WATCO, a joint venture comprised of Wayne Todd and Wilson Holdings, LP v. Pickering Environmental Consultants, Inc., a Tennessee Corporation ( 2007 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
JANUARY 17, 2007 Session
WATCO, a joint venture comprised of Wayne Todd and Wilson Holdings, LP
v. PICKERING ENVIRONMENTAL CONSULTANTS, INC., a Tennessee
Corporation
Direct Appeal from the Circuit Court for Shelby County
No. CT-003944-04 John R. McCarroll, Judge
No. W2006-00978-COA-R3-CV - Filed June 5, 2007
The plaintiff, a real estate development company, conditionally agreed to purchase real property from
a trustee bank if the bank first obtained a satisfactory “Phase I” environmental site assessment of the
property. The trustee bank hired the defendant environmental consulting company to perform a
Phase I environmental site assessment. After performing an assessment, the defendant prepared a
report in which it represented that it had conformed with the applicable professional standard in its
assessment, that it had not detected any hazardous materials or environmental concerns at the subject
property due to current or past uses of the property, that it had not identified any significant
environmental concerns in the surrounding area of the subject property, and that it did not
recommend further environmental review of the subject property. The plaintiff purchased the subject
property in 1995. During residential development of the subject property in 2004, the plaintiff
discovered the remains of a municipal garbage dump which had previously existed adjacent to the
subject property, and which extended under a portion of the subject property. The plaintiff had the
garbage removed and the land filled, and development was delayed as a result. The plaintiff
development company sued the defendant environmental consulting company, alleging professional
negligence and negligent misrepresentation. A bench trial was held, and the trial court entered
judgment in favor of the defendant. For the following reasons, we affirm.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Affirmed
ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and DAVID R. FARMER , J., joined.
Allen T. Malone, R. Porter Feild, Memphis, TN, for Appellant
J. Kevin Walsh, James R. Newsom, III, Memphis, TN, for Appellee
OPINION
I. FACTS AND PROCEDURAL HISTORY
This case involves an environmental site assessment of real property. The plaintiff WATCO,
a joint venture comprised of Wayne Todd and Wilson Holding Company, (“WATCO” or
“Appellant”) is a real estate development company. The defendant, Pickering Environmental
Consultants, Inc. (“Pickering” or “Appellee”), is a company that provides environmental site
assessments for clients involved in commercial transactions. In 1994, the American Society for
Testing and Materials (“ASTM”) developed and published an industry standard to guide
environmental professionals in their performance of “Phase I” environmental site assessments. This
standard was known as ASTM Practice Standard E1527-94 (“the ASTM Standard” or “the
Standard”), and it was effective in 1995.
The real property at the center of this dispute is a 169 acre tract (“the subject property”) on
Highway 70/Summer Avenue near Brunswick Road in Shelby County, Tennessee. In December of
1994, Peter Norfleet signed a quitclaim deed conveying title of the subject property to the Norfleet
Charitable Remainder Uni-Trust. National Bank of Commerce (“NBC”) served as trustee of the
Norfleet Charitable Remainder Uni-Trust. Fletcher Haaga was the trust officer for NBC assigned
to administer the assets of the trust. According to Mr. Haaga, the purpose of this trust was to
generate cash flow for Mr. Norfleet and his wife through the sale of the subject property. Joel Smith
of VCM, Inc., a real estate company, was selected to be the real estate agent responsible for listing
the subject property.
In May of 1995, Kemmons Wilson and Wayne Todd, acting on behalf of the joint venture
WATCO, contracted with NBC to purchase the subject property for $880,588.00. WATCO intended
to develop a residential subdivision on the subject property, which was undeveloped at the time. The
purchase contract provided that the sale was conditional upon a “Phase I Environmental Survey
satisfactory to Buyer (at Seller’s expense),” and Pickering was selected by NBC as the company that
would provide this service. On May 31, 1995, Timothy McCaffery, a Pickering geologist, submitted
a letter agreement to Mr. Haaga which stated the purpose of the Phase I environmental site
assessment, the scope of the work to be performed, compensation of $1,800 to be paid for
performance of the environmental site assessment, the performance schedule, and the client’s
responsibilities concerning the work to be performed. The letter agreement recited, “The Engineer
understands the Project to be an undeveloped, wooded 169 acre tract of land.” The letter agreement
provided in part:
The Engineer’s services listed in this Scope of Work are in
conformance with the scope of ASTM Practice E 1527 and exceed
the Practice in Items 2 and 7 of this Scope of Work. No other testing
for specific solids, liquids or gases, such as tank testing, soil boring
and testing, air monitoring, asbestos testing, radon testing or magnetic
survey is included in this Phase I Environmental Site Assessment.
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Additional testing can be provided in a future Phase II study, if
required, and authorized in writing by the Client. The Scope of Work
does not include any wetland investigation.
Items 2 and 7 of the letter agreement stated:
2. Provide a USGS 7.5 min. Topographic Map, vicinity map (street
map with subject property accurately located) and a site plan showing
subject property and detailing the locations of any concerns.
...
7. Provide a report of the findings of the Phase I Environmental Site
Assessment. A separate letter containing the Engineer’s
recommendations regarding the subject property will be attached to
the report.
Mr. Haaga sent a letter in return on June 1, in which he indicated NBC’s agreement to the terms and
asked that Joel Smith, the real estate agent, be utilized as the site contact “to obtain many of the
items requested.”
Three employees of Pickering conducted a Phase I environmental site assessment of the
subject property in the summer of 1995: Mr. McCaffrey, who served as project manager, was the
primary author of the Phase I report, and was further responsible for records review and interviews
regarding the subject property; Jason Balogh, a summer intern who conducted site reconnaissance
and inspection of the subject property and acted under the supervision of Mr. McCaffrey; and
Edward Powell, an engineer who provided senior review of the Phase I report.
Pickering provided NBC the completed Phase I report in July of 1995. Pickering also
provided WATCO a revised copy of the report in August of 1995, which was essentially identical
to the one provided to NBC. The cover letter attached to this report provided as follows:
Dear Mr. Wilson and Mr. Haaga:
You have requested our opinion with respect to the existence of
hazardous materials or environmental concerns at the above
referenced Property (the “Property”). The attached opinion is being
made to you in connection with the sale of the Property. We
understand that you will rely on this opinion for such purposes.
After a review of the Property and available record documents
regarding same, we have not detected any hazardous materials or
environmental concerns at the Property due to current or past uses of
the property itself. No significant environmental concerns were
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identified in the surrounding area which would represent a significant
environmental concern to the Property.
Further environmental review of the subject Property is therefore not
recommended at this time. The report and this letter has [sic] been
revised to add the names of other entitles [sic] who may rely on this
opinion.
The accompanying report detailed the efforts of Pickering in performing the Phase I environmental
site assessment. Relying on the report, WATCO closed its purchase of the subject property on
August 15, 1995.
Located adjacent to the subject property to the west is Freeman Smith Park, which is
presently the site of a baseball park, as was the case at the time of the Phase I assessment in 1995.
This property was, at one time, also owned by Mr. Norfleet and his family’s trust. Although it was
unknown by either WATCO or Pickering at the time of the Phase I assessment in 1995, this property
had been the site of a residential garbage dump known as “Craven Road landfill.” The dump was
not an approved site by the Shelby County government, but served the communities of Brunswick,
Bolton, and Barrettsville from approximately 1955 until it was closed in the late 1970's. Under two
separate deeds in 1980 and 1986, Mr. Norfleet and NBC transferred this property to Shelby County
for the use and benefit of the Shelby County Conservation Board, which later developed Freeman
Smith Park.
In March of 2004, while grading a portion of the subject property for the purposes of
developing a residential subdivision, contractors for WATCO discovered garbage buried 3 to 5 feet
beneath approximately 25 to 30 acres of the western portion of the subject property. It was
subsequently discovered that this garbage had spilled onto the subject property from the formerly
existing Craven Road landfill, now Freeman Smith Park. WATCO incurred significant costs in
removing the garbage and filling the land, and it suffered delays in completion of the residential
subdivision. It is stipulated that the residential garbage was not tested for the presence of hazardous
waste.
On July 8, 2004, WATCO filed a complaint in the Shelby County Circuit Court, alleging that
Pickering breached the professional standard of care by which it was bound in performing the 1995
Phase I environmental site assessment and that it misrepresented certain facts in a business
transaction relating to the subject property.1 The gravamen of the complaint was that Pickering had
“failed to determine and advise WATCO of the existence of the disposed solid waste” on the subject
1
Pickering filed a third party complaint against NBC, seeking indemnity under the terms of its contract for
the Phase I assessment. NBC filed a motion to dismiss the third party complaint based upon an arbitration provision in
the contract, which the trial court granted. Pickering then amended its answer to name NBC as a comparative tortfeasor.
W ATCO amended its complaint to name Diversified Investment Co., Inc., which then held the Norfleet trust, as a
defendant. The trial court ultimately dismissed Diversified Investment Co., Inc. from the proceedings and struck
Pickering’s defense of comparative fault by NBC, leaving W ATCO and Pickering as the sole parties in this litigation.
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property and “failed to determine and advise WATCO of the former use of the adjoining property
as a long-time garbage dump.” WATCO sought damages of not less than one million dollars,
representing costs of removing the garbage, interest charges suffered from the delay in development,
and the lost profits from WATCO’s alleged loss of use of approximately 5 acres of the subject
property for WATCO’s intended residential subdivision purposes.
A bench trial was held on February 20-23, 27, 28, and on March 2, 3, and 9, 2006, before the
Honorable John R. McCarroll, sitting by interchange.2 At trial, WATCO and Pickering each called
expert witnesses to testify on the subject of Phase I environmental site assessments. Testifying on
the behalf of WATCO was Edward Williams. Pickering offered the testimony of William Samford.
Both of these individuals possessed significant expertise with the practice of Phase I environmental
assessments, as well as with the ASTM Standard. Both experts agreed that the ASTM Standard
consisted of four principal components: records review, site reconnaissance, interviews, and
preparation of the report itself. Both experts also agreed that Phase I environmental site assessments
did not involve any subsurface investigation or soil borings.
The ASTM Standard provided in relevant part:
1.1 Purpose – The purpose of this practice, as well as Practice
E 1528, it to define good commercial and customary practice in the
United States of America for conducting an environmental site
assessment[] of a parcel of commercial real estate with respect to the
range of contaminants within the scope of Comprehensive
Environmental Response, Compensation and Liability Act
(CERCLA) and petroleum products. As such, this practice is
intended to permit a user to satisfy one of the requirements to qualify
for the innocent landowner defense to CERCLA liability; that is, the
practices that constitute “all appropriate inquiry into the previous
ownership and uses of the property consistent with good commercial
or customary practice” as defined in 42 USC § 9601(35)(B) . . . .
1.1.1 Recognized Environmental Conditions – In defining a
standard of good commercial and customary practice for conducting
an environmental site assessment of a parcel of property, the goal of
the processes established by this practice is to identify recognized
environmental conditions. The term recognized environmental
conditions means the presence or likely presence of any hazardous
substances or petroleum products on a property under conditions that
indicate an existing release, a past release, or a material threat of a
release of any hazardous substances or petroleum products into
structures on the property or into the ground, groundwater, or surface
water of the property. The term includes hazardous substances or
2
The Honorable D’Army Bailey presided over the proceedings occurring prior to trial.
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petroleum products even under conditions in compliance with laws.
The term is not intended to include de minimis conditions that
generally do not present a material risk of harm to public health or the
environment and that generally would not be the subject of an
enforcement action if brought to the attention of appropriate
governmental agencies.
(footnote omitted). Other notable sections under the ASTM Standard regarding the scope of a Phase
I assessment provided in relevant part:
4.5.1 Uncertainty not eliminated – No environmental site
assessment can wholly eliminate uncertainty regarding the potential
for recognized environmental conditions in connection with a
property. Performance of this practice or E 1528 is intended to
reduce, but not eliminate, uncertainty regarding the potential for
recognized environmental conditions in connection with a property,
and both practices recognize reasonable limits of time and cost.
4.5.2 Not Exhaustive – Appropriate inquiry does not mean an
exhaustive assessment of a clean property. There is a point at which
the cost of information obtained or the time required to gather it
outweighs the usefulness of the information and, in fact, may be a
material detriment to the orderly completion of transactions. One of
the purposes of this practice is to identify a balance between the
competing goals of limiting the costs and time demands inherent in
performing an environmental site assessment and the reduction of
uncertainty about unknown conditions resulting from additional
information.
...
4.5.4 Comparison With Subsequent Inquiry – It should not be
concluded or assumed that an inquiry was not appropriate inquiry
merely because the inquiry did not identify recognized environmental
conditions in connection with a property. Environmental site
assessments must be evaluated based on the reasonableness of
judgments made at the time and under the circumstances in which
they were made.
Edward Williams was WATCO’s environmental consulting expert. Mr. Williams, a
professional engineer, was president of Environmental Testing and Consulting of the Americas, an
environmental firm operating in the Memphis area since 1998, and he had formerly been the
president of E. F. Williams & Associates, an environmental consulting firm, for 18 years. Mr.
Williams also served as chairman for several committees of the Environmental Council of Memphis
Area Chamber of Commerce. Mr. Williams testified that he first became involved in the case in
March of 2004, after WATCO discovered the buried garbage on its property. He testified that the
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debris removed from the property consisted primarily of residential garbage. At the request of
WATCO, Mr. Williams investigated possible sources of the garbage, and he first contacted an
unidentified employee of the Tennessee Department of Environmental Conservation (“TDEC”), who
informed Mr. Williams that although he could locate no record of a garbage dump at that location,
that he personally was aware that there had been a landfill in that neighborhood that was known as
the Craven Road landfill. Mr. Williams testified that he recognized the name of this landfill from
his prior experience as a county commissioner, and that he next contacted the former director of
landfills for Shelby County, David Newsom, who verified Mr. Williams’s knowledge that Craven
Road Landfill had existed at what is presently Freeman Smith Park. Mr. Williams also reviewed
topographical maps and aerial photographs of this area and noted its history in the early 1900’s as
a site for gravel mining operations. After Mr. Williams completed his investigation, WATCO asked
him to review the Pickering Phase I report from 1995. Mr. Williams testified that the report did not
indicate the prior existence of a landfill at Freeman Smith Park, which is adjacent to the subject
property. Mr. Williams was of the opinion that Pickering’s failure to identify the existence of the
adjacent former landfill or buried garbage on the subject property in its report evinced a lack of
conformity with the ASTM Standard, and that Pickering’s failure to interview additional persons
regarding former uses of the subject property constituted a breach of the professional standard of
care.
Pickering’s expert, Mr. Samford, was a professional geologist and vice president of
geoenvironmental services for Virginia Geotechnical Services, P.C., a company that performed
Phase I assessments. Mr. Samford was also a board member, and later, president of the Association
of Soil and Foundation Engineers (“ASFE”). Mr. Samford testified that through his involvement
with the ASFE, he was appointed to the ASTM committee that developed the ASTM Standard. Prior
to trial, Mr. Samford had been asked to review Pickering’s 1995 report and express his opinions as
to whether the Phase I assessment had been conducted in accordance with the ASTM Standard and
the standard of care. In May of 2005, Mr. Samford provided Pickering with his written expert
opinion that Pickering’s 1995 Phase 1 assessment and report were in conformance with both the
ASTM Standard and the professional standard of care. Mr. Samford based his opinion on the ASTM
Standard, ASFE studies, the Pickering report, Phase I assessment reports prepared by environmental
consulting firms in 1995 in Shelby County, the depositions of Jason Balogh and Joel Smith, and
records and maps relied upon by Pickering in its 1995 Phase I environmental site assessment.
In its final judgment entered on April 19, 2006, the trial court included extensive findings
of fact and conclusions of law. The proof relied upon by the trial court consisted primarily of the
testimony of the two experts, Mr. Williams and Mr. Samford. The court determined both men to be
highly qualified, well informed, and credible witnesses on the issue of Phase I environmental site
assessments. The court ultimately ruled as follows:
JUDGMENT
The plaintiff, Watco, has the burden of proving that Pickering
did not conform with the applicable professional standard of care in
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connection with the Phase 1 Environmental Site Assessment
conducted in Shelby County, Tennessee in July of 1995. Based on all
of the proof and applicable law, the Court is of the opinion that
plaintiff, Watco, did not carry that burden. Pickering complied with
the ASTM Standard. The proof was equally balanced as to whether
or not Pickering had a duty to conduct further interviews than those
called for in the ASTM Standard.
The trial court thereby entered judgment in favor of Pickering. WATCO filed a timely notice of
appeal to this Court on May 2, 2006.
II. STANDARD OF REVIEW
We review findings of fact by the trial court in civil actions de novo upon the record of the
trial court, accompanied by a presumption of correctness, unless the preponderance of the evidence
is otherwise. Tenn. R. App. P. 13(d) (2006). As explained by this Court in Cumberland Bank v.
G & S Implement Co., Inc, 211 S.W.3d 223, 228 (Tenn. Ct. App. 2006):
Reviewing findings of fact under Tenn. R.App. P. 13(d) requires an
appellate court to weigh the evidence to determine in which party’s
favor the weight of the aggregated evidence falls. There is a
“reasonable probability” that a proposition is true when there is more
evidence in its favor than there is against it. Thus, the prevailing party
is the one in whose favor the evidentiary scale tips, no matter how
slightly.
When our review involves questions of law, no presumption of correctness attaches to the trial
court’s findings. Sexton v. Sevier County, 948 S.W.2d 747, 749 (Tenn. Ct. App. 1997).
III. ISSUES PRESENTED
On appeal, WATCO presents the following issues for our review:
1. Whether the trial court erred in finding that WATCO did not prove, by a preponderance of the
evidence, that Pickering supplied WATCO with negligent misrepresentations in its 1995 Phase I
environmental site assessment report, in which Pickering stated that its actions had conformed with
the ASTM Standard.
2. Whether the trial court erred in finding that WATCO did not prove, by a preponderance of the
evidence, that Pickering breached the applicable standard of care when it conducted a Phase I
environmental site assessment of the subject property in 1995 and prepared the corresponding report.
For the following reasons, we affirm the judgment of the trial court.
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IV. DISCUSSION
A. Negligent Misrepresentation in a Business Transaction
The Tennessee Supreme Court has recognized that our state adopted Section 552 of the
Restatement (Second) of Torts as the “guiding principle in negligent misrepresentation actions
against other professionals and business persons.” Robinson v. Omer, 952 S.W.2d 423, 426-428
(Tenn. 1997) (citing Bethlehem Steel Corp. v. Ernst & Whinney, 822 S.W.2d 592, 595 (Tenn.
1991)). Section 552 provides in relevant part:
(1) One who, in the course of his business, profession or employment,
or in any other transaction in which he has a pecuniary interest,
supplies false information for the guidance of others in their business
transactions, is subject to liability for pecuniary loss caused to them
by their justifiable reliance upon the information, if he fails to
exercise reasonable care or competence in obtaining or
communicating the information.
(2) Except as stated in Subsection (3), the liability stated in
Subsection (1) is limited to loss suffered (a) by the person or one of
a limited group of persons for whose benefit and guidance he intends
to supply the information or knows that the recipient intends to
supply it; and (b) through reliance upon it in a transaction that he
intends the information to influence or knows that the recipient so
intends or in a substantially similar transaction.
Robinson, 952 S.W.2d at 427 (citing Restatement (Second) of Torts, § 552 (1977)). Contractual
privity is not a prerequisite to liability in tort for negligent misrepresentation, as long as (1) the
defendant acts in the course of its business, profession, or employment, or in a transaction in which
it has a pecuniary interest, (2) the defendant supplies false information meant to guide others in a
business transaction, (3) the defendant fails to exercise reasonable care in obtaining or
communicating the information, and (4) the plaintiff justifiably relies on the information. See id.
(citing John Martin Co. v. Morse/Diesel, Inc., 819 S.W.2d 428, 431 (Tenn. 1991)); see also McRae
v. Hagaman, No. E2004-00852-COA-R3-CV, 2004 Tenn. App. LEXIS 693, at *13-14 (Tenn. Ct.
App. Oct. 25, 2004).
WATCO assigns error to the trial court’s judgment in favor of Pickering for the claim of
negligent misrepresentation in a business transaction. WATCO contends that Pickering made a false
statement in the 1995 report when it represented that it had complied with the ASTM Standard in
performing the Phase I environmental site assessment of the subject property. WATCO asserts that
the evidence presented at trial clearly preponderates against the trial court’s finding that Pickering’s
representation was accurate in this regard.
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In its final judgment, after detailing the actions taken by Pickering and weighing the
testimony of the experts at trial, the trial court found that the experts agreed that Pickering’s actions
were in accordance with the ASTM Standard. The trial court’s finding with which WATCO
expresses the most disagreement is that their expert, Mr. Williams, “testified that Pickering had
conformed to the requirements of the ASTM Standard but felt that Pickering should have done
more.” WATCO argues that this finding was clearly erroneous. WATCO relies upon the testimony
of Mr. Williams on direct examination to contradict the trial court’s finding. WATCO cites the
following exchanges in support of its position:
Q. In your opinion, did Pickering Environmental Consultants[’s]
investigation of the site – its site assessments that it carried
out for WATCO comport with the applicable ASTM Standard
that you’ve identified as E1527?
A. No.
Q. That would be for the reasons that you have stated in your
testimony?
A. Yes.
...
Q. Okay. Mr. Williams, based on your review of the documents
that you have reviewed, you’re [sic] sitting here most of this
week and last week and listening to the testimony that’s come
into this case, I’m going to ask you if you have an opinion as
to whether Pickering’s environmental site assessment of
Watco’s property comported with the professional standards
that are applicable to environmental professionals practicing
in Shelby County in this region in the year 1995 when they
did the assessment. Yes or no?
A. In my opinion, no.
Q. Okay. In your opinion, same question, did the environmental
site assessment comport with the ASTM Standard?
A. No. It lacked information from a person with good
knowledge.
Both experts testified that the ASTM Standard for Phase I environmental site assessments
consisted of four basic components: records review, site reconnaissance, interviews, and preparation
of the report. WATCO has not alleged deficiencies with Pickering’s preparation of the report.
However, our consideration of this issue requires us to address the remaining three components of
the Standard, in light of the arguments presented by the parties.
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1. Records Review
The Standard provided that the objective of the first step of the Phase I assessment, records
review, was “to obtain and review records that will help identify recognized environmental
conditions in connection with the property.” The Standard also provided:
7.1.4 Reasonable Ascertainable/Standard Sources – Availability of
record information varies from information source to information
source, including government jurisdictions. The user or
environmental professional is not obligated to identify, obtain, or
review every possible record that might exist with respect to a
property. Instead, this practice identifies record information that shall
be reviewed from standard sources, and the user or environmental
professional is required to review only record information that is
reasonably ascertainable from those standard sources. Record
information that is reasonably ascertainable means (1) information
that is publicly available, (2) information that is obtainable from its
source within reasonable time and cost constraints, and (3)
information that is practically reviewable.
...
7.1.4.3 Practically Reviewable – Information that is practically
reviewable means that the information is provided by the source in a
manner and in a form that, upon examination, yields information
relevant to the property without the need for extraordinary analysis of
irrelevant data. The form of the information shall be such that the
user can review the records for a limited geographical area. Records
that cannot be feasibly retrieved by reference to the location of the
property or a geographic area in which the property is located are not
generally practically reviewable.
In its 1995 report, Pickering described the records inquiry it had performed in the Phase I
assessment:
4.1 Standard Environmental Record Sources, Federal and State
The geographic database search of National and State environmental
records review was provided by Vista Environmental Information
(enclosed in Appendix 9.3). . . No State listed landfills, incinerators,
or transfer stations were listed as located within the designated search
radius.
One underground storage tank (UST) facility was identified within
the search radius around the subject Property. . . Review of the
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database record on this facility showed that this UST facility has
reported a release of petroleum products (LUST facility). Due to this
facility’s distance from the Property and the petroleum plume
migration patterns in the local area, this LUST facility does not
represent a significant environmental concern to the Property.
The unmappable sites within the Vista report were reviewed and none
of the recorded sites were determined to be a significant
environmental concern to the Subject Property. The TDEC Division
of Superfund in Memphis, TN was contacted regarding any
Superfund sites in the area of the Property. Mr. Wm [sic] A. Gebhart
wrote in a letter dated [] June 13, 1995, that there are no promulgated
state superfund sites at the Property or within a four mile radius of the
property. A copy of TDEC’s letter has been enclosed as Appendix
9.4.
4.2 Physical Setting Source
No unusual or recognized environmental conditions were apparent on
the Topographic Map reviewed for the Subject Property. As noted in
the former uses for the Property, the Property had been used for
gravel extraction and this activity has produced an uneven topography
relief. No recognized environmental conditions were apparent on the
Topographic Map for the adjacent properties.
WATCO’s expert Mr. Williams testified that, in conducting his own record search in 2004,
he obtained the minutes from a Shelby County Conservation Board meeting held in 1978 at which
the residential landfill at issue had been discussed. Mr. Williams claimed that Pickering could easily
have obtained this record and thereby discovered the prior existence of the Craven Road landfill on
the adjacent property at Freeman Smith Park. However, during cross-examination, Mr. Williams
admitted that the references to the “Brunswick area” or “Brunswick Site” in these minutes did not
sufficiently describe the location of the Craven Road landfill so as to deem the record “practically
reviewable” for the purposes of a Phase I assessment of the subject property. Furthermore, the
minutes from this meeting clearly indicated that the site was not even a recognized state landfill, as
evidenced by the following excerpt:
The landfill site that has been under discussion for quite sometime
[sic] was never a contract agreement with R. Vance Norfleet. The
site was not a state approved site and the Shelby County
Administration decided that this landfill would be closed permanently
upon recommendation of Mr. Harbor, Mr. Hays, Mr. David
Newsome, landfill director, and Mr. Price. The landfill being put
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there would be taken down to Walnut Grove landfill site. The Health
Department stated that one foot of earthen fill would be satisfactory
to cover the site.
Mr. Williams admitted on cross-examination that he could not identify any other public record of
the formerly existing Craven Road landfill.3 In questioning Mr. Williams, counsel for Pickering had
him identify within the Standard a listing of “Standard Environmental Record Sources” from which
professionals were advised to obtain records when conducting Phase I assessments. Mr. Williams
conceded that these sources were exhausted by Pickering during the assessment and adequately
described within the report. Mr. Williams also agreed that the Vista system utilized by Pickering
and described in the report was an acceptable method of records review under the Standard. Mr.
Samford, Pickering’s expert on Phase I assessments, testified that Pickering’s efforts satisfied the
records review component of the ASTM Standard.
2. Site Reconnaissance
According to the ASTM Standard, the objective of the site reconnaissance component of a
Phase I assessment was “to obtain information indicating the likelihood of identifying recognized
environmental conditions in connection with the property.” The Standard provided in part: “8.1
Observation – On a visit to the property (the site visit), the environmental professional shall visually
and physically observe the property and any structure(s) located on the property to the extent not
obstructed by bodies of water, adjacent buildings, or other obstacles.”
Mr. Balogh, a Pickering intern who had just received a Bachelor of Science degree in physics
from The University of the South at Sewanee, performed the site reconnaissance of the subject
property on June 28, 1995, after receiving approximately two weeks of training by Mr. McCaffrey
and Mr. Powell. Additionally, the project manager, Mr. McCaffrey later visited surrounding areas
of the subject property to follow up on certain findings reported by Mr. Balogh. In its Phase I
assessment report to WATCO, Pickering described the actions taken in its site reconnaissance and
its corresponding findings:
5.1 Hazardous Substances in Connection with Identified Uses
The site inspection was performed on June 28, 1995 and included a
walk of the subject Property acreage to determine the possible
presence of hazardous materials and environmental concerns.
3
W ATCO took the evidentiary deposition of Joe Smith, who it had originally intended to call as a witness at
trial, but who was unavailable because of a medical condition. Joe Smith retired from his position as Director of the
Sanitary Landfill Department of Shelby County in 1976, and he testified regarding his knowledge of the Craven Road
landfill. Under cross examination, he testified that throughout the period of time that he had worked for the county, he
had never seen a map or written record of the Craven Road landfill, nor was he aware of any written documentation
showing the boundaries of the former dump.
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No evidence of drum or container storage was apparent. No
miscellaneous maintenance substances were observed. The Property
facility did not have any signs of contractor use/storage/disposal of
hazardous materials.
No environmental permits, TSD facility numbers, EPA generator ID
numbers appeared to be necessary for the operations at the subject
Property. There was no evidence of process chemicals and storage,
battery disposal, or hazardous waste/waste oil disposal.
No individuals were available to interview to help determine any
possible source of environmental concern or activity.
...
5.5 Indication of Solid Waste Disposal
No evidence of drums, free liquids, odors, or unusual
depressions/excavations that would indicate solid waste disposal
activity was witnessed. The Property appears to have been formerly
used for gravel extraction which produced uneven topograph and
depressions in the western 2/3 area of the Property. At the end of
Independent Road in the subdivision abutting the Property’s
southwest corner, a small pile of rubbish, predominantly wood/brush,
was observed. No evidence of free liquids or containers with free
liquids was found associated with this off-site pile of rubbish. No
deleterious materials or stained soils were evident at the Property. An
off-site property at the intersection of Brunswick Road and Highway
70 was observed having construction demolition materials filling in
a portion of that Property. No drums or liquids or odors[] were found
associated with this off-site area of landfilling.
The videotaped deposition of Mr. Balogh was played into the record at trial. Mr. Balogh had
begun his employment as a summer intern with Pickering in early June of 1995, and he described
his training by Mr. McCaffery and Mr. Powell as follows:
Q. Well, you say on the job training. Let’s be more specific.
What kind of on the job training? And let’s talk about June.
I mean –
A. Okay.
Q. – you did the site – you did the inspection that is the subject
of this lawsuit two weeks after you went to work for –
A. That is correct.
-14-
Q. – Pickering? And during that two week period do you recall
any specific training that you received to prepare you for that
job of doing such an inspection?
A. I visited other sites that Ed [Powell] and Tim [McCaffery]
were working on. And they discussed what they were doing
at the site. And they basically told me what they would look
for when they came to a site and were doing a site assessment.
You know, what they were looking for visually and then, you
know, as what they would walk around the property and look
for.
Q. What do you recall they told you about what they were
looking for?
A. Distressed vegetation or obvious signs of dumping. A lot of
times above ground dumping or above ground storage tanks.
And distressed vegetation would be an important one. And
then if there were any water on the property to inspect the
water for discoloration that seemed to be out of the ordinary.
Q. During that two weeks prior to June 27 did you go to more
than one site along with either Ed Powell or Tim McCaffery?
A. I went to a number of sites. I cannot recall all of them
specifically but, yes, we visited a number of sites. Probably
one a day or so in those two weeks.
Q. Is this – and during those two weeks either Ed Powell or Tim
McCaffery would have been doing an inspection similar to
what you did on June 27?
A. Not at all the sites. Some of the sites we were there to do
some of the sampling, so I was also trained in some of the
sampling during that time. But, yes, we did do – go to other
sites that they were working on for site assessments.
Mr. Balogh testified that in performing the site reconnaissance on the subject property on June 28,
1995, he walked the land to look for signs of distressed vegetation or any dumping or any storage
tanks that might have been on the site, and he took photographs of the site. Mr. Balogh also stated
that during the site visit, he drove the periphery of the site to look at adjacent properties, which
included Freeman Smith Park, and took photographs. In the data forms that Mr. Balogh completed
during his site visit, he described the topography and elevation of the subject property as follows:
“Eastern 1/4 flat from Oliver Creek deposits. Western 3/4 man-made depressions from gravel
extraction.” Mr. Balogh also reported the presence of healthy vegetation, understory, and deciduous
trees on the western portion of the site. On the checklist of “On-Site Characteristics,” Mr. Balogh
indicated that there was no “evidence of landfill, past or ongoing activity.” However, Mr. Balogh
did report “landfill/burial activity” as a condition of concern on an adjacent residential property to
the southwest of the subject property, where he noted that a “resident own[ed] land on which he .
. . allow[ed] building materials to be dumped.” Mr. Balogh made handwritten notes on a
-15-
topographic map at the location of Independent Road, describing these building materials as 12 1-
gallon paint drums and another much larger drum. Mr. Balogh further described this debris to Mr.
McCaffery after his site visit. Mr. McCaffery reviewed Mr. Balogh’s findings and photographs, and
he testified that he personally visited the adjacent Independent Road dump site to “double-check”
Mr. Balogh’s findings and found nothing of environmental concern. Mr. McCaffery testified that,
during this limited visit, he did not see any evidence of a recognized environmental condition on the
subject property or on adjacent properties.
Mr. Williams, WATCO’s expert, testified that one site visit would be sufficient to satisfy the
site reconnaissance component of the ASTM Standard. Mr. Williams agreed that the Standard
provided as follows regarding the identification of solid waste on a site visit:
8.4.4.4 Solid Waste – To the extent visually or physically observed
or identified from the interviews or records review, areas that are
apparently filled or graded by non-natural causes (or filled by fill of
unknown origin) suggesting trash or other solid waste disposal, or
mounds or depressions suggesting trash or other solid waste disposal,
shall be described in the report.
Also during cross-examination, counsel for Pickering quoted Mr. Williams’s prior deposition
testimony on this issue and questioned the witness regarding its accuracy:
[“]Question: I’m talking about on the basis of your review of the
site reconnaissance that was done in this case. Was
there any indication of a recognized environmental
condition that you believe should have been reported
that wasn’t based upon site reconnaissance?
Answer: I don’t see anything in this that based on site
reconnaissance would have triggered that in and of
itself.[”]
...
“Question: Let’s specifically focus on site reconnaissance as
contemplated by the standard. That’s where I am
right now. I’ll certainly discuss interviews with you,
but let’s focus on site reconnaissance. Based upon
your review in connection with this case and the
formulation of your opinion, is there anything in the
site reconnaissance that was done by Pickering that
should have noted a recognized environmental
condition in the report?
Answer: It doesn’t appear so to me.
Question: So if I had walked the site or if you had walked the
site, would you have been able to identify a
-16-
recognized environmental condition based upon what
you note today from site reconnaissance alone?
Answer: Alone, I don’t believe so.
Question: Were there any signs to your knowledge on the
Freeman Smith Park that would have indicated it was
a former county dump?
Answer: Not that it would have indicated it was a former
county dump, but it certainly would have indicated it
was a county park, and that the contact with the
conservation board would probably lead to further
information.”
[By Mr. Walsh] Is that an accurate reading of your the [sic]
testimony?
A. Yes, it is.
Mr. Williams testified that at the time of this deposition, he had not seen the color photographs of
the construction debris from the adjacent property on Independent Road, which he claimed would
have persuaded him to “explore[] a little further into those bushes to see if there was something else
there of the same nature.” However, it is clear that this construction debris was located well
southeast of Freeman Smith Park, the site of the Craven Road landfill. The record supports a
finding, and the parties appear to agree, that these materials were not remnants of the Craven Road
landfill, which had been closed since the 1970’s. Nothing in the record suggests that further
investigation of the construction debris on Independent Road would have resulted in the discovery
of the unrelated garbage from Craven Road landfill, which was buried several feet underground.
Mr. Samford, Pickering’s expert, testified that it was acceptable practice under the ASTM
Standard to allow Mr. Balogh to conduct the site reconnaissance, because it was clear that he had
been under the supervision of Mr. McCaffery, who was a qualified project manager. Mr. Samford
noted that Mr. Balogh had been given the limited assignment of visually inspecting the subject
property for the possibility of a presence of hazardous materials, and that he had performed
adequately. Mr. Samford also noted that others who had walked the site on previous occasions,
including WATCO’s engineer Mr. Dickinson and property co-owner Mr. Todd, had reported similar
conditions to those found by Mr. Balogh and reflected in the Phase I report. Both Mr. Williams and
Mr. Samford agreed that the topographical map utilized by Mr. Balogh on the site visit did not
indicate unnatural filling of the subject property at the location where buried garbage was found in
2004, and that the statements in the report concerning prior gravel extraction and the uneven
topography were accurate.
3. Interviews
The interview component of Phase I assessments under the Standard consisted of both
“Interviews With Owners and Occupants” and “Interviews With Local Government Officials.” For
the former type of interview, section 9.5 dictated that a “key site manager” be identified by the owner
-17-
to be made available for an interview: “9.5.1 Key Site Manager – Prior to the site visit, the owner
should be asked to identify a person with good knowledge of the uses and physical characteristics
of the property (the key site manager).” The term “key site manager” is defined by the Standard as
“the person identified by the owner of a property as having good knowledge of the uses and physical
characteristics of the property.”
Pickering maintains that Joel Smith fulfilled the role of key site manager in this particular
Phase 1 assessment. After NBC, the ostensible owner of the property as trustee, contacted Pickering
regarding obtaining the assessment, Mr. McCaffrey, on the behalf of Pickering, sent a letter
agreement to Mr. Haaga, the NBC trust officer, in which Mr. McCaffrey requested “[c]ontacts at the
site or the names, addresses and phone numbers of persons who are knowledgeable about the site
including past and current uses, environmental reports, hazardous waste activities or regulatory
actions.” In response on June 1, 1995, Mr. Haaga sent a letter back to Pickering stating the
following: “This will return to you an executed letter agreement for your service in performing a
Phase I site assessment on the subject property. I would appreciate your contacting Joel Smith with
VCM Inc. to obtain many of the items requested.” Mr. Haaga further provided the address of Mr.
Smith.
At trial, Mr. Smith testified that, prior to listing the subject property for sale with Mr. Haaga
in 1995, he and his real estate company had considered developing the property in 1994, but had
ultimately abandoned the idea. Mr. Smith recalled visiting the property approximately 10 or 12
times. He testified that when he walked the property, he saw no evidence of dumping or significant
filling of the land. He described the topography of the western two-thirds of the property as “treed,
and some gullies, and just a rolling ground.” Mr. Smith testified that, once while visiting the subject
property with Mr. Norfleet, he had been informed of the property’s history of gravel mining
operations. Mr. Smith also said that Mr. Norfleet had never told him that there had been a dump on
the adjacent property, or that there was garbage buried beneath the subject property. Mr. McCaffery
testified that in the course of his interview with Joel Smith, he asked Mr. Smith “what he knew about
the property in terms of its current and prior uses,” and that Mr. Smith had informed him that the
subject property had been the site of gravel mining in the early 1900’s. Mr. McCaffery testified that
the findings of Mr. Balogh from the site reconnaissance were consistent with this prior use:
Q. All right. Now, what did you do in the course of your – of
this interview with Mr. Smith? What did you ask him? What
was your – what did you ask him?
A. I asked him what he knew about the property in terms of its
current and prior uses and, you know, whether there were any
environmental liens or pending threatened litigation against
it. Some of the items that are in our data form, I would have
run down through them: Whether there were any notices from
any governmental agencies regarding violations of
environmental laws; whether he had any hazardous – any
-18-
geotechnical studies or site – prior site assessments or reports
on it that would help us.
...
Q. Did you become aware as a result of your interview with Mr.
Smith of the presence of buried garbage on the subject
property?
A. No, I did not.
Q. The site reconnaissance indicated – what were the physical
characteristics of the western two-thirds of this property based
upon your own observation and the site reconnaissance by
Mr. Balog [sic]?
A. As reported by Mr. Balog [sic] and evident by the topography
that the ground was heavily – the topography was very
undulating or hilly, heavily incised with, you know gullies
and generally not level.
Q. All right. Was it treed? Or cleared?
A. And as was evident in the aerial photographs and from Jason
[Balogh], there were very strong, mature deciduous trees as
well as a very healthy understory of vegetation covering the
ground.
Q. Based upon – did you become aware of gravel extraction – a
history of gravel extraction in the early 1900's –
A. Yes, I did; and I noted as such.
Q. – as a result of your phone interview with Mr. Smith?
A. Yes, he did tell me that.
Q. Based upon the information that you received regarding the
property from Mr. Smith as part of the telephone interview,
was there anything in the site reconnaissance that was done by
Pickering that was inconsistent with what you had learned
from the interview?
A. Nothing.
Q. Was there anything in the records that you reviewed as part of
this phase 1 environmental site assessment that was
inconsistent with the information that was provided in the
interview with Mr. Smith?
A. Nothing was inconsistent with what he told me.
WATCO’s position at trial was that real estate agent Joel Smith did not, in fact, qualify as
a person with good knowledge of the uses and physical characteristics of the subject property,
therefore he could not have been considered a “key site manager” for the purposes of the ASTM
-19-
Standard.4 WATCO relies upon the trial testimony of its expert, Mr. Williams, for the notion that
Pickering was obligated under the Standard to conduct interviews of additional persons who might
have had good knowledge of the subject property, such as former owner Mr. Norfleet or adjoining
property owners. However, on cross examination, Mr. Williams appeared to backtrack on this
position:
Q. And there is no requirement that states interviews with
adjoining owners, does it? Anywhere in the standard,
correct?
A. No. I would say that our approach has been utilized by a
person with good knowledge.
Q. Is the answer is [sic] that the standard does not require
interviews with adjoining owners?
A. It does not specifically require it.
Q. All right. Now there’s no requirement in ASTM E1527 to
interview former owners of the subject property in [the] 1994
version, is there?
A. You really hit upon an interesting twist. It certainly does not
appear to make mention of former owners, yet, obviously that
would be a mighty important point if you were building a
history of the usage of the property.
Q. But with respect to interviews, the standard does not
anywhere require an interview with a former owner, does it?
A. I don’t see an item that specifically identifies a requirement
for an interview with a former owner.
Both experts therefore agreed that the ASTM Standard did not require interviews with adjoining
landowners or former owners. Pickering’s expert, Mr. Samford, testified that Mr. McCaffrey’s
phone interview with Mr. Smith satisfied the ASTM Standard. Mr. Samford testified that interviews
with adjoining owners was not required under the Standard for several reasons, including
confidentiality concerns related to the sale of the property. Mr. Samford also testified that Pickering
had no knowledge of Mr. Norfleet’s former ownership of the subject property, and that nothing in
Pickering’s file referenced Mr. Norfleet.
4
Additionally, W ATCO emphasizes the fact that Joel Smith was the son of the CEO of Pickering, implying
that because of these familial connections, Mr. Smith had the assessment “rushed” in order to facilitate a clean report
and obtain a commission on the sale of the property. The trial court addressed this circumstantial evidence in its final
order, and found this conclusion improbable under the proof presented at trial. “W here the trial judge has seen and heard
witnesses, especially where issues of credibility and weight of oral testimony are involved, on review considerable
deference must still be accorded to those circumstances.” Townsend v. State, 826 S.W .2d 434, 437 (Tenn. 1992)
(quoting Hum phrey v. David W itherspoon, Inc., 734 S.W .2d 315, 315 (Tenn. 1987)). Considering the absence of
evidence suggesting that either Smith or Pickering had knowledge of Craven Road landfill at the time of the
environmental site assessment in 1995, we agree with the trial court’s dismissal of this argument.
-20-
Although the Standard directed the environmental professional to make the initial inquiry,
it clearly allocated the task of identifying a person with “good knowledge of the uses and physical
characteristics of the property” to the owner of the property, which in this case was NBC as trustee.
As a witness at trial, Mr. Haaga, who was the trust officer responsible for the property at the time
of the site assessment, responded to questioning on this issue as follows:
Q. Okay. Did you at any time instruct or indicate to Pickering
that it should only look to Joel Smith as a person to interview
concerning the prior uses of the property?
A. I’d have to say, yes. You know, the only person I indicated.
With regard to this issue, the trial court found as follows:
The letter agreement provided that Pickering would charge a fee of
$1,800 for performing the [environmental site assessment]. It recited
that the NBC Trust Department had advised Pickering that the
Property was an undeveloped, wooded 169 acre tract of land. The
letter agreement provided that, among its responsibilities, the NBC
Trust Department was to provide Pickering with “Contact(s) at the
site or the names, addresses and phone numbers of persons who were
knowledgeable about the site including past and current uses,
environmental reports, hazardous waste activities or regulatory
actions.” May 31, 1995 letter at p. 4. The person identified by the
NBC Trust Department for this purpose was Joel Smith.
The evidence does not preponderate against these findings by the trial court.
Pickering’s cross-examination of Mr. Williams regarding his own familiarity with the actions
taken by Pickering and the sufficiency of the interview under the ASTM Standard elicited
inconsistent responses from WATCO’s expert:
Q. All right. Well, let’s talk about the interview issue, though.
At the time of your deposition, you didn’t know that Mr.
McCaffrey had even interviewed Joel Smith, correct?
A. That’s right.
...
Q. Have you since become aware of what Mr. Joel Smith – what
information Mr. Joel Smith provided to Mr. McCaffrey as
part of the interview?
A. Apparently passed along the information that there had been
gravel mining.
Q. Did you review the Pickering records relating to the
interview?
-21-
A. Are you talking about the forms they had filled out?
Q. Just anything. Anything in connection with the interview.
You haven’t read Mr. McCaffrey’s deposition?
A. I still haven’t read McCaffrey’s deposition.
...
Q. The report. Yes. All right. But with respect to the interview
issue, when I took your deposition you were unaware of the
fact that Mr. Smith had been interviewed. And I asked you
about that. And did you not admit to me that by interviewing
Mr. Smith that Pickering had met part of the standard with
respect to interviews? Do you remember that?
A. I’m having trouble recalling it, but I would concede that that
would meet part of the standard.
Q. Because in this case, what we have –
A. The problem is that Mr. Smith is obviously someone who did
not have good knowledge.
Q. You don’t know what knowledge he had, do you?
A. Well, judging by what has transpired, it appears he did not
have good knowledge.
Q. That’s based on hindsight, is it not?
A. By and large it’s based on reviewing the materials that have
been produced.
Q. You haven’t reviewed the information pertaining to Mr.
Smith’s knowledge, have you? You haven’t reviewed the
documents pertaining to what, if anything, Mr. Smith
specifically told Mr. McCaffrey, have you?
A. I have not seen those, no.
...
Q. Now, NBC Bank as trustee designated Mr. Joel Smith as the
contact with information about the site, correct?
A. That’s my understanding.
Q. NBC Bank as trustee did not provide the name of anyone else
including Peter Norfleet as someone to contact with regards
to information on the site, correct?
A. That’s what I understand. Yes.
This testimony further undermines WATCO’s contention that Pickering was required to conduct
additional interviews under the ASTM Standard. We believe that it was appropriate for Pickering
to rely upon NBC’s designation of Joel Smith as the lone contact regarding the property, and that it
was reasonable for them to infer that he was to be considered the key site manager, i.e., a person with
good knowledge of the uses and physical characteristics of the subject property, for the purposes of
conforming to this component of the ASTM Standard.
-22-
As for the second part of the interview component of the ASTM Standard, requiring
interviews with local government officials, section 10 of the Standard provided in relevant part:
10.1 Objective – The objective of interviews with local
government officials is to obtain information indicating recognized
environmental conditions in connection with the property.
...
10.5 Who Should Be Interviewed
10.5.1 Local Government Officials – A reasonable attempt
shall be made to interview at least one staff member of any one of the
following types of local government agencies:
10.5.1.1 Local fire department that serves the property,
10.5.1.2 Local health agency or local/regional office of state
health agency serving the area in which the property is located, or
10.5.1.3 Local agency or local/regional office of state agency
having jurisdiction over hazardous waste disposal or other
environmental matters in the area in which the property is located.
With regard to this component, Mr. McCaffrey testified that he called the local office of the
Tennessee Department of Environment and Conservation, Division of Superfund (“TDEC”), and that
he sent a follow-up letter on June 9, 1995, requesting any information relating to hazardous
substances on the subject property or any site in the vicinity. The local office of TDEC responded
by letter that the subject property was not on the State’s list for known or suspected releases of
hazardous substances and/or petroleum substances and that there were no such properties on the
State’s list within a four-mile radius of the subject property. Additionally, while reviewing aerial
photographs of the subject property, Mr. McCaffrey interviewed employees at the local office of the
USDA Soil Conservation Service and learned that this agency was unaware of any environmental
problem with the subject property. These efforts were documented in the final report submitted to
WATCO prior to its closing on the subject property. Both experts agreed that these agencies were
appropriate sources of knowledgeable government officials, and that these interviews technically
satisfied the ASTM Standard.
After a thorough review of the ASTM Standard, the Phase I environmental assessment report
prepared by Pickering in 1995, and the testimony of witnesses and exhibits offered at trial, we find
that the evidence does not preponderate against the trial court’s finding that Pickering conformed
to the ASTM Standard in its Phase I environmental site assessment of the subject property in 1995.
WATCO failed to establish, by a preponderance of the evidence, that Pickering had supplied
WATCO with false information in its Phase I environmental site assessment report. We therefore
affirm the judgment entered by the trial court in favor of Pickering on the claim of negligent
misrepresentation in a business transaction.
-23-
B. Breach of the Professional Standard of Care
WATCO further alleges that the trial court erroneously ruled in favor of Pickering when it
held that WATCO had not established, by a preponderance of the evidence, that Pickering breached
the applicable standard of care for environmental professionals conducting Phase 1 environmental
site assessments in Shelby County, Tennessee or similar communities in 1995. The trial court
specifically found as follows:
A standard of care or duty was established by the letter agreement,
Exhibit 7, i.e., that the work would be “in conformance with the
scope of the ASTM Practice E 1527". That duty was not breached
according to both experts.
The Plaintiff argues that in addition to the ASTM Standard,
the defendant, Pickering, was bound by a duty which exceeded the
ASTM Standard and required the defendant Pickering, to conduct
additional interviews not called for by the ASTM Standard. By not
doing the additional interviews, Plaintiff argues that defendant,
Pickering, breached the applicable professional standard of care in
connection with the Phase 1 Environmental Site Assessment
conducted in Shelby County, Tennessee in July of 1995.
Pickering argues that it conformed to the standard of care in
connection with the Phase 1 Environmental Site Assessment in
Shelby County, Tennessee in July of 1995. The standard of care in
connection with the Phase 1 Environmental Site Assessment
conducted by Pickering in Shelby County, Tennessee in July of 1995,
in Defendant’s opinion, included both the ASTM Standard and the
Shelby County standard. Defendant says that both the ASTM
Standard and the Shelby County Standard were complied with by
Pickering in that Pickering complied with the ASTM Standard and
there was no duty to conduct additional interviews not contemplated
by the ASTM Standard.
The trial court found that Pickering complied with the ASTM Standard and that “[t]he proof
was equally balanced as to whether or not Pickering had a duty to conduct further interviews than
those called for in the ASTM Standard.” The latter finding is the main focus of our review of the
court’s judgment in favor of Pickering on WATCO’s claim for professional negligence. We must
consider whether the evidence preponderates in support of a finding that the standard of care for
environmental professionals conducting Phase 1 assessments in Shelby County or similar
communities required more thorough efforts than those exerted by Pickering in 1995 with regard to
the interview component of a Phase 1 environmental site assessment.
In a negligence action, the plaintiff must establish, by a preponderance of the evidence, the
following elements in order to prevail: (1) a duty of a care owed by the defendant to the plaintiff; (2)
-24-
conduct falling below that standard of care amounting to a breach of that duty; (3) an injury or loss;
(4) causation in fact; and (5) proximate, or legal cause. Wood v. Newman, Hayes & Dixon Ins.
Agency, 905 S.W.2d 559, 562 (Tenn. 1995) (citing Bradshaw v. Daniel, 854 S.W.2d 865, 869
(Tenn. 1993)). Professionals are judged according to the standard of care required by their
profession. Jennings v. Case, 10 S.W.3d 625, 627-28 (Tenn. Ct. App. 1999). Tennessee courts
have adopted the “same or similar community” standard of care with respect to professional
negligence. Martin v. Barge, Waggoner, Sumner & Cannon, 894 S.W.2d 750, 751 (Tenn. Ct. App.
1994) (citing Dooley v. Everett, 805 S.W.2d 380, 384-85 (Tenn. Ct. App. 1990)); see also
Restatement (Second) of Torts, § 299(A) (1965) (“Unless he represents that he has a greater or less
skill or knowledge, one who undertakes to render services in the practice of a profession or trade is
required to exercise the skill and knowledge normally possessed by members of that profession or
trade in good standing in similar communities.”).
Although WATCO’s two theories of recovery are closely related, we note the subtle
distinction in this case that is to be made between the applicable standard of care, which defined the
scope of duty as to WATCO’s claim for professional negligence, and the ASTM Standard, which
was developed as an industry guide for environmental professionals conducting Phase 1
environmental assessments, and which has already been addressed regarding WATCO’s claim for
negligent misrepresentation. The trial court specifically found that both Mr. Williams and Mr.
Samford agreed that the ASTM standard “was a guideline to be used, but was not exclusive.” For
example, in his testimony on direct examination, WATCO’s expert Mr. Williams responded to
questioning as follows:
Q. Would you state your familiarity with something called
ASTM standard which is designated E1527 relative to Phase
1 environmental site assessments?
A. The American Society of Testing Materials adopted in 1994
that particular standard as the standard for environmental site
assessments.
...
Q. Does that document incorporate a guideline that was
applicable in 1995 to environmental site assessments in
Shelby County, in your opinion?
A. It does – yes, it does. But I should say with great emphasis on
the word guideline.
Q. Okay.
A. This is not a regulation. It’s a guidance document –
Q. Okay.
A. – for professionals in that field. It does not require that they
rigidly adhere to it, but on the other hand it’s pretty much a
standard that’s to be utilized.
-25-
Q. Is the guide – does the adherence to this guide depend to some
degree on the circumstances represented on a case-by-case
basis in environmental site assessments?
A. I would say that would be an appropriate way to describe it.
It certainly should be utilized with the circumstances of the
individual property in mind.
Q. Mr. Williams, you have conducted site assessments in Shelby
County, you’ve testified. Have you ranged beyond Shelby
County in your practice?
A. Yes. We have done them in Detroit, Jacksonville, Florida,
Indianapolis.
Q. Get over into Arkansas and Mississippi?
A. We do quite a few in eastern Arkansas, north Mississippi.
That’s very common.
Q. In all these locations, in your experience is ASTM E1527 the
applicable guide that’s used in those other locations as well as
Shelby County?
A. Well, in 1995 – short answer is, yes. But in 1995 there may
have been more variance.
...
Q. And the ‘94 version is the standard that is applicable for
Phase 1 ESA’s or environmental site assessments that were
done in 1995, correct?
A. It was the guidance that was being used at that time. Quite
frankly, I don’t believe that most of the consultants in
Memphis were rigidly adhering to it.
Mr. Samford, Pickering’s expert, testified:
A. There’s a fundamental distinction that you need to make
between the ASTM Standard and standard of care. The
standard is a prospective document[,] it’s something that says
this is the way you should do it. The standard of care is
retrospective[,] you can only determine the standard of care in
hindsight. You have to look back and see what people
actually did. So to the extent that people comply with the
standard and do the things that the standard suggests then the
standard may be considered in hindsight the standard of care
at the time. But you can’t say that whatever is done tomorrow
is going to be the standard of care because you don’t know
what that’s going to be.
...
-26-
Q. You don’t know what the standard of care was in Virginia but
you do know what it was in Shelby County where you’ve
never even practiced. Is that your testimony?
...
A. No, it can because I did an investigation of the standard of
care in Shelby County, Tennessee. And, actually, I may have
done one in connection with these other cases. I don’t
remember the dates on these, but if I had a Phase 1 site
assessment case in Virginia in 1995 I would have looked at
the standard of care at that point, also. But I specifically
looked at what the standard of practice here was in 1995 with
respect to this case. So, yes.
Q. Okay.
A. I do know what the standard of care here is even though I’ve
never practiced in the area. And my opinion is not jaded by
my own personal preferences. It’s what people did.
Q. [By the Court] Let me see, for my purposes of
understanding, if I can clarify what you’re saying. As
lawyers we approach the various issues that we’re
talking about including standard of care by defining
things such as duty, breach of duty, et cetera.
A. Yes, sir.
Q. The duty to do or not do whatever someone should or
shouldn’t have done in ‘95 is whatever it is. Whether
they breach that duty is the question that I have to
decide. So are you saying – it sounds like to me
you’re more saying in the prospect of retrospective
discussion – you’re saying whether somebody did or
failed to do something I don’t know until it’s actually
happened. Is that right? The duty stays the same.
A. The duty stays the same, but it’s tempered by what
people typically, commonly do –
Q. Yeah. That might be a part of it.
A. – practicing in the same area at the same time.
Q. Right. There may be two bases as I understand as far
as your testimony. It can be what people in the
community are doing and it’s then got to be analyzed
in light of the standard that was put into effect in 1994
and clearly was in effect in 1995.
A. Yes.
Q. Both of those factors have to be looked at?
A. Yes, sir.
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Mr. Samford’s testimony is consistent with his characterization of the standard of care for Phase I
assessments in the formal study and report that he prepared in May of 2005:
The Standard of Care is that level of care and diligence ordinarily
employed by the average firm practicing in the same geographic area
and at the same time. A “standard” such as ASTM E1527 only
becomes the “standard of care” if it is embraced as the ordinary way
things are done. An ASTM standard practice by definition includes
flexibility in the way the practice is applied to any given situation.
Consequently, application of the standard practice will vary between
consultants practicing in different areas and at different times.
...
Since 1987, one of the ongoing efforts of [the Association of Soil and
Foundation Engineers] has been to develop an understanding of the
Standard of Care for environmental site assessments . . . In 2000,
ASFE published its most comprehensive assessment of the Standard
of Care for Environmental Site Assessments. This study reported the
results of a review of approximately 150 Phase 1 reports. Firms
submitting reports included members of at least 5 professional
organizations representing moret han 20,000 Phase 1 ESA reports per
year. This ASFE study made a particular note of whether the reports
attempted to conform to the ASTM Standard Practice E1527, and
also, more importantly, whether they actually did strictly conform to
this standard practice. The study found that 73 % of the proposals
stated that they would conform to the ASTM standard E1527; and,
not a single report actually was in strict conformance to the standard.
This study clearly indicates that the Standard of Care and the ASTM
E1527 standard practice are not equivalent.
We believe that the totality of both experts’ testimony in this case supports the trial court’s
finding that the ASTM Standard and the standard of care were not equivalent at the time of the Phase
1 assessment by Pickering in 1995. “Customary conduct, while not conclusive or controlling, may
be considered as furnishing a standardized gauge and as one circumstance to be weighed along with
all others in determining whether or not ordinary care has been exercised.” Hames v. State, 808
S.W.2d 41, 45-46 (Tenn. 1991) (citing Bryan v. Hubbard, 32 Tenn. App. 648, 225 S.W.2d 282
(Tenn. App. 1949)). Therefore, for the purposes of our review of the trial court’s judgment in favor
of Pickering as to professional negligence, we do not limit our focus to Pickering’s actions with
regard to the ASTM Standard itself, but also consider the parameters of the standard of care in actual
practice by environmental professionals in Shelby County or similar communities in 1995,
considering the expert testimony and proof at trial.
Mr. Williams admitted that he had not conducted a formal study of the standard of care for
Shelby County and similar communities in 1995, but that his opinions were based upon his years of
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experience with other environmental consulting firms, including his own firm, E.F. Williams &
Associates. When asked for his opinion as to whether Pickering complied with the professional
standard of care for conducting environmental site assessments in 1995 in Shelby County,
WATCO’s expert Mr. Williams responded:
Well, it’s my opinion that they have breached the standard in that they
should have made some effort to find a knowledgeable person that
they could interview who knew something about the past uses of the
land around this site because once they knew that there had been
gravel mining, there are too many little tell-tale indications that it
occurred right on up to the boundary somewhere around the Freeman
Smith Park. And you’ve got level ground there and so something has
filled it, and you need to find somebody who can tell you something
about why it was filled.
For reasons already discussed, we find that the record before this Court does not support Mr.
Williams’s characterization of the subject property as “level.” The testimony of various witnesses
at trial established that the subject property was hilly and uneven. It is unclear what other bases Mr.
Williams relied upon in formulating his opinion that additional interviews were warranted under the
standard of care.
Pickering’s expert, Mr. Samford, also testified regarding the standard of care for
environmental site assessments in Shelby County and similar communities in 1995. Mr. Samford
testified that in conducting his study, he reviewed six environmental site assessments that had been
conducted by other environmental professionals in Shelby County in 1995 in order “to get an idea
of what other firms in the area were doing at that time this study was done.” After reviewing the
Pickering report, he concluded that Pickering’s Phase 1 environmental site assessment conformed
to the standard of care. Mr. Samford related his understanding that Joel Smith had been identified
as the sole contact for information regarding the subject property, and that he had provided Pickering
with information regarding its prior uses. Mr. Samford went on to explain that even if NBC had
provided Pickering with contact information for the prior owner, Mr. Norfleet, the standard of care
would not have required Pickering to interview him in this situation. Mr. Samford explained that
the information provided by Mr. Smith regarding gravel mining in the 1900’s on the subject property
was consistent with the topography of the land at the time of the 1995 site reconnaissance:
Again, the information that you got from somebody representing the
owner was that there was gravel mining on the site, and you can see
from that topographic map and from your site reconnaissance that
there had been gravel mining on the site. That wasn’t in question.
And there’s no evidence looking at the site, or looking at the
topography, or any information that you got that anything happened
between the gravel mining stopping and not. Trees had grown up,
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they were mature, they, you know, reflected that the site had been just
vacant.
...
You walk the site, you don’t see any evidence of dumping, you don’t
see any – in a situation like this you don’t even have trails and, you
know, gravel or dirt roads running through the property. So there’s
no method of somebody getting into the property to dump. If you had
an unknown road leading to a barren spot in the middle of the
property you would have a different level of concern. Then you
would start thinking, gee, somebody has been using this site for
something since the gravel mining for other kinds of purposes.
There’s none of this on this site.
Mr. Samford further opined that, based upon his review of other environmental site assessment
reports from Shelby County in 1995, the standard of care did not require Pickering to interview
adjoining property owners or prior owners. One of these reports was a 1995 Phase 1 environmental
site assessment report conducted by E.F. Williams & Associates, Mr. Williams’s company. When
asked about that particular assessment, Mr. Samford indicated that no interviews with an owner,
former owner, or adjoining owner were reflected in the E.F. Williams & Associates report.
The evidence in the record does not preponderate against the trial court’s finding that the
evidence was equally balanced as to whether the standard of care for Phase 1 environmental site
assessments performed in Shelby County or similar communities in 1995 required Pickering to
conduct further interviews than those called for in the ASTM Standard. Therefore, WATCO failed
to establish, by a preponderance of the evidence, that Pickering breached the applicable standard of
care when it performed a Phase 1 environmental site assessment of the subject property in 1995.
Accordingly, the trial court’s judgment in favor of Pickering on the claim for professional negligence
is affirmed.
V. CONCLUSION
For the foregoing reasons, the judgment of the trial court in favor of Pickering Environmental
Consultants, Inc., is affirmed. Costs are assessed against Appellant, WATCO, a joint venture
comprised of Wayne Todd and Wilson Holdings, LP, and its surety, for which execution may issue
if necessary.
___________________________________
ALAN E. HIGHERS, JUDGE
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