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FCA Associates v. Texaco

February 4, 2008


The opinion of the court was delivered by: Michael A. Telesca United States District Judge



Plaintiffs FCA Associates, a partnership organized under the laws of the State of New York and FCA Associates, LLC, a limited liability company organized under the laws of the State of New York (collectively "plaintiffs" and/or "FCA"), bring this action against defendants Texaco, Inc. and Texaco Refining and Marketing, Inc. ("Texaco Refining") (collectively "Texaco") seeking to recover costs associated with the environmental investigation and remediation of a property located at 697 North Winton Road, City of Rochester, County of Monroe, State of New York. The Texaco defendants filed a third-party complaint against eight named third-party defendants, including Richard Cohen ("Cohen") and Shell Oil Company ("Shell"), seeking indemnification and/or contribution should Texaco be found liable to plaintiffs. Plaintiffs moved to dismiss Texaco's third-party claims against Cohen and Shell. In addition, Shell moved to dismiss Texaco's third-party claims against it. By Decision and Order dated March 31, 2005, this Court granted plaintiffs and Shell's motions to dismiss Texaco's third-party claims against third-party defendants Shell and Cohen.

Currently for determination are two motions: (1) Texaco's motion for summary judgment dismissing plaintiffs' action against Texaco in its entirety, or in the alternative, partially dismissing plaintiffs' non-remediation damages claims; and (2) Plaintiffs' motion for partial summary judgment holding Texaco liable as dischargers under the New York State Navigation Law and liable for plaintiffs' attorneys' fees pursuant to the Resource Conservation and Recovery Act ("RCRA"). For the reasons set forth below, Texaco's motion for summary judgment is granted in part and denied in part. Plaintiff's motion for partial summary judgment is granted in part and denied in part.


I. History of the Site

On November 1, 1960, Texaco, Inc. became the record owner of a .44-acre parcel of land improved by a gasoline service station, located at 697 North Winton Road (the "Property").*fn1 On or about August 1, 1961, Texaco conveyed the Site to Leased Stations, Inc. ("Leased Stations"), predecessor to Texaco Refining whereupon, Leased Stations leased the property back to Texaco. Between 1961 and 1981, Texaco sub-leased the Site to a number of operators and repurchased it from Leased Stations in 1980. On November 3, 1981, Texaco conveyed the Site to Richard Cohen. In addition to the Site conveyed by Texaco, Cohen also owned the Adjoining Parcel upon which a building was located and from which he operated his business known as Nu-Way Auto Parts. In approximately 1985,*fn2 Cohen leased the Site to Metro Tire and Auto Service Center, Inc. ("Metro Tire"). It is unclear precisely how long Metro Tire was on-site because neither Cohen nor Metro Tire was able to locate an executed lease for any of the time Metro Tire was a tenant, and the parties' recollections differ widely about the date that Metro Tire vacated the Site. At the very least, Metro Tire was on site until 1995. However, there is testimony that places Metro Tire at the Site as recently as 1997 selling retail gas to customers.

In 1970, City records indicate that Texaco installed a 1,000 gallon Underground Storage Tank ("UST"). In addition, in 1978, Texaco installed an 8,000 gallon UST and removed three 2,000 gallon USTs. According to Texaco records, the 8,000 gallon UST subsequently developed a leak and the process had to be repeated. Texaco states that it successfully replaced the tank. Indeed, City records show that a permit was issued to install the first 8,000 gallon UST on February 15, 1978, then to repair it on May 1, 1978 and then replace it on May 10, 1978. It is undisputed that 750 gallons of gas was lost during this process. However, no documents have been located with respect to remediation records.

When Cohen purchased the Site from Texaco in 1981, he bought the property as an operating gas station in a "Used" and "As Is" condition.*fn3 The bill of sale from Texaco to Cohen showed a transfer of the following USTs: two 8,000 gallon USTs, one 3,000 gallon UST, one 550 gallon UST and one 1,000 gallon UST and three 2,000 gallon USTs. Texaco states that these eight USTs were included in the sale. Plaintiffs, however, state that only five USTs were present. According to plaintiffs, the three 2,000 gallon USTs listed on the bill of sale were not conveyed from Texaco to Cohen since those three USTs were already removed by City Pump & Tank in February or March 1978. See Building Records from the City of Rochester attached as Ex. D to Pl.'s Statement of Facts.*fn4 Moreover, Cohen has stated that he never knew how many USTs were on Site during his years of ownership and he had no idea which ones were operational.

II. The Agreements

On January 20, 1999, Cohen sold the Property and the Adjoining Parcel to plaintiff FCA Associates (the "Partnership") pursuant to a Purchase and Sale Agreement.*fn5 On November 7, 2002, the Partnership transferred its interest in the Property and the Adjoining Parcel to plaintiff FCA Associates, LLC (the "LLC"). In November 1998, prior to closing on the Site, Cohen and plaintiffs entered into a Purchase and Sale agreement relative to three properties, including the Site, wherein plaintiff acknowledged the environmental concerns with the Site and accepted the conditions of the Site. Indeed, prior to purchasing the property, plaintiffs ordered a Phase I environmental Investigation of the Site. The Phase I report recommended further investigation and notified plaintiffs of the environmental concerns. Subsequently, plaintiffs ordered a Phase II Investigation of the Site.*fn6 As part of the Purchase and Sale Agreement, plaintiffs agreed to indemnify and hold Cohen harmless against future liability for environmental claims associated with the property. Further, pursuant to plaintiffs' Environmental Escrow Agreement dated January 15, 1999, M&T Bank was unwilling to provide plaintiffs with a loan unless plaintiffs agreed to remediate the property. See Ex. Q to January 31, 2007 Cristo Aff. Plaintiffs agreed to remediate the property knowing that Phase I and Phase II investigations had information relating to specified and non-specified environmental concerns.*fn7

III. Contamination and Remediation at the Site

In the 1990's, two discharges of petroleum product were discovered in the area of the Site. On September 26, 1994, the Department of Environmental Conservation ("DEC") recorded contamination at the Site which was listed as being a release of unknown gasoline to ground water. A 3,000 gallon tank failed the September 26, 1994 test conducted by Okar Equipment, and was reported as DEC Spill No. 94084081. There reportedly was a small hole in the top of the tank, which was repaired and about two cubic yards of contaminated soil was found and removed. In 1995, Certified Tank Testing found that tank #3 (8,000 UST) failed when tested twice and two spill reports were made. It is disputed as to whether the tank was repaired, emptied or taken out of service. On March 13, 1998, the DEC recorded contamination at the Adjoining Parcel, which was listed as a contamination of gasoline to land.*fn8 The same 3,000 gallon UST reportedly failed again and the fuel was reportedly emptied. Steve Wade of Certified Tank opined that he did believe that the 3,000 gallon tank was not actually leaking.

The Partnership entered into a Stipulation agreement to investigate and remediate the Site at the direction of the DEC, which was finalized on November 8, 1999. However, the following USTs were removed from the Site in September 1999 by Hickory Hill Construction: two 8,000 gallon USTs, one 3,000 gallon UST, one 550 gallon UST and one 1,000 gallon UST. As part of the removal, approximately 176 tons of contaminated soil was excavated and disposed of at a landfill. Soil samples were collected after excavation and tank removal and analyzed for volatile organic compounds ("vocs"). The Hickory Hill consultant identified petroleum related contamination and stated that it was "just very old stuff." See Luther Keyes of Hickory Hill Tr. 51:4 - 52:3 attached as Ex. S to Pls. Facts. Texaco counters that the City records show that as early as May 17, 1940, years before Texaco's involvement at the Site, there was a gas station on the property, which presumably operated with USTs.

In 2004, five years after plaintiffs purchased the Site, additional leaking tanks and significant environmental discharge under the building area were discovered by GeoEnvironmental of New York ("GZA"), an environmental contractor.*fn9 GZA excavated four USTs and found the following three USTs to be deteriorated, corroded, and leaking: "(1) 550 gallon UST still containing 450 gallons of product" and "(1) 1,000 gallon UST and (1) 2,000 gallon UST[.]" Texaco defendants contend that plaintiffs did nothing for six years to investigate the environmental contamination near the sump pit or the floor drains under the building on the Site despite Day informing plaintiffs in 1998 that the sump system in the floor drains needed testing to ascertain the discharge location and the integrity of the drainage system of the building. As a result, Texaco claims that in 2004 GZA discovered significant contamination in that area including 60 tons of contaminated soil and free product in monitoring wells within the building resulting from sump pump or floor drain discharges. Plaintiffs argue that during the six years, they removed five USTs and conducted testing of the pit. Plaintiffs claim they also demanded that defendants undertake further investigation and remediation and they arranged for numerous further studies and work plans including GZA's Remedial Investigation and development of a Remedial Work Plan.

GZA provided Worldwide Geosciences, Inc. ("Worldwide") with the analytical results of samples collected and analyzed as part of GZA's Site investigation. Worldwide's analysis of samples collected and analyzed as part of the Site remedial action concluded that four of the seven samples had chromatograms that were indicative of pre-1975 gasoline and the remaining three showed characteristics consistent with parent gasoline of an age no later than 1985. See Hanna Expert Report at 6. Texaco disputes this fact because according to Texaco, plaintiffs did not inform Worldwide of the contaminated soils it discovered during the excavations in 1999 and 2004 and it did not ask Worldwide to determine the age or source of that contamination.*fn10 Texaco further states that plaintiffs' expert testified that "he could not rule out" that the product that caused the contamination was the result of product that was produced and leaked onto the property from 1981 to 1985.

In 2005 GZA completed remediation activities at the Site that included the removal of four USTs ("orphan tanks") that were encountered. The orphan tanks encountered on the property were not known by GZA to be present at the Site when they initiated remedial activities. Three excavations were necessary to remove the orphan tanks. On March 5, 2005, a 55 gallon steel UST was encountered that appeared to contain a mix of residual product/water and tank bottom sludge. On August 10, 2005, two excavations occurred. One 1,000 gallon steel UST and another 2,000 gallon steel UST were encountered and removed. The final excavation involved a 2,000 gallon steel UST with no residual product/water or impacted soil.*fn11

The identified zones of contamination that were remediated by GZA were present at locations not associated with the location of the USTs installed in 1978 and used by Nu-Way and/or Metro Tire. See Hanna Expert Report at 8.

In response to GZA's efforts, a No-Further Action letter was issued by the DEC on April 28, 2006. Plaintiffs contend that they paid a total of approximately $349,451.38 for environmental response costs, and were only reimbursed $108,000 from Shell, which was responsible for the contamination on the Adjoining Parcel. Further, plaintiffs claim that they incurred legal fees and expenses both in responding ...

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