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Celanese Ltd. v. Essex County Improvement Authority

January 16, 2009


On appeal from Superior Court of New Jersey, Chancery Division, Essex County, No. C-19-04.

The opinion of the court was delivered by: Wefing, P.J.A.D.



Argued September 16, 2008

Before Judges Wefing, Parker, and LeWinn.

Plaintiff Celanese Ltd. ("Celanese") appeals from a trial court order granting summary judgment to defendant Essex County Improvement Authority ("Authority") dismissing its complaint. After reviewing the record in light of the contentions advanced on appeal, we reverse and remand for further proceedings.

Celanese*fn1 was the owner of a large parcel of land in a section of Newark zoned for industrial use. The property consisted of nearly twenty-five acres on both sides of Doremus Avenue, with the Passaic River on its eastern border and Plum Creek, which flows into the Passaic River, on its western and southern sides. The portion of the property abutting the Passaic River was referred to as the East Farm while the portion on the other side of Doremus Avenue was referred to as the West Farm.

For years, the property was used by companies in the chemical industry. From the mid-1920s to the mid-1950s, Texaco used the site as a petroleum distribution facility. Later, Celanese used it as a chemical bulk storage and distribution facility, with underground and aboveground piping linking the parcels on either side of Doremus Avenue. At one point, Celanese manufactured methanol and formaldehyde at the site.

As a result of those chemical-related uses, the property was contaminated with a variety of substances, a fact well-known to both parties. In 1986, Celanese entered into an Administrative Consent Order ("ACO") with the New Jersey Department of Environmental Protection ("DEP") for the clean-up of this site.

By the mid-1990s, Celanese began to close down its operations at this site and, having no further use for it, sought to market it. Essex County needed to build a new jail to replace its older facilities and undertook, through the Authority, to locate an appropriate site and construct a new jail. The Authority began to explore the feasibility of using the Celanese tract and retained consultants to advise it with respect to the potential benefits and detriments of the site. In 1995, for example, the Authority received an extensive report from EcolSciences, Inc., which was "intended to identify the presence of potentially contaminated areas of concern" on the property. That report noted that the site was listed on the Comprehensive Environmental Response, Compensation and Liability Information System. It pointed out that the System was a "compilation of USEPA [United States Environmental Protection Agency] known or suspected uncontrolled or abandoned hazardous waste sites [and] may ultimately be placed on the National Priorities List." EcolSciences noted twenty-six areas of potential environmental concerns, including surface water. As to this, its report stated the following:

The primary surface water features of the overall property are Plum Creek, a tidal stream which separates the Praxair and Celanese properties, and the Passaic River, which borders the eastern boundary . . . .

Plum Creek flows under Doremus Avenue . . . ultimately discharging into Newark Bay . . . . The majority of surface runoff on the Celanese facility is intercepted stormwater system which directs runoff to the local sanitary sewers . . . . Generally, undirected runoff on the East Farm drains to the Passaic River, while undirected runoff on the West Farm discharges to Plum Creek or percolates into the ground. These drainage systems raise an environmental concern as to the potential for residual soil contamination and potential offsite migration of contaminants attributed to past and current industrial uses of both properties.

The Authority also retained John O. Lasser Associates, Inc. to appraise this land. Lasser's original appraisal was conducted in 1997. It was updated in 1998 and reported an appraised value of $7,088,000 as of March 1998. In May 1998, the Authority's then-counsel wrote to Celanese, enclosing a copy of both the Lasser appraisal and an April 1998 report from the Authority's environmental consultant, Camp Dresser & McKee. The letter transmitted an offer to purchase the property for its appraised value, with the Authority reserving "the right to pursue any legal remedies it may have, now or in the future, arising from any pre-existing environmental contamination to the property." Celanese responded by forwarding an appraisal prepared on its behalf, which concluded that the property had a fair market value of $8,130,000 as of March 1997. The appraisal noted that it had been conducted "as if [the property] were clean of any hazardous material."

The parties had met to discuss the matter, however, even prior to the May 1998 exchange of letters. The record before us, for example, contains an agenda of a meeting held on March 12, 1998, to discuss the Authority's potential acquisition of this site. Those attending included Celanese's in-house counsel and its outside counsel, the Authority's then-executive director, the Authority's environmental attorney, and a representative from Camp Dresser & McKee, the Authority's environmental consultant. The final items on the agenda dealt with groundwater and surface water remediation and listed the following topics to be addressed:

fl Scope of CEA/duration/contaminants of concern

fl Celanese future plans should NJDEP require remediation with regard to groundwater contamination

fl Celanese future plans should NJDEP require remediation with regard to surface water contamination in Plum Creek and/or Passaic River

fl Celanese/Environ's thoughts regarding source of naphthalene in groundwater

Following a period of detailed, comprehensive negotiations, in which both parties were assisted by counsel and environmental consultants, the parties executed a contract in September 1998 pursuant to which the Authority agreed to purchase the property for $6,400,000, substantially less than the Authority's original offer. In return for the ...

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