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MONTVILLE TOWNSHIP v. WOODMONT BUILDERS

August 12, 2005.

MONTVILLE TOWNSHIP, Plaintiff,
v.
WOODMONT BUILDERS, LLC; DAVID MANDELBAUM; NATHAN MANDELBAUM; RONALD G. TARGAN; LESLIE J. KORALEK AND RICHARD W. KORALEK, as Co-Trustees under the Anita S. Koralek Living Trust and POST, BUCKLEY, SCHUH & JERNIGAN, INC., Defendants.



The opinion of the court was delivered by: DICKINSON DEBEVOISE, Senior District Judge

OPINION

I. PROCEDURAL HISTORY

  This suit arises out of a purchase of a property located in Montville Township, New Jersey, by Plaintiff Montville Township ("the Township"). The Township's complaint in this case asserts fourteen counts against Defendants Woodmont Builders, LLC ("Woodmont"), a developer, David and Nathan Mandelbaum ("the Mandelbaums"), Ronald G. Targan, Leslie J. Koralek, and Richard W. Koralek, as Co-Trustees under the Anita S. Koralek Living Trust (collectively the "Trustees") the prior owners of the property, and Post, Buckley, Schuk & Jemigan, Inc. ("PBS&J"). The Mandelbaums moved to dismiss the Complaint, and PBS&J moved to dismiss Counts I through XI. On August 31, 2004, Judge Walls issued an opinion granting PBS&J's motion*fn1 and dismissing all but Counts II, III, and XII against the Mandelbaums. Woodmont now moves for judgment on the pleadings pursuant to Fed.R. Civ. P. 12(c) on Counts I through X, and for summary judgment pursuant to Fed.R.Civ.P. 56(c) on Counts XI and XII. The Mandelbaums move for summary judgment on Counts II, III, and XII, the remaining counts against them.*fn2 The case was reassigned to this Court on June 8, 2005. For the reasons stated below Woodmont's motion for judgment on the pleadings is granted on Counts I through X; (2) Woodmont's motion for summary judgment is granted on Counts XI and XII; and (3) the Mandelbaums' motion or summary judgment is granted in its entirety.

  II. FACTS

  The property at issue in this case ("the property") is approximately 130 acres in the Township of Montville intersected by Interstate Route 287. (Compl. ¶ 7.) The Mandelbaums owned the property from March 1970 until July 1999, when approximately 100 acres of the property were designated as "open space" and sold to the Township. (Compl. ¶¶ 7,8.) Before the Mandelbaums owned the property, it was operated for agricultural purposes. (Compl. ¶ 9.) The prior owners maintained composts and dumps for land disposal of wastes, as well as drums of chemicals and insecticides. (Compl. ¶ 10.) As a result of these agricultural operations, DDT, lead, and arsenic entered the soil of the property.

  Prior to October 1997, Woodmont entered into an agreement with the Mandelbaums and the other individual defendants "whereby Woodmont would develop the property for the construction of single family dwelling houses." (Compl. ¶ 12.) In October 1997, Woodmont applied for preliminary major subdivision approval of the property into forty-seven building lots. (Compl. ¶ 13.) Its application was denied by the Township's planning board. (Compl. ¶¶ 13-14.) In response, Woodmont and the owners filed an "Action in Lieu of Prerogative Writ" in New Jersey Superior Court against the Township. (Compl. ¶ 15.) The parties settled the case. (Compl. ¶ 16.) The Settlement Agreement provided that the Township would pay $2.2 million for 100 acres of the property, and that Woodmont would file an amended subdivision application for 25 residential lots on the remainder of the property. (Compl. ¶ 16.)

  The Township's planning board approved Woodmont's amended subdivision application. (Compl. ¶ 20.) The resolution memorializing the approval included a provision that "[a]ll debris, junk, and the like shall be removed from the entire site . . . prior to any conveyances." (Compl. ¶¶ 22-23.) In May 1999, the Township and Woodmont executed a "Developer's Agreement" which incorporated by reference the subdivision approvals. (Compl. ¶ 24.) The Township had obtained a Phase I Environmental Assessment, dated April 1998 as required by the County of Morris, which was funding a substantial portion of the Township's acquisition cost. (Compl. ¶ 29.) The environmental engineering firm of PBS&J prepared the Phase I Environmental Assessment. The Phase I Environmental Assessment indicated that there was an "accumulation of abandoned motor vehicles, tires, tanks, construction debris, houschold debris, and other abandoned items." (Compl. ¶ 28.) The Township and the County required removal of the debris as a condition of closing (Compl. ¶ 29, 30). Counsel for Woodmont advised the Township in December 1998 and January 1999 that Woodmont would remove all debris prior to closing on the property. (Compl. ¶¶ 30, 31.) Woodmont and the Mandelbaums represented that the debris was cleared from the property. (Compl. ¶ 32.) The Township hired an environmental consulting firm to inspect the property, and the consulting firm indicated that the debris had been cleared. (Compl. ¶¶ 33-35.) The Township's planning board then authorized the perfection of the subdivision of the property; the Township authorized the closing of title on the open space portion of the property; and on July 13, 1999, the owners conveyed the property to the Township. (Compl. ¶¶ 36, 37, 39.)

  However, in December 1999, the Township discovered that the property was in the same condition as it was when the Phase I Environmental Assessment was conducted, and the Township demanded the Defendants clean up the property. (Compl. ¶¶ 40-42.) Soil investigation revealed that there were DDT, lead, and arsenic present at levels above the commercial and residential clean up standards imposed by the New Jersey Department of Environmental Protection. (Compl. ¶ 45.) Woodmont and the Mandelbaums refused to clean the property and filed a prerogative writ action (the "State Action") in New Jersey Superior Court. (Compl. ¶ 44.) They sought relief from the Township's denial of further building permits and/or certificates of occupancy for certain subdivided lots, and the Township counterclaimed, asserting breach of contract and misrepresentation. (Compl. ¶ 44.) The third count of the Township's counterclaim in the State Action, alleging misrepresentation, was identical in all material respects to Count XII in this action. (Woodmont's Undisputed Facts ¶ 3.) On January 22, 2004, Woodmont and the Township settled the State Action and the settlement was placed on the record of the court. (Id. at ¶ 4.) The settlement provided that the Township would "make no claim of any sort under CERCLA or the New Jersey Spill Act or any other environmental statute or law against Woodmont or its contractors in connection with this cleanup." (Woodmont's Reply at 2.) On February 2, 2004, a Stipulation and Order was entered in the State Action dismissing with prejudice all of the Township's claims against Woodmont relating to the debris cleanup. (Woodmont's Undisputed Facts ¶ 5.)

  At present, Woodmont has completed construction on all lots in the subdivision except one, and has deeded those lots to purchasers of the residences constructed there. (Woodmont's Undisputed Facts ¶ 6.) Soils are stored on the remaining lot and the New Jersey Department of Environmental Protection would have to approve any construction on that lot. (Id.)

  The Complaint contains fourteen counts, only twelve of which are applicable on the instant motion, because Counts XIII and XIV name only PBS&J.

  Count I of the complaint asserts a claim for response costs against all the defendants under § 107(a), 42 U.S.C. § 9607(a) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). Judge Walls found that the plaintiff Township as owner of the 100 acres was a potentially responsible party ("PRP"), and under the law in this Circuit a PRP may not bring a § 107 recovery action against another PRP unless it is an innocent owner. New Castle County v. Haliburton NUS Corp., 113 F.3d 1116 (3d Cir. 1997). Because the Township was not an innocent owner Judge Walls granted PBS&J's and the Mandelbaums' motion to dismiss Count I. Count II of the complaint asserts a contribution claim against all the defendants under § 113(f)(1) of CERCLA, 42 U.S.C. § 9613(f). Judge Walls held that claims under § 113(f)(1) may only be brought by PRPs as defined in 42 U.S.C. § 9607(a)(1)-(4). He found the PBS&J was alleged to have done nothing except conduct a Phase I Environmental Assessment and that, therefore, it was not a "covered person" and thus liable under CERCLA as a PRP. He dismissed Count II against PBS&J.

  Judge Walls found that the complaint sufficiently alleged conduct on the part of the Mandelbaums to constitute them PRPs and that because the Township was also a PRP, its claim for contribution under § 113(f)(1) must stand. It denied the Mandelbaums' motion to dismiss Count II.

  Count III seeks a declaratory judgment that all defendants are liable to the Township under CERCLA. Based on his dismissal of Counts I and II against PBS&J, Judge Walls granted PBS&J's motion to dismiss Count III as to it; based on his denial of the Mandelbaums' motion to dismiss the Count II CERCLA claim, Judge Walls denied the Mandelbaums' motion to dismiss Count III.

  Count IV asserts a claim for contribution against all Defendants under the New Jersey Spill Act, N.J.S.A. 58:10-23.11(f)(a)(2) (the "Spill Act"). In his opinion Judge Walls found that "[b]ecause Plaintiff makes no allegation of an act or omission by PBS&J that resulted in a discharge under the Spill Act, the Fourth Count against PBS&J is dismissed.

  As to the Mandelbaums, Judge Walls stated, "[t]hough the pleadings are sufficient to state a claim against the Mandelbaum Defendants under CERCLA by virtue of their previous ownership of the property, the mere fact of ownership is insufficient to state a claim under the Spill Act. Spill Act liability requires `some act or omission of . . . conduct' by Defendants which is not alleged here." Consequently, Judge Walls dismissed Count IV as against the Mandelbaums.

  Count V alleges a strict liability ultra-hazardous or inherently dangerous activity claim against all defendants. As to PBS&J Judge Walls's opinion noted that the complaint alleged only that PBS&J prepared a Phase I Environmental Assessment regarding the subject property, that there are no allegations from which the court can infer that PBS&J created, stored, used or released hazardous substances on the subject property and that "[c]onsidering the Restatement [(Second of Torts § 520 (1977)] factors . . . the performance of a Phase I Environmental Assessment does not present a high risk of harm and any harm from failure to identify areas of concern can be climinated by the exercise of reasonable care." The court dismissed Count V as to PBS&J.

  Turning to the Mandelbaums, Judge Walls assumed, without deciding, that the use of pesticides containing hazardous substances is an abnormally dangerous activity. He observed that the only inference that an be drawn from the allegations in the complaint is that pesticides containing hazardous substances were used during the time that the Mandelbaums owned the property but that there are no specific factual allegations that the Mandelbaums "carried on" any abnormally dangerous activity themselves. Consequently, he held, the complaint failed to state a claim against these Defendants in Count V.

  Count VI asserts a claim for restitution against all Defendants. Citing Restatement of Restitution § 106 (1937) and pertinent federal cases, including Smith Land & Improvement Corp. v. The Celotex Corp., 851 F.2d 86 (3d Cir. 1988); and Mayor and Council v. Klochner & Klochner, 811 F. Supp. 1039 (D.N.J. 1993), Judge Walls held that the Township, as the owner of the property under a legal duty to remediate the environmental condition of the property, is not entitled to restitution. He dismissed Count VI as to PBS&J and the Mandelbaums.

  In Count VII the Township seeks contribution against all the Defendants under New Jersey's Joint Tortfeasors Contribution Act, N.J.S.A. 2:53A-I, et seq. Citing Pennsylvania Greyhound Lines, Inc. v. Rosenthal, 14 N.J. 372 (1954), Judge Walls held that the Township's claims under the Act failed because the statutory right of contribution accrues only on the payment by a joint tortfeasor of a money judgment against him for the injurious consequences of the wrong. The court dismissed the complaint against PBS&J and the Mandelbaums because the Township did not plead entry of a judgment against it.

  Count VIII asserts against all Defendants a claim based upon common law indemnification. Citing New Jersey case law, Judge Walls noted that "[t]he right of indemnity rests upon a difference between the primary and secondary liability of two persons, each of whom is made responsible under the law to an injured party. It is a right which enures to a person who, without active fault on his own part, has been compelled by reason of some legal obligation, to pay damages occasioned by the initial negligence of another, and for which he himself is only secondarily liable." The court dismissed Count VIII of the complaint against PBS&J and the Mandelbaums because the Township "has not included any specific allegations or allegations from which the Court could infer, that PBS&J or the Mandelbaum defendants caused the contamination of the subject property."

  Count IX asserts a claim against all Defendants based upon alleged creation of a public nuisance. "In New Jersey, a public nuisance consists of an unreasonable interference with the exercise of a right common to the general public." Mayor of Alpine Borough v. Brewster, 7 N.J. 42, 50 (1951). Judge Walls observed that the complaint fails to identify what public right the continuing presence of hazardous substances on the premises interfered with. Further, the opinion states, "the Complaint contains no allegation, or facts from which an inference arises, that PBS&J aimed, used, or disposed of hazardous substances at the property. Likewise, as noted above, there are no specific allegations that the Mandelbaum ...


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