Power Test Realty Company Limited Partnership, et al., Plaintiffs, v. LUKOIL AMERICAS CORPORATION (2019)

Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered August 16, 2017, which, to the extent appealed from as limited by the briefs, granted defendants' motion to dismiss the breach of contract cause of action as against defendant Lukoil Americas Corporation and denied the motion as to the causes of action alleging violations of New York, New Jersey and Connecticut environmental laws, unanimously modified, on the law, to deny the motion as to the breach of contract cause of action as against Lukoil, and otherwise affirmed, without costs.

Plaintiff Getty Properties Corp. (plaintiff) seeks to recover damages from defendant Lukoil as an alter ego of its defunct subsidiary, nonparty Getty Petroleum Marketing, Inc. (GPMI).  Plaintiff alleges that GPMI breached its obligations under a master lease and violated state laws concerning environmental contamination and that, as a result, plaintiff incurred substantial expense to remediate environmental contamination on its properties.

Contrary to defendants' contention, plaintiff's settlement of its direct claims against GPMI in the context of the latter's bankruptcy does not require that its alter ego claims be dismissed.  The settlement agreement expressly preserves plaintiff's ability to pursue claims against Lukoil as an “alter ego” of GPMI. Plaintiff had the right to name GPMI as a nominal party in any such suit, and agreed not to seek any further recovery from GPMI (cf. Bailon v. Guane Coach Corp., 78 A.D.3d 608, 912 N.Y.S.2d 188 [1st Dept. 2010];  see also Morales v. Solomon Mgt. Co., LLC, 38 A.D.3d 381, 382, 832 N.Y.S.2d 195 [1st Dept. 2007] [“a release may not be read to cover matters which the parties did not desire or intend to dispose of”] [internal quotation marks omitted] ).  The parties did not fully release and extinguish the underlying claims but clearly expressed their intent that plaintiff could pursue additional recovery from GMPI's parent, Lukoil, on an alter ego theory (see Plath v. Justus, 28 N.Y.2d 16, 19, 319 N.Y.S.2d 433, 268 N.E.2d 117 [1971];  CDR Creances S.A.S. v. Cohen, 104 A.D.3d 17, 29, 957 N.Y.S.2d 75 [1st Dept. 2012], mod on other grounds 23 N.Y.3d 307, 991 N.Y.S.2d 519, 15 N.E.3d 274 [2014];  cf. In re Tronox Inc. v. Anadarko Petroleum Corp., 549 B.R. 21, 28–30 [S.D.N.Y. 2016], appeal dismissed 855 F.3d 84 [2d Cir. 2017] [intent alone cannot revive claims released in settlement agreement with no carve-out] ).

The motion court erred in dismissing the breach of contract cause of action against Lukoil on the ground that it was not a party to the lease and had not assumed GPMI's contractual obligations.  Plaintiff did not proceed against Lukoil under those theories, but seeks to hold Lukoil liable for its subsidiary's contractual obligations under an alter ego or veil-piercing theory, which is a permissible theory even though Lukoil is not a party to the agreement (see Baby Phat Holding Co., LLC v. Kellwood Co., 123 A.D.3d 405, 997 N.Y.S.2d 67 [1st Dept. 2014];  see also 2406–12 Amsterdam Assoc. LLC v. Alianza LLC, 136 A.D.3d 512 [1st Dept. 2016] ).