Jump to Navigation
Jump to Content

U.S. Postal Serv. v. Phelps Dodge Ref. Corp.

ELR Citation: 27 ELR 20748
Nos. 92 CV 3855 (JG), 950 F. Supp. 504/(E.D.N.Y., 01/02/1997)

The court rescinds a contract under which a metal refining company sold a contaminated site in Queens, New York, to the U.S. Postal Service. Applying New York law, the court first holds that breach of contract can be grounds for rescission. The company breached its contract with the Postal Service by failing to perform the responsibilities that were set forth in a remedial action plan (RAP) and that the company assumed in the contract. The company failed to complete the RAP and deliver a buildable and marketable site within a reasonable time after commencing the RAP. The parties intended to bind the company to an excavation plan in the RAP even though the New York Department of Environmental Conservation (DEC) might eventually permit a different remedial program. The court rejects the company's argument that if the company can persuade the DEC to approve a form of remediation different from the excavation required by the RAP, the company may fulfill its obligation to the Postal Service by performing the amended RAP, even if the Postal Service cannot use the property for its intended purpose. The court notes that even if it accepted the company's description of the company's obligations, it would still conclude that a material breach had occurred and rescission was appropriate. The company failed to achieve any approved remediation of the site, and no remediation is in sight.

The court further holds that rescission is appropriate where, as in this case, a mistake produces a practical inability to perform a contract, the resulting nonperformance is so substantial and fundamental as to defeat the parties' object in contracting, and damages cannot be ascertained with reasonable certainty. The contract specifically allocated to the company the responsibility to remediate the property by excavation. When that obligation was assumed, neither party knew or could reasonably have been expected to anticipate that unacceptable levels of lead and cadmium would continue to be present even after the excavation reached groundwater. The parties were mutually mistaken as to the extent of the contamination on the site, the amount of time it would take to remove it, and the feasibility of completing the RAP without encountering groundwater. The court rejects the company's argument that the Postal Service waived its right to seek rescission by waiting too long. If, as occurred in this case, a defendant has promised performance within a reasonable time, the plaintiff is under no duty to rescind when it first discovers that performance has been unreasonably delayed. Although a party seeking rescission for mistake or nonperformance may not unreasonably delay the making of such a claim, there was no unreasonable delay here. Finally, the court grants the Postal Service prejudgment interest on the amount of money the agency paid for the property. The interest runs from the date that the Postal Service filed its complaint seeking rescission.

Counsel for Plaintiff
Zachary W. Carter, U.S. Attorney
U.S. Attorney's Office
U.S. CtHse.
225 Cadman Plaza E., Brooklyn NY 11201
(718) 330-7106

Counsel for Defendants
Daniel M. Abuhoff
Debevoise & Plimpton
875 Third Ave., New York NY 10022
(212) 909-6000