Milliken & Co. v. Consolidated Edison Co. of New York, Inc.
| Citation | 619 N.Y.S.2d 686,84 N.Y.2d 469,644 N.E.2d 268 |
| Decision Date | 01 December 1994 |
| Docket Number | No. 1,No. 3,No. 2,1,2,3 |
| Court | New York Court of Appeals Court of Appeals |
| Parties | , 644 N.E.2d 268, 63 USLW 2361 MILLIKEN & CO. et al., Respondents, v. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Appellant, and City of New York et al., Respondents. (And a Third-Party Action.) (Action) GOLD MILLS, INC., Respondent, v. CITY OF NEW YORK et al., Respondents, and Consolidated Edison Company of New York, Inc., Appellant. (And a Third-Party Action.) (Action) I.S.K. MANHATTAN, INC., doing business as McDonald's # 2276, et al., Respondents, v. CITY OF NEW YORK et al., Respondents, and Consolidated Edison Company of New York, Inc., Appellant. (And Third- and Fourth-Party Actions.) (Action) |
In early August 1983, over 11 years ago, an underground water main burst near 38th Street and 7th Avenue in Manhattan. The unleashed waters flooded the subbasement of the Navarre Building at 500-512 Seventh Avenue, where Consolidated Edison maintained an electricity supply substation. A fire broke out in the subbasement when the waters seeped into the substation and came into contact with Con Edison's electrical equipment. The fire engulfed the substation, causing extensive damage which disrupted the flow and supply of electricity to most of the Manhattan "Garment Center" for four days. The disaster occurred during the biannual "Buyers Week," when merchandisers from all over the world were in New York City to visit fashion showrooms, to examine merchandise and to place orders for lines of goods for future seasons.
Alleging various acts of negligence, some 200 Garment Center businesses brought over 50 lawsuits against Con Edison, the owners and managing agents of the Navarre Building ("real estate" defendants), the City of New York, Empire City Subway Company and New York Telephone. This group of plaintiffs included those who did have and those who did not have a direct contractual relationship with the appellant utility. The claims of those plaintiffs having a direct contractual relationship with appellant Con Edison are not the subject of this appeal.
Before this Court are the claims of the commercial tenants of the Navarre Building and of other Garment Center properties who had no direct contractual relationship with Con Edison. These noncontract customer claims were reinstated by the Appellate Division after Supreme Court dismissed them. These tenants sued, claiming a connected duty relationship with Con Edison by virtue of their lease agreements, which obligated them to pay an apportioned share of the electricity expenses to the direct contracting entities, their landlords.
Among these noncontractually related plaintiffs are those who alleged physical damages and associated economic losses, as well as those who asserted only pure economic losses, such as lost profits, overhead expenses, and out-of-pocket expenses resulting from their inability to conduct business during "Buyers Week." These noncontract plaintiffs' claims are the sole subjects of this narrow certified question appeal. *
The central issue involves the scope of the duty owed by the electricity supplying utility to noncontractual users. Specifically, the Court must decide whether a regulated utility owes a duty of due care, answerable in negligence, to commercial tenants who do not have service contracts with the utility, but who are obligated under their leases to reimburse their landlords for apportioned electricity costs.
We agree with the Supreme Court determination that, under the facts of this case, the utility does not owe such a duty to these commercial tenants who lack a direct contractual arrangement with it. The certified question, thus, should be answered in the negative, and the order of the Appellate Division should be modified in accordance with this opinion.
Supreme Court limited appellant Con Edison's liability to its direct customers. That court, at a summary judgment stage, (1) dismissed all claims by plaintiffs who were tenants without a direct relationship with Con Edison; (2) dismissed all claims against all defendants which were predicated solely upon economic losses unassociated with any property damage; (3) dismissed all claims against the real estate defendants by nontenants of the Navarre Building; and (4) dismissed, without prejudice, the cross claims, counterclaims, and third-party actions in relation to the underlying primary complaints that had been dismissed.
The Appellate Division modified to the extent of (1) reinstating all claims against Con Edison of those plaintiffs which were dismissed for lack of a direct contractual relationship with the defendant utility, including for loss of profits, and (2) dismissing the tenants plaintiffs' claims against the real estate defendants, and otherwise affirmed (199 A.D.2d 75, 605 N.Y.S.2d 682). The Appellate Division granted Con Edison leave to appeal, certifying the question whether its order was properly made.
Relying principally on Strauss v. Belle Realty Co. (65 N.Y.2d 399, 492 N.Y.S.2d 555, 482 N.E.2d 34), appellant Con Edison argues that it should suffer no duty, answerable in tort, to commercial tenants who lack a direct contractual relationship with it as the electricity supplying utility. Con Edison argues that the Appellate Division ruling transgresses the public policy precedential authorities of this Court by expanding the utility's "orbit of duty" to an "uncontrollable degree," and thus exposing the strictly regulated public utility to potentially crushing liability (see, Strauss v. Belle Realty Co., supra, at 404-405, 492 N.Y.S.2d 555, 482 N.E.2d 34).
Plaintiffs-respondents assert that their lack of direct contractual linkage to the utility should not be an absolute bar to suit against it. They contend that as tenants of a commercial building--be they direct contractual customers or ultimate consumers-users and, hence, indirect customers--they are a well-defined, reasonably identifiable class. Therefore, allowing tort exposure or responsibility in favor of this class of plaintiffs would not unduly expand the appropriate scope of the utility's liability. Plaintiffs-respondents also tender a distinguishing feature to their cases. They stress that their injuries occurred in locations where plaintiffs have a proprietary interest in direct need of the electricity product and services and that their lease responsibilities are also directly keyed to costs proportioned for...
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