Town of Huntington v. American Manufacturers Mutual Insurance

267 F.R.D. 449, 2010 U.S. Dist. LEXIS 43648, 2010 WL 1837729
CourtDistrict Court, E.D. New York
DecidedMay 3, 2010
DocketNo. CV 09-3232
StatusPublished

This text of 267 F.R.D. 449 (Town of Huntington v. American Manufacturers Mutual Insurance) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Town of Huntington v. American Manufacturers Mutual Insurance, 267 F.R.D. 449, 2010 U.S. Dist. LEXIS 43648, 2010 WL 1837729 (E.D.N.Y. 2010).

Opinion

MEMORANDUM AND ORDER

WEXLER, District Judge.

The Town of Huntington (the “Town”) commenced this action against Defendant American Manufacturers Mutual Insurance Company (“AMICC”), alleging breach of two separate construction performance surety bonds, and breach of a state court “so ordered” settlement agreement. AMICC moves to dismiss the complaint, pursuant to Rule 12(b)(6) and (7) of the Federal Rules of Civil Procedure on the grounds of res judica-ta, and failure to name a necessary party. For the reasons set forth below, the motion is granted.

BACKGROUND

I. The Parties and Prior Proceedings

AMICC is surety on two performance bonds executed in favor of the Town in 2002, and 2003 (the “Bonds”). The principal on both bonds is an entity known as Half Hollow Construction Co., LLC. (“Half Hollow”). As surety, AMICC agreed to reimburse the Town for any damages incurred as a result of Half Hollow’s failure to perform work at a residential housing project located within the Town, known as “The Greens at Half Hollow” (the “Greens”). This litigation arises out of alleged construction deficiencies with respect to, inter alia, drainage and paving work at the Greens.

This is not the first litigation arising out of construction work covered by the Bonds. In December of 2005, the Town commenced an action in the Supreme Court of the State of New York against, inter alia, AMICC and Half Hollow (the “State Court Litigation”). The causes of action asserted in the State Court Litigation name AMICC as surety, and Half Hollow, as principal, with respect to the same Bonds alleged to have been breached in this action. The State Court Action was settled, by way of a “so ordered” settlement agreement (the “Settlement Agreement”). While the parties to the Settlement Agreement include only the Greens and the Town, recitals in the Settlement Agreement refer specifically to the intent to settle not only the State Court Action, but also other pending state court actions involving construction issues that have arisen with respect to the Greens. These actions, referred to as the “Litigation Matters,” name as Defendants not only Half Hollow and AMICC, but other entities and insurance companies acting as principals, and sureties on other performance bonds executed in connection with construction at the Greens.

As noted, the only parties to the Settlement Agreement are the Town and Half Hollow. The agreement contemplates the completion of further construction work by Half Hollow at the Greens. It acknowledges the existence of the performance bonds in effect (including the bonds at issue here), and states that those bonds shall be released and cancelled, upon completion of the work set forth in the Settlement Agreement.

The Settlement Agreement states that within ten days of its signing, the parties thereto would execute a stipulation of discontinuance with prejudice. The filing of that stipulation is stated to be without prejudice to the parties’ right to enforce the Settlement Agreement, and the agreement provides for the continuing jurisdiction of the State Court for such purpose. The Settlement Agree[451]*451ment also contains a general statement that the agreement is “without prejudice to the rights of any party to exercise any right or remedy not inconsistent with or contrary to the terms of the Settlement Agreement.” The stipulation of discontinuance with prejudice of the State Court Action was executed, and “so ordered,” in June of 2008. It is signed by the Town’s attorney on behalf of the Town, and by a single attorney stated to be the “Attorney for Defendants.”

II. The Present Action

This case arises out of the same set of facts, and seeks recovery pursuant to the same performance bonds, referred to in the State Court Action. Unlike that action, this case names only AMICC, (the surety) as a defendant, but does not name Half Hollow, the principal on the Bonds.

The causes of action in the complaint seek recovery pursuant to the Bonds. The “background” section of the complaint refers to the State Court Action, and the Settlement Agreement, and alleges that Half Hollow has refused to comply with its obligations pursuant to that agreement. In addition to seeking recovery pursuant to the Bonds, this action seeks to hold AMICC liable for breach of the Settlement Agreement.

III. The Motion to Dismiss

AMICC moves to dismiss on two separate grounds. First, AMICC alleges that this action should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, on the ground of res judicata. This argument relies on the settlement of the State Court Action, and accompanying dismissal with prejudice of that action. The second ground seeks dismissal pursuant to Rule 12(B)(7) of the Federal Rules of Civil Procedure on the ground that the Town has failed to name a necessary party. This branch of the motion argues not only that AMICC did not sign the Settlement Agreement, but that Half Hollow, the only party signing the Settlement Agreement on behalf of the defendant parties to the State Court Action, is a necessary party to any action alleging breach thereof. It is further argued that because the naming of Half Hollow as a defendant here would destroy diversity jurisdiction, dismissal for lack of subject matter jurisdiction is required.

DISCUSSION

I. Standard for Motions to Dismiss Pursuant to Rule 12(b)(6)

In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court rejected the “oft quoted” standard set forth in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that a complaint should not be dismissed, “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id. at 45-46, 78 S.Ct. 99. The court discarded the “no set of facts” language in favor of the requirement that plaintiff plead enough facts “to state a claim of relief that is plausible on its face.” Bell Atlantic Corp., 127 S.Ct. at 1974.

In the context of a motion to dismiss, this court must, as always, assume that all allegations set forth in the complaint are true, and draw inferences in favor of the non-moving party. Watts v. Services for the Underserved, 2007 WL 1651852*2 (E.D.N.Y. June 6, 2007). The court must ensure, however, that the complaint sets forth “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp., 127 S.Ct. at 1974.

When considering a motion to dismiss for failure to state a claim, the court can consider the facts as set forth in the complaint, documents attached thereto and those incorporated in the complaint by reference. Stuto v. Fleishman, 164 F.3d 820, 826 n. 1 (2d Cir.1999); Kramer v. Time Warner, Inc.,

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Related

Conley v. Gibson
355 U.S. 41 (Supreme Court, 1957)
Provident Tradesmens Bank & Trust Co. v. Patterson
390 U.S. 102 (Supreme Court, 1968)
Bell Atlantic Corp. v. Twombly
550 U.S. 544 (Supreme Court, 2007)
Kramer v. Time Warner Inc
937 F.2d 767 (Second Circuit, 1991)
Stuto v. Fleishman
164 F.3d 820 (Second Circuit, 1999)
Huber Lathing Corp. v. Aetna Casualty & Surety Co.
132 A.D.2d 597 (Appellate Division of the Supreme Court of New York, 1987)
Brass v. American Film Technologies, Inc.
987 F.2d 142 (Second Circuit, 1993)

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Bluebook (online)
267 F.R.D. 449, 2010 U.S. Dist. LEXIS 43648, 2010 WL 1837729, Counsel Stack Legal Research, https://law.counselstack.com/opinion/town-of-huntington-v-american-manufacturers-mutual-insurance-nyed-2010.