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GRAND ST. ARTISTS v. GE

August 25, 1998

GRAND STREET ARTISTS, et. al., Plaintiffs,
v.
GENERAL ELECTRIC COMPANY, et. al., Defendants, PARKER, et al., Plaintiffs, v. GENERAL ELECTRIC COMPANY, et. al., Defendants.



The opinion of the court was delivered by: ACKERMAN

Ackerman, D.J.

 This matter comes before the court upon a motion for summary judgment by the defendant, Jenny Engineering Corp ("Jenny") on several counts: first, plaintiffs' negligence count (Count XVIII of the First Amended Complaint) *fn1" , second, the claim for contribution brought by the defendants and third party defendants, third, the claim for indemnification brought by the defendants and third party defendants, and fourth, defendant David P. Pascale's crossclaim for breach of contract. For reasons detailed below, Jenny's motions on the negligence, contribution, and indemnification claims are DENIED and its motion on David Pascale's breach of contract claim is GRANTED.

 I. Background

 In 1993, a partnership formed by artists, Grand Street Artists ("GSA"), purchased the premises at 720-732 Grand Street, Hoboken, New Jersey which had been formerly used for industrial purposes by the defendant Quality Tool & Die Co. ("Quality"). GSA envisioned the building of "customized urban homes" to serve the dual purpose of providing housing to their families and spaces in which they could work. Thus, GSA intended to convert the premises into residential condominium units and working lofts, but were forced to evacuate when mercury contamination was discovered. The Agency for Toxic Substances and Disease Registry issued a public health advisory and found that an "imminent public health hazard is posed to the residents of the premises from past, current and potential future exposures via inhalation of mercury vapors." See Plaintiff's Br. at 14 (quoting Stein Aff., Ex. 18). Thereafter, the plaintiffs, GSA and the individual artists, brought suit against a number of defendants alleging violations of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Environmental Clean Up Responsibility Act ("ECRA"), the New Jersey Spill Compensation and Control Act, the New Jersey Consumer Fraud Act and common law claims for strict liability, negligence, fraud, recission, public nuisance and punitive damages. There are several defendants. First, there are the prior owners of the premises which include General Electric Company ("GE"), Cooper-Hewitt Electric Co., John Pascale, Quality, David P. Pascale, Sherill Pascale. Additionally, there are: Jenny, who assisted Quality in complying with ECRA; Rogers Environmental Management, Inc. ("REM"), an environmental consulting firm hired by GSA to conduct a "Due Diligence Pre-Purchase" report; the law firm Chasan, Leyner, Tarrant, Lamparello which was retained by GSA for the purchase; ENPAK Services Company, Inc. ("ENPAK"), an environmental testing company hired by GSA to investigate the mercury contamination once it was initially discovered; and Environmental Waste Management Associates, Inc. ("EMWA"), a firm engaged by GSA to advise it on mercury contamination and prepare a remediation plan and solicit bids for removal. Jenny has filed the instant motion.

 Before 1954, the Grand Street buildings were owned by either GE or Cooper-Hewitt. Between 1954 and September 1988, Quality operated a tool and die business on the premises. At the end of that period, defendant John Pascale, in his capacity as Quality's principal, decided to terminate operations and to sell all machinery. That decision is where much of this story begins. When John Pascale shut down operations, he did so without following New Jersey's hazardous waste statute, the Environmental Clean Up Responsibility Act ("ECRA") and thus, in a way which was technically improper. The version of ECRA which existed at the time imposes a number of conditions upon the cessation of operations by an owner of an industrial establishment. See N.J. STAT. ANN. §§ 13:1K-1 through 14 (1990). *fn2" Among other things, an owner who decides to terminate operations must notify the New Jersey Department of Environmental Protection ("DEP") and then submit to an extended ECRA process. At the end of this process, the DEP must give its approval to either a negative declaration stating that the property is not contaminated or to a cleanup plan. Id. By not participating in the ECRA process, John Pascale did not properly shut down operations in September 1988.

 Contemporaneously with the termination of operations, John Pascale and his son David were engaged in a protracted legal battle for control of the company. Apparently, John Pascale had brought an action seeking to set aside stock transfers which had been made to his son. The Superior Court found in favor of David Pascale, but the Appellate Division reversed, and finally, the New Jersey Supreme Court returned control of the company to David Pascale in November 1988. See Pascale v. Pascale, 113 N.J. 20, 549 A.2d 782 (1988). For purposes of the instant motion, this see saw battle meant that John Pascale controlled Quality from March 1987 to November 1988 -- the time when operations were discontinued. Upon his return, David learned of Quality's noncompliance with ECRA and in March 1989, Quality hired Jenny to provide "technical assistance" in the ECRA process. Because Quality's decision to comply with ECRA came one year after the actual shut down, Jenny expressed its concern about incurring legal liability for this failure. Thus, in its proposal, Jenny informed Quality that its "professional services [were] ... for technical assistance in ECRA compliance only, and that ... legal counsel [would] assist [Quality] with any complications resulting from the NJDEP for the overdue submission." See Jenny Br. at 4. Specifically, Jenny agreed to perform the following:

 
1. An evaluation of ECRA applicability which was to involve an assessment of the history of known operations by present and previous owners at the site. Jenny anticipated that most of this information would be provided by the owner.
 
2. Data collection and review of federal, state, and local government environment permits applied and received at the facility.
 
3. Preparation of ECRA's "General Information Submission" (known as ECRA-1).
 
4. Site reconnaissance and mapping identifying activity at the facility and all areas where hazardous substances or wastes have been or currently are generated, transported, treated, stored, handled, or disposed above or below the ground.
 
5. Preparation of a report "describing the operations and processes at the establishment in accordance with the requirements of Item 10 of ECRA's "Site Evaluation Submission" ("SES") (known as ECRA-2). Item 10 covers the "Discharge History of Hazardous Substances and Wastes" at the site.
 
6. Site evaluations, environmental assessments and the preparation of inventory of hazardous substances, wastes, surface impoundments storage facilities, etc. together with descriptions as required by Items 11 through 13 of the ECRA-2 submission. Items 11 through 13 cover a "Sampling Plan Proposal," "Decontamination/Decommissioning Plan," and "Historical Data on environmental quality at the Industrial Establishment."
 
7. Development of a Sampling and Testing Plan to be submitted with the ECRA-2 submission.
 
8. Review of known previous soil, groundwater, surface water and air sampling and testing results, if any, including effluent quality monitoring, conducted at the site during the history of ownership/operations. Data to be provided by Quality.
 
9. Arrangement and supervision of Underground Storage Tank Integrity Testing.
 
10. Preparation of necessary maps, drawings, figures for the ECRA-2 compliance and preparation of the ECRA-2 submission.
 
11. Provide liaison with the client and the DEP, and meet with DEP representative during his site visit.
 
12. Preparation of a Negative Declaration required by ECRA if the property meets the requirements.
 
See Stein Aff. at Ex. 1 (copy of proposal).

 Jenny further informed Quality that its work would be "limited to that described herein and [would be] based on the accuracy of statements from the owner as to the site conditions and the history of operations." See Id. Between September 30, 1989 and September 30, 1992, Jenny's invoices demonstrate that it engaged in the "preparation of ECRA submissions" and provided "professional services for ECRA compliance." See Plaintiffs' Br. at 11 (citing review of Jenny invoices).

 On April 23, 1990, Quality submitted an ECRA-1 General Information Statement and an ECRA-2 Site Evaluation Submission. Quality answered "No" to the question of whether the "transaction initiating ... ECRA review" involved a sale. See Stein Aff. at Ex. 6 (copy of ECRA-1 Submission). Indeed, there is no question that it was the "cessation of operations" that triggered ECRA. Shortly after making its submissions, the DEP informed Quality that its ECRA-2 submission was incomplete because its answers regarding history, prior ownership and use did not cover the period between 1940 and 1950. With Jenny's help, Quality filed a letter on June 18, 1990 with the DEP indicating that prior to 1950 the building had been operated by GE and Cooper-Hewitt and that the two companies manufactured light bulbs at the site. See Stein Aff. at Ex. 9 (copy of letter dated June 18, 1990). The ECRA filing made no mention of any mercury contamination.

 Quality terminated Jenny on October 9, 1992 and hired a new environmental consultant to complete the ECRA process. *fn3" In his letter informing Jenny to stop work, David Pascale expressed that based upon a "turnover in personnel" at Jenny, he lacked confidence in Jenny's ability to complete the project. See McDermott Aff. at Ex. E (copy of letter). Thereafter, on December 15, 1992, Quality filed its ECRA "negative declaration affidavit." See Stein Aff. at Ex. 5 (copy of negative declaration affidavit).

 Based upon Quality's "negative declaration affidavit," there is no question that Quality was seeking DEP approval of its "cessation of operations" and thus, informed that the DEP that there were no potential sellers or buyers. Id. The DEP reviewed the submissions and granted its approval in February 1993, but limited its approval to the "cessation of operations." See McDermott Aff. at Ex. H (copy of approval).

 Beginning in at least 1993, GSA began considering the purchase of the premises and it decided to retain Rogers Environmental Management, Inc. ("REM"), an environmental consulting firm to conduct a "Due Diligence Pre-Purchase." This "Due Diligence Pre-Purchase" involved an examination of the premises to determine whether they could be safely converted to residential use. See Stein Aff. at Exs. 19, 21 (copies of the "understanding" between REM and GSA and REM's report and correspondence outlining nature of services). As part of its due diligence, REM reviewed Quality's ECRA case file and concluded that the level of contamination met current "Cleanup Standards." Id. at Ex. 21. REM advised GSA that the property was suitable for development as a residential project. In August ...


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