Con Ed May Continue With Sept. 11 Claims

MANHATTAN (CN) - The electricity provider for most of lower Manhattan may go ahead with its lawsuit claiming that diesel fuel tanks allowed by the Port Authority below the World Trade Center fueled the fire in the twin towers during the Sept. 11 terrorist attacks and caused the destruction of the electrical substation below one of the towers when it fell.

In an unsigned opinion, the 2nd Circuit reversed the federal court's decision, finding that the 43-year-old lease agreement between electricity provider Consolidated Edison and the Port Authority of New York and New Jersey allows Consolidated to sue for reimbursement of the cost of rebuilding the substation, because the Port Authority may have been negligent in giving a green light to the construction of the diesel tanks.

Consolidated Edison leased a parcel of land in lower Manhattan from the Port Authority in 1968. Under the terms of the lease, the agency was to build an electrical substation on the land for Consolidated to operate in order to supply power to the World Trade Center and much of the surrounding area.

The lease also allowed for the Port Authority to build on top of the substation. It exercised this right in 1980, hiring a contractor to construct the 7 World Trade Center building there. It leased the space out to the Salomon Brothers investment bank and New York City's emergency management center. Both tenants installed diesel fuel tanks and generators in the building to supply emergency power.

After one of the falling World Trade Center towers demolished the substation, the utility provider sued in federal court, arguing that the Port Authority and its agents were negligent "in connection with the design and/or construction" of 7 World Trade Center, as well as "in the design or construction of the building's emergency power backup system," according to the ruling.

Consolidated claimed that the Port Authority should not have allowed 7 WTC's tenants to install the diesel fuel tanks, which, the company argued, contributed to the destruction of its substation when the building was demolished during the Sept. 11 attacks.

The electric company additionally claimed that the lease required the Port Authority to reimburse them for expenses related to the rebuilding of the substation, regardless of where the fault for the destruction lay.

In the latter claim, 2nd Circuit upheld the lower court's decision in favor of the Port Authority, saying that protections in the 1968 lease did not extend to a "situation where, as alleged here, an outside event works in combination with an alleged latent design defect to cause damage to the building and its substructures years after construction has been completed."

But the appellate court threw out the verdict in favor of the Port Authority on some of the negligence charges. "The district court interpreted the lease to preclude Con Edison from maintaining an action against Port Authority based on Port Authority's negligence in connection with construction or maintenance of 7WTC," the appellate court's ruling states. "This was error. Con Edison's negligence claim arises at least from Port Authority's independent duty, as owner of the leased premises, to exercise reasonable care to avoid damage to persons or property thereon."

"We conclude that Con Edison may prosecute its claims for negligence related to 'negligent design, approval, inspection, installation, maintenance, operation, conduct and control of' the diesel fuel tanks at 7WTC, as well as any of the more ancillary acts of negligence identified in both the notice of claim and asserted in the Second Amended Complaint."

But the appellate court also ruled that claims for negligent design and construction of 7WTC were not filed on time by Consolidated Edison and "must be dismissed."

"We leave it to the district court to apply this rule to the various claims asserted in Con Edison's Second Amended Complaint," the ruling states.

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