In a must-read decision centered upon the tragic death of two individuals during the May 2008 crane collapse in New York City, the First Department’s opinion in Matter of 91st St. Crane Collapse Litigation, 154 A.D.3d 139 (1st Dep’t 2017) analyzes not only the liability and damages aspects of two consolidated wrongful death actions, but also factors supporting the First Department’s affirmance of the jury’s determination that both punitive damages and personal liability (premised upon piercing the corporate veil) were warranted.
The Underlying Facts
The case involved the construction of a 34-story building complex on East 91st Street. The concrete subcontractor for the project leased a crane from defendant New York Crane & Equipment Corp. (“NY Crane”), an entity owned by defendant James F. Lomma (“Lomma”). The crane consisted of four principal components: a tower, a cab for the operator of the crane, a 160-foot boom (or arm) that lifted materials; and a counterweight arm extending in the opposite direction from the boom. Each of the components rested upon a turntable assembly that permitted the crane to rotate, the critical piece being a large bearing ring that ultimately became the focal point of the litigation.
Before it was used on the subject project, the bearing ring developed a crack and required replacement. NY Crane attempted to obtain a replacement from the manufacturer of the original turntable, and was informed that it would cost $34,000 and take one year, unless NY Crane paid an additional $120,127 to expedite its manufacture within 28 weeks. At that time there was a waiting list for the company’s cranes. Lomma then instructed one of his employees to find an alternative potential source for the replacement; notably, the employee was a mechanic who had no relevant technical expertise and resorted to a Google search of potential manufacturers to locate the replacement. Ultimately, the employee located a company from China called RTR Bearing Company Limited (“RTR”) who committed to manufacture the bearing ring for $20,000.
Lomma’s testimony revealed that he had no direct contact with RTR and that all contact with RTR was through his employees. The Court explained that RTR was merely a broker/distributor that subcontracted the work to Chinese factories and that no one at RTR was an engineer. After drawings of a different bearing ring were sent to RTR because neither NY Crane nor Lomma had drawings for the original bearing ring, RTR told NY Crane, inter alia, that the welding technique RTR utilized for bearing was “not good” and that RTR did not “have confidence” with respect to the welding. As such, RTR suggested that NY Crane weld it. In response, Lomma’s employee sent RTR a drawing with some general information from the manufacturer regarding welds; with that in hand, RTR changed course, indicating it could do the welding for a nominal price increase.
While RTR was producing the bearing, Lomma contacted engineers to “get their take” on the bearing, as well as to see whether they would sign off on it for the NYC Department of Buildings certification. None of the engineers contacted would agree to certify the new bearing. Lomma admitted that despite the fact that he was not an engineer, welder or other specialist, he personally certified its compliance. Even worse, Lomma engaged one of his former employees who then worked at the DOB to visually inspect the crane instead of the regularly-assigned NYC Department of Buildings employee.
As noted by the Court, Lomma made a series of calculated decisions to put “profit over the safety of construction workers and the public, despite having multiple opportunities to change course.”
On May 30, 2008, approximately one month after being erected, the crane was being used for the construction of the 14th floor of the project when, with the decedent operator in the cab, the crane teetered and then fell backward from a height of 200 feet, struck another building and bounced off a number of terraces until it crashed down upon the other decedent. The First Department, in extraordinary and compelling narrative, summarized the trial court testimony concerning the hell that the crane operator encountered between the time that the crane failed and his ultimate demise many stories below. Indeed, much of the Decision centered upon the basis for Plaintiffs’ pre-impact terror damages:
The injuries [Plaintiff] sustained from the impact were “blunt impact head trauma” with “cranial fracturing,” “pulpification of the brain” and “near-complete decapitation.” Specifically, [Plaintiff] suffered multiple rib fractures piercing his lungs, a fractured pelvis, head trauma, bilateral humerus fractures, and bilateral transected leg fractures. Medical testimony was elicited that the fractures to his arms and legs indicated that he was aware of his situation and tried to brace himself, aware of his impending death. It was also opined that [Plaintiff] was consciously aware, and under a significant amount of physical and mental distress, while trapped in the glass cab, alone, and able to see everything as it happened. [Plaintiff’s] father, also a crane operator, saw his son in the rubble with his eyes open and shaking. The EMS technician reported him as alive and conscious approximately seven minutes after the accident, and the medical examiner determined the time of death to be nine minutes after that. …
The evidence supported the jury’s findings that [Plaintiffs] both endured inconceivable pre-impact terror. It is undisputed that the crane did not fall straight to the ground. With [Plaintiff] in the glass cab, it first teetered, and then fell backward from a height of 200 feet (approximately 14 stories), struck the Electra building, and bounced off a number of terraces before reaching the ground, where it crashed down onto [co-Plaintiff]. [Plaintiff], trapped in the glass cab, was aware of his impending death, as detailed by witnesses in the adjacent apartment buildings. Witnesses described the look of sheer panic and fear on [his] face. They described him making a series of hand movements and putting his hands together as if praying. They described him as then seeming to attempt to brace himself, placing both his hands forward on the cab glass, and they described the cab as ultimately sliding to [Plaintiff’s] left side until it was gone.
The Trial Court
Two wrongful death actions were commenced wherein the plaintiffs contended that the accident was the result of a defective weld by RTR during the manufacture of the bearing ring. The jury determined that Lomma, JF Lomma and NY Crane were negligent and that the corporate veil should be pierced to assess personal liability against Lomma.
The Appellate Division
Defendants appealed arguing that the awards should be set aside as excessive and that the trial court erred in permitting the jury to pierce the corporate veils of NY Crane and JF Lomma. Although the Appellate Division agreed that the awards were excessive and significantly reduced them, the Court upheld the jury’s decision to pierce the Lomma entities’ respective corporate veils.
Relying upon, inter alia, the Court of Appeals’ decision in Matter of Morris v. New York State Dept. of Taxation and Fin., 82 N.Y.2d 135 (1993), the Appellate Division held that jury’s conclusion to pierce the corporate veils of NY Crane and JF Lomma was warranted because Lomma had conducted business in his various corporations “as a single entity.” The evidence presented in the cases demonstrated that while different Lomma-controlled entities served different purposes, the entities rented out each other’s equipment at will and the actual ownership of the equipment amongst the entities did not matter. Lomma also had the discretion to shift profits between his companies and all the entities were from the same offices using the same email system, as well as the same management and administrative personnel. The Court found that Lomma exercised domination and control over multiple corporations that he treated as one entity, warranting piercing. The Court further determined that jury’s determination of Lomma’s personal liability was warranted due to his personal participation in the corporate defendants’ affirmatively tortious acts launching the dangerous instrumentality that caused the accident.
While it is certainly rare for commercial principles to appear in the personal injury realm, the interplay is a gentle incentive for lawyer “cross-training” (wherein “niche” practitioners occasionally sit for CLEs outside their primary practice areas to keep abreast of developments in distinct practice areas).