McLellan Highway Corp. v. U.S.
| Decision Date | 28 March 2000 |
| Docket Number | No. CIV. A. 98-12142-DPW.,CIV. A. 98-12142-DPW. |
| Parties | McLELLAN HIGHWAY CORPORATION, Plaintiff, v. UNITED STATES of America, United States Department of Defense, Department of the Navy, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Richard A. Johnston, Mark C. Kalpin, Hale & Dorr, LLP, Boston, MA, for plaintiff.
Andrew J. Doyle, Environment & Natural Resources Division, Henry T. Miller, Wealthia Rodriguez, Civil Division, United States Dept. of Justice, Washington, DC, for defendants.
Plaintiff McLellan Highway Corporation ("McLellan") brings this action against the United States under the Federal Torts Claim Act (FTCA) and Massachusetts state law for reimbursement of cleanup costs incurred on oil contaminated property previously owned and used by the Navy as a strategic fuel reservation in the 1940s and 1950s. The United States has moved for dismissal or, in the alternative, summary judgment. McLellan has cross-moved for partial summary judgment.
The United States owned eighty acres of property in East Boston known as the Naval Fuel Annex from 1942 to 1964. The United States Department of Defense, Department of the Navy (the "Navy") is alleged by Plaintiff to have committed the acts which form the basis of Plaintiff's complaint.
McLellan is incorporated under the laws of Massachusetts with its principal place of business in East Boston. (Compl.¶ 5.) McLellan owned approximately six acres of property located at 345-365 McClellan Highway in East Boston (hereinafter "the Site"). (Id. ¶ 11.) McLellan's corporate predecessor, East Boston Parking, Inc., purchased the Site in 1984 for $1 million from Grossman Industrial Properties, Inc. ("Grossman"). (Id. ¶¶ 5, 11-12.) McLellan sold the property in November 1997 for $3.5 million to Logaland Corp., a nonparty to this action. (United States' Statement of Undisputed Facts in Supp. Mot. to Dismiss or for Summ. J. ("United States 1st Facts"), Ex. 16 (Florence Dep.) at 62:13-19.)
The Navy acquired approximately eighty acres of property located in East Boston in 1942, by a declaration of taking for use as a strategic fuel reservation known as the Naval Fuel Annex. (Compl. ¶ 8; United States 1st Facts ¶ 2.) Fuel unloaded from Navy vessels was stored at the Naval Fuel Annex and later pumped through pipelines to Boston Harbor to refuel other naval vessels. (United States 1st Facts ¶ 3.) To carry out these operations, the Navy constructed nineteen underground fuel oil storage tanks, associated fill and transfer piping, steam heating pipes, and small above ground service buildings. (Compl. ¶ 9; United States 1st Facts ¶ 4; McLellan Statement of Undisputed Facts in Supp. Partial Summ. J. Motion ("McLellan 1st Facts") ¶ 2.)
In the mid-1950s, the Navy determined that the Naval Fuel Annex was no longer needed. Consequently, the facility was deactivated and reported to the United States' General Service Administration (GSA) as surplus property in December 1955. (Compl. ¶ 10; United States 1st Facts ¶ 6; Ex. 6 at 1.) The entire facility was shut down by November 1961. (United States 1st Facts ¶ 6.)
Shortly after its closing, the former Naval Fuel Annex was put up for sale by the GSA through a bidding process in which the facility was offered "as is" and without any express or implied warranties. (United States 1st Facts ¶ 7; Ex. 7 at BostAR 70.) In June 1964, GSA awarded the sale of the former Naval Fuel Annex to Grossman. (Compl. ¶ 11; United States 1st Facts ¶ 8.)
Grossman owned the property from 1964 to 1984. (United States 1st Facts ¶ 11.) In 1982, East Boston Parking, the corporate predecessor to McLellan, entered into an option agreement to purchase a portion of the former Naval Fuel Annex located at 345-365 McClellan Highway. (Id. ¶ 11; Ex. 13.) When East Boston failed to carry out the agreement, Grossman sued East Boston Parking in Suffolk Superior Court in 1983 for breach and sought specific performance on the agreement. (Id. ¶ 11; Ex. 14.) The litigation settled and East Boston Parking purchased the property for $1 million in 1984. (Id. ¶ 12.) As part of the sale, Grossman and East Boston Parking entered into an indemnity agreement in which Grossman agreed
to indemnify and hold East Boston harmless from and against all loss, cost, damage and expenses (including, without limitation, reasonable attorneys' fees) arising out of any claim against East Boston (including without limitation the defense thereof) resulting from releases of oil, hazardous materials, or any other illegal toxic substances from the premises during the period from January 1, 1941 through [May 1, 1984].
(Id., Ex. 18.) At the time of the purchase, East Boston Parking was aware that the Site had been part of the Naval Fuel Annex, but was allegedly unaware that the tanks and pipelines were still present underground at the Site. (McLellan 1st Facts ¶ 4, Ex. 1 ("Florence Aff.") ¶ 7.)
McLellan (f/k/a East Boston) intended to develop the Site as a commercial parking lot for nearby Logan International Airport. (McLellan 1st Facts, Florence Aff. ¶ 6.) To do this, McLellan needed a licensing permit from the City of Boston which could only be obtained by supplying a report from an environmental consultant stating the land was free of hazardous materials in compliance with Chapter 21E the Massachusetts Oil and Hazardous Material Release Act (MHRA). McLellan hired Goldberg-Zoino & Associates, Inc. (GZA), an environmental consulting firm to inspect the Site in 1984. (Id. ¶ 7; Ex. 7.) The report prepared by GZA notified McLellan of oil contamination on the Site. McLellan then undertook remediation efforts. Specifically, McLellan hired Euclid Associates, Inc. ("Euclid") in late 1985 to remove the tanks at the Site and remediate any environmental contamination that was present. (McLellan 1st Facts ¶ 7.)
Euclid's work was documented in reports by K.H. Lewis and Associates ("K.H.Associates"), another environmental consulting firm. (Id. ¶ 8.) McLellan filed those reports with the Massachusetts Department of Environmental Quality Engineering (DEQE).1 (Id.) In response to the submissions made by McLellan's environmental consultants, the DEQE in a letter dated July 31, 1987, issued a Notice of Responsibility to McLellan pursuant to Chapter 21E. (Id. ¶ 11; Ex. 11.) The letter notified McLellan that there was evidence of soil and groundwater contamination at the Site, and directed McLellan, as the current owner of the Site, to develop a remediation plan. (United States 1st Facts, Ex. 19.)
McLellan undertook further response actions to remediate the oil contamination at the Site. Those actions included pumping out the underground tanks, demolishing them to at or below grade, and filling the remaining areas with clean fill. (Compl.¶ 14.) In total, between 1984 and 1989, McLellan spent $831,641.60 for response actions at the Site. (Id. ¶ 18.)
On June 14, 1989, the DEQE sent a letter to McLellan informing it that "all the requisite site actions" had been completed at that time. (United States 1st Facts, Ex. 20.) The letter informed McLellan, however, that "the federal government, as part of their Defense Environmental Restoration Program, may be conducting its own investigation of the Old Naval Fuel Depot." (Id.) Accordingly, "the Department reserve[d] the right to allow the federal government to conduct a further assessment and/or any additional measures, as needed, as part of their investigation of the adjacent properties which comprise the Old Naval Fuel Depot." (Id.) (emphasis added).
The United States also received a Notice of Responsibility communication from the DEQE in 1987. (McLellan 1st Facts, Ex. 19.) Shortly thereafter, the United States responded that the existence of the Site was unknown until receipt of the DEQE letter. (Id., Ex. 20.) The Government went on to state that a project recommendation of the Site would be made to the Office of the Secretary of Defense by the end of 1987. (Id.) The United States Army Corps of Engineers ("the Corps") then began investigating whether the properties that were once part of the Naval Fuel Annex were eligible for federally funded and supervised remediation under the Defense Environmental Restoration Program (DERP), 10 U.S.C. §§ 2701-08, which became effective on or about 1984. (Id. ¶ 18.) The relevant eligibility requirements were:
(1) former use by the United States as a defense site;
(2) the existence of containerized hazardous and toxic waste; and
(3) no beneficial use of the tanks and pipelines by subsequent owners that would supersede the United States' responsibility under the DERP.
(Id. ¶ 18, Ex. 22 at 32:22-24, 33:1-24, 34:1-3.) In or about February 1990, the Corps found the former Naval Fuel Annex to be eligible under these criteria. (Id. ¶ 18, Ex. 23) In 1995, the Corps began conducting remediation on the Site. (Id. ¶ 19.)
McLellan had several discussions with the Navy and the Corps regarding the reimbursement of McLellan's expenses2 and the Corps' proposed imposition of an Activity and Use Limitation ("AUL") on the site to minimize the need for additional response expenditures by the Navy.3 (Compl.¶ 19.)
On August 4, 1997, McLellan filed a claim under the FTCA for reimbursement of its remediation expenses with the Naval Facilities Engineering Command (NFEC).4 (United States 1st Facts, Ex. 21.) The Navy received the claim on September 15, 1997. (Id. ¶ 20.) The claim was denied on March 3, 1998, on the grounds that the claim was barred by the two-year statute of limitations under the FTCA. In the meantime, McLellan had sold the property in November 1997. (See United States 1st Facts, Ex. 16, Florence Dep., at 62:13-19.)5 In response to that denial, McLellan asked the Navy to reconsider its decision, asserting that the running of the statute of...
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