Strauss v. Belle Realty Co.

Opinion by Kaye:

OPINION OF THE COURT
Kaye, J.
On July 13, 1977, a failure of defendant Consolidated Edison’s power system left most of New York City in darkness.
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In this action for damages allegedly resulting from the power failure, we are asked to determine whether Con Edison owed a duty of care to a tenant who suffered personal injuries in a common area of an apartment building, where his landlord — but not he — had a contractual relationship with the utility. We conclude that in the case of a blackout of a metropolis of several million residents and visitors, each in some manner necessarily affected by a 25-hour power failure, liability for injuries in a building’s common areas should, as a matter of public policy, be limited by the contractual relationship.
This court has twice before confronted legal questions concerning the 1977 blackout (see,
Koch v Consolidated Edison Co.,
62 NY2d 548
,
cert denied
105 S Ct 1177
;
Food Pageant v Consolidated Edison Co.,
54 NY2d 167
).
Plaintiff, Julius Strauss, then 77 years old, resided in an apartment building in Queens. Con Edison provided electricity to his apartment pursuant to agreement with him, and to the common areas of the building under a separate agreement with his landlord, defendant Belle Realty Company. As water to the apartment was supplied by electric pump, plaintiff had no running water for the duration of the blackout. Consequently, on the second day of the power failure, he set out for the basement to obtain water, but fell on the darkened, defective basement stairs, sustaining injuries. In this action against Belle Realty and Con Edison, plaintiff alleged negligence against the landlord, in failing to maintain the stairs or warn of their dangerous condition, and negligence against the utility in the performance of its duty to provide electricity.
Plaintiff moved for partial summary judgment against Con Edison (1) to estop it from contesting the charge of gross negligence in connection with the blackout, and (2) to establish that Con Edison owed a duty of care to plaintiff. He argued that Con Edison was prohibited from denying it was grossly negligent by virtue of the affirmed jury verdict in
Food Pageant v Consolidated Edison Co.
(
54 NY2d 167
,
supra),
and that it owed plaintiff a duty even though he was “not a customer of Consolidated Edison in a place where the accident occurred.” Con Edison cross-moved for summary judgment dismissing the complaint, maintaining it had no duty to a noncustomer.
The court granted the motion insofar as it sought collateral estoppel regarding gross negligence,
1
and denied Con Edison’s cross motion to dismiss the complaint, finding a question of fact
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as to whether it owed plaintiff a duty of care. The Appellate Division reversed and dismissed the complaint against Con Edison. Citing
Moch Co. v Rensselaer Water Co.
(
247 NY 160
), the plurality concluded that “Con Ed did not owe a duty to plaintiff in any compensable legal sense” (
98 AD2d 424, 428
). Justice Gibbons dissented, finding extension of the duty tolerable here because “[t]he tenants of the building in question constitute a defined, limited and known group of people”
(id.,
at p 437). On public policy grounds, we now affirm the Appellate Division order dismissing the complaint against Con Edison.
A defendant may be held liable for negligence only when it breaches a duty owed to the plaintiff
(Pulka v Edelman,
40 NY2d 781, 782
). The essential question here is whether Con Edison owed a duty to plaintiff, whose injuries from a fall on a darkened staircase may have conceivably been foreseeable, but with whom there was no contractual relationship for lighting in the building’s common areas.
Duty in negligence cases is defined neither by foreseeability of injury
(Pulka v Edelman, supra,
at p 785
) nor by privity of contract. As this court has long recognized, an obligation rooted in contract may engender a duty owed to those not in privity, for “[tjhere is nothing anomalous in a rule which imposes upon A, who has contracted with B, a duty to C and D and others according as he knows or does not know that the subject-matter of the contract is intended for their use”
(MacPherson v Buick Motor Co.,
217 NY 382, 393
). In
Fish v Waverly Elec. Light & Power Co.
(
189 NY 336
), for example, an electric company which had contracted with the plaintiff’s employer to install ceiling lights had a duty to the plaintiff to exercise reasonable care. And in
Glanzer v Shepard
(
233 NY 236
), a public weigher, hired by a seller of beans to certify the weight of a particular shipment, was found liable in negligence to the buyer.
(See also, Wroblewski v Otis Elevator Co.,
9 AD2d 294, 296
;
Rosenbaum v Branster Realty Corp.,
276 App Div 167
).
But while the absence of privity does not foreclose recognition of a duty, it is still the responsibility of courts, in fixing the orbit of duty, “to limit the legal consequences of wrongs to a controllable degree”
(Tobin v Grossman,
24 NY2d 609, 619
;
see also, Howard v Lecher,
42 NY2d 109
), and to protect against crushing exposure to liability
(see, Pulka v Edelman,
40 NY2d 781
,
supra; Ultramares Corp. v Touche,
255 NY 170
). “In fixing the bounds of that duty, not only logic and science, but policy play an important role”
(De Angelis v Lutheran Med. Center,
58 NY2d 1053,1055
;
see also, Becker v Schwartz,
46 NY2d 401, 408
). The
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courts’ definition of an orbit of duty based on public policy may at times result in the exclusion of some who might otherwise have recovered for losses or injuries if traditional tort principles had been applied.
Considerations of privity are not entirely irrelevant in implementing policy. Indeed, in determining the liability of utilities for consequential damages for failure to provide service — a liability which could obviously be “enormous,” and has been described as
“sui generis,”
rather than strictly governed by tort or contract law principles
{see,
Prosser and Keeton, Torts § 92, at 663 [5th ed]) — courts have declined to extend the duty of care to noncustomers. For example, in
Moch Co. v Rensselaer Water Co.
(
247 NY 160
,
supra),
a water works company contracted with the City of Rensselaer to satisfy its water requirements. Plaintiff’s warehouse burned and plaintiff brought an action against the water company in part based on its alleged negligence in failing to supply sufficient water pressure to the city’s hydrants. The court denied recovery, concluding that the proposed enlargement of the zone of duty would unduly extend liability. Similarly, in
Beck v FMC Corp.
(
42 NY2d 1027
,
affg
53 AD2d 118
), an explosion interrupted a utility’s electrical service, which in turn resulted in the loss of a day’s pay for hourly workers at a nearby automobile plant. In an action brought by the workers, the court denied recovery on the basis of controlling the'unwarranted extension of liability
(see also, Nicholson v City of New York,
272 App Div 899
,
affd
297 NY 548
;
Kraye v Long Is. Light. Co.,
42 AD2d 972
;
Shubitz v Consolidated Edison Co.,
59 Misc 2d 732
).
Moch
involved ordinary negligence, while Con Edison was guilty of gross negligence, but the cases cannot be distinguished on that basis. In reserving the question of what remedy would lie in the case of “reckless and wanton indifference to consequences measured and foreseen” (
247 NY, at p 169
), the court in
Moch
contemplated a level of misconduct greater than the gross negligence involved here
(cf. Matter of Almgren v Fletcher,
304 NY 547
;
Weld v Postal Telegraph-Cable Co.,
210 NY 59
; 1 NY PJI2d 2:10A [1984 Cum Supp]; Prosser and Keeton, Torts § 34, at 208 [5th ed]). The court in
Food Pageant
,
in upholding the jury’s verdict against Con Edison, noted as instances of Con Edison’s misconduct its employee’s failure to follow instructions to reduce voltage by “shedding load” after lightning had hit the electrical system, and its staffing decisions (54 NY2d, at pp 173-174,
supra).
Though found by the jury to constitute gross negligence, this behavior was not so consciously culpable as to fall
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into the category of conduct contemplated as “reckless and wanton” by the court in
Moch (compare, Hall v Consolidated Edison Co.,
104 Misc 2d 565
).
In the view of the Appellate Division dissenter,
Moch
does not control because the injuries here were foreseeable and plaintiff was a member of a specific, limited, circumscribed class with a close relationship with Con Edison. The situation was thought to be akin to
White v Guarente
(
43 NY2d 356
), where an accounting firm was retained by a limited partnership to perform an audit and prepare its tax returns. As the court noted there, the parties to the agreement contemplated that individual limited partners would rely on the tax returns and audit; Refusing to dismiss a negligence action brought by a limited partner against the accounting firm, the court said, “the services of the accountant were not extended to a faceless or unresolved class of persons, but rather to a known group possessed of vested rights, marked by a definable limit and made up of certain components”
(id.,
at p 361;
see also, Glanzer v Shepard,
233 NY 236
,
supra; Fish v Waverly Elec. Light & Power Co.,
189 NY 336
,
supra).
Central to these decisions was an ability to extend the defendant’s duty to cover specifically foreseeable parties but at the same time to contain liability to manageable levels. In
White
,
for instance, liability stemmed from a single isolated transaction where the parties to the agreement contemplated the protection of identified individuals. Here, insofar as revealed by the record, the arrangement between Con Edison and Belle Realty was no different from those existing between Con Edison and the millions of other customers it serves. Thus, Con Edison’s duty to provide electricity to Belle Realty should not be treated separately from its broader statutory obligation to furnish power to all other applicants for such service in New York City and Westchester County (Transportation Corporations Law § 12; Public Service Law § 31 [1]). When plaintiff’s relationship with Con Edison is viewed from this perspective, it is no answer to say that a duty is owed because, as a tenant in an apartment building, plaintiff belongs to a narrowly defined class.
2
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Additionally, we deal here with a system-wide power failure occasioned by what has already been determined to be the utility’s gross negligence. If liability could be found here, then in logic and fairness the same result must follow in many similar situations. For example, a tenant’s guests and invitees, as well as persons making deliveries or repairing equipment in the building, are equally persons who must use the common areas, and for whom they are maintained. Customers of a store and occupants of an office building stand in much the same position with respect to Con Edison as tenants of an apartment building. In all cases the numbers are to a certain extent limited and defined, and while identities may change, so do those of apartment dwellers
(compare, White v Guarente,
43 NY2d 356, 361
,
supra
[“situation did not involve prospective limited partners, unknown at the time”]). While limiting recovery to customers in this instance can hardly be said to confer immunity from negligence on Con Edison
(see, Koch v Consolidated Edison Co.,
62 NY2d 548
,
supra),
permitting recovery to those in plaintiff’s circumstances would, in our view, violate the court’s responsibility to define an orbit of duty that places controllable limits on liability.
Finally, we reject the suggestion of the dissent that there should be a fact-finding hearing to establish the alleged catastrophic probabilities flowing from the 1977 blackout and prospective blackouts, before any limitation is placed on Con Edison’s duty to respond to the public for personal injuries
(see, Tobin v Grossman,
24 NY2d 609, 620
[Keating, J., dissenting],
supra).
In exercising the court’s traditional responsibility to fix the scope of duty, for application beyond a single incident, we need not blind ourselves to the obvious impact of a city-wide deprivation of electric power, or to the impossibility of fixing a rational boundary once beyond the contractual relationship, or to the societal consequences of rampant liability.
In sum, Con Edison is not answerable to the tenant of an apartment building injured in a common area as a result of Con Edison’s negligent failure to provide electric service as required by its agreement with the building owner. Accordingly, the order of the Appellate Division should be affirmed, with costs.
. The collateral estoppel question was decided against Con Edison in
Koch v Consolidated Edison Co.
(
62 NY2d 548
).
. In deciding that public policy precludes liability to a noncustomer injured in the common areas of an apartment building, we need not decide whether recovery would necessarily also be precluded where a person injured in the home is not the family bill payer but the spouse. In another context, where this court has defined the duty of a public accounting firm for negligent financial statements, we have recognized that the duty runs both to those in contractual privity with the accountant and to those whose bond is so close as to be, in practical effect, indistinguishable from privity, and we have on public policy grounds precluded wider liability to persons damaged by the accoun
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tant’s negligence.
(See, Credit Alliance Corp. v Andersen & Co.,
65 NY2d 536
[decided herewith].)

---

Dissent by Meyer:

Meyer, J.
(dissenting). My disagreement with the majority results not from its consideration of public policy as a factor in determining the scope of Con Ed’s duty, but from the fact that in reaching its public policy conclusion it has considered only one
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side of the equation and based its conclusion on nothing more than assumption. I, therefore, respectfully dissent.
As Professors Prosser and Keeton have emphasized (Prosser and Keeton, Torts, at 357-358 [5th ed]), “The statement that there is or is not a duty begs the essential question — whether the plaintiff’s interests are entitled to legal protection against the defendant’s conduct * * * It is a shorthand statement of a conclusion, rather than an aid to analysis in itself * * * But it should be recognized that ‘duty’ is not sacrosanct in itself, but is only an expression of the sum total of those considerations of policy which lead the law to say that the plaintiff is entitled to protection.” We accepted the concept without reservation in
De Angelis v Lutheran Med. Center
(
58 NY2d 1053, 1055
), stating as to the role played by policy that, “A line must be drawn between the competing policy considerations of providing a remedy to everyone who is injured and of extending exposure to tort liability almost without limit.”
Although
De Angelis
did not define the “competing policy considerations” to be reviewed in deciding where the line is to be drawn, it made clear that “absent legislative intervention, the fixing of the ‘orbit’ of duty, as here, in the end is the responsibility of the courts”. Thus, the suggestion in the plurality opinion at the Appellate Division (98 AD2d, at p 429) that the liability issue now considered is “best addressed to the Legislature” is no more correct in the present situation than it was when in
Codling v Paglia
(
32 NY2d 330
) we imposed upon manufacturers the economic burden of strict products liability to bystanders as well as to those in privity.
There is, of course, legislative intervention in the regulation of gas and electric companies (Transportation Corporations Law art 2; Public Service Law art 4). But the only “legislative” limitation upon the liability of such companies consists of Public Service Commission acceptance and approval of Con Ed’s rate schedule, which incorporates the rule, previously enunciated by this court
(Weld v Postal Telegraph-Cable Co.,
199 NY 888
,
on second appeal
210 NY 59
), that liability “be limited to damages arising from the utility’s willful misconduct or gross negligence”
(Food Pageant v Consolidated Edison Co.,
54 NY2d 167, 172
). But, as
Food Pageant
and
Koch v Consolidated Edison Co.
(
62 NY2d 548
,
cert
denied_US_,
105 S Ct 1177
) establish, what caused the injuries for which compensation is sought in this action was Con Ed’s gross negligence.
What policy considerations are involved in determining whether Con Ed’s gross negligence liability should be extended
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to “bystanders” and where, if at all, a line should be drawn between the varying bystander situations is, then, the issue to be decided.
Codling v Paglia
looked at the total exclusion of the bystander from opportunity to detect a product defect, the system of mass production and distribution, the ability of the manufacturer to pass on, in part if not in whole, the economic burden of postdistribution liability, and the added incentive toward safety that could be expected to result (
32 NY2d, at p 341
). To that extent at least it departed from the rationale of
Moch Co. v Rensselaer Water Co.
(
247 NY 160,168
) that performance of a contract to supply water to a municipality did not impose “another duty, apart from contract, to an indefinite number of potential beneficiaries.”
Ultramares Corp. v Touche
(
255 NY 170
),
Tobin v Grossman
(
24 NY2d 609
) and
Pulka v Edelman
(
40 NY2d 781
), on which the majority rely, spoke, it is true, to the necessity of avoiding crushing liability, but articulated no factors by which the crushing nature of the potential liability was to be determined. They can, perhaps, be distinguished from
Codling
on the ground that the service businesses they involved (accounting, medicine and parking) do not have the potential of
Codling’s
mass distribution system to pass on or absorb the resulting economic burden, but the same cannot be said for the present defendant though it too is involved in furnishing a service.
Criteria more extensive than the unsupported prediction of disaster for determining liability are not wanting, however. Thus, in
Tarasoff v Regents of Univ.
(17 Cal 3d 425,434,
551 P2d 334, 342
), the Supreme Court of California listed the major factors to be balanced in determining duty as “the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved.” Prosser and Keeton
(op. cit., supra,
at 359), on the basis of the
Tarasoff
case and
Vu v Singer Co.
(
538 F Supp 26
,
affd
706 F2d 1027,
cert denied
464 US 938
), list similar factors, which are discussed at greater length in section 4 of their treatise. As to the loss distribution factor, they note
(op. cit,
at 24-25) that, “The defendants in tort cases are to a large extent public utilities,
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industrial corporations, commercial enterprises, automobile owners, and others who by means of rates, prices, taxes or insurance are best able to distribute to the public at large the risks and losses which are inevitable in a complex civilization. Rather than leave the loss on the shoulders of the individual plaintiff, who may be ruined by it, the courts have tended to find reasons to shift it to the defendants”, except where there are “limitations upon the power of a defendant to shift the loss to the public * * * [as] where the liability may extend to an unlimited number of unknown persons, and is incapable of being estimated or insured against in advance.”
The majority’s blind acceptance of the notion that Consolidated Edison will be crushed if held liable to the present plaintiff and others like him ignores the possibility that through application to the Public Service Commission Con Ed can seek such reduction of the return on stockholders’ equity (Public Service Law § 66 [16];
cf. Matter of Consolidated Edison Co. v Public Serv. Commn.,
74 AD2d 384
,
appeal dismissed
51 NY2d 877
,
lv denied
51 NY2d 705
) or increase in its rates, or both, as may be necessary to pay the judgments obtained against it. It ignores as well the burden imposed upon the persons physically injured by Con Ed’s gross negligence or, as to those forced to seek welfare assistance because their savings have been wiped out by the injury, the State. Doing so in the name of public policy seems particularly perverse, for what it says, in essence, is the more persons injured through a tort-feasor’s gross negligence,
*
the less the responsibility for injuries incurred.
I agree that there are situations encompassed by our tort system that require such a result, perverse though it may be, but before granting public utilities absolution beyond that which they already enjoy through the limitation of their liability to acts of gross negligence, I would put the burden upon the utility to establish the necessity for doing so. I am not suggesting that the issue is to be determined by a jury for, as already noted, I do not question that “duty” is a question of law to be determined by the courts. But the law is not without illustrations of preliminary issues involving facts to be determined by a Judge
(e.g.,
competency and privilege of witnesses, Richardson, Evidence § 117 [Prince 10th ed]; Morgan, Evidence § 53 [3d ed];
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suppression of evidence, CPL 710.60; Richardson,
op. cit.
§ 550). Nor am I necessarily suggesting that a retrospective determination of how crushing the liability from the 1977 blackout may be, as distinct from a more generalized prospective determination, should govern, although I would not balk at the former if the latter proved impossible of demonstration. All that I am suggesting is that it is Con Ed which claims that its duty does not encompass plaintiff, not because Con Ed was not grossly negligent, but because the effect of that negligence if Con Ed is held liable for it would be to cripple Con Ed as well as the victim’s of the negligence. There simply is no basis other than the majority’s say so for its assumptions (majority opn, at p 405) that the impact of a city-wide deprivation of electric power upon the utility is entitled to greater consideration than the impact upon those injured; that a rational boundary cannot be fixed that will include some (apartment tenants injured in common areas, for example), if not all of the injured; that the consequence of imposing some bystander liability will be more adverse to societal interests than will follow from blindly limiting liability for tort to those with whom the tort-feasor has a contractual relationship. Before we grant Con Ed’s motion to dismiss, therefore, we should require that a rational basis for such assumptions be established.
Con Ed may well be able to do so, but before its motion is granted at the expense of an unknown number of victims who have suffered injuries the extent and effects of which are also unknown, it should be required to establish that the catastrophic probabilities are great enough to warrant the limitation of duty it seeks (cf.
Tobin v Grossman,
24 NY2d 609, 620
[Keating, J., dissenting],
supra).
I would, therefore, deny the summary judgment motions of both sides and remit to Supreme Court for determination of the preliminary fact issues involved.
Chief Judge Wachtler and Judges Simons, Alexander and Titone concur with Judge Kaye; Judge Meyer dissents and votes to reverse in a separate opinion in which Judge Jasen concurs.
Order affirmed, with costs.
Nor can I accept the “consciously culpable” distinction which the majority seeks to impose between Con Ed and the employee who failed to “shed load.” If, as
Ultramares
holds (
255 NY 170, at p 193
), the employer can be held for its subordinate’s fraud, absent a showing that the subordinate acted out of an interest adverse to the employer, the same should be true of gross negligence.