INTEGRATED WASTE SERV. v. AKZO NOBEL SALT

• Citation: 921 F. Supp. 1037
• Decision Date: 16 April 1996
• Docket Number: No. 95-CV-6247L.,95-CV-6247L.
• Parties: INTEGRATED WASTE SERVICES, INC. and Bear Development Company, Inc., Plaintiffs, v. AKZO NOBEL SALT, INC., f/k/a Akzo Salt, Inc., Defendant.
• Court: U.S. District Court — Western District of New York

921 F. Supp. 1037

INTEGRATED WASTE SERVICES, INC. and Bear Development Company, Inc., Plaintiffs, v. AKZO NOBEL SALT, INC., f/k/a Akzo Salt, Inc., Defendant.

No. 95-CV-6247L.

United States District Court, W.D. New York.

April 16, 1996.

COPYRIGHT MATERIAL OMITTED

Stephen F. Szymoniak, Donald G. McGrath, Falk & Siemer, Buffalo, NY, for plaintiffs.

Kenneth A. Payment, Rochester, NY, for defendant.

DECISION AND ORDER

LARIMER, Chief Judge.

This is a diversity action brought by Integrated Waste Services, Inc. ("IWS") and Bear Development Company, Inc. ("Bear") against Akzo Nobel Salt, Inc. ("Akzo"). Plaintiffs assert claims for negligence, strict liability for conducting an abnormally dangerous activity, nuisance, and trespass, all in connection with certain salt-mining activities undertaken by Akzo. Akzo has moved for summary judgment.

BACKGROUND

The parties in the instant case were also parties, or are the successors to parties, in a prior case before this court, International Salt Co. v. Geostow, 87-CV-1501L. Akzo, which was then known as International Salt Company,¹ sought a declaration of its rights under certain deeds to the use and ownership of the mining or containing chamber created by its salt mining operation in Retsof, New York. The defendants in that case included surface owners and other parties who had acquired the surface owners' purported possessory interests in the chambers, which the latter parties planned to use to store incinerator ash.

In a Decision and Order entered on October 12, 1988, I granted partial summary judgment in favor of Akzo, and held that it was the owner in fee simple of all salt in the mine and that it presently had the exclusive right to use and enjoy the chamber created by the mining operations. International Salt Co. v. Geostow, 697 F.Supp. 1258, 1270 (W.D.N.Y.1988). I also held, however, that Akzo did not have a fee simple absolute estate in the containing chamber created by the extraction of salt. Id. On cross-appeals by both sides, the Second Circuit affirmed. International Salt Co. v. Geostow, 878 F.2d 570 (2d Cir.1989).²

Although the issue of the surface owners' rights was not squarely presented in International Salt, both my decision and that of the Court of Appeals indicated that the right to possession of the mining chambers would revert to the surface owners when the salt in the mine was completely exhausted, or when Akzo abandoned the mine. See 697 F.Supp. at 1298; 878 F.2d at 576.

On March 1, 1992, Bear (which had been one of the defendants in International Salt), along with IWS, which is an affiliate of Bear, and several other parties entered into an agreement with Akzo ("the Agreement"). Bear and the other parties ("the sellers") had previously purchased some of the surface owners' rights in the mining chambers. Although Akzo had a present possessory interest in the chambers, then, the sellers owned interests in the chambers that would become possessory upon the exhaustion or abandonment of the mine.

The Agreement concerned a plan to use the mining chambers for commercial ash disposal. The nature of Akzo's and the sellers' respective interests in the mining chambers required some kind of joint undertaking between them for this project. Neither Akzo nor the sellers could store ash in the cavities without obtaining the other's consent or by acquiring the other's rights. Akzo could not store ash on its own because its possessory right was only for the purpose of mining salt, not for other operations. The sellers could not store ash in the cavities because they had no present right of possession at all.

Under the Agreement, Akzo received an option to buy the seller's interests in the property for use in an ash-disposal project. In exchange for the option, Akzo agreed to make mortgage payments on the property until the closing date of the purchase, or, if the purchase was not consummated, until the Agreement expired or was terminated. If Akzo exercised its option and the project went forward, Akzo agreed to pay IWS royalties once ash disposal began.

In March 1994, a portion of the mine collapsed, and water began entering the mine, eventually at the rate of millions of gallons per day. Although mining has continued in other parts of the mine, eventually the entire mine will fill with water and become unusable.

When the mine collapsed, therefore, the plans for the ash-disposal project collapsed as well. Accordingly, on February 27, 1995, Akzo terminated the Agreement.

There does not appear to be any dispute that Akzo had an absolute contractual right to terminate the Agreement. The Agreement set certain conditions for the setting of a closing date. See Agreement (Def.Ex. B) §§ 10.09, 10.10. As of the closing, the sellers' obligation to sell their interests, and Akzo's obligation to buy those interests, would take effect. Id. The closing date could not be set, however, until Akzo notified an escrow agent that it had "elected to proceed to the Closing ..." Agreement § 9.03(b). Akzo was not required to proceed to the closing at any time, however.

Several other parts of the Agreement make clear the very limited nature of Akzo's obligations. Most notably, § 11.01 stated that "prior to the Closing Date the Purchaser Akzo may terminate this Agreement for any reason by delivering to Sellers and the Escrow Agent a written notice signed by a duly authorized officer of Purchaser that Purchaser has elected to terminate this Agreement." The Agreement would also terminate automatically after five years if Akzo notified the sellers that it did not want to renew the Agreement. Agreement § 11.02. If termination occurred for either reason, § 11.04 provided that "the parties shall be relieved of all obligations hereunder except as set forth expressly herein."

In addition, Akzo's obligation to make royalty payments was conditioned upon Akzo's commencement of operations of the storage facility, which was left to Akzo's "sole discretion and without obligation ..." to do so. Agreement § 3.01. Similarly, Akzo had no obligation to exercise its option to purchase the sellers' rights unless it commenced operation of the facility before termination of the Agreement. Agreement § 3.01(d).

The Agreement further stated that Akzo would not bear the risk of loss to the property by reason of any casualty in the event that it did not take title to the property, and "that nothing in this Agreement shall impose any obligation on Purchaser to repair or restore the Property or the Option Property or otherwise remedy such a loss." Agreement § 8.01.

Akzo's termination of the Agreement, then, was clearly permitted by the terms of the Agreement, and plaintiffs do not assert any claims for breach of contract. Instead, Bear and IWS allege that Akzo is liable to them for damages on theories of negligence, strict liability based on conducting an abnormally dangerous activity, nuisance, and trespass. The gist of their claims is that Akzo caused plaintiffs to lose their "cavity rights" and profits from the ash-disposal project, and that Akzo damaged surface property owned by Bear.

Akzo moves for summary judgment, principally on two grounds: (1) Akzo had no duty to preserve the mine cavities for plaintiffs' use; and (2) plaintiffs' claimed damages are too speculative.

DISCUSSION

I. Akzo's Alleged Duty to Preserve the Cavities

In International Salt, both this court and the Court of Appeals noted that the original grant to Akzo gave it a right to mine "by any subterranean process," which implicitly encompassed processes that, for technological reasons, might not become available until some time in the future. See 697 F.Supp. at 1270; 878 F.2d at 576. Akzo asserts that in accordance with that right, it could have used a method of mining that would have destroyed the cavities. For example, Akzo states, it could have employed "solution mining," in which the salt is dissolved with water and flushed out of the cavities. According to Akzo, the flushed-out water is then evaporated to recover the salt, but the cavities remain filled with water. Since Akzo could rightfully have destroyed the cavities in such a manner, Akzo argues, it could not have had a duty to preserve the cavities for future use by defendants.

Plaintiffs dispute this argument on several grounds. First, they assert that destruction of the cavities would cause surface damage, which Akzo admits it had no right to do. Second, plaintiffs contend that International Salt's references to the right to mine by "any" methods simply meant that Akzo could retain possession of the cavities as long as there were possible present or future methods to extract the salt, not that Akzo could destroy the mining chambers.

Plaintiffs also maintain that under International Salt, they had a property interest in the cavity, even if they could not yet enjoy that interest. They argue that Akzo therefore had a duty of care not to destroy the areas in which plaintiffs had a future interest. Plaintiffs contend that there are factual issues concerning whether Akzo breached that duty through its negligent mining methods.

After reviewing the applicable case authority and considering both sides' contentions, I find that Akzo had no duty to maintain or preserve usable subterranean chambers. Plaintiffs' claims therefore fail.

The original grantors conveyed a fee simple absolute interest in salt. International Salt, 697 F.Supp. at 1269. They did not convey a fee interest in the space containing the salt, although Akzo's interest in the salt was accompanied by a present and exclusive right of use and enjoyment of that space for mining purposes. Id. at 1270.

When the salt was exhausted, then, or when Akzo abandoned the mine, Akzo's interest would simply terminate. As I noted in International Salt, strictly speaking the containing chambers would not "revert" to the surface owners because ownership of the chambers was never conveyed to Akzo. Id. at 1269 n. 11.

As...