105 Mt. Kisco Assocs. LLC v. Paul Carozza, Richard's Lumber & Bldg. Materials Ctr., Inc.

• Decision Date: 30 March 2017
• Docket Number: No. 15 Civ. 5346 (NSR),15 Civ. 5346 (NSR)
• Parties: 105 MT. KISCO ASSOCIATES LLC, AMANDA'S LANE LLC, and MARK STAGG, Plaintiffs, v. PAUL CAROZZA, RICHARD'S LUMBER & BUILDING MATERIALS CENTER, INC., CANRAD as successor to CANADIAN RADIUM & URANIUM CORP., VILLAGE OF MOUNT KISCO, MT. KISCO URBAN RENEWAL AGENCY, WESTCHESTER COUNTY DEPARTMENT OF HEALTH, UNITED STATES, TELEDYNE ENVIRONMENTAL, INC. as successor to ISOTOPES INC., WESTWOOD NUCLEAR CORP. as successor to ISOTOPES INC., NDL ORGANIZATION, INC., as successor to NUCLEAR DIAGNOSTICS LABORATORIES, INC., MERRITT ENVIRONMENTAL CONSULTING CORP., DOES 1 through 50, and DOES 51 through 100, Defendants.
• Court: U.S. District Court — Southern District of New York

105 MT. KISCO ASSOCIATES LLC, AMANDA'S LANE LLC, and MARK STAGG, Plaintiffs,
v.
PAUL CAROZZA, RICHARD'S LUMBER & BUILDING MATERIALS CENTER, INC.,
CANRAD as successor to CANADIAN RADIUM & URANIUM CORP., VILLAGE OF MOUNT
KISCO, MT. KISCO URBAN RENEWAL AGENCY, WESTCHESTER COUNTY
DEPARTMENT OF HEALTH, UNITED STATES, TELEDYNE ENVIRONMENTAL, INC. as
successor to ISOTOPES INC., WESTWOOD NUCLEAR CORP. as successor to ISOTOPES
INC., NDL ORGANIZATION, INC., as successor to NUCLEAR DIAGNOSTICS LABORATORIES,
INC., MERRITT ENVIRONMENTAL CONSULTING CORP., DOES 1 through 50, and
DOES 51 through 100, Defendants.

No. 15 Civ. 5346 (NSR)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 30, 2017

OPINION & ORDER

NELSON S. ROMÁN, United States District Judge

Plaintiffs 105 Mt. Kisco Associates LLC ("105 Mt. Kisco Associates"), Amanda's Lane LLC ("Amanda's Lane") and Mark Stagg ("Stagg") (collectively, "Plaintiffs") bring this action pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et. seq., against Defendants Paul Carozza ("Carozza"); Richards Home Center & Lumber, Inc.; Village of Mount Kisco (the "Village"); Mt. Kisco Urban Renewal Agency ("MKURA"); Westchester County Department of Health ("WCDOH"); the United States;

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Teledyne Environmental Inc. ("Environmental") as successor to Isotopes, Inc.; Canrad as successor to Canadian Radium & Uranium Corp.; Westwood Nuclear Corp. as successor to Isotopes, Inc.; the NDL Organization as successor to Nuclear Diagnostics Laboratory, Inc.; Merritt Environmental Consulting Corp. ("Merritt"); DOES 1 through 50 and DOES 51 through 100, in connection with the contamination of real property located at 105 Kisco Avenue, Mt. Kisco, New York ("the Property" or "105 Mt. Kisco"), the purchase of said Property and the operating agreement for an LLC related to the Property. Before this Court are motions to dismiss filed by Defendants WCDOH, the Village of Mount Kisco/MKURA, Paul Carozza, and Teledyne/Environmental Inc. as successor to Isotopes Inc., and a motion to dismiss or for summary judgment and sanctions by Defendant Merritt. For the following reasons, Defendant WCDOH's motion is GRANTED in part and DENIED in part, Defendant Village/MKURA's motion to dismiss is GRANTED in part and DENIED in part, Defendant Carozza's motion to dismiss is GRANTED in part and DENIED in part, Defendant Merritt's motion is GRANTED in part and DENIED in part, and Defendant Environmental Inc.'s motion is GRANTED.

BACKGROUND

The following facts are derived from the Amended Complaint, and unless otherwise noted, and are accepted as true for purposes of this motion. Given the extensive facts in this case, only those relevant to these motions are included here.

105 Mt. Kisco "has a long history of radiological contamination stemming from the Property's involvement in the Manhattan Project during World War II." (Am. Compl. ("FAC") ¶ 6, ECF No. 86.) The Property was first contaminated as a result of the operation of a uranium and radium processing facility (the "Refinery"), which provided the United States with materials to create the first atomic bomb. (Id. ¶¶ 72-74.) This Refinery, located on and around the Property,

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was opened by Defendant Canrad in 1942. (Id.) Uranium residues were processed at the Refinery, and "materials recovered at the refinery included radium, radium-D, polonium and actinium, which are all highly radioactive substances." (Id. ¶¶ 78-80.) As a result of the "waste inherent in the uranium production processes," radiological contamination was located throughout the Refinery and in other areas. (Id. ¶ 85.)

After World War II, Canrad began to produce commercial quality radium and uranium at the Refinery for instruments and other products at the Refinery. (Id. ¶ 87.) Throughout the 1940s and 1950s, the government noted "deplorable conditions at the Refinery," which led to high exposure rates among employees. (Id. ¶¶ 88-89.) In 1958, Canrad began recovery operations, or clean-up, after the NYSDOH directed it to dispose of radioactive waste originating on the Property, which included multiple recovery operations from 1958 to 1966. (Id. ¶¶ 91-92.) However, Canrad failed to decontaminate the Property. (Id. ¶ 92.)

In 1966, Defendant MKURA purchased the Property, as well as the adjoining 103 Kisco Avenue, with the intention of rehabilitating it and returning it to the market. (Id. ¶¶ 93-94.) MKURA owned and operated 105 Mt. Kisco and oversaw remediation, removal and disposal efforts, including the demolition of the Refinery. (Id. ¶¶ 95.) MKURA coordinated with Defendant WCDOH in November 1966 to expedite the demolition of the Refinery and decontamination of the Property, and as a result, released radioactive materials over the Property and contaminated previously clean areas. (Id. ¶¶ 95-97.) This release and distribution of radioactive materials occurred because of "grossly negligent demolition of the Refinery, construction of the adjacent Railroad Avenue and disposal of waste from" the Property, carried out by MKURA, WCDOH, "and/or" the Village of Mount Kisco. (Id. ¶ 99.) Although, as Plaintiffs allege "at all relevant times," during the demolition and construction the Property was

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owned and operated by MKURA (Id. ¶ 100) the Village of Mount Kisco arranged for and directed the construction of Railroad Avenue, which further released and dispersed radioactive materials throughout the Property. (Id. ¶ 101.) Defendant Teledyne ("and/or" Westwood) contracted with MKURA, WCDOH, "and/or" the Village of Mount Kisco to dispose of contaminated material from the former Refinery site. (Id. ¶ 103.) Teledyne and/or Westwood contaminated the Property when it failed to dispose of large amounts of contaminated soil which was released and spread throughout the Property. (Id.) Additionally, surveys conducted by WCDOH, NYSDOH, and other entities indicate that residual hot spots of radium existed in parts of the Property even after various attempts to rehabilitate the Property throughout 1970 by MKURA and the Village of Mount Kisco. (Id. ¶ 106.)

From the late 1970s onward, local, state, and federal agencies investigated, discovered, and reported on harmful contaminates at the Property. (Id. ¶ 108.) In 1980, the WCDOH reviewed the Property and confirmed new areas of contamination. (Id. ¶ 109.) In 1993, the NYSDOH, in coordination with the WCDOH, completed a survey of the Refinery site and identified multiple hot spots that existed throughout the Property. (Id. ¶ 110.) In 1994, the EPA conducted an on-site inspection to measure radon levels and exposure rates and to collect samples, and observed "elevated" radioactive exposure rates on the Property. (Id. ¶ 111.) Another report of the Property issued by another governmental entity in 1998 stated that radioactive materials were present in other areas owned and controlled by Carozza and his partner. (Id. ¶¶ 113-116.) No further state or federal reviews were initiated until 2013. (Id. ¶ 116.)

In 1980, Defendant Carozza began to operate Defendant Richard's Lumber (a lumber and hardware store located on the Property), located on the Property, and owned and operated Richard's Lumber from 1993 until 2012, exercising complete and unfettered control and dominion

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over it. (Id. ¶¶ 117-118.) During the thirty-two years of operation and ownership, Carozza oversaw disposal, release, and removal of radioactive soil and substances from the Property. (Id. ¶ 119.) Defendants Carozza's and Richard's Lumber's regular disturbance, release, and disposal of radioactive soil further contaminated and damaged the Property. (Id. ¶ 120.) Defendant Carozza also arranged for the removal of contaminated soil from the Property, further dispersing and releasing radioactive materials throughout the Property as noted in various governmental reports. (Id. ¶ 121.)

In fact, as a result of a 1993 letter from the New York State Department of Environmental Conservation ("NYSDEC"), which identified the possible contamination of the Property, Richard's Lumber commenced a lawsuit against the Village/Town of Mt. Kisco, alleging that the Village failed to disclose the contamination to Richard's Lumber when it negotiated a lease agreement. (Id. ¶ 122.) During that litigation, Carozza submitted an affidavit, stating that he only learned of the radiation "hot spots" on the Property in 1993, after he had already leased the Property, and that Richard's Lumber would not have leased the Property had it known it could not disturb the soil for the purposes for which it was rented. (Id. ¶¶ 123-124.) Carozza was thus fully aware in 1993 of contamination on the Property. (Id. ¶ 126.)

Additionally, in 1998, Carozza's business partner in Richard's Lumber attended a meeting with members from various governmental entities and the Village of Mt. Kisco to discuss a survey issued that year by the NYSDEC, and possible remediation at the Property. (Id. ¶ 127.) Plaintiffs allege that Carozza's partner kept Carozza apprised of all information communicated to him at that

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meeting by the government agencies regarding the radioactive contamination at the Property. (Id. ¶ 128.)

As to the fraud allegedly committed by Carozza, in late summer 2012, Carozza informed Plaintiff Stagg, who later became Carozza's co-member in 105 Mt. Kisco Associates LLC, that Richard's Lumber was in dire straits because it had defaulted on its mortgage for the Property, and the Local Teamsters Union had outstanding judgments against Richard's Lumber for more than $200,000. (Id. ¶ 133.) Plaintiffs allege that Carozza "schemed to draw Stagg into a partnership, offload the Property" and satisfy the mortgage and debts, recognizing that Stagg would never purchase property contaminated by radioactive materials. (Id. ¶¶ 135-136.) Without knowledge of the radioactive contamination, Stagg decided to partner with Carozza. (Id. at 139.) Together, Stagg and Carozza formed two LLCs,...