On January 19th, the Massachusetts Supreme Judicial Court (SJC) ruled in favor of Grand Manor Condominium unit owners in their long battle with the City of Lowell to recover their loss in property value as a result of contamination caused by the city’s operation of a landfill in the 1940s and 1950s on the property where the Condominium was built. Rackemann represents current and former owners of 36 Grand Manor units. Regarding the unit owners’ Chapter 21E, Section 5 property damage claims, the SJC ruled that the plaintiffs’ claims were not time barred because they could not have known that they sustained permanent property damage until the Massachusetts Contingency Plan (MCP) mandated Phase II/III environmental report was submitted to MassDEP by the city in June of 2012. The Phase II/III report determined that removing all of the hazardous waste present on site was prohibitively costly and therefore residual contamination would remain on the property after remediation activities were completed. The SJC vacated the trial court judgment and remanded the case for a determination of damages.

The city acquired the land from the Town of Dracut in 1906. It mined rock and gravel before converting and operating the site as a landfill in the 1940s and 1950s. After that, the city capped the site and it lay vacant until 1983 when the city conveyed the land to a developer. Although required by statute, the city failed to file a notice in the chain of title that the property had been used as a landfill. The developer built the 48 unit Grand Manor condominium shortly thereafter. In 2008, a contractor excavating a drainage ditch on the property discovered discolored soil and pieces of solid waste. Soil samples were sent to a lab for testing and the results showed that a release of hazardous materials, as defined by the MCP, had occurred. Grand Manor fulfilled its Chapter 21E and MCP obligations by notifying MassDEP of the release and hired a licensed site professional to address the contamination.

Meanwhile, members of the condominium Association’s Board conducted research and discovered that the city had operated a landfill on the property before the condominium was built. The Board notified unit owners and MassDEP of its findings in April, 2009. MassDEP issued notices of responsibility to the city and the Association in May, 2009. In July, 2009 the city hired its own LSP and took over site investigation activities. On October 13, 2009, the Association sent a Chapter 21E, Section 4A demand letter to the city seeking reimbursement of its costs in responding to and investigating the release. The city’s LSP submitted a Phase I Initial Site Investigation Report to MassDEP in April, 2010. The Phase I report found that the release affected a larger area of the property than the drainage excavation area but more investigation was necessary to determine the full extent of the contamination and how it was to be remediated. The city’s investigation continued and in June, 2012 the Phase II/III report was submitted to MassDEP. This was the first time the plaintiffs were on notice that the contamination was present beneath the ground on virtually all of the property and it would be cost prohibitive to remove all of the contamination. The report called for a capping of certain areas, the installation of a continuously operating soil venting system and the implementation of a notice of activity and use limitation on the property. The plaintiffs filed their action on October 10, 2012 seeking reimbursement of their response costs pursuant to Chapter 21E, Section 4A and reimbursement of lost property value pursuant to Chapter 21E, Section 5.

The city asserted that the plaintiffs’ Section 5 property damage claims were time barred because the statute of limitations had expired prior to the filing of the complaint. The city argued that pursuant to Chapter 21E, Section 11A (4), the statute began to run when the contamination was discovered and the Board discovered that the city owned and operated the landfill back in the spring of 2009. The plaintiffs countered that in order to bring a Section 5 claim they needed to be on notice that their property damage was permanent, meaning that residual contamination would remain on the property. The plaintiffs had three years from the time of such notice to bring property damage claims. The plaintiffs further argued that they were not aware that their property damage was permanent and therefore recoverable under Section 5 until the Phase II/III report was made available in June, 2012 when they knew for the first time that residual contamination would remain on their property. Prior to trial, the trial court judge, while not necessarily agreeing with the city’s position, rejected the plaintiffs’ position and the case went to trial leaving the statute of limitations issue to be decided by the jury.

After a three week trial, a jury awarded the plaintiffs Section 4 response costs in the amount of $113,673.19 but decided that their Section 5 property damage claims were time barred.[1]  In vacating the judgment on the statute of limitations, the SJC stated:

We conclude that a plaintiff must be on notice that he or she has a claim under Sec. 5 (a) (iii) before that claim may be time barred, and that such notice is separate from a plaintiff’s notice that environmental contamination has occurred. This will not ordinarily occur until the plaintiff learns that the damage to his or her property is not reasonably curable by the remediation process. As we conclude that as a matter of law that the plaintiffs could not know that they had a claim under Sec. 5 before June 6, 2012, when the city filed its Phase II/III report … the stature of limitations issue should not have been presented to the jury.

The SJC’s decision is a common sense approach that spares plaintiffs from being forced to file Section 5 property damages claims before they know whether they have a cognizable claim, risking dismissal and wasting judicial resources. The decision also prevents a responsible party conducting site investigations on another’s property to wait out the statute of limitations period by waiting until three years after the discovery of contamination and its source to reveal that residual contamination will be left on site.

[1] In post-trial proceedings, the trial court judge awarded the plaintiffs $226,252.55 for litigation fees and costs pursuing the Section 4 response costs because the city failed to respond to the plaintiffs’ Section 4A demand letter and plaintiffs’ action had properly advanced the purposes of Chapter 21E.