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dismissing navigation law claim where there was no indication that third-party claimant "ha[d] provided any cleanup or removal of petroleum from the Site," as required by "the plain language of Section 176"
Summary of this case from ELG Utica Alloys, Inc. v. Niagara Mohawk Power Corp.Opinion
03-CV-6083T.
March 31, 2005
DECISION and ORDER
INTRODUCTION
Plaintiffs FCA Associates, a partnership organized under the laws of the State of New York (the "partnership"), and FCA Associates, LLC, a limited liability company organized under the laws of the State of New York (the "LLC") (collectively "plaintiffs"), bring this action against defendants Texaco, Inc. and Texaco Refining and Marketing, Inc. ("Texaco Refining") (collectively "Texaco" or the "Texaco defendants") 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 "Site"). The Texaco defendants bring 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.
For determination are three motions: (1) plaintiffs' motion to dismiss the Texaco defendants' third-party claims against Cohen and Shell, or in the alternative, to amend their complaint (Doc. No. 29); (2) Shell Oil's motion to dismiss the Texaco defendants' third-party claims against it, or in the alternative, for an order of the Court directing plaintiffs to indemnify Shell in the case that Shell is not dismissed from this suit (Doc. No. 38); and (3) Texaco's cross-motion for summary judgment against plaintiffs seeking a declaration that plaintiffs are "dischargers" under New York State Navigation Law (Doc. No. 37). For the reasons set forth below, the plaintiffs' motion to dismiss Texaco's third-party claims against Cohen is granted; Shell's motion to dismiss Texaco's third-party claims against Shell is granted; and Texaco's cross-motion for summary judgment is denied.
BACKGROUND
I. History of the Site
On November 1, 1960, defendant Texaco, Inc., became the record owner of a .21-acre parcel of land improved by a gasoline service station, located at 697 North Winton Road (the "Site"). The Site includes two 8,000-gallon underground storage tanks ("USTs") used to store unleaded gasoline, one 3,000-gallon UST used to store leaded gasoline and one approximately 500-gallon UST used to store waste oil.
The Site was also known as 2340 East Main Street and 701 North Winton Road.
On or about August 1, 1961, Texaco conveyed the Site to Leased Stations, Inc. ("Leased Stations") by Warranty Deed. Leased Stations is the predecessor in interest to defendant Texaco Refining and Marketing, Inc. Shortly thereafter, on August 15, 1961, Leased Stations leased the Site back to Texaco. Over the next twenty years, Texaco sub-leased the Site to various individuals who operated the service station.
On October 4, 1980, Leased Stations conveyed the Site back to Texaco. On November 3, 1981, Texaco conveyed the Site to third-party defendant Richard Cohen. Cohen then sub-leased the Site to Metro Tire and Auto Service Center, Inc. which in 1994 operated under the name "Metro Tire and Auto Service Center."
On January 20, 1999, Cohen sold the Site and an adjacent parcel to plaintiff FCA Associates (the "Partnership"). On November 7, 2002, the Partnership transferred its interest in the Site and the Adjacent Parcel to plaintiff FCA Associates, LLC (the "LLC"), which currently owns the two properties.
II. The Contamination
In the 1990's, while third-party defendant Cohen owned the property, two discharges of petroleum product were discovered in the area of the Site and an Adjacent Parcel. 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. On March 13, 1998, the DEC recorded contamination at the Adjacent Property which was listed as a contamination of gasoline to land.
The DEC assigned spill number 9408481 to the spill recorded on September 26, 1994, and spill number 9731823 to the spill recorded on March 13, 1998.
III. The Release Agreements
Germane to the present disputes are two liability release agreements entered into by FCA and Cohen, and FCA and Shell. The agreement negotiated between FCA and Cohen arose pursuant to FCA's purchase of the property in 1998. According to the plaintiffs, FCA agreed to indemnify Cohen against future liability for environmental claims in exchange for, at least in part, a deeply discounted purchase price for the contaminated property. The indemnity portion of the agreement specified that FCA would "indemnify and hold harmless [Cohen] . . . from and against any and all liabilities, penalties, fines, forfeitures, demands, claims, causes of action, suits, costs and expenses incidental thereto (including cost of defense, settlement and reasonable attorney's fees) incurred as a result of any failure to comply or alleged failure to comply with any Environmental Laws." See Exhibit A to the May 3, 2004 Affidavit of David Appelbaum at ¶ 11.
With respect to the agreement between FCA and Shell, plaintiffs contend that in an attempt to marshal assets to pay for remediation of the Site, it negotiated a settlement with Shell, the owner of an adjacent property on which petroleum tanks were stored. Shell ultimately agreed to pay $108,000 in return for, among other things, a release from liability for any environmental contamination claims. Specifically, the indemnification agreement provided that FCA would indemnify Shell with respect to "every claim or demand of every kind or character" related to environmental contamination at the Site.See Exhibit "D" to Shell's Cross-Motion for Summary Judgement
DISCUSSION
I. The Motions to Dismiss the Third-Party Claims Against Third-Party Defendants Cohen and ShellOn the basis of the indemnity agreements entered into between the plaintiffs and third-party defendants Cohen and Shell, plaintiffs move to dismiss Texaco's causes of action against those parties on grounds that Texaco lacks standing to bring its third-party claims, and that the indemnity agreements preclude recovery by Texaco against Cohen or Shell. Specifically, the plaintiffs contend that indemnity agreements release Cohen and Shell from further liability for monies expended to investigate and remediate the Site, including any claim for contribution by Texaco. In a separately filed motion, Shell moves to dismiss Texaco's third-party claims for essentially the same reasons as those raised by FCA, and invites the court to treat the motions to dismiss as motions for summary judgment.
The Amended Third-party Complaint asserts four causes of action against Cohen and Shell, including: (1) an action pursuant to the Resource Conservation and Recovery Act, (codified at 42 U.S.C. § 6972(a)(1)(A)), to abate an imminent and substantial endangerment to the environment; (2) an action pursuant to the New York Navigation Law for contribution; (3) an action for negligence; and (4) an action for equitable and implied indemnification. In response to the motions to dismiss and/or for summary judgment filed by FCA and Shell, Texaco contends that the indemnity agreements entered into between Shell, Cohen, and the plaintiffs do not relieve Cohen and Shell from liability to the Texaco defendants.
A. Texaco Defendants' RCRA Claim
Texaco's first cause of action seeks an order pursuant to the Resource Conservation and Recovery Act ("RCRA") directing, inter alia, the third-party defendants to remediate contamination at the Site, and abate an imminent and substantial endangerment caused by the contamination. For the reasons set forth below, I find that Texaco lacks standing to bring such a claim against defendants Cohen and Shell.
The Citizen Suit provision of the RCRA provides in relevant part that any person may commence a civil action on his own behalf:
against any person, . . . including any past or present generator, past or present transporter, or past or present owner or operator of a treatment, storage, or disposal facility, who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment. . . .42 U.S.C. § 6972(a)(1)(B). The national policy underlying RCRA is "to minimize the present and future threat to human health and the environment." Meghrig v. KFC Western, Inc., 516 U.S. 479, 485 (1996). As such, a RCRA suit may only be initiated to address an imminent threat of harm. Id. Insofar as the Texaco defendants assert their first cause of action under the RCRA for contribution, the claim can not lie. Nowhere does the statute provide for the remedy of contribution, and absent an immediate threat, such relief is inconsistent with the purposes of the statute.
Moreover, a party asserting an RCRA claim must have the requisite standing to do so.
To satisfy Article III's standing requirements, a plaintiff must show (1) it has suffered an `injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and 3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.Friends of the Earth Incorporated v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 180-81 (2000).
Here, the Texaco defendants are unable to establish that they satisfy the third requirement needed to bring an RCRA claim. Specifically, they are unable to demonstrate that a favorable decision on their RCRA claim would address their injury. There is no remedy of contribution under RCRA, and thus no possible redress of the injury the Texaco defendants are seeking to rectify through their first cause of action. See Solvent Chemical Company, ICC Industries, Inc. v. E.I.DuPont De Nemours Company, 242 F. Supp. 2d 196, 217-218 (W.D.N.Y. 2002) (plaintiffs had standing to bring RCRA claim where they established that the court was able to award the relief requested, namely an order preventing the mitigation of hazardous chemical to or near plaintiffs' property). Therefore, the Texaco defendants' first cause of action under the RCRA is dismissed with prejudice against each third-party defendant.
B. Texaco Defendants' Navigation Law Contribution Claim
In their second cause of action, the Texaco defendants allege that the third-party defendants are strictly liable pursuant to the New York Navigation Law to indemnify or make contribution to Texaco for all costs associated with the environmental investigation and remediation of the Site because they — and not the Texaco defendants — caused the discharge that contaminated the Site. In opposition to Texaco's motion, third-party defendant Shell contends that pursuant to New York General Obligations Law § 15-108(b), (which provides in general that a settling tortfeaser who has in good faith obtained a release from an injured party may not be held liable for contribution to any other person), Shell cannot be held liable to Texaco for remediation costs because Shell has already settled claims for remediation costs with the plaintiffs, and has been indemnified by the plaintiffs for any and all claims related to the contamination and remediation of the Site. Similarly, third-party defendant Cohen contends that he may not be held liable to Texaco because he has been indemnified by FCA for any and all claims arising out of the contamination and remediation of the Site. While Texaco acknowledges the existence of the releases, it contends that pursuant to Section 176(8) of the New York Navigation Law, the releases are ineffective against Texaco because under that law a party responsible for remediation costs cannot assert a release as a defense to a claim for contribution. Section 176(8) of the New York Navigation law provides that: "[n]otwithstanding any other provision of law to the contrary, including but not limited to section 15-108 of the general obligations law, every person providing cleanup, removal of discharge of petroleum or relocation of persons pursuant to this section shall be entitled to contribution from any other responsible party." N.Y. Nav. Law § 176(8) (McKinney 2004).
Though the parties expend considerable argument on whether the "plain language" of Section 176(8) expressly allows for or expressly prohibits contribution claims against responsible parties that have already settled claims relating to the remediation of a contaminated site, I need not decide the issue, as I find that Texaco lacks standing to bring an action for contribution pursuant to Section 176(8). As stated above, Section 176(8) of the Navigation Law states that despite the existence of such laws as Section 15-108 of the General Obligations Law, a person that has provided cleanup, removal of discharge of petroleum or relocation of persons pursuant to the Oil Spill Law may bring an action for contribution against any other responsible party. In the instant case, there is no evidence, allegation, or suggestion that Texaco has provided any cleanup or removal of petroleum from the Site, and therefore, under the plain language of Section 176(8), Texaco lacks standing to seek contribution from any other responsible party.See Niagara Mohawk Power Corporation v. Consolidated Rail Corporation, 291 F. Supp. 2d 105, 137 (N.D.N.Y. 2003) ("failure to show that it sustained an injury caused by another party is fatal to [plaintiff's] Navigation Law claim").
Despite the plain language of Section 176(8), Texaco argues that it is not required to have expended monies prior to initiating a suit for contribution under the Navigation Law because as an "injured party" who is alleged to be a discharger, it may, pursuant to separate sections of the Navigation Law, (including Sections 181(1) and 181(5)) initiate a suit against a party that actually caused the contamination. This argument, however, suffers from the same deficiency as Texaco's position with respect to Section 176(8), in that Texaco is not an injured party. Texaco has not undertaken remediation of the contaminated site, has not been required to remediate the site, and is not the owner of the contaminated property. Accordingly, it is not an injured party under the Navigation Law. Niagara Mohawk Power Corporation v. Consolidated Rail Corporation, 291 F. Supp. at 137 .
Because Texaco is not an injured party under the Navigation Law, Texaco's second cause of action asserting claims under the Navigation Law is dismissed with prejudice against all third-party defendants.
C. Texaco Defendants' Negligence Claim
The Texaco defendants' third cause of action alleges that any contamination of the Site is the result of the third-party defendants' negligent acts, and as such, Shell and Cohen are obligated to provide contribution. Plaintiffs (on behalf of Cohen) and Shell argue that pursuant to the releases entered into between FCA, Cohen, and Shell, third-party defendants Cohen and Shell are relieved of any liability to Texaco for their allegedly negligent acts. Texaco contends that the settlement agreements do not relieve Cohen and Shell from liability because those agreements failed to expressly address any potential liability resulting from Cohen or Shell's own negligence, and thus, can not cover the liability the Texaco defendants are seeking to redress.
Section 15-108(b) of the New York General Obligations Law provides in relevant part that, "[a] release given in good faith by the injured person to one tortfeasor . . . relieves [the tortfeasor] from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules." N.Y. Gen. Oblig. Law § 15-108(b) (McKinney 2001). Pursuant to this statute, I find that the releases at issue bar Texaco from asserting a claim for contribution against Shell and Cohen based on a theory of negligence.
The agreement entered into between FCA and Shell released Shell from "every claim or demand of every kind or character" relating to environmental contamination at the Site. See Exhibit "D" to Shell's Cross-Motion for Summary Judgement. The release was the result of a negotiated settlement between FCA and Shell, and was given in consideration of a payment by Shell of $108,000 to the plaintiffs. Moreover, even though the language of the release is unambiguous, each party to the contract asserts that it was the parties mutual intention that the release cover any and all claims arising from the contamination of the Site, including negligence claims. Accordingly, because the unambiguous language of the release between FCA and Shell provides that FCA would indemnify Shell for all claims (which necessarily includes negligence claims) related to the contamination of the site, I find that Texaco's negligence claims against Shell must be dismissed.
Similarly, the release entered into between Cohen and FCA is unambiguous, and was clearly intended to cover all claims, including negligence claims. Specifically, the agreement between FCA and Cohen provides that FCA "will indemnify and hold harmless [Cohen] . . . from and against any and all liabilities, penalties, fines, forfeitures, demands, claims, causes of action, suits, costs and expenses incidental thereto (including cost of defense, settlement and reasonable attorney's fees) incurred as a result of any failure to comply or alleged failure to comply with any Environmental Laws." See Exhibit A to the May 3, 2004 Affidavit of David Appelbaum at ¶ 11. This language is clear and unambiguous, and the parties to the contract agree that the intent of the parties was to indemnify Cohen against all claims, including negligence claims. Accordingly, I dismiss Texaco's negligence claims against defendant Cohen.
The fact that Texaco may not sue Cohen or Shell for alleged negligence does not render Texaco without a remedy if in fact, those parties were negligent. Section 15-108(a) of the General Obligations Law provides that where one of several tortfeasors has settled claims with the injured party, the injured party's claims against the non-settling tortfeasors is reduced. The purpose of this provision is to ensure that a non-settling defendant does not pay more than its equitable share. Williams by Williams v. Niske by Niske, 81 N.Y.2d 437 (1993). Thus, even if Cohen and Shell were negligent in causing or contributing to the contamination at the site, and Texaco is also determined to be liable for contamination, Texaco cannot be held responsible for more than its equitable share of damages.
D. Texaco Defendants' Equitable and Implied Indemnification Claims
Finally, Texaco asserts claims against the third-party defendants based on a theory of equitable and implied indemnification. Specifically, Texaco contends that the third-party defendants owed a duty to Texaco to prevent and/or remediate contamination at the Site, and that as a result of the third-party defendants' failure to discharge that duty, Texaco is entitled to equitable indemnification from those parties.
Third-party defendants Cohen and Shell move to dismiss Texaco's equitable indemnification claims on grounds that they are indemnified by FCA from such claims, and that there is no relationship between the parties that would give rise to either an express or implied obligation to indemnify Texaco. It is undisputed that there is no contractual obligation on the part of Cohen or Shell to indemnify Texaco. Accordingly, the only basis upon which Cohen or Shell could be required to indemnify Texaco is if Cohen or Shell have an implied obligation to indemnify Texaco.
In the instant case, there is no basis for a finding that either Cohen or Shell have an implied obligation to indemnify Texaco for remediation costs should Texaco be found liable as a party responsible for contamination. If Texaco is liable as a discharger, its liability will arise from its own actions with respect to the contaminated site, and therefore, absent a contractual agreement to indemnify, there is no basis for imposing an indemnification obligation on Shell or Cohen. See McDermott v. City of New York, 50, N.Y.2d 211 (1985) (purpose of indemnification is to ensure that a party which has discharged a duty actually owed by another may be reimbursed for undertaking that duty).
II. Texaco's Motion for Summary Judgment Against FCA
In its cross-motion for summary judgment, Texaco seeks a declaration that because FCA is the owner of the contaminated Site, and because FCA had control over operations of the Site, it is, as a matter of law, a "discharger" under the New York Navigation Law, and as such, is: (1) strictly liable for remediation costs; and (2) precluded from bringing an action under the Navigation Law against another discharger. See N.Y. Nav. Law at § 181(1) (McKinney's 2004) (providing that "[a]ny person who has discharged petroleum shall be strictly liable, without regard to fault, for all cleanup and removal costs and all direct and indirect damages, no matter by whom sustained, as defined in this section"); White v. Long, 85 N.Y.2d 564 (1995) (party responsible for the discharge may not bring an action pursuant to Navigation Law as an "injured" person under the Navigation Law). In support of its argument, Texaco cites State v. Green, 96 N.Y.2d 403 (2001) in which the New York Court of Appeals held that a landowner could be held strictly liable under the Navigation Law as a "discharger" where the landowner, even though not responsible for any discharge, had the authority to control activities occurring on his property and had reason to believe that petroleum products would be stored there.
While FCA does not concede that it is a "discharger" under the New York Navigation Law, plaintiffs contend that even if they are deemed a "discharger", they may still pursue their Navigation Law claims against Texaco because they are "faultless" dischargers. In support of their position, plaintiffs also cite State v. Green, 96 N.Y.2d 403 (2001), arguing that the court in Green expressly held that even if a landowner could be characterized as a discharger under the Navigation Law, the landowner could nevertheless maintain an action as an "injured" person pursuant to Navigation Law § 181(5) if the contamination was not the fault of the landowner.
I find that under New York law, a "faultless" discharger may proceed with a Navigation Law claim pursuant to Section 181(5). In White, 85 N.Y.2d 564, the New York Court of Appeals held that a "faultless" discharger — that is a discharger who did not cause or contribute to the contamination at issue — could maintain an action for cleanup and remediation costs against the party responsible for the discharge. This interpretation was reaffirmed in State v. Green, where the Court of Appeals citedWhite with approval, and noted that "Navigation Law § 181(5) allows a faultless landowner to seek contribution from the actual discharger, even though the landowner itself is liable as a discherger under § 181(1)." Green, 96 N.Y.2d at 408.
Because a discharger under the Navigation law may still be entitled to maintain an action under the Navigation Law, I deny Texaco's motion for summary judgment seeking a declaration that because plaintiffs are dischargers, they may not procesucte their Navigation Law claims against Texaco. A finding that plaintiffs are dischargers without a finding that they are "at fault" dischargers would not entitle Texaco to the relief of summary judgment which it seeks. Moreover, at this early stage, there is no evidence in the record upon which this court could find that as a matter of law, the plaintiffs are "at fault" dischargers, and thus precluded from bringing their claims against Texaco. Indeed, plaintiffs contend that the spills at issue in this case occurred prior to their ownership of the property, and therefore they neither owned not controlled the property at the time of the spills. Because there are material questions of fact as to whether or not plaintiffs are faultless dischargers, I deny Texaco's motion for summary judgment.
CONCLUSION
For the reasons set forth above, I hereby grant FCA and Shell's motions to dismiss the Texaco defendants' third-party claims against third-party defendants Shell and Cohen (Doc. Nos. 29 and 38 respectively), and deny Texaco's motion for summary judgment and a declaration that FCA is a "discharger" under the New York State Navigation Law (Doc. No. 37).
ALL OF THE ABOVE IS SO ORDERED.