Appeals Court Overturns Hellerstein Ruling on WTC7, Sort Of

gretavo's picture

Odd that they claim the Port Authority owned WTC7, my understanding is that it was owned outright by Silverstein...

http://www.insurancejournal.com/news/east/2011/06/22/203489.htm

Court Says Suit Can Proceed over WTC Tower Collapse
By Basil Katz | June 22, 2011

The Port Authority of New York and New Jersey can be sued for negligence over the collapse of a World Trade Center building in the Sept. 11 attacks in 2001, a U.S. appeals court ruled Tuesday.

The agency is one of the most prominent issuers in the $2.9 trillion municipal market. Its finances have been strained by the costly rebuilding of the World Trade Center complex.

The lawsuit centers on 7 World Trade Center, which was built just north of the World Trade Center site, above an existing Con Edison base station, the appeals court decision said.

Consolidated Edison and its insurers had sued the Port Authority. owner of 7 World Trade Center, after the building collapsed in a maelstrom of fire on the afternoon of the Sept. 11, 2001, attacks.

The order by a three-judge panel of the 2nd U.S. Circuit Court of Appeals partially overturned a decision by Manhattan federal court Judge Alvin Hellerstein, who has been handling much of the litigation following the deadly air attacks.

Hellerstein had granted summary judgment to the Port Authority, finding that under the terms of its lease to Con Edison, it could not be held responsible for the tower’s speedy destruction.

“The district court interpreted the lease to preclude Con Edison from maintaining an action against Port Authority based on Port Authority’s negligence in connection with construction or maintenance of 7WTC,” Circuit Judges Roger Miner, Pierre Leval and Richard Wesley wrote. “This was error.”

In a September 2002 lawsuit, Con Edison claimed the Port Authority had improperly allowed its tenants to place diesel fuel tanks used for back-up power, and that the burning tanks had accelerated the collapse of the building late in the afternoon of Sept. 11.

Con Edison also claimed in its lawsuit that the Port Authority could be found negligent in the tower’s design and construction.

“In short, we conclude it was error to read the parties’ lease as precluding claims by Con Edison against Port Authority premised on Port Authority’s negligence in connection with the construction of 7WTC or the installation of the diesel fuel tanks in the building,” the appeals court order said.

But the order upholds the lower court judge on the more general negligence claim, saying Con Edison had not properly notified the Port Authority of its intention to sue on those grounds.

“Claims of negligent design and construction of 7WTC, of which Port Authority was not reasonably notified by the June 2002 Notice, must be dismissed,” the decision said.

In 2006, the same address was the scene of a newly completed 42-story tower, the first new building in the reconstruction of the World Trade Center complex.

The case is Aegis Insurance Services, Inc as subrogee for Consolidated Edison Co. of New York et al v The Port Authority of New York and New Jersey, U.S. Second Circuit Court of Appeals, No. 09-3603.

For Aegis: Franklin M. Sachs, Greenbaum, Rowe, Smith & Davis LLP, Iselin, N.J.

For Port Authority: Beth D. Jacob, Schiff Hardin LLP, New York, N.Y.

Copyright 2011 Reuters

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gretavo's picture

Circuit Revives Negligence

Circuit Revives Negligence Suit in 9/11 Substation Destruction
Mark Hamblett ContactAll Articles

New York Law Journal
June 22, 2011

The insurer for Con Edison can sue the Port Authority of New York and New Jersey for negligence in connection with the destruction by fire of 7 World Trade Center on Sept. 11, 2001, a federal appeals court ruled yesterday.

Reversing a lower court's grant of summary judgment, the U.S. Court of Appeals for the Second Circuit said the Port Authority can potentially be held liable in the $314.5 million suit for the installation of diesel fuel tanks at 7 World Trade.

Aegis Insurance, Con Edison's insurer, claims the presence of the tanks accelerated and ultimately caused the destruction of the building, which housed an electrical substation that powered the World Trade Center.

The building began to burn after it was hit by streaming fire and debris from the adjacent Twin Towers when terrorists flew two jets into them on 9/11. 7 World Trade burned throughout the day until Fire Chief Daniel Nigro made the call to abandon the building. It collapsed at 5:20 p.m., destroying the Con Edison substation.

Con Edison and its subrogee, Aegis, allege the fire raged out of control because of the fuel tanks the Port Authority allowed to be installed in 1987 by its primary tenant, Salomon Brothers investment bank, and in 1996, when New York City signed a lease to house its Office of Emergency Management command center and installed a diesel fuel tank and generator.

But Southern District Judge Alvin K. Hellerstein granted summary judgment for the Port Authority on a claim based on the installation of the tanks and on a second claim alleging negligent design and construction of the building.

Yesterday, the Second Circuit upheld Judge Hellerstein on the negligent design and construction claim but reversed him on the fuel tanks.

Judges Roger J. Miner, Pierre N. Leval and Richard C. Wesley issued a 14-page summary order in Aegis Insurance Services Inc. v. The Port Authority of New York and New Jersey, 09-3603-cv, that focused on the terms of the 1968 lease signed by Con Edison and the Port Authority.

"The district court interpreted the lease to preclude Con Edison from maintaining an action against Port Authority based on Port Authority's negligence in connection with construction or maintenance of 7 World Trade Center. This was an error," the panel said. "Con Edison's negligence claim arises at least from Port Authority's independent duty, as owner of the leased premises, to exercise reasonable care to avoid damage to persons or property thereon."

A "broad exculpatory clause" in the lease that relieves the Port Authority from liability to Con Edison, the circuit said, "contains an exception for cases when 'said damage, injury, and death shall be due to the negligence of Port Authority.'"

Judge Hellerstein interpreted the clause as allowing for negligence actions "in certain, very limited circumstances," which the circuit inferred as not including damage from negligence in connection with the construction of the building or installation of the tanks.

"We do not think such a limited reading of the negligence exception is warranted," the circuit said.

The panel also disagreed with the lower court's interpretation of another clause in the lease requiring the Port Authority to indemnify Con Edison for damages to the substation "in connection with the construction or maintenance" of 7 World Trade regardless of negligence or fault.

While the circuit agreed that this no-fault provision was limited to property damage during active construction or maintenance, it said the provision should not have been read by Judge Hellerstein to provide Con Edison an "exclusive basis for recovery" against the Port Authority.

On remand, the Port Authority is expected to continue its defense that the terror attacks, the collapse of the Twin Towers and Chief Nigro's decision to abandon the building were superseding events that relieves the agency from liability.

Franklin M. Sachs of Greenbaum, Rowe, Smith & Davis in Iselin, N.J., argued for Aegis.

Beth D. Jacob of Schiff Hardin argued for the Port Authority.

@|Mark Hamblett can be contacted at mhamblett@alm.com.