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The Plumbing Supply, LLC v. Exxonmobil Oil Corp.

United States District Court, S.D. New York

September 5, 2017



          Vincent L. Briccetti, United States District Judge.

         Plaintiff's plumbing supply store sits between two gas stations-a Mobil station and a Gulf station. One or both stations has spilled petroleum that has migrated onto plaintiff's property, contaminating the air, soil, and groundwater. Plaintiff seeks to hold liable the past and present owners of one or both stations in an effort to remediate the contamination.

         This opinion addresses two motions concerning claims and counterclaims between third-party plaintiff CPD NY Energy Corp. (“CPD”), the Mobil station's current owner, and Groundwater & Environmental Services, Inc. (“GES”), the environmental consulting firm CPD hired to remediate the contamination on plaintiff's property. GES moves (Doc. #370) to dismiss CPD's fraud claim, the eleventh cause of action in CPD's Third Amended Third Party Complaint (“TATPC”) (Doc. #363). CPD moves (Doc. #391) to dismiss GES's counterclaims and to strike the third, sixth, eleventh, and twelfth affirmative defenses in GES's Amended Answer to the TATPC (“answer” or “Ans.”) (Doc. #387).

         For the reasons discussed below, GES's motion is DENIED, and CPD's motion is GRANTED in part and DENIED in part.

         The Court has subject matter jurisdiction under 28 U.S.C. §§ 1331 and 1367(a).[1]


         I. Allegations in the TATPC

         Since 2006, plaintiff has owned and operated a plumbing supply store called Faucet Works and the site on which it is located, at 395 White Plains Road in Eastchester, New York.

         Cumberland Farms, Inc. (“CFI”), owned and operated the Gulf station immediately south of Faucet Works from September 2003 until selling it after the events described in the TATPC took place.

         CPD has owned and operated the Mobil station immediately north of Faucet Works since January 2011. ExxonMobil Oil Corporation (“EMOC”) owned the Mobil station previously.

         Before plaintiff purchased Faucet Works, petroleum migrated onto the property, contaminating the air, soil, and groundwater. For years, plaintiff, EMOC, and CPD assumed the contamination was from a particular spill at the Mobil station, documented with the New York State Department of Environmental Conservation (“DEC”) as administrative Spill No. 89-13000. As a result, EMOC, and later CPD, tried to remediate plaintiff's property. EMOC hired GES to remediate beginning in 2007. After CPD bought the Mobil station, CPD and GES entered into a contract, the Fixed Price Remediation Agreement (the “Agreement”), under which GES agreed to remediate Faucet Works and several other CPD-owned sites. The Agreement also obligated GES to pursue CFI to take responsibility for the Faucet Works contamination.

         Now, however, CPD alleges the contamination came from the Gulf station on the other side of the property, and that GES knew this long before the parties entered into the Agreement. CPD claims GES has done remediation work at the Gulf station site since 1999, knows that groundwater flows from the Gulf station toward Faucet Works, and discovered contamination on the boundary between the Gulf station and Faucet Works in 2002 and 2008. CPD also claims GES wrote a letter in 2004 indicating the contamination at Faucet Works came from the Gulf station, and another letter in 2008 indicating it may have come from there. Then, in 2009, EMOC wrote to CFI and GES indicating CFI was responsible for the ongoing contamination at Faucet Works. Also in 2009, EMOC and GES jointly drafted “Planning Assumptions” for the Mobil station that indicated “impacts to the sump at the Faucet Works property . . . likely originate from the Gulf Station.” (TATPC ¶ 190).

         CPD also claims, after CPD and GES executed the Agreement, the GES project manager assigned to the Faucet Works project analyzed the site and concluded the Gulf station caused the contamination. The project manager drafted a letter to the DEC attributing the Faucet Works contamination to the Gulf station, but GES management allegedly told him not to submit it.

         The TATPC also alleges GES intentionally withheld its knowledge about the contamination's true source and misled CPD to believe it came solely from the Mobil station. When CPD and GES were negotiating the Agreement in November 2010, GES's Senior Project Manager and its Junior Geologist provided CPD with a “Phase 1” written report stating “GES installed a carbon filtration system and AS system on the [F]aucet [W]orks property to treat sump water in association with [DEC] Spill # 89-13000” and there was “no ‘evidence of surface or subsurface (soil &/or GW) contamination'” at the Gulf station site. (TATPC ¶ 194). During negotiations, GES's vice president allegedly withheld GES's knowledge about the contamination's source.

         From April 2012 through the end of 2015, the GES project manager submitted reports to CPD “reporting the contamination of the Faucet Works Property under spill number 89-13000 associated with contamination from the [Mobil station].” (TATPC ¶ 204). These reports did not indicate contamination was coming from the Gulf station. The project manager and another GES employee also submitted invoices to CPD that “implicitly and explicitly assured CPD that the work being performed to mitigate contamination at the Faucet Works Property was associated with spill number 89-13000.” (Id. ¶ 205). CPD paid these invoices, relying on GES's assurances that the contamination came from a spill at the Mobil station.

         CPD claims GES was motivated to mislead CPD for two different reasons: to keep costs down, and to curry favor with CFI. First, under the Agreement, if funds allotted to the remediation of a particular site are left over after remediation is complete, GES keeps 50% of the leftover funds. CPD contends GES chose to remediate Faucet Works as though the Mobil station was the sole source of contamination because it was less costly to do so. Second, in 2012, after CPD and GES executed the Agreement, GES entered into a contract with CFI worth significantly more money than its contract with CPD. CPD claims when GES told CFI the contamination at Faucet Works may have come from the Gulf station, CFI told GES to stop investigating this possibility. GES never disclosed to CPD its relationship with CFI.

         But for GES's misrepresentations and omissions about the contamination's source, CPD claims it “(a) may not have purchased the [Mobil station], (b) may have renegotiated the Purchase Agreement with [EMOC], (c) would not have authorized payments under the [Agreement] as demanded by GES, (d) may have pursued available remedies against or a resolution with GES well before any action was pursued by the Plaintiff Faucet Works and/or (e) would have provided proper notice to the [DEC] of the conditions at the Faucet Works Property so as to prompt [DEC] to include CFI as a Responsible Party.” (TATPC ¶ 212).

         II. GES's Affirmative Defenses and Counterclaims

         GES asserts three counterclaims based on CPD's alleged breaches of the Agreement.

         First, GES claims CPD breached its obligation under Section 5(c) of the Agreement to “provide reasonable access for GES and its subcontractors[] to the properties and [to] enter into any other access agreements with other third party property owners, as necessary to complete the performance of the scopes of work.” (Ans. ¶ 237). GES contends it needed access to CFI's property to perform the scope of work because the Gulf station caused the contamination. CPD allegedly did not enter into an agreement to procure this access.

         Second, GES claims CPD breached Sections 8 and 16(b) of the Agreement. The Agreement provides for GES to remediate “covered contamination, ” which, by definition, “arose from [EMOC's] operations prior to the closing date.” (Ans. ¶ 249). If GES and CPD discover contamination that is not “covered, ” Section 8 requires them to negotiate in good faith to set prices and determine what remediation is necessary, and Section 16(b) requires CPD to name an independent consultant and engage in technical dispute resolution with GES. GES alleges the Faucet Works contamination is not covered contamination because it came from the Gulf station and thus was not caused by EMOC's prior operations. Yet, CPD allegedly has not negotiated in good faith or named an independent consultant, and has refused technical dispute resolution.

         The third counterclaim alleges CPD “breached the [Agreement] with GES in this matter” but does not specify how. (Ans. ¶ 279). GES also claims CPD's unspecified actions are the sole proximate cause of any damages to plaintiff and CPD.

         All three counterclaims assert “GES hereby denies any negligence, carelessness, fault, breach of contract, statutory violations, or other culpable conduct on its part with respect to the occurrence described in the complaints and the third-party complaints, including the [TATPC].” (Ans. ¶¶ 246, 276, 281). Moreover, all three counterclaims allege CPD's breaches of the Agreement caused the damages to plaintiff and CPD, either in whole or in part. GES claims it is entitled to indemnification and/or contribution from CPD against any judgment plaintiff recovers from GES in this action “to the ...

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