Who Pays When the Other Party Delays? “Loss of Use” Damages and the Recent Michigan Decision Newell Brands, Inc. v. Kirsch Lofts, LLC
When the responsible party and site owner differ, remediation projects can languish at times because the two parties' interests are not aligned. When that occurs, the site owner may want to know what legal remedies are available when the responsible party refuses to budge, especially when it seems the responsible party is utilizing dilatory tactics to delay the remediation.
A recent opinion from the U.S. District Court for the Western District of Michigan held that to the extent there is a remedy for this kind of delay, it is not found under the state’s Access Statute.
Background on Newell Brands, Inc. v. Kirsch Lofts, LLC
In 2009, Kirsch Lofts, LLC (“Kirsch”) purchased property that was subject to ongoing remediation by its neighbor, Newell Brands, Inc. (“Newell”). Newell Brands, Inc. v. Kirsch Lofts, LLC, No. 1:15-CV-597, 2016 WL 4940210, 1 (W.D. Mich. Sept. 15, 2016). Newell had previously entered into a consent decree with Michigan’s Department of Environmental Quality, agreeing to remediate its own contaminated property and the surrounding parcels of land, including the one purchased by Kirsch. At the time of purchase, Newell’s remediation activities were consistent with, and could co-exist with, Kirsch’s own redevelopment plans of building condominiums and commercial real-estate. Kirsch took advantage of the ongoing remediation and secured tax credits and incentives for purchasing the contaminated property. In order to cut down on the remediation costs, Newell selected a soil vapor extraction system (“SVE”) remedy, which was expected to operate for six years.
As of July 2016, seven years after the property was initially purchased, neither soil excavation nor the installation of the SVE system had occurred. In the meantime, Kirsch lost its time sensitive tax credits and incentives and was prevented from building on the property. When Newell filed a claim for access to the property under Michigan’s Access Statute, Kirsch filed a counterclaim seeking damages for the loss of use of the property and for the credits and incentives lost during the delay.
Are “loss of use” damages included in the Compensation Standard under Michigan’s Access Statute?
Michigan’s Access Statute states:
"A person who is liable ... may file a petition ... seeking access to the facility in order to conduct response activities approved by the department. If the court grants access to property under this section, the court may ... provide compensation to the property owner or operator for damages related to the granting of access to the property, including compensation for loss of use of property."
MCL 324.20135a(1)(a) (emphasis added).
Newell argued that only those damages “directly caused” by the access should be recoverable, while Kirsch advocated that the timing of access is necessarily related and that damages related to the timing of access — including delays of development — must be recoverable.
In answering the question of what constitutes “loss of use” damages, the court disagreed with both Newell’s and Kirsch’s arguments. The court reasoned that Newell’s definition failed to consider the ordinary meaning of “related to” and gave inadequate weight to the “loss of use” language in the statute. Kirsch’s argument, on the other hand, came closer to the actual definition but still failed to account for all of the language in the statute.
Instead, the court held, as a matter of first impression, that by tethering the recoverable damages to a particular act at a particular time (“related to the granting of access”), “the legislature expresses an intention to take a snapshot of what the ordered access will entail, whenever it physically occurs, and award a reasonable estimate of the damages fairly traceable to that grant as distinguished from any damages inherent in the ongoing presence of contamination itself.” None of the damages Kirsch sought fell under this definition and were thus denied. The court instead awarded Kirsch the assessment of cost of access proposed by Newell in the amount of $73,964.00 for the assessed market value of a license for access to the property.
All remedies are not foregone for parties that suspect purposeful dilatory tactics in remediating contaminated property. The court in Newell Brands, Inc. v. Kirsch Lofts, LLC expressed its sympathy for this type of practical plight and alluded that there may be remedies available for situations such as this one, but not under Michigan’s Access Statute.
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