New Damages Trial Ordered For Vapor Intrusion

In Sunrise Harbor Realty LLC v 35th Sunrise Corp, 2011 N.Y. App. Div. LEXIS 5834 (App. Div-2nd Dept 7/12/11), the plaintiff owned a commercial building in Copiague, New York. The plaintiff contemplated purchasing the adjacent property that contained a gas station to expand its building. A phase 2 detected petroleum-contaminated groundwater migrating onto the plaintiff property and the plaintiff commenced a lawsuit against the owner of the gas station under the state Navigation Law seeking recovery of cleanup costs and diminution of property value.

In a non-jury trial, the plaintiff introduced evidence that it would have to implement a cleanup plan to address vapors migrating from the contaminated groundwater consisting of installation of an air sparge soil vapor extraction system that would have to be operated for five years along with a sub slab depressurization system underneath the building on the plaintiff’s property that would have to be operated for 30 years. The trial court found that the defendant was liable as a discharger under the Navigation Law even though the contamination pre-dated the defendant’s ownership of the property. The court held that a landowner who purchases property after a spill may be liable under the Navigation Law if it fails to cleanup the spill after learning of the discharge. As a result, the court awarded $1,085, 559 in damages consisting of $721,827 for the estimated cleanup, $117, 733 in consultant fees and $175K in attorney fees. However, the court declined to award any damages for stigma.

On appeal, the defendant (now appellant) argued the plaintiff (now respondent) damages should be limited to $172K which was the costs estimated by its expert, and that the trial court should not have allowed testimony about vapor intrusion because the plaintiff had failed to plead vapor intrusion in its bill of particulars.  The Appellate Division for the Second Department upheld the determination that the defendant (now appellant) was a discharger but vacated the judgment and ordered a new trial for damages because of the failure of the plaintiff/respond to allege vapor intrusion in its bill of particulars. The court also ruled that in determining the cleanup costs, the trial court should consider any offset that might be caused by discharges of the plaintiff’s tenants into the on-site cesspool and from a former heating oil tank spill. Finally, the court said that since the award of litigation costs was based on the vapor intrusion cleanup costs, the trial court would need to make a new litigation costs award determination.

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