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Summary Judgment Granted in USDC-NH / Flood Damage Subrogation Action

Attorney John M. Dealy successfully obtained summary judgment on behalf of a property manager in a subrogation action brought by a national retail store for significant flood damage sustained following Hurricane Irene in 2013.

The plaintiff, a national retail store located in West Lebanon, New Hampshire, alleged damages in excess of $7,000,000 in connection with property damage and lost earnings, filed an action for breach of contract, negligence, promissory estoppel and accounting claims against its landlord and property management companies.  This action was subsequently consolidated with an action for flood damage to an adjacent property filed by another national retail chain.

Following discovery, all parties moved for summary judgment.  The plaintiffs filed summary judgment relative to their breach of contract claims.  The defendant landlords moved for summary judgment on the grounds that the flooding event was the result of an “Act of God.”   Attorney Dealy and co-counsel moved for summary judgment on behalf of the defendant property managers, arguing the property managers owed no contractual or other legal duty to the plaintiff store.

During oral argument, plaintiffs’ attorneys asserted that although no actual contract existed between the stores and the property managers, the property managers still owed a duty to the stores because they possessed special “knowledge and authority of a landlord” insofar as they were aware of the potential danger for flooding and did nothing to prevent same. They argued that New Hampshire law provides for a common law duty of care running from a property manager to a commercial tenant. In support of this position, plaintiffs cited New Hampshire Supreme Court decision of Mbahaba v. Morgan, 163 N.H. 561 (2012), which found negligence on the part of a residential property manager for a tenant’s injury despite the lack of a contract between the property manager and the injured tenant.  Attorney Dealy successfully distinguished the Mbahaba decision, arguing that it did not apply to a commercial tenancy situation or a claim for flood (property) damage. The Mbahaba court held that the minor plaintiff was a “vulnerable” residential tenant, who claimed injuries arising from lead paint exposure where the property manager had leased the property to a family with a child despite knowing that lead paint existed on the property.  The court’s rationale in Mbahaba included an assessment of the bargaining power and ability of the parties (landlord, property manager, and residential tenant) to determine who was in the best position to detect and correct property defects posing a risk of injury to the occupants. In the instant case, Attorney Dealy correctly pointed out that the retail stores were sophisticated parties to a commercial lease rather than “vulnerable” residential tenants.  As such, the plaintiffs were aware that their stores were located in a flood zone and had the knowledge and means to protect the stores. In fact, as Attorney Dealy stressed at argument, the plaintiffs had taken measures to implement flood gates at other store locations located in flood zones.

Judge Joseph N. Laplante of the United States District Court, District of New Hampshire, agreed with Attorney Dealy’s arguments and granted summary judgment for the property manager.