This second installment in our series on recent due care caselaw is from the federal district court for the eastern district of New York. In State of New York v Adamowicz, 2011 U.S. Dist. LEXIS 102988 (E.D.N.Y. 9/13/11), a property owner spent over $1MM in cleanup in response to contamination caused by a bankrupt tenant. However, because the owner had been aware of environmental problems and violations at the site for five years before taking action, the court ruled that the landlord had failed to satisfy the due care requirement of the CERCLA third party defense.
In this case, the tenant had used the premises for lithographic tri-color printing and generated a variety of hazardous wastes including wastes solvents and used inks. From 1983 to 1988, the Suffolk County Department of Health Services (SCDHS) had issued notices of violations involving improper discharges of wastewater to on-site leaching pools, observed stained soil from leaking waste drums and had also cited the property for improper storage of hazardous wastes. The violations included an exterior drum storage area without secondary containment, uncovered and leaking drums.
The tenant and owner failed to comply with directives to remove contaminated liquids and sludges from the leaching pools, and the discharge to the leaching pools was not halted until 1987 when the property was connected to the local sewer system. It wasnt until the tenant filed for bankruptcy and the case was converted to a chapter 7 case in 1988 that the owner began taking measures requested by the SCDHS.
In 1994, the site was placed on the state superfund list after the owner declined NYSDEC's invitation to implement a remedial investigation. Eventually, the NYSDEC incurred $4MM in cleanup costs. Suffolk County Water Authority also expended $24MM extending public water to six residences and three businesses after learning that groundwater contamination had migrated to the private wells serving these properties.
Im not sure that there has been any due care case where a property owner spent so much money and failed to be able to assert the defense. It just shows how important timing can be in these due care cases and illustrates why property owners should due thorough due diligence so that they will be in a position to timely implement response measures that could satisfy the due care defense. Because the "appropriate care" obligation of the bona fide prospective purchaser (BFPP) defense is informed by the due care caselaw of the third party defense, this case serves as a lesson to those who seek to qualify for the BFPP defense as well.
A more detailed discussion on the facts of the case is available from my website at: http://www.environmental-law.net/2012/03/owner-incurs-1mm-on-cleanup-but-ct-says-no-due-care-owner-waited-too-long-to-act/