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COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, over a two-judge concurring opinion, determined that the complaints stated causes of action against the Long Island Power Authority (LIPA), Long Island Lighting Company (LILCO),  and National Grid Electric Services LLC based upon defendants’ failure to shut down the power in advance of landfall by Hurricane Sandy. Plaintiffs alleged the failure to shut down the power resulted in fires which destroyed their property. The complaints alleged the defendants acted in a proprietary, not governmental, capacity and therefore were not entitled to governmental immunity. The Court of Appeals held that the defendants, at this pre-answer stage, had not met their burden of demonstrating their actions were governmental:

Defendants moved to dismiss the amended complaints pursuant to CPLR 3211 (a) (7) insofar as asserted against them on the ground that LIPA was immune from liability based on the doctrine of governmental function immunity, and that LILCO and National Grid were entitled to the same defense. Specifically, LIPA argued, among other things, that the actions challenged were taken in the exercise of its governmental capacity and were discretionary, and, even if they were not discretionary, plaintiffs’ failure to allege a special duty in the complaints amounted to a failure to state viable claims. Plaintiffs opposed the motions on the ground that defendants’ actions were proprietary, not governmental, and that special duty rules did not apply. Supreme Court denied the motions to dismiss in three substantially similar orders. * * *

… .[P]laintiffs’ allegations concern the provision of electrical power by defendants, a service that traditionally has been provided by private entities in the State of New York. In fact, LIPA itself was created to replace LILCO which, at the time, was an “investor owned utility” (Public Authorities Law § 1020-a). This takeover was anomalous and, when the legislation creating LIPA was enacted, the New York State Public Service Commission — the agency charged with ensuring safe and reliable utility service throughout the State — observed that, “[i]n New York State we have generally adopted a system of private ownership subject to close regulation” … . …

… [W]e cannot say, as a matter of law based only on the allegations in the amended complaints, as amplified, that LIPA was acting in a governmental, rather than a proprietary, capacity when engaged in the conduct claimed to have caused plaintiffs’ injuries. Connolly v Long Is. Power Auth., 2018 NY Slip Op 01148, CtApp 2-20-18

MUNICIPAL LAW (IMMUNITY, COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP))/IMMUNITY (GOVERNMENTAL, COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP))/NEGLIGENCE (GOVERNMENTAL IMMUNITY,  COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP))/GOVERNMENTAL IMMUNITY (ELECTRIC POWER,  COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP))/UTILITIES (GOVERNMENTAL IMMUNITY,  COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP))/ELECTRIC POWER (GOVERNMENTAL IMMUNITY,  COMPLAINTS AGAINST LONG ISLAND ELECTRIC POWER PROVIDERS STATED CAUSES OF ACTION FOR NEGLIGENCE IN FAILING TO SHUT DOWN POWER BEFORE LANDFALL BY HURRICANE SANDY, DEFENDANTS DID NOT DEMONSTRATE THEY WERE ENTITLED TO GOVERNMENTAL IMMUNITY AT THIS PRE-ANSWER STAGE (CT APP))

THE PUBLIC SERVICE COMMISSION HAS THE STATUTORY AUTHORITY TO IMPOSE RATES CHARGED FOR GAS AND ELECTRICITY BY ENERGY SERVICE COMPANIES 3RD DEPT.

The Third Department determined the Public Service Commission (PSC) has the power to regulate the rates charged by energy service companies (ESCO’s) in an effort to bring down the cost of gas and electricity for mass market consumers. The rates imposed by the PSC were included in a Reset Order. The petitioner, the Retail Energy Supply Assn., challenged the statutory authority of the PSC to issue the Reset Order imposing the new rates:

We … find … that the PSC’s broad statutory jurisdiction and authority over the sale of gas and electricity authorized it to impose the limitations set forth in the Reset Order. Pursuant to Public Service Law § 5, “[t]he jurisdiction, supervision, powers and duties of the [PSC] shall extend . . . [t]o the manufacture, conveying, transportation, sale or distribution of gas . . . and electricity . . . to gas plants and to electric plants and to the persons or corporations owning, leasing or operating the same” … . The emphasized language speaks to general authority over the sale of gas and electricity, followed by the specific extension of the PSC’s jurisdiction over gas and electric plants. Importantly, there is no dispute that the PSC is authorized to set “just and reasonable” tariff rates for gas and electric corporations pursuant to Public Service Law articles 1 and 4 … . In fact, it is the PSC’s broad jurisdiction that enabled it to allow ESCOs access to utility systems in the first place. The PSC essentially maintains that this same authority allows it to impose limitations on ESCO rates as a condition to continued access. We agree. * * *

As explained in the Reset Order, the PSC discerned that most ESCOs only offered commodity resale to their customers in direct competition with utilities. In doing so, ESCOs have had difficulty competing because the PSC “requires utilities to flow through energy commodity to end-users at cost, without a markup.” In consequence, numerous customer complaints have been made that ESCOs are charging more than the utilities — a result contrary to the very purposes of opening up the energy market in the first place, i.e., to promote lower energy costs to consumers. The rule change was implemented because the PSC determined that “it is not in the public interest for ESCOs to provide commodity supply only products for mass market customers.” This decision falls within the PSC’s broad authority to assure that “just and reasonable rates” are charged for gas and electric sold to the consumer, consistent with its authority over utilities … . Accordingly, we agree with Supreme Court that the PSC had jurisdiction to impose the rate limitations set forth in the Reset Order. Matter of Retail Energy Supply Assn. v Public Serv. Commn. of The State of New York, 2017 NY Slip Op 05908, 3rd Dept 7-27-17

 

UTILITIES (THE PUBLIC SERVICE COMMISSION HAS THE STATUTORY AUTHORITY TO IMPOSE RATES CHARGED FOR GAS AND ELECTRICITY BY ENERGY SERVICE COMPANIES 3RD DEPT)/PUBLIC SERVICE COMMISSION (THE PUBLIC SERVICE COMMISSION HAS THE STATUTORY AUTHORITY TO IMPOSE RATES CHARGED FOR GAS AND ELECTRICITY BY ENERGY SERVICE COMPANIES 3RD DEPT)/ENERGY SERVICE COMPANIES (THE PUBLIC SERVICE COMMISSION HAS THE STATUTORY AUTHORITY TO IMPOSE RATES CHARGED FOR GAS AND ELECTRICITY BY ENERGY SERVICE COMPANIES 3RD DEPT)

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PROVIDING ELECTRICITY IS A PROPRIETARY FUNCTION; LAWSUIT ALLEGING NEGLIGENT FAILURE TO CUT OFF POWER DURING HURRICANE SANDY ALLOWED TO PROCEED.

The Second Department, over a dissent, determined defendants Long Island Power Authority (LIPA) and National Grid Electric Services (NGES) were not protected by government-function immunity. The lawsuit alleged defendants were negligent in not cutting off electrical power during Hurricane Sandy, resulting in fires which damaged plaintiffs’ property. The court held the defendants were performing proprietary, not governmental, functions and standards of ordinary negligence therefore applied:

… [T]he provision of electricity is properly categorized as a proprietary function. The provision of electricity has traditionally been a private enterprise in this State, and the Legislature clearly created LIPA as a public authority to substitute for a private enterprise … . * * *

… [T]he functions of electric utilities in the ordinary course of providing electricity and in responding adequately to a hurricane are both part of the proprietary core functions of their business. True, here, the appellants’ actions, because of the size of LIPA’s customer base, affected many people and many businesses. True, too, LIPA’s response to the hurricane may have involved complex considerations. But every private electric utility in the region faced the same hurricane. Heeran v Long Is. Power Auth. (LIPA), 2016 NY Slip Op 05486, 2nd Dept 7-13-16

 

NEGLIGENCE (PROVIDING ELECTRICITY IS A PROPRIETARY FUNCTION; LAWSUIT ALLEGING NEGLIGENT FAILURE TO CUT OFF POWER DURING HURRICANE SANDY ALLOWED TO PROCEED)/GOVERNMENTAL IMMUNITY (PROVIDING ELECTRICITY IS A PROPRIETARY FUNCTION; LAWSUIT ALLEGING NEGLIGENT FAILURE TO CUT OFF POWER DURING HURRICANE SANDY ALLOWED TO PROCEED)/PUBLIC UTILITIES (PROVIDING ELECTRICITY IS A PROPRIETARY FUNCTION; LAWSUIT ALLEGING NEGLIGENT FAILURE TO CUT OFF POWER DURING HURRICANE SANDY ALLOWED TO PROCEED)/PROPRIETARY FUNCTION (PROVIDING ELECTRICITY IS A PROPRIETARY FUNCTION; LAWSUIT ALLEGING NEGLIGENT FAILURE TO CUT OFF POWER DURING HURRICANE SANDY ALLOWED TO PROCEED)

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Owner of Land through Which Power Lines Pass Pursuant to a Utility Easement (Servient Owner) Does Not Have a Duty to Maintain the Easement—Servient Owner Not Liable for Damage to Abutting Property Stemming from a Vegetation Fire Started by Sparks from the Power Lines

The Second Department determined the easement which allowed the power company’s lines to pass through the owner’s property did not impose a duty to maintain the easement on property owner.  Vegetation around the power lines caught fire causing damage to an abutting landowner’s property. The plaintiff insurer paid the claim and sued the owner of the land through which the power lines passed (the servient owner). The Second Department explained that “a servient owner has no duty to maintain an easement to which its property is subject. Indeed, a servient owner has a passive duty to refrain from interfering with the rights of the dominant owner” … .  Encompass Ins. Co. of Am. v Long Is. Power Auth., 2015 NY Slip Op 03800, 2nd Dept 5-6-15

 

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If the Action Challenging Governmental Action Could Have Been Brought in an Article 78 Proceeding, No Matter How the Action Is Labelled, the Four-Month Statute of Limitations Applies

The collection of assessments by the defendant from hydroelectric power plants was deemed illegal in a federal lawsuit brought by a hydroelectric power plant.  Plaintiff, a different hydroelectric power plant, thereafter sought return of the assessments it had paid for six years (between 2002 and 2008) in an action for unjust enrichment.  The Third Department determined that action could have been brought as an Article 78 proceeding challenging the assessments as they were imposed.  Therefore the four-month Article 78 statute of limitations applied, rendering the action untimely:

…Supreme Court erred in applying a six-year statute of limitations because, even though plaintiffs have now labeled their cause of action as one for unjust enrichment, they could have raised their claim for refunds in a CPLR article 78 proceeding challenging each annual assessment, for which the applicable statute of limitations is four months (see CPLR 217 [1]).

“Where, as here, governmental activity is being challenged, the immediate inquiry is whether the challenge could have been advanced in a CPLR article 78 proceeding” … . Thus, whether plaintiffs’ “claims are subject to the four-month statute of limitations period under CPLR article 78 . . . turns on whether the parties’ rights could have been resolved in an article 78 proceeding” … . Indeed, the analysis does not depend upon how plaintiffs label their claims but, rather, we “must look to the underlying claim and the nature of the relief sought and determine whether such claim could have been properly made in another form” … . The purpose of this rule, which results in the imposition of a short statute of limitations to governmental action, is to ensure “that the operation of government [will] not be trammeled by stale litigation and stale determinations” … . Northern Elec Power Co LP v Hudson River-Black Riv Regulating District, 2014 NY Slip Op 08280, 3rd Dept 11-26-14

 

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Transmission Line from Hydroelectric Power Facility in Canada to Queens Properly Approved

The Third Department determined that the NYS Public Service Commission properly issued a certificate of environmental compatibility and public need (EC & PN) for an electric power transmission line running from a hydroelectric power facility in Canada to Queens.  After the issuance of the EC & PN, the petitioners sought a rehearing pursuant to Public Service Law 22.  The Commission denied the petition on the ground it had been filed and served one day late.  The Third Department held that the failure to timely file was nonprejudicial “law office failure” which should have been excused pursuant to CPLR 2005 and went on to review the Commission’s grant of the EC & PN on the merits, including the economic feasibility of the plan, the public need for the hydropower-produced electricity (reduced carbon emissions),  and the effects of the transmission line on the environment:

We begin by recognizing that, as parties to the proceedings at the agency level, petitioners have standing … . The criteria for authorizing the construction and operation of a major utility transmission facility are set forth in Public Service Law § 126. Under this statute, the Commission may not grant a certificate approving an electric transmission project unless it finds and determines (1) the need for the facility, (2) whether the facility will achieve the minimum adverse environmental impacts, (3) whether the facility will be located underground and comport with the state’s long-range plan to expand the electric power grid, (4) that there has been conformance with applicable state and local laws and regulations, and (5) that the facility promotes the public interest, convenience and necessity (see Public Service Law § 126 [1] [a]-[d], [f], [g]). This project involves the placement of a high voltage, direct current transmission line extending from the Canadian border to a converter station in Queens and, from there, a high voltage, alternating current transmission line to the Rainey Substation. The line will be placed underwater in Lake Champlain and the Hudson River and underground in the upland segments. * * *

Petitioners contend that the Commission failed to adequately consider the potential harm to aquatic species, including the endangered shortnose and atlantic sturgeon, posed by the placement of cables underwater. The plan requires the underwater cables to be buried at least six feet beneath the lake/river bottom, except in areas of utility crossings and hard rock. In these areas, the cable will be covered by concrete mats. The specific risks emanate from the use of the concrete mats as well as magnetic and electromagnetic field impact. The record supports the Commission’s determination that any risk has been minimized by the placement of the cable route utilizing existing habitat information designed to avoid significant coastal fish and wildlife habitat areas designated by the Department of State (see 19 NYCRR part 602) and the exclusion zones identified by the parties in the joint proposal. There is also expert record evidence supporting the Commission’s conclusion that the magnetic fields’ impact on sturgeon and other aquatic species would be minimal. Further, we agree with the Commission’s observation that the July 5, 2011 letter from the Army Corps of Engineers addressing the cable route under Lake Champlain and the Hudson River was a preliminary assessment. Moreover, the certificate is conditioned on the applicants’ procurement of a construction permit from the Army Corps of Engineers, which has jurisdiction over these navigable waterways, prior to commencing construction.  Matter of Entergy Nuclear Power Mktg LLC v New York State Pub Serv Comm, 2014 NY Slip Op 07711, 3rd Dept 11-13-14

 

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Power Company Must Pay Town’s Ad Valorem Sewer Taxes Whether Or Not It Owns the Land On Which Its Transmission Facilities Are Located and Whether or Not It Produces Sewage

The Fourth Department determined that as long as the power company owns the land on which its mass properties (transmission facilities) are located, it must pay the “ad valorem” sewer taxes, even if no sewage is generated. The court further determined that even if the power company did not own the land, it would still be liable for the tax because the town’s storm water sewer system protects the facilities from flooding:

If petitioner owns the land, it must pay the sewer taxes regardless of whether the properties currently produce sewage inasmuch as it is theoretically possible that the properties could be ” developed in a manner that will result in the generation of [sewage]’ ” …, and it is immaterial that the Town taxes the land separately from the improvements thereon and that petitioner challenges only the tax on the improvements.

We further conclude that the court properly granted respondents’ application for summary judgment based on the fact that petitioner may still benefit from the sewer district even if it does not own the land on which its mass properties are located. Respondents established that a significant amount of storm water infiltrates the Town’s sewer system and that “the sewer district encompasses storm sewers that actually or might potentially safeguard [petitioner]’s transmission and distribution facilities from flooding” … . Matter of Niagara Mohawk Power Corp v Assessor, Town of Cheektowaga, 2014 NY Slip Op 04627, 4th Dept 6-20-14

 

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Valid State Purpose (Conserving Drinking Water) Did Not Relieve State of Liability Re: Breach of an Agreement to Provide a Certain Amount of Water to a Hydroelectric Power Provider

The Third Department determined that a contract with a hydroelectric power provider requiring a certain amount of water to be released from a reservoir was unambiguous and therefore must be enforced.  The amount of water released was less than called for in the contract due to a drought and concerns about the drinking water supply:

The parties to the agreement intended to resolve a dispute after defendants took claimant’s predecessor’s land in eminent domain.  Claimant’s predecessor wanted to ensure that sufficient water would reach its hydroelectric generation facility and accepted a considerably smaller amount of money than it sought, in exchange for the rights associated with the water release rates from the reservoir.  These rights would be far less valuable if defendants could deviate from the operating diagram’s release rates, and avoid liability in doing so, as long as defendants supported their actions with any State purpose. Pursuant to the agreement, defendants could only avoid liability if they deviated from the operating diagram’s release rates for a State canal use or purpose.  Because defendants altered the release rate for the purpose of preserving safe drinking water during a drought – a legitimate public and State purpose (see ECL 15-0105 [5]) – and not for a canal-related purpose, defendants are liable for breaching the contract… .  Erie Boulevard Hydropower v State, 516510, 3rd Dept 1-9-14

 

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Local Law Prohibiting Use of Groundwater Outside Village Preempted by State Law

The Second Department determined a village Local Law which prohibited the removal of groundwater for use outside the village was preempted by state law (Transportation Corporations law, Environmental Conservation Law (ECL)):

As relevant to this case, the Transportation Corporations Law permits water-works corporations to extend their service area to neighboring municipalities by entering “into a contract with the authorities of any city, town or village not mentioned in its certificate of incorporation, but situated in the same county as the city, towns or villages mentioned therein or in an adjoining county” (Transportation Corporations Law § 46). … Notably, the statutory procedure for obtaining a certificate of extension does not require the water-works corporation to obtain the consent or permission of the municipality where it was originally incorporated, an omission which we must conclude the Legislature intended (see McKinney’s Cons Laws of NY, Book 1, Statutes § 240) and which comports with the long-recognized policy in favor of the extension of water resources to less-advantageously situated municipalities… . … Accordingly, we conclude that the Legislature manifested an intent to preempt local laws which have the effect of prohibiting a water-works corporation from transferring water from one municipality to another … .Further, to the extent that the Local Law was enacted, either in purpose or effect, as a measure to regulate withdrawals of groundwater, it is further preempted by article 15 of the ECL. The terms “waters,” as used in ECL article 15, is expansive and includes all surface and underground water within the state’s territorial limits (see ECL 15-0107[4]). ECL article 15 states: “The sovereign power to regulate and control the water resources of this state ever since its establishment has been and now is vested exclusively in the state of New York, except to the extent of any delegation of power to the United States” … . The Legislature declared it to be the public policy of the state that: “The regulation and control of the water resources of the state of New York be exercised only pursuant to the laws of this state” (ECL 15-0105[1] … ), and the Department of Environmental Conservation (hereinafter the DEC) is given jurisdiction “in any matter affecting the construction of improvements to or developments of water resources for the public health, safety or welfare, including but not limited to the supply of potable waters for the various municipalities and inhabitants thereof” (ECL 15-0109). Woodbury Hgts Estates Water Co Inc v Village of Woodbury, 2013 NY Slip Op 07468, 2nd Dept 11-13-13

 

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Court Refused to Entertain All Issues Raised on Appeal Because They Were Not Raised Below and Could Not Be Determined as Matters of Law

In a case involving an assessment by defendant against plaintiff under the Federal Power Act for costs associated with a hydropower plant, dams and reservoirs, the Third Department noted that none of defendant’s arguments on appeal could be addressed because they were not raised below:

On appeal, defendant makes none of the arguments raised in connection with the motions before Supreme Court.  Instead, defendant now argues that plaintiff failed to state a cause of action for a refund by failing to allege that it paid the unauthorized assessments under protest.  However, “[a]n appellate court should not, and will not, consider different theories or new questions, if proof might have been offered to refute or overcome them had they been presented at the trial [level]” … .  By raising this issue for the first time on appeal, defendant has deprived plaintiff of the opportunity to provide evidence of any protest.  The issue is, therefore, not properly before us, and we decline to consider it (see CPLR 5501 [a] [3]…).  Similarly, defendant’s contention that equity does not support a finding of unjust enrichment is also fact-intensive and, as such, it too was required to be raised before Supreme Court in order to be preserved for appellate review … .

Also unpreserved is defendant’s alternative argument that the action is time-barred … .  Although listed as an affirmative defense in the answer, defendant did not pursue dismissal of the action on this ground … .  Nor is this an issue of law that may be addressed for the first time on appeal, as plaintiff responds that it would be entitled to a toll of the statute of limitations based on the ongoing administrative proceedings and we must agree that the question of whether a statute of limitations is tolled raises factual issues … . Inasmuch as there are steps that plaintiff might have taken to counter the statute of limitations defense if it had been raised before Supreme Court, the issue is not properly before us and, again, we decline to consider it … .  Albany Engineering Corp v Hudson River/Black River Regulating District, 516220, 3rd Dept 10-17-13

 

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