International Clinical Laboratories, Inc. v. Stevens

No. CV 87-3472 (E.D.N.Y. January 11, 1990)

The court holds that a prior landowner, his corporate tenant, and the tenant's president are jointly and severally liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to the current landowner for all past and future costs in investigation and cleanup of a hazardous waste site. The court finds that the current owner had no knowledge that the tenant generated any hazardous wastes that were discharged into the soil or that the site had been listed by the New York State Department of Environmental Conservation as a suspected hazardous waste site. The court holds that the prior landowner was the "owner" of the facility under CERCLA § 107(a) and that the tenant and tenant's president were "operators." Defendants are not entitled to contribution, since they did not assert a counterclaim for response costs and the current owner acquired the property after the placement of the hazardous substances on it.

[A previous decision in this litigation is published at 19 ELR 21084.]

Counsel for Plaintiff
David D. Patterson
Breed, Abbott & Morgan
153 E. 53rd St., New York NY 10022-4658
(212) 888-0800

Counsel for Defendant
Joseph Calderon
Linden & Deutsch
320 Park Ave., New York, NY 10022
(212) 758-1100

[20 ELR 20560]

Wexler, J.:

Findings of Fact and Conclusions of Law

The issues in this action having been tried before the Court on August 1, 2, 3, 11 and 16, 1989, the Court does hereby make the following Findings of Fact and Conclusions of Law.

Findings of Fact

1. Defendant Milton S. Stevens ("Stevens") was the owner of the premises known as 290 Duffy Avenue, Hicksville, New York, a property consisting of 2.93 acres on which there was erected an industrial building of 55,000 square feet (the "site").

2. Pursuant to a net lease dated September 16, 1976, the site was leased by Stevens to defendant Magnusonic Devices, Inc. ("MDI") for a lease term commencing April 1, 1977 and expiring March 31, 1987.

3. During the lease, MDI manufactured computer tape heads at the site and remained in possession of the site after the expiration of the lease term until May 1, 1987.

4. From 1974 until sometime in 1985 when MDI connected to the municipal sewage system, MDI disposed of its waste waters by depositing them into cesspools, adjacent to the building, which dispersed the waste waters into the ground.

5. These waste waters contained heavy metals, including chromium, copper, iron, lead, nickel and zinc, and organic cleaners, including 1,1,1- trichloroethane.

6. MDI also generated solid wastes which included a sludge consisting of heavy metals, such as ferric hydroxide.

7. On July 10, 1984, the New York State Department of Environmental Conservation ("DEC") filed a complaint against MDI asserting that MDI did not have a required permit for the discharge of waste waters into a receptacle in the rear of MDI's parking lot, and that liquid samples collected by personnel of the DEC on June 30, 1983 from the rear cesspool contained concentrations of trichloroethylene, lead and nickel in excess of effluent limitations specified by New York law. The matters asserted in the DEC's complaint were resolved by MDI's entry into a February 22, 1986 Consent Order with the DEC and payment of a fine of $ 2,500.00.

8. At some time prior to the end of 1986, the DEC placed the property on its Inactive Hazardous Waste Disposal Sites list (the "DEC list"). The DEC list stated that the site had been associated with hazardous waste since 1978; that there had been discharge of solvents and metals into cesspools on the site; that the concentrations of the effluent exceeded the specified limits; and that it was suspected that the waste had entered the groundwater. The DEC list further stated that hazardous waste disposal at the site had been confirmed and that volatile halogenated solvents, lead and nickel had been found in the cesspool in concentrations exceeding effluent limitations, and identified the problem as relating to freon TF (DOH), 1,1,1-trichloroethane, methylene chloride, other organics, lead, nickel and acetone.

9. During the period, defendant Myron Levitt ("Levitt") had overall responsibility for the management of MDI and was its principal shareholder and President.

10. By contract of sale closed on December 22, 1986, plaintiff International Clinical Laboratories, Inc. ("ICL") purchased the property from Stevens for $ 2,950,000.

11. Prior to his sale of the site, Stevens had no knowledge:

(a) of the kinds of materials and chemicals used by MDI in its manufacturing operations;

(b) that any hazardous wastes generated by MDI were discharged into the soil at the site;

(c) of the regulations of the DEC or of the proceedings taken by the DEC against MDI relating to environmental matters at the site; or

[20 ELR 20561]

(d) that the site had been listed by the DEC as a suspected inactive hazardous waste site.

12. As of the closing, there were no visible environmental problems at the site, and MDI did not disclose the existence of any to ICL in the course of ICL's inspection of the property.

13. As of the closing, ICL had no knowledge of any environmental problem at the site, and the purchase price did not reflect a reduction on account of any such problem.

14. In January 1987, ICL first learned from the DEC that the site had been placed on the DEC list, and that the DEC required that a soil and hydrogeological investigation be conducted under its supervision.

15. ICL requested that MDI and Stevens take whatever steps were necessary to remedy the emerging environmental problems at the property, but both denied that any problem existed and Stevens denied any legal responsibility.

16. ICL retained Pedneault Associates, Inc. ("Pedneault"), a testing laboratory, to conduct preliminary assessments of the soil and groundwater at the property, which resulted in Pedneault reports to ICL dated February 12, March 4, and December 2, 1987.

17. In order to properly vacate the premises, MDI was required to comply with so-called "closure" procedures whereby, under the supervision and to the satisfaction of the DEC, MDI was to remove all hazardous wastes from the premises. MDI failed to complete closure because of its insolvency, and so ICL was required to do so. In order to effect closure, ICL agreed to pay an outstanding bill incurred by MDI with EcoTest Laboratories, Inc. ("EcoTest") for analysis of the cement in various rooms of the building and of the soil underneath the building.

18. EcoTest's July 1987 lab analysis for MDI revealed elevated levels of chromium and lead in the cement flooring in the plating and photo etching areas of the building, and elevated levels of chromium, lead, copper and nickel in the soil below the building. As part of the DEC required closure procedure, ICL removed and disposed of portions of the concrete flooring in the plating and photo etching areas. ICL incurred costs of $ 14,244 in connection with closure.

19. There is no evidence of any disposal of hazardous substances into the soil or groundwater subsequent to ICL's purchase of the property on December 22, 1986, or by any person other than MDI at any time. Since 1961, only MDI engaged in manufacturing activities on the property.

20. The DEC requested that MDI, Stevens and ICL enter into a consent order with the DEC for the investigation and remediation of the property. MDI and Stevens refused to do so. However, ICL has sought to cooperate with the DEC, and entered into negotiations for a consent order.

21. After protracted negotiations with the DEC, on November 28, 1988, ICL entered into a Consent Order with the DEC that required ICL to investigate the soil and groundwater. The investigation was required as a result of the property's inclusion on the DEC list.

22. Conducted under on site DEC supervision, the investigation found that the storm drain just east of the building, adjacent to the MDI plating area, contained a sludge material with elevated levels of heavy metals, including chromium, hexavalent chromium, copper, lead, nickel and zinc, and volatile organics, including dichloroethane and tetrachloroethane.

23. Comparison of the groundwater quality at the southern end of the property with that at the upstream northern side of the property indicated that heavy metals, such as chromium and copper, and volatile organics, such as 1,1,1-trichloroethane, were continuing to be released into the groundwater at the property.

24. Exploratory borings in the north portion of the site disclosed the presence of a sludge similar to the iron oxide sludge generated by MDI's operation and containing elevated levels of heavy metals, including iron, lead, zinc, copper and chromium, together with pieces of copper wire and metals, and certain volatile organics.

25. On June 19, 1989, ICL filed its Draft Report with the DEC. ICL incurred $ 113,351.13 in expenses in conducting the DEC-mandated Phase II investigation and in preparing the report. In addition, ICL incurred legal expenses in connection with the investigation of the property and response to the DEC through June 1989 of $ 19,425.

26. In summary, ICL has evidenced expenditures of $ 164,221.13 in connection with the environmental problems at the site, consisting of $ 17,201 for its initial investigation, $ 14,244 for "closure", $ 113,351.13 for the DEC-mandated Phase II study, and $ 19,425 for legal services in this dealings with the DEC.

27. The DEC has the power to require ICL to conduct such additional investigation as may be necessary. Once investigation of the site to the satisfaction of the DEC has been completed, and the characterization of site conditions contained in the Draft Report has been revised to the satisfaction of the DEC, the DED is expected to notify ICL what, if any, remediation it deems appropriate, and ICL and the DEC will thereupon negotiate and agree upon the appropriate remediation. It is not possible at this time to assess the extent of the additional investigation and remediation that will be required.

Conclusions of Law

1. This Court has jurisdiction over this action under 42 U.S.C. § 9613(b).

2. Venue is proper in this judicial district pursuant to 42 U.S.C. § 9613(b).

3. The property is a "facility" within the meaning of 42 U.S.C. §§ 9607(a) and 9601(9).

4. There has been a "release" and there is a continued "threatened release" of hazardous substances, including chromium, copper, lead, nickel, zinc and 1,1,1-trichloroethane, into the groundwater at the property within the meaning of 42 U.S.C. §§ 9607(a) and 9601(22).

5. Each of the foregoing substances is a "hazardous substance" within the meaning of 42 U.S.C. §§ 9607(a) and 9601(14). See 42 U.S.C. § 9602(a); 42 C.F.R. § 302.4, Table 302.4 (1988).

6. The release and threatened release of these hazardous substances at the property has caused ICL to incur "necessary costs of response . . . consistent with the national contingency plan" in the amount of $ 164,221.13 within the meaning of 42 U.S.C. §§ 9607(a)(4)(B) and 9601(25). These costs were incurred to "monitor, assess, and evaluate the release or threat of release of hazardous substances" and to "clean up . . . released hazardous substances" within the meaning of 42 U.S.C. § 9601(23).

7. MDI was an "operator," Levitt had overall management responsibility and thus was an "operator," and Stevens was the "owner" of the facility within the meaning of 42 U.S.C. §§ 9607(a)(2) and 9601(20)(A) at the time such hazardous substances were disposed of into the soil and groundwater.

8. Since the harm caused by disposal of such hazardous substances at the property is indivisible as between MDI, Levitt and Stevens, MDI, Levitt and Stevens are jointly and severally liable for any necessary costs of response incurred by ICL consistent with the national contingency plan. New York v. Shore Realty Corp., 759 F.2d 1032 [15 ELR 20358] (2d Cir. 1958); Kelley v. Thomas Solvent Co., 714 F. Supp. 1439, 1448 [20 ELR 20109] (W.D. Mich. 1989).

9. Defendants are not entitled to contribution by ICL for the costs of response. None of the defendants has asserted a counterclaim against ICL for response costs; and since such a counterclaim would have been compulsory, see New York v. City of Johnstown, 701 F. Supp. 33, 37 [19 ELR 20578] (N.D.N.Y. 1988), it has been waived. 3 J. Moore, Moore's Federal Practice para. 13, 12[1], at 13-52, para. 13.13 (2d ed. 1988); 6 C. Wright & A. Miller, Federal Practice and Procedure §§ 1409, 1410, 1417 (1971).

10. In any event, ICL could not be held liable since ICL has established by a preponderance of the evidence that it acquired the property after the placement of the hazardous substances on it and that ICL otherwise satisfies the requirements of 42 U.S.C. §§ 9607(b)(3) and 9601(35)(A).

11. Even if ICL was an owner or operator within the meaning of 42 U.S.C. § 9607(a)(2), and not within a defense afforded by § 9607(b), ICL would not be liable for any share of response costs after equitable apportionment pursuant to 42 U.S.C. § 9613(f).

12. Plaintiff is entitled to judgment against the defendants jointly and severally in the amount of $ 164,221.13.

13. Plaintiff is entitled to statutory interst on this amount pursuant to 42 U.S.C. § 9607(a).

14. Plaintiff is entitled to a declaratory judgment that defendants are jointly and severally liable for all other necessary response costs incurred or to be incurred by ICL consistent with the national contingency plan.

SOORDERED.