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Korman Co. v. Cumberland Farms, Inc.

Citation: 28 ELR 21094
(04/06/1998)

The court vacates a bankruptcy court decision that a bankrupt gasoline station satisfied its cleanup obligations and was due payment under a settlement agreement that provided for the lessor's buyout of the gasoline station's lease. The agreement stated that 75 percent of the payment would be released to the station when it completed certain specified tasks pertaining to the cleanup of contaminated soil and groundwater. The remaining 25 percent would be paid only after the state environmental agency approved the station's closure report at the conclusion of the cleanup. After the station notified the lessor that it satisfied the requirements specified for release of 75 percent of the payment, the lessor refused to pay.

The court first holds that the station, in complying with the requirements of the agreement, need not obtain prior governmental approval of its remedial actions under the procedures promulgated by the state environmental agency. The most straightforward reading of the contested provision of the agreement is that removal, replacement, commencement of remediation, and installation must meet the substantive requirements or standards set by the government. If agency approval were a precondition of the first-stage 75-percent payment, it could easily have been expressed in those terms. The court further holds that to secure the 75-percent payment the station had to perform the necessary tasks to whatever substantive level is required under the law, even if no explicit order to the station had issued from an environmental agency. However, only for the remaining 25 percent did the station have to obtain the final seal of approval from the state environmental agency. The court next holds that the written certification that the station must deliver to the lessor after performing the removal, replacement, commencement, and installation is not conclusive. According to the agreement's language, the lessor was free to accept the written certification as adequate or to dispute that the specified tasks had in fact been satisfied. Because the bankruptcy court did not decide whether or not the station satisfied state requirements, the court holds that it cannot decide this issue, particularly in the face of conflicting assertions by the parties' experts. Thus, the court remands the case for further proceedings.

Counsel for Appellant
Michael H. Landis
Smolow & Landis
Two Neshaming Interplex, Trevose PA 19053
(215) 244-0880

Counsel for Appellee
Barbara D. Gilmore
Sullivan & Worcester
One Post Office Sq., Boston MA 02109
(617) 338-2800

Before Selya and Lynch, JJ.