Mareld Company, Inc. v. New England Telephone and Telegraph Company n/k/a Verizon New England Inc.

2018 DNH 236

• Court: District Court, D. New Hampshire
• Decided: November 28, 2018
• Docket: 16-cv-390-PB
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Mareld Company, Inc. Case No. 16-cv-390-PB v. Opinion No. 2018 DNH 236

New England Telephone and Telegraph Company n/k/a Verizon New England Inc.

MEMORANDUM AND ORDER

Mareld Company seeks to hold New England Telephone and

Telegraph Company (“NET”) liable for the cleanup of

polychlorinated biphenyl (“PCB”) contamination at a commercial

property that Mareld leased to NET. NET argues that Mareld’s

state-law claims for breach of contract and negligence per se

are time-barred. It is undisputed that this action was filed

more than three years after the lease ended, which is the

applicable limitations period. Accordingly, I must determine

whether the discovery rule tolls the statute of limitations.

I. BACKGROUND

A. Lease Agreements

From 1970 until 2011, NET leased a motor vehicle garage

facility located at 100 Tri City Road in Somersworth, New

Hampshire from Mareld and its predecessors. The garage was

constructed around 1970, shortly before NET took possession.

The original lease agreement, executed in 1970, provided for a twenty-year lease term. A provision in the 1970 lease stated

that “at the expiration of the said term [NET] will quit and

surrender the leased premises in as good state and condition as

reasonable use and wear thereof and alternations therein will

permit.” Doc. No. 34-8 at 1.

When the 1970 lease expired in 1990, Mareld and NET signed

a new lease agreement for a five-year period. The parties later

executed four amendments to the 1990 lease, extending the lease

term incrementally through October 2011. At the end of the

term, the 1990 lease required NET to “peaceably yield up [the]

Premises and all additions thereto to [Mareld], leaving the same

clean and in such repair, order and condition as in the

Commencement date.” Doc. No. 34-10 at 4.

NET vacated the facility in 2008, when it sold its northern

New England landline telephone business to FairPoint

Communications. FairPoint continued to use the facility until

October 2011, paying $37,541 in monthly rent at the end of the

lease term. Doc. No. 81-3 at 2. I assume, without deciding,

when resolving the statute-of-limitations issue that NET

remained responsible to Mareld under the 1990 lease during

FairPoint’s occupancy.

B. PCB Detections

PCBs were first detected at the facility in 1990, during a

routine cleaning of garage floor drains. NET’s environmental

2 consultant, Clean Harbors, conducted wipe sampling of four floor

drains and the surrounding garage floor surface and collected

soil samples from the drain discharge area behind the garage.

Testing confirmed PCBs exceeding the regulatory limit in the

garage floor drains and the drain discharge soil. The

contaminated soil was removed, and the floor drains were

decontaminated following the United States Environmental

Protection Agency’s cleaning instructions. Another round of

sampling and testing revealed the continued presence of PCBs

above the regulatory limit in the floor drains. Clean Harbors

noted these results in an October 1990 report and stated that

the type of PCB mixture detected, Aroclor 1254, “was once a

common constituent of transformer oil, and it is possible that

PCBs were at some time in the past released during the handling

of transformers in the garage.” Doc. No. 79-8 at 34.

At NET’s behest, Clean Harbors conducted another round of

cleaning and follow-up sampling. In a May 1991 report, Clean

Harbors stated that the second remediation reduced the PCB

levels to below the regulatory limit and that no further action

was needed. Doc. No. 79-8 at 39. Mareld received both reports

around the time they were issued. The reports were submitted to

the New Hampshire Department of Environmental Services (“DES”),

which did not require additional assessment or remediation.

3 In connection with refinancing the property in 1991, Mareld

hired Groundwater Technologies, Inc. (“GTI”) to prepare an

environmental site assessment report. GTI collected a composite

groundwater sample and soil samples from the floor drain

discharge area and three locations where monitoring wells were

installed. Testing confirmed that, where detected, PCB levels

were below the regulatory limit. Doc. No. 79-8 at 12, 15.

In 2010, FairPoint retained St. Germain Collins to assess

the utility pole storage yard at the facility for various

contaminants. St. Germain Collins collected soil samples from

the pole storage areas, pole debris pile, and adjacent areas.

Aroclor 1254, the same PCB mixture found in 1990-91, was

detected in the upper six inches of some soil samples. The

contaminated soil was removed in August 2011. Confirmation

sampling showed that any remaining PCBs in the pole yard were

below the regulatory limit. St. Germain Collins submitted a

report dated October 3, 2011 to DES, which summarized its

investigation and remedial actions and noted that the cause of

the PCB contamination was unknown. Doc. No. 79-9 at 7-10. In

December 2011, DES issued a “no further action” letter and

removed the property from its active project list. Doc. No. 79-

10.

FairPoint kept Mareld apprised of St. Germain Collins’s

investigation, and Mareld received a copy of the October 3, 2011

4 report around the time it was prepared. That same month,

Mareld’s consultant, GeoInsight, observed oil stains on the

garage floor during an inspection of the property but did not

test the floor for PCBs. FairPoint vacated the facility by the

end of October 2011, when the 1990 lease ended.

In 2014, Mareld decided to sell the property. As part of

its pre-sale due diligence, a prospective buyer retained Nobis

Engineering to conduct a “Phase I” environmental site

assessment. Nobis reviewed the historical environmental reports

on file with DES as part of its assessment. The 1990-91

detection of PCBs in the garage floor drains, coupled with oil

stains on the garage floor that Nobis observed, suggested to

Nobis that PCBs may have contaminated the concrete floor. Doc.

No. 60-1 at 28. The prospective buyer then tasked Nobis to

complete a “Phase II” environmental site assessment, which

included testing samples of the garage floor for PCBs. Nobis

quoted a total price of $11,000 for the Phase II assessment.

Doc. No. 81-2. The results showed the presence of Aroclor 1254

above the regulatory limit in all ten concrete samples. Doc.

No. 35-13 at 2-3.

GeoInsight subsequently determined that there was

widespread PCB contamination of the garage floor that required

remediation. Doc. No. 35-14. After NET refused to address the

5 problem, Mareld spent nearly $1.5 million to clean up the

contamination.

C. Procedural History

Mareld filed this action on July 20, 2016 in New Hampshire

Superior Court, alleging claims for (1) breach of contract, (2)

violation of Section 147-A:9 of the New Hampshire Revised

Statutes, (3) contribution pursuant to Section 147-B:10 of the

New Hampshire Revised Statutes, (4) contribution pursuant to

Section 507:7-f of the New Hampshire Revised Statutes, (5)

negligence, and (6) negligence per se based on a violation of

Section 147-A:9. NET removed the case to federal court based on

diversity of citizenship, 28 U.S.C. § 1332.

After eighteen months of discovery, NET filed a motion for

summary judgment on all claims. At a hearing held on September

17, 2018, I granted in part and denied in part NET’s motion. I

granted the motion with respect to all of Mareld’s claims except

its claims for contribution pursuant to Section 147-B:10, breach

of contract based on NET’s failure to return the premises in

good and clean condition, and negligence per se. See Doc. No.

74 (order summarizing oral rulings).

In its summary judgment briefing and at oral argument, NET

asserted a statute-of-limitations defense with respect to

Mareld’s breach-of-contract and negligence-per-se claims. In

response, Mareld argued that the discovery rule tolled the

6 limitations period until the 2014 discovery of PCBs. I declined

to resolve the issue on summary judgment, and the parties agreed

that New Hampshire law authorizes the court to make a factual

determination on the applicability of the discovery rule.

Because none of the underlying facts are in dispute on this

issue, the parties also agreed that I can determine whether the

discovery rule applies based on the existing record without

holding an evidentiary hearing. To aid my determination, I

directed the parties to file supplemental briefs addressing the

statute of limitations issue in greater detail.

II. STANDARD OF REVIEW

The statute of limitations is an affirmative defense.

Lamprey v. Britton Constr., Inc., 163 N.H. 252, 257 (2012). The

defendant bears the burden of proving that the defense applies

by showing that the action was not filed within the limitations

period. Id. The burden then shifts to the plaintiff to prove

that the discovery rule saves the claims. Id.; Kelleher v.

Marvin Lumber & Cedar Co., 152 N.H. 813, 825 (2005).

The discovery rule is an exception to the defense that

tolls the statute of limitations until the plaintiff knows or

reasonably should have known of its injury and the causal

connection between the injury and the defendant’s conduct.

Kelleher, 152 N.H. at 824-25. The rule is not intended to toll

the limitations period until the full extent of the plaintiff’s

7 injury becomes known. Furbush v. McKittrick, 149 N.H. 426, 431

(2003). Rather, the limitations period is tolled until “the

plaintiff could reasonably discern that he suffered some harm

caused by the defendant’s conduct.” Id. The plaintiff “need

not be certain of this causal connection; the possibility that

it existed will suffice to obviate the protections of the

discovery rule.” Beane v. Dana S. Beane & Co., P.C., 160 N.H.

708, 713 (2010).

Whether the plaintiff exercised reasonable diligence in

discovering the injury and its causal relationship to the

defendant’s conduct is a question of fact. Kelleher, 152 N.H.

at 825; Keshishian v. CMC Radiologists, 142 N.H. 168, 179

(1997). Because the discovery rule is equitable in nature, the

court may act as the trier of fact. Kelleher, 152 N.H. at 825.

The court may decide the issue at an evidentiary hearing before

trial, which “is often most economical and equitable.” Id.

Alternatively, the court may rule after trial or submit the

question to the jury. Id. Where the underlying facts that bear

on the applicability of the discovery rule are undisputed, the

court may resolve it based on the evidence in the record without

holding an evidentiary hearing. Cf. Keshishian, 142 N.H. at

177-78 (resolving applicability of discovery rule based on

contract interpretation where plaintiff rested his argument

solely upon its “clear language”).

8 III. ANALYSIS

The three-year limitations period established in Section

508:4 of the New Hampshire Revised Statutes applies to Mareld’s

common-law claims for breach of contract and negligence per se.

See Black Bear Lodge v. Trillium Corp., 136 N.H. 635, 638

(1993). Unless tolled by the discovery rule, that period begins

to run from the date of the act or omission giving rise to the

injury. Id.; see N.H. Rev. Stat. Ann. § 508:4, I.

It is undisputed that NET’s allegedly wrongful acts or

omissions happened, at the latest, in October 2011, when

FairPoint vacated the premises at the end of the 1990 lease.

This is the latest point in time when the PCB contamination that

gives rise to the negligence-per-se claim could have occurred. 1

Likewise, this is when NET allegedly breached its contractual

obligation to return the facility to Mareld in good state and

clean condition. 2 Mareld filed this lawsuit in July 2016, almost

1 The negligence-per-se claim is premised on NET’s alleged violation of Section 147-A:9 of the New Hampshire Revised Statutes, which provides that “[a]ny owner, operator, generator, or transporter who causes or suffers the . . . disposal of hazardous waste in violation of RSA 147-A . . . shall be strictly liable” for the costs of containment, cleanup and removal of the hazardous waste. The New Hampshire Supreme Court has recognized a common-law private right of action for a causal violation of this statutory duty. See Bagley v. Controlled Env’t Corp., 127 N.H. 556, 561-62 (1986). 2 Mareld appears to allege that NET violated both the “good state and condition” clause in the 1970 lease and the “clean” condition clause in the 1990 lease when NET returned the PCB-

9 five years later. The statute of limitations thus bars the

claims unless Mareld can prove that the discovery rule tolled

the limitations period until July 2013 or later such that its

claims were timely filed.

The parties agree that Mareld did not learn that the garage

floor was contaminated with PCBs until 2014, when the

contamination was discovered as part of a prospective buyer’s

due diligence. The question, therefore, is whether Mareld, with

reasonable diligence, should have known of the contamination and

its link to NET’s operations more than three years before it

filed its complaint. See Kelleher, 152 N.H. at 824-25. Based

on the undisputed evidence in the record, I find that a

reasonably diligent person in Mareld’s position would have

discovered the contamination and the possibility that NET caused

it between October 2011 and July 2013. Mareld’s failure to

investigate the matter during this period was unreasonable,

depriving it of the benefit of the discovery rule.

By the time the tenancy ended in October 2011, there was

enough indication of a potential PCB contamination and its

connection to NET’s use of the facility to put Mareld on

contaminated property to Mareld in 2011. The question whether Mareld has enforceable rights under the 1970 lease has not been sufficiently briefed or argued. For purposes of this motion, I assume, without deciding, that Mareld’s breach-of-contract claim is based on both lease provisions.

10 reasonable notice that further investigation was needed. When

the tenancy ended, Mareld knew that the same PCB mixture, at

levels requiring cleanup, had been discovered in multiple

locations on the property on multiple occasions. Mareld was

informed in 1990 and 1991 that Aroclor 1254 was found in the

garage floor drains and the drain discharge soil. Remediation

efforts included two rounds of drain cleaning and removal of the

impacted soil. Mareld received a copy of the Clean Harbors

October 1990 report, which specifically noted that the

contamination was potentially attributable to NET’s operations

involving the handling of PCB-laden transformers in the garage.

The discovery of the same PCB mixture in the pole storage

yard in 2011 indicated that the earlier contamination was not an

isolated phenomenon. Mareld again received a contemporaneous

copy of the environmental assessment report detailing the

discovery and subsequent removal of the contaminated soil. St.

Germain Collins reported that the cause of the contamination was

unknown. Mareld took no steps to determine the cause or

investigate other areas for potential contamination, despite

knowing that NET may have disposed of this PCB mixture at the

facility. Moreover, during an inspection of the garage in

October 2011, Mareld’s consultant observed oil stains on the

garage floor but did not test the floor or any other location

for PCBs.

11 PCBs were repeatedly detected at a facility that, for more

than forty years, was in the sole possession of a telephone

company that potentially disposed of PCBs as part of its

operations. That situation triggered a duty to investigate

whether unremediated PCBs remained on the property once the

tenancy ended. Mareld’s failure to investigate whether there

was actionable conduct in the nearly two-year period after the

telephone company left the premises was unreasonable. Cf. New

W. Urban Renewal Co. v. Viacom, Inc., 230 F. Supp. 2d 568, 573-

76 (D.N.J. 2002) (discovery rule inapplicable where new owner of

contaminated property failed to timely investigate its claims

against prior owner despite knowledge of reports reflecting

potential environmental contamination and prior owner’s use of

hazardous substances during its lengthy occupancy).

The fact that NET and FairPoint remediated the known PCB

contaminations to DES’s satisfaction did not absolve Mareld of

the duty to investigate further. The appreciable risk of

unknown contamination arising from the recurrent PCB discoveries

and NET’s historical use of the site triggered the duty to

investigate the matter. Cf. Vector-Springfield Props., Ltd. v.

Cent. Ill. Light Co., 108 F.3d 806, 809-10 (7th Cir. 1997)

(plaintiff put on notice of need to investigate potential

environmental contamination of land adjoining site of defunct

12 manufacturing plant when it became aware of risk that such

plants could contaminate neighboring lands).

Armed with the same information concerning the property

that Mareld had, a potential buyer in 2014 readily determined

that testing the garage floor for PCBs was warranted. All ten

samples of the concrete floor tested were contaminated with

Aroclor 1254, the same PCB mixture found in the garage floor

drains and the drain discharge soil in 1990-91 and the pole yard

in 2011. Had Mareld conducted similar tests, it would have

discovered the PCB contamination.

Mareld acknowledges that it was reasonable for the buyer to

test for PCBs but argues that it should not be held to the same

standard. In support, Mareld cites only to an affidavit of its

principal, Charles Denault, who stated that for a commercial

lessor like Mareld, the cost of PCB testing “would be

prohibitive, and possibly more than the rent received” given

“the volume of tenants a lessor may have.” Doc. No. 80 ¶ 7.

But this property effectively had only one tenant for more than

forty years, and Mareld was receiving more than $37,000 in

monthly rent by the end of the lease term. The price that Nobis

quoted to the buyer for a Phase II site assessment that included

PCB testing ($11,000) was less than one-third of one month’s

rent that Mareld collected. Under the circumstances, a

reasonably diligent lessor in Mareld’s position would have spent

13 the money to determine if its long-term tenant left PCBs behind

when it vacated the premises. The discovery rule therefore

cannot toll the limitations period in this case.

IV. CONCLUSION

For the foregoing reasons, I find as a matter of fact that

Mareld’s claims for breach of contract (Count I) and negligence

per se (Count VI) are barred by the statute of limitations. The

claims are dismissed with prejudice.

SO ORDERED.

/s/ Paul Barbadoro Paul Barbadoro United States District Judge

November 28, 2018

cc: Terri L. Pastori, Esq. Beth A. Deragon, Esq. Jeffrey M. Karp, Esq. Nathaniel R. Koslof, Esq. Nicholas M. O’Donnell, Esq. Kyle M. Noonan, Esq. Mark B. Rosen, Esq.