Court rules on environmental cleanup case

Jennifer Nelson
January 1, 2008
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The Indiana Supreme Court ruled yesterday that the statute of limitations on a claim for contribution toward cleanup costs doesn't begin until the owner is ordered to clean up the property, regardless of whether the owner should have known about the contamination earlier.

The issue in Richard U. Pflanz and Delores J. Pflanz v. Merrill Foster, individually, Merrill Foster d/b/a/ Friendly Foster's Service, and Sunoco Inc. (R&M),  No. 36S01-0710-CV-425, is when the 10-year statute of limitations began on a claim for contribution toward environmental cleanup costs.

Richard and Delores Pflanz bought a former service station from Merrill Foster, who told them there were underground storage tanks of petroleum, but they were not in use and were closed. The Pflanzes opened a tire shop, but later sold the business and leased the property to a third-party.

The Pflanzes discovered in 2001 the tanks remained open and were leaking petroleum and spent more than $100,000 in cleanup costs. They filed a complaint in December 2004 against Foster and Sunoco seeking a determination of liability relating to the environmental contamination, damages under theories of waste, negligence, and stigma, contribution for cleanup costs pursuant to the Underground Storage Tanks Act (USTA), and declaratory relief from future anticipated cleanup costs.

Foster moved to dismiss the claim on the grounds the complaint was barred by the statute of limitations; the trial court dismissed the claim as well as another filed by the Pflanzes on similar grounds.

The Indiana Court of Appeals affirmed, finding the Pflanzes should have tested the property for contamination once Indiana enacted the USTA in 1987 and amended it in 1991, so the statute of limitations began in 1991.

The Indiana Supreme Court decided the statute of limitations on the contribution claim didn't begin to accrue until after the Pflanzes were ordered to clean up the property. Parties who bring contribution claims must wait until the obligation to pay is incurred or otherwise the claim lacks the essential damage element, wrote Chief Justice Randall T. Shepard. As such, when IDEM ordered the Pflanzes to clean up the land in 2001, the claim was within the 10-year statute of limitation.

The statute of limitations of stigma damage claims cannot start until after the claimant has incurred real damage - diminution in property value despite cleanup because future buyers will worry about future cleanup costs. The claim for stigma damages also fell within the statute of limitations, wrote the chief justice.

On the Pflanzes waste and negligence claims, which are governed by a six-year statute of limitations, the Indiana Supreme Court remanded the issue for further examination to determine when the Pflanzes should have known about the environmental issues. The Pflanzes filed these claims, saying they were injured when they purchased the property because Foster fraudulently misrepresented the land; Foster argued the Pflanzes should have investigated the property after the adoption of the USTA legislation.

"We cannot accept the trial court's holding that, as a matter of law, the passage of the USTA automatically put landowners on notice that they should inspect and monitor any underground storage tanks on their property even if, taking the Pflanzes' allegations as true, the former property owners had assured them the tanks were closed and not in use," wrote Chief Justice Shepard.

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