Target Corp. has agreed to pay $22.5 million to settle a multiyear government investigation into the alleged dumping of hazardous waste by the retail chain.
I previously posted about how lenders frequently overlook environmental compliance for retail or commercial properties on my EDR Schnapf Judgment blog. See http://commonground.edrnet.com/posts/ba6464cfa8, http://commonground.edrnet.com/posts/899933f985, http://commonground.edrnet.com/posts/0e841cd373
The violations identified by prosecutors included improper storage, transportation and disposal of bleach, paint, pesticides, batteries, lightbulbs and other hazardous materials. Prosecutors accused the company of cutting corners for the bottom line. Chemicals returned by customers or found to be defective were poured down the drain, tossed into dumpsters and trucked to landfills not equipped for hazardous waste. Stores also kept incompatible and combustible liquids like ammonia and bleach side-by-side on shelves and poured them into dumpsters mixed together, creating fire and other safety hazards
As a result of this investigation, prosecutors have launched investigations of other large retailers.
Complete story from LA Times is at: http://www.latimes.com/news/local/la-me-target-settlement-20110205,0,7700027.story
Showing posts with label dilgence. Show all posts
Showing posts with label dilgence. Show all posts
Saturday, February 5, 2011
Monday, December 27, 2010
Telecommunications Company May Be Liable for Pipeline Contamination
In a number of posts, I have suggested that petroleum pipelines may soon become the new USTs. An interesting case from Missouri illustrates the dangers that easement holders may face for historic spills from pipelines--much line property owners may be liable for historic contamination from old UST.
In Henke v Arco Midcon LLC, 2010 U.S.Dist, LEXIS 116314 (E.D.Mo. 11/2/10), an 8-inch cast iron pipeline was used from early 1900s to until mid-1990s to transport petroleum. The Sinclair Oil Company owned and operated the easement and pipeline. In 1950, the easement and pipeline was conveyed to the Sinclair Pipeline Company which changed its name to ARCO Pipeline Company in 1969. In 1994, ARCO sold the pipeline and easment to Williams Pipeline Company ( now Magellan Pipeline Company). Prior to the sale, Williams employees reviewed records of past leaks and the list was attached to the Pipeline Sale and Purchase Agreement. As part of the deal, Williams agreed to a "no look" clause whereby Williams would not conduct any soil or groundwater sampling in connection with the past leaks. Following the sale, Williams Communications Company (now Wiltel Communicatios), a subsidiary of Williams Pipeline, acquired the easement and operated the pipeline for fiber optic cable. There is no evidence that any of the Williams entities performed any remediation after taking title to the easement and pipeline.
At some point, owners of property along the pipeline route discovered soil and drinking water contaminated with petroleum and benzene. Plaintiffs then filed their lawsuit against Magellan, Wiltrl and ARCO alleging that the defendants had a duty to stop the leaks from the pipelines and easement, to investigate for past and present leaks including using "intelligent pigs" to inspect the pipeline, to warn the plaintiffs about the contamination and to remediate the contamination.
The Telecommunication defendants file motion for summary judgment, arguing they did not own easement at the time the pipeline was used to transport petroleum, and therefore could not have caused the spill. The plaintiffs responded that their claims were not limited to the original leaks but also based on the continued migration of the contamination from the easement along with the defendant's failure to prevent the migration.
Relying on the Section 824 of the Second Restatement of Torts, the court dismissed nuisance claim on the grounds that the plaintiffs did not allege any actions that set in motion the chain of events resulting in the damage. The court also found that under Missouri law, petroleum pipelines were not as a matter of law an abnormally dangerous activity, and dismissed the strict liability claims. However, the court allowed the plaintiffs' claim for negligence on the grounds that they had sufficiently alleged that the defendants had a duty to stop the migration and such failure was the cause of their damages. The court also allowed the trespass claim to survive based on the defendants' knowledge about the leaks and failure to act.
A motion to dismiss is not a ruling on the merits of a case. Instead, the court simply decides after assuming the facts alleged as being true whether the plaintiff claims are plausible. The parties will now presumably move to discovery and then file a motion for summary judgment.
Monday, October 18, 2010
Developer Who Did No Dilgence Turns to Litigation To Recover Damages For Contaminated Property
Back in August, I reported on the busted construction loan in Pennsylvania where a lender failed to require any environmental due diligence for property that was impacted by an off-site plume and the development now consists of unsold homes. http://www.linkedin.com/groupItem?view=&gid=41433&type=member&item=27076689&qid=1d2084d5-846e-4f45-9c12-825885e6b1ad&goback=%2Egna_41433
We all know that lender due diligence and underwriting standards were "lax" during the great real estate bubble of the past decade. However, I continue to be astounded by the indifference that developers exhibited to environmental issues since after all they were taking title to potentially contaminated land. Now that the developers have been stuck with cleanups and are unable to sell the homes, they are trying to use lawsuits to compensate for their lack of diligence. Following is a recent example of such a case. I will discuss another interesting case in a separate post.
In KB Homes v Rockville TBD Corp. George and Patricia Kopetsky (Kopetsky) purchased some unimproved farmland in 1989 that was adjacent to the defendant Rockville plant that manufactured airplane components. Kopetsky did not perform any environmental due diligence prior to acquiring the farm land.
As part of a 1993 asset sale, an environmental investigation determined that TCE had been discharged into the facility’s septic system located on the eastern portion of the property. In 1995, the defendant entered into the Indiana Voluntary Remediation Program of the facility and subsequently determined but the levels were below the cleanup standards. The septic system was decommissioned and the Indiana Department of Environmental Management (IDEM) issued a Certificate of Completion in 1996. A subsequent investigation performed on the western portion of the property in 1997 and 1998 revealed a plume of TCE-contaminated groundwater that had migrated from the facility and beneath a portion of the Koetsky’s farmland.
In the meantime, the Kopetsky submitted a plat plan for a subdivision known as Cedar Park in 1998. After they received plat approval, Kopetsky entered into a lot purchase and option agreement with Dura Builders. In the agreement, Kopetsky represented that the Cedar Park land was free of any hazardous materials and promised that he would, at each closing, execute a vendor's affidavit certifying the environmental condition of the lot The affidavits stated, in part, that the land did not contain any hazardous waste or materials, and that no disclosure statement was required to be filed pursuant to the Indiana Responsible Property Transfer Law. Kopetsky also represented to their lender that “after due investigation and inquiry, no contamination was present at the property.
In 1999, Dura Builders began purchasing lots from Kopetsky but did not perform any environmental due diligence either before executing the lot purchase agreement or actually purchasing the individual lots. In 2002, a consultant retained by Cedar Park provided Kopetsky with groundwater monitoring results showing that a portion of the Cedar Park property was impacted with TCE-contaminated groundwater. A cleanup to non-residential standard was proposed but Kopetsky objected because since this would prevent the sale of the land for residential development. Kopetsky continued to sell lots to Dura Builders but did not notify Dura of the contamination.
In 2004, KB Homes acquired Dura Builders. KB did not conduct environmental due diligence prior to acquiring Dura Buildings. Indeed, KB did not learn of the contaminationuntil March 2005 when KB had performed its own sampling. KB was forced to halt construction as buyers were either unable to obtain financing or walked away from their contracts. In 2007, KB filed a complaint against Rockville, Kopetsky, and Patriot Engineering for negligence, trespass, nuisance, breach of contract and constructive fraud. KB requested damages for reduction in value of its property as a result of the TCE contamination; legal and consultant fees; fees paid to maintaining the lots and homes; and interest on the capital investment made unproductive by the contamination.
The trial court granted Rockville’s motion for summary judgment and KB appealed. The Indiana Court of Appeals agreed that the KB could not bring a trespass claim because it did not have possession of the land at the time that the activity that caused the contamination had occurred.
On the nuisance claim, the appeals court said the lower court erred when it found that Rockville could have not foreseen that a release of TCE could harm an adjoining property. However, the court went on that under Indiana law, the nuisance claims could not proceed because Rockville had sold the property in 1993 and the actions that caused the contamination had occurred prior to the time KB acquired the sale.
For the negligence claim, though, the appeals court said that the trial court had erred when it granted summary judgment. The trial court had that the damages that KB sought were economic in nature and therefore were not recoverable in a negligence action. Under the economic loss doctrine, parties may not use tort law to try to evade an allocation of risk that was negotiated in a contract. However, the appeals court said that KB did not have a contractual relationship with Rockville so its negligence claim was not an attempt to circumvent a contractual limitation. KB’s claims against Kopetsky and Patriot Engineering have yet to be resolved.
We all know that lender due diligence and underwriting standards were "lax" during the great real estate bubble of the past decade. However, I continue to be astounded by the indifference that developers exhibited to environmental issues since after all they were taking title to potentially contaminated land. Now that the developers have been stuck with cleanups and are unable to sell the homes, they are trying to use lawsuits to compensate for their lack of diligence. Following is a recent example of such a case. I will discuss another interesting case in a separate post.
In KB Homes v Rockville TBD Corp. George and Patricia Kopetsky (Kopetsky) purchased some unimproved farmland in 1989 that was adjacent to the defendant Rockville plant that manufactured airplane components. Kopetsky did not perform any environmental due diligence prior to acquiring the farm land.
As part of a 1993 asset sale, an environmental investigation determined that TCE had been discharged into the facility’s septic system located on the eastern portion of the property. In 1995, the defendant entered into the Indiana Voluntary Remediation Program of the facility and subsequently determined but the levels were below the cleanup standards. The septic system was decommissioned and the Indiana Department of Environmental Management (IDEM) issued a Certificate of Completion in 1996. A subsequent investigation performed on the western portion of the property in 1997 and 1998 revealed a plume of TCE-contaminated groundwater that had migrated from the facility and beneath a portion of the Koetsky’s farmland.
In the meantime, the Kopetsky submitted a plat plan for a subdivision known as Cedar Park in 1998. After they received plat approval, Kopetsky entered into a lot purchase and option agreement with Dura Builders. In the agreement, Kopetsky represented that the Cedar Park land was free of any hazardous materials and promised that he would, at each closing, execute a vendor's affidavit certifying the environmental condition of the lot The affidavits stated, in part, that the land did not contain any hazardous waste or materials, and that no disclosure statement was required to be filed pursuant to the Indiana Responsible Property Transfer Law. Kopetsky also represented to their lender that “after due investigation and inquiry, no contamination was present at the property.
In 1999, Dura Builders began purchasing lots from Kopetsky but did not perform any environmental due diligence either before executing the lot purchase agreement or actually purchasing the individual lots. In 2002, a consultant retained by Cedar Park provided Kopetsky with groundwater monitoring results showing that a portion of the Cedar Park property was impacted with TCE-contaminated groundwater. A cleanup to non-residential standard was proposed but Kopetsky objected because since this would prevent the sale of the land for residential development. Kopetsky continued to sell lots to Dura Builders but did not notify Dura of the contamination.
In 2004, KB Homes acquired Dura Builders. KB did not conduct environmental due diligence prior to acquiring Dura Buildings. Indeed, KB did not learn of the contaminationuntil March 2005 when KB had performed its own sampling. KB was forced to halt construction as buyers were either unable to obtain financing or walked away from their contracts. In 2007, KB filed a complaint against Rockville, Kopetsky, and Patriot Engineering for negligence, trespass, nuisance, breach of contract and constructive fraud. KB requested damages for reduction in value of its property as a result of the TCE contamination; legal and consultant fees; fees paid to maintaining the lots and homes; and interest on the capital investment made unproductive by the contamination.
The trial court granted Rockville’s motion for summary judgment and KB appealed. The Indiana Court of Appeals agreed that the KB could not bring a trespass claim because it did not have possession of the land at the time that the activity that caused the contamination had occurred.
On the nuisance claim, the appeals court said the lower court erred when it found that Rockville could have not foreseen that a release of TCE could harm an adjoining property. However, the court went on that under Indiana law, the nuisance claims could not proceed because Rockville had sold the property in 1993 and the actions that caused the contamination had occurred prior to the time KB acquired the sale.
For the negligence claim, though, the appeals court said that the trial court had erred when it granted summary judgment. The trial court had that the damages that KB sought were economic in nature and therefore were not recoverable in a negligence action. Under the economic loss doctrine, parties may not use tort law to try to evade an allocation of risk that was negotiated in a contract. However, the appeals court said that KB did not have a contractual relationship with Rockville so its negligence claim was not an attempt to circumvent a contractual limitation. KB’s claims against Kopetsky and Patriot Engineering have yet to be resolved.
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