Tuesday, April 17, 2018

SJC Ruling Favors Owners on Deadline to Sue for Property Damage by Contamination

In the case of Grand Manor Condominium Association v. City of Lowell, the Supreme Judicial Court established with clarity an important rule as to when the statute of limitations begins to run for
filing in court a claim for property damage under the Massachusetts Superfund statute, General .Laws, Chapter. 21E, Section 5(a) (iii).  The SJC ruled that a claim for such damage due to contamination does not accrue until the plaintiff learns that the damage is not reasonably or feasibly curable. 

Significantly, the SJC said that this relatively late date for the deadline to begin to run ordinarily is not until the environmental remediation process under Chapter 21E and the Massachusetts Contingency Plan (“MCP”) is well advanced.  The SJC rejected arguments that this claim accrues at the relatively early date when the plaintiff first knew that there was contamination.

In Grand Manor, the City had acquired in 1906 the property upon which the condominium was later built. In the early part of the twentieth century it used the property as a quarry for mining rock and gravel.  During the 1940s and 1950s, it used the site as a landfill.  The landfill was eventually covered and in 1983 the City conveyed the land to a developer, who built the condominium. 
A long history of industrial use of a property over a period of many decades or longer is a common feature of Chapter 21E cases.

In November 2008, the condominium hired a contractor to install a drainage system.  The excavation quickly uncovered solid waste and hazardous material.  A consultant was hired who began efforts to remediate it.  In June 2011, a consultant’s report concluded that there were 1.5 million cubic feet of hazardous material extending down to bedrock. Restoring the site would cost approximately $11.7 million and was not feasible.

Plaintiffs filed suit on October  of 2012 seeking recovery under Chapter 21E, Section 4A for reimbursement of their response costs and under Section 5(a) (iii) for the damage to their property.  The statute of limitations for a claim under Section 5 is three years, as provided in Section 11A.

At trial, the Superior Court ruled that the plaintiffs had the burden of proving that their claim under Section 5 was timely and submitted the issue to the jury, together with a list of several potential dates that could have triggered the limitations period, including dates of preliminary work by the consultants and the date of a demand letter by the plaintiff. 

The jury found that the plaintiff was entitled to reimbursement of response costs under Section 4A but had failed to bring their property damage claim under Section 5 within the limitations period, and that claim was dismissed. This result was appealed.

The SJC considered the statute of limitations in the context of the over-all statutory scheme and the regulations set forth in the Superfund law and MCP.  The statutory and regulatory scheme sets out separate phases of assessment and remediation, which eventually leads to a decision about the appropriate level of cleanup, beyond which further cleanup would be cost-prohibitive.

The SJC said that full remediation of the contamination is desirable and, if that occurs, the plaintiff has no cause of action under Section 5. It also said, however, that the Superfund law and MCP do not require remediation of all contamination in all cases, since that may not be financially feasible.  It held that Section 5 provides for the recovery of residual damage in that the property, even after undergoing the mandated cleanup, still may contain pollutants that may diminish the fair market value of the property.  It said that the plaintiff also may have suffered temporary loss of use that cannot be cured or compensated by remediation and reimbursement of response costs.

The SJC held that a plaintiff has suffered damage within the meaning of Section 5 if he has suffered damage that is not reasonably curable through the clean-up process. The cause of action under section 5 is triggered when he has knowledge that it is not reasonably curable.  “Such knowledge is generally not provided until the MCP process is sufficiently advanced.”

The SJC said it would make little sense to hold otherwise.  If the plaintiff were required to file suit earlier, he might be required to file suit before he knows whether the contamination can be reasonably remedied, that is, before he knows whether he has a claim.

The SJC vacated the judgment and remanded the case to the Superior Court. This likely is for trial if the case is not settled.

Mike O’Neill is an associate at McGregor & Leger P.C.   He has more than 20 years of experience in real estate and litigation, including environmental law, land use and commercial litigation, and conveyancing.  Mike’s email address is moneill@mcgregorlaw.com.

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