Reproduced on Recycled Paper
APL-2016-00202 To be argued by:
KATHY CHANG PARK
15 minutes requested
Court of Appeals
State of New York
DORMITORY AUTHORITY OF THE STATE OF NEW YORK and
THE CITY OF NEW YORK,
Plaintiffs-Respondents,
and
NEW YORK CITY HEALTH AND HOSPITALS CORPORATION,
Plaintiff,
against
SAMSON CONSTRUCTION CO. (a/k/a SAMSON
CONSTRUCTION CO., INC. d/b/a SAMSON CONSTRUCTION
COMPANY, SAMSON CONSTRUCTION INC.),
Defendants,
and
PERKINS EASTMAN ARCHITECTS, P.C.,
Defendant-Appellant,
(Caption Continues on Inside Cover)
BRIEF FOR RESPONDENTS
RICHARD DEARING
DEVIN SLACK
KATHY CHANG PARK
of Counsel
April 13, 2017
ZACHARY W. CARTER
Corporation Counsel
of the City of New York
Attorney for Respondents
100 Church Street
New York, New York 10007
Tel: 212-356-0855 or -0817
Fax: 212-356-2509
kpark@law.nyc.gov
________________________
SAMSON CONSTRUCTION CO., INC.
Third-Party Plaintiff,
against
HAYWARD BAKER, INC., VACHRIS ENGINEERING, P.C., and AKRF ENGINEERING, P.C.,
Third-Party Defendants.
________________________
VACHRIS ENGINEERING, P.C.,
Fourth-Party Plaintiff,
against
MUESER RUTLEDGE CONSULTING ENGINEERS,
Fourth-Party Defendant.
________________________
PERKINS EASTMAN ARCHITECTS, P.C.,
Second Third-Party Plaintiff,
against
SEVERUD ASSOCIATES CONSULTING ENGINEERS, P.C., GILBANE BUILDING COMPANY,
TDX CONSTRUCTION CORPORATION, GILBANE BUILDING COMPANY/TDX
CONSTRUCTION CORPORATION, a joint venture, and
PILE FOUNDATION CONSTRUCTION COMPANY, INC.,
Second Third-Party Defendants.
________________________
SAMSON CONSTRUCTION CO., INC., and
PILE FOUNDATION CONSTRUCTION COMPANY, INC.,
Third Third-Party Plaintiffs,
against
ROADWAY CONTRACTING, INC., SOIL SOLUTIONS, INC., CONSOLIDATED EDISON
COMPANY OF NEW YORK, INC., KLINE IRON & STEEL CO., INC.,
A.J. MCNULTY & COMPANY, INC. and SPX CORPORATION,
Third Third-Party Defendants.
________________________
TABLE OF CONTENTS
Page
i
TABLE OF AUTHORITIES ....................................................... iii
PRELIMINARY STATEMENT ................................................... 1
QUESTIONS PRESENTED ....................................................... 5
STATEMENT OF THE CASE .................................................... 6
A. The City’s $240 million DNA lab .................................. 6
B. Perkins’ key design and monitoring role in the
project ............................................................................ 9
C. Plaintiffs’ lawsuit against Perkins ............................. 11
ARGUMENT ............................................................................. 16
POINT I: THE CITY RAISED A TRIABLE ISSUE
THAT IT IS AN INTENDED THIRD-PARTY
BENEFICIARY OF DASNY’S CONTRACT WITH
PERKINS ......................................................................... 16
A. The City’s status as a third-party beneficiary gives
it the right to bring a contract claim against
Perkins. ....................................................................... 16
B. Perkins’ stingy reformulation of the third-party
beneficiary doctrine cannot be squared with this
Court’s decision in Newburgh. .................................... 21
POINT II: PLAINTIFFS RAISED A TRIABLE ISSUE
THAT THEIR CLAIMS LIE IN BOTH TORT AND
CONTRACT ...................................................................... 26
A. As a third-party beneficiary, the City’s professional
malpractice claim against Perkins is timely. ............. 27
TABLE OF CONTENTS (cont’d)
Page
ii
B. Plaintiffs’ tort claims sounding in professional
malpractice are not duplicative of the contract
claims. ......................................................................... 29
1. Separate from its contractual obligations,
Perkins owed a duty arising from its professional
status. ...................................................................... 30
2. As further support, Perkins’ failure to perform
competently posed a risk of catastrophic harm to
public safety. ........................................................... 34
C. Perkins’ arguments concerning plaintiffs’ damages
are meritless. .............................................................. 37
CONCLUSION .......................................................................... 42
CERTIFICATE OF COMPLIANCE .......................................... 43
TABLE OF AUTHORITIES
Page(s)
iii
Cases
17 Vista Fee Assocs. v. Teachers Ins. & Annuity Ass’n of
Am., 259 A.D.2d 75 (1st Dep’t 1999) ......................................... 40
Assured Guar. (UK) Ltd. v J.P. Morgan Inv. Mgt. Inc.,
80 A.D.3d 293 (1st Dep’t 2010), aff’d 18 N.Y.3d 341
(2011) ......................................................................................... 39
Bd. of Managers of Riverview at Coll. Point
Condominium III v. Schorr Bros. Dev. Corp.,
182 A.D.2d 664 (2d Dep’t 1992) ................................................. 25
Bellevue South Assoc. v. HRH Constr. Corp.,
78 N.Y.2d 282 (1991) ................................................................. 39
Brushton-Moira Cent. Sch. Dist. v. Fred H. Thomas
Assocs., P.C., 91 N.Y.2d 256 (1998) ..................................... 30, 31
City Sch. Dist. of the City of Newburgh v. Stubbins &
Assocs., 85 N.Y.2d 535 (1995) ............................................ passim
Clark-Fitzpatrick, Inc. v. Long Island R. Co.,
70 N.Y.2d 382 (1987) ................................................................. 29
Encore Lake Grove Homeowners Ass’n, Inc. v. Cashin
Assoc., P.C., 111 A.D.3d 881 (2d Dep’t 2013) ............................ 17
Fourth Ocean Putnam Corp. v. Interstate Wrecking Co.,
66 N.Y.2d 38 (1985) ....................................................... 21, 22, 26
Hydro Investors, Inc. v. Trafalgar Power, Inc.,
227 F.3d 8 (2d Cir. 2000) ........................................................... 40
Kerusa Co. LLC v. W10Z/515 Real Estate Ltd.
Partnership, 50 A.D.3d 503 (1st Dep’t 2008), rev’d on
other grounds, 12 N.Y.3d 236 (2009) ......................................... 25
TABLE OF AUTHORITIES (cont’d)
Page(s)
iv
Lake Placid Club Attached Lodges v. Elizabethtown
Builders, Inc., 131 A.D.2d 159 (3d Dep’t 1987) ......................... 25
Lawrence v. Fox,
20 N.Y. 268 (1859) ..................................................................... 16
Mendel v. Henry Phipps Plaza W., Inc.,
6 N.Y.3d 783 (2006) ................................................................... 17
New York Univ. v. Cont’l Ins. Co.,
87 N.Y.2d 308 (1995) ................................................................. 33
Port Chester Electric Construction Corp. v. Atlas,
40 N.Y.2d 652 (1976) ........................................................... 21, 22
Schiavone Constr. Co. v. Elgood Mayo Corp.,
81 A.D.2d 221 (1st Dept’ 1981), rev’d on dissent
below, 56 N.Y.2d 667 (1982) ...................................................... 39
Sears, Roebuck & Co. v. Enco Assocs.,
43 N.Y.2d 389 (1977) ..................................................... 28, 30, 31
Seaver v. Ransom,
224 N.Y. 233 (1918) ................................................................... 16
Sommer v. Fed. Signal Corp.,
79 N.Y.2d 540 (1995) ......................................................... passim
Town of Oyster Bay v. Lizza Indus.,
22 N.Y.3d 1024 (2013) ......................................................... 28, 29
Triangle Underwriters, Inc. v. Honeywell, Inc.,
604 F.2d 737 (2d Cir. 1979) ....................................................... 31
Trustees of Columbia Univ. v. Gwathmey Siegel &
Assocs. Architects, 192 A.D.2d 151 (1st Dep’t 1993) ................. 35
TABLE OF AUTHORITIES (cont’d)
Page(s)
v
Other Authorities
2007 Annual Report, DASNY, http://bit.ly/2oVaxla (last
visited Apr. 13, 2017). .................................................................. 6
About, DASNY, http://bit.ly/2omRz3w (last visited Apr.
13, 2017). ...................................................................................... 6
Bellevue Hospital, New York City Health + Hospitals,
http://bit.ly/2o7rXJN (last visited Apr. 13, 2017). ....................... 7
PRELIMINARY STATEMENT
This case centers on a $240 million state-of-the-art forensic
lab for the City of New York’s Office of the Chief Medical
Examiner (OCME), funded by the City and custom-built for the
City on a City-owned parcel on the Bellevue Hospital Campus in
Manhattan. Flaws in the design and construction of the lab
resulted in significant damage to adjacent hospital structures
owned by the City and operated by the New York City Health +
Hospitals Corporation, as well as to nearby streets, water mains,
and sewer lines.
Plaintiffs-respondents the City of New York and the
Dormitory Authority of the State of New York (DASNY), the
entity hired by the City to manage and provide the initial
financing for the construction of the lab, subsequently sued
Perkins Eastman Architects P.C., the architect for the project.
Plaintiffs alleged that Perkins’ faulty recommendations and
failure to conduct proper site investigations caused substantial
damage to public property, increased project costs, and delayed
the project by more than 18 months. After limited discovery,
2
Perkins moved for summary judgment, arguing that (1) the City
could not recover for breach of contract because it never entered
into a contract with Perkins and was not a third-party beneficiary
of the contract between DASNY and Perkins, and (2) neither the
City nor DASNY could recover in tort because their professional
malpractice claims were either time-barred or duplicative of their
breach of contract claims. The Appellate Division, First
Department rejected Perkins’ arguments, finding that plaintiffs’
claims should proceed to trial.
This Court should affirm, and allow a jury to decide this
dispute. The Appellate Division correctly found it would be
premature to dismiss the City’s breach of contract claim because
triable issues exist regarding whether the City was a third-party
beneficiary to DASNY’s contract with Perkins. That contract
identified three City agencies—OCME, NYPD, and FDNY—as the
“Client,” and it made clear that OCME would operate the forensic
lab. The City also retained control over critical aspects of the
project, including the building’s design and construction, the
project’s budget, and the selection of contractors (including
3
Perkins). This case thus falls in the heartland of traditional third-
party beneficiary principles, which are rooted in the fairness,
practicality, and expediency of permitting the person for whose
benefit a contract is made to bring suit.
Distilled to its essence, Perkins’ core argument is that, for
the third-party beneficiary doctrine to apply, there must be a
contractual provision explicitly naming a third party as an
intended beneficiary. But Perkins fails to grapple with this Court’s
ruling in City School District of the City of Newburgh v. Stubbins
& Associates, 85 N.Y.2d 535 (1995). That case—which mirrored
the facts at issue here—puts to rest any notion that a contract
must explicitly confer third-party beneficiary status. Here, if
anything, the contract and surrounding circumstances compel the
conclusion that the City was an intended third-party beneficiary
of the contract between DASNY and Perkins. After all, the
projected was conceived by and for the City, built on City-owned
land, and meant to fulfill a need unique to the City. And even if
there were any doubt as to whether the City was an intended
4
beneficiary (and there is none), at the very least, there is a triable
issue of fact to be resolved at trial.
Contrary to Perkins’ argument, plaintiffs can also proceed to
trial on the professional malpractice claims against Perkins. First,
the City’s professional malpractice claim against Perkins is timely
because, as a third-party beneficiary, the City’s claim did not
accrue until the completion of the project.
Second, plaintiffs can pursue both tort and contract claims
because, in addition to its contractual obligation to investigate the
site conditions and make appropriate recommendations for the
excavation system, Perkins had an entirely separate duty arising
from its professional status to exercise the standard of
professional care generally accepted in the field of architecture.
That professional relationship alone is sufficient to establish
existence of a separate duty of care distinct from the contractual
duties Perkins owed to DASNY and the City. The eight-inch
settlement of a hospital building and the accompanying damage to
road beds, sidewalks, sewers, and water pipes near a hospital in a
crowded city raised a triable issue that Perkins’ failures presented
5
a risk of catastrophic consequences affecting public safety, further
supporting a separate duty of care.
QUESTIONS PRESENTED
1. Is there a triable issue as to whether the City was a third-
party beneficiary of DASNY’s contract with Perkins, where the
City was indisputably the owner and ultimate user of the DNA
lab; the City provided the land and funded the design and
construction of the lab; the City remained involved in and
exercised control over aspects of the project; and the contract’s
plain language designated OCME, along with other City agencies,
as DASNY’s client?
2. Can plaintiffs proceed with their professional malpractice
claims, where (a) the City’s tort claim is timely because it did not
accrue until the project was completed, and (b) Perkins owed
plaintiffs a duty arising out of its professional status, and, as
additional support, there is a triable issue as to whether Perkins’
shortcomings created a risk of catastrophic harm?
6
STATEMENT OF THE CASE
A. The City’s $240 million DNA lab
In 2000, the City decided to build a state-of-the-art forensic
biology lab for OCME to analyze DNA collected from crime scenes
(Record on Appeal (“R.”) 148, 617). OCME—a city agency—is a
division of the New York City Department of Health and Mental
Hygiene (R. 617). OCME performs more DNA analyses than any
other government lab in the country.1
To facilitate its project, the City turned to DASNY, a public
benefit corporation whose mission is to help finance and construct
public projects for New York’s higher education, health care, and
public institutions (R. 617).2 DASNY manages hundreds of multi-
million dollar construction projects for public and not-for-profit
entities every year: other recent projects include the $457 million
expansion of John Jay College, the $401 million construction of a
new facility to house the Bronx County Supreme Court Criminal
1 2007 Annual Report, DASNY, at 22, http://bit.ly/2oVaxla (last visited Apr.
13, 2017).
2 About, DASNY, http://bit.ly/2omRz3w (last visited Apr. 13, 2017).
7
Term, and the $51 million renovation of Kings County Hospital
Center.3
In August 2001, DASNY and the City entered into an
agreement for DASNY to manage and finance the planning,
design, and construction of the DNA lab for the City (R. 623-44).
The DNA lab was designed to be a 15-story structure with a two-
level basement, occupying a footprint of approximately 25,000
square feet (R. 618). The City selected a parcel of City-owned land
at First Avenue and East 26th Street in Manhattan as the site for
the DNA lab (R. 618). The location is part of Bellevue Hospital
Campus and directly adjacent to the wing of Bellevue Hospital
known as the C&D Building, which is also owned by the City and
occupied by New York City Health + Hospitals Corporation
(R. 618). Bellevue Hospital is a busy hospital: in 2015 alone, the
hospital had more than 800 beds in operation, over 100,000
emergency visits, and nearly 500,000 clinic visits.4
3 2007 Annual Report, supra note 1, at 22-23, 36.
4 Bellevue Hospital, New York City Health + Hospitals, http://bit.ly/2o7rXJN
(last visited Apr. 13, 2017).
8
The City’s interests in and control of the DNA lab were
apparent from the project’s inception. For one, the project was
funded by the City and the lab is situated on City-owned land
(R. 617-18, 730-32). And the project involved a uniquely large and
state-of-the-art DNA processing lab that only the City would need.
Although DASNY was initially responsible for covering the
project’s day-to-day expenses, the City reimbursed DASNY for
those payments (R. 730-32). In addition, OCME—which was
identified in DASNY’s contract with Perkins as the “client”—was
intimately involved with the design and construction process: the
agency reviewed and approved plans and specifications for the lab,
retained control of the budget, and approved contract change
orders (R. 618). OCME representatives also periodically visited
the site (R. 618).
DASNY’s contract with Perkins contained other indicia
supporting the City’s intended beneficiary status. Specifically, the
City was protected by being named as an additional insured on
Perkins’ general liability insurance policy for the project, and
Perkins was also required to indemnify and hold harmless the
9
City against all claims arising out of its negligent acts (R. 135,
138, 618). The contract also required meetings between Perkins
and OCME representatives at various points during the design
and construction process (R. 148, 155).
B. Perkins’ key design and monitoring role in
the project
Under their agreement, the City authorized DASNY to
contract with consultants, contractors, and a construction
manager (R. 619, 627-28). DASNY retained Perkins as the
architect for the project (R. 130-78, 619).
As part of its $10 million contract, Perkins agreed to provide
a broad range of architectural, engineering, and construction
supervision services (R. 132, 148). From the outset, Perkins was to
interview “Client” staff—with the “Client” identified as OCME,
NYPD, and FDNY—to determine the needs for the project
(R. 148). Perkins was also charged with creating a site plan to
“locate the new [lab] in relation to the Bellevue Hospital Campus”
(R. 151); developing a plan for soil testing and subsurface
investigations (R. 151); making appropriate design
10
recommendations (R. 666); preparing contract drawings and
specifications (R. 148-58, 618, 620); and ensuring that
construction work complied with specifications and the design
intent (R. 156-57).
As the project moved forward, Perkins and its subcontractors
presented two viable options for a suitable earth excavation
system: (1) the use of steel sheeting pilings, and (2) the use of
slurry walls (R. 243, 246, 620). Relying on Perkins’
recommendation that either option was acceptable, plaintiffs
decided to go with the more cost-effective option of using driven
steel sheeting pilings (R. 243, 620). But it later became apparent
that the recommendation by Perkins was premised in part on
their mistaken assumption that the adjacent Bellevue C&D
Building was supported by steel piles to bedrock, rather than
wood friction piles in sand (R. 243, 245-47)
DASNY awarded a contract to lay the foundation to Samson
Construction Company (R. 620, 736-98). In May 2002, when
Samson began driving piles as part of the foundation work, the
adjacent C&D Building began to settle and continued to settle
11
during the ongoing foundation work (R. 620-21). Initially, the
vibrations from the excavation caused cracks and fissures in the
adjacent building, and in some instances, caused settlements
within a matter of hours (R. 621). On August 26, 2003 (after a few
incremental settlements), the building foundation abruptly
dropped a few inches (R. 95, 343, 345, 620-21).
By March 2004, the C&D Building had experienced
differential settlement totaling nearly eight inches (R. 621).
Structures adjacent to the project, including the C&D Building,
sidewalks, roadbeds, sewers, and water systems, were extensively
damaged (R. 621). The Department of Buildings issued two stop-
work orders due to the settlements (R. 250, 255, 282), and the
steps taken to address risks posed by settlements delayed the
project by more than 18 months (R. 621).
C. Plaintiffs’ lawsuit against Perkins
DASNY and the City sued Perkins and Samson (R. 90-101).
With respect to Perkins, the complaint alleged, among other
things, that Perkins failed to comply with its contractual and
common-law professional malpractice obligations in connection
12
with its work on the project (R. 99-100). Plaintiffs asserted that
the settlement and the resulting damage were caused by Perkins’
failure to conduct an adequate site investigation, failure to provide
a foundation design appropriate to the existing site conditions,
and failure to advise plaintiffs of the risks that the installation of
the steel sheeting system posed to the C&D Building, among other
things (R. 620). Thus, plaintiffs sought to recover the increased
project costs as well as the expenses to repair damage to City-
owned structures and facilities adjacent to the site (R. 101).
With multiple witnesses remaining to be deposed and the
note of issue yet to be filed (R. 515-46), Perkins moved for
summary judgment on plaintiffs’ fifth cause of action sounding in
breach of contract, as to the City, and the sixth cause of action
sounding in professional malpractice, as to both plaintiffs (R. 565-
87). Supreme Court, New York County (Bransten, J.) dismissed
the City’s breach of contract and malpractice claims against
Perkins, but found triable issues of fact to preclude the dismissal
of DASNY’s malpractice claim against the City (R. 55-63).
13
Supreme Court ruled that the City was not an intended
third-party beneficiary of the contract, simply because the
contract between DASNY and Perkins did not expressly refer to
the City as such (unlike the Samson contract, which contained a
provision stating that the City was an intended beneficiary)
(R. 57-60, 783). Thus, the court determined that the City had no
right to sue Perkins for breach of contract (R. 60).
Having determined that the City was not an intended third-
party beneficiary, the court further concluded that the City’s tort
claim was a simple negligence claim, instead of a professional
malpractice claim premised on a professional relationship. Thus,
the court determined that the City’s claim was subject to the
three-year statute of limitations for simple negligence measured
from the date damage first became apparent (R. 60-63).5 Since
Perkins was not named as a defendant until more than three
5 The three-year statute of limitations for a professional malpractice claim, on
the other hand, would have accrued when Perkins’ professional relationship
ended in 2007 (R. 60).
14
years after the first signs of settlement became apparent, the
court dismissed the City’s tort claim (R. 60-63).
But the court determined that DASNY had properly alleged
and could maintain both tort and contract claims against Perkins
(R. 55-57). The court recognized that “professionals ... may be
subject to tort liability for failure to exercise reasonable care,
irrespective of their contractual duties” (citations and inner
quotation marks omitted) (R. 55).
The Appellate Division, First Department unanimously
reversed Supreme Court’s determination regarding the City’s
third-party beneficiary status, holding that the City had amply
demonstrated issues of fact as to that question (R. 7). Central to
the court’s reasoning were the following considerations: the
contract expressly stated that a City agency would operate the
DNA lab, and the City retained control over various aspects of the
project, including the building’s design and construction, the
project’s budget, and the selection of contractors (R. 7).
The majority, however, agreed with Supreme Court that the
malpractice claim could proceed to trial (R. 7). The court noted
15
that Perkins, as the architect, may be subject to tort liability
based on a failure to exercise due care in the performance of its
duties (R. 7-8). The court also determined that “the particular
project ... is so affected with the public interest that the failure to
perform competently can have catastrophic consequences” (R. 7-8).
Citing the resulting damage to sidewalks, roadbeds, sewers, and
water systems located near a major medical center, the court
found a triable issue as to whether the project was so affected with
the public interest that Perkins’ failure to comply with relevant
professional standards had the potential to result in catastrophic
consequences (R. 9).
Justice Tom dissented in part (R. 12-16). He would have held
that DASNY’s cause of action for malpractice was not independent
of its contractual claim (R. 16). In his view, the settling was not
“catastrophic” because it was gradual and “never posed a serious
threat to the public’s safety” (R. 14-15).
16
ARGUMENT
POINT I
THE CITY RAISED A TRIABLE ISSUE
THAT IT IS AN INTENDED THIRD-
PARTY BENEFICIARY OF DASNY’S
CONTRACT WITH PERKINS
A. The City’s status as a third-party beneficiary
gives it the right to bring a contract claim
against Perkins.
For well over a century, this Court has recognized that a
party may have a right to sue on a contract even without being a
party to the contract. See Lawrence v. Fox, 20 N.Y. 268, 272-75
(1859). This longstanding principle—known as the third-party
beneficiary doctrine—arises from the notion that “it is just and
practical to permit the person for whose benefit the contract is
made to enforce it against one whose duty it is to pay” or perform.
Seaver v. Ransom, 224 N.Y. 233, 237 (1918). Because the party
who is supposed to receive the benefit of the contract’s
performance is often the true injured party when a contract is
breached, it makes pragmatic and equitable sense for that party to
share the right to sue for the breach, at least as a default rule
from which contracting parties are free to depart.
17
Of course, not every party that derives some benefit from a
contract will qualify as a third-party beneficiary. A party’s status
as a third-party beneficiary hinges on whether the party was an
intended, as opposed to merely an incidental, beneficiary of a valid
and binding contract. See Mendel v. Henry Phipps Plaza W., Inc., 6
N.Y.3d 783, 786 (2006). To determine whether the party was an
intended third-party beneficiary of a contract, courts may look at
the surrounding circumstances as well as the agreement. Encore
Lake Grove Homeowners Ass’n, Inc. v. Cashin Assoc., P.C., 111
A.D.3d 881, 882 (2d Dep’t 2013); see also City Sch. Dist. of the City
of Newburgh v. Stubbins & Assoc., 85 N.Y.2d 535, 538-39 (1995).
The contract does not have to expressly name the party as a
third-party beneficiary. City School District of the City of
Newburgh v. Stubbins & Association, 85 N.Y.2d 535 (1995), is
directly on point. There, this Court recognized that the plaintiff
municipality was the intended third-party beneficiary of a
contract between an architect and a development corporation that
assisted the municipality with the financing and construction of a
18
library, even though the contract did not explicitly name the
municipality as a third-party beneficiary. Id. at 538-39.
Indeed, this Court stressed other considerations: (1) the
development corporation undertook the construction of the library
on behalf of the municipality; (2) the intended purpose of the
building, which was for the municipality’s use, was known to all
parties at the time the contracts were negotiated; and (3) the
municipality remained involved in the construction project: it
reviewed and approved the architectural plans and specifications,
retained control of the budget and change orders during
construction, and had a representative at the construction site on
a daily basis. Id. Thus, this Court concluded that the
municipality’s relationship with the architect amounted to the
“functional equivalent of privity.” Id. at 539 (inner quotation
marks omitted).
This case is strikingly similar and, indeed, it is telling that
Perkins ignores Newburgh entirely in its brief, even though the
case was a focus below. Here, as in Newburgh, the City likewise
entered into a project management agreement with DASNY.
19
DASNY then contracted with Perkins for architectural and
engineering services in connection with the design and
construction of the DNA lab.
Just as in Newburgh, the surrounding circumstances leave
no doubt that the City was an intended beneficiary of the contract
between DASNY and Perkins. This was no run-of-the-mill
building; it was a large, state-of-the-art DNA processing lab. The
City paid for the lab’s construction, the lab was built on City-
owned land, the City would own the completed lab, and the parties
understood from the outset that OCME—a City agency—intended
to use the lab. The contract also expressly named the OCME
(along with other city agencies) as DASNY’s “Client” (R. 148). The
contract additionally included the requirement that Perkins
indemnify and hold harmless the City for Perkins’ negligent acts
(R. 138), thus contemplating the City’s ability to bring an
indemnification suit enforcing this contractual obligation against
Perkins, and reflecting that the City was intimately involved and
far from a “stranger to the contract.” Newburgh, 85 N.Y.2d at 538.
20
Like the municipality in Newburgh, the City was also
involved in the design and construction process. It reviewed and
approved the plans and specifications for the DNA lab, and
retained control of the budget and change orders during
construction (R. 618). The City’s representatives were also
periodically on the project site (R. 618). Perkins cannot seriously
claim that it did not know about the City’s involvement in the
project (App. Br. at 37): even setting aside the fact that the entire
function of the contract was to build a DNA lab for the City, the
contract expressly provided for meetings between Perkins and
OCME at various points during the design and construction
process (R. 148, 155), and DASNY’s well-known role as a project
manager for governmental entities belies any suggestion that it
was funding the $240 million project itself (supra, p. 6-7).
Viewed cumulatively, these circumstances confirm that the
City was an intended beneficiary of the contract. At a bare
minimum, the City raised a triable issue of fact on this issue.
Accordingly, the Appellate Division correctly reinstated the City’s
contract claim against Perkins.
21
B. Perkins’ stingy reformulation of the third-
party beneficiary doctrine cannot be squared
with this Court’s decision in Newburgh.
Seeking to dramatically undercut the third-party beneficiary
doctrine, Perkins urges this Court to cabin the doctrine so that it
applies only where the contract contains an express statement
bestowing third parties with a right to enforce the contract (App.
Br. at 31-32). But Perkins’ narrow reformulation squarely conflicts
with Newburgh, which makes clear that a contract need not
include an express statement of intent for the doctrine to apply.
Thus, although the parties here could have included a provision
confirming the City’s status as an intended beneficiary of the
Perkins contract (like the parties did in the Samson contract), the
default rule endorsed by this Court inures to the City’s benefit,
especially where numerous indicators reveal that the parties
intended the City to benefit from the agreement.
Perkins accordingly errs in its reliance on Port Chester
Electric Construction Corporation v. Atlas, 40 N.Y.2d 652 (1976),
and Fourth Ocean Putnam Corporation v. Interstate Wrecking
Company, 66 N.Y.2d 38 (1985). Both cases predated Newburgh
22
and, in any event, are not even remotely similar to this case. In
Port Chester, this Court recognized that a subcontractor hired to
perform work for which it was paid simply receives an incidental
benefit from a contract between an owner and general contractor.
See 40 N.Y.2d at 656. And in Fourth Ocean, this Court ruled that
a defaulting property owner seeking to claim the benefits of a
contract undertaken to remedy its own default by removing a
public nuisance was not the intended beneficiary, because the
contract work was not undertaken to benefit him, but to protect
the public. 66 N.Y.2d at 45. Neither case involved a situation
where the party seeking intended beneficiary status paid for the
project or retained control over the budget and plans, let alone
both, as was the case with the City here.
Nor did Fourth Ocean mandate an express statement of
intent, as Perkins suggests (App. Br. at 32-33). Quite the opposite:
Fourth Ocean recognized that “intention can be negated by express
agreement of the promisor and the promisee.” Id. at 44 n.2
(emphasis added). Here, Perkins never bargained for a provision
negating the default rule. In any event, this Court’s later decision
23
in Newburgh confirmed that the contract need not contain a
provision explicitly stating that a third party is the intended
beneficiary for the doctrine to apply—at least under the factually
similar circumstances presented here.
Perkins also mistakenly decries that the courts below erred
by relying on extrinsic or “parol” evidence (App. Br. at 36-39). As a
threshold matter, what Perkins evidently views as extrinsic
evidence is nothing of the sort, but rather the context that gives
all agreements the meaning their terms contemplate. Plaintiffs do
not, for instance, depend on extra-contractual communications
relating to the negotiation of the contract as reflecting the parties’
understanding of particular provisions. What matters here is the
essential context that gave the contract between DASNY and
Perkins shape and purpose: the fact that the DNA lab was
conceived to fulfill a governmental need unique to the City, was
built on City-owned land, and was to be operated by a City agency.
In any case, Newburgh settled that consideration of
circumstances outside the contract is permissible when
determining whether a party is a third-party beneficiary: there,
24
the Court clearly considered circumstances such as the extent of
the municipality’s involvement in the project (R. 618). Thus,
although Perkins suggests that there is a split among the
Appellate Divisions on the use of extrinsic evidence in
determining third-party beneficiary status (App. Br. at 39-41),
this Court’s precedent makes clear that the considerations
relevant to this case may be taken into account on this issue.
Equally flawed is Perkins’ contention that courts have
repeatedly held that mere end-users of buildings are not intended
beneficiaries (App. Br. at 37-38). The cases that Perkins cites
(App. Br. at 37-39) are inapposite, because they involved
condominium owners and prospective home purchasers who had
no involvement in the construction and design of the building, or,
25
in some instances, had not even purchased the condominium until
after construction was complete.6
The City was much more than a mere end-user here. Indeed,
this case presents polar opposite facts from a condo development
or ordinary home purchase. Here, the contracting parties
understood that a City agency was the client for the $240 million,
custom-built, high-tech DNA lab. The City was also continually
involved in the design and construction of the project, since it
reviewed and approved the plans and specifications, retained
control of the budget and change orders during construction, and
had its representatives periodically on the project site (R. 618).
These circumstances amply show that the City was not a mere
end-user of a facility: the project was conceived by and for the
City, as Perkins was well aware.
6 See Kerusa Co. LLC v. W10Z/515 Real Estate Ltd. Partnership, 50 A.D.3d
503, 504 (1st Dep’t 2008), rev’d on other grounds, 12 N.Y.3d 236 (2009)
(noting that the condo owners had no relationship, whether contractual or
otherwise, with the contractors involved in the construction); Bd. of Managers
of Riverview at Coll. Point Condominium III v. Schorr Bros. Dev. Corp., 182
A.D.2d 664, 664-65 (2d Dep’t 1992) (involving some condo owners who were
not the original purchasers of the home); Lake Placid Club Attached Lodges v.
Elizabethtown Builders, Inc., 131 A.D.2d 159, 160-61 (3d Dep’t 1987) (same).
26
Perkins sounds alarm that, under a more elastic view of the
third-party beneficiary doctrine, parties would be unable to
predict who might have a right of action with respect to any
particular project (App. Br. at 37-38). But the third-party
beneficiary doctrine will never have unduly expansive application
because it is cabined by the parties’ intent. And any lingering
concern on this point is easily resolved by the parties’ ability to
include contractual language expressly barring enforcement of the
contract by third parties, as this Court stated in Fourth Ocean.
The absence of such a contractual provision undermines Perkins’
entitlement to summary judgment here.
POINT II
PLAINTIFFS RAISED A TRIABLE
ISSUE THAT THEIR CLAIMS LIE IN
BOTH TORT AND CONTRACT
The Appellate Division also correctly determined that
plaintiffs may proceed with their professional malpractice claims.
Far from being merely duplicative of the contract claims, the tort
claims figure prominently in this litigation, because plaintiffs’
ability to bring professional malpractice claims not only allows
27
them to hold Perkins to the distinct duty attendant to the special
relationship of trust and confidence that architects have with their
clients, but also has important consequences for insurance
purposes and the ability to recover damages. There are also no
litigation efficiencies to be gained by dismissing the tort claims
alone before trial, since the two sets of claims turn on the same
events. This Court should therefore decline to dismiss plaintiffs’
tort claims.
A. As a third-party beneficiary, the City’s
professional malpractice claim against
Perkins is timely.
Since the City raised a triable issue of fact as to its third-
party beneficiary status, Supreme Court erred in dismissing on
summary judgment the City’s professional malpractice claim
28
against Perkins as untimely.7 In cases against architects, the
accrual date for statute of limitations purposes is completion of
performance. Newburgh, 85 N.Y.2d at 535. “[N]o matter how a
claim is characterized in the complaint—negligence, malpractice,
breach of contract—an owner’s claim arising out of defective
construction accrues on date of completion, since all liability has
its genesis in the contractual relationship of the parties.” Id.;
Sears, Roebuck & Co. v. Enco Assocs., 43 N.Y.2d 389, 396 (1977).
This Court has already decided that this accrual rule applies
equally to actions brought by “intended beneficiar[ies]” of
construction contracts. Town of Oyster Bay v. Lizza Indus., 22
N.Y.3d 1024, 1030 (2013) (citing Newburgh, 85 N.Y.2d at 538).
Applying this rule, the existence of a triable issue regarding the
7 Although the Appellate Division did not explicitly address the City’s
professional malpractice claim, as evidenced by Supreme Court’s decision and
the parties’ Appellate Division briefing, everyone understood that the City’s
professional malpractice claim rises and falls with its third-party intended
beneficiary status. The Appellate Division’s order, moreover, restored
plaintiffs’ sixth cause of action (R. 7), the one sounding in tort and asserted
on behalf of both plaintiffs. On appeal, Perkins does not appear to be
challenging the City’s professional malpractice claim on the ground that it is
duplicative of its contract claim, but in any event, the Appellate Division’s
reasoning as to why DASNY’s contract claim is not duplicative of the
professional malpractice claim applies equally to the City’s claims.
29
City’s third-party beneficiary status precludes dismissal of the
City’s tort claim on timeliness grounds. As a third-party
beneficiary, the City would not be time-barred from bringing its
professional malpractice claim, because it would not have accrued
until 2007 (when the project finished), and the City sued Perkins
within that year. See Town of Oyster Bay, 22 N.Y.3d at 1030
(citing Newburgh, 85 N.Y.2d at 538). As a result, the Appellate
Division’s order correctly restored the City’s professional
malpractice claim against Perkins.
B. Plaintiffs’ tort claims sounding in
professional malpractice are not duplicative
of the contract claims.
Nor are plaintiffs’ professional malpractice claims
duplicative of their contract claims. Perkins does not deny that, in
some cases, the law may impose a legal duty independent of
contractual obligations as an incident to the parties’ relationship.
Contract and tort claims are not always mutually exclusive; to the
contrary, this Court has been clear that a tort duty “may be
connected with and dependent upon [a] contract.” Clark-
Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 389 (1987).
30
Thus, one set of facts may give rise to both types of claims,
particularly where, as here, the public interest is implicated.
1. Separate from its contractual
obligations, Perkins owed a duty arising
from its professional status.
Perkins, as an architect, had a duty arising from its
professional status distinct from any contractual obligations. See
Brushton-Moira Cent. Sch. Dist. v. Fred H. Thomas Assocs., P.C.,
91 N.Y.2d 256, 260-61 (1998) (recognizing that “when the rights
and obligations of an owner and architect arise out of their
contractual relationship, the owner may sue in contract or tort”);
Sears, Roebuck & Co., 43 N.Y.2d at 392-93 (same). While Perkins
relegates this principle to a mere footnote in its brief (App. Br. at
23 n.2), professionals frequently fall within the category of parties
who may be subject to tort liability for failure to exercise
reasonable care, irrespective of their contractual duties. See
Sommer v. Fed. Signal Corp., 79 N.Y.2d 540, 552 (1995). “[I]n
these instances, it is policy, not the parties’ contract, that gives
rise to a duty of due care.” Id. at 553. Thus, a special relationship
31
based on professional status, on its own, is sufficient to give rise to
a tort duty distinct from any contractual obligations.
These principles make sense when it comes to architects.
Like other professionals, architects undergo extensive education,
training, and licensing requirements, since the proper
performance of architectural duties is crucial to keeping the public
safe from risks posed by poorly designed structures. But architects
and their clients do not stand on equal footing, because those
outside of the profession do not understand the intricacies of the
practice or know what necessary steps should be taken. Thus, the
very nature of the relationship demands trust and confidence.
Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 745
n.15 (2d Cir. 1979). To that end, the law has long rightly imposed
a separate, common-law duty upon architects to perform
obligations in a manner consistent with the generally accepted
standards of professional care in its industry. See Brushton-Moira
Cent. Sch. Dist., 91 N.Y.2d at 260-61; Sears, Roebuck & Co., 43
N.Y.2d at 392-93.
32
Here, as an architect, Perkins entered into a special
professional relationship with plaintiffs: it was hired to design and
to oversee the construction of a 15-story tower, to be located on a
waterside site in dense lower Manhattan, on a portion of Bellevue
Hospital Campus within 20 feet from the southern facade of an
active hospital facility (R. 148, 617). Accordingly, there is no
question that Perkins owed a professional duty of care to
plaintiffs, separate and distinct from its contractual obligations.
Citing Sommer v. Federal Signal Corporation, 79 N.Y.2d 540
(1995), Perkins argues that, to establish an independent duty, the
promisor must have breached a regulatory scheme designed to
protect the public (App. Br. at 17-19). But Perkins misapprehends
that decision. In Sommer, the plaintiff (the owner of an apartment
building) sued the defendant fire alarm company under both
contract and tort theories, after the company failed to timely
transmit the alarm to the fire department when a fire erupted in
the building. 79 N.Y.2d at 548-49. In that case, there was no
preexisting special relationship to speak of, since the common law
does not generally view the relationship between fire alarm
33
companies and those that engage them as warranting unique
protections. As a result, this Court looked to the regulatory
framework to see if the fire company’s services implicated the
public interest, precisely because the fire company did not have a
professional relationship with the municipality. 79 N.Y.2d at 552-
53; see also New York Univ. v. Cont’l Ins. Co., 87 N.Y.2d 308, 317
(1995) (looking to regulatory framework because insurer owed no
professional duty, but finding that insurance law was not in “the
same league as the protection of the personal safety of citizens.”).
Sommer simply did not address the situation where a common-law
duty arises from the parties’ special relationship alone.
This Court has no need to look to a regulatory framework to
fashion a new tort here, because Perkins’ duty flows from its
recognized professional status as an architect and thus by
definition implicates a deeply rooted public interest. As a result,
Perkins assumed an independent legal duty as an architect to
comply with professional standards, separate from any
contractual duties. Because that duty “stems from the nature of
34
its services,” and “is not only a function of its private contract,”
Sommer, 79 N.Y.2d at 552, Perkins is accountable in tort.
2. As further support, Perkins’ failure to
perform competently posed a risk of
catastrophic harm to public safety.
Courts thus have little need to resort to the guideposts
identified in Sommer when confronted with a claim based on an
already deeply rooted common-law duty, like the one that runs
from architects to their clients. See 79 N.Y.2d at 552-53. But even
if those guideposts were relevant here, they would only further
support the conclusion that Perkins owed plaintiffs a duty distinct
from its contractual duties.
In Sommer, the Court concluded that, even in the absence of
a preexisting special relationship, the fire alarm company in that
case still had an independent duty deriving from the nature of its
services, in addition to its contractual obligations. 79 N.Y.2d at
552. Considering the comprehensive fire-safety regulations and
the potential for grave consequences from the alarm company’s
failure to carefully and competently perform its job, the Court
determined that the alarm company’s services were rooted in the
35
protection of public safety. Id. at 552-53. The Court also pointed to
the manner in which the injury occurred (an abrupt and
unexpected fire) and the resulting harm (damage to real property),
finding that both were typical of tort claims, even if no one was
physically injured. Id. at 553. Thus, the Court held that the
municipality could proceed with its tort claim. Id.
So too here. The project site was located on Bellevue
Hospital Campus, twenty feet from the southern façade of
Bellevue Hospital, a fully operational and “much-used” hospital
facility “located in the heart of the largest city in the country.”
Trustees of Columbia Univ. v. Gwathmey Siegel & Assocs.
Architects, 192 A.D.2d 151, 154-55 (1st Dep’t 1993). The abrupt
and unexpected subsidence of the C&D Building, as well as
nearby streets, sidewalks, and water and sewer lines caused costly
delays to the project and, critically, damaged adjacent property
that was not part of the project.
Contrary to Perkins’ argument, some of the damage occurred
suddenly (App. Br. at 22): most notably, in August 2003, the
building settled by several inches in a single day (R. 95, 333-34,
36
620-21). But in any event, as the Appellate Division observed, “the
suddenness of the injury is only one factor for the court to
consider” in assessing the potential for a catastrophe (R. 10). Here,
the damage posed a sufficiently serious and concrete threat to
public safety: the actual damage to nearby streets, sidewalks, and
water and sewer lines created a risk of contamination to the water
supply and unsafe conditions in the City’s densely populated
streets, and potentially threatened the condition of vulnerable
hospital patients and the public’s access to the hospital. That risk
need not have ripened into an actual catastrophe, as long as it
“could have” resulted in grave harm, Sommer, 79 N.Y.2d at 553;
after all, in this context, tort liability helps discourage parties
from ever approaching a risk of such magnitude. Here, at a
minimum, DASNY raised a triable issue as to the potential for
catastrophic harm.
There is also no merit to Perkins’ suggestion that this Court
should extinguish the liability that ordinarily runs from architects
to the clients that depend on them on the theory that third parties
far more removed from the matter—like those who are injured
37
when using or walking by a building—might be able to bring
downstream negligence claims too (App. Br. at 29). This Court has
made clear that public policy dictates that a professional
malpractice claim may be brought against a professional by those
reliant on their expertise, even before any third party is harmed.
Indeed, it makes good sense to locate that right with a party who
has a closer relationship with the professional, because that party
has the incentive and ability to control risk to prevent future
harm at the time when it matters most. Whether other forms of
liability may also exist is beside the point, because this
longstanding framework is best calibrated to prevent harm.
C. Perkins’ arguments concerning plaintiffs’
damages are meritless.
This Court should reject Perkins’ argument (App. Br. at 24-
30) that plaintiffs are barred from bringing their professional
malpractice claims in conjunction with the contract claims on the
theory that they are not seeking damages unique to their tort
claims. Plaintiffs did indeed assert different amounts of damages
for the tort and contract claims in their complaint: plaintiffs
38
sought “an amount to be determined at trial, but reasonably
believed to be in excess of $12,000,000” for the contract claim, and
“an amount to be determined at trial, but reasonably believed to
be in excess of $16,000,000” for the tort claim (R. 101). This
difference in the amount sought for each cause of action is due to
the City’s pursuit of distinct damages under its tort theory—
namely, the property damage beyond the scope of the project itself
to the C&D Building, public roadways, and water and sewer
systems. And while Perkins repeatedly suggests (incorrectly) that
plaintiffs seek the same amount of damages under both theories, it
consistently stops short of admitting that the City and DASNY
can recover all of its damages under either theory, suggesting that
Perkins itself recognizes that there is a difference. Setting
sophistry aside, Perkins never explains why these questions are
suitable for resolution as a matter of law now, short of trial.
Equally unavailing is Perkins’ assertion that City itself
incurred no damages because all of the losses were directly
incurred by DASNY (App. Br. at 34). Plaintiffs submitted a
detailed account of the City’s reimbursement payments to DASNY
39
(R. 728-32), which, at a minimum, raised a triable issue that the
City was funding the project and the resulting expenses (R. 728-
32). This is sufficient for this early stage of litigation: if liability is
later proven at trial, the fact-finder will ultimately resolve which
party incurred which damages. Here too, it is telling that Perkins
never says who has the right to recover for certain damages. It
cannot have it both ways: either one defendant can recover for all
of the damages incurred as a result of its failures, or there is a
material difference in the damages each defendant can recover.
Perkins also misguidedly relies on case law applying the
economic loss rule (App. Br. at 26-27). That rule, which is typically
confined to the products liability context, bars parties from
bringing tort claims in addition to contractual claims when the
suffered loss is purely pecuniary, with no personal injury or
damage to property other than damage to the bargained-for
product. Bellevue South Assoc. v. HRH Constr. Corp., 78 N.Y.2d
282, 292-93 (1991); Schiavone Constr. Co. v. Elgood Mayo Corp.,
81 A.D.2d 221, 227-34 (1st Dept’ 1981) (Silverman, J., dissenting),
rev’d on dissent below, 56 N.Y.2d 667, 668-69 (1982); Assured
40
Guar. (UK) Ltd. v J.P. Morgan Inv. Mgt. Inc., 80 A.D.3d 293, 306
(1st Dep’t 2010), aff’d 18 N.Y.3d 341 (2011). Under this rule,
economic loss is understood as direct financial damages tied to the
bargained-for transaction. Thus, even if costs are incurred to
recover for damage to outside property, it is considered non-
economic loss.
But this Court need not consider the reach of the economic
loss rule in this case. Here, plaintiffs are seeking property
damages resulting from the destruction to the public streets,
roadbeds, and sewer systems, not to the site or building itself,
thus putting this case outside the purview of the economic loss
rule. In any event, New York courts have repeatedly declined to
extend the economic loss rule in cases involving liability for the
violation of a professional duty, based on the practical reality that
“many types of malpractice actions, such as those against an
accountant or attorney, will frequently result in economic loss
only.” 17 Vista Fee Assocs. v. Teachers Ins. & Annuity Ass’n of
Am., 259 A.D.2d 75, 83 (1st Dep’t 1999); see also Hydro Investors,
Inc. v. Trafalgar Power, Inc., 227 F.3d 8, 16-17 (2d Cir. 2000).
41
Otherwise, extending the rule to professional malpractice claims
would mean that, in nearly every instance, a party would be
foreclosed from bringing this type of claim, which would sharply
limit the liability of architects when the law imposes a broad duty
on them precisely because their work presents profound dangers.
Thus, the economic loss doctrine does not bar plaintiffs’
professional malpractice claims here.
42
CONCLUSION
The Court should affirm the order of the Appellate Division,
First Department.
Dated: New York, NY
April 13, 2017
RICHARD DEARING
DEVIN SLACK
KATHY CHANG PARK
of Counsel
Respectfully submitted,
ZACHARY W. CARTER
Corporation Counsel
of the City of New York
Attorney for Respondents
By: __________________________
KATHY CHANG PARK
Assistant Corporation Counsel
100 Church Street
New York, NY 10007
212-356-0855
kpark@law.nyc.gov
43
CERTIFICATE OF COMPLIANCE
I hereby certify that this brief was prepared using Microsoft
Word 2010, and according to that software, it contains 7,288
words, not including the table of contents, the table of cases and
authorities, the statement of questions presented, this certificate,
and the cover.
KATHY CHANG PARK
