Toxic Tort Litigation Blog : Toxic Tort Lawyer & Attorney : Epstein Becker Green Law Firm : Product Liability, Contamination, Pollution

A recent Michigan Court of Appeals decision, Alfieri et al. v. Bertorelli et al., dated October 18, 2011 re-visits the issue of whether a real estate agent has a duty to disclose environmental information to a prospective purchaser in the absence of privity. The take-away in this and similar cases is that the  result is often dependent upon the specific facts presented, and even then, the result may vary depending upon the law of the state at issue. For example, New York strongly adheres to the doctrine of caveat emptor, which imposes no liability on a seller (let alone the seller's agent)  for failing to disclose information regarding the premises in an arms length transaction, unless there is some conduct on the part of the seller which constitutes active concealment.  In New York, the purchaser of contaminated property would arguably have a difficult time, in the absence of some affirmative misrepresentation and a showing of reasonable reliance, holding seller's agent liable.

Although the Alfieri case is based on Michigan, not New York, law, its holding is instructive. Alfieri arose out of plaintiffs’ purchase of a condominium unit in what had once been an abandoned factory. The factory had been contaminated with trichloroethylene, and in the process of converting it into condominiums, a vapor barrier was installed. Nonetheless, the former factory property was never properly decontaminated. However, plaintiffs were led to believe that the contamination had been cleaned up. In part, plaintiffs relied upon a sales brochure, prepared by Coldwell Banker, the seller’s agent, indicating that the site had been decontaminated. The plaintiffs purchased the condominium without conducting any independent diligence of their own and only learned following the closing that the property was seriously contaminated.

In rejecting Coldwell Banker’s motion for summary judgment, the Michigan court discussed two of plaintiffs’ theories of recovery – silent fraud and negligent misrepresentation. The court explained that common law fraud or fraudulent misrepresentation involves: (1) a defendant making a false representation of material fact with the intention that a plaintiff would rely on it; (2) the defendant either knowing at the time that the representation was false or making it with reckless disregard for its accuracy; and (3) plaintiff actually relying on the representation and suffering damage as a result. Silent fraud is essentially the same, except that it is based on a defendant suppressing a material fact that he or she was legally obligated to disclose, rather than making an affirmative misrepresentation. A silent fraud may be a misleadingly incomplete response to the purchaser’s inquiry concerning a particular concern.

The court did not accept seller’s agent’s argument that Michigan jurisprudence did not impose upon the seller’s agent a duty of disclosure, in contrast to the duty imposed on the sellers themselves. The court held that a duty of disclosure may be imposed on seller’s agent to disclose newly acquired information that is recognized by the agent as rendering a prior affirmative statement untrue or misleading. In this case, there was evidence that the plaintiffs made direct inquiries of defendants about the condition of the property. The Michigan Department of Environmental Quality provided information to the seller which suggested that the sales brochure contained inaccurate and misleading information. What is troubling about the court’s holding is that the agent for the seller prepared the sales brochure on the basis of information obtained from the client. Did the agent have reason to believe that the contents of the sales brochure were not true until the plaintiffs filed suit? The decision does not provide a clear answer. However, the court apparently believed that there was a sufficiently genuine issue of material fact to deny the agent’s motion for summary judgment.
 

I am pleased to report that the New York Court of Appeals has amended the Rules of the Court of Appeals for the Admission of Attorneys and Counselors at Law to permit in-house counsel admitted in any U.S. jurisdiction to be able to register with the Court of Appeals and provide legal advice in New York to the lawyer's employer.  For years, non-admitted in-house counsel have been hindered in their ability to provide advice to their employers concerning New York law issues at times due to the restrictions that have now been lifted.  There are two exceptions to the new rule: (1) such advice does not include court litigation representation; and (2) the Court rejected the NYS Bar Association's recommendation to include lawyers admitted to a home jurisdiction outside the United States. 

Recently, New York DEC issued its draft regulations for hydraulic fracturing based on the proposed requirements in the revised supplemental generic EIS released earlier this month. Public comment began yesterday and will run concurrently with the public comment period on the DSGEIS, which ends on December 12.  DEC  also released the proposed SPDES general permit for storm water discharges associated with hydraulic fracturing.  Public hearings will be held during November and here in New York on Nov. 30 at Tribeca Performing Arts Center. No permits can be issued for hydraulic fracturing until the SGEIS is finalized and the DEC issues the required Findings Statement.  The summary of express terms can be found on the DEC website at  http://www.dec.ny.gov/regulations/77373.html

 On September 22, 2010, the New York League of Conservation Voters Education Fund (“NYLCV Education Fund”) hosted Jay Walder, Chairman of the Metropolitan Transit Authority (“MTA”), at an Eco-Partner Breakfast, a quarterly event at which leaders from around New York State meet to network and discuss issues of environmental concern. Jay Walder was nominated by Governor David A. Patterson on July 14, 2009 and confirmed as chairman and chief executive officer of the MTA on September 10, 2009. We applaud Mr. Walder for his vision and the aggressive steps that he has taken in his one year in office to keep the largest mass transit system in the United States moving in the right direction. Walder has prior experience in public transportation within the MTA, where he previously served as Chief of Staff and later as Executive Director and Chief Financial Officer. Mr. Walder left the MTA in 1995 to teach public policy at the John F. Kennedy School of Government at Harvard. Thereafter, he joined Transport for London, where he was credited with the introduction of that system’s extremely successful “Oyster card” and with leading the transportation charge as part of London’s successful bid for the 2012 Summer Olympics. 

Mr. Walder set the tone for the morning’s discussion by emphasizing the importance of seeking “transformational” change rather than “evolutionary” change at MTA. Mr. Walder identified two significant transformational milestones in the New York subway system. The first occurred in 1982, when the MTA’s first capital program was established. As a New Yorker, Mr. Walder recalled to mind how the New York subway system was considered a symbol of urban decay in the 1970’s, characterized by graffiti, constant breakdowns, oppressive heat in summer and ineffectual heating in winter. As a result of capital improvements, today’s subway system no longer suffers from the systemic problems of the 1970’s. He points out that there was a breakdown every 7,000 system miles in the 1970’s as compared to today when there is a breakdown only every 150,000 miles. 

The second transformational milestone was the introduction of the MetroCard in 1991. As a result of the MetroCard’s introduction, tokens became relics of the past, and monthly and weekly passes and automatic bus/rail transfers became a pleasant reality. Subway ridership increased from 3.5 million riders daily in 1992 to over 5 million riders daily today. Although the MTA has been criticized for recently announced service cuts, Mr. Walder has made significant strides in his one year in office in reducing MTA’s annual operating budget. This cost-cutting initiative has resulted in the removal of 3,500 jobs, a reduction by 20% of positions at MTA HQ, reduction in overtime, consolidation of functions and renegotiation of contracts with vendors. MTA is now introducing “countdown” clocks in subway stations to remove rider angst over train delays and to make New Yorkers’ long-time habit of constantly looking over the edge of the platform toward the tunnel for the next train a thing of the past.

The application of CPLR Article 16 can significantly limit a defendant’s exposure in NY litigation for non-economic loss to his or her equitable share of fault. The CPLR defines “non-economic loss” to include pain and suffering, mental anguish, loss of consortium or other similar categories of damages. Thus, Article 16 does not avail a defendant in a claim to recover lost earnings or unreimbursed medical expenses. However, for claims seeking recovery for pain and suffering, Section 1601 modifies the common law rule of joint and several liability by making a joint tortfeasor, whose share of fault is fifty percent or less, liable for plaintiff’s non-economic loss only to the extent of that tortfeasor’s equitable share. For a thoughtful analysis of whether to assert a contribution claim or to rely on the application of Article 16, I commend you to “Securing Full Protection of CPLR Article 16 for Defendants,” an article by John Lyddane and Ellen B. Fishman, partners at Martin Clearwater & Bell, which appeared in The New York Law Journal on September 14, 2010. Although the article focuses on the application of Article 16 in defending medical malpractice actions, the authors’ analysis is equally applicable to the defense of toxic tort litigation. In particular, Mr. Lyddane and Ms. Fishman provide a valuable discussion concerning how to keep Article 16 issues, (i.e., the non-defendants’ wrongs) before the finder of fact.

CPLR Article 16 contains many traps for the unwary practitioner. In particular, the exceptions to CPLR Article 16 must be considered in advising clients concerning the relief this section potentially affords them as defendants. For example, tortfeasor liability on property damage and wrongful death claims remains joint and several in respect to all categories of damages. There may be instances when a defendant should implead a co-tortfeasor as a third-party into the case rather than seek relief from Article 16. Another trap for the unwary litigant is in construction litigation. A tortfeasor shown to have violated what the law denominates a “non-delegable duty” gets no several-only status. Thus, in Labor Law Section 240 and 241 cases, a tortfeasor found liable under those sections may be found joint and severally liable for satisfying an adverse judgment if that liability is predicated upon a “non-delegable duty.”

On February 26, 2010, the New York League of Conservation Voters (“NYLCV”) hosted an Eco-Partners Breakfast with New York City Department of Environmental Protection (“DEP”) Commissioner Cas Holloway, DEP's energetic new commissioner.  Mayor Bloomberg appointed Mr. Holloway to head DEP in November 2009 after a year long nation-wide search. Prior to his appointment, Mr. Holloway served as a Senior Advisor and Chief of Staff to Ed Skyler, New York's Deputy Mayor for Operations. Mr. Holloway, a former Cravath associate who earned an undergraduate degree at Harvard and a law degree from the University of Chicago, brings to the position a rare combination of political savvy and operational know how that should serve DEP well.  Although DEP has a $1,000,000 budget and a staff of over six thousand, it often flies below the radar screen. DEP performs four basic functions. (1) First and foremost, it is a water utility. It is responsible for the supply, distribution and treatment of New York City’s drinking water. Unlike California, which delegates the supply and treatment functions to different agencies, both functions fall within DEP's  aegis in New York; (2) DEP is a customer service agency. It more or less determines the price of water; (3) DEP is a capital projects agency. For example, it is building at a cost of $6,000,000,000 the third underground tunnel that will carry drinking water from upstate to millions of New Yorkers; and (4) DEP is an environmental regulator on, among other things, air and water issues.   Based upon his first few months on the job, Cas Holloway appreciates the importance of working with various stakeholders and interest groups. On February 25, 2010, Mayor Bloomberg, Mr. Holloway's agency,  NYS Department of Environmental Conservation and several environmental groups announced an agreement-in-principle to significantly improve the health of Jamaica Bay through sewage treatment plant upgrades and investments in marsh restoration. As a result of the agreement-in-principle, DEP headed off a potentially costly Clean Water Act litigation arising from the alleged failure of its four sewage treatment plants to prevent nitrogen discharges to the bay. Mr. Holloway described the resolution of the Jamaica Bay dispute as a "paradigm shift" and a case study for how he hopes DEP will resolve future disputes. Up next for Mr. Holloway is the threat to water quality in the New York City Watershed posed by natural gas companies  seeking permits to exploit valuable natural gas deposits in the Marcellus Shale through the extensive use horizontal drilling and hydrofracking.  All New Yorkers should wish Mr. Holloway well in addressing this new Watershed concern.

Are defendants in New York product liability and toxic tort litigation better off in federal court than in state court? Federal court discovery rules certainly are more liberal than state court discovery rules. There, plaintiff’s experts are subject to deposition and, if appropriate, Daubert challenges. In contrast, state court provides only minimal expert disclosure. However, state court rules concerning the production of electronically stored information (“ESI”) may be more favorable to corporate defendants litigating in state court. In state court, the general rule is that the requesting party pays for the defendant’s ESI retrieval. In federal court, the court will apply “proportionality” concepts, and balance the importance of the discovery with the burden on the producing party. Thus, the result of the burden shifting analysis is somewhat more complex and subject to more variables. As reported in this space on November 4, 2009, (“Cost Allocation of E-Discovery in NY Trial Courts”), the Joint Committee on Electronic Discovery, convened by the Association of the Bar of the City of New York, has recommended that the legislature amend the CPLR to address time-consuming ESI disclosure disputes. The new proposed CPLR rule is expected to address a litigant’s duty to preserve ESI in anticipation of litigation; the scope of that duty; and the scope of ESI production. 

An article in Kramer Levin’s Electronic Discovery Update (January 2010), “Cost Shifting in New York: Forum Makes All the Difference,” discusses the background of the general presumption in state court that the requesting party pays for the cost of discovery. Although the CPLR does not explicitly apply this presumption to ESI costs, New York state courts have followed this presumption when deciding how to allocate e-discovery costs. In Lipco Elec. Corp. v. ASG Consult. Corp., for example, the court found that “… cost shifting of electronic discovery is not an issue in New York, since the courts have held that, under the CPLR, the party seeking discovery should incur the costs.” Lipco Elec. Corp. v. ASG Consult. Corp., 4 Misc.3d 1019(A), 2004 WL 1949062 (Sup. Ct. Nassau Co. Aug 18, 2004). In contrast to state court practice, the standard under federal jurisprudence is less clear cut.  The Hon. Shira Scheindlin (SDNY) has articulated a multi-factored balancing test, which has been influential in guiding determinations of when the cost of producing “inaccessible” data should be shifted to the requesting party. Zubulake v. UBS Warburg LLC, 216 F.R.D. 280 (S.D.N.Y. 2003). The Kramer Levin Update observes that a recent New York trial court opinion declined to apply this federal approach, stating that it was “not empowered – by statute or case law – to overturn the well settled rule in New York state that the party seeking discovery bear the cost incurred in its production.” T.A. Ahern Contractors Corp. v. Dormitory Auth. of the State of N.Y., 2009 WL 806779 (Sup. Ct. N.Y. Co. Mar. 19, 2009). Citing the policy behind the rule, the court observed that the requester-pays standard gives a party “a strong incentive to formulate its discovery requests in a manner as minimally burdensome as possible.”  I predict that the differences between state and federal ESI practice will narrow in the near term, possibly with the promulgation of a CPLR rule, and that New York will ultimately adopt a more federal approach modeled on the influential Sedona Conference Working Group template.  However, for the present, a New York state court plaintiff runs the risk of incurring substantial costs in demanding burdensome ESI from a corporate defendant.  Be careful what you wish for!

According to a report issued by Cornell Law School, the State of New York’s blueprint for Marcellus Shale development proposes 187 new regulatory activities necessary for the oversight of natural gas drilling, but the blueprint does not explain how DEC will carry out these activities.  Cornell’s report concludes that DEC does not have the manpower to appropriately regulate economic development in the Marcellus Shale Formation. According to Adjunct Professor Keith Porter at Cornell Law School, “There is no way they [DEC’s Division of Mineral Resources] have enough people to visit the sites to make sure conditions are met.”  The Cornell study notes that DEC’s proposals require firsthand inspections and the development of detailed spill prevention plans on a site-by-site basis. The proposals also involve assessing and monitoring water resources to ensure they are not damaged by the gas industry’s need for huge volumes of fresh water to stimulate gas production in the fracking process. This process involves shooting millions of gallons of chemical solutions into each well, which then regurgitate brine and wastewater with chemicals, heavy metals and naturally occurring radioactivity. For their part, industry proponents point to New York’s strict regulations and a strong track record by industry. Environmental advocates challenge industry claims, pointing to hundreds of incidents and complaints involving natural gas and oil drilling buried in the DEC’s hazardous spills database. However,  it was reported on January 11, 1010 that DEC Commissioner Pete Grannis had asserted in a letter to Assemblyman William Parment, a member of the legislature's Environmental Conservation Committee, that reports of accidents relating to natural gas drilling in New York have been overblown and taken out of context.  Without additional DEC inspectors, says Professor Porter, Marcellus Development “will rely on self-compliance.” Environmental advocates point to the water contamination and regulatory violations that plagued the operations of Cabot Oil & Gas in Dimock, Pennsylvania as an object lesson. The Cornell study summarizes the proposed regulatory obligations DEC sets forth in the draft Supplemental Generic which include, among other things,  protecting water resources such as New York’s portion of the Great Lakes Basin;  reviewing permits for equipment and structures that might disturb surface water bodies such as rivers and streams or potentially impact aquatic wetland and terrestrial habitats and water quality;  impacts to wetlands; aquifer depletion arising from proposed groundwater withdrawals for high-volume hydraulic fracturing; reviewing major water withdrawals and approved diversions in the Great Lakes-St. Lawrence River Basin under the Great Lakes-St. Lawrence River Water Resources Compact; comprehensive storm water pollution prevention plans and review of permits to address storm water runoff and storm water discharges; industrial activities, including addressing potential sources of pollution and determining when drilling and hydraulic fracturing operations are completed; surface spills and releases at the Well Pad; drilling rig, fuel and tank refueling activities; groundwater impacts associated with well drilling and construction;  private water well testing;  infrastructure control from waste transport to road spreading; and, not least, protecting New York City’s subsurface water supply infrastructure. The import  of the Cornell Law School study is that New York can build an elaborate regulatory scheme designed to protect the environment, but unless there are enough of the right people to enforce the regulations and ensure that they are being rigorously adhered to, the regulations do not amount to much. 

Environmental groups and proponents of economic development and natural gas exploration are on a collision course of competing economic and environmental interests involving an enormous untapped reservoir of natural gas in the Marcellus Shale Formation. That the Marcellus Shale Formation lies in part across economically depressed regions in upstate New York and Pennsylvania, in urgent need of  an economic boost,  only adds fuel to the dispute. At the heart of the controversy lies the New York City watershed, pristine waters in upstate New York  counties that provide the drinking water for millions of people in New York City. The Marcellus Shale Formation sits underground and stretches southwest from New York through Pennsylvania, and into West Virginia and Ohio. According to experts at Penn State University, the Marcellus Shale Formation is the largest known shale deposit in the world. Recently developed extraction techniques in horizontal drilling and hydraulic fracturing are expected to provide an additional boost to the productivity of Marcellus gas wells. Terry Englander, a geoscience professor at Penn State University, estimates that recoverable reserves in Marcellus Shale could be as high as 489 trillion cubic feet! The Draft 2009 New York State Energy Plan recognizes the great potential benefit to New York from development of the Marcellus Shale natural gas resource. But what environmental safeguards should accompany this monumental enterprise?

On December 23, 2009, the New York City Department of Environmental Protection (“DEP”) (not to be confused with theNew York State Department of Environmental Conservation or "DEC"),  called for a prohibition on natural gas drilling in the New York City watershed, urging that, “[N]natural gas drilling and exploration are incompatible with the operation of New York State’s unfiltered water supply system and pose unacceptable risks for more than nine million New Yorkers in this City and State.” According to DEP’s Final Impact Assessment Report, drilling in the watershed requires invasive industrialization and would create a substantial risk of chemical contamination and infrastructure damage. In particular, the DEP’s report singled out the high-volume hydrofracking and horizontal drilling as posing significant environmental risks. Clearly, measures will be taken to protect the watershed, but the devil will be in the details.  A Congressional Research Service report, released on September 9, 2009, examines gas drilling in the Marcellus Shale region.  The report acknowledges that groundwater contamination from improper drilling and casing is a risk.  Water sources in New York listed as "primary" or "principal" aquifers may be at risk, according to the report, due to the permeable "unconsolidated sand and gravel deposits" in northern Pennsylvania and southern New York because of short distances from the land surface to the water table. 

Virtually everyone believes that it is good public policy to encourage the recycling of old electronic products, including computers, cathode ray tubes, televisions, printers and portable music devices.  Nearly 20 states have e-waste laws on the books.  However, New York City recently enacted an e-recycling law (over Mayor Bloomberg's veto), the first municipality in the United States to do so, that is so overly aggressive and costly that trade associations for the electronics industry have filed suit to block the law's implementation.  Under the law, if a television manufacturer is apprised, for example, that a homeowner on East 87th Street is desirous of recycling his 15 year old television, the manufacturer is required to make a special trip to pick it up on East 87th Street, regardless of the fact that the cost of this pick-up may be prohibitively expensive and  was never factored into the cost of the television when it was sold for $279.99 at Best Buy in 1994.  Worse, if the television is an "orphan", for whom no manufacturer currently doing business can be identified, there is still an obligation to drive up to East 87th Street and haul it away.  My own Sony Trinitron is more over 15 years old having provided me with flawless service from the day I brought it home from The Wiz in Herald Square.  But I hardly expect Sony to drive to my house to pick it up all these years later!  For goodness sakes!  It's a television set, not a hazardous CERLCA waste!  This law appears to confuse the CERLCA statute, which holds generators of waste responsible for their disposal practices years after the fact, and the sale of a useful product, such as a television.  A worthwhile discussion of the dispute, with some helpful background links, can be found in Meline MacCurdy's article of Aug. 12, 2009 in the Marten Law Group's Environmental News titled, "Electronic Manufacturers Challenge New York City E-Waste Law."

The electronic industry alleges that this program will cost manufacturers over $200,000,000 per year and that, on a per pound basis, the cost of collection alone will be ten times more expensive that the total cost of collection and recycling in California and Maine, two states that have promulgated e-recycling statutes.  Among other arguments, the manufacturers allege that the NYC statute violates the equal protection clause of the Constitution by targeting only certain types of electronic equipment while excluding other electronic equipment containing the same types of potentially harmful substances, and constitutes a regulatory taking and violates the manufacturers' substantive due process rights.    Some e-recycling advocates and environmentalists are concerned that this lawsuit may represent the first step of an attempted roll-back by industry of the e-recycling strides made in other states.  The Electronic TakeBack Coalition, whose motto is "Take it Back, Make it Green, Recycle Responsibly," has issued a call-to-arms on its web-site, "Electronic Industry Attacks Product Stewardship with Lawsuit in New York City". If interested in reviewing the pleadings filed in the lawsuit, the Electronic TakeBack Coalition web-site is a great resource.  Unfortunately, this entire controversy does nothing to advance the cause of e-recycling.  If the New York legislature enacted a state-wide e-recycling measure, which is what is needed here,  NYC could gracefully withdraw from the fray by rescinding its Draconian measure and permit the state legislation to  take effect. 

At last night's Spring Gala for the New York League of Conservation Voters ("NYLCV"), former New York Governor George Pataki and Mayor Michael Bloomberg received well-deserved standing ovations from both environmental activists and business leaders for their truly heroic accomplishments on the tough environmental issues New York faces.  It is rare that I come home completely inspired and renewed after listening to speeches, but that is precisely how Mr. Pataki and Mr. Bloomberg made me feel.  Based upon his exemplary record as New York's governor, Mr. Pataki should give consideration to running for the U.S. Senate seat left vacant when Senator Clinton became Secretary of State.  Senator Kirsten Gillibrand is terrific (she delivered last night's keynote address), but she would be challenged to match Mr. Pataki's charisma and his record.  The prospect of having the strongest environmental governor in New York's history representing the State in the Senate, particularly on the Republican side of the aisle, would be potentially transformative were Mr. Pataki to bring to Washington the passion for the causes he championed in  Albany.  Paul Elston, NYLCV's Founding Board Chair, was right when he said last night that George Pataki forced environmentalists to change how they dealt with politicians.  Previously, environmentalists prodded the politicians to adopt pro-environmental policies.  After Mr. Pataki became governor, environmentalist had to run just to keep up with Mr. Pataki's broad-based initiatives, according to Mr. Elston.  Mr. Pataki's legacy resides in every sip of water New Yorkers drink (because of his historic efforts to protect the upstate watershed as a pristine source of our water) and in every breath of air public school children inhale (due to Clean Air/Clean Water Bond Act funds used to replace out-dated and dangerous coal-burning furnaces in the City's schools.