Grand Manor: Extending the Claims Period for Environmental Property DamagePosted: August 22, 2018
by Dylan Sanders
In a significant development under the Commonwealth’s hazardous waste cleanup law, Chapter 21E, the Supreme Judicial Court ruled that the statute of limitations for a claim of property damage under § 5 of Chapter 21E begins to run when a party learns that the property damage caused by contamination cannot be reasonably remediated. Grand Manor Condominium Association v. City of Lowell, 478 Mass. 682 (2018). This marks an extremely expansive limitations period during which such a claim can be brought. Before Grand Manor, most believed the limitations period began to run when the property owner learned of contamination and the identity of those responsible for it. Now, the running of the limitations period is only triggered when the property owner learns that the contamination will not be fully remediated.
Chapter 21E and its Statutes of Limitation
Chapter 21E permits a private party injured by a release of oil or hazardous materials to bring two types of claims. First, under §§ 4 and 4A, a party who has incurred costs from responding to a release may sue other statutorily responsible parties for reimbursement, contribution, or an equitable share of the response costs.
Second, under § 5(a)(iii), a party may recover economic damages to property interests beyond the party’s response costs. Property damages recoverable under §5 may be permanent damages, such as the diminished market value of property that will not be fully remediated by a cleanup, or they may be temporary damages, such as the rent lost while the property underwent assessment and/or remediation.
Although it was well-established that § 5 property damages were recoverable separate and apart from response costs, it was not clear what statute of limitations applied. Chapter 21E initially had no independent statute of limitations; limitations periods were added in 1992 during a comprehensive overhaul of the law. Those periods require a private party seeking to recover response costs under §§ 4 and 4A to sue within three years of the latest of four events, the most generous of which typically is the date by which the party has incurred all of its response costs. See c. 21E, § 11A.
A private party seeking to recover damages under §5 must sue “within three years after the date that the person seeking recovery first suffers the damage,” or within three years of learning the identity of the party responsible for the damage, whichever is later. See c. 21E, § 11A(4) (emphasis added).
But what does “first suffers the damage” mean? Before Grand Manor, many practitioners counseled their clients not to wait to understand the full extent of the property damage before bringing a § 5 claim. They based that advice cautiously applying the plain meaning of “first suffers the damage.” Grand Manor may now cause many to change that advice.
The Grand Manor Condominium
At issue in Grand Manor was a condominium built on the site of a former landfill that had been owned and operated by the City of Lowell. In 1983, a developer purchased the site and later constructed the condominium.
In late 2008, the condominium association made underground repairs and encountered discolored soil. By early 2009, the association understood that at least a portion of the property was contaminated with hazardous materials from the site’s prior use as a landfill. The City, assuming responsibility for the response action, further assessed the site and concluded in June 2012 that the entire site was contaminated and that full remediation would not be feasible.
In October 2012, the condominium association and 36 current and former unit owners filed suit against the City. Pursuant to § 5, the unit owners sought property damages measured by their units’ diminished market value due to the contamination.
The City asserted that those claims were barred by the three-year statute of limitations. The unit owners moved for summary judgment, which the trial court denied. At trial, the jury was asked to decide whether the § 5 claims for property damage were time-barred, and, specifically, whether the claims were “brought within three years of the date they discovered, or should have discovered, both that they had suffered property damage and that the City of Lowell was legally responsible for the release of hazardous materials that caused the damage.”
The jury found that the unit owners’ property damage claims under § 5 were time-barred. The SJC accepted direct appellate review.
On appeal, the unit owners argued that the trial court never should have submitted the statute of limitations issue to the jury. The owners contended that, since the SJC had previously held that § 5 property damages were damages for losses that a response action did not address, the response action had to be sufficiently advanced to put the owners on notice that they would, in fact, suffer such losses. The City, in turn, chiefly relied on the general principle that statutes of limitation ordinarily begin to run when a party has reason to know that they may have been harmed, not when a party knows the harm’s full extent.
The SJC declined to apply that common law rule to property damage claims under Chapter 21E and instead adopted the owners’ argument that, at least insofar as a property damage claim is one for permanent damage, the clock is not triggered until “the plaintiff learns whether or not remediation and response costs will fully compensate the plaintiff for the harm he or she has suffered. “478 Mass. at 683. Wrote the court, “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.”
The SJC’s reasoning was threefold. First, the SJC concluded, the word “damage” in §11(4) does not mean contamination of the property, but rather only what the SJC characterized as “residual damage,” i.e., economic damage to property that cannot or will not be addressed by remediating the contamination, such as diminished property value.
Second, the SJC sought a bright-line rule to align the statute of limitations for a property damage claim with the Massachusetts Contingency Plan’s Phase III stage, the point in the assessment process at which it is often determined whether remediating the contamination is feasible. Although not all Phase III reports provide such a clear conclusion, the SJC apparently believed that aligning the claims’ timing with MCP reporting obligations would add some predictability.
Third, the SJC said that requiring a party to bring § 5 claims for permanent property damage before it was clear that the damage could not be cured by remediation would be “wasteful for both the parties and the court system.” 478 Mass. at 695. In so holding, the SJC implicitly rejected the common-law discovery rule’s balance between the competing interests of plaintiffs who might not know the basis of their claims and of defendants who might be disadvantaged with the passing of time.
The decision also implicitly reflects the SJC’s preference for a standard that furthers and arguably maximizes one of Chapter 21E’s core statutory purposes, which is “to ensure that costs and damages are borne by the appropriate responsible parties.” 478 Mass. at 684 (quoting Taygeta Corp. v. Varian Assocs., Inc., 436 Mass. 217, 223 (2002)).
Finally, the SJC addressed the statute of limitations for claims of temporary property damage under Chapter 21E, § 5(a)(iii), such as loss of rent. In an important if cryptic footnote, the SJC said that temporary damage claims are also “dependent on the remediation process” and “that the Phase II and Phase III reports required pursuant to the MCP therefore lend necessary clarity to such claims as well.” 478 Mass. at 694 n.15.
“For this reason, and to avoid splitting claims under § 5, the statute of limitations for claims under § 5 should be uniformly defined.” Id.
But it is not entirely clear what this means. Grand Manor’s central holding is that the limitations period for permanent property damage claims under § 5 does not start “until the plaintiff learns that the damage to his or her property is not reasonably curable by the remediation process.” 468 Mass. at 683. By definition, temporary property damage is temporary and ends through the remediation process. How then could the statute of limitations for both permanent and temporary property damages claims be “uniformly defined?” The answer to this riddle will need to be flushed out in future cases.
Dylan Sanders is a partner at Sugarman, Rogers, where he concentrates in disputes involving environmental issues, real estate, land use, and administrative law.