R.M. Bacon, LLC v. Saint-Gobain Performance Plastics Corp.

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: KEARSE, Circuit Judge
• Citation: R.M. Bacon, LLC v. Saint-Gobain Performance Plastics Corp., 959 F.3d 509 (2nd Cir. 2020)
• Decision Date: 18 May 2020
• Docket Number: August Term, 2018,Docket No. 18-2018
• Parties: R.M. BACON, LLC and Michael Bacon, Plaintiffs-Appellees, v. SAINT-GOBAIN PERFORMANCE PLASTICS CORP., and Honeywell International Inc. f/k/a Allied-Signal Inc., Defendants-Appellants.

959 F.3d 509

R.M. BACON, LLC and Michael Bacon, Plaintiffs-Appellees,

v.SAINT-GOBAIN PERFORMANCE PLASTICS CORP., and Honeywell International Inc. f/k/a Allied-Signal Inc., Defendants-Appellants^** .

Docket No. 18-2018^*

August Term, 2018

United States Court of Appeals, Second Circuit.

Argued: April 17, 2019

Decided: May 18, 2020

WILLIAM A. WALSH, New York, New York (Robin L. Greenwald, James J. Bilsborrow, Weitz & Luxenberg, New York, New York, on the brief), for Plaintiffs-Appellees.

MICHAEL D. DANEKER, Washington, D.C. (Elissa J. Preheim, R. Stanton Jones, William C. Perdue, Arnold & Porter Kaye Scholer, Washington, D.C.; Jennifer R. Kwapisz, Arnold & Porter Kaye Scholer, New York, New York, on the brief), for Defendant-Appellant Honeywell International Inc.

DECHERT, New York, New York (Sheila L. Birnbaum, Mark S. Cheffo, Bert L. Wolff, Lincoln Davis Wilson, New York, New York, of counsel), for Defendant-Appellant Saint-Gobain Performance Plastics Corp.

Before: KEARSE, POOLER, and CARNEY, Circuit Judges.

KEARSE, Circuit Judge:

In this action, plaintiffs R.M. Bacon, LLC ("RM"), a construction company operating in the Village of Hoosick Falls, New York (the "Village" or "Hoosick Falls"), and its founder Michael Bacon ("Bacon"), who owns land in and/or near the Village, pursue negligence claims alleging that defendants Saint-Gobain Performance Plastics Corp. ("Saint-Gobain") and Honeywell International Inc., f/k/a Allied-Signal Inc. ("Honeywell"), respectively the owner and a past owner of a manufacturing facility in the Village, used and disposed of the chemical perfluorooctanoic acid ("PFOA") in a manner that contaminated the Village's water supply and Bacon's land. Defendants appeal pursuant to 28 U.S.C. § 1292(b) from so much of an order of the United States District Court for the Northern District of New York, Lawrence E. Kahn, Judge , as denied their motion under Fed. R. Civ. P. 12(b)(6) to dismiss claims that defendants' negligence caused RM to lose revenues and caused Bacon to suffer diminution in the value of his property, see R.M. Bacon, LLC v. Saint-Gobain Performance Plastics Corp. , No. 17-CV-0441, 2018 WL 1010210 (Feb. 20, 2018) (" Bacon I "). Defendants contend that neither of those alleged losses constitutes injury cognizable in an action for negligence under New York law. For the reasons that follow, we conclude that the district court properly denied defendants' motion to dismiss the claim of Bacon but erred in denying their motion to dismiss the claim of RM.

I. BACKGROUND

This appeal was argued orally in tandem with two others decided today, including Benoit v. Saint-Gobain Performance Plastics Corp. , 959 F.3d 491 (2d Cir. 2020) (" Benoit II "). The three appeals deal with numerous actions brought in the district court against Saint-Gobain and Honeywell, asserting claims of injury resulting from defendants' contamination of the Village's water supply with PFOA, see generally Benoit II , 959 F.3d at ––––.

The factual allegations in the amended complaint in this action ("Am. Compl."), taken as true for purposes of considering a Rule 12(b)(6) motion, are set forth in the district court's opinion, see Bacon I , 2018 WL 1010210, familiarity with which is assumed. We summarize here more briefly plaintiffs' property damage claims premised on negligence, their other claims having been dismissed or withdrawn.

A. The Amended Complaint

RM, located in the Town of Hoosick (or "Hoosick Town"), which is adjacent to the Village, primarily provides home construction and home improvement services. (See Am. Compl. ¶¶ 76, 79, 81.) RM was organized by Bacon in 1985; by 2015 it had become "the leading construction company in an approximate[ly] 25-mile radius of Hoosick Falls" (id . ¶ 86); between 2010 and 2015, it performed excavation and roadway development work for virtually all new commercial construction in the area and for some 75 percent of all private property development, enjoying revenues of more than $1 million annually. (See id . ¶¶ 85-88.)

In 2015 and 2016, the United States Environmental Protection Agency ("EPA") issued health advisories for Village residents, stating that it was dangerous to ingest water whose PFOA content was more than 70 parts per trillion, and advising against using Village water for drinking or cooking. (See id . ¶¶ 29, 56-57.) In 2017, the New York ("State") Department of Environmental Conservation ("DEC") reported on groundwater tests it had conducted at various Village locations connected with defendants. The lowest average PFOA content shown in those tests was 1,596 parts per trillion; the highest PFOA content was 130,000 parts per trillion. (See id . ¶ 50.)

The EPA noted that peer-reviewed studies indicate that "exposure to PFOA over certain levels may result in adverse health effects, including developmental effects to fetuses during pregnancy or to breastfed infants (e.g., low birth weight, accelerated puberty, skeletal variations), cancer (e.g., testicular, kidney), liver effects (e.g., tissue damage), immune effects (e.g., antibody production and immunity), thyroid effects and other effects (e.g., cholesterol changes)."

(Am. Compl. ¶ 30.)

The State placed defendants' manufacturing facility on the State Superfund list as a site presenting a significant threat to public health, and asked the federal government to designate that facility as a federal Superfund site; Honeywell entered into a consent order with the State; and Saint-Gobain agreed to provide Village residents with bottled water and to fund the installation and maintenance of filtration systems for the municipal water supply. (See id . ¶¶ 62, 48, 58.) The amended complaint alleged that

[t]he public is also generally aware that the DEC[-]overseen blood testing of local residents has uncovered incredibly high levels of PFOA in blood of many local community members. That testing reveals that most residents have PFOA in their blood well in excess of the national average.

(Am. Compl. ¶ 70.)

As a result of the "general knowledge" of PFOA in the Village, the "population" became "fearful of its long-term health" and "reluctant to undertake property development." (Id . ¶ 71.) At least one bank official publicly stated that his bank would not issue mortgages for any home connected to the municipal water supply; and some local banks indicated that they would not advance funds for the purchase or refinancing of a home in Hoosick Falls due to lack of access to potable water. (See id . ¶ 63.) As a result of PFOA contamination and the lack of available financing, "the economic development of the Village has largely ceased" (id . ¶ 67), and property values in Hoosick Falls have declined dramatically (see id . ¶ 66).

1. The Effect on RM

As alleged in the amended complaint, described by the district court,

[t]he discovery of PFOA contamination in Hoosick Falls had a profound impact on RM's business. [Am. Compl.] ¶ 90. The decline in property values, groundwater contamination, and lack of available financing caused nearly all home construction and improvement work to cease in 2016. Id . ¶ 90-105. RM "had no construction or excavation work scheduled at the start of July 2016," id . ¶ 102, and "no new contracts for 2016," id . ¶ 105. Its shrinking payroll reflects the economic downturn. From 2010 to 2016, RM had seven employees. Id . ¶ 101. By June 2016, the company had only one part-time and three full-time employees. Id . By September 2016, Bacon was RM's sole remaining employee, and he received no salary for his work. Id . ¶ 107. The company "experienced a substantial loss of revenue for the 2016 fiscal year." Id . ¶ 111. "Individuals have expressly stated that the presence of PFOA in the environment prevents them from hiring" RM. Id . ¶ 109.

Bacon I , 2018 WL 1010210, at *2. "[N]o property development occurred in the Village during 2016." (Am. Compl. ¶ 166.) The amended complaint alleges that by contaminating the Village's groundwater, defendants wreaked havoc on the local housing market and destroyed RM's business. (See id . ¶¶ 166-68.)

2. The Effect on Bacon

The amended complaint alleges that Bacon owns the Hoosick Town property on which RM is located, as well as approximately 90 surrounding acres. (See Am. Compl. ¶ 112.) The amended complaint does not allege that his drinking water has been affected but alleges that his property is contaminated with PFOA. (See id . ¶¶ 44, 161.) Bacon attempted to sell the property in 2016, offering it at $100,000 below its 2015 assessed value; but no one sought to purchase it or even looked at it. (See id . ¶¶ 113-114.) All told, Bacon's property has "lost approximately $250,000 of its value." (Id . ¶ 169.) Together, plaintiffs seek damages totaling $2.4 million.

B. The Denial of Defendants' Motion To Dismiss

Defendants moved for dismissal of plaintiffs' negligence claims, relying principally on 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc. , 96 N.Y.2d 280, 727 N.Y.S.2d 49, 750 N.E.2d 1097 (2001) (" 532 Madison "). That case resulted from construction-related building collapses in midtown Manhattan--one on Madison Avenue and one near Times Square--that had not damaged the nearby plaintiffs' physical property but had resulted in street closures that prevented vehicular and pedestrian access to plaintiffs' businesses; plaintiffs' "sole injury [wa]s lost income," 96 N.Y.2d at 286, 727 N.Y.S.2d at 51, 750 N.E.2d 1097. The New York Court of Appeals ruled that the plaintiffs had no cognizable negligence claim against the owners of the collapsed buildings for losses that were "purely economic." Id . at 290, 727 N.Y.S.2d at 54, 750 N.E.2d 1097. Defendants here argued that this principle requires dismissal of the negligence claims of RM and Bacon.

The district court disagreed. It stated that "[t]he 532 Madison court recognized that ‘[a] landowner who engages in activities that may cause injury to persons on adjoining premises surely owes those persons a duty to take reasonable precautions to avoid...