State v. Howe Cleaners, Inc.

• Decision Date: 06 August 2010
• Docket Number: No. 09-110.,09-110.
• Citation: 2010 VT 70,9 A.3d 276
• Court: Vermont Supreme Court
• Parties: STATE of Vermont v. HOWE CLEANERS, INC., David Benvenuti, Jason's Dry Cleaning, Inc., Granite Savings Bank & Trust Company, The Howard Bank, N.A., T.D. Banknorth, N.A., and John Fiore, Trustee, 9 Depot Square Realty Trust.

9 A.3d 276

2010 VT 70

STATE of Vermont

v.HOWE CLEANERS, INC., David Benvenuti, Jason's Dry Cleaning, Inc., Granite Savings Bank & Trust Company, The Howard Bank, N.A., T.D. Banknorth, N.A., and John Fiore, Trustee, 9 Depot Square Realty Trust.

No. 09-110.

Supreme Court of Vermont.

Aug. 6, 2010.

William H. Sorrell, Attorney General, and Mark J. Di Stefano and John D. Beling, Assistant Attorneys General, Montpelier, for Plaintiff-Appellant.

R. Bradford Fawley, Matthew S. Borick, and Elizabeth R. Wohl of Downs RachlinMartin PLLC, Brattleboro, for Defendant-Appellee T.D. Banknorth, N.A.

Robert Reis and Matthew D. Anderson of Reis, Urso, Ewald & Anderson, PLLC, Rutland, for Defendant-Appellee Fiore.

Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.

BURGESS, J.

¶ 1. In this civil enforcement action concerning the State's attempt to hold prior and past owners liable for its costs of responding to and cleaning up a hazardous waste contamination site, the State appeals from the dismissal of its claims against appellees T.D. Banknorth, N.A. (Banknorth), and John Fiore. We affirm.

¶ 2. In 2000, the Agency of Natural Resources (ANR) determined that the property located at 9 Depot Square in the City of Barre was the source of extensive perchloroethylene contamination of the soil and groundwater in the area. A dry-cleaning business, Howe Cleaners, Inc., had operated on the site for over two decades before a bakery business started up in 1997. When the bakery failed a year or so later, Banknorth (through a predecessor-in-interest) foreclosed on and took title to the property. Several months later, in March 1999, Fiore purchased the property and operated a pizzeria on the premises until a fire destroyed the building in 2008. Since 2000, the State has incurred, and is continuing to incur, substantial response costs for studying and monitoring the site.

¶ 3. In January 2004, the State brought an action in the superior court pursuant to 10 V.S.A. § 6615 of Vermont's Waste Management Act (VWMA) and the common law of public nuisance against the current owner, Fiore, and various past owners and operators of the site, including Banknorth and Howe Cleaners. The State sought to hold defendants liable for its past, present, and future response costs and also sought civil penalties against Howe Cleaners and Banknorth based on the release of hazardous material into the environment during the time that they owned the premises. Defendants generally denied liability and filed cross-claims or third-party claims or sought indemnity from other defendants.

¶ 4. In June 2005, Banknorth and Fiore moved for summary judgment. The State opposed the motions and cross-moved for summary judgment. In March 2006, the trial court issued a ruling on the motions. In denying Fiore's motion, the court ruled that Fiore, as owner of the property, could be held liable even absent proof of any release or threat of release while he owned the property. The court further held that it had no clear factual record on which to decide whether Fiore was entitled to judgment as a matter of law on his defense that, as a "diligent owner" who investigated the site before buying it, he was not liable under the statute. Regarding Banknorth's motion, the court ruled that the State had presented sufficient evidence "in the posture of the motion under consideration to establish a triable issue" as to whether there was a release or threat of release during Banknorth's ownership, but that the State had failed to come forward with any facts demonstrating a triable issue on whether Banknorth had created a public nuisance. Accordingly, the court denied summary judgment to Banknorth as to the State's statutory claim, but granted its motion as to the public nuisance claim. The court also denied the State's cross-motion with respect to Howe Cleaners and Banknorth. Finally, although the court ruled that Fiore could be liable as owner of the contaminated site, it reiterated that he was entitled to present his diligent-owner defense at trial.

¶ 5. Two months later, in June 2006, the trial court ruled on Banknorth's pending motion to compel the attendance of the State's designee(s) at a deposition noticed pursuant to V.R.C.P. 30(b)(6). Rule 30(b)(6) allows a party to name an organization, including a governmental agency, as the deponent and requires the named organization to designate one or more persons to testify on its behalf. Banknorth's notice included a request for the State to produce nine categories of documents and evidence underlying or relating to the claims of contaminants released at the property during and prior to Banknorth's ownership. In response, the State moved for a protective order, arguing that the Rule 30(b)(6) deposition improperly sought attorney work-product and was premature, overbroad, and not sufficiently particular. For the most part, the court rejected each of these arguments in granting Banknorth's motion to compel the discovery and denying the State's request for protection except for one category of information relating to the federal government's role at the site. Banknorth decided not to proceed with the deposition at that time, however, while the parties engaged in court-ordered mediation over the summer of 2006.

¶ 6. On October 10, 2006, following an unsuccessful mediation, Banknorth and Fiore filed motions to compel further discovery and issued a joint Rule 30(b)(6) "re-notice" of deposition scheduled for November 1, 2006. This re-notice listed the same evidence to be produced as in the first deposition notice, including the one category previously quashed by the court, plus two new requests to disclose evidence of Fiore's knowledge of contaminant release and lack of care. The State opposed the discovery and, five days before the scheduled deposition, again filed a motion for a protective order on many of the same grounds as before. The State notified Banknorth and Fiore that it would not appear for the deposition pending a ruling on its renewed motions. With no ruling from the court, the State did not appear at the deposition. Nevertheless, Banknorth and Fiore did attend the deposition as scheduled, and then filed motions for sanctions based on the State's failure to appear.

¶ 7. In April 2007, the trial court, with a new judge presiding on rotation, granted Fiore's renewed motion for summary judgment, concluding that Fiore's reasonable reliance on his physical inspection of the subject property and on a professional environmental assessment produced for his review by Banknorth before its sale of the contaminated property to him was, as a matter of law, a diligent and appropriate investigation that satisfied the statutory diligent-owner defense to liability under the VWMA. The court also concluded that the State failed to make an adequate showing of a public nuisance that was actionable outside the scope of the Act.

¶ 8. Soon afterwards, in May 2007, and in response to Banknorth's motion for sanctions, the trial court precluded the State "from using at trial evidence that should have been provided in accordance with" the court's first order, in June 2006, compelling the State's compliance with discovery and its attendance at deposition. Following that ruling, Banknorth filed a second motion for summary judgment, arguing that the State could not prevail in light of the evidence limitations imposed by the sanctions order. The State opposed Banknorth's motion and cross-moved for summary judgment.

¶ 9. In February 2008, the trial court granted summary judgment to Banknorth. Declining the State's invitation to set aside the sanction in light of more recent discovery production, the court reviewed the historyof the discovery dispute and reiterated that the serious sanction imposed on the State was justified. Most significantly, the court concluded that without the evidence of contaminant release precluded by the sanctions order, the State could not meet its burden of proof on its claims against Banknorth.

¶ 10. In July 2008, the State entered into a consent decree with Howe Cleaners. Further negotiations proceeded between the remaining parties. The trial court dismissed the State's claims against Banknorth and Fiore in February 2009 after those and other defendants settled cross-claims and third-party claims among themselves.

¶ 11. The State appeals, arguing that the trial court erred in granting summary judgment to Banknorth based on a litigation-ending discovery sanction against the State by not considering a lesser penalty, by disregarding its earlier acknowledgement of evidence produced by the State, and by failing to specify the perimeters of its preclusion order. Regarding summary judgment in favor of Fiore, the State asserts that the court erred in accepting as adequate Fiore's reliance upon a site-assessment report that the State contends was insufficient as a matter of law to satisfy the statutory defense of diligent investigation. The court erred further, the State maintains, by not allowing the State to seek additional discovery as to whether Fiore knew or should have known about the contamination regardless of the assessment report, and by ruling that its public nuisance claim was effectively preempted by the VWMA.

I.

¶ 12. We first address the State's claims of error with respect to the trial court's grant of summary judgment in favor of Banknorth. The State's primary argument is that, given the facts and circumstances of this case, the court lacked a sufficient basis to impose what amounted to a litigation-ending sanction under Rule 37(b)(2) of the Vermont Rules of Civil Procedure. For the reasons discussed below, we disagree.

¶ 13. Before examining Rule 37 and the State's specific arguments, we recount in detail the parties' positions on Banknorth's liability and the trial court's reasoning for initially denying, and then later granting, summary judgment to Banknorth. In the March 2006 order, Judge Toor denied both Banknorth's...