Development Rights Constitute Real Property for Purposes of RPAPL 1602, but Plaintiffs Failed to Establish That Sale of Development Rights Would Be “Expedient” as Required by RPAPL §1604

This decision involved an appeal by the plaintiffs, in an action, inter alia, pursuant to Real Property Actions and Proceedings Law (RPAPL) §1602 (§1602), from a trial court order which dismissed plaintiff's cause of action pursuant to §1602 to compel the sale of certain development rights (development rights).

The parties were siblings who disagreed as to the future of a farm that had been owned by their family for more than 240 years. The parties' mother's will “conferred a qualified life estate in the property upon [the plaintiff brother], and left the remainder interest to her four children in equal shares.” The plaintiff and “two of his sisters, who hold remainder interests, seek authorization pursuant to [§1602] to sell the [development rights] to the property in order to preserve its future use as a farm.” The Appellate Division, Second Dept. (court), explained that it had to determine, “for the first time,” “whether [development rights] constitute 'real property, or a part thereof' for purposes of [§1602].” The court held that “development rights constitute real property for purposes of [§1602], but that the plaintiffs failed to establish their entitlement to relief pursuant to that statute.”

In or about 2011, “the plaintiffs became interested in permanently preserving the property as farmland and restricting its future development by selling some or all of the [development rights] or, in the alternative, placing a conservation easement over some or all of the property.” After the defendant refused to sell her share of the development rights, the plaintiffs commenced the subject action pursuant to §1602 “for a judgment determining that they 'may either sell the [development rights]…,or, alternatively, to place a conservation easement” on the farm.

Pursuant to §1602, an “owner of a possessory interest in real property, such as a life estate, may apply to the court for an order directing that the 'real property, or a part thereof, be mortgaged, leased or sold.'” Courts are authorized to grant such applications pursuant to §1602, if they are “satisfied that the requested relief is 'expedient'” (RPAPL §1604).

The defendant asserted that a sale of the development rights would be “contrary to their mother's will, which specified that the property would go to the four siblings as tenants in common if their brother ceased farming or died.” She was opposed to a sale of the development rights which would limit the property's future use. The defendant had allegedly proposed “carving out a piece of the property for her so that the plaintiffs could…use the remaining property as they saw fit” and the plaintiffs allegedly rejected that offer. The defendant lacked any specific plans to use the property, but wanted to keep the property in the family, noting that her interest could eventually be left to her “children and grandchildren, who could use the property for living, working, or as an income source.”

The parties had stipulated that a sale of development rights “typically,” involves an owner's agreement that “in exchange for a sum of money to be determined by an appraisal, they place perpetual restrictions on the property limiting the density of development.”

The trial court had held that development rights did not constitute real property, or a part thereof, for purposes of §1602. The trial court reasoned that “the statutory authority granted by [§1602] 'cannot be rationally extended to compel the sale of a portion of the abstract and intangible rights that contribute to the value of that land, separate and apart from the sale of the land itself'….”

Section 1602 provides, in relevant part:

When the ownership of real property is divided into one or more possessory interests and one or more future interests, the owner of any interest in such real property or in the proceeds to be derived therefrom on a directed sale thereof, except the owner of a possessory estate in fee simple absolute therein, may apply to the court…for an order directing that said real property, or a part thereof, be mortgaged, leased or sold” (RPAPL 1602 [. . .]).

New York's General Construction Law defines the term “real property” to encompass “real estate, lands, tenements and hereditaments, corporeal and incorporeal.” Such “expansive definition includes, but is not limited to, the tangible aspects of real property, such as physical land, buildings, and fixtures . . . the multiplicity of estates in land that may be held by freehold, e.g., in fee simple, a term for life, etc…as well as more intangible rights in real property, such as easements….

Here, the parties stipulated to “a definition of '[development rights].'” However, “the specific rights or burdens broadly referred to by this term may vary according to contractual terms or applicable governing statutes.” The court held that regardless, development rights, as that term was understood by the parties, “are clearly 'real property, or a part thereof.'”

The New York Court of Appeals has held that “development rights constitute interests within the metaphorical 'bundle of rights' that comprise fee interests in real property….” The court explained that “in drafting [§1602], the Legislature gave courts the authority to compel the mortgage, lease, or sale of 'real property, or a part thereof'…without placing any limitations on which 'parts' of the bundle of rights comprising real property are subject to the statute.”

However, the court affirmed the dismissal of the §1602 cause of action, because “the plaintiffs failed to establish that the proposed sale of [development rights] would be expedient.” RPAPL §1604 provides:

The court to which an application has been duly made pursuant to the provisions of … section 1602 is authorized to grant such application upon such terms as to it shall seem proper, if satisfied …., that the act to be authorized is expedient…. The granting of such an application is not necessarily precluded by the fact that it is opposed by one or more persons having interests in the affected real property; or by the fact that the granting thereof will be in contravention of a provision contained in the instrument creating some or all of the interests in the affected real property.

Decisional precedent held that the term “expedient” in this context means “'characterized by suitability, practicality, and efficiency in achieving a particular end; fit, proper or advantageous under the circumstances.'” The court acknowledged that “the plaintiffs' desire to preserve the property as farmland in perpetuity could be considered a laudable and moral goal.” However, the plaintiffs “failed to establish that stripping the [development rights] from the underlying land would be expedient….” The plaintiffs had failed to “present any evidence of a proposed buyer for the [development rights],” the “value of the underlying property with and without the [development rights],” or any evidence “of any other tangible or intangible benefit that would be achieved by a sale of the [development rights]….” The plaintiffs also failed to present “evidence that the sale of the [development Rights] was necessary to preserve the property as an asset.” Since the plaintiffs failed to establish that the sale of the development rights would be expedient, the court affirmed the dismissal of the §1602 cause of action.

Hahn v. Hagar, 2015-06560, NYLJ 1202793938609, at *1 (App. Div., 2d, Decided July 19, 2017), Decision by Connolly, J.; Hall, J.P.; Austin and Sgroi, JJ. concur.

Environmental—Contamination of Ground Water—Property and Personal Injury Damages—Negligence—Strict Liability—Nuisance—Trespass

This decision involved 16 consolidated cases arising from “the contamination of groundwater with perfluorooctanoic acid, or PFOA,” (contamination) in a village (village). The plaintiffs alleged that the defendants “contaminated the village's groundwater by discharging PFOA from . . . manufacturing facilities they operated within the village.” The plaintiffs asserted that because the drinking water “became nonpotable,” they suffered property value losses and personal injury damages. Several lawsuits involving the contamination had been filed in the district, “including a putative class action on behalf of all village residents, as well as individuals who drank contaminated water and exhibit a heightened blood-serum level of PFOA.”

The salient issue involved “a consolidated motion to dismiss for failure to state a claim.” The court granted the defendant's motion to dismiss in part and denied the motion in part.

The plaintiffs asserted that “[h]uman studies show associations between increased PFOA levels in blood and an increased risk of several health effects, including effects on the liver, the immune system, high cholesterol levels,…,and kidney and testicular cancer.”

The plaintiffs had not cited studies or made any allegations as to “the dose dependency of these conditions or the threshold levels of exposure associated with them,” but noted that the “U.S. Environmental Protection Agency ('EPA') recently issued a health advisory for drinking water of seventy parts per trillion….” The advisory suggested that people should “avoid ingesting drinking-water with greater levels of PFOA.”

The New York State Department of Environmental Conservation (DEC), had identified the defendants “as the parties responsible for the village's PFOA contamination.” The defendants thereafter had entered into two consent orders with the DEC. The consent orders required that defendants “investigate the causes and scope of the contamination, identify a feasible alternative water supply…fund the installation of municipal filtration systems, and provide bottled water to residents until the filtrations systems were installed.”

The complaint alleged that the contamination “made properties in the area less marketable and resulted in significant property devaluation.” Homeowners allegedly “faced difficulty obtaining financing because banks have cut back and/or cease[d] mortgage and refinancing activities in and around [the village] for fear of future property devaluation and/or the lack of access to potable water.” Not all plaintiffs alleged “current manifestation of disease or symptoms related to PFOA exposure, but plaintiffs note that 'no medical studies have been done in [the village] falls regarding the PFOA contamination.” The court noted that “[n]ot every plaintiff claims an increased level of PFOA in her blood.” However, several plaintiffs alleged that they suffered from “diseases or symptoms they claim were caused by PFOA exposure.” With respect to property damage, the plaintiffs asserted claims for “negligence, trespass, strict liability, and nuisance.”

The defendants argued, inter alia, that the plaintiffs “have not suffered a legally cognizable injury—either to their property or to their bodies—sufficient to allege a tort under New York law.” They contended that “claims for economic injury alone—here, a loss in property value—are not allowed under New York law.” They argued that the “property damage claims are based on injury to groundwater, but because groundwater in New York is 'a natural resource entrusted to the state by and for its citizens,' Plaintiffs lack standing to sue and cannot claim a cognizable injury to their own property.” Eleven plaintiffs had not alleged “any impact on their property….” The defendants further argued that the “vast majority” of plaintiffs failed “to adequately allege personal injury,” since the alleged harm, i.e., “an increased risk of illness—is not a 'presently existing physical injury' cognizable under New York law.” The defendants also argued that the “nuisance claims fail as a matter of law because the injury alleged is common across thousands of people, yet a private nuisance must 'threaten[] one person or a relatively few'” and that plaintiffs who failed “to allege that they own or rent their residences lack standing to state a private nuisance claim.”

Many of the defendants' arguments had been addressed in the court's prior decision in Baker v. Saint-Gobain Performance Plastics Corp., No. 16-CV-917, 2017 WL 486939 (N.D.N.Y. Feb. 6, 2017) (Kahn, J.), (Baker), which involved a putative class action.

With respect to property damage, the plaintiffs argued that they had properly pled a negligence claim because they alleged that the defendants “knew or should have known that 'exposure to PFOA was hazardous to the environment and human health,'” that defendants' disposal method caused the PFOA to enter the environment and the water supply and that such actions “together were unreasonable and negligent.” The plaintiffs also argued that the defendants, by manufacturing and handling of PFOA, had engaged in a “dangerous activity,” and they may “be held strictly liable.”

The court denied the motion to dismiss the negligence claim. Decisional precedent held that “[i]n cases involving the pollution of underground waters, liability arising from negligence may be founded only upon a demonstration that the defendant failed to exercise due care in conducting the allegedly polluting activity, and that he or she knew or should have known that such conduct could result in contamination.” Baker held that “even assuming plaintiffs cannot state a negligence claim premised on groundwater contamination, plaintiffs have sufficiently alleged other property-based injury to avoid dismissal.”

Baker observed that there was “a duty not to pollute a plaintiff's drinking water. Society has a reasonable expectation that manufacturers avoid contaminating the surrounding environment….” “It is sensible public policy to require that manufacturers avoid polluting the drinking water of the surrounding community….” Moreover, under defendants' theory, “a manufacturer may freely contaminate the local drinking water supply, thereby depriving neighboring properties of potable water. This position is not supported by New York law and runs counter to society's reasonable expectations.” Accordingly, the court held that the plaintiffs sufficiently stated a claim for negligence.

Furthermore, other courts have found that “loss-of-value damages constitute a sufficient injury in contamination suits when the plaintiff's property is directly affected by the defendant's conduct. What Defendants dismiss as 'stigma damages' have been recognized as a valid category of damages by the New York courts in environmental cases.” Additionally, “nonstigmatic injuries claimed by plaintiffs provide an independent reason why plaintiffs' negligence claims survive even under Defendants' interpretations” of two prior court cases. The plaintiffs' main “injury is the loss of their potable water supply…an injury that is not fairly categorized as purely economic in nature.” Here, the plaintiffs alleged a loss of “property values due” to such injury, but they also sought “compensatory damages for the cost of remediating the contamination to their property and restoring a long-term potable water supply.” Thus, the court held that the negligence and strict liability claims survive the defendants' motion to dismiss.

Since “PFOA is associated with an increased risk of cancer and other conditions,” the main remedy sought by the plaintiffs “is medical monitoring.” Only some of the plaintiffs alleged “current manifestation of disease or symptoms associated with PFOA exposure.” Among the remaining non-symptomatic plaintiffs, “all but two” alleged “elevated levels of PFOA in their blood.” The defendants contended that the “non-symptomatic plaintiffs are not entitled to medical monitoring damages as a matter of law….” However, the court explained, inter alia, that it previously held that “the blood accumulation of PFOA—as alleged by the . . . plaintiffs . . .—is sufficient to permit a claim for negligence seeking medical monitoring damages.” “[E]ven if the accumulation of PFOA in the blood were not enough to constitute an injury within a preexisting tort,” prior precedent permits the plaintiffs “to seek medical monitoring as consequential damages for a tort alleging injury to property.” Thus, the plaintiffs had “sufficiently alleged claims for negligence and other torts concerning property” and they could not be “denied medical monitoring damages at this stage.”

The court previously held that trespass claims could be brought on behalf of property owners who obtained drinking water from private wells. Here, all plaintiffs, even those who obtained water from the municipal water supply, alleged trespass. The court held that trespass claims could not be based on “groundwater contamination alone.” The court explained that “groundwater contamination is not an invasion of property interests under New York law and . . . cannot constitute trespass.” Trespass claims may be based on groundwater where “the contaminant entered the homeowners' soil.” Here, the plaintiffs had not made such claim. The court noted that “[h]ad they done so, the…plaintiffs' claims might have fared better.”

Thus, the court granted the motion to dismiss the trespass claims asserted by the “Municipal Water Plaintiffs,” but denied the motion to dismiss the trespass claims asserted by the “Private Well Plaintiffs.” However, the court permitted the “Municipal Water Plaintiffs” to amend their complaints to properly allege trespass.

The defendants asserted that the injury was “too widespread to constitute a private nuisance because private nuisance can only be based on conduct 'that threatens one person or a relatively few.'” The court found that to the extent that the plaintiffs asserted that the groundwater contamination impacted all village residents, they failed “to state a claim for private nuisance and instead allege[d] a public nuisance, for which only the state or one of its subdivisions has standing to bring suit.” However, nuisance claims brought by plaintiffs with private wells sufficiently stated a cause of action, because they sustained “a special loss.” The “Private Well” plaintiffs sought damages for “the costs of repair or restoration.” Since such costs “will presumably be different for different properties and wells,” the court held that the “Private Well” plaintiffs had “adequately alleged a private nuisance….” i.e., they alleged “a special harm that sufficiently differs from that suffered by the rest of the area's population.”

The plaintiffs had acknowledged that “it would be futile for the Municipal Water Plaintiffs to amend their complaints,” since they could “state a claim for public nuisance.” Similarly, it would be futile for the plaintiffs who rented their homes “to amend their complaints because they do not own the properties for which they seek property damages.” However, it would be possible for certain plaintiffs “to allege sufficient facts to state a claim for negligence and strict liability related to personal injury” and it is possible that the “Municipal Water” plaintiffs may adequately allege a trespass claim if they “allege soil contamination or the invasion of some other property interest.” Since there was “no indication that plaintiffs have unduly delayed or engaged in bad faith” and the defendants did not claim that they would be prejudiced if the plaintiffs were permitted to amend their complaints, the court allowed certain plaintiffs to amend their complaints. The court also granted the plaintiffs a right to pursue an interlocutory appeal pursuant to 28 U.S.C. §1292(b).

Bodenstab v. Saint-Gobain Performance Plastics Corp, U.S.D.C., N.D.N.Y., No. 1:16-CV-1367 (LEK/DJS), decided Aug. 2, 2017, Kahn, J.,

Scott E. Mollen is a partner at Herrick, Feinstein and an adjunct professor at St. John's University School of Law.

Development Rights Constitute Real Property for Purposes of RPAPL 1602, but Plaintiffs Failed to Establish That Sale of Development Rights Would Be “Expedient” as Required by RPAPL §1604

This decision involved an appeal by the plaintiffs, in an action, inter alia, pursuant to Real Property Actions and Proceedings Law (RPAPL) §1602 (§1602), from a trial court order which dismissed plaintiff's cause of action pursuant to §1602 to compel the sale of certain development rights (development rights).

The parties were siblings who disagreed as to the future of a farm that had been owned by their family for more than 240 years. The parties' mother's will “conferred a qualified life estate in the property upon [the plaintiff brother], and left the remainder interest to her four children in equal shares.” The plaintiff and “two of his sisters, who hold remainder interests, seek authorization pursuant to [§1602] to sell the [development rights] to the property in order to preserve its future use as a farm.” The Appellate Division, Second Dept. (court), explained that it had to determine, “for the first time,” “whether [development rights] constitute 'real property, or a part thereof' for purposes of [§1602].” The court held that “development rights constitute real property for purposes of [§1602], but that the plaintiffs failed to establish their entitlement to relief pursuant to that statute.”

In or about 2011, “the plaintiffs became interested in permanently preserving the property as farmland and restricting its future development by selling some or all of the [development rights] or, in the alternative, placing a conservation easement over some or all of the property.” After the defendant refused to sell her share of the development rights, the plaintiffs commenced the subject action pursuant to §1602 “for a judgment determining that they 'may either sell the [development rights]…,or, alternatively, to place a conservation easement” on the farm.

Pursuant to §1602, an “owner of a possessory interest in real property, such as a life estate, may apply to the court for an order directing that the 'real property, or a part thereof, be mortgaged, leased or sold.'” Courts are authorized to grant such applications pursuant to §1602, if they are “satisfied that the requested relief is 'expedient'” (RPAPL §1604).

The defendant asserted that a sale of the development rights would be “contrary to their mother's will, which specified that the property would go to the four siblings as tenants in common if their brother ceased farming or died.” She was opposed to a sale of the development rights which would limit the property's future use. The defendant had allegedly proposed “carving out a piece of the property for her so that the plaintiffs could…use the remaining property as they saw fit” and the plaintiffs allegedly rejected that offer. The defendant lacked any specific plans to use the property, but wanted to keep the property in the family, noting that her interest could eventually be left to her “children and grandchildren, who could use the property for living, working, or as an income source.”

The parties had stipulated that a sale of development rights “typically,” involves an owner's agreement that “in exchange for a sum of money to be determined by an appraisal, they place perpetual restrictions on the property limiting the density of development.”

The trial court had held that development rights did not constitute real property, or a part thereof, for purposes of §1602. The trial court reasoned that “the statutory authority granted by [§1602] 'cannot be rationally extended to compel the sale of a portion of the abstract and intangible rights that contribute to the value of that land, separate and apart from the sale of the land itself'….”

Section 1602 provides, in relevant part:

When the ownership of real property is divided into one or more possessory interests and one or more future interests, the owner of any interest in such real property or in the proceeds to be derived therefrom on a directed sale thereof, except the owner of a possessory estate in fee simple absolute therein, may apply to the court…for an order directing that said real property, or a part thereof, be mortgaged, leased or sold” (RPAPL 1602 [. . .]).

New York's General Construction Law defines the term “real property” to encompass “real estate, lands, tenements and hereditaments, corporeal and incorporeal.” Such “expansive definition includes, but is not limited to, the tangible aspects of real property, such as physical land, buildings, and fixtures . . . the multiplicity of estates in land that may be held by freehold, e.g., in fee simple, a term for life, etc…as well as more intangible rights in real property, such as easements….

Here, the parties stipulated to “a definition of '[development rights].'” However, “the specific rights or burdens broadly referred to by this term may vary according to contractual terms or applicable governing statutes.” The court held that regardless, development rights, as that term was understood by the parties, “are clearly 'real property, or a part thereof.'”

The New York Court of Appeals has held that “development rights constitute interests within the metaphorical 'bundle of rights' that comprise fee interests in real property….” The court explained that “in drafting [§1602], the Legislature gave courts the authority to compel the mortgage, lease, or sale of 'real property, or a part thereof'…without placing any limitations on which 'parts' of the bundle of rights comprising real property are subject to the statute.”

However, the court affirmed the dismissal of the §1602 cause of action, because “the plaintiffs failed to establish that the proposed sale of [development rights] would be expedient.” RPAPL §1604 provides:

The court to which an application has been duly made pursuant to the provisions of … section 1602 is authorized to grant such application upon such terms as to it shall seem proper, if satisfied …., that the act to be authorized is expedient…. The granting of such an application is not necessarily precluded by the fact that it is opposed by one or more persons having interests in the affected real property; or by the fact that the granting thereof will be in contravention of a provision contained in the instrument creating some or all of the interests in the affected real property.

Decisional precedent held that the term “expedient” in this context means “'characterized by suitability, practicality, and efficiency in achieving a particular end; fit, proper or advantageous under the circumstances.'” The court acknowledged that “the plaintiffs' desire to preserve the property as farmland in perpetuity could be considered a laudable and moral goal.” However, the plaintiffs “failed to establish that stripping the [development rights] from the underlying land would be expedient….” The plaintiffs had failed to “present any evidence of a proposed buyer for the [development rights],” the “value of the underlying property with and without the [development rights],” or any evidence “of any other tangible or intangible benefit that would be achieved by a sale of the [development rights]….” The plaintiffs also failed to present “evidence that the sale of the [development Rights] was necessary to preserve the property as an asset.” Since the plaintiffs failed to establish that the sale of the development rights would be expedient, the court affirmed the dismissal of the §1602 cause of action.

Hahn v. Hagar, 2015-06560, NYLJ 1202793938609, at *1 (App. Div., 2d, Decided July 19, 2017), Decision by Connolly, J.; Hall, J.P.; Austin and Sgroi, JJ. concur.

Environmental—Contamination of Ground Water—Property and Personal Injury Damages—Negligence—Strict Liability—Nuisance—Trespass

This decision involved 16 consolidated cases arising from “the contamination of groundwater with perfluorooctanoic acid, or PFOA,” (contamination) in a village (village). The plaintiffs alleged that the defendants “contaminated the village's groundwater by discharging PFOA from . . . manufacturing facilities they operated within the village.” The plaintiffs asserted that because the drinking water “became nonpotable,” they suffered property value losses and personal injury damages. Several lawsuits involving the contamination had been filed in the district, “including a putative class action on behalf of all village residents, as well as individuals who drank contaminated water and exhibit a heightened blood-serum level of PFOA.”

The salient issue involved “a consolidated motion to dismiss for failure to state a claim.” The court granted the defendant's motion to dismiss in part and denied the motion in part.

The plaintiffs asserted that “[h]uman studies show associations between increased PFOA levels in blood and an increased risk of several health effects, including effects on the liver, the immune system, high cholesterol levels,…,and kidney and testicular cancer.”

The plaintiffs had not cited studies or made any allegations as to “the dose dependency of these conditions or the threshold levels of exposure associated with them,” but noted that the “U.S. Environmental Protection Agency ('EPA') recently issued a health advisory for drinking water of seventy parts per trillion….” The advisory suggested that people should “avoid ingesting drinking-water with greater levels of PFOA.”

The New York State Department of Environmental Conservation (DEC), had identified the defendants “as the parties responsible for the village's PFOA contamination.” The defendants thereafter had entered into two consent orders with the DEC. The consent orders required that defendants “investigate the causes and scope of the contamination, identify a feasible alternative water supply…fund the installation of municipal filtration systems, and provide bottled water to residents until the filtrations systems were installed.”

The complaint alleged that the contamination “made properties in the area less marketable and resulted in significant property devaluation.” Homeowners allegedly “faced difficulty obtaining financing because banks have cut back and/or cease[d] mortgage and refinancing activities in and around [the village] for fear of future property devaluation and/or the lack of access to potable water.” Not all plaintiffs alleged “current manifestation of disease or symptoms related to PFOA exposure, but plaintiffs note that 'no medical studies have been done in [the village] falls regarding the PFOA contamination.” The court noted that “[n]ot every plaintiff claims an increased level of PFOA in her blood.” However, several plaintiffs alleged that they suffered from “diseases or symptoms they claim were caused by PFOA exposure.” With respect to property damage, the plaintiffs asserted claims for “negligence, trespass, strict liability, and nuisance.”

The defendants argued, inter alia, that the plaintiffs “have not suffered a legally cognizable injury—either to their property or to their bodies—sufficient to allege a tort under New York law.” They contended that “claims for economic injury alone—here, a loss in property value—are not allowed under New York law.” They argued that the “property damage claims are based on injury to groundwater, but because groundwater in New York is 'a natural resource entrusted to the state by and for its citizens,' Plaintiffs lack standing to sue and cannot claim a cognizable injury to their own property.” Eleven plaintiffs had not alleged “any impact on their property….” The defendants further argued that the “vast majority” of plaintiffs failed “to adequately allege personal injury,” since the alleged harm, i.e., “an increased risk of illness—is not a 'presently existing physical injury' cognizable under New York law.” The defendants also argued that the “nuisance claims fail as a matter of law because the injury alleged is common across thousands of people, yet a private nuisance must 'threaten[] one person or a relatively few'” and that plaintiffs who failed “to allege that they own or rent their residences lack standing to state a private nuisance claim.”

Many of the defendants' arguments had been addressed in the court's prior decision in Baker v. Saint-Gobain Performance Plastics Corp., No. 16-CV-917, 2017 WL 486939 (N.D.N.Y. Feb. 6, 2017) (Kahn, J.), (Baker), which involved a putative class action.

With respect to property damage, the plaintiffs argued that they had properly pled a negligence claim because they alleged that the defendants “knew or should have known that 'exposure to PFOA was hazardous to the environment and human health,'” that defendants' disposal method caused the PFOA to enter the environment and the water supply and that such actions “together were unreasonable and negligent.” The plaintiffs also argued that the defendants, by manufacturing and handling of PFOA, had engaged in a “dangerous activity,” and they may “be held strictly liable.”

The court denied the motion to dismiss the negligence claim. Decisional precedent held that “[i]n cases involving the pollution of underground waters, liability arising from negligence may be founded only upon a demonstration that the defendant failed to exercise due care in conducting the allegedly polluting activity, and that he or she knew or should have known that such conduct could result in contamination.” Baker held that “even assuming plaintiffs cannot state a negligence claim premised on groundwater contamination, plaintiffs have sufficiently alleged other property-based injury to avoid dismissal.”

Baker observed that there was “a duty not to pollute a plaintiff's drinking water. Society has a reasonable expectation that manufacturers avoid contaminating the surrounding environment….” “It is sensible public policy to require that manufacturers avoid polluting the drinking water of the surrounding community….” Moreover, under defendants' theory, “a manufacturer may freely contaminate the local drinking water supply, thereby depriving neighboring properties of potable water. This position is not supported by New York law and runs counter to society's reasonable expectations.” Accordingly, the court held that the plaintiffs sufficiently stated a claim for negligence.

Furthermore, other courts have found that “loss-of-value damages constitute a sufficient injury in contamination suits when the plaintiff's property is directly affected by the defendant's conduct. What Defendants dismiss as 'stigma damages' have been recognized as a valid category of damages by the New York courts in environmental cases.” Additionally, “nonstigmatic injuries claimed by plaintiffs provide an independent reason why plaintiffs' negligence claims survive even under Defendants' interpretations” of two prior court cases. The plaintiffs' main “injury is the loss of their potable water supply…an injury that is not fairly categorized as purely economic in nature.” Here, the plaintiffs alleged a loss of “property values due” to such injury, but they also sought “compensatory damages for the cost of remediating the contamination to their property and restoring a long-term potable water supply.” Thus, the court held that the negligence and strict liability claims survive the defendants' motion to dismiss.

Since “PFOA is associated with an increased risk of cancer and other conditions,” the main remedy sought by the plaintiffs “is medical monitoring.” Only some of the plaintiffs alleged “current manifestation of disease or symptoms associated with PFOA exposure.” Among the remaining non-symptomatic plaintiffs, “all but two” alleged “elevated levels of PFOA in their blood.” The defendants contended that the “non-symptomatic plaintiffs are not entitled to medical monitoring damages as a matter of law….” However, the court explained, inter alia, that it previously held that “the blood accumulation of PFOA—as alleged by the . . . plaintiffs . . .—is sufficient to permit a claim for negligence seeking medical monitoring damages.” “[E]ven if the accumulation of PFOA in the blood were not enough to constitute an injury within a preexisting tort,” prior precedent permits the plaintiffs “to seek medical monitoring as consequential damages for a tort alleging injury to property.” Thus, the plaintiffs had “sufficiently alleged claims for negligence and other torts concerning property” and they could not be “denied medical monitoring damages at this stage.”

The court previously held that trespass claims could be brought on behalf of property owners who obtained drinking water from private wells. Here, all plaintiffs, even those who obtained water from the municipal water supply, alleged trespass. The court held that trespass claims could not be based on “groundwater contamination alone.” The court explained that “groundwater contamination is not an invasion of property interests under New York law and . . . cannot constitute trespass.” Trespass claims may be based on groundwater where “the contaminant entered the homeowners' soil.” Here, the plaintiffs had not made such claim. The court noted that “[h]ad they done so, the…plaintiffs' claims might have fared better.”

Thus, the court granted the motion to dismiss the trespass claims asserted by the “Municipal Water Plaintiffs,” but denied the motion to dismiss the trespass claims asserted by the “Private Well Plaintiffs.” However, the court permitted the “Municipal Water Plaintiffs” to amend their complaints to properly allege trespass.

The defendants asserted that the injury was “too widespread to constitute a private nuisance because private nuisance can only be based on conduct 'that threatens one person or a relatively few.'” The court found that to the extent that the plaintiffs asserted that the groundwater contamination impacted all village residents, they failed “to state a claim for private nuisance and instead allege[d] a public nuisance, for which only the state or one of its subdivisions has standing to bring suit.” However, nuisance claims brought by plaintiffs with private wells sufficiently stated a cause of action, because they sustained “a special loss.” The “Private Well” plaintiffs sought damages for “the costs of repair or restoration.” Since such costs “will presumably be different for different properties and wells,” the court held that the “Private Well” plaintiffs had “adequately alleged a private nuisance….” i.e., they alleged “a special harm that sufficiently differs from that suffered by the rest of the area's population.”

The plaintiffs had acknowledged that “it would be futile for the Municipal Water Plaintiffs to amend their complaints,” since they could “state a claim for public nuisance.” Similarly, it would be futile for the plaintiffs who rented their homes “to amend their complaints because they do not own the properties for which they seek property damages.” However, it would be possible for certain plaintiffs “to allege sufficient facts to state a claim for negligence and strict liability related to personal injury” and it is possible that the “Municipal Water” plaintiffs may adequately allege a trespass claim if they “allege soil contamination or the invasion of some other property interest.” Since there was “no indication that plaintiffs have unduly delayed or engaged in bad faith” and the defendants did not claim that they would be prejudiced if the plaintiffs were permitted to amend their complaints, the court allowed certain plaintiffs to amend their complaints. The court also granted the plaintiffs a right to pursue an interlocutory appeal pursuant to 28 U.S.C. §1292(b).

Bodenstab v. Saint-Gobain Performance Plastics Corp, U.S.D.C., N.D.N.Y., No. 1:16-CV-1367 (LEK/DJS), decided Aug. 2, 2017, Kahn, J.,

Scott E. Mollen is a partner at Herrick, Feinstein and an adjunct professor at St. John's University School of Law.