532 MADISON AVE. v. Finlandia

• Decision Date: 07 June 2001
• Citation: 727 N.Y.S.2d 49,750 N.E.2d 1097,96 N.Y.2d 280
• Court: New York Court of Appeals Court of Appeals
• Parties: 532 MADISON AVENUE GOURMET FOODS, INC., Respondent, v. FINLANDIA CENTER, INC., et al., Appellants. 5TH AVENUE CHOCOLATIERE, LTD., et al., Respondents, v. 540 ACQUISITION CO., L. L. C., et al., Appellants. GOLDBERG WEPRIN & USTIN, L. L. P., Individually and on Behalf of All Others Similarly Situated, Appellant, v. TISHMAN CONSTRUCTION CORP. et al., Respondents.

96 N.Y.2d 280

750 N.E.2d 1097

727 N.Y.S.2d 49

532 MADISON AVENUE GOURMET FOODS, INC., Respondent, v.FINLANDIA CENTER, INC., et al., Appellants.

5TH AVENUE CHOCOLATIERE, LTD., et al., Respondents, v.540 ACQUISITION CO., L. L. C., et al., Appellants.

GOLDBERG WEPRIN & USTIN, L. L. P., Individually and on Behalf of All Others Similarly Situated, Appellant, v.TISHMAN CONSTRUCTION CORP. et al., Respondents.

Court of Appeals of the State of New York.

Argued April 26, 2001.

Decided June 7, 2001.

Smith & Laquercia, P. C.,New York City(Charles R. Strugatz and Edwin L. Smith of counsel), for appellants in the first above-entitled action.

Steven B. Sarshik,New York City, for respondent in the first above-entitled action.Smith & Laquercia, L. L. P.,New York City(Charles R. Strugatz and Edwin L. Smith of counsel), for appellants in the second above-entitled action.

Ashman & Griffin, L. L. C.,New York City(Kenneth J. Ashman of counsel), for respondents in the second above-entitled action.

Jaroslawicz & Jaros,New York City(David Jaroslawicz of counsel), for appellant in the third above-entitled action.Stroock & Stroock & Lavan, L. L. P.,New York City(Joseph L. Forstadt, Deborah L. Goldstein and Joseph E. Strauss of counsel), for Tishman Construction Corp. of New York and another, respondents in the third above-entitled action.

Plunkett & Jaffe, P. C.,New York City(Justin E. Driscoll, III, of counsel), for Universal Builders Supply, Inc., respondent in the third above-entitled action.

Judges SMITH, LEVINE, CIPARICK, WESLEY, ROSENBLATT and GRAFFEO concur.

OPINION OF THE COURT

Chief Judge KAYE.

The novel issues raised by these appeals—arising from construction-related disasters in midtown Manhattan—concern first, a landholder's duty in negligence where plaintiffs' sole injury is lost income and second, the viability of claims for public nuisance.

Two of the three appeals involve the same event.On December 7, 1997, a section of the south wall of 540 Madison Avenue, a 39-story office tower, partially collapsed and bricks, mortar and other material fell onto Madison Avenue at 55th Street, a prime commercial location crammed with stores and skyscrapers.The collapse occurred after a construction project, which included putting 94 holes for windows into the building's south wall, aggravated existing structural defects.New York City officials directed the closure of 15 heavily trafficked blocks on Madison Avenue—from 42nd to 57th Street—as well as adjacent side streets between Fifth and Park Avenues.The closure lasted for approximately two weeks, but some businesses nearest to 540 Madison remained closed for a longer period.

In 532 Madison Ave. Gourmet Foods v Finlandia Ctr.,plaintiff operates a 24-hour delicatessen one-half block south of 540 Madison, and was closed for five weeks.The two named plaintiffs in the companion case, 5th Ave. Chocolatiere v 540 Acquisition Co., are retailers at 510 Madison Avenue, two blocks from the building, suing on behalf of themselves and a putative class of "all other business entities, in whatever form, including but not limited to corporations, partnerships and sole proprietorships, located in the Borough of Manhattan and bounded geographically on the west by Fifth Avenue, on the east by Park Avenue, on the north by 57th Street and on the South by 42nd Street."Plaintiffs allege that shoppers and others were unable to gain access to their stores during the time Madison Avenue was closed to traffic.Defendants in both cases are Finlandia Center (the building owner), 540 Acquisition Company(the ground lessee) and Manhattan Pacific Management (the managing agent).

On defendants' motions in both cases, Supreme Court dismissed plaintiffs' negligence claims on the ground that they could not establish that defendants owed a duty of care for purely economic loss in the absence of personal injury or property damage, and dismissed the public nuisance claims on the ground that the injuries were the same in kind as those suffered by all of the businesses in the community.In 5th Ave. Chocolatiere,plaintiffs' additional claims for gross negligence and negligence per se were dismissed on the ground that plaintiffs could not establish a duty owed by defendants, and their private nuisance cause of action was dismissed on the ground that they could not establish either intentional or negligent wrongdoing.

Goldberg Weprin & Ustin v Tishman Constr. involves the July 21, 1998 collapse of a 48-story construction elevator tower on West 43rd Street between Sixth and Seventh Avenues—the heart of bustling Times Square.Immediately after the accident, the City prohibited all traffic in a wide area of midtown Manhattan and also evacuated nearby buildings for varying time periods.Three actions were consolidated—one by a law firm, a second by a public relations firm and a third by a clothing manufacturer, all situated within the affected area.Plaintiff law firm sought damages for economic loss on behalf of itself and a proposed class "of all persons in the vicinity of Broadway and 42nd Street, New York, New York, whose businesses were affected and/or caused to be closed" as well as a subclass of area residents who were evacuated from their homes.Plaintiff alleged gross negligence, strict liability, and public and private nuisance.

Noting the enormity of the liability sought, including recovery by putative plaintiffs as diverse as hot dog vendors, taxi drivers and Broadway productions, Supreme Court concluded that the failure to allege personal injury or property damage barred recovery in negligence.The court further rejected recovery for strict liability, and dismissed both the public nuisance claim (because plaintiff was unable to show special damages) and the private nuisance claim (because plaintiff could not show that the harm threatened only one person or relatively few).The Appellate Division affirmed dismissal of the Goldberg Weprin complaint, concluding that, absent property damage, the connection between defendants' activities and the economic losses of the purported class of plaintiffs was "too tenuous and remote to permit recovery on any tort theory"(275 AD2d 614).The court, however, reinstated the negligence and public nuisance claims of plaintiffs532 Madison and 5th Ave. Chocolatiere, holding that defendants' duty to keep their premises in reasonably safe condition extended to "those businesses in such close proximity that their negligent acts could be reasonably foreseen to cause injury"(which included the named merchant plaintiffs)(272 AD2d 23) and that, as such, they established a special injury distinct from the general inconvenience to the community at large.Two Justices dissented, urging application of the "economic loss" rule, which bars recovery in negligence for economic damage absent personal injury or property damage.The dissenters further concluded that the public nuisance claims were properly dismissed because plaintiffs could not establish special injury.

We now reverse in 532 Madison and 5th Ave. Chocolatiere and affirm in Goldberg Weprin & Ustin.

Plaintiffs' Negligence Claims

Plaintiffs contend that defendants owe them a duty to keep their premises in reasonably safe condition, and that this duty extends to protection against economic loss even in the absence of personal injury or property damage.Defendants counter that the absence of any personal injury or property damage precludes plaintiffs' claims for economic injury.¹

The existence and scope of a tortfeasor's duty is, of course, a legal question for the courts, which "fix the duty point by balancing factors, including the reasonable expectations of parties and society generally, the proliferation of claims, the likelihood of unlimited or insurer-like liability, disproportionate risk and reparation allocation, and public policies affecting the expansion or limitation of new channels of liability"(Hamilton v Beretta U.S.A. Corp.,96 NY2d 222, 232[quotingPalka v Servicemaster Mgt. Servs. Corp.,83 NY2d 579, 586]).At its foundation, the common law of torts is a means of apportioning risks and allocating the burden of loss.In drawing lines defining actionable duty, courts must therefore always be mindful of the consequential, and precedential, effects of their decisions.

As we have many times noted, foreseeability of harm does not define duty (see, e.g., Pulka v Edelman,40 NY2d 781, 785).Absent a duty running directly to the injured person there can be no liability in damages, however careless the conduct or foreseeable the harm.This restriction is necessary to avoid exposing defendants to unlimited liability to an indeterminate class of persons conceivably injured by any negligence in a defendant's act.

A duty may arise from a special relationship that requires the defendant to protect against the risk of harm to plaintiff(see, e.g., Eiseman v State of New York,70 NY2d 175, 187-188).Landowners, for example, have a duty to protect tenants, patrons and invitees from foreseeable harm caused by the criminal conduct of others while they are on the premises, because the special relationship puts them in the best position to protect against the risk (see, e.g., Nallan v Helmsley-Spear, Inc.,50 NY2d 507, 518-519).That duty, however, does not extend to members of the general public (see, Waters v New York City Hous. Auth.,69 NY2d 225, 229).Liability is in this way circumscribed, because the special relationship defines the class of potential plaintiffs to whom the duty is owed.

In Strauss v Belle Realty Co.(65 NY2d 399)we considered whether a utility owed a duty to a plaintiff injured in a fall on a darkened staircase during a citywide blackout.While the injuries were logically foreseeable, there was no contractual relationship between the plaintiff and the utility for lighting in the building's common areas.As a matter of policy, we restricted liability for damages in...