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Rococo Assocs., Inc v. Award Packaging Corp. and R&E

March 30, 2011


The opinion of the court was delivered by: Seybert, District Judge


Pending before the Court is a motion for summary judgment filed by Award Packaging Corporation ("Award") and R&E Packaging, LLC ("R&E") (collectively, "Defendants") seeking dismissal of all of the claims of Rococo Associates, Inc. ("Rococo" or "Plaintiff") and also partial summary judgment on their counterclaims against Plaintiff and the Third-Party Defendants, Richard L. Cohen ("Cohen") and Marvin Rosenberg ("Rosenberg"). For the reasons discussed below, Defendants' motion is GRANTED IN PART and DENIED IN PART.


This civil action concerns environmental cleanup liability stemming from Award's use of volatile organic compounds ("VOCs") and metals in connection with its printing business at an industrial property located at 625 South Street, Garden City, New York ("Premises").

In 1967, Plaintiff's predecessors-in-interest*fn1 and Award entered into a contract which arranged for construction on, and the long-term lease of, the Premises where Award would carry on its business of printing on plastic bags and other packaging materials. Joint Pre-Trial Order ("JPTO"), Docket Entry No. 61, p. 22-23. Both parties acknowledged at the time that in its regular course of business Award would routinely handle and use VOCs and other substances inimical to the environment. Id.

For this reason, pursuant to their agreement, Plaintiff designed and constructed an explosion-resistant ink room to store the chemicals. The ink room's floor drain ("DW-1") and "spill capture system" (which simply consisted of a 55-gallon drum ensconced in the ink room's floor) constitute one of the two chief areas of contamination in this action. Id.

The second contamination area comprises two drywells ("DW-2" and "DW-3") situated on the northwest corner of the Premises where Award would dump chemical waste. Id. Although not designed for the purpose of receiving such contaminants, the parties agree that the drywells--and, for that matter, the floor drain--satisfy the United States Environmental Protection Agency's ("EPA") definition of an "underground injection well." The drywells are therefore regulated under the Underground Injection Control ("UIC") program superintended by the EPA. JPTO ¶ 4.

In the period between 1967 and the early 1980s (when wastes were henceforward "manifested" offsite), it is estimated that Award dumped approximately 110,000 to 137,000 gallons of polluting waste into the two drywells. Defs.' Mem. in Supp. of Mot. Summ. J. ("Defs. Br."), Ex. 9. As a result, in the early 1990s, the EPA advised the Defendants that the floor drain and drywells were in need of environmental remediation. Accordingly, over the course of several years, Defendants consulted with experts, formulated work plans, submitted them to the EPA, and at length created a final, approved remediation plan embodied in two documents drafted by Environmental Resources Management ("ERM"), Defendants' environmental engineer: the Report on Findings of Site Investigation of Abandoned Drywells and Floor Drain ("Report") and the Remedial Action Plan ("RAP").

Armed with the Report and the RAP, Plaintiff and the Defendants engaged in protracted negotiations over which party would bear the remediation costs and undertake implementation of the RAP. Negotiations culminated in the Settlement Agreement, by the terms of which Defendants committed to reimburse Plaintiff in the amount of $267,300.00 and to non-suit a pending tax certiorari action; Plaintiff meanwhile promised to implement the RAP at its own expense in compliance with all laws, as required by the EPA pursuant to the UIC program, and to indemnify Defendants and hold them harmless for all remediation associated with the floor drain and drywells. Defs. Br., Ex. 1.

In its preambulary section, the Settlement Agreement defines which sections of the Premises Plaintiff would be responsible for decontaminating:

WHEREAS, both the Report and the RAP only addressed environmental contamination existing in an interior floor drain in a storage room in the Premises (delineated DW-01 in the Report and the RAP), and in two (2) outdoor drywells located near the northwest corner of the Premises (delineated DW-02 and DW-03 in the Report and the RAP) (DW-01, DW-02, DW-03 are hereinafter collectively referred to as the "Site").

Defs. Br., Ex. 1. (Emphasis added.)

Paragraph Nine of the Settlement Agreement, entitled "Release", provides:

The Landlord, Cohen and Rothenberg, shall hereby release and discharge the Tenant, and shall waive any right or claim of right against the Tenant, from all actions, causes of action, suits, debts, damages, assessments, liabilities, clean-up costs, interest, penalties, judgments, losses, claims and demands whatsoever, in law or equity, which the Landlord, Cohen and Rothenberg now have or hereinafter may have against the Tenant for environmental contamination at the Site, as specifically addressed in the Report. Id. (Emphasis added.)

The Report, which is specifically incorporated by reference into the Release supra, defines its scope as covering two drywells and a floor drain. Defs. Br., Ex. 10. Section 1.3 of the Report, entitled "Project Objectives and Scope", contains this introductory sentence: "The objective of the limited site investigation was to collect waste characterization samples from the two abandoned drywells and the abandoned floor drain located in a storage room within the building." Similarly, Section 3.0 of the RAP (also incorporated into the Settlement Agreement), entitled "Remedial Approach", reads: "The objective of the proposed remedial action is to safely remove impacted materials within the two abandoned drywells and the abandoned floor drain, via excavation and off-site disposal." Defs. Br., Ex. 11.

In specifying the digging procedures to be followed for removal of the contaminants in both the drywells and the floor drain, the RAP notes that excavation would extend "to a depth of approximately twenty (20) feet below grade." Id. There is no explicit statement in the document of precisely how deep the excavators would dig to accomplish their goal of removing all contaminants from the Site; there are, however, some subtle indications, perhaps, that by "approximately twenty (20) feet below grade", the RAP may have contemplated deeper levels. For one thing, the team that prepared the RAP sent soil borings into the drywells down to a maximum depth of sixteen feet (and no deeper lest they push the contaminated material deeper still) and encountered contaminants every step along the way. Id. At least partly for this reason, the RAP estimates that excavation would have to reach "approximately", as opposed to exactly, twenty feet below grade, the more so as the exact depth of the contaminants was unknown. Id. Second, the RAP may entertain the contingency of digging deeper than twenty feet in its provision that ...

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