Blasland, Bouck & Lee, Inc. v. City of North Miami, 00-14975.

• Decision Date: 01 March 2002
• Docket Number: No. 00-14975.,00-14975.
• Citation: 283 F.3d 1286
• Parties: BLASLAND, BOUCK & LEE, INC., a New York Corporation, Plaintiff-Counter Defendant-Appellee-Cross-Appellant, v. CITY OF NORTH MIAMI, a municipal corporation of the State of Florida, Defendant-Counter-Claimant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

283 F.3d 1286

BLASLAND, BOUCK & LEE, INC., a New York Corporation, Plaintiff-Counter Defendant-Appellee-Cross-Appellant, v. CITY OF NORTH MIAMI, a municipal corporation of the State of Florida, Defendant-Counter-Claimant-Appellant-Cross-Appellee.

No. 00-14975.

United States Court of Appeals, Eleventh Circuit.

March 1, 2002.

COPYRIGHT MATERIAL OMITTED

Earl G. Gallop, Nagin, Gallop & Figueredo, P.A., Miami, FL, Ridgway M. Hall, Jr., Crowell & Moring, Washington, DC, for City of North Miami.

Evan M. Goldenberg, Kirk L. Burns, White & Case, LLP, Miami, FL, for Blasland, Bouck & Lee.

Appeals from the United States District Court for the Southern District of Florida.

Before CARNES, BARKETT and KRAVITCH, Circuit Judges.

CARNES, Circuit Judge:

The City of North Miami hired Blasland, Bouck and Lee (Blasland), an environmental engineering firm, to clean up a polluted parcel of land owned by the City. The City was required to clean up the land by a consent decree it had entered into with the United States Environmental Protection Agency in settlement of a lawsuit the EPA had brought against the City under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 et seq. Midway through the cleanup job, the City terminated Blasland's contract. Blasland believed that the City had terminated the contract without cause and had failed to pay all the money owed under the contract; the City believed that Blasland was not entitled to payment because it had been negligent in doing the work. This litigation is the fruit of their disagreement.

Blasland sued the City to recover the money owed under their contract, asserting theories of recovery that included breach of contract and CERCLA cost recovery. The City counterclaimed for professional negligence, breach of contract, and CERCLA contribution. All of the claims but the CERCLA claims were tried to a jury, which found in favor of Blasland on its breach of contract claim and in favor of the City on its professional negligence (malpractice) and breach of contract counterclaims. The CERCLA claims were then tried to the court, which ruled in favor of Blasland and against the City. That ruling provided an alternate ground of support for the damage award the jury had returned for Blasland, but it did not add to the total award. After the verdicts, the court also ordered that the City's counterclaim award be set off by amounts the City had recovered in a previous CERCLA contribution suit against the companies that had shipped the waste to the landfill. That setoff reduced the City's counterclaim award to zero, and the court entered judgment for Blasland in the full amount awarded it by the jury, plus prejudgment interest on that amount.

The City appeals, raising three points of error. Blasland cross-appeals, raising its own four points of error, including one point that requires us to confront an issue of first impression in this circuit about the availability of defenses to a CERCLA suit. For the reasons discussed below, we affirm in part, reverse in part, and remand.

I. BACKGROUND

A. FACTS

In 1970 the City acquired a tract of land along Biscayne Bay. In 1972 it leased the land to a private company, Munisport Incorporated, for development as a golf complex, and then in 1974 it amended the lease to allow the site to be used as a landfill. Solid waste was dumped at the Munisport site from 1974 to 1980. In 1983 EPA put the site on its National Priorities List¹ of hazardous release sites and conducted a series of studies that revealed that the buried waste was decomposing and causing ammonia to leach into the underlying groundwater. That contaminated ground-water was, in turn, polluting an adjacent mangrove preserve in Biscayne Bay.

In 1990 the EPA compiled the results of its studies in a Record of Decision document, developed a cleanup plan for the site, and filed a CERCLA complaint against the City to force it to clean up the Munisport site. The EPA and the City settled that suit by a consent decree, under which the City agreed to clean up the Munisport site according to the EPA plan in return for the EPA's covenant not to sue. Attached to the consent decree was a document, called a Scope of Work, that outlined the EPA's vision of how the City should study the pollution problem, design a more detailed cleanup plan, and put that plan into effect. The EPA plan required the City to: 1) breach a causeway between the adjacent mangrove preserve and Biscayne Bay, allowing more tidal circulation into the preserve; 2) construct groundwater-pumping wells at the borders of the landfill to intercept contaminated water before it entered the preserve, thereby forming a "hydraulic barrier" between the site and the preserve; 3) construct a treatment system for the intercepted groundwater; and 4) perform the hydrogeological studies necessary to design the hydraulic barrier and treatment system.

At roughly the same time as it settled the EPA suit, the City entered into an agreement with the Florida Department of Environmental Regulation (DER), under which the Department agreed to reimburse the City for the study and cleanup of the pollution at the Munisport site, and the City agreed to cleanup the landfill and then close it. DER's payment was conditioned on its approving the cleanup work, and its approval was neither conditioned on nor triggered by EPA approval.

In July 1992 the City hired Blasland, an engineering firm, to do the studies and coordinate the cleanup work at the site.² The City-Blasland contract provided that Blasland's work must be done to the satisfaction of both EPA and DER, and it specifically referenced the terms of both the consent decree and the agreement between the City and DER. By referencing the consent decree, the contract incorporated the terms of the attached Scope of Work. The Scope of Work laid out a multi-step process for studying the contamination problem and then designing and implementing a solution. EPA approval was necessary at each step. The City was required to cure any deficiencies identified by the EPA, which had authority to order the City to redo any study or test that the EPA judged had not been properly performed.

The contract between Blasland and the City contained a "pay-when-paid" clause in recognition of the fact that the City was depending on reimbursement from DER to pay Blasland for the cleanup work. Under the pay-when-paid clause, the City only became obligated to pay Blasland on a given invoice after DER had cleared that invoice and reimbursed the City for it.

Payment for the main cleanup job was to be a fixed price of $1.4 million. In addition, the contract included an extra-work clause, under which the City could have Blasland perform additional "out of scope" tasks at the site that were not part of the EPA cleanup. Payment for those tasks was to be based on Blasland's normal hourly rate.

While Blasland was coordinating the CERCLA-cleanup work, it was also doing other work at the site under the contract's extra-work clause. In particular, one extra task Blasland performed was supervising another contractor's placement of fill dirt at the site. Unfortunately, that contractor illegally dumped fill into wetlands, causing additional cleanup costs and prompting notices of violation from federal and state agencies.

The primary work under the contract, however, was the "in scope work" of cleaning up the Munisport landfill according to the EPA plan. Once the City and Blasland signed the contract, Blasland began work on that job, with the EPA providing oversight to assess compliance with the consent decree and its Scope of Work. The first few phases of the plan went through without a hitch, as Blasland devised a plan to study the pollution, conducted studies, and began using the studies to develop a plan for the actual cleanup work. Problems arose, however, in the design of the planned hydraulic barrier. To build that barrier, Blasland first had to conduct a "pump test" to determine how many pumps it would need to effectively prevent water from seeping into the mangrove preserve. Blasland deficiently performed one of the pump tests,³ and then it used the results of that test to design of the barrier. The EPA deemed that design unacceptable, and it sent Blasland and the City a letter identifying deficiencies in the design and instructing the City to revise its cleanup plan.

In June 1995, approximately one month after the EPA instructed the City to revise the plan, the City terminated Blasland's contract. The City refused to pay Blasland for some of its work, which the City claimed had been improperly invoiced. About three-quarters of the work for which the City refused to pay was out-of-scope work.

The City then replaced Blasland with another firm, Secor International, which prepared and implemented its own cleanup plan for the site. In September 1997, the EPA amended its Record of Decision document to one of "No Further Action," meaning that no further cleanup work at the site was required of the City, and in 1999 the site was removed from the National Priorities List.

While it was having the site cleaned up by Blasland, and then by Secor, the City also sought to recover the costs of that cleanup from those who had caused the pollution in the first place. In 1992, soon after signing the consent decree with the EPA, the City brought a CERCLA contribution lawsuit against the former operators of the landfill, seeking to recover "the past and future costs associated with the cleanup and remediation" of the site. City of North Miami v. Berger, 828 F.Supp. 401, 403 (E.D.Va.1993). The City settled that case, receiving from the defendants $900,000 and title to a tract of land.

Later, in 1995, the City brought a second CERCLA contribution lawsuit, this time against the towns and companies that had sent their garbage to the landfill. See City of North Miami v. A&E Constr., Inc., No....