARG Trucking Corp v Amerimart Dev Co, 302 A.D.2d 876, 877 [4th Dept 2003]). Plaintiff in the instant action appealed the judgment in the Prior Action and the 4th Department already held, as a matter of law, that OCC's failure was not an act that relieves Hedman of responsibility (Viglietta v Asebstos Corp Ltd., (227 A.D.3d 1516, 1517 [4th Dept 2024]). Having already been found negligent, (with reckless disregard), Hedman is barred from seeking indemnification as a matter of law (see Roasado v Proctor & Schwartz, 66 N.Y.2d, 21, 25 [1985]["A party who seeks what it characterizes as indemnification thus must show that it may not be held responsible in any degree"]).
Hedman also seeks contribution pursuant to CPLR § 1401 arising from OCC's breach of its duties to Mr. Viglietta that substantially contributed to his injuries for which Hedman was found liable. Contribution claims against a settled tortfeasor like OCC are barred, as a matter of law, by GOL § 15-108(b). Hedman counters, seeking declaratory judgment, that OCC's settlement with the plaintiffs in the Prior Action was not obtained in good faith and OCC should be equitably estopped from asserting a defense under GOL § 15-108.
Hedman's theory of bad faith is based solely on conclusory accusations. Hedman claims that the timing of the settlement, the settlement's purpose, and the amount of the settlement are enough to demonstrate that the settlement does not meet GOL § 15-108(b)'s good faith requirement. Taking Hedman's allegations as true, there is nothing that would indicate that OCC entered a settlement agreement in bad faith. Simply alleging bad faith is not enough.
First, regarding timing, there isn't anything in the complaint that suggests there was anything improper about the timing. Hedman seems to imply it was improper because the settlement was entered into while OCC was preparing its motion to quash Hedman's trial subpoena in the Prior Action. Hedman also alleges that counsel for OCC failed to disclose the settlement by stating, "[w]e're not dealing with a former party who settled. We're dealing with a non-party" (NYSCEF Doc No 3 p 5). Hedman argues that this statement was made to obfuscate the fact that OCC had entered into a settlement. Hedman goes as far as intentionally misstating what OCC's attorney said alleging in its complaint that OCC declared it was a "stranger to this litigation who had not entered into a settlement with Mr. Viglietta" and stating that "[c]learly the Court was under the impression that [OCC] was not a party and had not settled" (NYSCEF Doc No 2 para 48). In reality, OCC never stated it had settled in the prior action. As the transcript clearly shows, the thrust of OCC's argument was that it was a non-party, not that it had or had not settled. This was, once again, confirmed by the 4th Department. "OCC is not a party and Hedman lacked the ability to apportion any liability to OCC (Viglietta, 227 A.D.3d at 1517).Hedman also points to statements made by plaintiff's counsel in the Prior Action regarding the purpose of the settlement. "They paid the plaintiff money to buy their peace; meaning the potential for their - the plaintiff to die, and therefore, to be subject to a crossclaim for contribution from this defendant and for them to potentially go on the verdict sheet" (NYSCEF Doc No 4 p 29). The 4th Department, in Mielcarek v. Knights, 50 A.D.2d 122, 375 N.Y.S.2d 922 (4th Dept.1975), analyzing GOL § 1508 stated "a potential defendant has a sincere and substantial interest in 'buying his peace,'" and that is exactly what OCC did here. To imply bad faith in this instance would be inapposite to the purpose of GOL § 1508.
Finally, Hedman fails to allege there was any collusion between OCC and the plaintiffs in the Prior Action (see Torres v State, 67 A.D.2d 814 [4th dept 1979]["The good faith requirement was imposed to assure that an injured party would not collusively release one wrongdoer for a small amount in return for a promise to co-operate improperly in an attempt to extract from the other wrongdoers more than their equitable share of the damages"]. Collusion would imply some benefit to the colluding parties, however, there was, in fact, no benefit since there was no potential for equitable apportionment against OCC as a matter of law (see CPLR § 1601[1]; Workers' Compensation Law § 11; Viglietta, at 1517).
Hedman also seeks declaratory judgment arguing OCC is equitably estopped from relying on GOL § 15-108(b)'s contribution bar. Hedman, once again, relies on alleged misstatements by OCC in its motion to quash Hedman's subpoena in the Prior Action. Hedman falsely claims that OCC misstated to the Court and Hedman that it had not settled with Mr. Viglietta in the Prior Action. Based on Hedman's own exhibit attached to its complaint this allegation is just not true (see NYSCEF Doc No 3). Hedman further alleges that they justifiably relied on those misstatements by not seeking a jury apportionment based on OCC's negligence. Hedman claims its right to equitable apportionment vested the day OCC settled with Mr. Viglietta and it was deprived of its right under GOL § 15-108(a).
Hedman's complaint fails as a matter of law. "The purpose of equitable estoppel is to preclude a person from asserting a right after having led another to form the reasonable belief that the right would not be asserted, and loss or prejudice to the other would result if the right were asserted" (Shondel J v Mark D., 7 N.Y.3d 320, 326 [2006]). To succeed on equitable estoppel, therefore, Hedman must claim it relied on misstatements by OCC and relied on those misstatements to its detriment. First, there were no misstatements for Hedman to rely on. OCC never claimed or implied it hadn't settled (see NYSCEF Doc No 3). Second, even if Hedman could somehow prove it reasonably relied on OCC's alleged misstatements, there was no detriment to it. Hedman, as a matter of law, and despite its arguments to the contrary, was precluded from seeking equitable apportionment in the Prior Action (Viglietta at 1517).
GOL § 15-108(a) allows, in part, a Plaintiff to seek apportionment against a settling tortfeasor's "equitable share of the damages under article fourteen of the civil practice law and rules." CPLR § 1401 is subject to Workers' Compensation Law § 11, which states, in part, that "[a]n employer shall not be liable for contribution or indemnity to any third person based upon liability for injuries sustained by an employee acting within the scope of his or her employment for such employer."
Hedman argues that the Workers' Compensation Law § 11's bar on contribution is now moot because Mr. Viglietta has since died and therefore has sustained a grave injury. It was not moot, however, at the time of the settlement and trial in the Prior Action when Mr. Viglietta was still alive, therefore, Hedman cannot claim detrimental reliance on OCC's statements at that time. The only thing Hedman was entitled to under GOL 15-108(a) in the Prior Action was a set off in the amount of the settlement, which it received (see Trzaska v Cincinatti, Inc., 277 A.D.2d 1048 [4th Dept 2000]).
Hedman's argument, more than two years after the jury trial in the Prior action, for entitlement to equitable apportionment due to Mr. Viglietta's post-trial death, is a desperate attempt to substantially undermine the State's system of worker's compensation. "The sole and exclusive remedy of an employee against his employer for injuries in the course of employment is compensation benefits" (Gonzales v Armac Industries, Ltd., 81 N.Y.2d 1, 8 [1993]). "Under New York's workers' compensation scheme, an employee receives medical benefits and compensation for workplace injuries, regardless of fault, paid for by the employer. In exchange for this certain and swift remedy, the employee gives up the right to sue the employer for personal injuries" (New York Hosp. Medical Center of Queens v Microtech Contracting Corp., 22 N.Y.3d 501, 509-510 [2014]).
The Court of Appeals noted that this trade-off between employers and workers was seriously compromised by its decision in Dole v Dow Chem. Co. (30 N.Y.2d 143 [1972])(id.)." Dole allowed a primary defendant in an action [to] seek unlimited contribution or indemnification from an employer as a third party... although a direct action against the employer would be barred by the exclusivity provisions of the workers' compensation system" (New York Hosp. Medical Center of Queens v Microtech Contracting Corp., 22 N.Y.3d at 510 [internal quotation mark omitted]). In 1996 the New York State Legislature amended section 11 of the Workers' Compensation Law to explicitly limit an employer's exposure to third-party liability to those situations, inter alia, where the employee suffers a grave injury (e.g., death) (id.).
"Section 11 was written with the obvious, deliberate intention of ensuring preservation of the concept of the Workers' Compensation Law being the employer's exclusive liability to its employees. The language redundantly provides that the employer's liability not only "shall be exclusive" but also "in place of any other liability," then adds the word "whatsoever" (Martin Minkowitz, 2013 Practice Commentaries, McKinney's Cons. Laws of NY, Book 64, Workers' Compensation Law § 11, at 56). Hedman's back door attempt to circumvent the clear intent of the legislature in enacting the 1996 amendment by asserting the "grave injury" exception years after the conclusion of the trial in the Prior Action is unavailing.
Accordingly, and pursuant to the foregoing, it is hereby
ORDERED that Defendant's motion pursuant to CPLR § 3211 is hereby GRANTED in its entirety and Plaintiff's complaint is hereby dismissed with prejudice.