Court: Vermont Can’t Collect on Pollution Cleanup

August 11, 2010

The state of Vermont can’t collect from a succession of owners of a property in downtown Barre that was polluted by a former dry cleaning shop, the Vermont Supreme Court has ruled.

The justices on Friday upheld a lower court’s decision to penalize the state for delaying its disclosure of evidence it had against the bank it had sued, now known as TD Bank, which owned the property for seven months after a foreclosure in the late 1990s.

That penalty effectively barred the state from introducing evidence it said it had that the former Howe Cleaners Inc. shop on Depot Square in Barre had released the chemical perchloroethylene, which has been linked to cancer, into soil and groundwater around the shop, including during the time that the bank owned the property.

The state has spent about $350,000 on the cleanup of the site, with the federal Environmental Protection Agency spending hundreds of thousands of dollars more, R. Bradford Fawley, a lawyer for the bank, said Friday. Vermont law often allows the state to recoup costs like that from private property owners who can be proved responsible for the pollution.

In the Barre case, though, the state resisted demands by the bank — and orders by Judge Mary Miles Teachout in Washington Superior Court — that it disclose to the bank what evidence it had that pollutants were emitted from the building during the bank’s seven-month ownership. The dry cleaning shop had shut down years before, with the space being used as a bakery in the interim; the bank foreclosed on the bakery, Fawley said.

The state was slow to produce the evidence of the bank’s liability, at one juncture failing to show up at a deposition — a meeting at which sworn statements are taken before a trial, the justices found. Eventually, the judge told the state it could not bring the evidence to court even after it disclosed it, effectively ending the state’s suit against the bank.

Messages left Friday for two lawyers in the attorney general’s office who were involved in the case were not immediately returned.

“The court’s refusal to overlook the state’s egregious noncompliance simply because the state cooperated after the sanction was invoked is an entirely supportable act of discretion,” the justices said.

The state also targeted Howe Cleaners, with which it reached a settlement, Fawley said, and it went after a more recent owner of the property, the 9 Depot Square Realty Trust and its trustee, John Fiore.

In addition to granting summary judgment — essentially saying the state’s case wasn’t worth bringing to trial — to the bank, the lower court did the same for the Realty Trust.

In a portion of its decision it decided 3-2, the Supreme Court upheld that part of the lower court’s decision, saying the Realty Trust should be excused from liability because when it bought the property, an environmental assessment gave it a clean bill of health.

That portion of the decision drew dissenting opinions from Chief Justice Paul Reiber and Associate Justice Denise Johnson. Both said the environmental assessment later turned out to be negligent. Reiber said the lower court should have let a jury decide whether it was reasonable for Fiore and the trust to rely on it.

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