Village of Milford v. K-H Holding Corp.
| Citation | 390 F.3d 926 |
| Decision Date | 23 November 2004 |
| Docket Number | No. 03-1597.,03-1597. |
| Parties | VILLAGE OF MILFORD, Plaintiff-Appellant, v. K-H HOLDING CORPORATION, a foreign corporation; TRW, Inc., a foreign corporation, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
ARGUED: Matthew J. Lund, Pepper Hamilton, LLP, Detroit, Michigan, for Appellant. Kenneth H. Adamczyk, Butzel Long, Bloomfield Hills, Michigan, for Appellees. ON BRIEF: Matthew J. Lund, Scott L. Gorland, Pepper Hamilton, LLP, Detroit, Michigan, for Appellant. Kenneth H. Adamczyk, Michael F. Smith, Butzel
Long, Bloomfield Hills, Michigan, for Appellees.
Before: SUTTON and COOK, Circuit Judges; ALDRICH, District Judge.*
This case concerns a Michigan law trespass claim and claims under the Comprehensive Environmental Response and Liability Act ("CERCLA") and Michigan's Natural Resources and Environmental Protection Act ("NREPA").
The district court granted judgment as a matter of law in favor of Defendant-Appellees K-H Holding Corporation and TRW, Inc. ("K-H" collectively) on Plaintiff-Appellant Village of Milford's trespass claim because the claim was barred by the statute of limitations. It found K-H not liable under CERCLA or NREPA because it found that Milford's costs incurred in response to a release of hazardous substances by K-H were not "necessary" or "required" as the statutes respectively require, and the contamination was not "caused" by K-H, as NREPA requires.
We conclude that the district court correctly applied the three-year statute of limitations for trespass, and affirm the district court's grant of judgment notwithstanding the verdict. We conclude that the district court incorrectly applied CERCLA and NREPA to deny Milford recovery of any of its costs, vacate its judgment on those claims, and remand the case for further proceedings.
The factual history of the trespass claim focuses on what Milford knew and when it knew it. In 1989, Milford learned that its municipal water supply wells contained two hazardous chlorinated compounds, trichloroethene ("TCE") and dicholorethene ("DCE"). In response, the Michigan Department of Natural Resources ("MDNR") required Milford to increase monitoring of its wells from once every six years, to four times per year. Milford later discovered three other hazardous chlorinated compounds in its groundwater: dichloroethane ("DCA"), trichloroethane ("TCA"), and tetrachloroethene ("PCE"). In 1994, Milford retained an environmental attorney and consultants to determine the source of contamination. Also in 1994, Milford asked MDNR to determine that K-H was a "potentially responsible party" ("PRP") with respect to the contamination. MDNR declined, and advised Milford to conduct additional studies. Milford continued to study the area's geology and groundwater contamination, and in 1996, asked the Michigan Department of Environmental Quality ("MDEQ") to identify K-H as a PRP. MDEQ did so in February 1997, based upon Milford's studies. During this time, Milford never stopped using its water, which at all times met federal safe drinking water standards.
Since about 1971, K-H has owned and operated a factory, situated uphill and 1,400 feet north of Milford's wells. K-H used TCE and TCA, which degrade to DCE and DCA, respectively. Before 1975, waste oil containing chlorinated compounds was spread by K-H and its predecessors on K-H's property. In the late 1970s and early 1980s, waste oil leaked from a dumpster onto K-H's property.
In 1993, K-H discovered that DCA, DCE, PCE, TCA, and TCE were in the groundwater on its property, and were migrating toward Milford's wells. K-H provided Milford with a report and documentation of its investigation but denied responsibility for contamination of Milford's wells. K-H began monitoring activities, which included sampling water from area residents' wells and creating new monitoring wells. In 1994, K-H began remedial measures. K-H installed a soil vapor extraction system which, after it began operation in 1997, removed contaminants from the soil at the facility. It also installed a groundwater interdiction system to stop contaminants flowing south, toward Milford's wells, in 1999.
Milford filed suit against K-H on March 1, 1999, seeking damages for trespass under Michigan law, and recovery of its costs under CERCLA, 42 U.S.C. § 9607, and NREPA, Mich. Comp. Laws § 324.20126.
A jury found K-H liable for trespass, but the court granted judgment notwithstanding the verdict for K-H, determining that the three-year statute of limitations barred the claim.
The statutory claims were tried to the bench. Before trial, the court ruled that the only attorney's fees that Milford could recover under CERCLA, if it could recover at all, were those related to determining that K-H was a PRP. After the trial, the court concluded that the CERCLA claim failed because Milford's response costs were not "necessary." The court concluded that the NREPA claim failed because Milford did not show by a preponderance of the evidence that K-H "caused" the release of contaminants, and because Milford's actions were not a "required" response to the contamination.
When exercising jurisdiction over state claims, this court follows state law standards for granting motions for judgment notwithstanding the verdict. J.C. Wyckoff & Assoc., Inc. v. Standard Fire Ins. Co., 936 F.2d 1474, 1483 (6th Cir.1991). Michigan courts review a trial court's decision to grant judgment notwithstanding the verdict de novo. Sniecinski v. Blue Cross & Blue Shield of Mich., 469 Mich. 124, 666 N.W.2d 186, 192 (2003). Judgment notwithstanding the verdict should be granted "only when, viewing the evidence and all legitimate inferences in a light most favorable to the non-moving party, there remain no issues of material fact upon which reasonable minds could differ." Ewing v. City of Detroit, 252 Mich.App. 149, 651 N.W.2d 780, 786 (2002), rev'd on other grounds, 468 Mich. 886, 661 N.W.2d 235 (2003).
In Michigan, the statute of limitations for trespass is three years. Mich. Comp. Laws § 600.5805(10). The parties dispute whether CERCLA or Michigan law determines when the statute of limitations begins. We conclude that both CERCLA and Michigan law provide the same commencement date, and that this date was more than three years before Milford filed its suit.
CERCLA provides that if a state statute of limitations provides a commencement date for a property damages claim that results from a release of hazardous substances into the environment that is earlier than the "federally required commencement date," then the statute of limitations for the state law claim will commence at the federally required date, rather than the state law date. 42 U.S.C. § 9658(a)(1). The federally required commencement date is the date on which "the plaintiff knew (or reasonably should have known) that the ... property damages ... were caused by or contributed to by the hazardous substance or pollutant or contaminant concerned." 42 U.S.C. § 9658(b)(4)(A).
Under Michigan's "discovery rule," a plaintiff's claim accrues when the plaintiff discovers, or through the exercise of reasonable diligence should have discovered, (1) an injury and (2) the causal connection between the injury and the defendant's breach. Moll v. Abbott Laboratories, 444 Mich. 1, 506 N.W.2d 816, 824 (1993). Because Michigan courts have not considered whether the discovery rule applies to groundwater contamination cases, this court must decide based on its assumption of how the highest state court would decide the issue if confronted with it. Miles v. Kohli & Kaliher Assoc., Ltd., 917 F.2d 235, 241 (6th Cir.1990).
We assume that the Michigan Supreme Court would apply the discovery rule in this case. The discovery rule generally applies where a plaintiff may remain unaware of an injury for a long time, and the policies behind the statute of limitations are not offended by applying the discovery rule. The policies behind the statute of limitations include the provision of opponents with a fair opportunity to defend, elimination of "stale" claims in which evidence is likely to have been forgotten or destroyed, and protection of defendants from protracted fear of litigation. Moll, 506 N.W.2d at 823.
These policies are not offended by applying the discovery rule to cases of groundwater pollution. It may take years for a tortfeasor's pollutants to reach a victim's groundwater, to detect the resulting pollution, and for the contaminee to know of contaminants' harmful effects. Moreover, we reasonably may assume that the Michigan Supreme Court would consider parties who use hazardous substances likely to keep records of the substances they use, and more likely than those they harm to know of the danger posed by those substances. For these reasons, we assume Michigan would apply the discovery rule to groundwater pollution cases.
The commencement date established by Michigan's discovery rule is functionally identical to CERCLA's federal commencement date. Both rules look to when the plaintiff knew or should have known of his potential cause of action against the defendant. See, e.g., Presque Isle Harbor Dev. Co. v. Dow Chem. Co., 875 F.Supp. 1312, 1319 (W.D.Mich.1995).
The parties do not dispute that K-H admitted to Milford in 1993 or 1994 that it had discovered a release of hazardous substances, or that Milford asked MDNR to identify K-H as a PRP in 1994. Milford argues that it was not certain that K-H caused the contamination at this time, in part because K-H denied that it was the source of the wells' contamination, despite its release of the hazardous substances.
But the discovery rule does not permit a party to await certainty. To toll the limitations period because a prospective def...
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