Archive for April, 2010

Demolition of home to allow for cleanup of contamination is not excluded from coverage due to owned property exclusion.

SteveK April 29th, 2010

In the recent unreported decision, Proformance Insurance Co. v. Riggins, the New Jersey Appellate Division addressed a dispute between two insurers as to the responsibility to pay for the demolition of a home necessary for implementation of cost effective environmental remediation, holding that the cost of demolition was not excluded by the owned property exclusion.  In the case, Proformance insured the property owned by Don Kolbe from 2002 until 2004, and MetLife insured it from 2004 until 2006.  A leak was discovered from the underground eating oil tank in 2006.  It was undisputed that the tank had been leaking for four to eight years prior to the discovery.

Proformance acknowledge its obligation to provide coverage, and engaged two consultants to evaluate the options to remediate the property. Each consultant provided two options, one that required demolition of the house, the other allowed the house to remain with structural supports during the process of remediation.  The cost of the demolition option cost approximately $145,000 less than the support option. Proformance elected the more cost effective option.  MetLife agreed to contribute to the remediation, but not for the costs related to demolition, arguing that it constituted damage to owned property. The Court disagreed finding that the house was not damaged by the contamination and that the destruction to the house was not due to “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Court held that the decision to destroy the house was “simply a function of the decision to employ the most cost-effective means of addressing covered claims, rather than the product of any ‘occurrence’ as defined in the MetLife policy.”  Accordingly, the Court concluded that the exclusion did not apply. The Court further stated that it saw no rational basis to extend coverage for the costs of the structural option but excluding coverage for the less expensive option of reimbursing the homeowner for the demolition of the residence.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and insurance matters. For additional information about the matters in this bulletin or in the firm’s environmental  or insurance practice, please contact Steven A. Kunzman, Esq. who heads the Environmental and Insurance Coverage Practice Groups.

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3rd Circuit wrestles with the distinctions between Sections 107(a) and 113(f) of CERCLA

SteveK April 26th, 2010

In the recent decision in Agere Systems, Inc, et. al. v. Advances Environmental Technologies, LLC, et. al., the 3rd Circuit Court of Appeals continued the discussion of the complex interaction between sections 107(a) and 113(f) of CERCLA. Agere involved a case from the Eastern District of Pennsylvania related to the Boarhead Superfund Site. The EPA commenced a 107(a) action against Cytec, Ford and SPS on June 2, 2000 by filing a complaint along with a consent decree for OU-1. Cytec, Ford and SPS subsequently entered into a separate settlement agreement with Agere, TI and two other companies to collectively fund and perform work for OU-1. The EPA subsequently commenced another 107(a) suit against Cytec, Ford and TI by filing a complaint and a second consent decree related to OU-2.  A private settlement agreement was entered into by the three companies with Agere, which assigned its rights for cost recovery to the group. The parties that had settled subsequently brought an action against Carpenter Technology Corporation to recover costs. After trial, the District Court held Carpenter liable, and allocated a significant share to Carpenter, including an enhanced share based upon the court finding that Carpenter had significant culpability in creating the Superfund site and because of its lack of cooperation in cleaning up the site.

The 3rd Circuit identified six essential challenges present by Carpenter: 1) the 113(f) claim was time-barred because Carpenter did not share a common liability with the plaintiffs since the EPA claim was filed after the expiration of the time for the filing of such actions, 2) Agere and TI cannot bring a 107(a) action for sums paid in a private settlement with other plaintiffs, as opposed to sums paid by the other parties to the EPA, based upon the provisions of 107(a), 3) the plaintiffs that signed the OU-1 and OU-2 Consent Decrees do not have rights to sue under 107(a); only section 113(f) claims may be pursued, 4) Cytec, Ford, SPS and TI failed to present competent evidence of the total waste they disposed of at the site, and therefore the allocation of liability by the District Court was flawed, 5) the allocation was flawed by a miscalculation of volumetric shares in that the court did not consider the culpability and lack of cooperation of the plaintiffs, and improperly relied upon volumetric shares rather than the dollar amounts collected from the settling defendants, and 6) the limitations of the plaintiffs claims under section 107(a) of  CERCLA should apply to the similar provision in related Pennsylvania law.

The 3rd Circuit carefully explored each issue and remanded the case to the District Court for further findings. The district court was directed to make further findings on facts related to whether certain claims were time-barred. In addition, the district court was required to make determinations as to the waste volumes based upon appropriate evidence.

The most significant aspect of the decision is the Circuit Court’s exploration of the interaction between Section 107(a) and 113(f) as developed in United States v. Atlantic Research Corp. 551 U.S. 128 (2007). The Court noted that in Atlantic Research the Supreme Court held that 107(a) “permits a PRP to recover only the costs is has ‘incurred’ in cleaning up a site,” and that payment to settle a claim does not constitute the incurring of response costs. Since the money paid by TI and Agere to settle the case was placed in a trust to fund the actual work at OU-1 and OU-2, the requirement that the claim be for recovery of response costs was satisfied. The 3rd Circuit concluded that the Supreme Court did not intend to exclude all settlement payments, particularly where the funds were not reimbursement of costs incurred by others, but were actually used to fund the remedial work.  The Court went on to distinguish the Supreme Court’s statement that the parties that could not make 107(a) claims could still maintain a claim under Section 113(f), noting that it was not intended to provide the opposite; that is, that a party that was precluded from a 113(f) claim would not have a 107(a) claim.  In this case neither Agere nor TI were able to maintain 113(f) claims for contribution because neither were sued by the EPA or the other PRPs. The Court concluded that Congress could not have intended to “penalize cooperative cleanup efforts by excluding from CERCLA’s broad recovery provisions all PRPs who, like Agere and TI, have come forward and assist[ed] in a cleanup even though they have not been subjected to cost recovery suit.” The Court found that such a result would be contrary to the goal of CERCLA “to encourage private parties to assume the financial responsibility of cleanup by allowing them to seek recovery from others.”

The 3rd Circuit then went on to consider the 113(f)/107(a) issues regarding the defendants sued by the EPA: Cytec, Ford and SPS. Carpenter argued that those parties had only 113(f) claims since once a party settles the 107(a) claims, it is only entitled to assert 113(f) claims.  The Court noted that the issue of whether a party in the position of Cytec, Ford and SPS may bring a 107(a) claim in addition to a 113(f) claim was left open in Atlantic Research. The 3rd Circuit noted that if the parties had rights under 107(a) as well as 113(f), the trial court, on remand, could impose 100% of the liability on Carpenter. Further, Carpenter would not be able to resolve this by a Section 113(f) counterclaim since the parties that had settled with the EPA would be shielded from liability under section 113(f)(2).  The Court agreed that this would be a perverse result since the primary goal of CERCLA is to have polluters pay.

The remand to the trial court, therefore, required the court to explore significant issues regarding whether certain aspects of the claim were time barred, and to conduct a fact intensive analysis to support an allocation among all parties.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

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Tax Court Developments

SteveK April 12th, 2010

In Davanne v. Edison, (see previous blog entry of Feb. 19,2010) Martin Allen successfully argued before the New Jersey Supreme Court that the 8th Amendment prohibition against unreasonable and excessive fines does not apply to a dismissal of a tax appeal because of an income producing property owner’s failure to respond to a request from a tax assessor for income and expense information.

More recently, in Stellakis v South Plainfield, an unreported decision of the Tax Court, we argued, and the Court determined that taxpayer’s counsel failed to present any evidence at the County Tax Board despite calling the Assessor as his witness and referring him to comparable sales referred to in a settlement letter. The Tax Court, after reviewing an audio recording of the County Board hearing, held that the hearing was a sham and dismissed the Tax Court appeal pursuant to N.J.S.A. 54:51A-1(c), which precludes review by the Tax Court if the County Board matter was dismissed for lack of prosecution.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in real estate tax appeals. For additional information about the matters in this bulletin or in the firm’s real estate tax appeal group, please contact Martin Allen, Esq

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NJ App. Div. upholds $30 million mesothelioma judgment.

SteveK April 12th, 2010

On April 5, 2010 the NJ in Buttitta v. Allied Signal, Inc. et.al. the Appellate Division affirmed the largest award in an asbestos/mesothelioma case in NJ. The jury awarded the plaintiff widow and family $8,000,000 for pain and suffering, $2,000,000 for loss of consortium, $9,281,660 for loss of earnings, $2,030,544 for loss of services and $3,000,000 to each of the three children for loss of parental care and guidance. The award against Borg-Warner and the Canadian mining company, Asbestos Corporation, Ltd. (ACL), was in addition to funds collected from settling parties, General Motors, Honeywell (for Bendix brake products) and C.L. Zimmerman a distributor of ACL asbestos. (This office represented Zimmerman, which settled during trial.) Borg-Warner and ACL challenged this significant award on numerous grounds, including causation, failure of the court to exclude testimony of numerous experts, and the failure of the court to allow the defendants to submit interrogatory responses of settled parties to the jury for the purpose of allocating responsibility to those settled parties, as well as the refusal of the court to include the settled parties on the verdict sheet, also for the purpose of allocating liability. ACL also challenged the striking of its defenses based upon their inability to produce certain documents required in discovery due to Canadian laws that prohibited production of the information requested.

The decedent, Mark Buttitta, had worked as a parts picker at a GM facility in summers while a student at Colgate University. His father had also worked at the same facility while Mark was growing up. It was claimed that Mark was exposed to asbestos from the parts and the accumulated dust in the GM parts warehouse, and also from the asbestos in the dust on his father’s clothing when Mark was growing up. Mark contracted mesothelioma in his early 50’s and died leaving a wife and three daughters in their teens and early 20s. Claims were asserted against the manufacturers and distributors of asbestos containing automotive parts including brakes and clutches, as well as the companies that mined and distributed asbestos to GM for the manufacture of brakes and clutches.

The Appellate Court affirmed all of the procedural and evidentiary decisions of the trial judge and the jury award. In doing so it concluded, based upon the uncontradicted expert testimony, that mesothelioma “is associated with the ‘the smallest’ exposure to asbestos and can develop from the cumulative effects of minimal and infrequent exposure.” The Court also affirmed the ruling that the responses to interrogatories of GM, which had settled before the start of trial, were not admissible by defendants under the rules of court, which permit use of interrogatories as statements of any party, since GM was no longer a party to the litigation. Borg-Warner, the court also held, “bore the burden of presenting a basis for allocation of percentages of fault in order to reduce its individual percentages of fault, which it failed to do.” In short, there was no evidence presented at trial to support the claims against the settled parties.  Accordingly, the Court concluded that it was correct that the settling parties were not included on the verdict sheet to permit the jury to allocate percentages of liability to any party other than the remaining defendants, Borg-Warner and ACL.

A significant question raised in this decision involves the ruling prohibiting the use of the interrogatories of settled parties to prove cross-claims so that the jury can assign liability to settled defendants.  This raises questions where joint defense groups are careful not to develop independent evidence to support cross-claims. This, of course, only present a question if parties settle during or immediately prior to trial when it is too late for the remaining parties to adequately develop the necessary evidence and expert testimony. In the usual case, independent settlement is always a possibility at any time. Accordingly, defendants will need to develop a manner to develop appropriate evidence to support cross-claims in the event they become the last party in a case.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

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California District Court dismisses CERCLA claim against manufacturer of dry cleaning machine under BNSF “arranger” test.

SteveK April 12th, 2010

On March 12, 2010, in Hinds Investments v. Team Enterprises, the court for the Eastern District of California found the manufacturer of dry cleaning equipment designed to discharge wastewater containing PCE into open drains was not an “arranger” under CERCLA and dismissed the claims.

The plaintiffs were the former owners of properties that had been leased to dry cleaners. The dry cleaners used a machine that instructed the operators to have the wastewater, which contains PCE, to “flow into an open drain.” Plaintiffs argued that this evidenced a “conscious decision” to discharge and dispose of PCE-contaminated wastewater. The Court, however, focused upon the transaction; the sale of the machine, not how the machine functioned.  The court viewed the machine more in the line of a “useful product.”  As noted in the Supreme Court’s decision in Burlington Northern Santa Fe Railway v. United States (BNSF)(see blog post from August 14, 2009), the Courts have generally refused to hold manufacturers of a “useful product” liable even though the product contains a hazardous substance that was later disposed by the user. The court followed the Supreme Court decision in BNSF, and focused on the question of whether there were “intentional steps to dispose of a hazardous substance.” The court found that the machine itself was not a hazardous substance, and did not produce or directly involve hazardous substances. Since there were insufficient facts alleged in the complaint to support at the conclusion that the sale of the machine substantially involves the disposal of the PCE-contaminated wastewater the matter was dismissed.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

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Second Circuit applies a low standard of liability in defense motion for summary judgment under CERCLA.

SteveK April 12th, 2010

The February 24, 2010 decision by the Second Circuit Court of Appeals in Niargra Mohawk Power Corp. v. Chevron USA, Inc., made it more difficult for defendants in a private contribution action to obtain summary judgment. The court held that the plaintiff did not need to demonstrate the “precise amount of hazardous material” that was discharged by any defendant, nor did it need to prove with certainly that a defendant had actually discharged the hazardous materials, to be able to defeat a motion for summary judgment.

Certain defendants had been granted summary judgment by the trial court for a variety of reasons related to plaintiff’s inability to present sufficient evidence. The trial court dismissed clams for NiMo’s failure to demonstrate that the current owner had not engaged in appropriate inquiry when it purchased the property, finding an expert report supporting the contention that another defendant had released hazardous materials at the site was considered “speculative”, insufficient evidence that another had disposed of waste at the site, and lack of evidence of causation as to yet another defendant. The Second Circuit, however, explained that in considering the equitable factors required under Section 113 of CERCLA, the standard of proof required to defeat a motion for summary judgment is low and that “caution is appropriate” when considering a motion to dismiss a PRP from a CERCLA case. The court considered this low standard to be particularly important when dealing with cases that so often involve such a long passage of time. (The plaintiff had owned and operated portions of the property from 1922 to 1951.)   The court pointed out, however, that although the dearth of evidence was not sufficient to support summary judgment, many of the factors would be considered in the apportionment phase of the case.

This ruling will likely make it more difficult for defendants in the Second Circuit to avoid liability in a CERCLA private contribution case. Since most of these cases are resolved in a complex ADR process, the decision will enhance the potential for parties to resolve matters through ADR or some other form of settlement allocation, as even parties with insignificant exposure will contribute to a settlement to avoid the significant expense of defending a CERCLA case.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

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