February 21, 2018

A governmental entity operating in a public capacity may loose its right to claim sovereign immunity in litigation if it is found that the underlying cause of action involved its acting in a proprietary capacity

A governmental entity operating in a public capacity may loose its right to claim sovereign immunity in litigation if it is found that the underlying cause of action involved its acting in a proprietary capacity
Connolly v Long Is. Power Auth., Court of Appeals, 2018 NY Slip Op 01148

As was indicated in an earlier posting in NYPPL entitled Sovereign Immunity, Absolute Immunity, Qualified Immunity, Use Immunity, Transaction Immunity and Qualified Privilege, since updated to include the Connolly decision,  claims that may be advanced by public officers and employees involved in litigation and, or, administrative hearings, there are a number of theories that may be cited as a defense that will bar or limit legal action being taken, or continued, against an individual.

In Turturro v City of New York, 28 NY3d 469, the Court of Appeals addressed another theory for a defendant claiming immunity in an effort to avoid litigation, a claim that the entity is a governmental body. In Turturro the court explained that a government entity performing a purely proprietary, non-governmental role when its activities essentially substitute for or supplement traditionally private enterprises. In contrast, a government entity will be deemed to have been engaged in a governmental function when its acts are undertaken for the protection and safety of the public pursuant to the general police powers.

The issue before the Court of Appeals in the captioned matter was whether the defendants, the  Long Island Power Authority (LIPA), Long Island Lighting Company (LILCO), and National Grid Electric Services, LLC (National Grid) were, collectively entitled to dismissal of plaintiffs' amended complaints on the rationale that the actions challenged were governmental and discretionary as a matter of law. 

The court rejected the defendants argument that assuming their actions were not discretionary, "plaintiffs' failure to allege a special duty is a fatal defect." Rather, the Court of Appeals ruled that because defendants had not met their threshold burden of demonstrating that the action was governmental in the context of its "pre-answer, pre-discovery CPLR §3211(a)(7) motions," it could not concluded that plaintiffs' complaints fail to state causes of action as a matter of law.

The Court of Appeals also took note of the fact that LIPA was a public authority that was created by the legislature as a "corporate municipal instrumentality of the state . . . which shall be a body corporate and politic and a political subdivision of the state, exercising essential governmental and public powers," and authorized it to operate in LILCO's service area (Public Authorities Law §1020-c [1], [2]).

It then explained that it is "well settled that, "[d]espite the sovereign's own statutory surrender of common-law tort immunity for the misfeasance of its employees, governmental entities somewhat incongruously claim — and unquestionably continue to enjoy — a significant measure of immunity fashioned for their protection by the courts" (Haddock v City of New York, 75 NY2d 478, 484 [1990]). 

The doctrine of governmental function immunity "reflects separation of powers principles and is intended to ensure that public servants are free to exercise their decision-making authority without interference from the courts," citing Valdez v City of New York, 18 NY3d 69. Additionally, said the Court of Appeals, "this immunity reflects a value judgment that — despite injury to a member of the public — the broader interest in having government officers and employees free to exercise judgment and discretion in their official functions, unhampered by fear of second-guessing and retaliatory lawsuits, outweighs the benefits to be had from imposing liability for that injury."

Because the issue in this CPLR §3211(a)(7) motion is whether plaintiffs' complaints have stated a viable claim, the first issue that to be considered "is whether the . . . entity was engaged in a proprietary function or acted in a governmental capacity at the time the claim arose. This is because if the action challenged in the litigation is governmental, the existence of a special duty is an element of the plaintiff's negligence cause of action.

As the court explained in (Matter of World Trade Ctr. Bombing Litig., 17 NY3d 428, "[w]hen the liability of a governmental entity is at issue, it is the specific act or omission out of which the injury is claimed to have arisen and the capacity in which that act or failure to act occurred which governs liability."

Assuming the government entity was acting in a governmental capacity, the court observed that a plaintiff may nevertheless state a viable claim by alleging the existence of a special duty to the plaintiff, citing Turturro, 28 NY3d at 478. 

If the plaintiff establishes the elements of the cause of action, including special duty, the government entity can avoid liability under the governmental function immunity defense by proving the challenged actions were discretionary in nature and that discretion was, in fact, exercised. However, because the governmental immunity defense protects government entities from liability only for discretionary actions taken during the performance of governmental functions, "[t]he . . . defense has no applicability where the [entity] has acted in a proprietary capacity, even if the acts of the [entity] may be characterized as discretionary."

Viewing plaintiffs' allegations in the light most favorable to plaintiffs, "as [the Court of Appeals] must given the procedural posture" of this action, plaintiffs' allegations concern the providing of electrical power by defendants, a service that traditionally has been provided by private entities in the State of New York., nor does LIPA dispute that the provision of electricity traditionally has been a private enterprise which, in the normal course of operations, would be a proprietary function.

Accordingly, the Court of Appeals said that it could not, as "a matter of law based only on the allegations in the amended complaints, as amplified," conclude that LIPA was acting in a governmental, rather than a proprietary, capacity when engaged in the conduct claimed to have caused plaintiffs' injuries.

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