In the

United States Court of Appeals

For the Seventh Circuit

Nos. 98-2162 and 98-2314

NRC CORPORATION,

Plaintiff-Appellee, Cross-Appellant,

v.

AMOCO OIL COMPANY,

Defendant-Appellant, Cross-Appellee.

Appeals from the United States District Court 

for the Southern District of Indiana, Indianapolis Division.

No. 93 C 1448--V. Sue Shields, Magistrate Judge.

Argued April 13, 1999--Decided March 9, 2000

 Before KANNE, ROVNER and DIANE P. WOOD, Circuit

Judges.

 ROVNER, Circuit Judge. For approximately thirty

years, Amoco leased land from NRC for a gasoline

service station. Near the end of the lease

period, the parties discovered that underground

storage tanks installed by Amoco had leaked,

contaminating the property. Amoco ultimately

agreed to remediate the property. NRC sued Amoco

for damages, and after a bench trial, the court

entered judgment for NRC and against Amoco./1

The court ordered Amoco to pay $528,000.81 for

NRC’s loss of use of the property, $13,000 for

NRC’s environmental response costs, and NRC’s

costs of the suit. The court declined to award

attorney’s fees to NRC. Amoco appeals the amount

of the award and NRC cross-appeals the amount of

loss of use damages, the attorney’s fees ruling,

and the court’s refusal to grant punitive

damages.

I.

 NRC owns 35 acres in Hamilton County, Indiana,

at the northwest corner of 96th and Meridian

Streets. In 1959, Amoco leased the very tip of

that large corner property, a .75 acre patch of

land, in order to operate a gasoline service

station. Because of two separate highway projects

completed by the State of Indiana during the

lease period, the parcel was twice reduced in
size through condemnation proceedings, first to

.36 acres and then to .327 acres. Amoco renewed

the lease several times over the years, with the

final lease period ending on March 31, 1989.

Amoco ultimately refused to renew the lease

because it wanted a larger parcel of land on the

same corner so that it could build and operate a

more modern service station. NRC refused to lease

additional land because it had a master plan for

the entire 35 acre parcel that did not include a

service station at that location. Up until that

time, the rest of the 35 acres was not developed

and was used for farming only.

 The lease permitted Amoco to install underground

storage tanks, and Amoco made use of such tanks

throughout the lease period. In December 1986,

thirty gallons of gasoline spilled onto the

property when the tanks were being filled. Amoco

cleaned the spill and reported it to the Indiana

Department of Environmental Management ("IDEM").

Shortly thereafter, Amoco installed monitoring

wells on the property, and although hydrocarbon

odors and gasoline smells were reported at two of

the wells, Amoco did not further investigate

until approximately two years later. In November

1988, well sampling revealed gasoline odors in

one well and three to four inches of "free

product" in two other wells./2 Testing done on

the well samples was completed in March 1989, and

revealed gasoline constituents in four of the six

wells. Amoco reported these results to IDEM that

same month. A hydrogeologist subsequently

recommended that Amoco remove the underground

storage tanks and that Amoco subject the property

to remediation, a process that would take a

minimum of one to three years.

 Amoco hired Soil Exploration Services ("SES") to

remove six underground storage tanks from the

property, five used to store gasoline and one

used to store waste oil. SES reported that there

was significant free product floating on the

water in the tank pit area and removed about 50

gallons from the site at that time. Amoco

installed pumps in the tank pit area to remove

hydrocarbons once a week. The company also

installed more monitoring wells to determine the

extent of the hydrocarbon contamination. The

contamination detected in these wells was

reported to IDEM. In June 1989, NRC asked Amoco

to enter into a written agreement to remediate

the property, and Amoco did not respond. More

wells and additional testing revealed more

contamination in October 1989. The Indiana

Department of Transportation then asked Amoco to

remediate the property and Amoco agreed to do so.

In March 1990, Amoco discharged SES from the

project and hired Groundwater Technology, Inc.

("GTI") to study the problem. GTI continued the
testing that SES had begun and tried to determine

the outer boundaries of the contamination. In

November 1990, NRC again sought a formal

commitment from Amoco to remediate the property,

and Amoco again failed to respond. 

 In July 1992, after discussions between Amoco

and IDEM, and following assorted delays caused by

road construction, Amoco provided NRC with a

corrective action plan that it had submitted to

IDEM nearly a year earlier. Amoco and NRC

subsequently reached an agreement to give Amoco

access to the property to complete the

remediation, and Amoco hired GTI to complete the

task. Because of the delays, though, IDEM

withdrew its support for the corrective action

plan, fined Amoco and required it to submit an

updated plan. GTI developed another corrective

action plan which IDEM approved in December 1993.

After additional testing, Amoco submitted

revisions to the plan, and IDEM approved the

final corrective action plan in March 1994. The

remediation system was installed that same month

and at the time of the district court’s opinion

in April 1998, the system was still operating.

Amoco ultimately concluded through testing that

the contamination was confined to the leased

premises and had not spread to adjacent land or

groundwater.

 NRC sued Amoco for the loss of the use of the

property during the remediation process. After a

bench trial, the district court found that the

property would not attain its full fair rental

value until the cleanup was complete, which was

projected at the time of trial to occur in March

2000. The court found that buyers and renters

alike had difficulty measuring the risk

associated with contaminated property and

therefore avoided it. Lenders are similarly

loathe to deal with the uncertainties posed by

contaminated property, making a sale during

remediation even less likely than a lease. The

court thus ruled that the property was

unmarketable until IDEM approved the corrective

action plan, and remediation had actually begun.

During the remediation period, the court found,

the market demanded a full indemnification

agreement, and as of the time of trial no such

agreement had been reached between Amoco and NRC,

rendering the property unmarketable during that

time as well. The highest and best use of the

property was as part of a multi-acre tract,

according to the district court’s findings:

A reasonably sized area that would bear the brunt

of the stigma of possible contamination is an

area, including the Property, of approximately

two acres. Further, even without the threat of

contamination outside the Property, a prospective
buyer, tenant, or lender would not consider a

two-acre tract that did not include the Property,

because it is the Property’s corner location with

access onto both U.S. 31 and 96th Street that

will dictate the highest and best use if rezoning

is allowed. Thus, NRC has and will continue to

suffer loss of marketability of the two-acre

tract until the Property is remediated within

approved limits.

NRC Corp. v. Amoco Oil Co., No. IP 93-1448-C,

slip op. at 18 (S.D. Ind. April 7, 1998)

(internal cite omitted). The court calculated the

lease price of the two-acre parcel, and

determined that between March 1989 (when the

lease terminated) and March 2000 (when

remediation was projected to be complete), NRC

lost $528,000.81 in rent. Because Amoco agreed in

the lease to fully indemnify NRC for any and all

damages caused by the operation of the gas

station at the site, the court held Amoco liable

for that entire amount. The court also held Amoco

liable for $13,000 in "response costs," the

amount NRC paid to monitor Amoco’s compliance

with the corrective action plan. After allowing

NRC to recover its court costs as well, the trial

court declined to award NRC attorneys’ fees

incurred in the action or punitive damages. Both

parties appeal from the district court’s

judgment.

II.

 Amoco challenges the district court’s finding

that NRC was due damages on any land other than

the leased premises. Amoco contends that the

district court should have limited the damages to

the .327 acre leased parcel because the

contamination did not spread beyond that area.

Amoco also disputes the award of damages for loss

of use, faulting NRC for voluntarily declining to

use the property. According to Amoco, the

property could have been used for a number of

purposes during remediation, and NRC would have

recovered significant rent during that period.

Finally, Amoco claims the district court erred in

awarding damages for the period of time between

March 1994 and March 2000, positing that no

damages should be awarded once the remediation

had begun. NRC cross-appeals the amount of the

damage award, contending that the district court

undervalued the property in light of the

substantial probability that the land would be

rezoned to a higher use. NRC also appeals the

district court’s refusal to grant punitive

damages and attorneys’ fees.

A.

 Both sides agree that Indiana law governs this
dispute. After a bench trial, we review the

district court’s fact findings with great

deference, reversing only for clear error. See

Fed. R. Civ. Pro. 52(a); Petrilli v. Drechsel, 94

F.3d 325, 329 (7th Cir. 1996). We review

conclusions of law de novo. Petrilli, 94 F.3d at

329. The district court ruled that damages were

due for a two-acre parcel encompassing the .327

acres leased, on the theory quoted above, that

two acres was the smallest parcel that would bear

the brunt of the stigma of contamination, and

that no one would lease those two acres without

the .327 acre leased parcel which was situated on

the very corner of the property. Thus the

district court held Amoco liable for damages

beyond the leased premises. Amoco characterizes

this ruling as both factually and legally

incorrect. It is factually incorrect, according

to Amoco, because the record was insufficient to

support the view that such a two-acre parcel

existed and that NRC ever tried to market such a

parcel. It is legally incorrect, according to

Amoco, because, under Indiana law, stigma damages

are limited to the area leased. We will address

these claims together because the district court

relied on a legal theory that encompasses the

alleged factual deficiency.

 Amoco asks this Court to rely on the general

rule in Indiana that the proper measure of

damages for loss of use of property is the fair

rental value of that property during the time of

the injury. However, the parties bargained for a

different measure of damages when they entered

into a lease agreement with a broad

indemnification clause that held Amoco liable for

any damages to NRC arising from the operation of

the service station. The district court found

that Amoco is liable to NRC for all the damages

NRC incurred as a result of the contamination of

the site based on an indemnity clause in the

lease. The court did not simply rely on the

"unitary" nature of the property in awarding

damages; nor did the court rely on a theory of

stigma created by the contamination. The parties

vigorously contest the appropriateness of the

application of the unitary property theory or the

stigma theory to this case, but the district

court relied on something much simpler and more

straightforward. The lease contained an

indemnification clause that required Amoco to

indemnify and "save harmless the Lessor [NRC]

from all claims, mechanic liens, damages,

demands, actions, costs and charges arising out

of or by reason of the . . . operation of the

business herein authorized on the premises . . .

during the term of this lease." The court found

that the plain language of this clause required

Amoco to reimburse NRC for any damages caused by

the operation of the gas station. The court
concluded that "[t]here is no dispute that the

operation of the Amoco station caused

contamination on the site, and to the extent that

the presence of that contamination caused damages

to NRC, Amoco is liable for that damage." NRC

Corp., slip op. at 19-20. Nothing in this

provision limited Amoco’s liability to harm to

the leased premises, and the court therefore

charged Amoco with liability for all the damage

suffered by NRC due to the contamination.

 Two of NRC’s experts testified that the highest

and best use of the leased land was as part of a

two-acre parcel on the corner. The .327 leased

land provided the only entrance to those 1.673

acres and according to one appraisal expert, "The

Amoco site in itself, whatever remains of it, is

only important to the appraisal problem in my

view because of the fact that it’s an integral

part of a two-acre site that would be demanded in

the market place. It provides the only legal and

physical access that we would have to a corner

location there off of Meridian and 96th Street."

Tr. at 634. As the district court noted, the

contamination of the leased parcel affected the

surrounding 1.673 acres because no one would

lease that space without the road access and

visibility provided by the corner-location leased

parcel. Thus, when Amoco rendered the leased

parcel temporarily unusable, it also eliminated

NRC’s opportunity to lease or sell the

surrounding 1.673 acres. Although the court

borrowed language from the unitary theory, a

legal theory, in reaching this conclusion, this

was really a factual conclusion that Amoco

damaged NRC by reducing its opportunities to sell

or lease not only the .327 acre leased parcel but

also the immediately contiguous land. See United

States v. 105.40 Acres of Land, More or Less, in

Porter County, Indiana, 471 F.2d 207 (7th Cir.

1972) (applying the unitary theory in the eminent

domain context); City of Indianapolis v. Heeter,

355 N.E.2d 429 (Ind. Ct. App. 1976) (same). In

those cases, in order to value the condemned

property, the courts allowed the land owners to

show that the highest and best use of the land

was in combination with contiguous and noncontiguous parcels. The courts held that the

market value of the condemned parcels should be

set by considering the effects of the surrounding

land on potential uses. Here, in a mirror-image

scenario, the court found that contamination on

the leased parcel affected the owner’s ability to

market surrounding land. 

 Under the indemnification clause, the court

found that Amoco was liable for all damages

caused by Amoco’s use of the leased land as a

service station, not just the damages to the

leased parcel itself. Again, although the court
used the word "stigma" in finding that the

contamination affected the contiguous parcel, the

court did not find that the damages were based on

stigma, and the stigma cases are thus

inapplicable. See Adams v. Star Enterprise, 51

F.3d 417 (4th Cir. 1995) (land owners could not

recover under Virginia law under nuisance or

negligence theories for stigma caused by

underground oil spill without showing physical

impact on owner’s property or physical injury);

Berry v. Armstrong Rubber Co., 989 F.2d 822 (5th

Cir. 1993), cert. denied, 510 U.S. 1117 (1994)

(property owners could not establish nuisance,

trespass, or stigma action under Mississippi law

without evidence of physical damage to the

owner’s land). The fact that NRC could not prove

contamination beyond the boundaries of the leased

parcel was irrelevant to the district court’s

finding that the contamination on that parcel

eliminated NRC’s ability to sell or lease the

surrounding property. The court relied on the

indemnification clause and Amoco did not

challenge that reliance on appeal. Amoco thus

waived any challenge to that theory of damages,

and we affirm on that ground alone. United States

v. Neely, 980 F.2d 1074, 1082 (7th Cir. 1992) (to

preserve an issue for appellate review, a party

must alert the district court to the specific

grounds for the party’s argument).

B.

 Amoco also challenges the award of damages

because NRC could have been using the property

during remediation for any number of uses. Amoco

faults NRC for voluntarily declining to market

the property. For example, Amoco itself wanted to

lease the property to build and run a larger,

more modern service station. Amoco also argues

that the property could have been used as a

parking lot or landscaping while remediation went

on just below the surface. The district court

took a different view of the evidence, and we

reverse the district court’s fact findings for

clear error only. Petrilli, 94 F.3d at 329.

According to the district court’s findings,

before the corrective action plan was approved,

it was impossible for potential buyers, lessees,

and lenders to assess the risks associated with

the contamination, and thus the property was

unmarketable until that time. Even after a

corrective action plan is approved and

remediation has begun, the district court found

that "the market demands a full indemnification

agreement in order to make contaminated property

marketable." NRC Corp., slip op. at 16. Because

the parties had not entered into a formal

indemnification agreement (for the post-lease

period), the property was unmarketable until

remediation was complete. Amoco contends that
there is no support in the record for the

proposition that the market demands a full

indemnification agreement. 

 NRC counters with substantial evidence

supporting the decreased value of contaminated

property, both before and during remediation. For

example, Amoco’s appraiser agreed that

contamination blocks marketability, and that

prospective purchasers, developers and lenders

will require evidence that the remediation has

been completed and approved by IDEM. Experts

testified consistently that until the corrective

action plan was approved in March 1994, the

property was unmarketable. After that time, while

the property was undergoing remediation,

uncertainty remained. Testimony demonstrated that

lenders would be reluctant to get behind the

property without guarantees that remediation was

working. During the remediation, the progress

reports Amoco submitted to IDEM showed

fluctuations in contaminant levels. Sometimes

levels were lower, but sometimes they were

higher, so that during the process there was

uncertainty as to the effectiveness of the

remediation. The district court did not stretch

far in inferring that the market would demand

indemnity during this period in order to make the

property marketable. Because the district court’s

finding is supported by the evidence, we find no

error.

C.

 We now turn to NRC’s cross-appeal. NRC

complains that the district court undervalued the

two-acre parcel. The district court projected

revenue for the parcel, setting the value at

$3.95 per square foot in 1989, and increasing

that amount 5% per year. The court agreed with

one expert that the fair market value of a twoacre tract would have been $12.54 per square foot

as of March 1989 had there been a change in

zoning for the property. The court further found

that a "change in zoning is highly probable, and

this probability enhances the square foot value

of the Property by 20%." NRC Corp., slip op. at

18. NRC urges us to find that if the chance of

rezoning was "highly probable," then the court

should have valued the land at $12.54 per square

foot as of March 1989, with a 5% increase for

each subsequent year. 

 NRC’s reasoning is faulty, however. In order

for the district court to grant full value for

the rezoning, the probability would have to be

100% that the land would be rezoned. Clearly, the

court did not agree with this assessment, finding

that the high probability was approximately 20%.

A "high probability" does not mean 100% or even
more than 50%. It is a subjective term that the

district court rendered objective by assigning it

a value of 20% under the facts of this case. This

is a fact finding, and we reverse the district

court’s findings of fact for clear error only.

NRC fails to convince us that the district court

erred in finding that there was less than a 100%

probability that the land would be rezoned. We

reject NRC’s claim for damages for lost

opportunity cost for the same reason. The

district court’s decision was based on fact

findings, and lost opportunity cost is an

inherently speculative amount that the district

court was well within its discretion to reject as

an element of damages on these facts.

D.

 The district court granted Amoco’s motion for

judgment on the evidence on NRC’s claim for

punitive damages at the close of NRC’s case-inchief. The district court found that, even

accepting as true all of NRC’s allegations of

Amoco’s conduct, "that still does not rise to the

level of conduct that is necessary for punitive

damages." Tr. at 836. NRC contends that the trial

court relied on USA Life One Ins. Co. of Indiana

v. Nuckolls, 682 N.E.2d 534 (Ind. 1997), which

was inapplicable. Instead, NRC urges us to find

that it should have been allowed to prove

punitive damages under Gray v. Westinghouse

Electric Corp., 624 N.E.2d 49 (Ind. Ct. App.

1993). 

 Under Nuckolls, punitive damages may be awarded

in a contract case only if the plaintiff pleads

and proves an independent tort and only if there

is clear and convincing evidence that the

defendant acted with "malice, fraud, gross

negligence, or oppressiveness which was not the

result of a mistake of fact or law, honest error

or judgment, overzealousness, mere negligence, or

other human failing." 682 N.E.2d at 541. Gray was

a nuisance case, not a contract case, and NRC

thus argues that it is more applicable than

Nuckolls. Under Gray, punitive damages may be

awarded if the plaintiff proves the defendant

acted with a quasi-criminal state of mind or

wilful and wanton misconduct, which under

existing conditions, the defendant knows will

result in injury. "Willful and wanton misconduct

need not include malice or intent to injure.

Further, conduct which is oppressive or amounts

to gross negligence justifies punitive damages."

624 N.E.2d at 54-55. Interestingly, Gray cites a

breach of contract case for the standard for

punitive damages, and we therefore doubt that

Gray is good law after the Indiana Supreme Court

ruled in Nuckolls. In any case, this was a breach

of contract case, and the court awarded damages
under the indemnity clause of the lease contract.

The court specifically stated that Amoco’s

conduct did not rise to the level necessary under

Nuckolls, and we will not overturn that finding

unless clearly erroneous. Nothing in the record

suggests error, and so we affirm the district

court’s denial of punitive damages.

E.

 Finally, we address NRC’s claim for attorneys’

fees. NRC claims that the same conduct justifying

an award of punitive damages justifies an award

of attorneys’ fees under the indemnification

clause. According to NRC, Indiana law allows an

indemnitee to recover from the indemnitor the

costs of prosecuting the indemnity action,

including attorneys’ fees. In the district court,

NRC sought attorneys’ fees under two statutory

provisions and under the common law. The district

court rejected those theories and NRC does not

challenge those rulings on appeal, instead

relying on the indemnification agreement as the

source of fees. But NRC did not raise that

argument below and therefore waived it. Neely,

980 F.2d at 1082. Even had NRC preserved this

argument, however, the result would be the same.

The indemnity case on which NRC primarily relies

was founded on an agreement containing an express

provision for attorneys’ fees. There is no such

express provision in this indemnity agreement,

and thus NRC is not entitled to fees under the

lease. See Zebrowski & Assoc., Inc. v. City of

Indianapolis, 457 N.E.2d 259 (Ind. Ct. App.

1983). We thus affirm the district court’s

refusal to grant attorneys’ fees to NRC.

III.

 In sum, the district court did not clearly err

in finding Amoco liable under the lease for all

of the damages caused by contamination of the

leased premises, including damages for NRC’s

inability to lease or sell the property

immediately surrounding the leased parcel. Nor

did the district court err in awarding damages

for the period of time after remediation had

begun, while there was still great uncertainty as

to the success of the remediation process. We

also affirm the district court’s measure of

damages for the property, which the court

enhanced based on a 20% probability that the land

could be rezoned. Finally, we find that the court

did not err is refusing to award punitive damages

or attorneys’ fees.

AFFIRMED.
/1 The parties consented to a trial before a

magistrate judge pursuant to 28 U.S.C. sec.

636(c). 

/2 "Free product" refers to gasoline and its

constituents.