United States District Court, W.D. New York
DECISION AND ORDER
MICHAEL A. TELESCA, District Judge.
Plaintiff, the Volunteers of America of Western New York ("VOA"), instituted this action pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. ("RCRA"), and New York State statutory and common law seeking damages for environmental contamination on two parcels of real property located at 214 Lake Avenue, Rochester, New York ("the Site"). VOA claims that petroleum, hazardous waste, and other contaminants have been released by the defendants, previous owners or operators of the Site. On January 12, 2000, this Court granted in part and denied in part the property owners' joint motion to dismiss. Subsequently, VOA settled with all of the defendants save RG&E and its as-yet unidentified insurers.
Presently pending before the Court are VOA's Motion for Declaratory Judgment [#174] and RG&E's Cross-Motion for Declaratory Judgment [#183]. The parties seek a declaration of their contractual rights, responsibilities, and obligations under the Memorandum of Understanding ("MOU") entered into on January 11, 2005, as well as declaration as to whether there exist other enforceable oral or written contracts between the parties and whether RG&E is liable to VOA under a theory of promissory estoppel. Specifically, VOA contends that RG&E is in breach of the MOU because it failed to execute a new MOU and failed to remediate the Site, and that RG&E has reneged upon its promise to pay for the remediation (a Construction Cap Remedy) desired by VOA. RG&E argues that it has not breached the MOU, and did not contract, promise, or otherwise agree to pay for a Construction Cap Remedy ("CCR").
II. Factual Background and Procedural History
A. History of Contamination at the Site
VOA's allegations concerning the use and contamination of the Site are summarized in the Court's January 12, 2000 decision and order [#17], Volunteers of America v. Heinrich , 90 F.Supp.2d 252 (W.D.N.Y. 2000). Briefly, RG&E purchased a portion of the Site in 1918, and the remainder of the Site by 1924, using it for coal storage and land-filling it with street excavation materials. RG&E sold the Site to defendants Jonathan C. Heinrich and David W. Heinrich in 1981, and VOA acquired the Site in November 1997.
VOA, as noted above, filed suit against all the former owners of the Site. The initial stage of this litigation ended in 2000, with VOA entering into settlement agreements with all defendants except RG&E and its insurers. At the Court's urging, RG&E eventually agreed to commence settlement discussions with VOA in 2003.
Meanwhile, in October 2003, the New York State Legislature passed the Brownfield Cleanup Program ("BCP"), to facilitate remediation of contaminated real estate by offering certain cleanup incentives, such as a statutorily binding liability release and tax credits for the remediation and redevelopment of contaminated sites, to "volunteers", i.e., parties who did not contribute to the contamination of the real estate at issue. Because VOA did not cause any of the contamination on the Site, it was eligible for participation in this program; RG&E, as a responsible party, was not.
On January 11, 2005, VOA and RG&E entered into the MOU, the main purposes of which were to limit legal expenses and fund further investigation into the nature and extent of the contamination of the Site. VOA was to pull the laboring oar in negotiating a remediation of the parcel with the New York State Department of Environmental Conservation ("NYSDEC"), while RG&E remained in the background but had significant input into the process.
VOA applied to the BCP on February 11, 2005, and the DEC accepted VOA as a "volunteer" on April 26, 2005. VOA and the DEC entered into a BCA on June 15, 2005, pursuant to which Plaintiff agreed to limit its future use of the Site to a commercial use.
The parties subsequently entered into three addenda to the MOU ("the Addenda") [#174-19] in 2007, 2010, and 2012. In the Addenda, RG&E agreed, inter alia, to increase its financial contribution to the Site investigation and to fund the next step in the BCP process, the preparation of an Alternatives Analysis Report ("AAR") and a Remedial Action Work Plan ("RAWP").
In August 2006, a Remedial Investigation Work Plan ("RIWP") was prepared, and it was approved by NYSDEC on December 16, 2006. The RIWP was implemented between October 2007 and April 2010. Then, NYSDEC requested additional investigatory work at the Site. A supplemental RIWP ("SRIWP") was approved by NYSDEC on April 16, 2010. The SRIWP field work was completed in September 2011, and the results of the RIWP and SRIWP were compiled in the December 2011 Remedial Investigation Report ("RIR"), revised in May 2012. RG&E reviewed and made comments to the RIR before it was sent to NYSDEC. The RIR attributes the presence of the semi-volatile organic compounds and heavy metals contamination to the contaminated historic fill at the Site, which RG&E placed or arranged to have placed there. The RIR concluded that petroleum contamination was not present, as evidenced by, e.g., the lack of volatile organic chemical ("VOC") contamination detected in surface soils or subsurface soils.
By this point in time, VOA had new development partners and a planned project ("the Project") to construct a commercial senior day care center and residential apartments on the Site. The Project, intended to be a public-private partnership, would help create an assisted living facility which would be a less expensive alternative to a traditional nursing home. However, VOA found that the Project could only save money if the tax credit benefits afforded by both the BCP and the State's low income housing tax credit programs could be applied since the construction costs on the Site were higher than on a non-contaminated, non-landfill site. VOA in turn asked RG&E if it would fund a contamination remedy that would build the foundation and parking lot for the Project. RG&E verbally agreed VOA could begin discussing with NYSDEC the concept of a permanent construction cap or CCR.
The CCR, which VOA advocated as the preferred remedy, was mentioned in the RIR. The RIR noted that the "planned development" (i.e., VOA's senior day care center), which will "primarily consist of asphalt pavement and building materials, will serve as a cap to prevent exposure to the contaminated fill materials."
In a July 10, 2012 status update to Magistrate Judge Marian W. Payson, VOA's counsel mentioned what VOA characterizes as "verbal agreements" RG&E made to fund the CCR:
[T]he VOA and RG&E teams ha[ve] been able to collectively agree on a proposed, preferred remedy to clean up the Site for the intended use, and on several remedial alternatives, which would all be analyzed in the RAWP. However, all of the remedies contemplated only involved limited contaminated soil removal and "capping" methodologies. RG&E has conceptually agreed it will fund this type of limited soil removal and capping remedy if agreed upon by NYSDEC, even though no final work plan has been developed and approved at this time.
Letter from Linda Shaw, Esq. to Magistrate Judge Payson dated 07/10/12 [#174-31].
After reviewing the data and the RIR, in December 2012, NYSDEC and the New York State Department of Health ("NYSDOH") indicated that they were inclined to deem the Site a "significant threat" ("ST") site, i.e., a site that poses a significant threat to human health and the environment. If an ST site remains in the BCP, NYSDEC can select whatever remedy it wants to impose on the Site; if the Site owner withdraws from the BCP, such a site can be listed as a "Superfund Site" and NYSDEC may seek indemnification from the responsible parties for the costs of remediation. Both VOA and RG&E, for obvious reasons, wished to avoid an ST designation.
RG&E suggested that the groundwater sampled contained particles of contaminated soil, which may have affected the results in a negative manner. NYSDEC permitted re-testing of the groundwater, paid for by RG&E, the results of which revealed much lower levels on contamination. According to a February 2013 status update from VOA's counsel, NYSDEC and NYSDOH verbally informed VOA's environmental consultants they were refraining from imposing a ST determination on the Site and were "essential adopt[ing] VOA's proposed capping and hot spot removal remedy." However, NYSDEC apparently has not issued any final written decision on whether a groundwater remedy is or is not required, or whether an ST designation will be imposed.
VOA's environmental consultants began working on the Remedial Alternatives Analysis Report/Remedial Action Work Plan (RAAR/RAWP) and began sharing drafts with RG&E in December 2012. The parties continued to work on drafts through February 2013.
Meanwhile, the RIR was approved by NYSDEC on January 4, 2013, which enabled VOA to submit its application for funding of the Project to the New York State Housing Agency. At that time, VOA anticipated that the RAWP and AAR documents would be approved by Spring 2013, which would allow construction on the Project to proceed.
However, the process came to a halt following RG&E's review of the third draft of the RAAR/RAWP which it sent to VOA on February 12, 2013. RG&E had placed in the draft the following commentary notes in highlighted text:
Based on the RI Addendum sampling results and DEC comments indicating they are not requesting groundwater cleanup for the site (S. DeMeo's 16 12/2012 email), the objective of a cover for the site has changed from a cover that served dual purpose to minimize the potential for direct human exposure and also strived to eliminate groundwater infiltration, to a cover that simply minimizes the direct human exposure pathway...
We suggest that the "cover" should be a separate layer instead of integrating it as part of a building floor, sidewalk, parking lot, etc. as it's currently discussed and described in Alternative 3. Decoupling the "cover" from the building, parking lot & sidewalks will minimize VOA's maintenance requirements of those features in an SMP (which VOA has voiced concern about) since regardless of the condition of those building features (such as a crack or settling), one foot of clean material will exist below it.
The areas of the property that are covered with asphalt, sidewalks, and the building will serve to provide an additional but not required barrier. An appropriate demarcation material below the one foot of clean soil/aggregate and a vapor intrusion barrier below the building floor are warranted, as well as IC and EC's.
RIR Draft with Comments, Plaintiff's Statement of Material Facts ("Pl's SMF"), Exhibit ("Ex.") N [#174-20] at 26-27. In addition, RG&E commented, "We are not disputing the needed [sic] for a cover but don't agree with the proposed design of the cover that you have asked us to pay for." Id . at 35. VOA viewed these comments by RG&E as "reneg[ing] on its commitments in the MOU and subsequent agreements" and "refus[ing] to cleanup the Site to the agreed upon commercial cleanup standards compatible with the planned future commercial use or to the preferred remedy[, ]" i.e., the CCR. Thus, the crux of the parties' dispute is whether or not RG&E ever contracted or promised to pay for the CCR (as it was envisioned by VOA).
At a scheduling conference on October 5, 2013, Magistrate Judge Payson suggested that VOA have the Court rule, via a declaratory judgment action, on the issue of whether RG&E breached the MOU or any other purported agreement. The parties agreed to permit that process and entered into a Stipulated Scheduling Order [#170] on ...