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*Note: The following opinion was edited by AudioCaseFiles' staff.
© 2007 AudioCaseFiles, LLC.

532 Madison Avenue Gourmet Foods, Inc. v. Finlandia Center, Inc.
750 N.E.2d 1097
Court of Appeals of New York, 2001

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, . . . 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.

. . . 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. . . .

Goldberg Weprin & Ustin v. Tishman Construction 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. . . . 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. . . .

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". The court, however, reinstated the negligence and public nuisance claims of plaintiffs 532 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) 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.

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. Corporation... [quoting Palka v Servicemaster Management Services Corporation...). 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. . . . 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. . . . 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. . . . That duty, however, does not extend to members of the general public. . . . Liability is in this way circumscribed, because the special relationship defines the class of potential plaintiffs to whom the duty is owed. . . .

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. . . . 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 Corporation and Dunlop Tire & Rubber Corporation v FMC Corporation 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 Corporation...). . .

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. . . . 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... . In such circumstances, limiting the scope of defendants' duty to those who have, as a result of these events, suffered personal injury or property damage--as historically courts have done--affords a principled basis for reasonably apportioning liability.

We therefore conclude that plaintiffs' negligence claims based on economic loss alone fall beyond the scope of the duty owed them by defendants and should be dismissed.

Plaintiffs' Public Nuisance Claims

Plaintiffs contend that they stated valid causes of action for public nuisance, alleging that the collapses forced closure of their establishments, causing special damages beyond those suffered by the public.

A public nuisance exists for conduct that amounts to a substantial interference with the exercise of a common right of the public, thereby offending public morals, interfering with the use by the public of a public place or endangering or injuring the property, health, safety or comfort of a considerable number of persons. A public nuisance is a violation against the State and is subject to abatement or prosecution by the proper governmental authority (Copart Industries v. Consolidated Edison Company...).

A public nuisance is actionable by a private person only if it is shown that the person suffered special injury beyond that suffered by the community at large... . This principle recognizes the necessity of guarding against the multiplicity of lawsuits that would follow if everyone were permitted to seek redress for a wrong common to the public (Restatement [Second] of Torts...; Prosser, Private Action for Public Nuisance...).

A nuisance is the actual invasion of interests in land, and it may arise from varying types of conduct ( Copart Industries v Consolidated Edison Company...). In the cases before us, the right to use the public space around Madison Avenue and Times Square was invaded not only by the building collapses but also by the City's decision, in the interest of public safety, to close off those areas. Unlawful obstruction of a public street is a public nuisance, and a person who as a consequence sustains a special loss may maintain an action for public nuisance ( Callanan v Gilman...). Indeed, "in a populous city, whatever unlawfully turns the tide of travel from the sidewalk directly in front of a retail store to the opposite side of the street is presumed to cause special damage to the proprietor of that store, because diversion of trade inevitably follows diversion of travel" ( Flynn v Taylor...).

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... . 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...). 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.

Accordingly, in 532 Madison Ave. Gourmet Foods v Finlandia Center, the order of the Appellate Division should be reversed... . In 5th Ave. Chocolatiere v 540 Acquisition Company, the order of the Appellate Division should be reversed... . In Goldberg Weprin & Ustin v Tishman Construction, the order of the Appellate Division, insofar as appealed from, should be affirmed... .

This case is in these books

• Cases and Materials on Torts
• Epstein
• 8th Edition