Litgo N.J. Inc. v. Comm'r N.J. Dep't of Envtl. Prot.

725 F.3d 369

LITGO NEW JERSEY INC.; Sheldon Goldstein, Appellants

v.COMMISSIONER NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION; United States of America; United States Department of Army; United States Department of the Air Force; United States Department of Navy; Alfred Sanzari Enterprises Inc.; Mary Sanzari; David Sanzari, as Executor of the Estate of Alfred Sanzari; Frank Huttle, as Executor of the Estate of Alfred Sanzari; Mian Realty; Kirby Avenue Realty Holdings.

Nos. 12–1288, 12–1418.

United States Court of Appeals, Third Circuit.

Argued Feb. 14, 2013.

Filed: Aug. 6, 2013.

John McGahren [Argued], Andrew McNally, Daniel F. Mulvihill, IV, Patton Boggs, Floor Newark, NJ, Brendan M. Walsh, Pashman Stein, Hackensack, NJ, for Appellants/Cross–Appellees Sheldon Goldstein.

Edward Devine, Rachel J. Lehr, A. Paul Stofa, Office of Attorney General of New Jersey, Division of Law, Trenton, NJ, for Defendant Commissioner of the New Jersey Department of Environmental Protection.

Brian C. Toth [Argued], Aaron P. Avila, United States Department of Justice, Environment & Natural Resources Division, Jessica O'Donnell, Christina L. Richmond, United States Department of Justice, Environmental Defense Section Land and Natural Resources Division, T. Monique Peoples, United States Department of Justice, Environmental Defense Section, Washington, DC, for Appellees/Cross–Appellants Department of Air Force, United States Department of Navy and United States Department of the Army.

Robert A. Bornstein, Berger & Bornstein, Morristown, NJ, David F. Edelstein, Christopher R. Gibson, Archer & Greiner, Haddonfield, NJ, for Defendants.

Kenneth K. Lehn [Argued], Winne, Banta, Hetherington, Basralian & Kahn, Hackensack, NJ, for Appellees/Cross–Appellants Frank Huttle, David Sanzari and Alfred Sanzari Enterprises Inc.

Craig S. Provorny, Anthony J. Reitano, Herold Law, Warren, NJ, for Defendant–Appellee Mian Realty.

Before: HARDIMAN, and GARTH, Circuit Judges and STARK ^*, District Judge.

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

This appeal comes to us following a seventeen-day bench trial that involved several claims arising under federal and state environmental laws. At issue is which parties bear the responsibility for the removal of hazardous substances present in the soil and groundwater at a parcel of land in Somerville, New Jersey (the Litgo Property or Property). Although this issue is complicated by the fact that the Property has been the site of various private and public concerns since 1910, the District Court engaged in a careful examination of the evidence and the arguments of the parties, and we essentially agree with its adjudication of the case. We disagree with the District Court's determination, however, in two respects, and will reverse in part and remand.

I. Background

A. Contamination of the Litgo Property

The Litgo Property is located at 40 Haynes Street in Somerville, New Jersey. During the past century, title to the Property has passed hands many times, and the site has been put to various uses. Somerville Iron Works, a company that operated a sanitary landfill on adjacent tracts of land, owned the Property in the early 1900s and used it to manufacture pipes and fittings. In 1941, the Property was leased to Columbia Aircraft, a manufacturer that machined precision parts for the United States military effort during World War II. Decades later, in 1976, the Property was purchased by Alfred Sanzari, who converted the buildings thereon into warehouses. Those warehouses were then leased to a number of commercial and industrial tenants, including a company known as JANR Transport, Inc.

Both the soil and the groundwater on the Litgo Property became contaminated as a result of the commercial activity that occurred there over the years. The soil contained high levels of metals and petroleum hydrocarbons, and the groundwater currently contains a high level of volatile organic compounds (VOCs), including trichloroethylene (TCE) and tetrachloroethylene (PCE). The District Court provided a thorough account of the history of this contamination in its opinion, see Litgo N.J., Inc. v. Martin ( Litgo I ), 2010 WL 2400388, at *2–19 (D.N.J. June 10, 2010), on reconsideration in part,2011 WL 65933 (D.N.J. Jan. 7, 2011)( Litgo II ), and so we will recount it only briefly here.

The contamination most likely began in the 1940s, when Columbia Aircraft leased the Property. Columbia Aircraft machined precision parts on-site for military equipment using some equipment owned by the United States government, including boring mills, grinding machines, lathers, milling machines, and a shaper. After the precision parts were machined, they were cleaned of excess grease as part of the “finishing” process. Columbia Aircraft degreased the precision parts in vapor degreaser tanks, using TCE as the degreasing agent. It then disposed of the TCE by dumping it onto the ground and allowing it to evaporate.

The contamination worsened after a series of accidents that occurred between 1983 and 1987. In 1983, a company known as Signo Trading International was storing both hazardous and non-hazardous waste at a location other than the Litgo Property. Some of this waste had been generated by the United States, which had contracted with Resource Technologies Service (RTS), a then-reputable hazardous waste transporter, for its disposal. RTS had arranged to store the waste at Signo's property, but the waste containers were removed under the supervision of the New Jersey Department of Environmental Protection (NJDEP) following a fire in April 1983. Signo was allowed to send non-hazardous substances to a location of its choice, but NJDEP was responsible for ensuring that the hazardous wastes were moved by licensed haulers to licensed facilities. As a result of NJDEP's inadequate supervision, thousands of containers of materials were shipped to the JANR warehouse on the Litgo Property, and some of them contained hazardous waste.

In 1984, the Borough of Somerville became aware that hazardous materials were being stored improperly at the JANR warehouse, and that many of the containers were spilling and leaking. An inspection and inventory of the materials at the warehouse revealed that it contained 106 gallons of TCE. NJDEP hired an inexperienced contractor to remediate the site, resulting in significant problems, including spills and leaks. Both TCE and PCE were likely released into the soil and the groundwater during the warehouse cleanup, contributing to the contamination.

Some of the remedial actions that have since taken place at the Litgo Property may have contributed further to the contamination. Sanzari—the owner of the Litgo Property between 1976 and 1990—hired environmental consultants to investigate the extent of the contamination and conduct remedial activities, such as soil excavations. One of the monitoring wells installed on the Property, however, had a faulty seal, a defect that likely increased the zone of contamination on the Property.

Although significant action has since been taken to remediate the soil contamination, groundwater contamination remains a significant problem on the Litgo Property. In this case, the central issue is who should be held responsible for past and future remediation.

B. The Litgo Appellants' Involvement at the Litgo Property

The Litgo Property is currently owned by Appellant Litgo New Jersey, Inc., a single purpose entity. Its sole shareholder, Appellant Sheldon Goldstein, first learned about the Property in the 1980s from an acquaintance, Lawrence Seidman, who suggested forming a partnership to develop it. Goldstein, who had previous experience in real estate, intended to have the Property rezoned for residential use, get approvals to build townhouses, and then sell the Property. He entered into an agreement of sale (Sales Agreement) with Sanzari to acquire the Property in August 1985.

Goldstein knew at the time that he entered into the Sales Agreement with Sanzari that there were problems with the site. Sanzari had informed him that there was some soil contamination, and a letter from NJDEP, incorporated by reference into the Sales Agreement, stated that hazardous wastes were being improperly stored at the JANR warehouse and that Sanzari had been ordered to take remedial steps. Goldstein was not, however, aware that TCE was present in the groundwater. Before entering the sale, he neither visited the Property nor further investigated the environmental issues.

The Sales Agreement stated that Sanzari would comply with all of the provisions of the New Jersey Environmental Cleanup Responsibility Act (ECRA), as well as obtain a cleanup plan from NJDEP. It also provided, however, that if the costs of obtaining and processing a cleanup plan were to exceed $100,000, Sanzari would have the option of terminating the Sales Agreement, unless Goldstein agreed to pay all costs in excess of $100,000.

NJDEP rejected Sanzari's proposed cleanup plan, and Sanzari—concerned about the potential cleanup costs—attempted to exercise his right to cancel the contract. Goldstein sought specific performance of the Sales Agreement in the Superior Court of New Jersey. During the suit, Goldstein hired an environmental consulting firm, EWMA, to review the compliance documents and cost estimates created by Sanzari's environmental consultants. EWMA criticized the reports for not fully disclosing the soil contamination and for failing to address potential groundwater issues. It found that the actual costs of a cleanup could not be accurately estimated based on the present information, and concluded that the actual costs could be far greater than the existing estimate.

Nevertheless, Sanzari and Goldstein reached an agreement regarding the Litgo Property, pursuant to which samples taken from monitoring wells on the Property would be tested for various substances. Goldstein could elect to move forward with the transaction within ten days of...