On March 24, 2020, the Second Circuit Court of Appeals affirmed a district court decision dismissing a $2.7M claim by the Long Island Lighting Company (LIPA) in the case of Bouchard Transportation Co. Inc. vs. The Long Island Lighting Company. The case arose out of alleged damage to an underwater electric power cable in Hempstead Harbor, N.Y. The cable is owned by the Power Authority of the State of New York (NYPA). LIPA principally uses the energy generated by the underwater cable pursuant to an agreement with NYPA. LIPA claimed damages of $2,367,000 for the alleged costs of providing power to its customers for the 14 days when the underwater cable was not operational. LIPA also claimed $350,048 in damages relating to congestion rent shortfalls.
We moved to dismiss the LIPA claims based on Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 203 (1927), which precludes a party from recovering purely economic losses unless there is physical damage to property in which the party has a proprietary interest. LIPA claimed a proprietary interest in the cable. We argued before the district court that the LIPA claims must be dismissed under Robins and that LIPA was collaterally estopped from re-litigating its alleged proprietary interest in the cable since LIPA had previously litigated and lost that same issue in the Southern District of Texas. The district court agreed and dismissed the claims.
On appeal, LIPA argued that collateral estoppel should not apply because, it claimed, the Fifth Circuit applied a more stringent version of the Robins Dry Dock rule than the Second Circuit. LIPA also sought a public policy exception form the Robins Dry Dock rule. We opposed those arguments and the Second Circuit agreed that there is no difference between the application of the Robins Dry Dock rule in the Second Circuit and the Fifth Circuit. The Second Circuit also found no basis for any public policy exception in favor of LIPA. The appeal was handled by Freehill partner Gina Venezia, who argued the appeal, and associate Mike Dehart. To read the Second Circuit decision, click HERE.