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Sumitomo Machinery Corp. of America, Inc. v. AlliedSignal

April 11, 1996

SUMITOMO MACHINERY CORPORATION OF AMERICA, INC.

v.

ALLIEDSIGNAL, INC., APPELLANT



On Appeal From the United States District Court For the District of New Jersey (D.C. Civil Action No. 91-cv-01790)

Mark J. Malone (Argued) Lori D. Linskey Stier, Anderson & Malone 1120 Route 22 East Bridgewater, NJ 08807

Attorneys for Appellee Douglas S. Eakeley (Argued) Lowenstein, Sandler, Kohl, Fisher & Boylan 65 Livingston Avenue Roseland, NJ 07068 Attorney for Appellant

Before the district court, Allied argued that the Agreement unambiguously required Sumitomo to execute the DER, and Sumitomo argued that it unambiguously did not. The district court denied Allied's request for specific performance or declaratory relief, finding that the Agreement unambiguously placed the costs of remediation on Allied and did not require Sumitomo to enter into the DER. We find the Agreement ambiguous and will reverse and remand for further proceedings.

STAPLETON, Circuit Judge

Argued October 10, 1995

Filed April 11, l996)

OPINION OF THE COURT

In 1991, Sumitomo Machinery Corporation of America ("Sumitomo") and AlliedSignal Inc. ("Allied") settled an environmental lawsuit concerning property sold to Sumitomo by a predecessor of Allied. Their respective responsibilities were delineated in an Environmental Agreement ("Agreement") which incorporated a cleanup plan approved by the New Jersey Department of Environmental Protection ("NJDEP"). *fn1 In 1994, NJDEP tightened the radioactive remediation requirements applicable to the property, effectively giving Sumitomo the choice of executing a Declaration of Environmental Restrictions and Grant of Easement ("DER") or remediating to a higher standard than originally approved. A DER attaches to the title of the land and restricts certain future uses without NJDEP approval.

I.

Between 1937 and 1939, the Bendix Corporation ("Bendix") acquired land in Teterboro, New Jersey. At various times since 1939, Bendix used the land for a sewage treatment facility, a thorium/magnesium alloy foundry, a chemical treatment facility to dispose of the radioactive waste magnesium, and storage for various oils and solvents. In 1977 Bendix subdivided its land and sold one parcel to Sumitomo. The current litigation concerns the environmental cleanup of this parcel of land ("Site").

By 1988, government investigation had revealed radioactive contamination on the Site. In 1984 Bendix had merged into Allied, and Allied, as successor, took the lead in formulating a remediation plan for all the land formerly owned by Bendix. Meanwhile, Sumitomo moved its operations out-of-state in 1988 and attempted to sell the Site. To do so, Sumitomo had to institute a cleanup plan approved by NJDEP. See Environmental Cleanup Responsibility Act, N.J. Stat. Ann. Section(s) 13:1K-6 to 13:1K-13 (West 1991) ("ECRA"), repealed and replaced by Industrial Site Recovery Act of 1993, N.J. Stat. Ann. Section(s) 58:10B-1 to 58:10B-20 (West Supp. 1995) ("ISRA").

Unsatisfied with Allied's efforts, Sumitomo hired Dames & Moore, an environmental consulting firm, to perform various environmental tests and to draw up a cleanup plan to submit to NJDEP. In January 1991, Dames & Moore submitted an "ECRA Remedial Investigation and Cleanup Plan" ("Proposed Cleanup Plan") to NJDEP. According to the plan, radioactive contamination would be remediated to 5 pCi/gm for the first 15 cm. of soil, and 15 pCi/gm for any deeper soil ("5/15 standard"). *fn2 Dames & Moore estimated that the plan would require excavating only 300 cubic feet of dirt to remove the "hot spots" of radiation that pushed the site over the 5/15 standard.

On August 30, 1991, NJDEP approved the Proposed Cleanup Plan in a letter ("Plan Approval"). It unconditionally approved the plan for radiological contamination, and no DER was required. In contrast, NJDEP required a DER for PCBs:

2. PCBs in Soil. . .

The proposal is acceptable provided that a deed restriction be placed on properties where elevated levels of contaminants are allowed to remain on-site. . . . The deed restriction shall not allow contaminated subsurface soil to be brought to the surface (0-2') above allowable levels. App. at 475.

NJDEP similarly required a DER for metals (chromium): "Should the metal results be similar to those found in the earlier samples and the chromium is found to be in the trivalent form, no remedial action other than a deed restriction shall be required." Id.

A model DER was attached to the Plan Approval. It states that by executing a DER, the owner of property "impose[s] certain restrictions upon the use and occupancy of the Property, to restrict certain activities at the Property, and . . . grant[s] an easement to NJDEPE." See App. at 301; see also 24 N.J. Reg. 401 (proposed regulation N.J. Admin. Code 7:26D, Appendix A, "Model Document Declaration of Environmental Restrictions and Grant of Easement"). The owner agrees to avoid taking actions that may disturb clean soil covering contaminated land, or that may otherwise cause migration of contaminants. The easement allows NJDEP to enter onto the land, inspect its condition, and do remedial work. The DER is recorded and runs with the property until NJDEP executes and records a release. NJDEP, persons likely ...


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