New York Law Review

Tag: public nuisance

  • City of New York v. Smokes-Spirits.Com, Inc., 12 N.Y.3d 616 (2009): Limits on Derivative Standing for Lost Tax Revenue & Public Nuisance Claims Predicated on Public Health Law

    12 N.Y.3d 616 (2009)

    A municipality lacks standing under General Business Law § 349(h) to sue for lost tax revenue when its injury is derivative of injuries allegedly suffered by consumers misled by deceptive acts, and cannot assert a common law public nuisance claim predicated solely on Public Health Law § 1399-ZZ when the primary legislative intent of that law was to prevent underage smoking, not to address tax evasion.

    Summary

    The City of New York sued out-of-state cigarette sellers, alleging they illegally marketed and shipped cigarettes to city residents, depriving the city of tax revenue. The City claimed violations of General Business Law § 349 and public nuisance based on Public Health Law § 1399-ZZ. The Court of Appeals held that the City lacked standing under § 349(h) because its injury was derivative of consumer injury. Further, the Court determined that the public nuisance claim, predicated on a statute primarily aimed at preventing underage smoking, could not be used to address alleged tax evasion. This decision reinforces the principle that indirect injuries are not compensable under § 349(h) and clarifies the scope of public nuisance claims related to public health laws.

    Facts

    Out-of-state cigarette sellers marketed and shipped cigarettes to New York City residents. These sellers were located in states with low cigarette taxes. Some sellers misrepresented that their sales were tax-free, or that customers didn’t have to pay cigarette taxes. The City alleged that these misrepresentations, coupled with failures to file Jenkins Act reports, led to lost tax revenue.

    Procedural History

    The federal district court dismissed the City’s General Business Law § 349 and public nuisance claims. The Second Circuit certified two questions to the New York Court of Appeals regarding the City’s standing to assert these claims.

    Issue(s)

    1. Whether the City has standing to assert its claims under General Business Law § 349?
    2. Whether the City may assert a common law public nuisance claim that is predicated on N.Y. Public Health Law § 1399-ZZ?

    Holding

    1. No, because the City’s claimed injury, lost tax revenue, is derivative of injuries allegedly suffered by consumers who purchased cigarettes over the internet.
    2. No, because the Legislature did not contemplate that Public Health Law § 1399-ZZ would be used as the predicate for public nuisance actions in cases that primarily involve alleged tax evasion, as its primary purpose was to prevent underage smoking.

    Court’s Reasoning

    Regarding the General Business Law § 349 claim, the Court relied on its prior decision in Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc., holding that derivative actions are barred under § 349(h). The Court reasoned that the City’s injury was indirect because it arose solely from injuries sustained by consumers who were allegedly misled. The court emphasized that a “but for” causal connection is insufficient to state a claim under section 349(h). The Court rejected the City’s argument that alleging consumer injury or harm to the public interest was sufficient, stating that such a broad interpretation would lead to a “tidal wave of litigation.”

    Regarding the public nuisance claim, the Court noted that while the Legislature has the authority to deem certain activities public nuisances, Public Health Law § 1399-ZZ was primarily aimed at preventing underage smoking, not addressing tax evasion. The Court applied a similar analysis to that used in determining whether an implied private right of action exists, considering whether the City was in the class for whose benefit the statute was enacted, whether recognizing the action would promote the legislative purpose, and whether it would be consistent with the legislative scheme. The Court concluded that allowing the public nuisance claim would not be consistent with the legislative scheme, as the Legislature had entrusted enforcement of penalties to local district attorneys and the Commissioner of Health. As such the court stated, “The presence of such a scheme here, when coupled with the Legislature’s clear expressions that the public health thrust of section 1399-ZZ was related to the prevention of underage smoking, persuades us that the Legislature did not intend its findings to authorize a public nuisance claim based primarily upon alleged tax evasion”.

  • 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 N.Y.2d 280 (2001): Limits on Recovery for Purely Economic Loss in Negligence and Public Nuisance

    532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 N.Y.2d 280 (2001)

    In cases of widespread economic disruption, a duty of care in negligence does not extend to protect against purely economic loss without accompanying personal injury or property damage, and a public nuisance claim requires a special injury distinct from that suffered by the community at large.

    Summary

    These consolidated appeals arose from two construction-related collapses in Manhattan. Businesses sought recovery for economic losses suffered due to street closures ordered after the incidents. The New York Court of Appeals addressed whether landowners owed a duty of care to protect against purely economic loss in the absence of physical injury or property damage, and whether businesses could maintain a claim for public nuisance. The Court held that no duty existed for purely economic losses and that the businesses did not suffer a special injury required to sustain a public nuisance claim, reversing the Appellate Division’s order in two cases and affirming in the third.

    Facts

    On December 7, 1997, a portion of the south wall of 540 Madison Avenue collapsed, leading to the closure of 15 blocks of Madison Avenue. 532 Madison Ave. Gourmet Foods, Inc., a delicatessen, and 5th Ave. Chocolatiere, retailers two blocks away, both suffered economic losses due to the closure. On July 21, 1998, a construction elevator tower collapsed in Times Square, causing street closures and building evacuations. Goldberg Weprin & Ustin, a law firm, and other businesses in the area also incurred economic losses. All plaintiffs sought to recover for lost income due to the disruptions.

    Procedural History

    In 532 Madison Ave. Gourmet Foods and 5th Ave. Chocolatiere, the Supreme Court dismissed the negligence and public nuisance claims. The Appellate Division reinstated the negligence and public nuisance claims. In Goldberg Weprin & Ustin, the Supreme Court dismissed the complaint. The Appellate Division affirmed the dismissal. The New York Court of Appeals consolidated the cases, reversing the Appellate Division in 532 Madison Ave. Gourmet Foods and 5th Ave. Chocolatiere and affirming in Goldberg Weprin & Ustin.

    Issue(s)

    1. Whether a landowner owes a duty of care in negligence to protect against purely economic loss in the absence of personal injury or property damage to businesses affected by street closures following a building collapse?

    2. Whether businesses affected by street closures following a building collapse suffered a “special injury” sufficient to maintain a claim for public nuisance?

    Holding

    1. No, because limiting the scope of a defendant’s duty to those who suffered personal injury or property damage as a result of the event provides a principled basis for reasonably apportioning liability.

    2. No, because the economic loss was common to an entire community, and the plaintiffs suffered it only in a greater degree than others, not a different kind of harm.

    Court’s Reasoning

    The Court of Appeals reasoned that while harm may be foreseeable, foreseeability alone does not define duty. A duty may arise from a special relationship, but it must be circumscribed to avoid exposing defendants to unlimited liability. Citing Strauss v. Belle Realty Co. and Milliken & Co. v. Consolidated Edison Co., the Court emphasized the need to limit liability in cases of widespread disruption to avoid “crushing exposure” to potentially limitless claims. The Court distinguished the present cases from Dunlop Tire & Rubber Corp. v. FMC Corp., where there was direct physical damage alongside the economic loss. Here, the economic losses were too remote. The Court declined to follow People Express Airlines v. Consolidated Rail Corp., which allowed recovery for purely economic loss, finding it created an unacceptably broad scope of duty. The Court stated, “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.” Regarding public nuisance, the Court found that the economic harm suffered by the businesses was similar in kind to that suffered by the community at large, even if the degree of harm was greater for the named plaintiffs. Quoting Restatement (Second) of Torts § 821C, comment h, the court stated, “the economic loss was ‘common to an entire community and the plaintiff [s] suffer [ed] it only in a greater degree than others, it is not a different kind of harm and the plaintifffs] cannot recover for the invasion of the public right’.”

  • People ex rel. Arcara v. Cloud Books, Inc., 68 N.Y.2d 553 (1986): State Constitution Affords Greater Free Expression Protection

    68 N.Y.2d 553 (1986)

    The New York State Constitution’s guarantee of freedom of expression provides greater protection than the First Amendment of the U.S. Constitution, requiring the state to demonstrate that its actions are no broader than necessary when incidentally burdening free expression, even if the government’s purpose isn’t to directly suppress speech.

    Summary

    The District Attorney sought to close Cloud Books, an adult bookstore, as a public nuisance due to illegal sexual acts by patrons. The New York Court of Appeals previously ruled that closing the bookstore implicated the First Amendment and required the least restrictive means. The Supreme Court reversed, holding that the First Amendment was not implicated. On remand, the New York Court of Appeals considered whether the New York State Constitution afforded greater protection. The court held that it does, requiring the state to show its actions are no broader than necessary to achieve its purpose when incidentally burdening free expression, even if not directly targeting speech.

    Facts

    Cloud Books operated an adult bookstore selling books and showing movies that were sexually explicit but not obscene. Patrons engaged in illegal sexual acts on the premises. The owner was aware of these activities but took no action to prevent them and wasn’t criminally charged. The District Attorney observed the illegal acts but didn’t arrest the offenders or seek an injunction. Instead, the DA sought to close the bookstore for a year under a public nuisance law.

    Procedural History

    The District Attorney sought a court order to close Cloud Books. The New York Court of Appeals initially held that the closure implicated the First Amendment and required the least restrictive means, which the prosecutor had not demonstrated. The Supreme Court reversed, finding no First Amendment implication. The case was remanded to the New York Court of Appeals to determine if the state constitution provided greater protection.

    Issue(s)

    Whether the State constitutional guarantee of freedom of expression is implicated by an order closing the defendant’s bookstore to prevent illegal acts by patrons, requiring the state to demonstrate that the closure is no broader than necessary to achieve its purpose.

    Holding

    Yes, because the State constitutional guarantee of freedom of expression is of no lesser vitality than the First Amendment and requires the state to prove that in seeking to close the store, it has chosen a course no broader than necessary to accomplish its purpose.

    Court’s Reasoning

    The court reasoned that while bound by Supreme Court decisions on federal constitutional rights, it independently interprets the New York State Constitution, which can supplement federal rights. New York has a history of fostering freedom of expression, sometimes tolerating works considered offensive elsewhere. The court emphasized that government regulations incidentally burdening free expression must be no broader than needed to achieve their purpose. While bookstores aren’t exempt from general nuisance laws, they’re entitled to special protection. The crucial factor is the impact on protected activity, not the government’s motivation. Closing a bookstore for a year has a significant impact on free expression, requiring the state to explore less restrictive sanctions first, such as arresting offenders or seeking injunctive relief. The court quoted Bellanca v. State Liq. Auth., stating that “at the very least, the guarantee of freedom of expression set forth in our State Constitution is of no lesser vitality than that set forth in the Federal Constitution”. The court distinguished between regulations with a slight and indirect impact on free expression (e.g., arresting a reporter for a traffic violation) from those with a substantial impact, such as closing a bookstore.

  • Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314 (1983): Private Right of Action Under the Taylor Law

    59 N.Y.2d 314 (1983)

    The Taylor Law, which prohibits strikes by public employees, does not create a private right of action for damages resulting from illegal strikes, nor does it preempt existing common-law remedies, although the elements of those common law torts must still be proven independently.

    Summary

    Two law firms sued unions for damages caused by an illegal transit strike, alleging causes of action including violation of the Taylor Law, prima facie tort, public nuisance, and interference with business. The New York Court of Appeals held that the Taylor Law does not create a private right of action, as the legislative intent was to provide public remedies and maintain labor peace, not to create new avenues for private lawsuits. However, the Court also determined that the Taylor Law did not preempt common-law tort claims, but the plaintiffs failed to adequately state claims for prima facie tort (lack of disinterested malevolence), public nuisance (damages not distinct from the public at large), and intentional interference with business (interference was incidental).

    Facts

    In April 1980, a transit strike occurred in New York City, violating the Taylor Law and a preliminary injunction. Two law firms, Burns Jackson Miller Summit & Spitzer (“Burns Jackson”) and Jackson, Lewis, Schnitzler and Krupman (“Jackson, Lewis”), separately sued the Transport Workers Union of America (TWU) and other related unions and officers, seeking damages for losses sustained due to the strike. Burns Jackson filed a class action seeking $50 million per day in damages, alleging prima facie tort and public nuisance. Jackson, Lewis sued TWU, seeking $25,000 in damages, alleging violation of the Taylor Law, prima facie tort, intentional interference with business, willful injury, conspiracy, and breach of contract as a third-party beneficiary.

    Procedural History

    The Jackson, Lewis action was moved to Queens County and consolidated with the Burns Jackson action. The defendants moved to dismiss both actions for failure to state a cause of action. Special Term denied the motions, except for the Jackson, Lewis contract claim. The Appellate Division modified the order, dismissing both complaints entirely. The plaintiffs appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the Taylor Law either preempts common-law private damage actions for injuries caused by public employee strikes or creates a new private right of action for such damages?

    2. Whether the complaints adequately state a cause of action for (a) prima facie tort, (b) public nuisance, (c) intentional interference with business, or (d) breach of plaintiffs’ rights as third-party beneficiary of defendants’ contracts with NYCTA or MABSTOA?

    Holding

    1. No, because the Taylor Law was intended to be cumulative, not exclusive, and it was not intended to establish a new private cause of action.

    2. No, because (a) the plaintiffs failed to allege disinterested malevolence for the prima facie tort claim, (b) the damages alleged for the public nuisance claim were not distinct from those suffered by the public at large, (c) the interference with business was merely incidental, and (d) the contracts had expired before the strike, and the plaintiffs were merely incidental beneficiaries.

    Court’s Reasoning

    The Court reasoned that legislative intent is paramount in determining whether a statute creates a private right of action or preempts existing remedies. The Court found no explicit statement in the Taylor Law regarding exclusivity or intent to create a private cause of action. Examining the legislative history, the Court concluded that the Taylor Law was intended to be cumulative, not exclusive, and was not meant to create a new cause of action. The Court emphasized that implying a private action would impose a crushing burden on unions and employees, undermining the legislative goal of defusing tensions in public employer-employee relations and maintaining labor peace. The Court noted that the elaborate enforcement provisions within the Taylor Law suggested that the Legislature provided precisely the remedies it considered appropriate.

    Regarding the common-law claims, the Court held that the prima facie tort claim failed because the plaintiffs did not allege that the defendants’ sole motivation was “disinterested malevolence.” The Court clarified that a malicious motive must be unmixed with any other and exclusively directed to the injury of another. The public nuisance claim failed because the damages alleged were not “of a different kind from that suffered by other persons exercising the same public right.” The injury was common to the entire community. The intentional interference with business claim failed because the interference was an incidental result of the strike, and the Court declined to recognize a common-law cause of action for such incidental interference where the Legislature has established a comprehensive labor plan. Finally, the third-party beneficiary claim failed because the underlying contracts had expired before the strike, and the plaintiffs were merely incidental beneficiaries of those contracts.

    The Court cited Wyandotte Co. v. United States, 389 U.S. 191, 204 for the principle of not permitting a wrongdoer to shift responsibility for their actions onto their victim, but distinguished that case as being predicated on a comprehensive legislative scheme for redressing labor disputes.

  • People v. Hardy, 47 N.Y.2d 500 (1979): Licensing Requirements for Private Clubs Selling Alcohol

    People v. Hardy, 47 N.Y.2d 500 (1979)

    Private clubs that sell alcohol to members are subject to the same licensing requirements as other establishments under the Alcoholic Beverage Control Law, and a club’s private status does not automatically exempt it from local ordinances prohibiting public nuisances.

    Summary

    The defendants, officers of the Fellowmen Community Development Corporation (a private club), were charged with selling alcohol without a license and maintaining a public resort that disturbed the neighborhood’s peace. The New York Court of Appeals held that private clubs selling liquor are not exempt from state licensing laws. The court also found that whether the club was a “public resort” under the city code was a factual question, not a matter of law, and the city code provision was not unconstitutionally vague. The lower courts erred in dismissing the charges. The case was remanded for further proceedings.

    Facts

    The defendants incorporated the Fellowmen Community Development Corporation, operating it as a private club where liquor was sold. A police officer purchased a membership for one dollar and bought alcoholic beverages on the premises. Another officer observed the sale of liquor and large, noisy crowds at the club during early morning hours.

    Procedural History

    The defendants were arrested and charged with violating the Alcoholic Beverage Control Law and the Rochester Municipal Code. The Rochester City Court dismissed the charges, holding that the laws did not apply to private clubs. The Monroe County Court affirmed, also citing speedy trial concerns. The People appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a private club selling liquor only to members is exempt from New York’s liquor license requirements under the Alcoholic Beverage Control Law.
    2. Whether private clubs fall outside the scope of a municipal code prohibiting the maintenance of a public resort that disturbs the peace, comfort, or decency of a neighborhood.
    3. Whether the municipal code provision is unconstitutionally vague.

    Holding

    1. Yes, because the Alcoholic Beverage Control Law applies to any “person” (including corporations) selling alcohol, with no exemption for private clubs.
    2. No, because whether a private club is a “public resort” under the municipal code is a question of fact that depends on how it’s operated.
    3. No, because the code provides an objective standard for measuring disturbance to a neighborhood’s peace, comfort, or decency.

    Court’s Reasoning

    The Court of Appeals reasoned that the Alcoholic Beverage Control Law clearly intends to regulate all alcohol sales, defining “person” to include corporations and “sale” to include any transfer for consideration. The statute also includes specific provisions for “licensed clubs,” implying that all clubs selling alcohol must be licensed. To allow unlicensed clubs to sell alcohol would undermine the law’s purpose. As the court stated, “The policies and regulations established by the Legislature and by the authority pursuant to authorization by the Legislature would quickly become meaningless if their requirements could be avoided by simply incorporating as a private club”.

    Regarding the municipal code, the court determined that the code’s definition of “public resort” was broad enough to potentially include private clubs, depending on whether the club was operating in a way that the public had a right to go there. The court emphasized that the focus is not on the club’s organizational structure but on its actual operation. The court found the municipal code provision was not vague because it provided an objective standard for measuring disturbance, referencing the impact on the neighborhood’s peace, comfort, or decency, rather than subjective feelings. The court noted the provision essentially prohibits disturbance of the peace, or disorderly conduct, laws which have previously been upheld against vagueness challenges. The court remanded the case for a factual determination of whether the club was, in reality, a public resort causing a disturbance.

  • Fort Plain Bridge Co. v. Smith, 1863 N.Y. Gen. Term. LEXIS 104 (1863): Legislative Power to Grant Competing Franchises

    1863 N.Y. Gen. Term. LEXIS 104

    A state legislature can grant a franchise that impairs or destroys the value of a previously granted franchise, absent an express prohibition in the original grant.

    Summary

    Fort Plain Bridge Co. sued Smith for building a competing bridge near its own, alleging it infringed on their franchise. The court held that the state legislature’s repeal of a section in Fort Plain Bridge Co.’s charter that prohibited competing bridges meant the company had no exclusive right. Absent an express prohibition in the original grant, the legislature could authorize a competing bridge even if it diminished the value of the original franchise. Furthermore, to claim nuisance, the plaintiff needed to prove special damages distinct from the general public.

    Facts

    Fort Plain Bridge Co. was incorporated with the right to build a bridge and collect tolls. Initially, their charter prohibited any other bridge within a mile. Smith constructed a competing bridge near Fort Plain’s bridge after the legislature repealed the exclusive provision in Fort Plain’s charter. Fort Plain Bridge Co. claimed Smith’s bridge infringed upon their franchise and was a nuisance.

    Procedural History

    The case originated in a lower court, which ruled in favor of Smith. Fort Plain Bridge Co. appealed to the General Term of the Supreme Court of New York, arguing that Smith’s bridge unlawfully interfered with their franchise. The General Term affirmed the lower court’s decision.

    Issue(s)

    1. Whether the state legislature’s repeal of the exclusivity clause in Fort Plain Bridge Co.’s charter allows the legislature to authorize a competing bridge.
    2. Whether the construction of a bridge without legislative authority constitutes a nuisance that can be challenged by a party who does not suffer specific damages different from the general public.

    Holding

    1. Yes, because after granting a franchise, the legislature can grant a similar franchise to another party, even if it impairs the first franchise’s value, unless expressly prohibited in the original grant.
    2. No, because to maintain an action against a public nuisance, the plaintiff must demonstrate special damages distinct from those suffered by the general public.

    Court’s Reasoning

    The court relied on The Charles River Bridge v. The Warren Bridge to establish the principle that a state legislature can grant a franchise that diminishes the value of a prior franchise unless explicitly prohibited. The repeal of the exclusivity clause in Fort Plain’s charter removed any such prohibition. The court stated, “Since the case of The Charles River Bridge v. The Warren Bridge (11 Peters, 420), it has been understood to be the law, that it is competent for the legislature, after granting a franchise to one person, or corporation…to grant a similar franchise to another…the use of which shall impair or even destroy the value of the first franchise, although the right so to do may not be reserved in the first grant; unless the right so to do is expressly prohibited by the first grant.” Regarding the nuisance claim, the court reasoned that even if Smith’s bridge obstructed navigation, only those who suffered unique damages could bring a cause of action. The court cited precedent that “no one has the right to abate it, or sustain an action for damages occasioned by the erection, unless he has himself sustained some damages not sustained by the rest of the community.” The court acknowledged the possibly unfair outcome, stating, “I am free to say that I would be glad to see the old common law restored, which denied to the legislature the power to take away or impair a franchise granted by it; but the law is settled the other way, and we must conform to it.”