Bank v. Thermo Elemental Inc.

• Decision Date: 16 June 2008
• Docket Number: SJC-09874
• Citation: 888 N.E.2d 897,451 Mass. 638
• Parties: Michael D. BANK & others,<SMALL><SUP>1</SUP></SMALL> trustees,<SMALL><SUP>2</SUP></SMALL> v. THERMO ELEMENTAL INC., & others.<SMALL><SUP>3</SUP></SMALL>
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

888 N.E.2d 897

451 Mass. 638

Michael D. BANK & others,¹ trustees,² v. THERMO ELEMENTAL INC., & others.³

SJC-09874

Supreme Judicial Court of Massachusetts, Middlesex.

Argued February 7, 2008.

Decided June 16, 2008.

C. Dylan Sanders & Lisa C. Goodheart, Boston, for the plaintiffs.

Jonathan Sablone (Marcus E. Cohn & J. Christopher Allen, Jr., with him), Boston, for the defendants.

The following submitted briefs for amici curiae:

Martha Coakley, Attorney General, & Seth Schofield, Assistant Attorney General, for the Commonwealth.

Stephen D. Anderson, Arthur P. Kreiger, & Douglas H. Wilkins, Cambridge, for Real Estate Bar Association for Massachusetts & another.

Michelle N. O'Brien, Boston, for LSP Association, Inc.

Present: GREANEY, IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.

BOTSFORD, J.

After trichloroethylene (TCE)⁴ was found in the groundwater beneath their property in Waltham, the plaintiff trustees of the Lincoln Street Trust (trustees; trust; the words are used interchangeably) undertook a response action pursuant to the Massachusetts Oil and Hazardous Material Release Prevention Act, G.L. c. 21E, eventually spending more than $800,000 in the effort. At issue in this case is the trustees' endeavor to recover the costs incurred in carrying out this response from the several entities that successively leased the property between 1963 and 1988, as well as from corporate parents of some of those entities. The trustees commenced this action in the Superior Court to accomplish the cost recovery; their claims under G.L. c. 21E, § 4, as well as a contract-based claim, were tried to a jury, and the trial judge thereafter tried jury-waived the various parties' claims to attorney's fees and costs under G.L. c. 21E, §§ 4A and 15. We conclude that, pursuant to the jury's verdict, the trustees are entitled to recover their response costs under G.L. c. 21E, § 4, and also in connection with their contract claim⁵; and that they are entitled to attorney's fees under c. 21E, § 15. We also conclude that none of the defendants is entitled to recover its litigation-related attorney's fees and costs under c. 21E, § 4A (f). We affirm in part and reverse in part the judgment entered in the Superior Court.⁶

1. Background. What follows is a brief summary of the factual background of the case and the proceedings in the Superior Court⁷; further details concerning the facts and prior proceedings are discussed in connection with particular issues raised.

The trust is the owner of an eleven-acre property on Lincoln Street in Waltham (the site, or the property). The entire beneficial interest of the trust is owned by the Middlesex Mutual Building Trust (MMBT). The trust leased the property seriatim to a number of different entities between 1963 and 1988 under the same lease agreement, which was dated August 2, 1963 (lease). At the outset of the lease term, the trustees built a two-story manufacturing facility on the site in accordance with the specifications of the original tenant, the Jarrell Ash Company (JAC), and during the twenty-five years the lease was in effect, the successive lessees manufactured scientific instruments on the site. The lease included a provision requiring the lessee to indemnify the trust from liabilities arising from the lessee's use of or activities on the property.

a. Corporate history. The various entities that operated on the site present a complicated corporate history. The first tenant, JAC, occupied and used the site from the commencement of the lease in August, 1963, to some time in 1968. In that year, JAC sold some of its assets to Fisher Scientific Company, a Pennsylvania corporation (Fisher Pennsylvania). Fisher Pennsylvania assumed the lease pursuant to a written assignment, and took over manufacturing at the site. In 1981, Fisher Pennsylvania was acquired by Allied Corporation (Allied).⁸ Allied formed a Delaware subsidiary and merged Fisher Pennsylvania into it, and the subsidiary then changed its name to Fisher Scientific Company (Fisher Delaware). In 1984, Fisher Delaware merged with Instrumentation Laboratory Inc. (IL Inc.). The new combined entity was renamed Allied Health & Scientific Products Company (AHSPC), and it remained a subsidiary of Allied. AHSPC continued to manufacture scientific equipment on the site.

In 1986, AHSPC sold its Jarrell Ash scientific instrumentation manufacturing business to Thermo Jarrell Ash Corporation (TJA),⁹ a subsidiary of Thermo Electron Corporation (Thermo Electron) that was created for purposes of completing the sale. AHSPC then assigned its interest in the 1963 lease to TJA. The asset purchase and closing agreement between AHSPC and TJA included an indemnification provision that allowed TJA to pass on to AHSPC any liability resulting from AHSPC's tenancy on the site. Shortly after the asset sale between AHSPC and TJA took place, AHSPC changed its name to Fisher Scientific Company (Fisher Delaware II), which remained a subsidiary of Allied.

In 1988, TJA signed a lease termination agreement (1988 agreement, or agreement) with the trustees that contained an indemnification provision in favor of the trustees. In the same year, TCE was discovered on the site. In 1991, Fisher Delaware II formed a subsidiary called Instrumentation Laboratory Company (IL Co.), which was sold later that year. Before the sale, Fisher Delaware II (formerly AHSPC) assigned to IL Co. the indemnity obligation that it owed to TJA under the 1986 asset sale agreement between AHSPC and TJA.

b. Discovery of TCE and ensuing response action. In 1985, the trust's beneficial owner, MMBT, commissioned an environmental consulting firm, Haley & Aldrich, to conduct a preliminary site investigation at the property. The investigation revealed some broken sewer lines, as well as past discharges of chemicals into the floor drains, but it did not uncover any evidence of a discharge of chemicals into the ground. In 1987, MMBT commissioned Haley & Aldrich to conduct an additional investigation of the site, and the 1988 report of that work concluded that TCE was present in groundwater at the site in concentrations above recommended levels. As the owners of the property and therefore a liable party under G.L. c. 21E, § 5 (a) (2), the trustees undertook a response action on the site pursuant to G.L. c. 21E, § 4. The response was not completed until 2000. The twelve-year effort spanned both the promulgation of the Massachusetts Contingency Plan in October, 1988, see 310 Code Mass. Regs § 40.006 (1988), and its revision in 1993, see 310 Code Mass. Regs. § 40.0005 (1995). The trust eventually spent more than $800,000 in consultant fees, drilling, and laboratory costs, including approximately $90,000 for response-related work conducted by the trust's attorneys. At the conclusion of the work, the Department of Environmental Protection (department) approved the trustees' conclusion that the amount of TCE on the site was sufficiently small that it did not need to be contained or removed.

The trustees believed that TJA was liable for the response costs under the indemnity provision in the 1988 agreement. Accordingly, beginning in 1989, Thomas M. Dusel, one of the trustees, kept Earl R. Lewis, then TJA's senior vice-president and later president, informed of the progress of the response action. In a 1989 letter, TJA informed Fisher Delaware II of the contamination found at the site and invoked Fisher Delaware II's obligation to indemnify TJA for any liability TJA had for the cleanup costs. The parties met at least twice to discuss the response costs, once in 1991 and once in 1992. In December, 1995, the trustees sent a letter setting out a formal demand for reimbursement of response costs under G.L. c. 21E, § 4A. The letter was sent to JAC, Fisher Delaware II, Allied,¹⁰ IL Inc., AHSPC, TJA, and Thermo Electron.¹¹ The recipients responded within the time required by § 4A (a),¹² and a meeting was held in April, 1996, to discuss the trustees' demand. The parties did not reach an agreement at the meeting, and no subsequent meeting was ever arranged. The trustees commenced this action in the Superior Court in June, 1996.

c. Procedural history. The trustees' original complaint named the eight recipients of the § 4A demand letter as defendants, and in an amended complaint filed in November, 1996, added IL Co. as a ninth defendant. The trustees included in their complaint claims against all defendants under G.L. c. 21E, §§ 4, 4A, 5, and 15, a request for declaratory relief to resolve liability for future response costs, and a breach of contract claim against TJA based on the indemnification provision in the lease termination agreement. In 1998, a judge in the Superior Court denied cross motions for partial summary judgment filed by TJA and the trustees on the breach of contract claim, ruling that the language of the indemnification provision in the lease termination agreement was ambiguous and a trial was required to establish its meaning. In 2000, a different Superior Court judge granted partial summary judgment with respect to some of the trustees' remaining claims under G.L. c. 21E. The judge ruled that all claims under G.L. c. 21E for response costs paid by the trustees before July 1, 1989, as well as the trustees' claims under c. 21E, § 5, were barred by the applicable statutes of limitations.¹³

The case was tried by a third Superior Court judge in two parts in 2002. In September, 2002, the trustees' claims to recover response costs pursuant to § 4 and to recover on the indemnity provision in the 1988 agreement were tried to a jury.¹⁴ The jury found that the trust did not cause or contribute to the release of TCE at the site, that Fisher Delaware II should bear a one hundred per cent equitable share of the response costs—which were determined to be $719,484.20—and that the trust should bear a zero per cent equitable share. The jury also found that under the 1988 agreement TJA had agreed to...