Last year, we criticized the ruling in Stratford Holdings LLC v Fog Cap Retail Investors LLC where the district court for the southern district court of Georgia appeared to conflate reporting obligation of section 103 of CERCLA with the cost recovery and contribution provisions of CERCLA when the court granted a motion to dismiss by the defendant tenant. Click on the link above to read our analysis.
In that case, the predecessor of the Stratford had leased space to Kinney Shoe Corporation (Kinney) in 1975. Kinney or its successor, Foot Locker Retail, Inc., subsequently subleased the premises to a dry cleaner beginning in 1990. In 2002, Foot Locker assigned its lease to Fog Cap Retail Investors LLC (Fog Cap).
In 2010, a phase 1 was performed that revealed that the dry cleaner had been employing poor housekeeping practices. Concerned that the sloppy housekeeping could have impacted the soil and groundwater beneath the premises, Stratford demanded that Fog Cap perform an investigation and perform any cleanup required under law or pursuant to the lease. Fog Cap initially refused but then authorized a site inspection that concluded there had not been any PCE releases. Unsatisfied with the scope of the investigation, Stratford then retained an environmental consultant to conduct a phase 2 investigation that found PCE concentrations as high as 1200 ppb (soil) and 56 ppb (groundwater). Stratford filed a lawsuit seeking to recovery its costs along with a declaratory ruling that the tenant was responsible for remediating the site.
Earlier this month, the Court of Appeals for the Fourth Circuit ruled that district court had made an impermissible factual inference from the state No-Listing Letter. Stratford Holding v. Fog Cap Retail Investors LLC, 2013 U.S. App. LEXIS 7540 (4th Cir. 4/16/13). The landlord may now proceed with its lawsuit to recover its response costs from the tenant for PCE contamination.