[100 N.J. 248] [495 A.2d 108] Louis A. Ruprecht, Millburn, for appellant Consol. Rail Corp. (McDermott, McGee & Ruprecht, Millburn, attorneys).

John C. Heavey, Newark, for appellant Union Tank Car Co. (Carpenter, Bennett & Morrissey, Newark, attorneys; Thomas M. Moore, Newark, on the brief).

Dennis M. Cavanaugh, Newark, for appellant BASF Wyandotte Co. (Tompkins, McGuire & Wachenfeld, Newark, attorneys).

Raymond P. D'Uva, Roseland, for respondent (Rodino, Forman & D'Uva, Roseland, attorneys; Raymond P. D'Uva and Mary Ann Dubiel, Roseland, on the brief).

The opinion of the Court was delivered by

This appeal presents a question that has not previously been directly considered: whether a defendant's negligent conduct that interferes with a plaintiff's business resulting in purely economic losses, unaccompanied by property damage or personal injury, is compensable in tort. The appeal poses this issue in the context of the defendants' alleged negligence that caused a dangerous chemical to escape from a railway tank car, resulting in the evacuation from the surrounding area of persons whose safety and health were threatened. The plaintiff, a commercial airline, was forced to evacuate its premises and [100 N.J. 249] suffered an interruption of its business operations with resultant economic losses.

Because of the posture of the case--an appeal taken from the grant of summary judgment for the defendant railroad, subsequently reversed by the Appellate Division, 194 N.J.Super. 349, 476 A.2d 1256 (App.Div.1984)--we must accept plaintiff's version of the facts as alleged. The facts are straight-forward.

On July 22, 1981, a fire began in the Port Newark freight yard of defendant Consolidated Rail Corporation (Conrail) when ethylene oxide manufactured by defendant BASF Wyandotte Company (BASF) escaped from a tank car, punctured during a "coupling" operation with another rail car, and ignited. The tank car was owned by defendant Union Tank Car Company (Union Car) and was leased to defendant BASF.

The plaintiff asserted at oral argument that at least some of the defendants were aware from prior experiences that ethylene oxide is a highly volatile substance; further, that emergency response plans in case of an accident had been prepared. When the fire occurred that gave rise to this lawsuit, some of the defendants' consultants helped determine how much of the surrounding area to evacuate. The municipal authorities then evacuated the area within a one-mile radius surrounding the fire to lessen the risk to persons within the area should the burning tank car explode. The evacuation area included the adjacent North Terminal building of Newark International Airport, where plaintiff People Express Airlines' (People Express) business operations are based. Although the feared explosion never occurred, People Express employees were prohibited from using the North Terminal for twelve hours.

The plaintiff contends that it suffered business-interruption losses as a result of the evacuation. These losses consist of cancelled scheduled flights and lost reservations because employees were unable to answer the telephones to accept bookings; [100 N.J. 250] also, certain fixed operating expenses allocable to the evacuation time period were [495 A.2d 109] incurred and paid despite the fact that plaintiff's offices were closed. No physical damage to airline property and no personal injury occurred as a result of the fire.

According to People Express' original complaint, each defendant acted negligently and these acts of negligence proximately caused the plaintiff's harm. An amended complaint alleged additional counts of nuisance and strict liability based on the defendants' undertaking an abnormally dangerous activity, as well as defective manufacture or design of the tank car, causes of action with which we are not concerned here. Defendants filed answers and cross-claims for contribution pursuant to the Joint Tortfeasors Contribution Law, N.J.S.A. 2A:53A-1 to -6.

Conrail moved for summary judgment, seeking dismissal of the complaint and cross-claims against it; the motion was opposed by plaintiff, People Express, and defendants BASF and Union Car. The trial court granted Conrail's summary judgment motion on the ground that absent property damage or personal injury economic loss was not recoverable in tort. Defendants BASF and Union Car subsequently sought summary judgment dismissing the complaint; the trial court also granted these motions based on the same reasoning.

The Appellate Division granted plaintiff's interlocutory request for leave to appeal and reversed the trial court's order granting summary judgment. The Appellate Division held that recovery of negligently caused economic losses was not automatically barred by the absence of property damage and that summary judgment was inappropriate. 194 N.J.Super. at 355-56, 476 A.2d 1256. The cause was remanded to the trial court with instructions to determine whether the evidence could support the finding of a foreseeable risk of harm to the plaintiff. This Court granted defendant Union Car's petition for certification, in which Conrail and BASF joined, and denied People Express' [100 N.J. 251] motion to dismiss the petition for certification. 99 N.J. 169, 170, 491 A.2d 678 (1984).

The single characteristic that distinguishes parties in negligence suits whose claims for economic losses have been regularly denied by American and English courts from those who have recovered economic losses is, with respect to the successful claimants, the fortuitous occurrence of physical harm or property damage, however slight. It is well-accepted that a defendant who negligently injures a plaintiff or his property may be liable for all proximately caused harm, including economic losses. See Palsgraf v. Long Island R.R., 248 N.Y. 339, 162 N.E. 99 (1928); W. Prosser & W. Keeton, The Law of Torts § 129, at 997 (5th ed. 1984) (Prosser & Keeton). Nevertheless, a virtually per se rule barring recovery for economic loss unless the negligent conduct also caused physical harm has evolved throughout this century, based, in part, on Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed.2d 290 (1927) and Cattle v. Stockton Waterworks Co., 10 Q.B. 453 (1875). This has occurred although neither case created a rule absolutely disallowing recovery in such circumstances.^[1] See, e.g., Stevenson v. East Ohio Gas Co., 73 N.E.2d 200 (Ohio Ct.App.1946) (employee who was prohibited from working at his plant, which was closed due to conflagration begun by negligent rupture of stored liquified natural gas at nearby utility, could not recover lost wages); Byrd v. English, 117 Ga. 191, 43 S.E. 419 (1903) (plaintiff who owned printing plant could not recover lost profits when defendant negligently damaged utility's electrical conduits that supplied [100 N.J. 252] power to the plant); see also Restatement (Second) of Torts § 766C (1979) (positing rule of nonrecovery for purely economic losses [495 A.2d 110] absent physical harm). But see In re Kinsman Transit Co., 388 F.2d 821, 824 (2d Cir.1968) (after rejecting an inflexible rule of nonrecovery, court applied traditional proximate cause analysis to claim for purely economic losses).

The reasons that have been advanced to explain the divergent results for litigants seeking economic losses are varied. Some courts have viewed the general rule against recovery as necessary to limit damages to reasonably foreseeable consequences of negligent conduct. This concern in a given case is often manifested as an issue of causation and has led to the requirement of physical harm as an element of proximate cause. In this context, the physical harm requirement functions as part of the definition of the causal relationship between the defendant's negligent act and the plaintiff's economic damages; it acts as a convenient clamp on otherwise boundless liability. See Union Oil Co. v. Oppen, 501 F.2d 558, 563 (9th Cir.1974); The Federal No. 2, 21 F.2d 313 (2d Cir.1927); Byrd v. English, supra, 117 Ga. 191, 43 S.E. 419 (1903). The physical harm rule also reflects certain deep-seated concerns that underlie courts' denial of recovery for purely economic losses occasioned by a defendant's negligence. These concerns include the fear of fraudulent claims, mass litigation, and limitless liability, or liability out of proportion to the defendant's fault. See In re Kinsman Transit Co., supra, 388 F.2d at 823; Weller & Co. v. Foot & Mouth Disease Research Inst. [1966], 1 Q.B. 569, 577; Stevenson v. East Ohio Gas Co., supra, 73 N.E.2d at 203.

The assertion of unbounded liability is not unique to cases involving negligently caused economic loss without physical harm. Even in negligence suits in which plaintiffs have sustained physical harm, the courts have recognized that a tortfeasor is not necessarily liable for all consequences of his conduct. While a lone act can cause a finite amount of physical harm, that harm may be great and very remote in its final [100 N.J. 253] consequences. A single overturned lantern may burn Chicago. Some limitation is required; that limitation is the rule that a tortfeasor is liable only for that harm that he proximately caused. Proximate or legal cause has traditionally functioned to limit liability for negligent conduct. Duty has also been narrowly defined to limit liability. Compare the majority and dissenting opinions in Palsgraf v. Long Island R.R., supra, 248 N.Y. 339, 162 N.E. 99. Thus, we proceed from the premise that principles of duty and proximate cause are instrumental in limiting the amount of litigation and extent of liability in cases in which no physical harm occurs just as they are in cases involving physical injury.

Countervailing considerations of fairness and public policy have led courts to discard the requirement of physical harm as an element in defining proximate cause to overcome the problem of fraudulent or indefinite claims. See Portee v. Jaffee, 84 N.J. 88, 417 A.2d 521 (1980); Dillon v. Legg, 68 Cal.2d 728, 69 Cal.Rptr. 72, 441 P.2d 912 (1968) (abandoning zone of danger rule in favor of a foreseeability test to determine whether the plaintiff may recover for mental distress arising from physical harm to another). In this context, see, e.g., Portee v. Jaffee, supra, as well as in variant settings, see Merenoff v. Merenoff, 76 N.J. 535, 388 A.2d 951 (1978), we have subordinated the threat of potential baseless claims to the right of an aggrieved individual to pursue a just and fair claim for redress attributable to the wrongdoing of another. The asserted inability to define damages in cases arising under the cause of action for negligent infliction of emotional distress absent impact or near-impact has not hindered adjudication of those claims. Nor is there any indication that unfair awards have resulted.

The troublesome concern reflected in cases denying recovery for negligently-caused economic loss is the alleged potential for infinite liability, or liability out of all proportion to the defendant's fault. This objection is also not confined to negligently-caused economic injury. See infra [495 A.2d 111] at 110. The same objection has been asserted and, ultimately, rejected by this [100 N.J. 254] Court and others in allowing recovery for other forms of negligent torts, see H. Rosenblum, Inc. v. Adler, 93 N.J. 324, 461 A.2d 138 (1983), and in the creation of the doctrine of strict liability for defective products, see Feldman v. Lederle Laboratories, 97 N.J. 429, 479 A.2d 374 (1984); Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960), and ultrahazardous activities, see State, Dep't of Envtl. Protection v. Ventron Corp., 94 N.J. 473, 468 A.2d 150 (1983). See also Carpenter, "Interference With Contract Relations," 41 Harv.L.Rev. 728, 742 (1928) (noting that most advances in tort law have been attended by reluctance to take the step forward). The answer to the allegation of unchecked liability is not the judicial obstruction of a fairly grounded claim for redress. Rather, it must be a more sedulous application of traditional concepts of duty and proximate causation to the facts of each case. See Soler v. Castmaster, Div. of H.P.M. Corp., 98 N.J. 137, 484 A.2d 1225 (1984).

It is understandable that courts, fearing that if even one deserving plaintiff suffering purely economic loss were allowed to recover, all such plaintiffs could recover, have anchored their rulings to the physical harm requirement. While the rationale is understandable, it supports only a limitation on, not a denial of, liability. The physical harm requirement capriciously showers compensation along the path of physical destruction, regardless of the status or circumstances of individual claimants. Purely economic losses are borne by innocent victims, who may not be able to absorb their losses. See Comment, 88 Harv.L.Rev. 444, 449-50 (1974). In the end, the challenge is to fashion a rule that limits liability but permits adjudication of meritorious claims. The asserted inability to fix chrystalline formulae for recovery on the differing facts of future cases simply does not justify the wholesale rejection of recovery in all cases.

Further, judicial reluctance to allow recovery for purely economic losses is discordant with contemporary tort doctrine. The torts process, like the law itself, is a human institution designed to accomplish certain social objectives. One objective is to ensure that innocent victims have avenues of legal redress, [100 N.J. 255] absent a contrary, overriding public policy. See Kelly v. Gwinnell, 96 N.J. 538, 476 A.2d 1219 (1984); Evers v. Dollinger, 95 N.J. 399, 471 A.2d 405 (1984); Costa v. Josey, 83 N.J. 49, 415 A.2d 337 (1980); Berman v. Allan, 80 N.J. 421, 404 A.2d 8 (1979); Immer v. Risko, 56 N.J. 482, 267 A.2d 481 (1970); Henningsen v. Bloomfield Motors, Inc., supra, 32 N.J. 358, 161 A.2d 69. This reflects the overarching purpose of tort law: that wronged persons should be compensated for their injuries and that those responsible for the wrong should bear the cost of their tortious conduct.

Other policies underlie this fundamental purpose. Imposing liability on defendants for their negligent conduct discourages others from similar tortious behavior, fosters safer products to aid our daily tasks, vindicates reasonable conduct that has regard for the safety of others, and, ultimately, shifts the risk of loss and associated costs of dangerous activities to those who should be and are best able to bear them. Although these policies may be unevenly reflected or imperfectly articulated in any particular case, we strive to ensure that the application of negligence doctrine advances the fundamental purpose of tort law and does not unnecessarily or arbitrarily foreclose redress based on formalisms or technicalisms. Whatever the original common law justifications for the physical harm rule, contemporary tort and negligence doctrine allow--indeed, impel--a more thorough consideration and searching analysis of underlying policies to determine whether a particular defendant may be liable for a plaintiff's economic losses despite the absence of any attendant physical harm. See State v. Culver, 23 N.J. 495, 505, 129 A.2d 715, cert. den., 354 U.S. 925, 77 S.Ct. 1387, 1 L.Ed.2d 1441 (1957); see also Renz v. [495 A.2d 112] Penn Central Corp., 87 N.J. 437, 435 A.2d 540 (1981) (railroad immunity act's imputation of contributory negligence to minor injured while playing on railroad did not constitute absolute bar to recovery but was to be construed as a common law issue bearing on comparative fault).

We may appropriately consider two relevant avenues of analysis in defining a cause of action for negligently-caused economic [100 N.J. 256] loss. The first examines the evolution of various exceptions to the rule of nonrecovery for purely economic losses, and suggests that the exceptions have cast considerable doubt on the validity of the current rule and, indeed, have laid the foundation for a rule that would allow recovery. The second explores the elements of a suitable rule and adopts the traditional approach of foreseeability as it relates to duty and proximate cause molded to circumstances involving a claim only for negligently-caused economic injury.

Judicial discomfiture with the rule of nonrecovery for purely economic loss throughout the last several decades has led to numerous exceptions in the general rule. Although the rationalizations for these exceptions differ among courts and cases, two common threads run throughout the exceptions. The first is that the element of foreseeability emerges as a more appropriate analytical standard to determine the question of liability than a per se prohibitory rule. The second is that the extent to which the defendant knew or should have known the particular consequences of his negligence, including the economic loss of a particularly foreseeable plaintiff, is dispositive of the issues of duty and fault.

One group of exceptions is based on the "special relationship" between the tortfeasor and the individual or business deprived of economic expectations. Many of these cases are recognized as involving the tort of negligent misrepresentation, resulting in liability for specially foreseeable economic losses. Importantly, the cases do not involve a breach of contract claim between parties in privity; rather, they involve tort claims by innocent third parties who suffered purely economic losses at the hands of negligent defendants with whom no direct relationship existed. Courts have justified their finding of liability in these negligence cases based on notions of a special relationship between the negligent tortfeasors and the foreseeable plaintiffs [100 N.J. 257] who relied on the quality of defendants' work or services, to their detriment. The special relationship, in reality, is an expression of the courts' satisfaction that a duty of care existed because the plaintiffs were particularly foreseeable and the injury was proximately caused by the defendant's negligence.

The special relationship exception has been extended to auditors, see H. Rosenblum, Inc. v. Adler, supra, 93 N.J. 324, 461 A.2d 138 (independent auditor whose negligence resulted in inaccurate public financial statement held liable to plaintiff who bought stock in company for purposes of sale of business to company; stock subsequently proved to be worthless); surveyors, see Rozny v. Marnul, 43 Ill.2d 54, 250 N.E.2d 656 (1969) (surveyor whose negligence resulted in error in depicting boundary of lot held liable to remote purchaser); termite inspectors, see Hardy v. Carmichael, 207 Cal.App.2d 218, 24 Cal.Rptr. 475 (Cal.Ct.App.1962) (termite inspectors whose negligence resulted in purchase of infested home liable to out-of-privity buyers); engineers, see M. Miller Co. v. Central Contra Costa Sanitary Dist., 198 Cal.App.2d 305, 18 Cal.Rptr. 13 (Cal.Ct.App.1961) (engineers whose negligence resulted in successful bidder's losses in performing construction contract held liable); attorneys, see Lucas v. Hamm, 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685 (1961), cert. den., 368 U.S. 987, 82 S.Ct. 603, 7 L.Ed.2d 525 (1962) (attorney whose negligence caused intended beneficiary to be deprived of proceeds of the will was liable to beneficiary); [495 A.2d 113] notaries public, see Immerman v. Ostertag, 83 N.J.Super. 364, 199 A.2d 869 (Law Div.1964); Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958) (notaries public whose negligence caused out-of-privity mortgagee and intended beneficiary of will, respectively, to be deprived of expected proceeds held liable); architects, see United States v. Rogers & Rogers, 161 F.Supp. 132 (S.D.Cal.1958) (architects whose negligence resulted in use of defective concrete liable to out-of-privity prime contractor); weighers, see Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275 (1922) (public weigher whose negligence caused remote buyer's losses was liable for loss); and telegraph companies, [100 N.J. 258] see Western Union Tel. Co. v. Mathis, 215 Ala. 282, 110 So. 399 (1926) (telegraph company whose negligent transmission caused plaintiff not to obtain contract was liable); see also W. Prosser, The Law of Torts § 107, at 705 (4th ed. 1971); Restatement (Second) of Torts § 552 (1977) (positing recovery for negligent misrepresentation). Cf. Strauss v. Belle Realty Co., 65 N.Y.2d 399, 492 N.Y.S.2d 555, 482 N.E.2d 34 (1985); Food Pageant, Inc. v. Consolidated Edison Co., 54 N.Y.2d 167, 445 N.Y.S.2d 60, 429 N.E.2d 738 (1981); Newlin v. New England Tel. & Tel. Co., 316 Mass. 234, 54 N.E.2d 929 (1944) (although some physical harm occurred in each case due to utility blackout, plaintiffs recovered economic losses either in negligence or as third party beneficiaries of contract for electricity).

A related exception in which courts have allowed recovery for purely economic losses has been extended to plaintiffs belonging to a particularly foreseeable group, such as sailors and seamen, for whom the law has traditionally shown great solicitude. See Carbone v. Ursich, 209 F.2d 178 (9th Cir.1953) (plaintiff seaman recovered lost wages resulting from lack of work while the ship on which they were employed, damaged through defendant's negligence, was being repaired); accord Main v. Leask, Sess.Cas. 772 (Scot.2d Div.1910) (by implication).

Courts have found it fair and just in all of these exceptional cases to impose liability on defendants who, by virtue of their special activities, professional training or other unique preparation for their work, had particular knowledge or reason to know that others, such as the intended beneficiaries of wills (e.g., Lucas v. Hamm, supra) or the purchasers of stock who were expected to rely on the company's financial statement in the prospectus (e.g., H. Rosenblum, Inc. v. Adler, supra), would be economically harmed by negligent conduct. In this group of cases, even though the particular plaintiff was not always foreseeable, the particular class of plaintiffs was foreseeable as was the particular type of injury.

[100 N.J. 259] A very solid exception allowing recovery for economic losses has also been created in cases akin to private actions for public nuisance. Where a plaintiff's business is based in part upon the exercise of a public right, the plaintiff has been able to recover purely economic losses caused by a defendant's negligence. See, e.g., Louisiana ex rel. Guste v. M/V Testbank, 752 F.2d 1019 (5th Cir.1985) (en banc) (defendants responsible for ship collision held liable to all commercial fishermen, shrimpers, crabbers and oystermen for resulting pollution of Mississippi River); Union Oil Co. v. Oppen, 501 F.2d 558 (9th Cir.1974) (fishermen making known commercial use of public waters may recover economic losses due to defendant's oil spill); Masonite Corp. v. Steede, 198 Miss. 530, 23 So.2d 756 (1945) (en banc) (operator of fishing resort may recover lost profits due to pollution); Hampton v. North Carolina Pulp Co., 223 N.C. 535, 27 S.E.2d 538 (1943) (polluter liable for economic losses of downstream riparian landowners); Columbia River Fishermen's Protective Union v. City of St. Helens, 160 Or. 654, 87 P.2d 195 (1939) (same as Union Oil Co., supra); see also Burgess v. M/V Tamano, 370 F.Supp. 247 (D.Me.1973) (on nuisance theory, commercial fisherman may recover lost profits due [495 A.2d 114] to oil spill).^[2] Cf. Birchwood Lakes Colony Club v. Borough [100 N.J. 260] of Medford Lakes, 90 N.J. 582, 449 A.2d 472 (1982) (residents whose use of lakeside properties was diminished by pollution from defendant's sewage treatment plant could sue for compensatory damages on nuisance theory). The theory running throughout these cases, in which the plaintiffs depend on the exercise of the public or riparian right to clean water as a natural resource, is that the pecuniary losses suffered by those who make direct use of the resource are particularly foreseeable because they are so closely linked, through the resource, to the defendants' behavior.^[3]

Particular knowledge of the economic consequences has sufficed to establish duty and proximate cause in contexts other than those already considered. In Henry Clay v. Jersey City, 74 N.J.Super. 490, 181 A.2d 545 (Ch.Div.1962), aff'd, 84 N.J.Super. 9, 200 A.2d 787 (App.Div.1964), for example, a lessee-manufacturer had to vacate the building in which its business was located because of the defendant city's negligent failure to maintain its sewer line while the line was repaired. While there was some property [100 N.J. 261] damage, the court treated the tenant's and owner's claims separately; the tenant's claims were purely economic, stemming from the loss of use of its property right, as in the instant case. Further, the city had had notice of the leak since 1957 and should have known about it even earlier. Duty, breach and proximate cause were found to exist; the plaintiff-tenant recovered lost profits and expenses incurred during the shut-down. See also J'Aire Corp. v. Gregory, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 (1979) (contractor who undertook construction work for owner of building had duty to tenants to complete construction on time to avoid resultant economic losses).

These exceptions expose the hopeless artificiality of the per se rule against recovery for purely economic losses. When the plaintiffs are reasonably foreseeable, the injury is directly and proximately caused by defendant's negligence, and liability can be limited fairly, courts have endeavored to [495 A.2d 115] create exceptions to allow recovery. The scope and number of exceptions, while independently justified on various grounds, have nonetheless created lasting doubt as to the wisdom of the per se rule of nonrecovery for purely economic losses.^[4] Indeed, it has been [100 N.J. 262] fashionable for commentators to state that the rule has been giving way for nearly fifty years, although the cases have not always kept pace with the hypothesis. See Harvey, "Economic Losses and Negligence, the Search for a Just Solution," 50 Can.Bar.Rev. 580 (1972); Harper, "Interference with Contractual Relations," 47 Nw.U.L.Rev. 873 (1953), in 1 F. Harper & F. James, Torts, § 6.5, at 490 (1956); Carpenter, supra, "Interference with Contractual Relations," 41 Harv.L.Rev. 728; Note, "Negligent Interference with Contract: Knowledge As a Standard for Recovery," 63 Va.L.Rev. 813 (1977); Note, "Negligent Interference with Economic Expectancy: The Case for Recovery," 16 Stan.L.Rev. 664 (1964); Comment, "Foreseeability of Third Party Economic Injuries--A Problem in Analysis," 20 U.Chi.L.Rev. 283 (1953).

One thematic motif that may be extrapolated from these decisions to differentiate between those cases in which recovery for economic losses was allowed and denied is that of foreseeability as it relates to both the duty owed and proximate cause. The traditional test of negligence is what a reasonably prudent person would foresee and do in the circumstances; duty is clearly defined by knowledge of the risk of harm or the reasonable apprehension of that risk. In the above-cited cases, the defendants knew or reasonably should have foreseen both that particular plaintiffs or an identifiable class of plaintiffs were at risk and that ascertainable economic damages would ensue from the conduct. Thus, knowledge or special reason to know of the consequences of the tortious conduct in terms of the persons likely to be victimized and the nature of the damages likely to be suffered will suffice to impose a duty upon the tortfeasor not to interfere with economic well-being of third parties. See W. Prosser, supra, The Law of Torts § 129, at 941 ("The limitation of specifically foreseeable plaintiffs ... suggest[s] [100 N.J. 263] an ultimate solution to the problem" [of whether negligent interference with economic expectation absent physical harm should be compensable].).

The further theme that may be extracted from these decisions rests on the specificity and strictness that are infused into the definitional standard of foreseeability. The foreseeability standard that may be synthesized from these cases is one that posits liability in terms of where, along a spectrum ranging from the general to the particular, foreseeability is ultimately found. See W. Prosser, supra, The Law of Torts § 129, at 941; Note, supra, 63 Va.L.Rev. at 818; Comment, supra, 20 U.Chi.L.Rev. at 293. A broad view of these cases reasonably permits the conclusion that the extent of liability and degree of foreseeability [495 A.2d 116] stand in direct proportion to one another. The more particular is the foreseeability that economic loss will be suffered by the plaintiff as a result of defendant's negligence, the more just is it that liability be imposed and recovery allowed.

We hold therefore that a defendant owes a duty of care to take reasonable measures to avoid the risk of causing economic damages, aside from physical injury, to particular plaintiffs or plaintiffs comprising an identifiable class with respect to whom defendant knows or has reason to know are likely to suffer such damages from its conduct. A defendant failing to adhere to this duty of care may be found liable for such economic damages proximately caused by its breach of duty.

We stress that an identifiable class of plaintiffs is not simply a foreseeable class of plaintiffs. For example, members of the general public, or invitees such as sales and service persons at a particular plaintiff's business premises, or persons travelling on a highway near the scene of a negligently-caused accident, such as the one at bar, who are delayed in the conduct of their affairs and suffer varied economic losses, are certainly a foreseeable class of plaintiffs. Yet their presence within the area would be fortuitous, and the particular type of economic [100 N.J. 264] injury that could be suffered by such persons would be hopelessly unpredictable and not realistically foreseeable. Thus, the class itself would not be sufficiently ascertainable. An identifiable class of plaintiffs must be particularly foreseeable in terms of the type of persons or entities comprising the class, the certainty or predictability of their presence, the approximate numbers of those in the class, as well as the type of economic expectations disrupted. See Henry Clay v. Jersey City, supra, 74 N.J.Super. at 497-501, 181 A.2d 545. See also Strauss v. Belle Realty Co., supra, 65 N.Y.2d 399, 492 N.Y.S.2d 555, 482 N.E.2d 34 (tenants of building harmed by utility blackout comprise defined, limited, known class).

We recognize that some cases will present circumstances that defy the categorization here devised to circumscribe a defendant's orbit of duty, limit otherwise boundless liability and define an identifiable class of plaintiffs that may recover. In these cases, the courts will be required to draw upon notions of fairness, common sense and morality to fix the line limiting liability as a matter of public policy, rather than an uncritical application of the principle of particular foreseeability. See Rickards v. Sun Oil Co., 23 N.J.Misc. 89, 41 A.2d 267 (Sup.Ct.1945); Byrd v. English, supra, 117 Ga. 191, 43 S.E. 419.

Liability depends not only on the breach of a standard of care but also on a proximate causal relationship between the breach of the duty of care and resultant losses. Proximate or legal causation is that combination of " 'logic, common sense, justice, policy and precedent' " that fixes a point in a chain of events, some foreseeable and some unforeseeable, beyond which the law will bar recovery. Caputzal v. Lindsay Co., 48 N.J. 69, 77-78, 222 A.2d 513 (1966), (quoting Powers v. Standard Oil Co., 98 N.J.L. 730, 734, 119 A. 273 (Sup.Ct.1923), aff'd o.b., 98 N.J.L. 893, 121 A. 926 (E. & A. 1923); see also Palsgraf v. Long Island R.R., supra, 248 N.Y. at 350, 162 N.E. at 103 (Andrews, J., dissenting). The standard of [100 N.J. 265] particular foreseeability may be successfully employed to determine whether the economic injury was proximately caused, i.e., whether the particular harm that occurred is compensable, just as it informs the question whether a duty exists. See Hill v. Yaskin, 75 N.J. 139, 143, 380 A.2d 1107 (1977) (citing L. Green, Rationale of Proximate Cause 82-83 (1927)).

Although not expressly eschewing the general rule against recovery for purely economic losses, our courts have employed a traditional proximate cause analysis in order to decide whether particular claimants may survive motions for summary [495 A.2d 117] judgment. These cases embody a distinction between those economic losses that are only generally foreseeable, and thus non-compensable, and those losses the defendant is in a position particularly to foresee. In Henry Clay v. Jersey City, supra, 74 N.J.Super. 490, 181 A.2d 545, the court determined that the plaintiff-tenant's economic losses arising from the defendant city's failure to maintain its sewer line were directly and proximately caused by the defendant's negligence. There were no intervening causes, unlike Kinsman Transit Co., supra, 388 F.2d at 822.^[5] The economic injury was close in time and space; the defendant had ample opportunity to ascertain the identity and nature of the plaintiff's interests. Further, the amount of litigation and extent of liability was finite, rather than expansive. These are the kinds of considerations that converge in the determination whether economic losses are particularly foreseeable and proximate.

[100 N.J. 266] In two other cases, Rickards v. Sun Oil Co., supra, 23 N.J.Misc. 89, 41 A.2d 267, and Dale v. Grant, 34 N.J.L. 142 (Sup.Ct.1870), our courts again applied proximate cause principles to determine whether the plaintiffs could recover purely economic losses, and found that liability was unjustified. In Rickards, supra, the defendant's barge negligently destroyed a bridge that was the only means of access to six plaintiffs' retail businesses. In denying relief to these plaintiffs for recovery of "losses from expectant gains," 23 N.J.Misc. at 91, 41 A.2d 267, the court noted that principles of proximate cause applied to cases sounding in negligence and nuisance and that each case stood on its own facts. See Rickards, supra, 23 N.J.Misc. at 93, 41 A.2d 267. Recovery was denied because "[n]o ordinary prudent person could reasonably have been expected to have foreseen the resultant injurious consequences * * *." Id. at 95, 41 A.2d 267. This result may be explained in terms of the disproportionate extent of liability, which could not have been anticipated, and that the economic losses, while generally foreseeable, did not suffice to establish the requisite knowledge or particular foreseeability for recovery. In Dale v. Grant, supra, the court also applied traditional proximate cause principles to deny recovery to a plaintiff claiming lost profits. In that case, however, the interference with contractual relations was intentional, but that tort was not yet widely recognized as compensable. See Dale, supra, 34 N.J.L. at 149.

The particular-general foreseeability axis is also accordant with the policies underlying tort law. For good reason, tortfeasors are liable only for the results falling within the foreseeable risks of their negligent conduct. Assigning liability for harm that fortuitously extends beyond the foreseeable risk of negligent conduct unfairly punishes the tortfeasor for harm that he could not have anticipated and taken precautions to avoid. This comports with an underlying policy of the negligence doctrine: the imposition of liability should deter negligent conduct by creating incentives to minimize the risks and costs of accidents. See Note, supra, 63 Va.L.Rev. at 815. The [100 N.J. 267] imposition of liability for unforeseeable risks cannot serve to deter the conduct that has eventuated in attenuated results, but instead arbitrarily assigns liability unrelated or out of proportion to the defendant's fault. If negligence is the failure to take precautions that cost less than the damage wrought by the ensuing accident, see United States v. Carroll Towing Co., 159 F.2d [495 A.2d 118] 169, 173, reh. den., 160 F.2d 482 (2d Cir.1947), it would be unfair and socially inefficient to assign liability for harm that no reasonably-undertaken precaution could have avoided. Cf. Soler v. Castmaster, Div. of H.P.M. Corp., supra, 98 N.J. 137, 484 A.2d 1225; Brown v. United States Stove Co., 98 N.J. 155, 484 A.2d 1234 (1984); Campos v. Firestone Tire & Rubber Co., 98 N.J. 198, 485 A.2d 305 (1984) (employing objective-subjective foreseeability in product liability context).

We conclude therefore that a defendant who has breached his duty of care to avoid the risk of economic injury to particularly foreseeable plaintiffs may be held liable for actual economic losses that are proximately caused by its breach of duty. In this context, those economic losses are recoverable as damages when they are the natural and probable consequence of a defendant's negligence in the sense that they are reasonably to be anticipated in view of defendant's capacity to have foreseen that the particular plaintiff or identifiable class of plaintiffs, as defined infra at 263-64, is demonstrably within the risk created by defendant's negligence.

We are satisfied that our holding today is fully applicable to the facts that we have considered on this appeal. Plaintiff has set forth a cause of action under our decision, and it is entitled to have the matter proceed to a plenary trial. Among the facts that persuade us that a cause of action has been established is the close proximity of the North Terminal and People Express Airlines to the Conrail freight yard; the obvious nature of the plaintiff's operations and particular foreseeability of economic losses resulting from an accident and evacuation; the defendants' actual or constructive knowledge of the [100 N.J. 268] volatile properties of ethylene oxide; and the existence of an emergency response plan prepared by some of the defendants (alluded to in the course of oral argument), which apparently called for the nearby area to be evacuated to avoid the risk of harm in case of an explosion. We do not mean to suggest by our recitation of these facts that actual knowledge of the eventual economic losses is necessary to the cause of action; rather, particular foreseeability will suffice. The plaintiff still faces a difficult task in proving damages, particularly lost profits, to the degree of certainty required in other negligence cases. The trial court's examination of these proofs must be exacting to ensure that damages recovered are those reasonably to have been anticipated in view of the defendants' capacity to have foreseen that this particular plaintiff was within the risk created by their negligence.

We appreciate that there will arise many similar cases that cannot be resolved by our decision today. The cause of action we recognize, however, is one that most appropriately should be allowed to evolve on a case-by-case basis in the context of actual adjudications. See Merenoff v. Merenoff, supra, 76 N.J. at 557, 388 A.2d 951. We perceive no reason, however, why our decision today should be applied only prospectively. See Darrow v. Hanover Tp., 58 N.J. 410, 415, 278 A.2d 200 (1971). Our holdings are well grounded in traditional tort principles and flow from well-established exceptional cases that are philosophically compatible with this decision. See Cogliati v. Ecco High Frequency Corp., 92 N.J. 402, 415-16, 456 A.2d 524 (1983); Mirza v. Filmore Corp., 92 N.J. 390, 398, 456 A.2d 518 (1983).

Accordingly, the judgment of the Appellate Division is modified, and, as modified, affirmed. The case is remanded for proceedings consistent with this opinion.

For modification and affirmance --Chief Justice WILENTZ, and Justices CLIFFORD, HANDLER, O'HERN, GARIBALDI and STEIN--6.

For reversal--None.

[1] In Robins Dry Dock, supra, Justice Holmes ruled that the law did not protect third parties whose contractual expectations were disrupted when the contract was "unknown to the doer of the wrong." Id. at 309, 48 S.Ct. at 135, 72 L.Ed. at 292. In Stockton Waterworks, the court grounded its denial of recovery on the absence of a proximately caused injury. 10 Q.B. at 457.

[2] It has been suggested that courts are ill-equipped to manage efficiently the kind of litigation (and concommitant resource allocation) stemming from the type of disasters that may be produced by negligent mishaps in ultrahazardous businesses, many of which are concentrated here in New Jersey. See, e.g., Louisiana ex rel. Guste v. M/V Testbank, 752 F.2d 1019, 1032-34 (5th Cir.1985) (en banc ) (Gee, J. and Clark, C.J., concurring) (denying recovery to businesses dependent on commercial fishing that lost profits when twelve tons of a toxic chemical spilled into the Mississippi River and the river was closed to fishing for three weeks; commercial fishing businesses recovered). We believe, however, that it would be unwise for the Court to sidestep the question presented on this appeal by rigid adherence to the physical harm rule. Absent forthcoming remedies from our coordinate branches of government, it would seem to serve justice better for a court of law to fashion a remedy in a particular case, and perhaps be corrected by the legislature, than for innocent victims to have no redress at all. E.g., Kelly v. Gwinnell, 96 N.J. 538, 476 A.2d 1219 (1984). "[T]he difficulties of adjudication [should not] frustrate the principle that there be a remedy for every substantial wrong." Dillon v. Legg, supra, 68 Cal.2d at 739, 69 Cal.Rptr. at 79, 441 P.2d at 919.

[3] A further compromise of the nonrecovery rule may be discerned in cases in which courts have allowed a plaintiff to recover only the added costs of performing the contract, but not lost profits, without expressly resting the decision on such considerations as a special relationship or foreknowledge of a particular class of plaintiffs. See J. Ray McDermott & Co. v. S.S. Egero, 453 F.2d 1202 (5th Cir.1972) (defendant who negligently interfered with construction contract was liable for liquidated damages paid to subcontractor, though court said subcontractor could not have recovered if he had sued in his own right); Dominion Tape of Canada Ltd. v. L.R. McDonald & Sons, Ltd., 3 Ont. 627 (1971) (defendant, who caused power failure that forced plaintiff manufacturer to cease manufacturing, was liable for workers' lost wages, required to be paid under the plaintiff's employment contract, but no lost profits); Midvale Coal Co. v. Cardox Corp., 152 Ohio St. 437, 89 N.E.2d 673 (1949) (employer recovered the excess cost of workers' compensation insurance premiums resulting from negligence by defendant to plaintiff's employee); see also Medical Care Recovery Act, 42 U.S.C. § 2651 (giving the federal government a right of recovery for medical care it must and has provided someone, particularly in the armed services, injured by a defendant's negligence).

[4] The rationale has been proffered that negligently-caused economic losses are recoverable if they are part of the entire unit or complex of damages caused by an independent, threshold tort; nonrecoverable economic losses are damages that stand alone or apart from other damages suffered. See Prosser & Keeton, supra, § 129, at 997. This rationale, however, does not explain, for example, why economic losses stemming from an intentional, rather than negligent, interference with economic expectations are recoverable although there is no attendant physical harm and no independent, threshold tort. See, e.g., Lumley v. Gye, 118 Eng.Rep. 749 (Q.B.1853) (one who intentionally induced opera singer to dishonor contract was liable to theatre owner for lost profits). The notion that the defendant must have breached a duty independent of the negligent interference with economic expectations assumes that the defendant's negligence--fortuitously resulting only in economic losses--is not a tort. Whether the law recognizes the injury as compensable is a matter of policy; but clearly an "independent" tort has been committed, and no parasitic relationship with another tort should be required before determining whether the injury is compensable. Further, the rule-of-damages rationale does not explain why the application of concepts of duty and proximate cause, which serve negligence well in cases where the plaintiff is physically harmed, cannot function equally well in cases in which there has been no physical harm. See supra at 110.

[5] In Kinsman, the defendants' negligence caused a ship to break loose from her moorings and careen down the narrow, S-shaped Buffalo River channel. She struck another ship, which in turn broke loose from her moorings and drifted downstream--followed by the first ship--until she crashed into a bridge. The bridge collapsed and its wreckage, together with the two ships, formed a dam, which caused extensive flooding and an ice jam reaching almost 3 miles upstream. As a result of this disaster, transportation on the river was disrupted for a period of about two months. The plaintiff's grain shipments were delayed and substitute grain had to be obtained. 388 F.2d at 822-23. The resultant economic losses were deemed too remote to allow recovery. Id. at 824.

[479 N.Y.S.2d 165] William E. Hegarty, Ernest J. Williams, Thomas J. Kavaler, Vincent E. Gentile and Lisa Schilit, New York City, for appellant-respondent.

Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City (Alfred Weinstein, Leonard Koerner and Daniel E. Katz, New York City, of counsel), for respondents-appellants.

The determination made in a prior action that Con Edison was grossly negligent in connection with the 1977 blackout in the City of New York is binding and conclusive on Con Edison in this action. Although plaintiffs may recover damages for physical injury to persons and property directly resulting from the service interruption, including damages resulting from looting and vandalism by rioters, they may not recover damages for additional expenditures, occasioned by the blackout, made by plaintiffs in the performance of their governmental functions, nor may they recover for loss of revenues assertedly attributable to the blackout.

On July 13, 1977 at approximately 9:36 p.m. there was a complete failure of electrical service in the City of New York except for an area in the Borough of Queens which was supplied by the Long Island Lighting Company. The blackout lasted for approximately 25 hours with power not being completely restored until approximately 10:40 p.m. on July 14.

The present action was instituted on September 7, 1978 by the City of New York and 14 public benefit corporations to recover damages allegedly sustained as a result of Con Edison's gross negligence and reckless and willful conduct with respect to the blackout.

Plaintiffs moved for partial summary judgment with respect to Con Edison's liability for gross negligence "on the ground that, under the doctrine of collateral estoppel, a prior determination in another lawsuit (Food Pageant, Inc. v. Consolidated Edison Co., Inc., Supreme Court, Bronx County, Index No. 16971/77) ^[1] that the July 13-14, 1977 electric power failure * * * resulted from the gross negligence of the defendant Consolidated Edison, is conclusive and binding on the defendant Consolidated Edison in this action". Con Edison thereupon made a cross motion for partial summary judgment, so far as pertinent for the purposes of the present appeal, (1) dismissing plaintiffs' claims based on Con Edison's contracts with the Power Authority of the State of New York (PASNY) because "plaintiffs are neither parties nor third-party beneficiaries of those contracts", (2) dismissing "plaintiffs' claims for damages attributable to criminal activity, civil disturbances, municipal employee absenteeism and lost productivity" because "superseding causes preclude imposition of liability upon Con Edison for such damages", and (3) dismissing "plaintiffs' claims [479 N.Y.S.2d 166] for reimbursement of municipal expenditures incurred during July 13-14, 1977" because "plaintiffs cannot recover as damages the costs of governmental operations which they were created to perform".

Special Term granted plaintiffs' motion and denied Con Edison's motion as described above. The Appellate Division, 95 A.D.2d 988, 465 N.E.2d 99, affirmed, without opinion, and granted both plaintiffs and Con Edison leave to appeal to our court. We modify the determination at the Appellate Division.

We agree with both courts below that on the issue of Con Edison's liability for gross negligence in connection with the blackout, Con Edison is precluded by the adverse determination of the issue in Food Pageant v. Consolidated Edison Co., 54 N.Y.2d 167, 445 N.Y.S.2d 60, 429 N.E.2d 738. The applicable principle in this case is that of third-party issue preclusion.

It is plaintiffs who seek to invoke the principle of third-party issue preclusion to bar Con Edison from relitigating its liability for gross negligence. It is not disputed that this issue was actually litigated and determined by a valid and final judgment in Food Pageant and that the determination of that issue was essential to the judgment in that case. Plaintiffs contend, therefore, that the determination in Food Pageant is binding and conclusive in this case. Con Edison, having the burden^[3] to demonstrate that the circumstances of the prior determination justify affording it an opportunity to relitigate the issue of liability, advances several arguments in support of its contention that the determination in Food Pageant is not to be given preclusive effect.^[4] [479 N.Y.S.2d 167] These arguments, taken singularly or in combination, do not warrant the result for which Con Edison contends, and Con Edison has not tendered sufficient proof in admissible form to require trial of any issue of fact or reversal of the exercise of judgment by the courts below.

It is first contended that third-party issue preclusion should not apply because there are other judicial determinations concluding that Con Edison was not guilty of gross negligence in connection with the blackout.^[5] Whatever might be said of the effect properly to be given to inconsistent determinations of like judicial stature, in this instance it suffices to dismiss Con Edison's contention to observe that the inconsistent determinations on which it would rely are those in cases tried in the Small Claims Part of the Civil Court of New York City as to which informal and simplified procedures are applicable^[6] and which by express statutory provision are not to be deemed an adjudication of any fact at issue (other than the amount involved) with respect to any other action.^[7]

Con Edison next argues that there is now available exculpatory evidence which in fairness requires that it be permitted to relitigate the issue of liability. Reference is made to investigative reports, in particular to the so-called Clapp Report. These reports were available and offered but rejected in the Food Pageant trial. Nothing suggests that the exclusion of this hearsay evidence was there error (and any contention that it was could have been subjected to appellate review on the appeal in that case), and no persuasive argument is now advanced to support admissibility in this case.

Con Edison next makes an oblique plea that we should reintroduce the former requirement of mutuality which we declared "a dead letter" in B.R. DeWitt, Inc. v. Hall, 19 N.Y.2d 141, 147, 278 N.Y.S.2d 596, 225 N.E.2d 195. To grant this plea would, of course, be entirely to eliminate third-party issue preclusion. It is understandable that Con Edison should express concern, in the light of the multiplicity of claims arising out of the blackout, that the issue of its gross negligence will have been established in each case. Nevertheless, no sufficient justification is advanced to turn the clock back with respect to so [479 N.Y.S.2d 168] fundamental a legal development as the elimination of the requirement of mutuality. We have been committed since DeWitt, and indeed even before (Israel v. Wood Dolson Co., 1 N.Y.2d 116, 151 N.Y.S.2d 1, 134 N.E.2d 97), to the proposition that efficient utilization of the judicial system is served by preclusion of relitigation of issues as to which a litigant has had a full and fair opportunity for resolution, irrespective of the identity of his particular opponent. Nor does Con Edison advance any intermediate position warranting a different application of the principles of third-party issue preclusion with respect to a multiplicity of claims arising out of a community-wide disaster such as the blackout in this case.

It is then argued that the determination in Food Pageant should not be given preclusive effect because of indications that it was the result of compromise in the jury room. No tender has been made, however, of proof in admissible form sufficient to require trial of this factual issue. The arguments of Con Edison are grounded only in speculation, and it cannot be said as a matter of law that the Food Pageant verdict was the result of impermissible compromise.

The circumstance, to which Con Edison next points, that the claim in Food Pageant and the amount of the jury's verdict ($40,500) may be said to be "small in absolute terms and particularly so when compared to the aggregate of over $200 million in claims against Con Edison arising out of the 1977 blackout", provides no basis to deny application of third-party issue preclusion. In Food Pageant, Con Edison had a full and fair opportunity to litigate the issue of gross negligence, the forum and applicable procedures were the same, the burden of persuasion was the same, and Con Edison, explicitly then recognizing the potential preclusive effects of an adverse determination in that case, had every incentive to defend that action fully and vigorously.

Nor does the adoption of a rule of comparative negligence in New York (CPLR art. 14-A) foreclose application of third-party issue preclusion in the circumstances of this case. No contention whatsoever is put forth by Con Edison that any action or omission to act on the part of any of plaintiffs contributed to cause the blackout. There simply is no issue of comparative negligence involved in the question of Con Edison's responsibility for the blackout. It may be, however, that principles of mitigation will require consideration of certain action or inaction on the part of plaintiffs in the determination of damages.

Finally with respect to the preclusion issue, we reject as wholly without merit Con Edison's assertion that to apply third-party issue preclusion would be to deprive it of the due process to which it is constitutionally entitled. The characterization of this appeal as "presenting a question of fundamental fairness" neither concludes nor advances the argument. Con Edison cites no authority, and we know of none, which now regards the application of third-party issue preclusion as posing a question of constitutional dimension where in the prior action a full and fair opportunity to litigate has been afforded.

For the reasons stated we conclude that the prior determination in Food Pageant with respect to Con Edison's liability for gross negligence in connection with the 1977 blackout is binding and conclusive on Con Edison in this action.

We reject, too, Con Edison's argument that because the city and the other plaintiffs associated with it were customers of PASNY and not direct customers of Con Edison, they are not entitled to recover against Con Edison. In 1974 a new section, "s 1001-a. Emergency Provisions For The Metropolitan Area of the City of New York", was added to the Public Authorities Law (L. 1974, ch. 369, § 2). Pursuant to the authorization of that section, in December, 1974 and December, 1975 PASNY acquired from Con Edison two partially completed generating units (the Astoria 6 and the Indian Point 3 Units). The underlying [479 N.Y.S.2d 169] legislation and both acquisitions anticipated that Con Edison would continue to provide transmission and delivery of the electricity produced in the two plants. In conformity with that expectation, a service agreement was entered into by PASNY and Con Edison for delivery of power and energy from the Astoria 6 Unit and the Indian Point 3 Unit, in which was recited Con Edison's willingness, by use of its existing facilities, to assist PASNY in serving the needs of the Astoria-Indian Point customers, and Con Edison became obligated to provide the same quality of service to PASNY's customers as it did to its own customers and under Con Edison's regular tariff schedules. In a simultaneously executed "Contract for the Sale of Power and Energy", Con Edison agreed to provide sufficient energy to meet the requirements of PASNY's affected customers.

Against this background we have no difficulty in concluding that all the plaintiffs were third-party beneficiaries of the agreements between PASNY and Con Edison. They were precisely the consumers for whose benefit the legislation was enacted and the agreements made between PASNY and Con Edison.

To be distinguished are our holdings in Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 159 N.E. 896 and Kornblut v. Chevron Oil Co., 62 A.D.2d 831, 407 N.Y.S.2d 498, affd. on opn. below 48 N.Y.2d 853, 424 N.Y.S.2d 429, 400 N.E.2d 368 In neither of those cases did the operative contract provide that the service was to be rendered other than for the contracting party, city or authority. Moreover, in Moch we noted the distinction between the agreement of the water company, there in issue, to furnish water at the hydrants and the agreement of the water company to provide direct service to members of the public at their homes and factories (247 NY, at pp. 164, 166, 159 N.E. 896). In the present instance, the purpose of the enabling legislation was expressly stated to be "To preserve reliability of electric service in the metropolitan area of the city of New York" (Public Authorities Law, § 1001-a, subd. 1), and the service agreement contained the express obligation to "operate and maintain all the facilities necessary to deliver power to Astoria-Indian Point Customers in accordance with good utility operating practice". Indeed, the essence of the responsibility of a public utility is to provide services to the consuming public.

We turn then to issues posed by Con Edison's motion for partial summary judgment with respect to the extent of the damages to which plaintiffs may be entitled, on appropriate supporting proof, observing that plaintiffs' action sounds both in contract and in tort. Initially we note that procedurally Con Edison may raise challenges in this regard by a motion for partial summary judgment seeking dismissal of claims for specified and distinct categories of damages (CPLR 3212, subd. see Siegel, Practice Commentaries, McKinney's Cons.Laws of N.Y., Book 7B, CPLR C3212:30, p. 448).

It is not disputed that plaintiffs would be entitled, on supporting proof, to recover damages for physical injury to persons and property directly resulting from the service interruption. Con Edison disputes their right, however, to recover damages resulting from looting and vandalism by rioters related to the blackout. We reject this contention inasmuch as plaintiffs have shown facts sufficient to require a trial of the factual question of whether intervention of the rioters was within the contemplation of the parties or reasonably to have been foreseen by Con Edison. If so, a jury could, under appropriate instructions, properly include this element of damage in any award to plaintiffs (cf. Nallan v. Helmsley-Spear, Inc., 50 N.Y.2d 507, 429 N.Y.S.2d 606, 407 N.E.2d 451).

[479 N.Y.S.2d 170] We rule in favor of Con Edison, however, as to two other categories of damage. Con Edison argues persuasively that plaintiffs should not be permitted to recover costs incurred for wages, salaries, overtime and other benefits of police, fire, sanitation and hospital personnel from whom services (in addition to those which would normally have been rendered) were required in consequence of the blackout. The general rule is that public expenditures made in the performance of governmental functions are not recoverable (see, generally, Matter of TMI Litigation Governmental Entities Claims, 544 F.Supp. 853, 855, mod sub nom. Pennsylvania v. General Public Utilities Corp., 710 F.2d 117 City of Bridgeton v. B.P. Oil, 146 N.J.Super. 169, 178-179, 369 A.2d 49 Town of Freetown v. New Bedford Wholesale Tire, 384 Mass. 60, 423 N.E.2d 997).^[8] The general rule is grounded in considerations of public policy, and we perceive nothing in the different and somewhat closer relationship between Con Edison and plaintiffs in this case which would warrant departure from that rule. We additionally note that certain exceptions to the general rule have been created by statutory enactment to give a municipality a claim for expenditures for fire fighting and other police power services. (See, e.g., General Municipal Law, § 207-c id., § 209 id., § 209-g State Finance Law, § 54-e). No statute is called to our attention which would accord a comparable benefit to plaintiffs in the circumstances of this case.

Finally, and we think effectively, Con Edison disputes the right of plaintiffs to recover revenues allegedly lost in consequence of the blackout--taxes not recovered on sales, transfers, and business transactions not undertaken, transit fares and tolls not paid, and receipts from wagers not placed with the Off-Track Betting Corporation. In the same category is to be included loss of productivity of employees due to absenteeism. The tender of proof of damages in this category is speculative only, determinable solely by reference to collateral transactions (or their absence), and insufficient to defeat Con Edison's motion. (Cf. Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 334-335, 464 N.Y.S.2d 712, 451 N.E.2d 459). Additionally, there are strong considerations of public policy which militate against recognition of losses sustained by municipal and public benefit corporations in consequence of adverse effects on the general economy. That there will inevitably be interruptions in utility services from time to time must be taken for granted. Loss of revenues by municipal and public benefit corporations in consequence of the interruption of utility services, however, is the economic counterpart of the incurment of added costs attributable to such interruption (see supra, pp. 560-561, 479 N.Y.S.2d, pp. 169-170, 468 N.E.2d, pp. 7-8). In neither case will recovery be allowed.^[9]

[479 N.Y.S.2d 171] For the reasons stated, the order of the Appellate Division should be modified, without costs, to grant Con Edison's motion for partial summary judgment dismissing plaintiffs' claims for damages on account of expenditures made for additional governmental services furnished in consequence of the blackout and for loss of revenue and similar economic damage asserted to be attributable to the blackout, and as so modified, affirmed.^[10]

COOKE, C.J., and JASEN, WACHTLER, MEYER, SIMONS and KAYE, JJ., concur.

Order modified, without costs, in accordance with the opinion herein and, as so modified, affirmed. Cross appeal by plaintiffs dismissed, without costs. Question certified answered in the negative.

[1] When this case reached our court we upheld the jury verdict which found Con Edison to have been grossly negligent in causing the 1977 blackout and which awarded plaintiff grocery store chain damages in the sum of $40,500 for food spoilage and loss of business. (Food Pageant v. Consolidated Edison Co., 54 N.Y.2d 167, 445 N.Y.S.2d 60, 429 N.E.2d 738).

[2] Issue preclusion between the same parties is to be distinguished from third-party issue preclusion. In the former case as stated in section 27 of the Restatement of Judgments, Second--"When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim", subject to a very narrow range of exceptions (id., § 28). By some contrast the principle of third-party issue preclusion is that, again in the phraseology of the Restatement (§ 29)--"A party precluded from relitigating an issue with an opposing party, in accordance with §§ 27 and 28, is also precluded from doing so with another person". The range of circumstances which may lead to avoidance of preclusion, however, is now much broader--"unless the fact that he lacked full and fair opportunity to litigate the issue in the first action or other circumstances justify affording him an opportunity to relitigate the issue." With respect to the distinction between issue preclusion between the same parties and third-party issue preclusion, see Matter of American Ins. Co. (Messinger-Aetna Cas. & Sur. Co.), 43 N.Y.2d 184, 190, 401 N.Y.S.2d 36, 371 N.E.2d 798.

[3] (Schwartz v. Public Administrator, 24 N.Y.2d 65, 73, 298 N.Y.S.2d 955, 246 N.E.2d 725.)

[4] The relevant factors to be considered are set out in section 29 of the Restatement of Judgments, Second, and in Schwartz. Section 29 provides in full as follows:

"§ 29. Issue Preclusion in Subsequent Litigation with Others

"A party precluded from relitigating an issue with an opposing party, in accordance with §§ 27 and 28, is also precluded from doing so with another person unless the fact that he lacked full and fair opportunity to litigate the issue in the first action or other circumstances justify affording him an opportunity to relitigate the issue. The circumstances to which considerations should be given include those enumerated in § 28 and also whether:

"(1) Treating the issue as conclusively determined would be incompatible with an applicable scheme of administering the remedies in the actions involved;

"(2) The forum in the second action affords the party against whom preclusion is asserted procedural opportunities in the presentation and determination of the issue that were not available in the first action and could likely result in the issue being differently determined;

"(3) The person seeking to invoke favorable preclusion, or to avoid unfavorable preclusion, could have effected joinder in the first action between himself and his present adversary;

"(4) The determination relied on as preclusive was itself inconsistent with another determination of the same issue;

"(5) The prior determination may have been affected by relationships among the parties to the first action that are not present in the subsequent action, or apparently was based on a compromise verdict or finding;

"(6) Treating the issue as conclusively determined may complicate determination of issues in the subsequent action or prejudice the interests of another party thereto;

"(7) The issue is one of law and treating it as conclusively determined would inappropriately foreclose opportunity for obtaining reconsideration of the legal rule upon which it was based;

"(8) Other compelling circumstances make it appropriate that the party be permitted to relitigate the issue."

The articulation in Schwartz appears at page 72, 298 N.Y.S.2d 955, 246 N.E.2d 725, as follows: "A decision whether or not the plaintiff drivers had a full and fair opportunity to establish their nonnegligence in the prior action requires an exploration of the various elements which make up the realities of litigation. A comprehensive list of the various factors which should enter into a determination whether a party has had his day in court would include such considerations as the size of the claim, the forum of the prior litigation, the use of initiative, the extent of the litigation, the competence and experience of counsel, the availability of new evidence, indications of a compromise verdict, differences in the applicable law and foreseeability of future litigation."

[5] (Penichet v. Consolidated Edison Co., NYLJ, May 1, 1980, p. 7, col. 2; Lehman v. Consolidated Edison Co., NYLJ, March 25, 1980, p. 10, col. 6; Finkelstein v. Consolidated Edison Co., NYLJ, May 1, 1979, p. 13, col. 3; LoVico v. Consolidated Edison Co., 99 Misc.2d 897, 420 N.Y.S.2d 825; Lee v. Consolidated Edison Co., 95 Misc.2d 120, 407 N.Y.S.2d 777.)

[6] CCA 1804 provides: "The court shall conduct hearings upon small claims in such manner as to do substantial justice between the parties according to the rules of substantive law and shall not be bound by statutory provisions or rules of practice, procedure, pleading or evidence, except statutory provisions relating to privileged communications and personal transactions or communications with a decedent or mentally ill person. Disclosure shall be unavailable in small claims procedure except upon order of the court on showing of proper circumstances. The provisions of this act and the rules of this court, together with the statutes and rules governing supreme court practice, shall apply to claims brought under this article so far as the same can be made applicable and are not in conflict with the provisions of this article; in case of conflict, the provisions of this article shall control."

[7] CCA 1808 provides: "A judgment obtained under this article may be pleaded as res judicata only as to the amount involved in the particular action and shall not otherwise be deemed an adjudication of any fact at issue or found therein in any other action or court."

[8] For discussion of recovery of damages by nongovernmental plaintiffs, see Dunlop Tire & Rubber Corp. v. FMC Corp., 53 A.D.2d 150, 385 N.Y.S.2d 971.

[9] In private litigation, recovery of damages for loss of profits generally depends on the certainty and specificity of the proof (see Dunlop Tire & Rubber Corp. v. FMC Corp., 53 A.D.2d 150, 154-156, 385 N.Y.S.2d 971). Thus, in Food Pageant, 54 N.Y.2d 167, 445 N.Y.S.2d 60, 429 N.E.2d 738 a private litigant was awarded such damages. In that case, it is to be observed, Con Edison registered no protest to the charge that damages could be awarded for loss of profits, and in our court did not challenge the sufficiency of the evidence to support such an award.

[10] The cross appeal taken by plaintiffs should be dismissed on the ground that it does not lie inasmuch as they took no appeal to the Appellate Division.

[492 N.Y.S.2d 556] Bruce L. Birnbaum and Benjamin J. Golub, New York City, for appellant.

William E. Hegarty, Ernest J. Williams, Thomas J. Kavaler, Stanley K. Shapiro and Lisa Schilit, New York City, for respondent.

On July 13, 1977, a failure of defendant Consolidated Edison's power system left most of New York City in darkness. In this action for damages allegedly resulting from the power failure, we are asked to determine whether Con Edison owed a duty of care to a tenant who suffered personal injuries in a common area of an apartment building, where his landlord--but not he--had a contractual relationship with the utility. We conclude that in the case of a blackout of a metropolis of several million residents and visitors, each in some manner necessarily affected by a 25-hour power failure, liability for injuries in a building's common areas should, as a matter of public policy, be limited by the contractual relationship.

This court has twice before confronted legal questions concerning the 1977 blackout (see, Koch v. Consolidated Edison Co., 62 N.Y.2d 548, 479 N.Y.S.2d 163, 468 N.E.2d 1, cert. denied 469 U.S. 1210, 105 S.Ct. 1177, 84 L.Ed.2d 326, Food Pageant v. Consolidated Edison Co., 54 N.Y.2d 167, 445 N.Y.S.2d 60, 429 N.E.2d 738).

Plaintiff, Julius Strauss, then 77 years old, resided in an apartment building in Queens. Con Edison provided electricity to his apartment pursuant to agreement with him, and to the common areas of the building under a separate agreement with his landlord, defendant Belle Realty Company. As water to the apartment was supplied by electric pump, plaintiff had no running water for the duration of the blackout. Consequently, on the second day of the power failure, he set out for the basement to obtain water, but fell on the darkened, defective basement stairs, sustaining injuries. In this action against Belle Realty and Con Edison, plaintiff alleged negligence against the landlord, in failing to maintain the stairs or warn of their dangerous condition, and negligence against the utility in the performance of its duty to provide electricity.

Plaintiff moved for partial summary judgment against Con Edison (1) to estop it from contesting the charge of gross negligence in connection with the blackout, and (2) to establish that Con Edison owed a duty of care to plaintiff. He argued that Con Edison was prohibited from denying it was grossly negligent by virtue of the affirmed jury verdict in Food Pageant v. Consolidated Edison Co., 54 N.Y.2d 167, 445 N.Y.S.2d 60, 429 N.E.2d 738, supra, and that it owed plaintiff a duty even though he was "not a customer of Consolidated Edison in a place where the accident occurred." Con Edison cross-moved for summary judgment dismissing the complaint, maintaining it had no duty to a noncustomer.

The court granted the motion insofar as it sought collateral estoppel regarding gross negligence,^[1] and denied Con Edison's cross motion to dismiss the complaint, finding a question of fact as to whether it owed plaintiff a duty of care. The Appellate Division reversed and dismissed the complaint against Con Edison. Citing Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 159 N.E. 896, the plurality concluded that "Con Ed did not owe a duty to plaintiff in any compensable legal sense" (98 A.D.2d 424, 428, 469 N.Y.S.2d 948). Justice Gibbons dissented, finding extension of the duty tolerable here because "tenants of the building in question constitute a defined, limited and known group of people" (id., at p. 437, 469 N.Y.S.2d 948). On public policy grounds, we [492 N.Y.S.2d 557] now affirm the Appellate Division order dismissing the complaint against Con Edison.

A defendant may be held liable for negligence only when it breaches a duty owed to the plaintiff (Pulka v. Edelman, 40 N.Y.2d 781, 782, 390 N.Y.S.2d 393, 358 N.E.2d 1019). The essential question here is whether Con Edison owed a duty to plaintiff, whose injuries from a fall on a darkened staircase may have conceivably been foreseeable, but with whom there was no contractual relationship for lighting in the building's common areas.

Duty in negligence cases is defined neither by foreseeability of injury (Pulka v. Edelman, supra, at p. 785, 390 N.Y.S.2d 393, 358 N.E.2d 1019) nor by privity of contract. As this court has long recognized, an obligation rooted in contract may engender a duty owed to those not in privity, for "is nothing anomalous in a rule which imposes upon A, who has contracted with B, a duty to C and D and others according as he knows or does not know that the subject-matter of the contract is intended for their use" (MacPherson v. Buick Motor Co., 217 N.Y. 382, 393, 111 N.E. 1050). In Fish v. Waverly Elec. Light & Power Co., 189 N.Y. 336, 82 N.E. 150, for example, an electric company which had contracted with the plaintiff's employer to install ceiling lights had a duty to the plaintiff to exercise reasonable care. And in Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275, a public weigher, hired by a seller of beans to certify the weight of a particular shipment, was found liable in negligence to the buyer. (See also, Wroblewski v. Otis Elevator Co., 9 A.D.2d 294, 296, 193 N.Y.S.2d 855, Rosenbaum v. Branster Realty Corp., 276 App.Div. 167, 93 N.Y.S.2d 209).

But while the absence of privity does not foreclose recognition of a duty, it is still the responsibility of courts, in fixing the orbit of duty, "to limit the legal consequences of wrongs to a controllable degree" (Tobin v. Grossman, 24 N.Y.2d 609, 619, 301 N.Y.S.2d 554, 249 N.E.2d 419; see also, Howard v. Lecher, 42 N.Y.2d 109, 397 N.Y.S.2d 363, 366 N.E.2d 64), and to protect against crushing exposure to liability (see, Pulka v. Edelman, 40 N.Y.2d 781, 390 N.Y.S.2d 393, 358 N.E.2d 1019, supra; Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441). "In fixing the bounds of that duty, not only logic and science, but policy play an important role" (De Angelis v. Lutheran Med. Center, 58 N.Y.2d 1053, 1055, 462 N.Y.S.2d 626, 449 N.E.2d 406; see also, Becker v. Schwartz, 46 N.Y.2d 401, 408, 413 N.Y.S.2d 895, 386 N.E.2d 807). The courts' definition of an orbit of duty based on public policy may at times result in the exclusion of some who might otherwise have recovered for losses or injuries if traditional tort principles had been applied.

Considerations of privity are not entirely irrelevant in implementing policy. Indeed, in determining the liability of utilities for consequential damages for failure to provide service--a liability which could obviously be "enormous," and has been described as "sui generis," rather than strictly governed by tort or contract law principles (see, Prosser and Keeton, Torts § 92, at 663 )--courts have declined to extend the duty of care to noncustomers. For example, in Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 159 N.E. 896, supra, a water works company contracted with the City of Rensselaer to satisfy its water requirements. Plaintiff's warehouse burned and plaintiff brought an action against the water company in part based on its alleged negligence in failing to supply sufficient water pressure to the city's hydrants. The court denied recovery, concluding that the proposed enlargement of the zone of duty would unduly extend liability. Similarly, in Beck v. FMC Corp., 42 N.Y.2d 1027, 398 N.Y.S.2d 1011, 369 N.E.2d 10, affg. 53 A.D.2d 118, 385 N.Y.S.2d 956), an explosion interrupted a utility's electrical service, which in turn resulted in the loss of a day's pay for hourly workers at a nearby automobile plant. In an action brought by the workers, the court denied recovery on the basis of controlling the unwarranted extension of liability [492 N.Y.S.2d 558] (see also, Nicholson v. City of New York, 271 App.Div. 899, 67 N.Y.S.2d 156, affd. 297 N.Y. 548, 74 N.E.2d 477; Kraye v. Long Is. Light. Co., 42 A.D.2d 972, 348 N.Y.S.2d 16; Shubitz v. Consolidated Edison Co., 59 Misc.2d 732, 301 N.Y.S.2d 926).

Moch involved ordinary negligence, while Con Edison was guilty of gross negligence, but the cases cannot be distinguished on that basis. In reserving the question of what remedy would lie in the case of "reckless and wanton indifference to consequences measured and foreseen" (247 N.Y. at p. 169, 159 N.E. 896), the court in Moch contemplated a level of misconduct greater than the gross negligence involved here (cf. Matter of Almgren v. Fletcher, 304 N.Y. 547, 110 N.E.2d 396; Weld v. Postal Telegraph-Cable Co., 210 N.Y. 59, 103 N.E. 957; 1 N.Y. PJI2d 2:10A Prosser and Keeton, Torts § 34, at 208 ). The court in Food Pageant, in upholding the jury's verdict against Con Edison, noted as instances of Con Edison's misconduct its employee's failure to follow instructions to reduce voltage by "shedding load" after lightning had hit the electrical system, and its staffing decisions (54 N.Y.2d at pp. 173-174, 445 N.Y.S.2d 60, 429 N.E.2d 738, supra). Though found by the jury to constitute gross negligence, this behavior was not so consciously culpable as to fall into the category of conduct contemplated as "reckless and wanton" by the court in Moch (compare, Hall v. Consolidated Edison Co., 104 Misc.2d 565, 428 N.Y.S.2d 837).

In the view of the Appellate Division dissenter, Moch does not control because the injuries here were foreseeable and plaintiff was a member of a specific, limited, circumscribed class with a close relationship with Con Edison. The situation was thought to be akin to White v. Guarente, 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315, where an accounting firm was retained by a limited partnership to perform an audit and prepare its tax returns. As the court noted there, the parties to the agreement contemplated that individual limited partners would rely on the tax returns and audit. Refusing to dismiss a negligence action brought by a limited partner against the accounting firm, the court said, "the services of the accountant were not extended to a faceless or unresolved class of persons, but rather to a known group possessed of vested rights, marked by a definable limit and made up of certain components" (id., at p. 361, 401 N.Y.S.2d 474, 372 N.E.2d 315; see also, Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275; supra; Fish v. Waverly Elec. Light & Power Co., 189 N.Y. 336, 82 N.E. 150, supra).

Central to these decisions was an ability to extend the defendant's duty to cover specifically foreseeable parties but at the same time to contain liability to manageable levels. In White, for instance, liability stemmed from a single isolated transaction where the parties to the agreement contemplated the protection of identified individuals. Here, insofar as revealed by the record, the arrangement between Con Edison and Belle Realty was no different from those existing between Con Edison and the millions of other customers it serves. Thus, Con Edison's duty to provide electricity to Belle Realty should not be treated separately from its broader statutory obligation to furnish power to all other applicants for such service in New York City and Westchester County (Transportation Corporations Law § 12; Public Service Law § 31). When plaintiff's relationship with Con Edison is viewed from this perspective, it is no answer to say that a duty is owed because, as a tenant in an apartment building, plaintiff belongs to a narrowly defined class.^[2] [492 N.Y.S.2d 559] Additionally, we deal here with a system-wide power failure occasioned by what has already been determined to be the utility's gross negligence. If liability could be found here, then in logic and fairness the same result must follow in many similar situations. For example, a tenant's guests and invitees, as well as persons making deliveries or repairing equipment in the building, are equally persons who must use the common areas, and for whom they are maintained. Customers of a store and occupants of an office building stand in much the same position with respect to Con Edison as tenants of an apartment building. In all cases the numbers are to a certain extent limited and defined, and while identities may change, so do those of apartment dwellers (compare, White v. Guarente, 43 N.Y.2d 356, 361, 401 N.Y.S.2d 474, 372 N.E.2d 315, supra ). While limiting recovery to customers in this instance can hardly be said to confer immunity from negligence on Con Edison (see, Koch v. Consolidated Edison Co., 62 N.Y.2d 548, 479 N.Y.S.2d 163, 468 N.E.2d 1, supra), permitting recovery to those in plaintiff's circumstances would, in our view, violate the court's responsibility to define an orbit of duty that places controllable limits on liability.

Finally, we reject the suggestion of the dissent that there should be a fact-finding hearing to establish the alleged catastrophic probabilities flowing from the 1977 blackout and prospective blackouts, before any limitation is placed on Con Edison's duty to respond to the public for personal injuries (see, Tobin v. Grossman, 24 N.Y.2d 609, 620, 301 N.Y.S.2d 554, 249 N.E.2d 419 supra ). In exercising the court's traditional responsibility to fix the scope of duty, for application beyond a single incident, we need not blind ourselves to the obvious impact of a city-wide deprivation of electric power, or to the impossibility of fixing a rational boundary once beyond the contractual relationship, or to the societal consequences of rampant liability.

In sum, Con Edison is not answerable to the tenant of an apartment building injured in a common area as a result of Con Edison's negligent failure to provide electric service as required by its agreement with the building owner. Accordingly, the order of the Appellate Division should be affirmed, with costs.

My disagreement with the majority results not from its consideration of public policy as a factor in determining the scope of Con Ed's duty, but from the fact that in reaching its public policy conclusion it has considered only one side of the equation and based its conclusion on nothing more than assumption. I, therefore, respectfully dissent.

As Professors Prosser and Keeton have emphasized (Prosser and Keeton, Torts, at 357-358 ), "The statement that there is or is not a duty begs the essential question--whether the plaintiff's interests are entitled to legal protection against the defendant's conduct * * * It is a shorthand statement of a conclusion, rather than an aid to analysis in itself * * * But it should be recognized that 'duty' is not sacrosanct in itself, but is only an expression of the sum total of those considerations of policy which lead the law to say that the plaintiff is entitled to protection." We accepted the concept without reservation in De Angelis v. Lutheran Med. Center, 58 N.Y.2d 1053, 1055, 462 N.Y.S.2d 626, 449 N.E.2d 406, stating as to the role played by policy that, "A line must be drawn between the competing policy considerations of providing a remedy to everyone who is injured and of extending exposure to tort liability almost without limit."

Although De Angelis did not define the "competing policy considerations" to be reviewed in deciding where the line is to be [492 N.Y.S.2d 560] drawn, it made clear that "absent legislative intervention, the fixing of the 'orbit' of duty, as here, in the end is the responsibility of the courts". Thus, the suggestion in the plurality opinion at the Appellate Division (98 A.D.2d at p. 429, 469 N.Y.S.2d 948) that the liability issue now considered is "best addressed to the Legislature" is no more correct in the present situation than it was when in Codling v. Paglia, 32 N.Y.2d 330, 345 N.Y.S.2d 461, 298 N.E.2d 622 we imposed upon manufacturers the economic burden of strict products liability to bystanders as well as to those in privity.

There is, of course, legislative intervention in the regulation of gas and electric companies (Transportation Corporations Law art. 2; Public Service Law art. 4). But the only "legislative" limitation upon the liability of such companies consists of Public Service Commission acceptance and approval of Con Ed's rate schedule, which incorporates the rule, previously enunciated by this court (Weld v. Postal Telegraph-Cable Co., 199 N.Y. 88, 92 N.E. 415, on second appeal 210 N.Y. 59, 103 N.E. 957), that liability "be limited to damages arising from the utility's willful misconduct or gross negligence" (Food Pageant v. Consolidated Edison Co., 54 N.Y.2d 167, 172, 445 N.Y.S.2d 60, 429 N.E.2d 738). But, as Food Pageant and Koch v. Consolidated Edison Co., 62 N.Y.2d 548, 479 N.Y.S.2d 163, 468 N.E.2d 1, cert. denied 469 U.S. 1210, 105 S.Ct. 1177, 84 L.Ed.2d 326) establish, what caused the injuries for which compensation is sought in this action was Con Ed's gross negligence.

What policy considerations are involved in determining whether Con Ed's gross negligence liability should be extended to "bystanders" and where, if at all, a line should be drawn between the varying bystander situations is, then, the issue to be decided. Codling v. Paglia looked at the total exclusion of the bystander from opportunity to detect a product defect, the system of mass production and distribution, the ability of the manufacturer to pass on, in part if not in whole, the economic burden of postdistribution liability, and the added incentive toward safety that could be expected to result (32 N.Y.2d at p. 341, 345 N.Y.S.2d 461, 298 N.E.2d 622). To that extent at least it departed from the rationale of Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 168, 159 N.E. 896 that performance of a contract to supply water to a municipality did not impose "another duty, apart from contract, to an indefinite number of potential beneficiaries."

Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441, Tobin v. Grossman, 24 N.Y.2d 609, 301 N.Y.S.2d 554, 249 N.E.2d 419 and Pulka v. Edelman, 40 N.Y.2d 781, 390 N.Y.S.2d 393, 358 N.E.2d 1019 on which the majority rely, spoke, it is true, to the necessity of avoiding crushing liability, but articulated no factors by which the crushing nature of the potential liability was to be determined. They can, perhaps, be distinguished from Codling on the ground that the service businesses they involved (accounting, medicine and parking) do not have the potential of Codling's mass distribution system to pass on or absorb the resulting economic burden, but the same cannot be said for the present defendant though it too is involved in furnishing a service.

Criteria more extensive than the unsupported prediction of disaster for determining liability are not wanting, however. Thus, in Tarasoff v. Regents of Univ., 17 Cal.3d 425, 434, 131 Cal.Rptr. 14, 22, 551 P.2d 334, 342), the Supreme Court of California listed the major factors to be balanced in determining duty as "the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved." Prosser and Keeton (op. cit., supra at 359), on the basis of the Tarasoff case and Vu v. Singer Co., 538 F.Supp. 26, affd. 9th Cir., 706 [492 N.Y.S.2d 561] F.2d 1027, cert. denied 464 U.S. 938, 104 S.Ct. 350, 78 L.Ed.2d 315, list similar factors, which are discussed at greater length in section 4 of their treatise. As to the loss distribution factor, they note (op. cit., at 24-25) that, "The defendants in tort cases are to a large extent public utilities, industrial corporations, commercial enterprises, automobile owners, and others who by means of rates, prices, taxes or insurance are best able to distribute to the public at large the risks and losses which are inevitable in a complex civilization. Rather than leave the loss on the shoulders of the individual plaintiff, who may be ruined by it, the courts have tended to find reasons to shift it to the defendants", except where there are "limitations upon the power of a defendant to shift the loss to the public * * * where the liability may extend to an unlimited number of unknown persons, and is incapable of being estimated or insured against in advance."

The majority's blind acceptance of the notion that Consolidated Edison will be crushed if held liable to the present plaintiff and others like him ignores the possibility that through application to the Public Service Commission Con Ed can seek such reduction of the return on stockholders' equity (Public Service Law § 66 cf. Matter of Consolidated Edison Co. v. Public Serv. Commn., 74 A.D.2d 384, 428 N.Y.S.2d 343, appeal dismissed 51 N.Y.2d 877, 433 N.Y.S.2d 1030, 414 N.E.2d 405, lv. denied 51 N.Y.2d 705, 433 N.Y.S.2d 1025, 412 N.E.2d 1327) or increase in its rates, or both, as may be necessary to pay the judgments obtained against it. It ignores as well the burden imposed upon the persons physically injured by Con Ed's gross negligence or, as to those forced to seek welfare assistance because their savings have been wiped out by the injury, the State. Doing so in the name of public policy seems particularly perverse, for what it says, in essence, is the more persons injured through a tort-feasor's gross negligence,^[*] the less the responsibility for injuries incurred.

I agree that there are situations encompassed by our tort system that require such a result, perverse though it may be, but before granting public utilities absolution beyond that which they already enjoy through the limitation of their liability to acts of gross negligence, I would put the burden upon the utility to establish the necessity for doing so. I am not suggesting that the issue is to be determined by a jury for, as already noted, I do not question that "duty" is a question of law to be determined by the courts. But the law is not without illustrations of preliminary issues involving facts to be determined by a Judge (e.g., competency and privilege of witnesses, Richardson, Evidence § 117 Morgan, Evidence § 53 suppression of evidence, CPL 710.60; Richardson, op cit. § 550). Nor am I necessarily suggesting that a retrospective determination of how crushing the liability from the 1977 blackout may be, as distinct from a more generalized prospective determination, should govern, although I would not balk at the former if the latter proved impossible of demonstration. All that I am suggesting is that it is Con Ed which claims that its duty does not encompass plaintiff, not because Con Ed was not grossly negligent, but because the effect of that negligence if Con Ed is held liable for it would be to cripple Con Ed as well as the victims of the negligence. There simply is no basis other than the majority's say so for its assumptions (majority opn., at p. 405, 492 N.Y.S.2d at p. 559, 482 N.E.2d at p. 38) that the impact of a city-wide deprivation of electric power upon the utility is entitled to greater consideration than the impact upon those injured; that a rational boundary cannot be fixed that will include some (apartment tenants injured in common areas, for example), if not all of the injured; that the consequence of imposing [492 N.Y.S.2d 562] some bystander liability will be more adverse to societal interests than will follow from blindly limiting liability for tort to those with whom the tort-feasor has a contractual relationship. Before we grant Con Ed's motion to dismiss, therefore, we should require that a rational basis for such assumptions be established.

Con Ed may well be able to do so, but before its motion is granted at the expense of an unknown number of victims who have suffered injuries the extent and effects of which are also unknown, it should be required to establish that the catastrophic probabilities are great enough to warrant the limitation of duty it seeks (cf. Tobin v. Grossman, 24 N.Y.2d 609, 620, 301 N.Y.S.2d 554, 249 N.E.2d 419 supra ).

I would, therefore, deny the summary judgment motions of both sides and remit to Supreme Court for determination of the preliminary fact issues involved.

WACHTLER, C.J., and SIMONS, ALEXANDER and TITONE, JJ., concur with KAYE, J.

MEYER, J., dissents and votes to reverse in a separate opinion in which JASEN, J., concurs.

Order affirmed, with costs.

[1] The collateral estoppel question was decided against Con Edison in Koch v. Consolidated Edison Co., 62 N.Y.2d 548, 479 N.Y.S.2d 163, 468 N.E.2d 1.

[2] In deciding that public policy precludes liability to a noncustomer injured in the common areas of an apartment building, we need not decide whether recovery would necessarily also be precluded where a person injured in the home is not the family bill payer but the spouse. In another context, where this court has defined the duty of a public accounting firm for negligent financial statements, we have recognized that the duty runs both to those in contractual privity with the accountant and to those whose bond is so close as to be, in practical effect, indistinguishable from privity, and we have on public policy grounds precluded wider liability to persons damaged by the accountant's negligence. (See, Credit Alliance Corp. v. Andersen & Co., 65 N.Y.2d 536, 493 N.Y.S.2d 435, 483 N.E.2d 110.) [decided herewith].)

[*] Nor can I accept the "consciously culpable" distinction which the majority seeks to impose between Con Ed and the employee who failed to "shed load." If, as Ultramares holds (255 N.Y. 170, at p. 193, 174 N.E. 441), the employer can be held for its subordinate's fraud, absent a showing that the subordinate acted out of an interest adverse to the employer, the same should be true of gross negligence.