Opinion
Civil Action No. 97-1250 (NHP).
August 9, 1999
Michael M. Stone, Esq., BERGER BORNSTEIN, P.A., Morristown, N.J., Attorneys for Plaintiff, Black Horse Lane Assoc., L.P.
Paul H. Schafhauser, Esq., BERGER BORNSTEIN, Morristown, N.J., Attorneys for Plaintiffs, United States Land Resources, United States Realty Resources, Inc., Lawrence S. Berger.
Kenneth H. Mack, Esq., FOX, ROTHSCHILD, O'BRIEN FRANKEL, LLP, Lawrenceville, N.J., Attorneys for Defendants, Dow Chemical Corporation Essex Chemical Corporation.
LETTER OPINION ORIGINAL ON FILE WITH CLERK OF THE COURT
Dear Counsel:
This matter comes before the Court on cross-motions for summary judgment, and also on defendants' motion for sanctions pursuant to Federal Rule of Civil Procedure 11. The Court heard oral argument on June 28, 1999. For the reasons explained below, defendants' motion for summary judgment is GRANTED, plaintiffs' motion for summary judgment is DENIED, and defendants' motion for Rule 11 sanctions is DENIED.
FACTUAL BACKGROUND
This litigation arises out of a sale of environmentally distressed real property located at 120 Black Horse Lane, South Brunswick, New Jersey (the "Property").Plaintiffs United States Land Resources, Inc. ("USLR"), United States Realty Resources, Inc. ("USRR"), Black Horse Lane Associates, L.P. ("Black Horse"), and Lawrence S. Berger are related entities: USLR is the general partner in Black Horse; Plaintiff Berger is a principal in USLR, USRR, and Black Horse; finally, Mr. Berger is a named principal in the law firm representing the plaintiffs, Berger Bornstein, P.A.
Defendants Essex Chemical Corporation ("Essex") and Dow Chemical Corporation ("Dow") are also related entities, but only by virtue of Dow's purchase of Essex's stock.
During the early 1980s, defendant Essex Chemical Corporation owned and operated the Property, where it was engaged in the business of preparing adhesive-backed paper products. A chemical leak was discovered on the Property on August 17, 1984. Two months later, in October of 1984, Essex entered environmental cleanup and decommission negotiations with the New Jersey Department of Environmental Protection ("DEP"). Essex submitted a "Cleanup Plan" with respect to the Property to the DEP on December 19, 1985. The DEP conditionally approved the Plan on December 20, 1985.
Shortly before the submissions of the Cleanup Plan, Essex and USLR entered into an Agreement whereby USLR agreed to purchase the Property from Essex for the sum of $3,600,000. There is no dispute that the plaintiff-purchaser knew about the Property's environmental problems prior to the sale. Indeed, the 1985 Agreement specifically allocated to Essex, the defendant- seller, the responsibility of cleaning-up the Property and obtaining DEP approval.
The clean-up process has continued since 1985 and the Property is still under the supervision of the DEP. The plaintiffs' principal claim in this litigation is that the defendants breached their contractual duty to complete the environmental clean-up within a reasonable time.
DISCUSSION
I. Summary Judgment
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment may only be granted if, drawing all inferences in favor of the nonmoving party, there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. See Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.), cert. dismissed, 483 U.S. 1052 (1987). Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, for which that party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986). The moving party bears the initial burden of identifying evidence that demonstrates the absence of a genuine issue of material fact. Id. Once that burden has been met, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial," or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986).
The nonmovant must "do more than simply show that there is some metaphysical doubt as to the material facts." Id. at 586. Speculation, conclusory allegations, and mere denials are insufficient to raise genuine issues of material fact. To defeat "a properly supported summary judgment motion, the party opposing it must present sufficient evidence for a reasonable jury to find in its favor." Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir. 1995).
II. Count One: Breach of Paragraph 16 of the Contract
A. Implied Contract Terms
Plaintiffs allege that defendant Essex Chemical breached its obligation to remediate the Property in accordance with Paragraph 16 of the Agreement. In pertinent part, Paragraph 16 provides:
This Court will dismiss plaintiffs' claims against Dow Chemical because: 1) plaintiffs' causes of action arise solely out of plaintiffs' contractual relationship with defendant Essex; (2) Dow and Essex are not related except to the extent that Dow acquired Essex's stock; (3) Essex is a responsible party and not insolvent; and (4) there is not even a scintilla of evidence that would justify piercing Essex's corporate veil.
The parties acknowledge that the Subject Premises to be covered are subject to the provisions of the Environmental Clean-Up Responsibility Act, N.J.S.A. 13:1K-6, et seq. ("ECRA"). Seller agrees to obtain approval of a Clean-Up Plan from the Department of Environmental Protection ("DEP"), post the necessary financial security for performance pursuant to ECRA, will implement the approved Clean-Up Plan and complete the detoxification of the Subject Premises in accordance with and to the approval of the DEP. . . . In no event shall Purchasers be obligated under this Contract to assume any ECRA Clean-Up responsibilities.
Defendants' Exhibit 14 (emphasis supplied).
The Agreement does not specify a date for Essex's completion of the clean-up. Plaintiffs contend that, "by implication a reasonable time was intended." Becker v. Sunrise at Elkridge, 226 N.J. Super. 119, 129 (App. Div.), cert. denied, 113 N.J. 356 (1988). Because what constitutes a "reasonable time" is ordinarily a question of fact, see Dorchester Manor v. Borough of New Milford, 287 N.J. Super. 163 (Law Div.), aff'd, 287 N.J. Super. 114 (App.Div. 1994), plaintiffs argue that summary judgment is necessarily precluded in this case. The Court finds little merit in this argument.
First, "it is well-established that under New Jersey law, courts will imply contractual terms where `the parties must have intended them because they are necessary to give business efficacy to the contract written.' Thus, where the time for the performance of the contract is not fixed, the court will imply a reasonable time." Robins Nest, Inc. v. Atlantic Marine Diesel, Inc., 1994 WL 594592, *4 (D.N.J. 1994) (citingRidge Cheverolet- Oldsmobile, Inc. v. Scarano, 238 N.J. Super. 149, 155 (App.Div. 1990)). In this case, the Court finds no justification for implying a "reasonable time" for performance because such a term is not "necessary to give business efficacy to the contract as written." McGarry v. Saint Anthony of Padua Roman Catholic Church, 307 N.J. Super. 525, 533 (App.Div. 1998).
A main purpose of the Agreement, and the only purpose of Paragraph 16, was to require Essex to remediate the Property to the full satisfaction of the DEP and thereby make the land freely marketable. To that end, Paragraph 16 clearly and unambiguously requires Essex to "implement the approved Clean-Up Plan and complete the detoxification of the Subject Premises in accordance with and to the approval of the DEP." A "reasonable time" limitation is not necessary because Essex's performance under the contract — obtaining final DEP approval — must be evaluated solely by reference to the DEP. Such a contract simply does not lend itself to a reasonable time limitation. Indeed, the Agreement does not specify a date for completion because the parties understood that only an independent regulatory agency the New Jersey DEP could declare the clean-up process complete. See N.J.A.C. 7:26B-1.4. By the plain meaning of the Agreement, and also under ISRA, Essex's duty to detoxify the Property is discharged when and only when the DEP finally approves the site. Therefore, an implied "reasonable time" term is not necessary to the business efficacy of the contract as written.
In addition, it would be inappropriate for this Court to construe the Agreement so as to require Essex to "obtain final DEP approval within a reasonable time" because no reasonable business person would make such a promise. If the parties actually intended to make Essex liable for breach in the event that the DEP fails to approve the site "within a reasonable time," then they should have expressed that intention in the Agreement. This Court will not read so onerous a provision into an otherwise clear and sensible contract.
This Court is also guided by the established rule of construction that "the conduct of the parties after execution of the contract is entitled to great weight in determining its meaning." Joseph Hilton Assoc. v. Evans, 201 N.J. Super. 156, 171 (App.Div. 1985) (citing Journeymen Barbers, Local 687 v. Pollino, 22 N.J. 389, 395 (1956)). In this case, since the Agreement was executed in 1985, plaintiffs have never expressed any dissatisfaction with Essex's performance. Indeed, plaintiffs conceded at oral argument that service of the instant Complaint was their first attempt to notify Essex that it was in breach of the Agreement. In this Court's view, the plaintiffs' failure to complain about Essex's slow performance is inconsistent with their claim that Essex has breached a duty to complete the clean- up process and obtain DEP approval "within a reasonable time."
In sum, this Court will not imply a "reasonable time" for performance because such a term is not necessary to the business efficacy of the contract as written and it is inconsistent with the parties' course of conduct during the years following the Agreement's execution. Such a term would also be unreasonable in this case.
B. Evidence of Breach
Even assuming, arguendo, that a "reasonable time" for performance were implicit in the Agreement, plaintiffs have failed to adduce sufficient evidence of a breach.
Plaintiffs allege that Essex has breached its contractual obligation to complete the detoxification and obtain final DEP approval "within a reasonable time." Therefore, to prevail, plaintiffs must show that a "reasonable time" has already expired. The Agreement was executed in 1985. This Court cannot say that fourteen years is unreasonable as a matter of law. In the context of an ISRA clean-up, which plaintiff Berger understood to be a "cumbersome" and "long" process, plaintiffs must adduce evidence that a "reasonable time" for completion of the clean-up of the Property is less than fourteen years. Transcript of October 19, 1998 Deposition of Lawrence S. Berger at 125, attached as Defendants' Exhibit 13.
Such evidence might be in the form of reprimands or other statements from regulatory agencies like the DEP. Plaintiffs might also carry their evidentiary burden with expert testimony that, under the circumstances of this site and comparing it to other sites, fourteen years is an unreasonable length of time. In this case, however, plaintiffs have simply failed to adduce any evidence that fourteen years is unreasonable. The only evidence that even remotely addresses this issue is contained in plaintiffs' expert report. See Expert Report of Irving D. Cohen, Plaintiff's Exhibit 1A.
Giving plaintiffs the best of Mr. Cohen's report, "the environmental program undertaken on this site has been slow and ineffective in treating the contaminants that were released by Essex Chemical." Id. But evidence of a slow and ineffective clean-up process, without more, cannot reasonably support an inference that fourteen years is unreasonable.
Plaintiffs have the burden of proving that Essex has breached its duty to complete the detoxification and obtain DEP approval within a reasonable time. To carry this burden, plaintiffs must adduce evidence that a "reasonable time" has already expired. That is, there must be evidence from which a jury could find that a "reasonable time" is fourteen years or less, rather than fifteen years or longer. In this case, despite exhaustive discovery, plaintiffs have failed to carry their evidentiary burden. There is simply insufficient evidence in the record from which a jury could reasonably conclude that Essex has breached the contract.
III. Count Two: Implied Duty of Good Faith and Fair Dealing
New Jersey courts recognize an implied covenant of good faith and fair dealing in every contract. See Sons of Thunder, Inc. v. Borden, Inc. 148 N.J. 396, 420 (1997). This duty is breached when a party to a contract commits intentional misconduct, or "destroy[s] or injur[es] the right of the other party to receive the fruits of the contract." Id.;see also Onderdonk v. Presbyterian Homes, 85 N.J. 171, 182 (1981).
In this case, plaintiffs allege only that Essex has failed to complete the clean-up process and obtain final DEP approval within a reasonable time. They point to no acts or omissions done in bad faith. There is no allegation, and certainly no evidence, that Essex has committed any misconduct. Summary judgment is therefore appropriate.
IV. Counts Three and Four: Recoupment of Clean-Up Response Costs
Counts Three and Four of the Complaint seek an award of plaintiffs' past clean-up costs and a declaration that Essex is liable for such costs incurred in the future. Plaintiffs also seek an injunction compelling Essex to commence and complete the detoxification of the Property.
Under CERCLA, a party may recover costs that are incurred in connection with: (1) clean-up or removal of hazardous substances from the environment; (2) actions taken in the face of a threat of release of hazardous substances into the environment; (3) actions that may be necessary to monitor, assess, and evaluate the release or threat of release of hazardous substances; (4) the disposal of removal material; or (5) other actions that may be necessary to prevent, minimize, or mitigate damage to the public health or welfare or to the environment, which may otherwise result from a release or threat of release. See 42 U.S.C. § 9601(23).
Similarly, the Spill Act permits recovery of costs incurred in connection with: (1) removal or attempted removal of hazardous substances; or (2) taking reasonable measures to prevent or mitigate damage to public and private property, soils, and other affected property. See N.J.S.A. 58:10-23.11(b).
In this case, the only costs that plaintiffs allege that they have incurred are the fees they paid to their expert consultant EnviroScience, Inc. ("ESI"). However, ESI merely reviewed the quarterly reports that Essex submitted to the plaintiffs and the DEP. ESI never visited the Property; ESI never monitored contamination or clean-up at the Property; ESI never gathered data related to the investigation or remediation of the Property.
ESI's fees are clearly not compensable under the Spill Act because they are unrelated to any prevention, mitigation, or remediation of contamination on the Property. See T E Industries v. Safety Light Corp., 123 N.J. 371, 380 (1991). Similarly, the fees are not recoverable under CERCLA because they had nothing to do with any effort by plaintiffs to detoxify the Property or to prevent or minimize the release of hazardous substances. See Artesion Water Co. v. New Castle County, 851 F.2d 643, 651 (3d Cir. 1988); see also United States v. Lowe, 118 F.3d 399, 403 (5th Cir. 1997) (stating that monitoring and oversight costs are recoverable under CERCLA only if they are part and parcel of preventing and minimizing the release of hazardous substances).
In this Court's view, ESI's fees are those of an ordinary expert witness: the fees represent litigation costs, not environmental monitoring costs. Therefore, Essex is not liable to the plaintiffs for the consultant fees paid to ESI.
Nor are the plaintiffs entitled to a declaration that Essex is liable to plaintiffs for any future costs. First, it is significant that plaintiffs have not previously incurred any compensable clean-up costs.See Bowen Engineering v. Estate of Reeve, 799 F. Supp. 467, 476 (D.N.J. 1992). More importantly, however, plaintiffs have utterly failed to make any showing that they are likely to incur any future costs that will be recoverable under CERCLA or the Spill Act. Indeed, it is undisputed that Essex is contractually obligated to remediate the Property at its own expense. There is simply no evidence — or even an allegation that the plaintiffs intend to participate in future clean-up activities or incur any costs that might be recoverable under CERCLA. Plaintiffs cannot prevail in the absence of such evidence.
Finally, plaintiffs are not entitled to an injunction compelling Essex to commence and complete the clean-up because there is no case or controversy. There is no dispute that Essex is under both a contractual and statutory duty to detoxify the Property; nor is there any dispute that Essex has worked continuously to remediate the Property. In the absence of evidence that Essex has breached the Agreement or violated CERCLA or ISRA, there is no basis for the injunction that plaintiffs seek. Moreover, it would be inappropriate, on the basis of this record, for this Court to usurp the DEP's statutory mandate to oversee and regulate the clean-up of the Property.
V. Count Five: Damages
Because plaintiffs have failed to adduce sufficient evidence in support of their breach of contract claims, they cannot recover the damages outlined in Count Five of the Complaint. Summary judgment is therefore appropriate.
VI. Plaintiffs' Cross-Motion for Summary Judgment
Plaintiffs move for summary judgment dismissing defendants' counterclaim, which seeks to compel Black Horse to execute a Declaration of Environmental Restrictions ("DER"). However, plaintiffs cite no authority in support of their motion. Instead, they merely allege that "Plaintiffs do not and need not consent to any DER with respect to the Property." Plaintiffs' Brief in Opposition to Defendants' Motion for Summary Judgment and in Support of Plaintiffs' Cross-Motion for Partial Summary Judgment Dismissing Defendants' Counterclaim at 40.
On the present record, this Court is unable to say that the plaintiffs are entitled, as a matter of law, to a judgment dismissing defendants' counterclaim.
VII. Defendants' Motion for Rule 11 Sanctions
Courts may impose sanctions for Rule 11 violations where: (1) a party files a paper or pleading that has no reasonable factual basis; (2) a party advances a legal theory that has no reasonable chance of success under current law and cannot be advanced as a reasonable argument to alter existing law; or (3) a party files a motion or pleading for purposes of harassment or delay. See Business Guides, Inc. v. Chromatic Comm. Ent., Inc., 498 U.S. 533, 542 (1991).
In this case, plaintiffs have asserted causes of action that are clearly without merit. However, this Court is not persuaded that they were frivolous within the meaning of Rule 11. See Lukas v. Nasco Intern., Inc., 128 F.R.D. 619 (D.N.J. 1989). The Court will therefore deny defendants' motion for sanctions.
CONCLUSION
For the reasons discussed above, defendants' motion for summary judgment dismissing plaintiffs' Complaint is GRANTED; defendants' motion for Rule 11 sanctions is DENIED; and plaintiff's cross-motion for summary judgment dismissing defendants' counterclaim is DENIED.
An appropriate Order accompanies this Letter Opinion.
__________________________ NICHOLAS H. POLITAN U.S.D.J.