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Presque Isle Harbor Dev. Co. v. Dow Chem. Co.

ELR Citation: 26 ELR 20164
Nos. No. 2:92-CV-30, 875 F. Supp. 1312/40 ERC 1551/(W.D. Mich., 01/25/1995)

The court holds untimely a land development company's state-law claims against the majority stockholder of the company from which the development company acquired contaminated land, and holds that genuine issues of fact concerning the stockholder's participation in the former landowner's waste practices bar summary judgment on the development company's claims under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court first holds that the direct control or participation test is the appropriate standard for determining the stockholder's "operator" liability under CERCLA. The court holds, however, that a genuine issue of material fact exists whether the stockholder actively participated in the former landowner's waste handling practices and decisionmaking processes. The significance of wastewater analysis in the 1930s by an employee of the stockholder is unclear, and the deposition testimony of a chemical research technician, if believed by the trier of fact, could establish the stockholders' direct control of or participation in the former landowner's waste disposal practices.

Addressing the development company's claims under Michigan law, the court holds that the Michigan Supreme Court would hold that the discovery rule governs the accrual date for claims of property injury caused by environmental contamination. If the Michigan standard were applied, the development company's common-law causes of action accrued when the development company discovered or, through the exercise of reasonable diligence, should have discovered its claimed injury. The Michigan standard of reasonable diligence is functionally identical to the "reasonably should have known" standard of the CERCLA accrual rule. Consequently, the accrual date would be the same under either standard. Therefore, the state commencement date is not earlier than the federally required commencement date, and the Michigan "reasonable diligence" standard governs the accrual date of the development company's common-law claims. The court next finds that the deposition testimony of one of the partners in the development company and the media characterization of the property belie the development company's allegation that the comments of one of the stockholder's representatives concerning contamination at the property were the reason the development company was unable to proceed with the planned development, the alleged cause of its damages. Also, in 1988, an appraisal for the estate of another partner in the development company stated that some groundwater contamination existed and that the possibility existed for exposure by dermal contact and inhalation. The court holds that sufficient undisputed evidence exists to allow the court to conclude as a matter of law that through the exercise of reasonable diligence the development company should have known, not later than December 1988, of the injury it alleges under its common-law claims. Therefore, the limitations period began to run in December 1988, at the latest, and expired in December 1991, at the latest, and the development company's common-law claims, contained in its complaint filed February 4, 1992, are untimely.

Counsel for Plaintiffs
Robert M. Bordeau
Kendricks, Bordeau, Adamini, Keefe, Smith, Girard & Seavoy
128 W. Spring St., Marquette MI 49855
(906) 226-2543

Counsel for Defendant
Darrell M. Grams
Wise & Marsac
Buhl Bldg., 11th Fl., Detroit MI 48226
(313) 962-0643