Economic Loss versus Public Nuisance

A landowner who engages in activities that may cause injury to persons on adjoining premises undoubtedly owes those persons a duty to take reasonable precautions to avoid injuring them or causing damage to their property.  This duty applies to construction being done and the duty of the landowner to prevent harm to nearby persons and property during said construction.  Damages caused by negligence of a landowner to nearby property does not extend the liability of a landowner, however, to economic losses of those property owners.

A suit was brought against the property owner  in 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 N.Y.2d 280, 727 N.Y.S.2d 49 (2001), after 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 as a result of a construction project, which involved putting 94 holes for windows into the building’s south wall, and ended up aggravating existing structural defects.  As a result of the collapse and a concern for local safety, New York City officials directed the closure of 15 heavily trafficked blocks on Madison Avenue as well as adjacent side streets between Fifth and Park Avenues. The closure lasted for approximately two weeks, but some businesses nearest to the collapse remained closed for a longer period.  Several local businesses were involved in the suit, alleging lost business due to the closures, and that the property owner’s negligent work being the cause of their economic loss.  The court found that regardless of the foreseeability of the damages, the plaintiff’s negligence claims could not stand because they could not establish that defendants owed a duty of care for purely economic loss in the absence of personal injury or property damage

Alternatively, because economic loss alone does not make out a prima facie case for negligence, adjacent property owners that suffer damages as a result of a local construction project may be able to bring a suit in public nuisance and be granted an injunction against the offensive construction.  A public nuisance exists for conduct that amounts to a substantial interference with the exercise of a common right of the public, 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.  (Copart Industries, Inc. v. Consolidated Edison Co. of New York, Inc., 41 N.Y.2d 564, 394 N.Y.S.2d 169 [1977])

The adjacent property owners in 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc.  tried to bring a public nuisance suit as well, but were unable to satisfy the elements of this tort.  A nuisance is the actual invasion of interests in land, and it may arise from varying types of conduct (Copart Indus. v. Consolidated Edison Co., 41 N.Y.2d, at 569, 394 N.Y.S.2d 169, 362 N.E.2d 968, supra ).  In 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc. 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.  Although it can be argued that the surrounding business suffered an injury because they were unable to stay open and conduct business as a result of the collapse and closures, the special injury requirement was not met as all the injuries were the same in kind as those suffered by all of the businesses in the community.  Therefore the businesses surrounding the failed construction were unable to recover on either theory, economic loss nor public nuisance.

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