State Court Decision Ilustrates Dangers of Inadequately Evaluating Neighboring HRECs

The ASTM E1527 Phase 1 standard contains a term "Historic Recognized Environmental Condition" or HREC. The term was added to the standard in 2000 to provide a tool for consultants to help distinguish between properties 

where there was a release in the past that was satisfactorily remediated with sites that have historic contamination that have not been addressed. Because banks and property owners prefer that phase 1 reports not have RECs, the HREC provides a mechanism to allow the consultant to fulfill its obligations by flagging that there was a REC in the past while preventing the property from being unduly stigmatized by a release that no longer poses a risk to human health or the environment. 

Unfortunately, many consultants do not understand this term or use differing approaches for determining if a former REC can now be considered an HREC. Some EPs identify former releases that have been remediated to satisfaction of a regulator as an HREC. Others will identify a former REC as an HREC where residual contamination remains but the site has properly implemented  post-remedial institutional and engineering controls. Some EPS take the position that only "clean closure" sites may be an HREC while a narrower universe believe once a REC always a REC. 

A recent texas state case illustrates the dangers of not properly evaluating an HREC. In E-Z Mart Stores, Inc v Ronald Holland's A-Plus Transmission & Automotive, 2011 Tex. App. LEXIS 6000 (Ct. App. 8/3/11), E-Z Mart had purchased a site from Mapco in 1989 with an open spill. E-Z Mart remediated site and obtained NFA in 1998.

Meanwhile, Holland A-Plus Transmissions which owned property adjacent to the E-Z Mart site, entered into lease agreement with a cell phone provider to build and lease a cell tower. During drilling for tower, an explosion occurred due to gasoline vapors. The cell company subsequently terminated its lease and Holland was unable to loan for business expansion. Holland discovers benzene 8 times acceptable levels and sues E-Z Mart gas station. 

A series of complex lawsuits followed that resulted in jury trials.  A jury awarded Holland $550K in damages on nuisance and negligence grounds. E-Z Mart appealed. After a series of rulings, the appeals court affirmed the jury verdict in favor of Holland but ruled that the trial court had erred when it refused to allow E-Z Mart to introduce evidence of Mapco's liability.

It is unclear what level of diligence was done prior to the construction for the cell tower. Presumably, the parties believed that the Holland site could not have been impacted by the E-Z Mart site because of the NFA letter. In is unclear if a file review would have produced any evidence to suggest that the levels left behind at the E-Z Mart site could pose a risk to the Holland property. It may be that the contamination was missed during the UST remediation.

Since the late 1990s, the conventional wisdom is that petroleum contamination biodegrades and therefore does not pose a significant risk of vapor intrusion. This is another example of how that common perception may be wrong particularly in urban areas where underground conduits may serve as preferential pathways and significant pavement can reduce the amount of oxygen available for biodegradation. 

Class Action For Purchasers of Time Shares May Proceed With Mold Lawsuit

Plaintiff purchased time share units and files lawsuit against developer after resort units developed water leaks and mold. Defendant asserts that time share ownership points are not interest in property. Ct finds that while sellers of time share units retain exclusive right to specify which units would be occupied, the purchasers had exclusive possessory interest and timeshare was in nature of lease. Thus, plaintiff had pled sufficient evidence of property interest to support private nuisance and breach of implied warranty of habitability.


Ct also said plaintiff had sufficiently pled Unfair Competition Claim for purposes of motion to dismiss. The plaintiff had asserted that had defendant disclosed the water leaks and mold conditions, it would have selected different timeshare program, that failure to disclose was material misrepresentation, that defendant ignored recommendations of engineers and had continued to assess maintenance fees while not addressing the water moisture problems. Hermenegildo Martinez v The Welk Group, 2011 U.S.Dist. LEXIS 58718 (S.D.Ca. 6/2/11)

Appeals Court Denies Challenge to NJDEP Oversight Costs

North Bergen LLC purchased industrial property that was under Administrative Consent Order (ACO) between its former owner and DEP. Former owner requested that DEP terminate the ACO and allow North Bergen to proceed under ISRA remediation agreement.


NJDEP subsequently issued over two dozen oversight cost invoices to North Bergen. The company paid  $1,515 but refused to pay the outstanding balance of oversight costs on grounds that the costs were “excessive, unreasonable and duplicaye".  North Bergen filed an "oversight cost review request in July 2007. NJDEP responded that it would attempt to resolve informally instead of referring the matter for administrative review by the but a technical dispute arose leading North Bergen to submit a Technical Review Panel (TRP) request. In November 2008, the TRP advised North Bergen that no further action was needed for soils but that vapor intrusion testing and further ground water sampling was still required. North Bergen


North Bergen refused to pay five additional invoices, again alleging that the costs were excessive, unreasonable and duplicative, that NJDEP's activity description was generic and inadequate to determine the work actually performed by NJDEP, and also claimed that NJDEP's remediation approach wasted substantial NJDEP time and resources. After each objection, NJDEP offered to resolve the matter informally.


Finally, In December 2009, NJDEP advised North Bergen that if payment is not received within 30 days, the agency would have no choice but to send the invoice to a collection agency and stop work on the case. North Bergen then filed a lawsuit, arguing that that DEP's refusal to send the billing dispute to the Office of Administrative Law for a contested hearing was arbitrary, capricious and unreasonable. At the time of the lawsuit, the outstanding balance of unpaid oversight costs was $43,420.09. NJDEP countered that its December  2009 correspondence does not amount to final agency action and that North Bergen has failed to exhaust its administrative remedies.


The trial court agreed and appellate division affirmed, holding that a general refusal to pay all charges did not qualify as a conforming submission. The court said that a objects to the charges as "excessive and unreasonable" and to the work description as "generic and inadequate”. The court said the record was insufficient to determine if North Bergen was lawfully assessed the oversight costs charged by NJDEP. North Bergen LLC v NJDEP, 2011 N.J.Super. Unpub. LEXIS 1868 (App. Div. 7/12/11).