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UNITED STATES v. A&N CLEANERS & LAUNDERERS

April 3, 1992

UNITED STATES OF AMERICA, Plaintiff, against A&N CLEANERS AND LAUNDERERS, INC., BEN FORCUCCI, MARINE MIDLAND BANK, N.A., JORDAN W. BERKMAN, JOHN A. PETRILLO, JOSEPH CURTO, and MARIO CURTO, Defendants. MARINE MIDLAND BANK, N.A., Third-Party Plaintiff, - against - ST. PAUL FIRE AND MARINE INSURANCE COMPANY, ST. PAUL MERCURY INSURANCE COMPANY, UTICA MUTUAL INSURANCE COMPANY, THE NORTH RIVER INSURANCE COMPANY and UNITED STATES FIRE INSURANCE COMPANY, Third-Party Defendants.

SWEET


The opinion of the court was delivered by: ROBERT W. SWEET

Sweet, D. J.

Plaintiff United States of America (the "Government") has moved for partial summary judgment against defendants A & N Cleaners and Launderers, Inc. a/k/a Alben Cleaners & Launderers ("A & N" or "Alben Cleaners"), Ben Forcucci ("Forcucci"), Marine Midland Bank, N.A. ("Marine"), Jordan W. Berkman ("Berkman"), John A Petrillo ("Petrillo") and Joseph and Mario Curto (the "Curtos") (collectively with Berkman and Petrillo, the "Berkman Defendants") pursuant to Rule 56, Fed. R. Civ. P. on the ground that the defendants are jointly and severally liable under § 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. §§ 9601-9675, for costs incurred and to be incurred by the Government in response to the release or threatened release of hazardous substances at the Brewster Wellfield Site (the "Site") in Putnam County, New York. The Berkman Defendants and Marine have cross-moved for summary judgment dismissing the complaint against them. For the following reasons, the Government's motion is granted; Marine's motion is denied; and the Berkman Defendants' motion is denied.

 The Parties

 Defendant Jordan W. Berkman ("Berkman") is an attorney admitted to practice in New York State who has specialized in real estate law for approximately 33 years. Berkman was the Village Attorney for the Village of Brewster on a part-time basis from 1975 through 1990. John A. Petrillo ("Petrillo") was a builder and was engaged in the construction business in 1978 and all times relevant to this action. Mario and Joseph Curto (the "Curtos") are retired individuals. The Berkman Defendants presently hold title as one-third tenants in common to a piece of real property and the improvements thereon, consisting of a single one-story building (the "Building") and a parking lot, located at the intersection of Routes 6 and 22 in the Town of Southeast, in Putnam County, New York (the "Property").

 Defendant Ben Forcucci ("Forcucci") is the sole shareholder, officer and director of A & N. He alone was responsible for the day-to-day operation of the dry cleaning machines and the disposal of waste.

 Defendant Marine Midland Bank, N.A. ("Marine") was the lessor of the Property from 1970 through 1990. From 1970 to the present, Marine has maintained a branch bank at the Property. Since 1990, Marine's lease at the Property relates only to that part occupied by its branch office.

 Prior Proceedings

 The Government filed its complaint on October 16, 1989 (the "Complaint"). On June 5, 1991, this court ordered that the case be bifurcated for the litigation of liability and damages.

 Background

 This action arises out of the Government's investigation of and remedial actions relating to contamination at the Brewster Well Field in Putnam County, New York (the "Site" or the "Well Field"). The Government has alleged that releases of hazardous substances from the Property caused it to response costs for which the defendants are liable.

 The Property and the Building

 The Property consists of a one-story brick building (the "Building") akin to a shopping mall, which is surrounded by a parking lot and adjacent grassy area on a total of approximately 1.8 acres. The Building occupies 12,500 square feet and is currently occupied by a Marine branch office, A & N and a limousine service company. The Property is located approximately 900 feet from the Site, across the East Branch of the Croton River to the south. Significant to this action, a floor drain traverses the entire length of the interior of the Building which allegedly empties into a dry well (the "Dry Well") under the parking lot in the rear of the Property near the septic tank.

 Until 1979, title to the Property was held by Six & Twenty-Two Real Estate Company ("Six & Twenty-Two"). Effective October 1, 1970, Marine leased the entire Property from Six & Twenty-Two for a term of ten years, with a renewal option for two successive five year terms (the "Marine Lease"). Both renewal options were exercised, giving Marine a continuous leasehold over the Property from 1970 through 1990. Marine currently holds a two-year lease for only that portion of the Property occupied by its branch office.

 Under the Marine Lease, Marine was obligated to maintain fire, casualty and liability insurance on the Property, and to maintain the Property in good condition and repair. Marine also was obligated to comply with all governmental rules and regulations for the prevention or abatement of nuisances or other grievances relating to the Property. Marine was permitted to alter the Building, to change the grade of any land surrounding the Building, to erect embankments and/or retaining walls, and to place, alter or remove any temporary building on the Property. Marine had the unconditional right to sublet all or part of the Property or to assign the Marine Lease, but remained obligated to pay rent on the entire Property and to perform its obligations under the Marine Lease regardless of any subleases or assignments.

 The Marine Lease was subject and subordinate to prior leases to portions of the Property. Six & Twenty-Two assigned to Marine all of its right, title and interest in each of those leases and authorized Marine to collect rents and enforce all of the obligations of the tenants under them. One of the leases was held by Pircio's Aristocratic Cleaners Corp. ("Pircio's") and was to run until November 30, 1972 (the "Pircio's Lease"). The Pircio's Lease provided that the premises were to be used and occupied as a dry cleaning establishment and that responsibility for the care and maintenance of the Dry Well belonged to Pircio's. On October 5, 1970, Marine notified Pircio's to make all rent payments to Marine "as your new landlord." Glanville Aff. Ex. F.

 Shortly thereafter, Marine was notified that A & N had succeeded to Pircio's rights under the Pircio's Lease. Id. Like Pircio's, A & N occupied the premises as a dry cleaning business. In early 1971, Marine wrote to A & N to request that the store relocate from the northwest corner of the Building to a location on the north side of the Building, which move was to be financed by Marine. In consideration for the move, the Pircio's Lease was extended through October 31, 1977, and A & N was given the option to renew for one three-year term and one two-year term. In 1982, A & N entered into a sublease with Marine, running through 1985 (the "1982 Sublease"). The 1982 Sublease specifically provided that the premises would be used and occupied for a dry cleaning, rug cleaning and laundry establishment. The 1982 Lease contained no provision regarding the Dry Well. Marine extended the lease term on August 12, 1985, subject to cancellation by either party on 90-days notice.

 Meanwhile, the Berkman Group had purchased the Property from Six & Twenty-Two on March 2, 1979, taking title to the Property subject to the Marine Lease. The Building is presently occupied by three commercial establishments, including a Marine branch office and A & N's dry cleaning business.

 The Site and the Contamination

 The Site supplies water to the Village of Brewster ("Brewster") and parts of the Town of Southeast in Putnam County. Aquifers beneath lands owned by Brewster supply the Well Field. In 1978, the Putnam County Department of Health ("PCDH") detected contamination in the groundwater at the Well Field in the form of volatile organic compounds including perchloroethlene ("PCE") and trichloroethylene ("TCE"). Residents were urged by the PCDH to boil their water before drinking it. In response to the contamination, Brewster conducted several studies to identify possible alternative groundwater sources and to remove the volatile compounds. During 1978 and 1979, contaminant source investigations were also performed by the PCDH and the New York State Department of Environmental Conservation ("NYSDEC"). Based on these studies, the Village installed and began operating an air stripper in 1984 to treat the water supply.

 In September 1983, the United States Environmental Protection Agency ("EPA") placed the Site on the National Priorities List established pursuant to § 105 of CERCLA, 42 U.S.C. § 9605. Subsequently, the EPA and the NYSDEC entered into a cooperative agreement whereby NYSDEC's studies of the Site would be financed by the Superfund. In 1985 and 1986, GHR Engineering Associates ("GHR") conducted soil and groundwater sampling to identify the extent and potential sources of the contamination. (This study shall hereinafter be referred to as "OU One"). A & N and the Dry Well, together with a number of other commercial establishments, were considered as possible sources of the contamination. However, OU One did not definitively establish the source of the contamination. The Record of Decision of September 30, 1986 ("ROD One") recommended installing a second airstripper.

 A second study was performed in 1987 by EBASCO Services, Inc. ("EBASCO") (This study shall hereinafter be referred to as "OU Two"). Again, A & N and the Dry Well were a subject of the investigation. This time, the remedial investigation report ("OU Two RI") and Record of Decision for OU Two ("ROD Two") identified the Dry Well as a source of the Well Field contamination. Wing Dec. Ex. B at 64; id. Ex. C. The ROD Two provided for the excavation, treatment and disposal of the Dry Well, the Dry Well sediments and the surrounding contaminated soils. Id. Ex. C.

 A & N's Disposal of Hazardous Waste on the Property

 Forcucci personally operated A & N and was responsible for the day-to-day operation of the dry cleaning machines and of the disposal of waste. In the dry cleaning process, clothes are cleansed in a washer by agitation with a solvent, in this case, PCE. After washing, the clothes are transferred to dryers to remove as much solvent as possible. During the drying phase, the condensed PCE is recovered and collected in a bucket in front of each dryer for re-use; water containing PCE from the water separator of the dryer is collected in a bucket at the back of the dryer.

 Forcucci admittedly disposed of the PCE-infused waste water regularly through the floor drain of the Property. The date after which he ceased this practice and began storing waste water in 55-gallon containers is in dispute; the defendants claim that 1978 is the operative date, while the Government contends that the disposal of hazardous substances continued through at least 1983.

 The United States claims to have incurred approximately $ 3 million in response costs in connection with the contamination at the Site. However, in light of the bifurcation, the cost of the Government's response is not in issue at this time.

 I. CERCLA1

 Congress enacted CERCLA in 1980, and amended it in 1986, Pub. L. 99-499, 100 Stat. 1613 (1986), in response to severe environmental and public health effects posed by the disposal of hazardous wastes. See United States v. Hooker Chems. & Plastics Corp., 680 F. Supp. 546, 548 (W.D.N.Y. 1988). Despite a legislative history "shrouded with mystery," due in large part to CERCLA's enactment as a "last-minute compromise," it is possible to identify two essential purposes behind CERCLA. See Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074, 1080-81 (1st Cir. 1986). As articulated by the court in United States v. Reilly Tar & Chemical Corp., 546 F. Supp. 1100 (D. Minn. 1982),

 First, Congress intended that the federal government be immediately given the tools necessary for a prompt and effective response to the problems of national magnitude resulting from hazardous waste disposal. Second, Congress intended that those responsible for problems caused by the disposal of chemical poisons bear the costs and responsibility for remedying the harmful conditions they created.

 Id. at 1112, quoted in Dedham, 805 F.2d at 1081.

 CERCLA establishes an "array of mechanisms" to achieve its objectives. Relevant here, the Government may take response action whenever there is a release or threatened release of "hazardous substances" and then sue certain persons for reimbursement of the cleanup costs. 42 U.S.C. § 9604. To establish liability, the Government must demonstrate that (1) there has been a "release" or a "substantial threat of release" *fn2" of a "hazardous substance" *fn3" ; (2) from a "facility" *fn4" ; (3) which caused the Government to incur response costs; and (4) each of the defendants fits within one of the categories of responsible parties identified under § 107(a) of CERCLA. 42 U.S.C. § 9607(a); CPC Int'l, Inc. v. Aerojet-Gen. Corp., 777 F. Supp. 549 (W.D. Mich. 1991).

 Absent a showing by a preponderance of the evidence that one of the affirmative defenses contained in § 107(b), id. § 9607(b), has been satisfied, the liability of covered parties for costs incurred in the clean-up is strict. B.F. Goodrich Co. v. Harold Murtha, 958 F.2d 1192 (2d Cir. 1992); New York v. Shore Realty Corp., 759 F.2d 1032, 1044 (2d Cir. 1985); United States v. Monsanto Co., 858 F.2d 160, 167 & n.11 (4th Cir. 1988, cert. denied, 490 U.S. 1106, 104 L. Ed. 2d 1019, 109 S. Ct. 3156 (1989). Where the environmental harm is indivisible, liability is also joint and several. B.F. Goodrich, slip op. at 2199; O'Neil v. Picillo, 883 F.2d 176, 178-79 (1st Cir. 1989), cert. denied, 493 U.S. 1071, 110 S. Ct. 1115, 107 L. Ed. 2d 1022 (1990).

 Of the defenses available to a defendant otherwise liable under § 107(a), two are relevant here. First, under the "third party defense" set forth in section 107(b)(3), a defendant is not liable if it establishes by a preponderance of the evidence that the release or threatened release was caused by third parties other than those with whom it has a direct or indirect contractual relationship, assuming that the defendant has also exercised due care under the circumstances and has taken precautions against foreseeable acts or omissions by the third parties. 42 U.S.C. § 9607(b)(3). Section 101(35) defines a "contractual relationship" to include "land contracts, deeds or other instruments transferring title or possession." Id. § 9601(35).

 The second defense relevant in this case is the "innocent purchaser" or "innocent landowner" defense set forth in § 101(35). This defense is applicable if the covered party establishes by a preponderance of the evidence that the requirements of § 107(b)(3)(a) and (b) are satisfied and that:

 the real property . . . was acquired by defendant after the disposal or placement of the hazardous substances on, in or at the facility, and one or more of the circumstances described in clause (i), (ii), or (iii) is also established by the defendant by a preponderance of the evidence:

 (i) At the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release ...


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