Construction Contracts and Public Nuisance in NY.

Back in the days when Karen Carpenter was queen of the music world, the New York Counties of Nassau and Suffolk (i.e. Long Island) decided to embark upon a major sewer construction project. Any number of contractors were hired to tear up roads and lay down pipes. The work continued until the mid 1980s, when Michael Jackson was king (amazing how musical tastes can change).

In approximately 2009, the towns where the work was done began to receive complaints that the roads where the pipes had been laid had sunk into the ground and otherwise suffered problems. The townships, including lead plaintiff Oyster Bay, then began a series of lawsuits against any number of defendants. [Full disclosure – we represented one of the defendants in the lawsuits and therefore fully participated in all that you are about to hear (including the Court of Appeals arguments)].

The obvious problem that the townships faced was the statute of limitations, since the work ended many, many years ago. To get around this problem, the townships pleaded a continuing public nuisance cause of action. The trial court dismissed the complaints and the dismissal was twice affirmed by the Second Department, an intermediate court of appeals. NY’s Court of Appeals then took up the case. In a lengthy decision (with a concurring opinion), the Court unanimously affirmed the dismissal. Two issues were addressed by the Court.

First, the Court was asked to determine whether the townships only had six years after “substantial completion” of the work to file a lawsuit. The townships argued that they were not bound to the substantial completion rule because they were not parties to the contract. Five members of the Court of Appeals disagreed with that argument and instead held that because the townships were beneficiaries of the contract, they had six years from “substantial completion” of the work to commence defective construction (and resulting property damage) claims.

Second, the Court, in a case of first impression, had to specify what the elements of a continuing public nuisance are. All members of the Court held that to make out a prima facie case of continuing public nuisance both the acts and the damages must be continuing. Here, the Court ruled that only the damages were alleged to have continued (as the acts were conceded by all parties to have ended in approximately 1986), and thus the tort could not be made out.

This decision is obviously welcome news for contractors and their insurers. If the Court had changed the law through this case, construction defect claims would have effectively been converted into endless long-tail exposure cases.

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