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Raytheon Co. v. McGraw-Edison Co.

Citation: 28 ELR 20323
(10/13/1997)

The court holds that a purchaser of environmentally contaminated property is not precluded from bringing Resource Conservation and Recovery Act (RCRA) and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) claims against the property's vendor. However, the majority of the purchaser's pendent state-law tort claims are barred by the economic loss doctrine. The court first holds that the purchaser can bring a RCRA § 7002 citizen suit. The vendor's assertion that a private party may not recover past cleanup costs under RCRA because already excavated soil does not pose an imminent and substantial endangerment to health or the environment is misplaced under the circumstances posed here. The purchaser's RCRA suit seeks prospective injunctive relief for contamination remaining on the property. In addition, a finding of immediacy does not require a showing that actual harm will occur immediately so long as the risk of threatened harm is present. The purchaser's allegations meet this test. Because the purchaser qualifies as any person within the meaning of RCRA, the court also rejects the vendor's argument that the purchaser is impermissibly seeking a private remedy under the guise of a RCRA citizen suit. The court next holds that despite the presumption against the retroactive application of federal statutes, Congress clearly intended that CERCLA apply retroactively. The court then holds that under the innocent landowner exception, the purchaser can bring a CERCLA § 107 direct cost recovery action. The purchaser did not contribute to the presence of hazardous materials on the property and had no knowledge that waste was on the property prior to purchase.

The court next holds that the economic loss doctrine bars nine of the purchaser's state-law tort claims because the purchaser's damages are more akin to economic loss than to physical harm. The mere risk of harm to the public or the environment is not sufficient to transpose the purchaser's economic losses into tort damages. The court then rejects the purchaser's argument that the economic loss doctrine does not apply to transactions involving real estate. Where two equal and sophisticated commercial entities enter into an arm's-length transaction for the sale of industrial property, the parties are free to allocate the risks of loss through the contracting process. In addition, the court rejects the purchaser's argument that the economic loss doctrine does not apply to fraud claims. The court also holds that the purchaser has no common-law claim for contribution because it failed to assert a common liability to a named third person. The purchaser's claim for common-law indem-nification also fails because indemnification requires proof that the plaintiff was compelled to pay damages for which the plaintiff had no liability. Finally, the court denies the vendor's motion to dismiss the purchaser's breach of warranty and breach of contract claims. At the current stage in the litigation, the court cannot determine the scope of the liability the parties contemplated when they entered the contract.

Counsel for Plaintiffs
Todd E. Palmer
De Witt, Ross & Stevens
Two E. Mifflin St., Ste. 600, Madison WI 53703
(608) 255-8891

Counsel for Defendant
Kim Stollar
Squire, Sanders & Dempsey
4900 Key Tower
127 Public Sq., Cleveland OH 44114
(216) 479-8500