Opinion ID: 6986366
Heading Depth: 1
Heading Rank: 1

Heading: Plaintiffs’ CERCLA and Negligence Claims

Text: Upon review of the record, it is evident to us that plaintiffs misconstrue the nature of the remedies available under CERCLA. CERCLA provides that potentially responsible parties shall be liable for: (A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; (B) any other necessary costs of response incurred by any other person consistent with the national contingency plan.... 42 U.S.C. § 9607(a)(4). There is no dispute that Xerox is a potentially responsible party within the meaning of the statute. The question is whether plaintiffs incurred necessary costs of response as a result of Xerox’s contamination of their property. We note at the outset that CERCLA does not provide compensation to a private party for damáges resulting from contamination. Instead, CERCLA permits a private party to be reimbursed for all or some of the costs already incurred in response to contamination. See id. § 9613(g)(2) (authorizing suit for recovery of costs pursuant to § 9607 “at any time after such costs have been incurred”) (emphasis added). . CERCLA further permits a declaratory judgment allocating future response costs between potentially responsible parties. See id. (“[T]he court shall enter a declaratory judgment on liability for response costs or damages ... to recover further response costs or damages.”). As the Ninth Circuit explained in Dant & Russell, Inc. v. Burlington Northern Railroad (In re Dant & Russell, Inc.), 951 F.2d 246, 249-50 (9th Cir.1991), sections 9607 and 9613 “envision that, before suing, CERCLA plaintiffs will spend some money responding to an environmental hazard. They can then go to court and obtain reimbursement for their initial outlays, as well as a declaration that the responsible party will have continuing liability for the cost of finishing the job.” Xerox argues that plaintiffs have incurred no expenses compensable under CERCLA, that CERCLA does not provide for a lump-sum payment of future expenses, and accordingly that plaintiffs’ CERCLA claim fails as a matter of law. We agree.
Prior to submitting the case to the jury, the parties stipulated that the jury would determine the availability of past response costs, and the district court would set the amount. The jury decided that response costs were appropriately awarded against Xerox, but the district court found that plaintiffs had not actually incurred any costs of response and set plaintiffs’ CERC-LA recovery for past response costs at zero. On appeal, plaintiffs point to over $135,000 they claim to have spent responding to Xerox’s contamination, and further argue that they should be able to recover certain of their attorney’s fees incurred forcing Xerox to take responsibility for the contamination on the Gussack property. Xerox argues that all of these expenses were either unnecessary of were incurred only in anticipation of litigation and are therefore not recoverable. We review the district court’s statutory interpretation as to the compensability of various response costs de novo. See National Loan Investors L.P. v. Town of Orange, 204 F.3d 407, 410 (2d Cir.2000). But we review the district court’s factual determinations deferentially. See Key Tronic Corp. v. United States, 511 U.S. 809, 820 n. 14, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994) (“As .is customary in assessments of this sort, of course, trial courts will determine the exact amount of these [remediation] costs that is recoverable.”). CERCLA does not. define “response costs.” It provides that a polluter shall be liable for “any other necessary costs of response incurred by any other person consistent with the national contingency plan.” 42 U.S.C. § 9607(a)(4)(B). “Respond” and “response” are defined as “remove, removal, remedy, and remedial action.” ■ Id. § 9601(25). And “remove” and “remedial- action” are defined at length. 2 While compensable' costs are broadly defined in the statute, they do not include expenses incurred solely in preparation for litigation unless they “significantly benefited the entire cleanup effort and served a statutory purpose apart from the reallocation of costs.” Key Tronic Corp., 511 U.S. at 820, 114 S.Ct. 1960. Such expenses can include “[t]raeking down other responsible ... polluters,” which “increases the probability that a cleanup will be effective and get paid for.” Id. Xerox argues that because plaintiffs’ experts conducted none of their own independent testing, their work should not be considered necessary costs of response. Xerox’s interpretation of the statute is too narrow. CERCLA imposes no requirement that experts must conduct their own testing before their fees will be recoverable. We do not doubt that in many instances assessing the extent of pollution will necessarily include consultation with experts who have not conducted their own physical tests but are merely interpreting data gathered by others. There is, however, a requirement that experts’ fees be incurred not merely in preparation for litigation but as a necessary cost of remediating a site. The district court was asked, by stipulation of the parties, to determine as a factual matter the extent of plaintiffs’ experts’ fees that were recoverable response costs. The district court found that none of the fees were recoverable as they were not “ ‘closely tied to the actual cleanup’ of the Gussack Property so as to constitute a necessary cost of response. Plaintiffs were able to and did identify Xerox as a potentially responsible party without the expenditure of any of the requested consultation services.” Reviewing for abuse of discretion, we cannot say that the district court erred in its determination. And plaintiffs’ attorney’s fees were even less directly related to the actual cleanup of the property and thus fail under the Key Tronic standard. Thus, prior to litigation, plaintiffs incurred no costs compensable under CERCLA.
The jury’s award of $1,083,585 for plaintiffs’ CERLCA claim cannot be affirmed as compensation for future costs that plaintiffs will incur remediating the Gussack property. The proper remedy for future response costs is not a present lump-sum payment of anticipated expenses but instead a declaratory judgment award dividing future response costs among responsible parties. See 42 U.S.C. § 9613(g)(2); Bedford Affiliates v. Sills, 156 F.3d 416, 432 (2d Cir.1998) (affirming district court’s declaratory judgment award). By awarding plaintiffs $1,083,585 for the “future costs of cleaning-up the Gussack Property,” the district court provided a remedy not available under CERCLA. Moreover, since neither party on appeal has argued for a declaratory judgment apportioning future response costs, we decline to remand for reconsideration of this issue. Plaintiffs have not incurred any compensable expenses under CERCLA and the claim therefore fails as a matter of law. Accordingly, the judgment of the district court is reversed insofar as it is based on plaintiffs’ CERCLA claim. With the CERCLA claim dismissed, we see no basis for sustaining the district court’s order that plaintiffs indemnify Xerox for future response costs Xerox might incur remediating plaintiffs’ property. The district court’s future indemnification award is therefore reversed and we need not consider plaintiffs’ due process challenge to the award.
Plaintiffs’ state-law claim for negligent damage to real property provides an alternative basis on which to sustain the district court’s judgment awarding plaintiffs $1,083,585. Xerox argues that plaintiffs’ negligence claim is time-barred. We disagree. In New York, the statute.of limitations for plaintiffs'. negligence claim is three years from the date of discovery. See N.Y. C.P.L.R. § 214-c (McKinney 1990). Xerox argues that David Gussack testified to knowing of the Xerox monitoring wells as of 1982 and that the statute of limitations should have begun running no later than the mid-1980s. This was a fiercely contested issue at trial and the district court ultimately submitted the question to the jury, which determined that plaintiff knew of, or should have known of the contamination as of May 1992. The district court did not err by submitting this factual question to the jury and we will not disturb the jury’s determination on appeal. Thus, plaintiffs negligence claim was not time-barred. Regarding the substance of the negligence award, the district court determined that permanent injury to real property in New York is measured by the lesser of the diminution of value of the property or the cost .of remediating the contamination. See Scribner v. Summers, 138 F.3d 471, 472 (2d Cir.1998) (“Scribner II ”). Here, the lower value as determined by the jury was the cost of remediation, and the district court properly entered judgment on plaintiffs’ negligence claim in the amount of $1,083,585. Since plaintiffs’ negligence claim is the proper basis for the district court’s judgment, plaintiffs are entitled to prejudgment interest on their state-law claim. See N.Y. C.P.L.R, § 5001 (McKinney 1992 & Supp.2000). 3 The district court found that plaintiffs were not entitled to prejudgment interest, holding: “[s]ince no money has been spent on cleaning up [the property], it would be inequitable to award prejudgment interest.” However, section 5001 imposes an affirmative mandate on trial courts; they have- no discretion not to award prejudgment interest under New York law. See Indu Craft, Inc. v. Bank of Baroda, 87 F.3d 614, 617 (2d Cir.1996). The district court’s denial of prejudgment interest is therefore reversed and the case remanded for determination of the amount of prejudgment interest due.