923 F. Supp. 2d 351
N.D.N.Y.2013Background
- Gander Mountain leased premises in Johnson City, NY from Pathmark under a 15-year lease; defendant Islip U-slip LLC later owned the Premises.
- Flood history around the Premises includes multiple prior events (1986, 1993, 1996, 2000) affecting Flood Plain and access; extensive flooding impacted the store in 2006 and 2011.
- Plaintiff conducted due diligence Jan-Apr 2004 with CES environmental assessment; Pathmark provided little flood history information during this period.
- Lease required Tenant to maintain all-risk insurance for 80% of replacement value and full replacement value for buildings and improvements; insurance adequacy was a central issue after floods.
- Islip purchased the Premises from Pathmark on July 8, 2010; plaintiff later could not obtain all-risk insurance due to flood history and ceased operations in 2011-2012.
- Plaintiff filed suit May 15, 2012 seeking damages, declaratory relief, and termination of the lease; defendant moved to dismiss under Rules 12(b)(6) and 12(b)(7).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Estoppel/waiver of claims | Gander Mountain argues estoppel certificate creates factual issues; withholding information did not bar claims. | Islip contends estoppel certificate bars claims and binds plaintiff from pursuing certain actions. | Documentary estoppel issues not resolved; denial of dismissal on estoppel at this stage. |
| Frustration of purpose | Flood events and inability to procure insurance defeat purpose of lease. | Frustration not shown as contingency was foreseeable and risk allocation existed in contract. | Frustration of purpose claim dismissed. |
| Fraudulent inducement and concealment | Landlord failed to disclose flood risk/history, inducing lease; fraud and concealment alleged. | Claims time-barred; no fiduciary duty; no special relationship established. | Counts II and III dismissed for untimeliness and failure to state a claim. |
| Breach of contract (statute of limitations) | Continued lease representation alleged; accrual alleged in 2011-2012. | accrual at the lease execution in 2004; six-year period expired in 2010. | Breach of contract claim barred by statute of limitations. |
Key Cases Cited
- Kel Kim Corp. v. Central Markets, Inc., 131 A.D.2d 947 (2nd Dep’t 1987) (foreseeable risk of insurance gaps must be borne by the party who assumed the risk)
- Home Design Ctr.-Joint Venture v. County Appliances of Naples, Inc., 563 So.2d 767 (Fla. Dist. Ct. App. 1990) (insurance availability as a business risk not exculpating performance)
- Abercrombie v. Andrew Coll., 438 F. Supp. 2d 243 (S.D.N.Y. 2006) (due diligence and discovery rules govern fraud limitations period)