City of New York v. Consolidated Edison Co., 62 N.Y.2d 343 (1984)
A prior determination of gross negligence against a utility company in one action is binding in subsequent actions involving the same event under the doctrine of collateral estoppel (issue preclusion); however, municipalities cannot recover costs for governmental services during a blackout or lost revenue due to its economic impact.
Summary
The City of New York and several public benefit corporations sued Consolidated Edison (Con Ed) to recover damages sustained as a result of the 1977 blackout, alleging gross negligence. The plaintiffs sought partial summary judgment based on collateral estoppel, arguing that a prior case, Food Pageant, Inc. v. Consolidated Edison Co., had already determined Con Ed’s gross negligence in connection with the blackout. Con Ed cross-moved for partial summary judgment, seeking to dismiss claims related to contract breaches, criminal activity, and reimbursement of municipal expenditures. The Court of Appeals held that collateral estoppel applied regarding Con Ed’s gross negligence, but the City could not recover costs for governmental services or lost revenues.
Facts
On July 13, 1977, a blackout occurred in New York City, lasting approximately 25 hours. The City of New York and 14 public benefit corporations sued Con Ed, alleging gross negligence and reckless conduct caused the blackout. A prior case, Food Pageant, Inc. v. Consolidated Edison Co., had already found Con Ed grossly negligent in causing the same blackout, awarding damages to a grocery store chain for food spoilage and lost business.
Procedural History
The plaintiffs moved for partial summary judgment on liability based on collateral estoppel. Con Ed cross-moved for partial summary judgment, seeking dismissal of claims related to contract breaches, criminal activity, and municipal expenditures. Special Term granted the plaintiffs’ motion and denied Con Ed’s motion. The Appellate Division affirmed. Con Ed and the plaintiffs were granted leave to appeal to the Court of Appeals.
Issue(s)
1. Whether a prior determination of gross negligence against Con Ed in Food Pageant precludes Con Ed from relitigating the issue in this case under the doctrine of collateral estoppel.
2. Whether the City and other public benefit corporations, as customers of the Power Authority of the State of New York (PASNY), can recover against Con Ed.
3. Whether the plaintiffs can recover damages for looting and vandalism related to the blackout.
4. Whether the plaintiffs can recover costs incurred for wages, salaries, and benefits of public employees (police, fire, sanitation, and hospital personnel) required in consequence of the blackout.
5. Whether the plaintiffs can recover revenues allegedly lost in consequence of the blackout (taxes, transit fares, Off-Track Betting receipts) and loss of employee productivity.
Holding
1. Yes, because Con Ed had a full and fair opportunity to litigate the issue of gross negligence in the Food Pageant case, and the determination is binding in subsequent actions. The court stated that “efficient utilization of the judicial system is served by preclusion of relitigation of issues as to which a litigant has had a full and fair opportunity for resolution”.
2. Yes, because the plaintiffs were third-party beneficiaries of agreements between PASNY and Con Ed.
3. Yes, because the plaintiffs have shown sufficient facts to require a trial on whether the intervention of rioters was within the contemplation of the parties or reasonably foreseeable by Con Ed.
4. No, because public expenditures made in the performance of governmental functions are generally not recoverable based on public policy considerations. The Court noted that “public expenditures made in the performance of governmental functions are not recoverable”.
5. No, because proof of such damages is speculative, and strong public policy considerations militate against recognizing losses sustained by municipal and public benefit corporations due to adverse effects on the general economy.
Court’s Reasoning
The Court applied the principle of third-party issue preclusion, finding that Con Ed had a full and fair opportunity to litigate the issue of gross negligence in Food Pageant. Con Ed’s arguments against preclusion, including the existence of inconsistent small claims court decisions, availability of exculpatory evidence, and the size of the Food Pageant claim, were rejected. The court emphasized that the determination in Food Pageant was essential to the judgment and that Con Ed had every incentive to defend that action fully and vigorously.
Regarding the third-party beneficiary argument, the court distinguished the case from Moch Co. v. Rensselaer Water Co. and Kornblut v. Chevron Oil Co., noting that the PASNY agreements were specifically intended to benefit the plaintiffs as consumers. The legislation’s express purpose was “To preserve reliability of electric service in the metropolitan area of the city of New York”.
On the issue of damages, the court allowed recovery for physical injuries and property damage, including damages from looting and vandalism if foreseeable. However, it disallowed recovery for governmental expenditures, citing public policy and the absence of statutory authorization. Similarly, lost revenues were deemed too speculative and subject to public policy concerns.