532 Madison Avenue Gourmet Foods, Inc. v. Finlandia Center, Inc.

OPINION OF THE COURT

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

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).

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 negligence to direct customers of the utility in order to avoid crushing exposure to the suits of millions of electricity consumers in New York City and Westchester.

Even closer to the mark is Milliken & Co. v Consolidated Edison Co. ( 84 NY2d 469 ), in which an underground water main burst near 38th Street and 7th Avenue in Manhattan. The waters flooded a subbasement where Consolidated Edison maintained an electricity supply substation, and then a fire broke out, causing extensive damage that disrupted the flow of electricity to the Manhattan Garment Center and interrupting

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 injuring them (see, e.g., Weitzmann v Barber Asphalt Co., 190 NY 452 , 457). We have never held, however, that a landowner owes a duty to protect an entire urban neighborhood against purely economic losses. A comparison of Beck v FMC Corp. ( 53 AD2d 118 , 121, affd 42 NY2d 1027 ) and Dunlop Tire & Rubber Corp. v FMC Corp. ( 53 AD2d 150 , 154-155) is instructive. Those cases arose out of the same incident: an explosion at defendant FMC’s chemical manufacturing plant caused physical vibrations, and rained stones and debris onto plaintiff Dunlop Tire’s nearby factory. The blast also caused a loss of electrical power — by destroying towers and distribution lines owned by a utility — to both Dunlop Tire and a Chevrolet plant located one and one-half miles away. Both establishments suffered temporary closure after the accident. Plaintiffs in Beck were employees of the Chevrolet plant who sought damages for lost wages caused by the plant closure. Plaintiff Dunlop Tire sought recovery for property damage emanating from the blast and the loss of energy, and lost profits sustained during the shutdown.

In Dunlop Tire, the Appellate Division observed that, although part of the damage occurred from the loss of electricity and part from direct physical contact, defendant’s duty to plaintiffs was undiminished. The court permitted plaintiffs to seek damages for economic loss, subject to the general rule requiring proof of the extent of the damage and the causal relationship between the negligence and the damage. The Beck plaintiffs, by contrast, could not state a cause of action, because, to extend a duty to defendant FMC would, “like the rippling of the waters, [go] far beyond the zone of danger of the explosion,” to everyone who suffered purely economic loss (Beck v FMC Corp., 53 AD2d, at 121, supra).

Plaintiffs’ reliance on People Express Airlines v Consolidated Rail Corp. ( 100 NJ 246 , 495 A2d 107 ) is misplaced. There, a

Policy-driven line-drawing is to an extent arbitrary because, wherever the line is drawn, invariably it cuts off liability to persons who foreseeably might be plaintiffs. The Goldberg Weprin class, for example, would include all persons in the vicinity of Times Square whose businesses had to be closed and a subclass of area residents evacuated from their homes; the 5th Ave. Chocolatiere class would include all business entities between 42nd and 57th Streets and Fifth and Park Avenues. While the Appellate Division attempted to draw a careful boundary at storefront merchant-neighbors who suffered lost income, that line excludes others similarly affected by the closures — such as the law firm, public relations firm, clothing manufacturer and other displaced plaintiffs in Goldberg Weprin, the thousands of professional, commercial and residential tenants situated in the towers surrounding the named plaintiffs, and suppliers and service providers unable to reach the densely populated New York City blocks at issue in each case.

As is readily apparent, an indeterminate group in the affected areas thus may have provable financial losses directly traceable to the two construction-related collapses, with no satisfactory way geographically to distinguish among those who have suffered purely economic losses (see also, Matter of Kinsman Tr. Co., 388 F2d 821 , 825 n 8). In such circumstances, limiting the scope of defendants’ duty to those who have, as a

The question here is whether plaintiffs have suffered a special injury beyond that of the community so as to support their damages claims for public nuisance (see, Graceland Corp. v Consolidated Laundries Corp., 7 AD2d 89 , 91, affd 6 NY2d 900 ). We conclude that they have not.

In Burns Jackson we refused to permit a public nuisance cause of action by two law firms seeking damages for increased expenses and lost profits resulting from the closure of the New York City transit system during a labor strike. We concluded that, because the strike was so widespread, every person, firm and corporation conducting a business or profession in the City suffered similar damage and thus the plaintiffs could not establish an injury different from that of the public at large.

While not as widespread as the transit strike, the Madison Avenue and Times Square closures caused the same sort of injury to the communities that live and work in those extraordinarily populous areas. As the trial court in Goldberg Weprin & Ustin pointed out, though different in degree, the hot dog vendor and taxi driver suffered the same kind of injury as the plaintiff law firm. Each was impacted in the ability to conduct business, resulting in financial loss. When business interference and ensuing pecuniary damage is “so general and widespread as to affect a whole community, or a very wide area within it, the line is drawn” (Prosser, supra, at 1015). While the degree of harm to the named plaintiffs may have been greater than to the window washer, per diem employee or neighborhood resident unable to reach the premises, in kind the harm was the same.

Leo v General Elec. Co. ( 145 AD2d 291 ) is inapposite. In Leo, the Appellate Division recognized a private right of action by plaintiff commercial fishermen who contended that defendant’s pollution of the Hudson River with toxic polychlorinated biphenyls (commonly known as PCBs), created a public nuisance that had a devastating effect on their ability to earn a living.

Accordingly, in 532 Madison Ave. Gourmet Foods v Finlandia Ctr., the order of the Appellate Division should be reversed, with costs, the defendants’ motion to dismiss the complaint granted and the certified question answered in the negative. In 5th Ave. Chocolatiere v 540 Acquisition Co., the order of the Appellate Division should be reversed, with costs, the defendants’ motion to dismiss the complaint granted in its entirety and the certified question answered in the negative. In Goldberg Weprin & Ustin v Tishman Constr., the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs.

Judges Smith, Levine, Ciparick, Wesley, Rosenblatt and Graffeo concur.

In 532 Madison Ave. Gourmet Foods v Finlandia Ctr.: Order reversed, etc.

In 5th Ave. Chocolatiere v 540 Acquisition Co.: Order reversed, etc.

In Goldberg Weprin & Ustin v Tishman Constr. Corp.: Order, insofar as appealed from, affirmed, with costs.