Court Opinion

ID: 5784496
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:56:27.591059+00
Date Added: 2024-06-11T08:42:04.039850
License: Public Domain

Andrias, J.
(dissenting). Because of the majority’s misplaced reliance upon Parrott v Coopers & Lybrand (95 NY2d 479, 483 [2000]), a case not cited by either party, in order to justify its reversal in this case and its rejection of our decision in Board of Mgrs. of Astor Terrace Condominium v Schuman, Lichtenstein, Claman & Efron (183 AD2d 488, 489 [1992]), which it erroneously claims “is in direct conflict with Court of Appeals precedent,” namely Parrott, I dissent and would affirm the denial of *171defendant Cosentini Associates’s motion to dismiss the negligent misrepresentation claim against it.
In this appeal in which the only remaining issue is a cause of action brought by the purchasers of a $4 million condominium penthouse atop the Empire Condominium on East 78th Street against Cosentini Associates, the mechanical engineering firm that designed the HVAC systems for the building, we all agree that plaintiffs’ negligent representation claim is not duplicative of their professional malpractice claim (see Sage Realty Corp. v Proskauer Rose, 251 AD2d 35, 39 [1998]), and therefore is not barred by the statute of limitations applicable to professional malpractice claims. We differ, however, as to whether that cause of action can withstand Cosentini’s motion to dismiss pursuant to CPLR 3211 (a) (7) for failure to state a cause of action.
In order to state a cause of action for negligent misrepresentation, plaintiffs must allege awareness by Cosentini that the allegedly negligent misrepresentations were to be used for a particular purpose, reliance by a known party or parties in furtherance of that purpose and some conduct by Cosentini linking it to the party or parties and evincing its understanding of their reliance (Ossining Union Free School Dist. v Anderson LaRocca Anderson, 73 NY2d 417, 425 [1989], citing Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 551 [1985]).
For present purposes, the facts asserted in plaintiffs’ submissions in opposition to Cosentini’s motion satisfy those prerequisites. Plaintiffs’ allegations of a “special relationship” with Cosentini, i.e., “a relationship so close as to approach that of privity,” are sufficient to state a cause of action for negligent misrepresentation (Board of Mgrs. of Astor Terrace Condominium v Schuman, Lichtenstein, Claman & Efron, 183 AD2d 488, 489 [1992] [internal quotation marks and citation omitted]). Cosentini admittedly provided the sponsor of the building in which plaintiffs purchased an apartment with descriptions of the heating, ventilation and air conditioning systems for use in the offering plan. Plaintiffs allege that Cosentini knew the representations in the offering plan would be relied on by purchasers such as they, that they purchased the apartment pursuant to the offering plan, and that they relied on those representations in deciding to purchase the apartment.
The majority finds the complaint insufficient because plaintiffs have failed to allege reliance by a known party on Cosentini’s alleged misrepresentations or conduct on the part of Cosentini linking it to the relying party. However, in support of *172its motion to dismiss, Cosentini concedes that it provided a description of the building’s mechanical systems, specifically the heating and air conditioning systems, to the building’s architect and sponsor “for use in the Offering Plan.” That offering plan, based upon representations clearly made by Cosentini to the sponsor, states, in pertinent part, that “the heating system will be designed to maintain a temperature of 72 [degrees] F inside when the outside temperature is +15 [degrees] F” and “[t]he apartments will be provided with individual water source heat pump units in each room, capable of maintaining inside conditions of 78 [degrees] F and 60% humidity when outside temperatures are 89 [degrees] F.F.WB.”
The motion court found that paragraphs 81-98 of the amended complaint state a cause of action for negligent misrepresentation (2007 NY Slip Op 34431[U]). Those paragraphs allege, in pertinent part, that the sponsor and Cosentini through “reckless and/or negligent” oversight made specific representations in the offering plan, certification and related marketing materials concerning the “adequacy of the heating and air conditioning systems”; that Cosentini intended that those representations be relied on by purchasers of units in the building such as plaintiffs; that plaintiffs relied on representations, made either directly or indirectly to them, that the construction work had been done in a good and workmanlike manner in conformance with the plans as filed; and that plaintiffs relied upon the false and misleading representations in spending more than $4 million to purchase their unit.
In addition, the complaint alleges that both the sponsor and Cosentini understood that prospective purchasers such as plaintiffs were expected to and would rely upon Cosentini’s reputation and expertise as summarized in the offering plan, etc.; that plaintiffs relied upon the offering plan and marketing materials; that based on such reliance they bought their penthouse unit; that the selling agent represented that the contractors and workers “were of the best quality”; that the HVAC system was improperly sized and plaintiffs were unable to maintain temperatures in their unit as specified in the offering plan; and that plaintiffs were justified in their reliance on the representations that Cosentini would perform its work in a good and workmanlike manner.
Plaintiffs also argued in opposition to Cosentini’s motion that Cosentini entered into its contract with the sponsor with full knowledge that its HVAC design would be used in a luxury *173high-rise building for condominiums that would be sold to people like plaintiffs; that it admitted that it provided descriptions of the HVAC system to be used in the offering plan; and that the offering plan was incorporated by reference in plaintiffs’ purchase agreement.
The majority’s attempt to distinguish Astor Terrace is unpersuasive. Like the offering plan in Astor Terrace, which claimed that the architects and engineers in that case were the “best,” the offering plan in this case, in addition to touting its architect as “the architect of many of Manhattan’s most famous buildings [naming the Knickerbocker condominium on East 72nd Street, the Siena condominium on East 76th Street, and Metropolitan Tower on West 57th Street]”, describes Cosentini as having provided mechanical engineering for the ATT World Headquarters on 57th Street and Madison Avenue, and the Lever House at 390 Park Avenue. The offering plan also states that the plans and specifications had been prepared by such architects and engineers and that construction of the building, “including the individual Units and Common Elements,” would be completed substantially , in accordance with such plans and specifications.
Moreover, any reliance by the majority upon Parrott for a reversal in this case and its claim that Parrott indirectly rejected our decision in Astor Terrace, which they claim “is in direct conflict with Court of Appeals precedent,” is sadly misplaced. Significantly, as the Court stated in Parrott, it was not making new law, but merely reiterating what it had previously held time and time again, that is, in order to recover for pecuniary loss caused by negligent misrepresentation “there must be a showing that there was either actual privity of contract between the parties or a relationship so close as to approach that of privity” (95 NY2d at 483, quoting Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377, 382 [1992] [which cited Ossining Union Free School District (73 NY2d at 424) and Credit Alliance Corp. (65 NY2d 536 [1985]), the same two cases cited by this Court in Astor Terrace]).
In Astor Terrace, this Court held that “ ‘recovery may be had for pecuniary loss arising from negligent representations where there is actual privity of contract between the parties or a relationship so close as to approach that of privity’ (Ossining Union Free School Dist.[, 73 NY2d at 424])” (183 AD2d at 489 [emphasis added]). We held that “[l]iability in a relationship approaching privity depends on a showing that the defendants *174were aware that reports were to be used for a particular purpose, reliance by known parties in furtherance of that purpose, and some conduct by the defendants linking them to those parties and evincing an understanding of their reliance” (id., citing Credit Alliance Corp., 65 NY2d at 551).
The plaintiff in Astor Terrace “met these criteria by showing that the design and engineering defendants must have been aware that the substance of their reports would be distributed to and relied upon by prospective purchasers, that such reliance did occur, and that the conduct of such defendants sufficiently linked them to plaintiff and evinced their understanding of the unit purchasers’ reliance” (id.). “Of particular importance,” this Court found, was “the fact that the units were marketed as luxury condominiums with an emphasis on the fact that the sponsor had gathered the best engineers and architects to design and construct the building and provide for its amenities” (id. at 489-490).
The majority claims that Ossining Union Free School District is somehow distinguishable because in that case there was “direct contact” between the plaintiff and the defendants and the Court of Appeals emphasized that factor in holding that plaintiff had stated a claim for negligent misrepresentation. However, there is nothing in the Court’s opinion that indicates that “direct contact” was “emphasized” or weighed heavily in that holding. Direct contact was just one of several factors the Court considered in determining that the plaintiff had sufficiently alleged that “defendants were aware—indeed, could not possibly have failed to be aware—that the substance of the reports they furnished would be transmitted to and relied upon by” the plaintiff (Ossining Union Free School Dist., 73 NY2d at 425).
That litigation arose from certain reports made by several engineers following tests done to determine the structural soundness of a high school annex. The school district had retained an engineering consultant which in turn hired two engineering firms to conduct the tests. Both engineers reported serious weaknesses in the concrete slabs that formed the building’s superstructure and the consultant informed the school district of those findings. After arranging for the use of other facilities at substantial expense, the school district hired a third independent expert who advised it that the previous conclusions of structural problems were based on faulty assumptions as to the type of concrete used. The school district *175then sued the two engineers for negligence and malpractice, alleging that the two engineers knew that the school district would rely upon their reports in order to determine what measures should be taken to deal with the structural “problems.” The two engineers’ CPLR 3211 motion to dismiss the complaint was granted and the Second Department affirmed, citing the “long-standing rule that recovery will not be granted to a third person for pecuniary loss arising from the negligent representations of a professional with whom he or she has had no contractual relationship” (id. at 421).
In reversing and reinstating the cause of action for negligent misrepresentation, a unanimous Court of Appeals (per Kaye, J.) recited the history of the courts’ long struggle to define the ambit of duty or limits of liability for negligence, which in theory could be endless, the rhetoric of which was couched in the concept of foreseeability. Since, in negligent misrepresentation cases, what is objectively foreseeable injury may be vast and unbounded and wholly disproportionate to a defendant’s undertaking or wrongdoing, courts, in reaching the policy judgment called “duty,” have invoked a concept of privity of contract as a means of fixing fair, manageable bounds of liability (id.). The Court then traced the history of the concept through Ultramares Corp. v Touche (255 NY 170 [1931, Cardozo, Ch. J.]) and up to Credit Alliance Corp., in which the Court (per Jasen, J.) first spelled out the three-pronged criteria for liability.
As previously noted, the Court found that the school district had satisfied those prerequisites by alleging “that through direct contact with defendants, information transmitted by Anderson [the consultant], and the nature of the work, defendants were aware—indeed, could not possibly have failed to be aware—that the substance of the reports they furnished would be transmitted to and relied on by the school district ... in [the] ongoing project” (id. at 425). The Court concluded that “[n]ot unlike the bean weighers in Glanzer [v Shepard, 233 NY 236 (1922)], defendants allegedly rendered their reports with the objective of thereby shaping this plaintiffs conduct, and thus they owed a duty of diligence established in our law at least since Glanzer not only to Anderson [the consultant] who ordered but also to the school district who relied” (id. at 426).
Clearly, as the Court of Appeals found in Ossining Union Free School District and as we found in an identical situation in Astor Terrace, Cosentini, as evidenced by its concession that its descriptions of the HVAC systems it designed for the Empire *176Condominium were to be used in the sponsor’s offering statement, “must have been aware that the substance of [its information] would be distributed to and relied upon by prospective purchasers” (183 AD 2d at 489). As we further stated: “[a]s design and construction failures affect a condominium unit owner’s standards of living and ability to sell, [i]t cannot be heard that these condominium owners . . . were merely an incidental rather than an intended beneficiary of the contracts’ ” {id. [citation omitted]). In other words, if plaintiffs,' as prospective purchasers of a condominium unit that was not yet completed, were not expected or intended to rely upon Cosentini’s representations regarding the heating, ventilation and air conditioning systems, which concededly were provided to the building’s sponsor for use in the offering plan, who was?
Obviously, since we are only at the pleading stage, discovery will or will not flesh out the allegations in the complaint; however, based upon the controlling case law and the specific allegations in the complaint, it cannot be said as a matter of law that plaintiffs have not sufficiently pleaded a cause of action for negligent misrepresentation.
To the extent that the majority feels that Parrott has indirectly rejected our holding in Astor Terrace, such conclusion is unpersuasive. Parrott involved a dispute over the fair market value of shares in a small privately held corporation. This Court dismissed a negligence claim brought by a former director, vice-president and minority shareholder against an accounting firm retained by the corporation to periodically value the company on a minority interest basis in connection with the sale or proposed sale of the corporation. At the time that plaintiff left the company, the corporation exercised its option to buy back his shares at the price fixed by the accountants. In affirming the grant of summary judgment dismissing the negligence claim, this Court (per Tom, J.) found no indication that plaintiff ever met or even communicated with the accountants, or that the accountants were even aware that plaintiff owned company stock or that the stock would be repurchased by the employer client at a value fixed by the accountants. In sum, it found, the accountants’ discharge of their routine responsibilities was completely unrelated to the corporation’s purchase of plaintiffs stock (Parrott v Coopers & Lybrand, 263 AD2d 316 [2000]).
Justice Rosenberger, relying primarily upon Credit Alliance Corp., but also citing Astor Terrace among numerous other cases, dissented in part and would have found that, at the least, *177a question of fact existed as to whether the accountants knew that plaintiff left the company a month before they performed their latest analysis of the company’s value (Parrott, 263 AD2d at 325-334).
Without mentioning Astor Terrace, the Court of Appeals affirmed in a short opinion (per Wesley, J.) noting that it had “previously rejected a rule ‘permitting recovery by any “foreseeable” plaintiff who relied on [a] negligently prepared report, and [had] rejected even a somewhat narrower rule that would permit recovery where the reliant party or class of parties was actually known or foreseen’ but the individual defendant’s conduct did not link it to that third party” (Parrott, 95 NY2d at 485 [quoting Ossining Union Free School District, the same case cited by this Court in Astor Terrace]). Thus, Parrott merely adhered to well-settled legal principles and there is no conflict between Parrott and Astor Terrace, the only difference being the facts of each case. Clearly, if the Court of Appeals had intended to criticize or overrule our decision in Astor Terrace, it would have done so. Thus, Parrott in no way undermines our decision in Astor Terrace, which was recently cited with approval by this Court in Castle Vil. Owners Corp. v Greater N.Y. Mut. Ins. Co. (58 AD3d 178 [2008]), indicating that this Court still considers Astor Terrace good law and entitled to stare decisis effect in this Court long after Parrott was decided. There is no need for the majority to strain reason in order to avoid admitting that Astor Terrace was correctly decided on facts that are legally indistinguishable from those in this case.
Catterson and Renwick, JJ., concur with Moskowitz, J.; Tom, J.E, and Andrias, J., dissent in a separate opinion by Andrias, J.
Order, Supreme Court, New York County, entered October 9, 2007, reversed, on the law, with costs, the motion granted and the cause of action for negligent misrepresentation dismissed.