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Versatile Metals, Inc. v. Union Corp.

Citation: 19 ELR 20472
No. No. 85-4085, 693 F. Supp. 1563/(E.D. Pa., 06/15/1988)

The court holds that the lessee/buyer of property contaminated by polychlorinated biphenyls (PCBs) cannot recover damages or indemnification from the lessor/seller, and the seller cannot obtain contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) from the buyer since its remedial action was not consistent with the national contingency plan (NCP). The court first holds that the terms of the contract for sale constitute an express warranty and that the seller breached that warranty. The seller explicitly represented that the land was free of environmental contamination at the time of sale, and the property was found to be substantially contaminated before the buyer took possession. The court holds, however, that the buyer is barred from recovery on its claim for indemnification and breach of contract, since it failed to fulfill its contractual obligations of notice and reasonable action upon discovery of contamination. The court holds that the buyer's fraudulent misrepresentation claim fails because of insufficient evidence of causation, and its constructive eviction claim fails because the buyer substantially contributed to the contamination. The court holds that the seller is entitled to recover from the buyer the cost of necessary repairs incurred to restore the property to its former condition, since the buyer failed to use reasonable care upon the discovery of the PCBs. Concerning the seller's claim for contribution under CERCLA, the court holds that the buyer may not assert the equitable defense of estoppel, since only the defenses in § 107(b) may be asserted. Even if the equitable defense of unclean hands were available, the court holds, it would be unavailable to the buyer since its negligent conduct caused the PCB transformers to leak. The court notes that the buyer's claims of relative fault and innocence relate only to the apportionment of the necessary response costs. The court holds that the seller is not required by the terms of the contract to indemnify the buyer for cleanup costs, since the indemnity clause requires prompt notice of contamination and a duty of reasonable care.

The court holds that the buyer is not liable for the seller's CERCLA response costs. The court holds that the seller was not required to provide the buyer with 60 days notice pursuant to CERCLA § 112(a), since that provision is not applicable to a private cost recovery action. The court holds that the seller's cleanup was a remedial, rather than a removal, action, and that the seller was required to demonstrate consistency with the NCP's remedial action procedures. Despite the seller's characterization of its cleanup as a removal, the action was intended to be one of permanent remediation. The court holds that the seller failed to prove that its action was consistent with the NCP in effect at the time the response costs were incurred, and thus contribution for these remedial costs are disallowed.

Counsel for Plaintiffs
Michael W. Ford
Chapman & Cutler
111 W. Monroe St., Chicago IL 60603
(312) 845-3000

Counsel for Defendants
John Mattioni
Mattioni, Mattioni & Mattioni, Ltd.
Ste. 200, 330 Market St. E., Philadelphia PA 19106
(215) 629-1600