Court of Appeals Answers Second Circuit Certified Questions in World Trade Center Cleanup Suit Against Battery Park City Authority

After the 9/11 terrorist attack, first responders and volunteers spent weeks/months/years cleaning up the City from the debris and dust left after the World Trade Center towers fell. A few of the buildings that were cleaned up were owned by the Battery Park  City Authority, a public benefit corporation created by the Legislature to spur economic redevelopment in Battery Park. When the workers doing the cleanup began to fall ill because of the cleanup of toxic dust, they brought personal injury claims against the BPCA in federal court for negligence and violations of NY Labor Law §§ 200 and 241(6) for failing to provide a safe workplace.

The plaintiffs’ claims were dismissed on July 29, 2009, however, for failure to timely serve a notice of claim pursuant to the Public Authorities Law. Afterwards, the New York Legislature enacted “Jimmy Nolan’s Law,” which revived the time-barred claims against the BPCA and provided the plaintiffs with an additional year to serve the notices of claim. The eight plaintiffs then took advantage of the new law and sued BPCA again. BPCA moved for summary judgment dismissing the claims and challenging the constitutionality of Jimmy Nolan’s Law on due process grounds. The State intervened in defense of the statute and argued that BPCA, as a public benefit corporation, lacks capacity to challenge the constitutionality of the state statute.

As I previewed in more depth here, New York generally follows the traditional rule that municipalities and other arms of the State lack capacity to challenge the acts of the State as their creator, including state legislation. BPCA argued, however, that as a public benefit corporation it is different. Under the Court of Appeals’ decision in Clark-Fitzpatrick, Inc. v Long Is. R.R. Co. (70 NY2d 382, 387 [1987]), BPCA argued, “a particularized inquiry is necessary to determine whether—for the specific purpose at issue—the public benefit corporation should be treated like the State.”

The District Court (SDNY) held that the BPCA is an entity independent of the State because it “was created to be independent of the State in performing primarily private functions, funded primarily by private means,” through issuance of bonds (Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig., 66 F Supp 3d 466, 472 [SDNY 2014]). Thus, the District Court concluded that BPCA had capacity to challenge the statute on due process grounds, and held that Jimmy Nolan’s Law violated the BPCA’s due process rights under the New York Constitution (see id. at 476).

On appeal, the Second Circuit did not find New York law on whether a public benefit corporation has capacity to challenge a state statute on constitutional grounds to be so clear. Instead, the Second Circuit held, it is “unclear whether New York courts have applied the [Clark-Fitzpatrick] particularized-inquiry test in the present context—that is, to determine whether a public benefit corporation should be treated like the State for the purpose of having the capacity to raise a constitutional challenge to a State statute” (Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig., 846 F3d 58, 64 [2d Cir 2017]).

So, the Second Circuit certified two questions to the Court of Appeals:

(1) Before New York State’s capacity-to-sue doctrine may be applied to determine whether a State-created public benefit corporation has the capacity to challenge a State statute, must it first be determined whether the public benefit corporation “should be treated like the State,” see Clark–Fitzpatrick, Inc. v. Long Island R.R. Co., [70 N.Y.2d 382, 521 N.Y.S.2d 653] 516 N.E.2d 190, 192 ([ ]1987), based on a “particularized inquiry into the nature of the instrumentality and the statute claimed to be applicable to it,” see John Grace & Co. v. State Univ. Constr. Fund, [44 N.Y.2d 84, 404 N.Y.S.2d 316] 375 N.E.2d 377, 379 ([ ]1978), and if so, what considerations are relevant to that inquiry?; and

(2) Does the “serious injustice” standard articulated in Gallewski v. H. Hentz & Co., [301 N.Y. 164] 93 N.E.2d 620 ([ ]1950), or the less stringent “reasonableness” standard articulated in Robinson v. Robins Dry Dock & Repair Co., [238 N.Y. 271] 144 N.E. 579 ([ ]1924), govern the merits of a due process challenge under the New York State Constitution to a claim-revival statute?

Answering those two certified questions in Matter of World Trade Center Lower Manhattan Disaster Site Litigation (Faltynowicz et al v Battery Park City Authority and two others) (No. 119), the Court of Appeals held that public benefit corporations are no different than any other arm of the State for purposes of capacity to challenge a state statute. Thus, they must fall within one of recognized exceptions to the general incapacity rule before they can bring such a claim, and “no ‘particularized inquiry’ is necessary to determine whether public benefit corporations should be treated like the State for purposes of capacity” (Opn, at 5).

Public benefit corporations, which are vehicles for funding public projects, the Court held, have two purposes: (1) to “protect the State from liability” and (2) to “enable public projects to be carried on free from restrictions otherwise applicable” if the State was the project sponsor. In that way, public benefit corporations have an existence separate from the State. That separate existence for those limited purposes, however, does not mean that public benefit corporations, as agents of the State, fall outside of New York’s general rule that subdivisions of the State lack capacity to challenge the acts of their creator on constitutional grounds. Indeed, the “particularized inquiry” test applied in Clark-Fitzpatrick applies only to public benefit corporations’ relationships with private parties, not to its relationship with the State. Thus, the Court held, “with few exceptions, [New York’s] capacity bar closes the courthouse doors to internal political disputes between the State and its subdivisions,” such as those in this case (Opn, at 9).

Reviewing the second certified question, the Court concluded that the “serious injustice” standard and the “reasonableness” standard aren’t really that different, although the different terminology has been used in prior precedent. Clarifying, therefore, what standard applies to the merits of a due process claim to a claim-revival statute, the Court held “a claim-revival statute will satisfy the Due Process Clause of the State Constitution if it was enacted as a reasonable response in order to remedy an injustice” (Opn, at 32). As the Court explained, under that standard, a claim-revival statute will be constitutional if there was “an identifiable injustice that moved the legislature to act” and “the legislature’s revival of the plaintiff’s claims for a limited period of time was reasonable in light of that injustice” (Opn, at 30-31). A higher standard of review would be too much, the Court held.

A more heightened standard would be too strict. In the context of a claim-revival statute, there is no principled way for a court to test whether a particular injustice is “serious” or whether a particular class of plaintiffs is blameless; such moral determinations are left to the elected branches of government. While we have traditionally expressed an aversion to retroactive legislation, of which claim-revival statutes are one species, we have noted that the modern cases reflect a less rigid view of the Legislature’s right to pass such legislation. Nonetheless, there must first be a judicial determination that the revival statute was a reasonable measure to address an injustice

(Opn, at 31-32 [cleaned up]).

Judges Rivera and Wilson wrote separately to expand on their views of the issues. Judge Rivera explained her view of the second certified question that “unless it impinges on a separate vested property right and not merely the hope of avoiding litigation, a claim-revival statute does not violate due process, because defendant has no fundamental right to a statute of limitations in perpetuity” (Rivera, J., concurring, at 9). And Judge Wilson argued, on the first certified question, that the question was not one of capacity at all. Plainly, he thought, the BPCA has capacity to bring a suit.  What it doesn’t have, Judge Wilson explained, is prudential standing that would make the question justiciable. Judge Wilson would have gone farther too, to offer for the Second Circuit a view of the case on the merits: BPCA loses.

With those questions answered, the case will proceed back to the Second Circuit for a decision on whether BPCA has capacity to challenge Jimmy Nolan’s Law (after the Court of Appeals decision, there is likely zero chance that it does) and whether BPCA’s due process claims will succeed on their merits (even if BPCA had capacity, its claims would still likely fail under the Court’s newly clarified standard). So, in all likelihood, the plaintiffs’ personal injury claims will proceed in District Court with BPCA on the hook for damages.

The Court of Appeals’ opinion can be found here.

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