SC Appeals Ct Affirms Judgment To Golf Course Developer But Reduces Damages Award

A South Carolina appeals court affirmed a jury verdict that a seller of a 239-acre golf course in Blythewood, South Carolina had breached an environmental indemnity but reduced the damages award by the jury in Ginn-LA University Club Ltd. v. Amelia Capital III, LLC,2013 S.C. App. Unpub. LEXIS 95 (Ct. App. 2/13/13).

In this case, the parties executed a purchase and sale agreement in August 2005. Prior to executing the contract, the plaintiff retained an environmental consultant to conduct environmental due diligence. The consultant identified contamination in the vicinity of a maintenance shed  and near two small above-ground storage tanks (ASTs). The sampling results were reported to the South Carolina Department of Health and Environmental Control (DHEC) which required installation of a monitoring well in the AST area.

Because the groundwater monitoring results would not be available prior to the closing, the parties amended the agreement to provide for an environmental  indemnity. Section 5.2 of the contract provided that the parties acknowledged that hazardous materials had been disposed or released at the site, that DHEC required “additional assessment and removal measures” be conducted and reported back to the agency and that Seller agreed to indemnify purchaser for claims arising from or relating back to such work.

After the closing, the groundwater mornitoring results detected groundwater contamination and DHEC requested remediation. Plaintiff retained another consultant to prepare and implement a remediation plan under supervision of DHEC. The plaintiff incurred approximately $352K in cleanup costs and anticipated that it could incur another $600K in future costs.

In January 2010, plaintiff filed a complaint alleging breach of contract, negligence per se, equitable indemnification and a declaratory judgment stating the contract required the defendant to reimburse the plaintiff for cleanup costs. After a three-day trial, plaintiff elected to pursue only its breach of contract claim. The jury then awarded plaintiff $940K on the breach of contract claim.

The defendant filed a motion for a new trial which the court denied after a hearing. The defendant then appealed, arguing that the circuit court improperly allowed plaintiff’s environmental consultant to provide expert testimony on the future remediation costs and failed to instruct the jury that South Carolina law requires contracts of indemnity to be strictly construed.

The plaintiff’s expert had testified at trial that he had submitted a bid to complete the remediation for $598,000. The appeals court found this testimony was not an expert opinion that $598K worth of work was reasonably necessary to complete the remediation and obtain a no further action letter but simply factual testimony that the consultant was willing to do the work for that price. Because the plaintiff was entitled to remediation costs already incurred and not future costs, the court found the testimony on the future costs of achieving NFA letter was irrelevant. The court then reduced the jury verdict to $350K because that was the amount that plaintiff’s counsel conceded at oral argument that plaintiff had incurred.

On the argument that the circuit court erred in failing to give a jury instruction as to the construction of an indemnity provision, the appeals court said the requested instruction was un necessary because all contracts are to be strictly construed under South Carolina law. Therefore, the appeals court ruled the circuit court properly instructed the jury as to the law of contract interpretation

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