Second Circuit holds that New York Building Code imposes non-delegable duty on property owner

This summer, in reviewing a filed lawsuit, the Second Circuit Court of Appeals made a determination as a matter of law on a matter of first impression, specifically holding that property owners in New York City have a non-delegable duty to maintain the structural integrity of adjoining walls, including party walls.

According to the papers in the action, in 2008, a foreign government’s Permanent Mission to the United Nations began renovating a townhouse it owned in Manhattan. Its subcontractor negligently poured concrete alongside an existing party wall separating the foreign government’s property from that of the adjacent townhouse owned by an insurer’s subrogor. The party wall collapsed, causing substantial damage to the subrogor’s property.

Amongst other causes, the insurance company brought suit alleging that the foreign sovereign violated Section 3309.8 of the City Building Code for “failing to shore up the common wall.” The foreign government moved to dismiss the complaint alleging that it was immune from suit under the FSIA. The insurer argued that three statutory exceptions to the FSIA applied to the case, one for tortious activity, a second for commercial activity, and a third for claims involving “immovable property.” The Southern District of New York’s Court denied defendant's motion to dismiss counts of the complaint and found that the tortious activity exception applied. The Court further held that the construction activity concerning the consular mission was not a discretionary act of the foreign government, and therefore did not invoke the “exception to the exception” under the FSIA which would re-grant immunity from federal court jurisdiction.

The foreign government appealed the decision to the Second Circuit Court of Appeals, where oral argument was heard. On appeal, the foreign government also argued, under the tortious activity exception, that it owed no duty to its next-door neighbor under the independent contractor doctrine in that it was not responsible for the actions of its contractors.

The Second Circuit Court's opinion affirmed the lower court’s opinion. The Court held that the foreign government can be sued in tort for failure to comply with the New York City Building Code. While New York courts have not “specifically determined” whether §3309.8 imposes a delegable or non-delegable duty, the Second Circuit Court determined that, “The New York Court of Appeals has repeatedly held that statutes and regulations that address specific types of safety hazards create non-delegable duties of care,” especially where the regulation contains a “specific positive command.” The Court found that here, the New York Building Code, N.Y. City Admin. Code tit. 28, ch.1, §3309.8 contains such a command, requiring that the “person causing construction or demolition”, i.e. the property owner, maintain the structural integrity of adjoining walls, including party walls.
 

Subrogating Against The Long Island Power Authority--Guidelines and Pitfalls

In situations where the Long Island electrical distribution system is involved in causing the loss, it is critically important to make sure that you adhere to certain particular Notice of Claim requirements, heed the shortened statute of limitations period, and also identify any additional maintenance vendors as potential targets for recovery.

LIPA

The Long Island Power Authority (“LIPA”) was created by statute under N.Y. Pub. Auth. Law §§1020 et seq. which states, in part, as follows: “There is hereby created a corporate municipal instrumentality of the state to be known as the ‘Long Island Power Authority,’ which shall be a body corporate and politic and a political subdivision of the state, exercising essential governmental and public powers.”

LIPA owns the retail electric system on Long Island and provides electric service to over 1.1 million customers in Nassau and Suffolk counties, and the Rockaway Peninsula in Queens. LIPA does not own any electric generation assets on Long Island, and it does not provide natural gas service. According to its own press releases, LIPA is the second largest municipal electric utility in the nation in terms of electric revenues, third largest in terms of customers served and the seventh largest in terms of electricity delivered.

Notice of Claim

Any notice of claim must be served upon LIPA within the time limited by and in compliance with all the requirements of section 50-e of the general municipal law. Service of a notice of claim within 90 days after accrual of the claim is a condition precedent to the commencement of any tort action against LIPA. See McShane v Town of Hempstead, 66 AD3d 652 (2d Dept 2009) (citing General Municipal Law § 50-e [1] [a]; § 50-i [1]; Public Authorities Law § 1020-y [3].)

Statute of Limitations

When an action, other than one for wrongful death, founded upon tort is brought against LIPA, the action must be commenced within one year and ninety days after the cause of action accrues. N.Y. Pub. Auth. Law § 1020-y.
 

Entities selected to manage and operate the Long Island Electric Grid on LIPA’s behalf

Currently, a US subsidiary of the UK-based company National Grid plc maintains LIPA’s transmission and distribution system under a management services agreement. The US National Grid subsidiary also carries out other business through a number of subsidiary companies, all still doing business as “National Grid”. For example, Niagara Mohawk Power Corporation d/b/a/ National Grid owns separate, non-Long Island electric lines and should not be confused with the Long Island operations of National Grid.

Nevertheless, on December 15, 2011, LIPA selected Public Service Enterprise Group (“PSEG”) to take over management and operation of the electric grid, starting in January 2014.  The new contract is for 10 years and requires PSEG to create a wholly-owned subsidiary to be located on Long Island and dedicated to LIPA and its 1.1 million customers. Before the contracts between LIPA and PSEG become effective, regulatory approvals are required from the Internal Revenue Service, the NYS Attorney General and the Office of the State Comptroller.

If you intend to file suit in the next few years against LIPA, make sure that you investigate whether you should also name either National Grid or PSEG or its wholly-owned Long Island subsidiary as an additional applicable party to the lawsuit depending upon when the loss occurred.