Times Square suit dismissed.

Judge rules developer isn't liable after construction site accident

In a decision being hailed as a victory for the construction industry, the New York State Court of Appeals has dismissed a class action suit brought against the builders of the Conde Nast skyscraper in Times Square.

The suit was filed by Times Square residents and business owners who were seeking to recover income losses stemming from a 1998 accident at the construction site. After the accident, neighborhood streets were closed for as long as a month and merchants said builders of the 4 Times Square office tower should be held responsible for the lost business. If the suit had been successful, it could have exposed the construction industry to billions of dollars in liability, said a defense lawyer in the case.

"The decision establishes a very important rule of law, which is that no one can recover from purely economic losses unless they can prove they suffered property damage or personal injury," said attorney Joseph Forstadt, a partner at Stroock & Stroock & Lavan LLP who defended Tishman Construction Corp. in the case.

The suit - filed against Tishman Construction, the Durst Organization, Inc. and Universal Builders Supply, Inc. - was dismissed June 7 by Chief Judge Judith Kaye. Plaintiffs in the case were represented by attorneys from Goldberg Weprin & Ustin, LLP.

The suit stems from an accident July 21, 1998 when a 48-story construction elevator tower on West 43rd Street between Sixth and Seventh Avenues collapsed. An elderly woman who lived across the street from the accident site was killed, but there were no other injuries. In response to the accident, the city closed streets on Sixth, Seventh and Eighth Avenues from 34th to 57th Streets. Most streets were reopened within a day, but some streets closest to the site were closed for two weeks to a month.

Merchants in the area said they suffered economic losses because customers could not gain access to the businesses and the defendants should be held liable for those losses.

In the court decision, Kaye rejected the plaintiffs' claims saying "the negligence claims based on economic loss alone fall beyond the scope of the duty owed them by defendants." Kaye's ruling pertained not only to the Times Square lawsuit; but also to two similar lawsuits filed by Madison Avenue residents and businesses owners after a section of the south wall of a building at 540 Madison Ave. collapsed in December 1997. Plaintiffs in the Madison Avenue lawsuit made similar claims to those in the Times Square case.

Forstadt said contractors typically carry between $100 to $200 million in public liability insurance, but it would be insufficient to cover the huge claims that could come as the result of lost income. The added financial burden could make new construction and rehabilitation projects economically unfeasible, he said.

"The ruling sets a principled basis for reasonably apportioning liability," Forstadt said. If the construction or refurbishment of buildings in New York City were to be held responsible for losses resulting from the interruption of daily commerce, there would be a risk of boundless liability that would cripple the construction industry."