INDUSTRIAL WATER SOLUTIONS LLC v. RAVYN ROBYN CONSTRUCTION LLC (2020)

SUMMARY ORDER

Totaline, Inc. and Ravyn & Robyn Construction, LLC (together, “Appellants”) appeal from the September 28, 2018 judgment of the United States District Court for the Eastern District of New York (Feuerstein, J.) adopting the July 27, 2018 report and recommendation of the magistrate judge (Shields, M.J.) and granting the motion to dismiss brought by Industrial Water Solutions, LLC (“IWS”). We assume the parties’ familiarity with the underlying facts, procedural history, and specification of issues for review.

As it is undisputed that there is no express contractual right to indemnification between the parties, Appellants argue they adequately pleaded an implied right of indemnification. “Implied indemnity is a restitution concept which permits shifting the loss because to fail to do so would result in the unjust enrichment of one party at the expense of the other.” Mas v. Two Bridges Assocs., 75 N.Y.2d 680, 690, 555 N.Y.S.2d 669, 554 N.E.2d 1257 (1990) (citations omitted). “[A]n implied right to indemnification may be based on the special nature of a contractual relationship between parties.” Peoples’ Democratic Republic of Yemen v. Goodpasture, Inc., 782 F.2d 346, 351 (2d Cir. 1986). “This has been called an ‘implied contract theory’ of indemnity, or an ‘implied in fact’ indemnity.” Id. (citations omitted); see also Mathis v. United Homes, LLC, 607 F. Supp. 2d 411, 434 (E.D.N.Y. 2009) (“[I]mplied indemnification is only available if an agreement to indemnify can be implied between the parties, due to some special relationship that exists between them or some obligation imposed by law.” (citations omitted)).

No such contractual relationship exists here. The parties are not in any sort of contractual privity, or linked in a contractor-subcontractor relationship. Instead, Appellants argue, the parties they were in contractual privity with were alter egos of IWS, such that IWS is liable for indemnifying Appellants. Even assuming Appellants adequately preserved this argument, the third-party complaint fails to adequately plead an alter ego or veil piercing theory. In order to pierce the corporate veil under New York law, a plaintiff must establish that “(1) [the owner] ha[s] exercised such control that the [corporation] has become a mere instrumentality of the [owner], which is the real actor; (2) such control has been used to commit fraud or other wrong; and (3) the fraud or wrong results in an unjust loss or injury to plaintiff.” Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 138 (2d Cir. 1991) (internal quotation marks and citation omitted). Here, the third-party complaint sets out only generalized and conclusory allegations regarding common ownership, employees, management, control, and decision making between IWS and PATE ETV Operating Inc. Indeed, Totaline concedes that the third-party complaint “did not specifically seek to pierce PATE Operating’s corporate veil.” Appellants’ Reply Br. at 9.

We have considered the remainder of Appellants’ arguments and find them to be without merit. Accordingly, the order of the district court hereby is AFFIRMED.