Federal District Court Enjoins Part of Albuquerque Green Building Law

Back in 2009, I discussed the lawsuit filed by three trade organizations challenging a green building code adopted by the City of Albuquerque in 2007. In that case, Air Condition, Heating and Refrigeration Institute (AHRI) v City of Albuquergue, the court granted a preliminary injunction preventing the city from implementing its new code. Now, the court has issued a permanent injunction for part of the code. The Albuquerque Energy Conservation Code establishes standards for buildings that are designed to achieve certain energy efficiency goals. Volume 1 applies to commercial and multi-family buildings and volume 2 to one- and two-family detached dwellings and townhouses. The plaintiffs in this case represented manufacturers, distributors and installers of various heating, ventilation, air conditioning products equipment and water heaters. They argued that the Code was pre-empted by federal law. Volume 1 established two performance-based and one presciptive approach to achieve compliance: Buildings that satisfy LEED silver or higher and a performance-based approach where the building HVAC systems and equipment achieve 30% more energy efficiency that ASHRAE 90.1-1999 . The prescriptive compliance path requires use of products that are more efficiency efficient than the minimum federal efficiency standards. The court ruled that the prescriptive provisions of volume 1 were pre-empted by 42 U.S.C. 6316(b)(2)(A). However, the court denied without prejudice the portion of the motion that sought a declaration that the performance-based approachs were pre-empted by federal law. Turning to Volume 2, the court concluded the presciptive complianve path was pre-empted for the same reasons as volume 1. However, the court noted there was an exception from pre-emption for state or local building codes for new construction concerning energy efficiency or energy use of products subject to federal standards where the code meets seven specified requirements (42 U.S.C. 6297(f)(3). The plaintiffs argued that the LEED Silver and Build Green New Mexico compliance path did not comply with the building code exception to the pre-emption. Because the plaintiffs did not adequately brief how the building code did not satisfy any of the seven requirements, the court said the plaintiffs had not met their burden for obtaining a permanent injunction as a matter of law. Thus, the court denied that portion of the motion. This decision came on the heels of the lawsuit filed by the Building Industry Association of Washington seeking to enjoin certain amendments to the Washington State Energy Code that require homes to have HVAC, plumbing, or water heating equipment having efficiency exceeding the federal standards. The plaintiffs assert that the revisions slated to take effect July 1 are preempted by the National Appliance Energy Conservation Act of 1987 and the Energy Policy Act of 1992. Combined with the class action suit filed against USGBC last week, it looks like green building law has reached the level of maturity where we will start seeing lots more lawsuits.

Kiddie Kollege Ct Rules Tax Lien Purchaser Cannot Void Title

The saga continued this week when a New Jersey Appeals Court reversed a trial court ruling that the property owner who had acquired title to the contaminated site through purchase of tax lien could void title. Following is a summary of the case. For an interesting view of the insurance implications of this case by my friend Ed Greene on his blog, see:http://commonground.edrnet.com/posts/b791ce4583.

 

In this case, Accutherm had manufactured laboratory-grade thermometers from 1984 and 1992. Because of increasing environmental requirements, Accutherm ceased operations in 1992 without performing a cleanup of the mercury contamination even though it was required to do so under the New Jersey Industrial Site Recover Act (ISRA).. In 1994, Accutherm filed a bankruptcy petition and stopped paying real estate taxes. Franklin Township then sold two tax sale certificates in separate transactions to a bank who declined to foreclose on the certificates because of potential environmental issues that were flagged by the bank’s counsel. In 1999, Franklin Township sold a third tax sale certificate for the property to plaintiff Navillus, which subsequently also acquired the first two certificates by assignment from the bank. Navillus is a partnership consisting of members of the Sullivan family.

 The tax sale certificates contained the following disclaimer: “Purchasers are herewith advised, pursuant to N.J.S.A. 13:1K-6, THAT INDUSTRIAL PROPERTY MAY BE SUBJECT TO THE "Environmental Clean Up Responsibility Act," the "Spill Compensation and Control Act" or the "Water Pollution Control Act”

 Navillus subsequently obtained a final tax foreclosure judgment which vested title to Navillus. After entry of this judgment, Navillus conveyed title to plaintiff James Sullivan, Inc. (JSI), a corporation owned by James Sullivan, Jr., for the nominal sum of one dollar.

 In late 2003, JSI leased the property to "Kiddie Kollege" for $2000 per month. On May 4, 2006, the DEP sent a letter to JSI, which stated that "several environment issues exist at the [Accutherm] site," including the presence of mercury at levels above DEP limits, and asked JSI to provide the DEP "with documentation which outlines what measures, if any, have been undertaken to remediate these environmental concerns." JSI then hired an environmental consulting firm to conduct tests of air quality on the site, which revealed mercury vapor concentrations far in excess of the DEP's limits. Immediately thereafter, the daycare center was closed.

 

In August  2006, JSI signed an administrative consent order agreeing to remediate the site in accordance with the NJ Spill Compensation and Control Act (Spill Act) However, JSI subsequently refused to perform any remediation

 

Numerous lawsuits followed against Kiddie Kollege, JSI, Navillus, and Franklin Township alleging that the children who attended the daycare center and its employees suffered personal injuries as a result of their exposure to mercury within the facility.

 

Navillus and JSI then sought to void the judgment in the tax foreclosure action so that title would revert back Franklin Township. The township filed a counterclaim that the final judgment in the tax foreclosure action had vested title to the property to Navillus and extinguished the interest of prior title holders. The NJDEP also moved to dismiss the complaint on the ground that plaintiffs' action was a preemptive attempt to avoid possible liability under the Spill Act.

 

The trial court ruled that the plaintiffs were entitled to vacate the judgment in the tax foreclosure action based on a provision of ISRA under which the failure of a transferor of an industrial site to remediate environmental contamination before the transfer is grounds for voiding the transaction.

 

However, the appeals court reversed and vacated the trial court ruling. The appeals court noted that the plaintiff property owners did not seek that relief until more than five years after entry of the tax foreclosure judgment, which was far beyond the three-month limit established by the Tax Sale law.

 

The court also ruled that ISRA obligations were first triggered when the Accuterm closed its operations and not based solely the sale of the tax sale certificate. Consequently, the court held, there was no basis under ISRA or treating a tax foreclosure judgment as a "transfer or sale" that triggered ISRA for purposes of exercising the transaction voiding remedy. The court held that the Tax Sale Law was the exclusive grounds upon which a tax foreclosure judgment may be vacated. The court also noted that the Tax Sale Law places "the risk of facts discovered after the tax sale which have an impact on the value of the property" on the purchaser of the tax sale certificate. NAVILLUS GROUP v. ACCUTHERM INCORPORATED, Nos. A-4754-08T1, A-0568-09T1 (app. Div-8/11/11)

 

This continuing litigation in this case reinforces the need for tax lien purchasers to perform thorough due diligence prior to closing on a tax lien sale. Here, the plaintiffs had misunderstood the meaning of an EPA letter that could have been properly interpreted by an environmental lawyer and perhaps put into better context by an environmental consultant.

 

Another important tax lien case is U.S. v Capital Tax from the federal district court of the northern district of illinois. I have posted the most recent decision on this case on my "Environmental Issues in Business Transactions" linked in page.