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1
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OPINION
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EXTRACTED KEY WORDS
PLAINTIFFS EMBARCADERO PROJECT INVESTMENT NEGLIGENT MISREPRESENTATION COGENERATION CESI LIMITED PARTNERSHIP OFFICER DUTY REPRESENTATION RATE CHANGES PUBLICATION CARE SAN DIEGO JUSTIFY KIMMELL SPEAK ENERGY CHIEF FINANCIAL OFFICER GROSS COGENERATION INDUSTRY EMPLOYEES COST ACCOUNTANT POTENTIAL INVESTORS SUPREME COURT BUSINESS CORPORATION LAW LIABILITY RELIANCE |
LEE H. KIMMELL, ET AL., RESPONDENTS, v. HERMAN A. SCHAEFER, APPELLANT , ET
AL., DEFENDANTS.
89 N.Y.2d 257, 675 N.E.2d 450, 652 N.Y.S.2d 715 (1996).
November 26, 1996
1 No. 233 (1996 NY Int. 231)
Decided November 26, 1996
_________________________________________________________________
This opinion is uncorrected and subject to revision before publication
in the New York Reports.
Thomas P. Lynch, for Appellant.
Alan E. Kraus, for Respondents.
SMITH, J.:
The primary issue on this appeal is whether the relationship between
the parties was sufficient to render defendant liable to plaintiffs
for the tort of negligent misrepresentation. We affirm the order of
the Appellate Division because the record supports the finding that a
special relationship existed between the parties which under the
circumstances here required defendant to speak with care.
Plaintiffs invested $320,000 each in a limited partnership called
Cogenic Embarcadero LP. This partnership involved one of several
projects developed by Cogenic Energy Systems Inc. (CESI) for the
purpose of providing heat and electricity to industrial and commercial
energy users through on-site gas-powered "cogeneration" units. The
incentive for employing cogeneration to meet energy needs stemmed from
the lower cost of self-generated energy as compared to the rates
charged by utility companies for supplying the equivalent units of
power. In return for providing and installing the cogeneration units,
CESI shared a portion of the energy cost savings realized by the
participating facilities.
The Embarcadero project supplied electricity and heat to the Holiday
Inn in the San Diego area of California. In late 1987, CESI began
seeking new buyers for the Embarcadero project. In furtherance of the
renewed sales effort, CESI's president requested an updated
"feasibility study" from the San Diego office of the company so that
prospective buyers could evaluate the viability of the project on more
current financial information. In November 1987, CESI generated
projections on the Embarcadero project. The projections assumed that
electric and gas rates in 1988 would remain at 1987 levels despite a
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