959 F.3d 509
2d Cir.2020Background
- Plaintiffs: R.M. Bacon, LLC (RM), a local construction company, and Michael Bacon (Bacon), owner of the land where RM operates and about 90 surrounding acres.
- Defendants: Saint-Gobain (current owner) and Honeywell (past owner) of a manufacturing facility in Hoosick Falls alleged to have released PFOA into soil, air, and groundwater.
- Allegations: PFOA contamination of the Village water supply and of Bacon’s property; EPA/DEC warnings and very high measured PFOA levels led to public fear, lending refusals, a halt in local development, and sharp declines in property values and local construction work.
- Procedural posture: Defendants moved to dismiss negligence claims under Rule 12(b)(6) arguing plaintiffs sought only purely economic losses barred by New York law (532 Madison). District Court denied the motion as to both plaintiffs and certified the order for interlocutory appeal under 28 U.S.C. § 1292(b).
- Decision: The Second Circuit affirmed denial as to Bacon (property owner) — his alleged physical contamination supports a negligence claim — and reversed denial as to RM (business) — RM’s asserted lost revenues are purely economic losses not recoverable in negligence under New York law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether diminution in value/damage to Bacon's land from PFOA contamination states a negligence claim | Bacon: PFOA physically contaminated his property; that is property damage entitling him to damages including diminution in value | Defendants: Losses are essentially economic and should be barred by 532 Madison | Held: Claimable — physical contamination is invasion of possession; negligence claim properly survives dismissal |
| Whether RM's lost revenues and collapse of business from the local PFOA scare state a negligence claim | RM: Business operated inside the contamination zone and was directly impacted by contamination-driven market collapse and lending refusals | Defendants: RM alleges only purely economic losses (lost profits) without property or personal injury; 532 Madison forecloses such claims | Held: Not claimable — RM alleges only indirect, purely economic losses; no duty runs to RM under New York law, so negligence claim must be dismissed |
Key Cases Cited
- 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Ctr., Inc., 96 N.Y.2d 280 (2001) (economic-loss rule; duty limited to those with property damage or personal injury to avoid indeterminate liability)
- Ivory v. International Bus. Machs. Corp., 116 A.D.3d 121 (2014) (recognizes soil/water contamination as an invasion of possession of land)
- Murphy v. Both, 84 A.D.3d 761 (2011) (denial of summary judgment where adjacent property contamination alleged)
- Cottonaro v. Southtowns Indus., Inc., 213 A.D.2d 993 (1995) (diminution in market value from public fear of health hazard constitutes consequential damages)
- Dunlop Tire & Rubber Corp. v. FMC Corp., 53 A.D.2d 150 (1976) (physical property damage permits recovery including related economic loss)
- Beck v. FMC Corp., 53 A.D.2d 118 (1976) (no recovery for purely economic loss where no property damage)