R.M. Packer Co., Inc. v. Marmik, LLC , 88 Mass. App. Ct. 654 ( 2015 )

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14-P-1638 Appeals Court
R.M. PACKER CO., INC. vs. MARMIK, LLC & others.1
No. 14-P-1638.
Dukes. September 2, 2015. - November 25, 2015.
Present: Meade, Wolohojian, & Milkey, JJ.
Massachusetts Oil and Hazardous Material Release Prevention Act.
Hazardous Materials. Damages, Hazardous waste
contamination, Attorney's fees. Contribution. Practice,
Civil, Attorney's fees, Costs, Findings by judge.
Department of Environmental Protection.
Civil action commenced in the Superior Court Department on
May 8, 2009.
The case was heard by Gary A. Nickerson, J., and a motion
for attorney's fees and costs was heard by him.
John D. Curran for the plaintiff.
Marilyn H. Vukota for Vineyard Port Hole, Inc.
1
Wallace Realty Trust; TP Panancy LLC; Vineyard Markets,
Inc.; and the Vineyard Port Hole, Inc. Vineyard Port Hole, Inc.
is a closely held Massachusetts corporation, owned by Terrence
P. McCarthy, doing business as Dockside Marina (Dockside).
2
WOLOHOJIAN, J. At issue is whether R.M. Packer Co.
(Packer) was properly found liable for attorney's fees and costs
under G. L. c. 21E, § 4A(f), after it unsuccessfully sought
contribution from the defendants for costs to clean up an oil
spill. In three circumstances, the statute requires that
reasonable attorney's fees and costs be awarded against a
plaintiff who has sued seeking contribution for environmental
clean-up costs. Those three circumstances are
"[i]f the court finds that (1) the plaintiff did not
participate in negotiations or dispute resolution in good
faith; (2) the plaintiff had no reasonable basis for
asserting that the defendant was liable, or (3) the
plaintiff's position with respect to the amount of the
defendant's liability pursuant to the provisions of this
chapter was unreasonable."
G. L. c. 21E, § 4A(f), inserted by St. 1992, c. 133, § 294.
Here, after a bench trial, a judge found that Packer had no
reasonable basis for asserting its claim against the defendant
Dockside at the time it filed suit, and accordingly awarded fees
and costs under § 4A(f)(2). The judge reached this conclusion
despite the fact that, before Packer filed its complaint, the
Department of Environmental Protection (DEP) had issued a notice
of responsibility to Dockside, stating that it had reason to
believe that Dockside was a "[p]otentially [r]esponsible
[p]erson."
Packer argues that DEP's position vis à vis Dockside's
potential responsibility provided a reasonable basis upon which
3
Packer could sue Dockside for contribution. Hence, Packer
argues, the judge erred in awarding fees and costs under
§ 4A(f)(2). We do not need to reach this issue because, on the
facts found by the judge (and not challenged on appeal), the
award was independently proper under § 4A(f)(3). We accordingly
affirm the award on that basis.
Background.2 Packer was in the business of selling and
delivering petroleum-based products on Martha's Vineyard.3
Before the events at issue in this case, Packer had owned a
piece of commercial property located at 27 Lake Avenue in Oak
Bluffs, where a gas station was located. In 1998, Packer
2
The facts are drawn from the trial judge's clear and
detailed written findings. Where, as here, a judge acts as the
trier of fact, his or her factual findings must be accepted on
appeal unless shown to be clearly erroneous. See Mass.R.Civ.P.
52(a), as amended, 423 Mass. 1402 (1996). Packer does not argue
that any of the judge's subsidiary findings are clearly
erroneous. Moreover, the findings are in essence unreviewable
because the trial transcript was not included in the appellate
record. Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975),
& 18(a), as amended, 425 Mass. 1602 (1997). See Kunen v. First
Agric. Natl. Bank of Berkshire County, 6 Mass. App. Ct. 684,
689-691 (1978); Cameron v. Carelli, 39 Mass. App. Ct. 81, 83-84
(1995); Buddy's Inc. v. Saugus, 62 Mass. App. Ct. 256, 264
(2004).
3
Ralph M. Packer, Jr. was the company's chief executive
officer; Packer employees, Scott Bailey and Mark Leith, were
deliverymen.
4
installed underground fuel4 storage tanks behind the station.
Tank one was for diesel fuel; tank two was for gasoline.
Two piers stretched into Oak Bluffs Harbor nearby. On one
of those piers, Dockside owned and operated pumps that dispensed
fuel to motor boats. Dockside's pumps were connected to tanks
one and two, and Dockside purchased the fuel it needed for its
operations from Packer, who delivered it to, and stored it in,
those two tanks.
In 2000, as part of a larger business deal, Packer sold the
property, including the tanks, to Marmik, LLC (Marmik), an
unrelated firm. As a result, Marmik inherited Dockside as what
the parties call a "pass-through" customer; after the
transaction, Dockside continued to purchase fuel from Packer
(paying Packer directly), and Packer continued to deliver it to
tanks one and two. However, those tanks were now owned and
maintained by Marmik,5 and Dockside paid Marmik a per gallon
handling charge for this arrangement.6
4
When we refer to "fuel" in this opinion, we do so
colloquially where it makes no difference whether the substance
referred to is diesel fuel or gasoline.
5
Dockside neither leased the tanks nor exercised (or
assumed) exclusive or shared control of the tanks. Dockside was
not responsible for maintenance or repairs to the tanks.
Further, it had no duty to monitor the fitness of the tanks.
6
Dockside also entered into an indemnification agreement
with Marmik, agreeing to indemnify Marmik from "acts or
5
Marmik adapted the property to meet its business needs.
Among other changes, it added a nine-foot fence enclosing the
area where the tanks were buried. In this same area, Marmik had
installed a concrete base with layers of sand on top, which was
customized to serve as an outdoor seating area for a restaurant
on an abutting parcel. These changes to the site made it
difficult for Packer's deliverymen to use the pole method to
check the fuel levels before filling the tanks. The pole method
entails lowering a measuring pole through the direct fill cap of
the tank to measure the level of the tank's contents. The pole
method is a customary and reliable method of measuring the level
of a tank's contents and allows the deliveryman to determine how
much fuel can be added to the tank without risking a spill.
While Packer's deliverymen had on occasion used the pole
method to measure the fuel levels, they usually relied instead
on a remote electronic sensory system known as a veeder root
system (VRS), which Packer had put in place when the tanks were
added to the site. With the aid of sensors inside each tank,
the VRS measured and recorded each tank's fuel capacity on a
running tape (akin to a sales register printout); thus, the VRS
recorded the volume of fuel in a tank and its ullage, i.e., the
number of gallons that could be added. The VRS terminal was
omissions" of Dockside and its agents. This agreement, however,
does not appear to be implicated here.
6
housed in a nearby convenience store and available when the
store was open for business.
On the evening of Saturday, July 7, 2007, a Dockside
employee measured the fuel in the tanks using the VRS, which
recorded fifty-four inches of diesel fuel in tank one and
eighteen inches of gasoline in tank two. In turn, according to
the parties' well-established protocol, the Dockside employee
reported the readings to Packer, stating (in inches) the height
of fuel in each tank. In addition to reporting the fuel levels,
the Dockside employee ordered gasoline (for tank two) to be
delivered as early as possible the following morning. Dockside
did not order any diesel (for tank one). On Sunday, at about
6:00 A.M., Skip Bailey, Packer's employee, accurately recorded
Dockside's fuel levels (i.e., fifty-four inches of diesel and
eighteen inches of gasoline) in a company ledger.
For reasons set out in more detail in the margin,7 Packer
was delayed in making the delivery and Dockside's owner,
Terrence McCarthy, became correspondingly agitated that Dockside
would run out of fuel.8 Ultimately, Leith made the delivery.
7
Bailey intended to deliver gasoline to Dockside after a
delivery via ferry to another customer located on Chappaquiddick
Island. That delivery was dependent on the tides, and Bailey
was delayed on Chappaquiddick Island, due to unfavorable
conditions that prevented the ferry from returning to Edgartown.
8
McCarthy left two messages with an outside answering
service for Packer, indicating that without a prompt delivery
7
However, rather than delivering gasoline, he delivered diesel
fuel. Moreover, he did not check tank one's capacity, either by
the pole method or by using the VRS terminal before filling the
tank. Nor did he take any other reasonable step to ascertain
the level of diesel fuel in tank one.9 Instead, Leith attached
the truck's hose to the remote (indirect) fill spout for tank
one and proceeded to fill it. At the moment he began offloading
diesel fuel, tank one had room for about 273 gallons. By the
time Leith stopped force pumping diesel fuel, he had delivered
1,060 gallons of diesel, the tank had ruptured, the sensor rod
within the tank had shot through the top of the tank "like a
rocket," and diesel fuel was gushing from the tank "like a small
geyser." The best estimate is that 787 gallons of diesel fuel
spilled as a result.
In the aftermath of the spill, the DEP conducted an
investigation that led it to send a notice to Dockside stating
that it had reason to believe that Dockside was "a Potentially
Dockside would run out of fuel. Driving to the site, a Packer
employee, Mark Leith, telephoned McCarthy, who voiced his urgent
need for fuel. McCarthy did not refer to "diesel" fuel, either
in his messages left with the answering service or in
conversation with Leith. Nor did Leith inform McCarthy that
diesel, not gasoline, would be delivered that day.
9
Leith had delivered 2,000 gallons of diesel fuel the
previous day which, the trial judge found, should have raised
doubts in Leith's mind that additional diesel fuel was needed.
He could have easily resolved any such doubt by walking over to
the Dockside pumps.
8
Responsible Party (a 'PRP') with liability under . . . G. L.
c. 21E, § 5, for response costs." A like notice was sent by DEP
to Packer, indicating that Packer was also a PRP liable under
the Act for the spill.
Packer hired an environmental firm to remediate the spill
and, all told, the clean-up costs came to $300,000, which were
assumed by Packer's insurance company. Packer then, pursuant to
G. L. c. 21E, § 4A, sent demand letters to both Dockside and
Marmik, demanding that they each contribute eighty percent of
the remediation costs (which, had the defendants acceded to the
demand, would have resulted in a significant windfall).
Packer's demand at no point changed despite the fact that, as
the trial judge found, "Packer well knew that Dockside was
blameless in this instance." The parties did not resolve their
differences and Packer brought this suit against Dockside, among
others,10 asserting liability based on common-law (negligence)
principles as well as certain provisions of G. L. c. 93A and
G. L. c. 21E, the Massachusetts Oil and Hazardous Material
Release Prevention Act (Act). Dockside asserted a counterclaim
for an award of its attorney's fees and costs under G. L.
c. 21E, § 4A(f)(1)-(3).
10
See note 1, supra; the other named defendants are not
implicated in this appeal.
9
After an eight day bench trial, the judge issued findings
of fact and found in favor of Dockside on all of Packer's
claims. On Dockside's counterclaim, the judge awarded Dockside
$66,409.50 in attorney's fees and costs, relying on G. L. c. 21,
§ 4A(f)(2),11 and concluded: "[w]hen Packer filed its complaint,
application of the facts to the existing law made it reasonably
clear that Dockside was not liable under G. L. c. 21E." The
only issue before us is the award of fees and costs.12
Discussion. General Laws c. 21E is a comprehensive statute
designed to promote the prompt and efficient cleanup of sites
contaminated by the release of hazardous materials and to
provide a legal framework by which response costs are borne by,
and appropriately allocated among, those responsible. See
Commonwealth v. Boston Edison Co., 444 Mass. 324, 335 (2005);
Bank v. Thermo Elemental Inc., 451 Mass. 638, 653 (2008). Under
the Act, a person, as defined by § 2, is authorized to undertake
11
Section 4A(f)(2) authorizes an award of litigation costs
and reasonable attorney's fees to a defendant if a court
concludes that "the plaintiff had no reasonable basis for
asserting that defendant was liable." And, in connection with
his ruling, the judge cited Scott v. NG US 1, Inc., 450 Mass.
760, 773 (2008) ("the question is whether, when the complaint
was filed, application of the facts to existing law made it
reasonably clear that the defendant[] [was] not liable under
G. L. c. 21E").
12
Although Packer's notice of appeal states that Packer
appeals from the judgment, its only argument on appeal is in
regards to the award of attorney's fees and costs to Dockside
pursuant to G. L. c. 21E, § 4A(f)(2).
10
response actions13 to remediate a contaminated site and is
entitled to reimbursement "from any other person liable" for the
release of hazardous materials. G. L. c. 21E, § 4, third par.,
as appearing in St. 1992, c. 133, § 293. If two or more persons
are liable, then each is liable to the others for their
equitable share.14 Ibid. See Martignetti v. Haigh-Farr, Inc.,
425 Mass. 294, 308 (1997); Commonwealth v. Boston Edison Co.,
supra at 338.
Section 4A of the Act sets out a detailed prelitigation
process that a person must follow if that person wishes to
obtain contribution from others who may also have liability for
environmental clean-up costs. To begin with, the person seeking
contribution must send a demand letter specifying (among other
things) the nature, scope, and cost of the remediation, the
legal and factual basis for the demand, and the amount of
contribution or reimbursement being sought. G. L. c. 21E,
§ 4A(a). The recipient of such a demand letter is required to
13
"Response," as defined by § 2 of the Act, encompasses
assessment, containment, and removal measures to remediate a
site. A response action is deemed complete when it achieves a
"permanent" solution, a result that is attained when a site no
longer poses a "significant risk" to the public or environment
for a "foreseeable period of time." G. L. c. 21E, § 3A(g), as
appearing in St. 1992, c. 133, § 283.
14
There is no question in this case that Packer is liable
as a "person who . . . caused or is legally responsible for a
release . . . of oil . . . from a . . . site." G. L. c. 21E,
§ 5(a)(5), inserted by St. 1983, c. 7, § 5.
11
respond within forty-five days, and may request additional
documentation. Ibid. Either party may request that the dispute
be submitted to arbitration, mediation, or some other form of
alternative dispute resolution. G. L. c. 21E, § 4A(b). Only
after this procedure has been followed can suit be filed in
Superior Court. G. L. c. 21E, § 4A(c). The purpose of this
procedure is to prevent the parties from resorting to litigation
unless and until they have attempted to resolve the allocation
and burden of remediation among themselves.
As a further incentive to encourage the parties to take
reasonable prelitigation positions and to resolve their disputes
among themselves, the Legislature designed a fee-shifting
structure that penalizes any party who takes unreasonable
prelitigation positions regarding liability or cost sharing. A
plaintiff is to be awarded its litigation costs and reasonable
attorney's fees if the court finds that the defendant is liable
and "(1) failed without reasonable basis to make a timely
response to a [demand letter], or (2) did not participate in
negotiations or dispute resolution in good faith, or (3) failed
without reasonable basis to enter into or carry out an agreement
to perform or participate in the performance of the response
action on an equitable basis or pay its equitable share of the
costs of such response action or of other liability pursuant to
the provisions of this chapter, where its liability was
12
reasonably clear."15 G. L. c. 21E, § 4A(d). On the other hand,
"[i]f the court finds that (1) the plaintiff did not participate
in negotiations or dispute resolution in good faith; (2) the
plaintiff had no reasonable basis for asserting that the
defendant was liable, or (3) the plaintiff's position with
respect to the amount of the defendant's liability pursuant to
the provisions of this chapter was unreasonable, it shall award
litigation costs and reasonable attorneys' fees to the
defendant." G. L. c. 21E, § 4A(f). In essence, attorney's fees
and costs are to be awarded against any person who takes an
unreasonable prelitigation position regarding the existence or
extent of another person's liability.
Here, the judge awarded fees and costs, concluding that
Packer had "no reasonable basis for asserting that [Dockside]
was liable." G. L. c. 21E, § 4A(f)(2). This conclusion rested
on the judge's subsidiary findings, including his finding that
Dockside was wholly blameless for the spill in this case.
Indeed, the judge found that the spill was caused by Packer's
employee, who mistakenly delivered diesel fuel to tank one
without first measuring the level in the tank. Dockside had not
15
In the absence of one of these conditions, the plaintiff
shall not receive attorney's fees and costs even if the court
finds the defendant liable for contribution, reimbursement, or
equitable contribution. G. L. c. 21E, § 4A(e).
13
ordered diesel fuel to be delivered and, moreover, had
accurately reported the levels in the tanks.
Although these subsidiary findings are unassailable on
appeal, they do not dispose of the question whether Packer had a
reasonable basis for asserting that Dockside was liable for
purposes of awarding attorney's fees under § 4A(f)(2).16 That
question turns on whether Packer had a reasonable basis for
asserting that Dockside fell within one of the five broadly-
defined categories of persons who may be liable, under
§ 5(a)(1)-(5), "without regard to fault" or causation. G. L.
c. 21E, § 5(a), inserted by St. 1983, c. 7, § 5. If, as Packer
alleged, Dockside was strictly liable under § 5(a)(1) as an
"operator of . . . a site from . . . which there . . . has been
a release . . . of oil," Packer would have had a reasonable
basis for asserting Dockside's liability.
Whether a person is an "operator" for purposes of the Act
depends on whether the person (here, Dockside) had "actual
control of, and active involvement in, operations at the site.
16
What "ultimate legal determination" the facts support is
a legal question we review de novo. Matter of Jane A., 36 Mass.
App. Ct. 236, 239 (1994). See Simon v. Weymouth Agric. &
Industrial Soc., 389 Mass. 146, 148-149 (1983); VMark Software,
Inc. v. EMC Corp., 37 Mass. App. Ct. 610, 617 n.8 (1994)
("appellate court may reach its own ultimate conclusions based
on a trial judge's findings [of fact] and may set aside a trial
judge's ultimate ruling that is inconsistent with the [trial]
judge's own subsidiary factual findings").
14
This is a fact-specific determination, and the appropriate
factors to consider will differ according to the nature of the
enterprise and the relation between the parties involved."
Martignetti v. Haigh-Farr, Inc., 425 Mass. at 304. The judge's
conclusion that Dockside was not an "operator" of the site
rested on the following subsidiary findings. The judge found
that Dockside did not own or control the tanks or the land in
which they sat. Nor did it have any duty to maintain the tanks.
The judge found that Dockside had no role in the day-to-day
operations of the site, and no landlord-tenant relationship
existed between it and Marmik. Dockside received no rents or
profits from the premises and was not involved in a joint
venture with Marmik. On the other hand, several of the judge's
subsidiary findings point the other way. Dockside had a long-
standing arrangement (begun with Packer, and continued with
Marmik) whereby it pumped fuel from the tanks for sale to its
customers. Fuel was delivered to, and stored at, the tanks at
Dockside's instruction and for its use. Dockside's use of the
tanks was not casual or intermittent; it was pursuant to a
formalized business arrangement whereby it paid a fee to Marmik
in exchange for the use of the tanks. In addition, after
investigation, DEP notified Dockside that it (DEP) had reason to
believe Dockside was potentially liable under the Act. This
fact, taken together with those just recited, was certainly a
15
strong buttress for Packer's position that Dockside bore
potential liability as an operator of the site.
We need not, however, decide whether Packer had no
reasonable basis for asserting that Dockside was liable as an
operator such that an award of attorney's fees and costs was
proper under § 4A(f)(2). The award was independently proper
under § 4A(f)(3) given the judge's other findings. The judge
stated that "Packer's insistence that Dockside contribute eighty
percent of the clean up costs . . . when Packer well knew that
Dockside was blameless in this instance" was alarming.
Particularly when that demand is considered with the similar one
made to Marmik (together significantly exceeding the actual cost
of remediation), and Packer's inflexibility despite its own
responsibility for the spill, we have no difficulty concluding
that Packer's "position with respect to the amount of the
defendant's liability . . . was unreasonable" such that
attorney's fees and costs could be awarded under § 4A(f)(3).
Although in other circumstances we might not determine the
reasonableness of a presuit litigation position for the first
time on appeal, we do so here for several reasons. First, the
issue was raised and fully briefed below. Dockside's
counterclaim sought attorney's fees and costs under all three
subsections of § 4A(f), and its application for attorney's fees
also pressed all three grounds. Second, on appeal, Dockside
16
again argues that the award was proper under all three
subsections. Tellingly, Packer challenges only the award under
§ 4A(f)(2); it does not argue that the award could not rest on
§ 4A(f)(3). Finally, it is clear that the judge would have made
the award under § 4A(f)(3) as well as (or in lieu of) § 4A(f)(2)
had he considered the question. As the judge noted, had he
"reached the question of equitable apportionment of the
[response] costs vis-a-vis Dockside, a finding of zero share
would have been entered." It is but a short step from this
statement, considered together with the judge's subsidiary
findings concerning Dockside's lack of responsibility for the
spill and his forceful remarks concerning his "alarm[]" at
Parker's intransigent demand for an eighty percent contribution
to conclude that the judge would have found Packer's inflexible
contribution position unreasonable.
The judgment dated September 3, 2013, and the order dated
April 9, 2014, awarding attorney's fees and costs to Dockside
are affirmed under G. L. c. 21E, § 4A(f)(3).
So ordered.