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In re September 11 Property Damage and Business Los Litigation

January 12, 2006


The opinion of the court was delivered by: Alvin K. Hellerstein, United States District Judge:


The terrorist-related aircraft crashes of September 11, 2001, brought down, not only the Twin Towers of the World Trade Center, buildings One and Two, but Seven World Trade Center ("7WTC") as well, an adjacent 47-story office tower. The raging fires that caused Towers One and Two to collapse spread to Tower Seven, presumably from the debris that rained down on 7WTC and the surrounding area. The fires in 7WTC continued all that day, unquenched by water because of rupture of an adjacent water main, unfought by New York City firemen many of whom had died in Towers One and Two, and fueled by diesel fuel stored in tanks located in 7WTC. Approximately seven hours after the fires at 7WTC were initiated by the collapse of buildings One and Two, 7WTC itself collapsed. In marked contrast to the collapse of the Twin Towers, the collapse of 7WTC resulted in no loss of life. But there was substantial damage to property, giving rise to the set of lawsuits with which I now deal.

The Consolidated Edison Company of New York, Inc. ("Con Ed") operated a substation beneath 7WTC which the fires and building collapse heavily damaged. Nine transformers and considerable ancillary equipment housed in the substation were destroyed by the fire and the building collapse. Con Ed's insurers- Aegis Insurance Services, Inc., Liberty Insurance Underwriters, Inc., National Union Insurance Company of Pittsburgh, Nuclear Electric Insurance Limited, and Underwriters at Lloyds-reimbursed Con Ed for the damage it incurred, and became subrogated to and assignees of Con Ed to the extent of their reimbursement.

The insurers subrogated to Con Ed's claim allege that the negligence and fault of others involved with 7WTC proximately caused the collapse of the building and the consequent destruction of Con Ed's substation and, by this suit, seek damages to recover the sums they paid to, and incurred in defense of, Con Ed. Principally, plaintiffs claim that the Port Authority of New York and New Jersey (the "Port Authority"), the owner of the property, and 7 World Trade Company, the owner and manager of 7WTC, permitted Salomon Brothers, Inc. (since acquired by defendant Citigroup) and the City of New York to build and maintain large tanks of diesel fuel in their leased premises in 7WTC, and emergency generation systems powered by those fuel tanks, and that the tanks and generation systems caused the fires to grow out of control and consume the building. Plaintiffs claim also that the contractors, engineers and architects who designed and built 7WTC for the Port Authority and the leased premises for Salomon and the City, designed the building and the respective premises negligently and in violation of applicable building and safety standards, and that their faults also proximately caused the collapse of the building.

Defendants all move to dismiss the complaint for failing to state a legally sufficient claim for relief: the City, by motion for summary judgment following limited discovery pursuant to Rule 56, Fed. R. Civ. P.; all other defendants, by motion in lieu of complaint pursuant to Rule 12(b)(6), Fed. R. Civ. P.*fn1 I hold, as discussed in this opinion, that the motion of the City should be granted and the complaint against it should be dismissed; that the motions by the Port Authority and by Citigroup both should be denied as premature; and that the motion, of some, but not all, the other defendants should be granted. The proceedings against the defendants who remain should continue.


A. The Development and Construction of Seven World Trade Center

In 1968, during the planning stage for the development of the World Trade Center and the twin 107-story towers, the Port Authority approached Con Edison about constructing a power substation to provide power to the proposed development. Con Ed agreed, and entered into a lease agreement with the Port Authority for the space below what would become 7WTC. The lease contemplated that the Port Authority might authorize the construction of an office tower above the premises housing Con Ed's substation and, in anticipation of such future construction, provided that the Port Authority would indemnify Con Ed for damage to its property resulting from the construction and maintenance of the building.

In 1987, approximately eleven years later, 7WTC was built by 7 World Trade Company and its agent, Silverstein Properties ("Silverstein"), on the premises above the Con Ed substation pursuant to 7 World Trade Company's lease of ground rights from the Port Authority. (See Agreement of Lease between the Port Authority of New York and New Jersey and 7 World Trade Company (the "7WTC Lease"), Bekker Dec. Ex. E.) In setting forth standards applicable to the construction of 7WTC, the 7WTC Lease expressly provided that "so long as title to the World Trade Center or the premises remains in the Port Authority the Lessee shall not be required to submit its design, construction and building plans and specifications for approval by the City of New York." (7WTC Lease, § 4.5.)

One original tenant, Salomon Brothers (later acquired by Citigroup and now part of Citigroup Global Market Holdings), and one later tenant, the City of New York, obtained authorization in their lease agreements with the Port Authority and Silverstein to construct and maintain diesel fuel tanks and generators for emergency power back-up systems. Salomon Brothers, now Citigroup, proposed to operate a large trading floor in 7WTC for continuous operation, 24 hours a day seven days a week, and wanted a back-up generator system to ensure continuity of its trading activities in the event of power failures. In 1998, the City of New York leased the 23rd floor of 7WTC for its Office of Emergency Management command center and additional space below the first floor and on the seventh floor for an emergency fuel and power back-up generator system to ensure continuity of command and control functions by that center should power failures be experienced during a condition of emergency.

B. Procedural History of These Cases

Plaintiffs filed Civil Action 02 Civ. 7188 on September 10, 2002 against the City and the Port Authority,*fn2 and Civil Action 04 Civ. 7272 on September 10, 2004 against the owners and lessees of 7WTC, and against the design and construction professionals who designed and built 7WTC and the leased floors of Salomon and the City. Plaintiffs seek to recover their damage, the amounts paid to Con Ed and costs incurred defending Con Ed.

In lieu of an answer, the City moved to dismiss, arguing that plaintiffs could not state a legally sufficient claim for relief because of statutory immunities enjoyed by the City. On December 1, 2004, I heard oral argument, and ruled at that time that the motion was premature, before an answer pleading the immunities as affirmative defenses was filed. I ordered limited discovery to create an appropriate record, and invited the motion then to be renewed. The parties have completed their limited discovery, and the City now renews its motion as a motion for summary judgment.

The Port Authority also moved to dismiss the Complaint in 02 Civ. 7188, arguing that the Port Authority's negligence was not the proximate cause of plaintiffs' damages and that the lease agreement between the Port Authority and Con Ed barred Con Ed's subrogated insurers from maintaining an action against the Port Authority. Following oral argument, I denied the Port Authority's motion without prejudice to resubmission after limited discovery. The Port Authority now renews its motion to dismiss, on essentially the same record as previously.

In addition to the City's motion, the defendants named in 04 Civ. 7272 have also moved to dismiss, arguing that the Complaint does not state a legally sufficient claim for relief on its face. Defendants argue that, as a matter of law, defendants did not owe a duty to plaintiffs, and that defendants' acts were not the proximate cause of Con Ed's damage. Defendants advance other grounds as well. Citigroup argues that it was released from liability as an intended beneficiary of the lease between Con Ed and the Port Authority, and that the Port Authority's exercise of control over the construction of the Citigroup premises precludes any negligence claims against Citigroup based on such construction. The design professionals (primarily the architects and engineers who designed 7WTC, and the design and construction contractors that built the premises leased by Citigroup and the City) argue that the Complaint should be dismissed because they did not owe a duty to plaintiffs and for various other reasons.


The Complaint of Con Ed's insurers against the City alleges that the City was a tenant of 7WTC, that its Office of Emergency Management ("OEM") occupied the 23rd floor of 7WTC to function as a command and control center for emergencies, that a 6,000-gallon diesel fuel tank located below 7WTC, and a 275-gallon day tank on the 7th floor of 7WTC, were used as an independent supply of power to the command and control center, and that the City's negligence in designing and maintaining the diesel fuel emergency backup generator system enabled the fires that consumed 7WTC to continue, causing the building to collapse and the Con Ed substation to be damaged. Plaintiffs sue to recover for damage to the substation.

On November 30, 2004, the City moved to dismiss the Complaint based on the defense of sovereign immunity. I denied the motion at the time as premature, ruling that the defenses were not supported by the pleadings or attached documents, and ordered the parties to engage in limited factual discovery relevant to the issue of the City's sovereign immunity defense. Having completed this discovery, the City now renews its motion as a motion for summary judgment pursuant to Rule 56, Fed. R. Civ. P. I now hold that under the New York Defense Emergency Act, N.Y. Unconsol. Law § 9101 et seq. (McKinney 2002) (the "DEA"), the City is immune from liability, and the Complaint against it is dismissed.*fn3

A. The New York City Office of Emergency Management

The City created OEM pursuant to Mayor Giuliani's Executive Order No. 30, dated March 19, 1996. See Exec. Order No. 30, dated March 19, 1996. Stating that a primary purpose of the OEM was to oversee and implement the City's "civil defense" and emergency preparedness functions, the Executive Order provided that the City "must be prepared for and be able to coordinate rapid and effective responses to a wide range of emergency situations." Id. The Order provided further that OEM was to be "headed by a Director who shall serve as the local Director of Civil Defense, with the powers of a local Director of Civil Defense under [the New York Defense Emergency Act]." Id. OEM's functions, among others, were to establish and operate an emergency command center, to respond to emergencies of any type, whether natural or man-made; to be an on-scene coordinator; to ensure that the City was effective and efficient in using its resources; to manage the moving of resources to emergency scenes more quickly; and to ensure that a good recovery process was in place.

In 1996, Mayor Giuliani appointed Jerome Hauer as Director of OEM and Director of Civil Defense. At the time of his appointment, OEM's facilities were housed at One Police Plaza. The City determined to relocate OEM from One Police Plaza because the facilities were believed to be inadequate for OEM's growing requirements and responsibilities. Initially, OEM's office space was moved to 100 Church Street, with the command center remaining at One Police Plaza, but this too was found to be inadequate. Mayor Giuliani then determined that OEM should build a new facility, including a command center, that would have the capacities that One Police Plaza and 100 Church Street lacked.

OEM developed criteria for its new office space and command center. The command center had to be within walking distance of City Hall. It had to have capabilities similar to that of a data center, with high ceilings to permit raised floors for wiring and with unobstructed interior space for sight lines. The facility needed backup generator capacity for an uninterruptible power supply and a fuel source for the backup system located above the flood plain.

OEM, along with outside consultants and employees of the Division of Real Estate Services ("DRES") and the New York City Department of Citywide Administrative Services ("DCAS"), reviewed potential properties that could satisfy these criteria. They determined that the command center could not be housed in any of the available City-owned spaces. DRES then enlisted the aid of tenant representatives to look for privately owned facilities, and selected the 23rd floor of 7WTC as best satisfying OEM's criteria.

On March 25, 1998, the City signed a lease agreement with Silverstein, following a public hearing on its terms and approval by the Mayor. Among other things, the lease provided that Silverstein would make various interior, exterior, and structural repairs and alterations including the installation of diesel fuel storage tanks for backup generator systems.

DRES and OEM personnel attended meetings with the architects and engineers on the project with the goal of satisfying the design and technical requirements of OEM. One of the issues discussed was OEM's requirement for emergency backup power. The City personnel communicated both to Silverstein and to the architects and engineers that OEM needed backup power to support its emergency operations and related work in the command center, the watch command, the Mayor's office, and the press room, which together encompassed approximately half of OEM's floor space.

The potential fuel supply for the backup generator was also discussed. DRES and OEM explored using the underground tanks owned by Silverstein, but Silverstein rejected that option because of its own needs. DRES and OEM also explored sharing the tanks used by another tenant, but that option also was unavailable. Ultimately, the architect employed by the City and its consultants designed OEM's emergency backup system, including the size and location of the 6,000-gallon diesel tank beneath the first floor. They designed the system to have the 6,000-gallon tank refuel a 275-gallon day tank located on the 7th floor where the generators were located. The City reviewed final construction plans that the architect prepared, and DRES sent a letter to the architect, dated April 20, 1998, setting forth its comments to the proposed plans. Discussions continued as construction on the project began. The architect's first two designs for the proposed routes of the fuel lines were considered unworkable for logistical reasons. Another design was proposed placing the lines within an elevator shaft. DRES objected to that proposal on safety grounds. Ultimately, the fuel lines were placed outside the elevator shaft and in an elevated position below the first floor of 7WTC.

B. Standard of Review for Summary Judgment

Summary judgment may granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the initial burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Cartrett, 477 U.S. 317, 317 (1986). The court must view the evidence in the light most favorable to the non-moving party, and must draw all reasonable inferences in that party's favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, the non-moving party may not rely simply on "mere conjecture as to the true nature of the facts to overcome a motion for summary judgment." Howard v. Gleason Corp., 901 F.2d 1154, 1159 (2d Cir. 1986). Rule 56(e) provides that, when a properly supported motion for summary judgment is made, the adverse party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, (1986).

C. Application of The New York Defense Emergency Act

The New York State Legislature passed the New York Defense Emergency Act (the "DEA") in 1951 to establish procedures for emergency preparedness and civil defense. The statute establishes procedures and provisions for dealing with emergencies such as an attack in the State. DEA § 9102. Section 9193(1) of the DEA provides for immunity for actions taken by "the state, any political subdivision, municipal or volunteer agency . . . in good faith carrying out, complying with or attempting to comply with any . . . order duly promulgated or issued" pursuant to the statute and relating to "civil defense." Id. § 9193. Pursuant to the DEA, these governmental entities "shall not be liable for any . . . damage to property." Id.

The DEA defines "civil defense" as "all those activities and measures designed or undertaken (1) to minimize the effects upon the civilian population caused or which would be caused by an attack[.]" DEA § 9103(5). The DEA further defines "civil defense" to include ". measures to be taken in preparation for anticipated attack including . . . the construction or preparation of shelters and control centers." Id. OEM and its command center were created pursuant to this statute. See Exec. Order No. 30.

The creation of the OEM command center and its backup generator system qualifies as a civil defense measure, namely, the "construction or preparation of . control centers," under the DEA. DEA § 9103(5). Although the DEA "reflect[s] what was perceived at the time to be the imminent threat of atomic conflict with communist nations and the concomitant need for a comprehensive plan to ensure the survival of the State's citizens in the event of foreign attack," Fitzgibbons v. County of Nassau, 541 N.Y.S.2d 845, 847 (2d Dep't 1989), the statute is not limited to a particular time or a particular threat. Indeed, the legislative findings, incorporated into the text of the statute, show that the statute was based upon a broad notion of an "enemy attack" using any kind of weapon capable of inflicting mass injury. Thus, the DEA defines "attack" broadly as:

.[a]ny attack, actual or imminent, or series of attacks by an enemy or a foreign nation upon the United States causing, or which may cause, substantial damage or injury to civilian property or persons in the United States in any manner by sabotage or by the use of bombs, shellfire, or nuclear, radiological, chemical, bacteriological, or biological means or other weapons or processes."

DEA § 9103(2). As the New York Supreme Court held, the DEA "is not limited to a nuclear attack or a particular enemy." Daly v. Port Authority of New York and New Jersey, 793 N.Y.S.2d 712, 716 (Sup. Ct. N.Y. County 2005). So long as the action taken by the governmental or volunteer agency is one related to "civil defense" in anticipation of an "attack," liability for damage to property will not attach. DEA § 9193.

Here, it is clear that the City created its OEM command center in anticipation of an "attack" as defined by the statute. Although Mayor Giuliani may not have been aware of any particular imminent threat when he promulgated Executive Order 30, he nevertheless concluded, reasonably and with responsible foresight, that a terrorist attack of some sort in New York was foreseeable. The experiences of the 1993 World Trade Center bombing, the attempted bombing of the Atlantic Avenue subway station in Brooklyn, and other attacks in dense urban locations, such as the sarin attack in the Tokyo subways, impressed on the Mayor the need for a first-rate civil defense plan and a safe and accessible command center from which to coordinate a response, with independent sources of power to ensure reliable communications among City agencies and personnel and with the outside world the crucial aspect of such a command center. Indeed, the lack of an independent source of power was one problem with the original command center at One Police Plaza, for a power outage could make it impossible for Director Jerome Hauer and his team to use the phones during an emergency. (Hauer Dep. at 28, 13-20.) A backup generator system was considered essential to ensure that the center could continue to function even in the event of a general power outage.

The plaintiffs concede that the creation of OEM and the selection of 7WTC as a site for OEM and the command center were governmental activities. Plaintiffs argue, however, that the design and construction of the emergency backup generator system reflected the sort of ordinary business activities that City agencies normally perform and thus that these activities fall outside the scope of the DEA's grant of immunity. I hold, to the contrary, that the design and installation of the emergency backup generator system for the OEM command center was a good faith effort undertaken by the City to facilitate civil defense.

There exist only a handful of cases in which New York courts have been called upon to construe the DEA. In these cases, the courts have distinguished between routine conduct for which there is no immunity under the DEA, and conduct that a municipality performed while engaged in a civil defense function. In keeping with this distinction, immunity did not attach to the routine and regularly scheduled patrolling duties of auxiliary police officers serving in a unit that was part of the Nassau County Office of Civil Preparedness. Fitzgibbons, 541 N.Y.S.2d at 849-50. Likewise, a helicopter company hired by a municipality to enable its civil defense director to survey damage caused during rioting was found to be "nothing more . . . than engaging in its regular business of providing air transportation for hire." Abbott v. Page Airways, Inc., 245 N.E.2d 388, 391 (N.Y. 1969).

Unlike a helicopter company whose very business it was to provide air transport, or an auxiliary police patrol exercising normal patrol activities, the City's design and installation of emergency backup generators for its command center was performed specifically for the purpose of enabling the City to be prepared against the danger of mass calamity. Clearly, this was not routine City business. The City was not merely buying office furniture for an office, or doing any of the other mundane activities of a City bureaucracy; it was making possible the continuation, maintenance, and operation of a command center, intended to lead the City and its population successfully through a catastrophic event. The record reflects the good faith effort by the City "to have self-sufficiency in the command center if something catastrophic happened so that we could function for a two-week period with electricity . . . so that we could survive a catastrophic event." (Hauer Dep. at 52, 9-15.)

Although the design and construction of the backup generator system did not occur in the rush of an actual occurring catastrophe, the very point of having a carefully designed OEM and command center was to ensure that these emergency facilities would be in place and operating before a disaster occurred. And when that is done, the municipality is immune from liability for negligence in relation to the maintenance and operation of such facilities. See Ard v. Oklahoma, 382 P.2d 728 (Okla. 1963) (finding that an Oklahoma statute similar to the New York DEA immunized the municipality from liability for injuries sustained by a child playing on the door of an underground fallout shelter in a city park).

As would be expected with such a specialized project, private architects and engineers were engaged to do the work, some directly by the City, and some by contractors who were themselves engaged by the City. They worked in response to the City's stated needs and specifications, and under the ultimate direction and approval of the City. Mr. Hauer and other City officials testified that they attended meetings where they communicated the City's needs as they evaluated plans and proposals of the architects and engineers. Although these representatives of the City may not have had personal knowledge of how many gallons of fuel a system would need to generate power for a given period of time, they relied in good faith on the calculations of experts. The City's concern was that "it [the generator] worked, it was safe, it was compliant, and it followed all the codes." (Hauer Dep. at 77, 2-3.)

Although there may be some dispute in the record as to the details of how the OEM and generator system were designed and built in their particulars, the undisputed facts are clear: the Mayor decided that the City needed an OEM and command center to facilitate civil defense functions, and City officials, pursuant to that decision, engaged in a series of good faith negotiations and contracts with property holders, architects, engineers and outside consultants to design an effective and self-sufficient command center. Further, there is no allegation that the City acted in bad faith in carrying out its activities related to civil defense.

Accordingly, for the reasons stated, I hold that the City acted pursuant to the New York Defense Emergency Act, N.Y. Unconsol. Law § 9101, et seq., and is therefore entitled to the protections of that Act, including, under section 9193, immunity from suit. The Motion by the City is granted, and the Complaint against the City is dismissed.


The Amended Complaint of Con Ed's insurers against the Port Authority alleges that the Port Authority was the owner of the property located at Washington and Barclay Streets in New York City, that the property was part of the World Trade Center and the area where 7WTC was constructed, that the Port Authority entered into a lease with Con Ed pursuant to which Con Ed built a substation beneath the property that would become 7WTC, that the Port Authority retained final control over the design and construction of 7WTC, and that its negligence in approving the design and construction of 7WTC in general, and the maintenance of diesel fuel tanks housed in 7WTC in particular, proximately caused the collapse of 7WTC and the destruction of the Con Ed substation. The Amended Complaint also states a negligence per se claim against the Port Authority, claiming that the Port Authority failed to enforce New York City and State fire safety codes, regulations and practices, thus giving rise to the per se claim. Plaintiffs sue to recover for damage to the substation.

By motion of April 30, 2004, the Port Authority moved to dismiss the Amended Complaint filed by the plaintiffs on two grounds: 1) that the Port Authority's negligence was not the proximate cause of the destruction of the Con Ed substation; and 2) that the lease agreement between the Port Authority and Con Ed, naming the Port Authority as an insured, barred Con Ed's subrogated insurers from bringing the instant action. Following oral argument on November 30, 2004, I denied the Port Authority's motion to dismiss without prejudice to resubmission upon completion of limited discovery. See Summary Order, dated December 1, 2004.

Five months later, on April 20, 2005, the Port Authority, along with the "7WTC Ground Defendants" named in the Amended Complaint in 04 Civ. 7272, renewed its Motion to Dismiss (the "Renewed Motion") upon the same two grounds. I hold again that the Renewed Motion is premature and that, insofar as it states a negligence per se claim against the Port Authority, it should be dismissed. Fed. R. Civ. P. 12(b)(6).

A. Standard for Motion to Dismiss

A Rule 12(b)(6) motion requires the court to determine if plaintiff has stated a legally sufficient claim for relief, and may be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Branum v. Clark, 927 F.2d 698,705 (2d Cir. 1991). The court's function is "not to assay the weight of the evidence which might be offered in support" of the complaint, but "merely to assess the legal feasibility" of the complaint. Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980). In evaluating whether plaintiff may ultimately prevail, the court must take the facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Jackson Nat'l Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697, 699-700 (2d Cir. 1994).

For purposes of Rule 12(b), "the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." See Fed. R. Civ. P. 10(c) ("A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes."); Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (per curiam) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991)). "Even where a document is not incorporated by reference, a court may nevertheless consider it where the complaint 'relies heavily upon its terms and effect,' ...

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