Opinion
No. X08 CV 04 4002173 S
February 7, 2006
MEMORANDUM OF DECISION RE MOTION TO STRIKE ( 126.00)
The plaintiffs have brought a civil action against several defendants alleging injuries and damages suffered from the purported contaminated environmental conditions at certain property in Norwalk known as Oysterbend Properties which property plaintiffs purchased from the defendants in 2002. The revised complaint consists of fifteen counts, and the plaintiffs have moved to strike nine of the counts.
I. Standard of Review
The court's analysis of a motion to strike is guided by well accepted principles.
The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint to state a claim upon which relief can be granted. (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 576 Conn. 580, 693 A.2d 293 (1997), see Practice Book § 10-39. A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court . . . We take the facts to be those alleged in the complaint . . . and we construe the complaint in the manner most favorable to sustaining its legal sufficiency. Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied. (Citations omitted; internal quotation marks omitted.) Vacco v. Microsoft Corp., 260 Conn. 59, 64-65, 739 A.2d 1048 (2002). A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged. Novametrix Medical Systems, Inc. v. BOC Group, Inc., 224 Conn. 210, 215, 618 A.2d 25 (1992).
Fort Trumbull Conservancy, LLC v. Alves, 252 Conn. 480, 498 (2003).
II. Facts
The revised complaint alleges the following facts, among others. From 1969 to 1972 Oysterbend Properties was the site of a barrel and drum reconditioning facility where 55-gallon drums formerly containing solvent were cleaned, scraped and acid washed. The facility also had a gasoline pump and an underground storage tank. From 1972 to 1983 the property was used as a construction equipment storage yard. During these periods certain barrels of an unknown liquid waste were disposed of on the property when they were punctured by a backhoe. The crushed drums or barrels were then removed.
In 1983 Oysterbend Properties was sold to defendant Richard Scalise and a relative of defendant Eleanor Mihailidis, and in 1988 the property was transferred to defendant RG Industries, Inc. (RG) and OBC Associates, Inc. (OBC). In 1988 approximately 22,000 cubic yards of material dredged from the adjacent Norwalk River was stockpiled on Oysterbend Properties for one year. The material contained "hazardous waste" as defined under various provisions of Connecticut law.
Oysterbend Properties was listed in 1984 on the federal Comprehensive Environmental Response, Compensation and Liability Information System (CERCLIS) which contains information on hazardous or potential hazardous waste sites and remedial activities nationwide. The United States Environmental Protection Agency (EPA) commenced a preliminary assessment and did a site inspection on the property in 1984 and a site reassessment in 2001. In 1987 the Connecticut Department of Environmental Protection (DEP) listed Oysterbend Properties on its list of hazardous waste sites indicating that solvents had been disposed of on-site. Certain EPA and DEP studies done in 1988 and 1994 indicated the presence of hazardous waste on the property.
It is alleged that in 2002 the defendants sold their respective interests in Oysterbend Properties to the plaintiffs. The plaintiffs also allege that the public offering statement given to them in connection with the sale of Oysterbend Properties, which is a common interest community containing a marina, failed to disclose the CERCLIS listing, the Connecticut Hazardous Waste Sites listing, and that hazardous wastes had been stored, handled, released or disposed of on the property. Furthermore, it is alleged defendant Richard Scalise, representing the defendants, stated to the plaintiffs that all environmental investigations and remediation had been completed and that these were no environmental problems at Oysterbend Properties. The plaintiffs allege they have investigated the Oysterbend Properties and confirmed the presence of hazardous waste and hazardous materials, including petroleum products and toxic materials.
III Discussion A. Fraudulent Misrepresentation: Fraudulent Non-Disclosure.
In Counts I and II the plaintiffs plead claims of fraudulent misrepresentation and fraudulent concealment respectively. The defendants contend that the revised complaint's allegations of fraudulent activity are merely conclusory and "without any factual basis" and these unsupported allegations cannot legally sustain the two fraud counts.
The parties agree that the essential elements of fraud are (1) a false representation made as a statement of fact, (2) that was untrue and known to be untrue by the party making it, (3) made to induce another party to act upon it, and (4) the other party did so act to his detriment or injury. See Visconti v. Pepper Partners Limited Partnership, 77 Conn.App. 675, 683 (2003). Similarly, it is recognized that a fraud may occur when information is intentionally withheld for the purpose of inducing action or reliance. Pacelli Brothers Transportation, Inc. v. Pacelli, 189 Conn. 401, 407 (1983).
The court finds that the allegations of the plaintiffs are sufficient to withstand a motion to strike. It is specifically alleged that defendants Richard Scalise and Eleanor Milhailides individually, and as purported officers of RG and OBC, made the allegedly false representations to induce the plaintiffs to buy (Revised Complaint ¶ 41) and had a duty to make full disclosure to the plaintiffs and did not fully disclose. (Revised Complaint ¶¶ 47, 48.) There are specific allegations that Richard Scalise, as an agent of the three business entity defendants and Donald Scalise, described the property as "all clean," as having "no problems" and that nothing had to be done in response to EPA reports. Furthermore, it is alleged that the Public Offering Statement provided to plaintiffs omitted the fact of the CERCLIS and inventory of hazardous waste site listings.
There are no such allegations concerning specific statements referred to Eleanor Milhailides.
The defendants rely on Chestnut v. Kent, Superior Court, judicial district of Fairfield, CV 97 034 6653 (April 17, 1998, Skolnick, J.) ( 22 Conn. L. Rptr. 29), which correctly held that allegations of fraud must be specific and general assertions of fraudulent conduct are not sufficient to withstand a motion to strike. In Chestnut, however, the opinion does not cite exactly what the complaint alleged. In this case, the court finds the allegations noted above about what was allegedly untrue to be specific and factual, and the motion to strike Counts I and II is denied.
B. Transfer Act.
In Count V the plaintiffs allege that defendant Richard Scalise violated the Connecticut Transfer of Establishments Act, General Statutes § 22a-134 et seq. (Transfer Act). It is alleged that the transfer of Oysterbend Properties from Richard Scalise to RG and OBC in 1988 was accomplished without providing to RG and OBC, or filing with the Connecticut Department of Environmental Protection, any of Forms I, II, III and IV as required by Section 22a-134a(c) of the Transfer Act and therefore, pursuant to Section 22a-134b, Richard Scalise is strictly liable to the plaintiffs, without regard to fault, for all cleanup and removal costs.
The Transfer Act requires the transferor of a hazardous waste "establishment" (defined as real property on which there was generated 100 kilograms of hazardous waste per month, or property where hazardous waste generated elsewhere was recycled, reused, stored, handled or disposed of, or a dry cleaning, furniture stripping or vehicle body repair shop) to file either a Form I, II, III or IV certifying that no discharge or spillage of hazardous material has occurred on the property or that such a discharge or spill has been or will be remediated according to appropriate standards. General Statutes §§ 22a-134(3) (10) (11) (12) (13).
Mr. Scalise contends that this count should be stricken because, even assuming a violation of the Transfer Act as alleged, he can only be liable to the parties he transferred Oysterbend Properties to in 1988 and the transferees at that time were RG and OBC, not the plaintiffs.
Count IV sets forth a claim that the defendants OBC, RG, Dickmont and Donald Scalise violated the Transfer Act in connection with the sale of Oysterbend Properties to the plaintiffs in 2002. This count is not subject to the motion to strike.
Section 22a-134b reads:
Damages. Failure of the transferor to comply with any of the provisions of sections 22a-134 to 22a-134c, inclusive, entitles the transferee to recover damages from the transferor, and renders the transferor of the establishment strictly liable, without regard to fault, for all remediation costs and for all direct and indirect damages.
The plaintiffs' contention that they may sue Richard Scalise on a theory of strict liability because of his failure to comply with the Transfer Act in the 1988 transaction is based on the language of the second clause of the statute (beginning with "and renders") and on an unreported decision of Judge Thompson of the United States District Court for the District of Connecticut, K.V.L. Corp. v. The Holson Co., Civil Action No. 5:91 CV 59 (AWT) (August 3, 2000). The plaintiffs argue that the language "renders the transferor of the establishment strictly liable, without regard to fault, for all remediation costs and for all direct and indirect damage" does not restrict the ability to make claims to just the transferee. In addition, they point out that Judge Thompson reached the same conclusion after considering alternative interpretations and reviewing the legislative history. On the other hand, the defendants contend that the statutory language which references only a "transferee" as a potential claimant must be read as limiting a transferor's liability to only the transferee.
As the parties point out, there is a minimum of case law construing Section 22a-134b. By far the most extensive discussion of the statute is by Judge Thompson in K.V.L. Corp., who faced the issue of competing statutory constructions offered by the parties which were nearly identical to those offered in this case. The District Court determined that the provision in question was awkwardly written and imprecise and noted several possible drafting change and additions which would have clarified the legislature's intent. Eventually, the District Court determined that two interpretations of the statutory language were reasonable — one limiting damage claims to the transferee only, and one not — and found the statutory language ambiguous. The District Court then turned to the task of ascertaining the legislative intent behind the language through examination of its language and its legislative history and purpose. From this investigation the District Court found the following legislative purposes: (1) when a site has been contaminated or potentially so, the transfer of the site must be accompanied by assurances that it has been cleaned up or an undertaking that it would be cleaned up, (2) the Transfer Act relied on enforcement by private parties, (3) the transferor should not escape liability, (4) that the statute should be construed liberally and (5) there was no indication that the legislature's intent was limited to protecting direct purchasers. The District Court concluded that an interpretation of § 22a-134b under which a transferor could be liable to parties other than a transferee is more consistent with the perceived legislative purpose.
State court cases, with one exception, do not definitively hold whether there is a cause of action for damages under § 22a-134b by a party other than the transferee, although the language of these cases tends to support the defendants' contention. In Northeast CT Economic Alliance, Inc. v. ATG Partnership, 272 Conn. 14 (2004), the Connecticut Supreme Court stated: "[f]ailure to comply with the Transfer Act renders the transferor strictly liable to the transferee for remediation costs and other damages." Id., 40. That decision continued by quoting with approval the following language:
General Statutes §§ 22a-134 through 22a-134d were enacted to protect purchasers of property from being liable for the subsequent discovery of hazardous waste on the property by requiring the transferor of property to submit a formal declaration that the property is free of pollution.
Id., [quoting Diamond v. Marcinek, 27 Conn.App. 353, 358, 606 A.2d 1001 (1992), rev'd on the grounds, 226 Conn. 737, 629 A.2d 350 (1993)]. The Appellate Court has clearly stated its understanding that Section 22-134b provides a private cause of action by a transferee without mentioning a cause of action for anyone else. See Holly Hills Holdings v. Lowman, 30 Conn.App. 204, 206 n. 3 and 219 (1993).
The one exception is the Superior Court case of Alcoa Composites v. BTI Technology, Superior Court, judicial district of Middlesex at Middletown, CV 000093208 (Wolven, J.). In two separate opinions Judge Wolven held that a cause of action pursuant to Section 22a-134b was limited to one by the transferee against the transferor." In a memorandum, dated February 26, 2003 Judge Wolven pointed out that plaintiff's request for specific performance "exceeds the scope of damages . . . provided by . . . § 22a-134b . . . which provides a private cause of action by the transferee as against the transferor" (italics in original). Judge Wolven's holding becomes clearer in a subsequent memorandum filed in the case on September 11, 2003 [ 35 Conn. L. Rptr. 646] which stated:
The plaintiff argues that the language of § 22a-134b should be construed as meaning that the "certifying" party, rather than the transferor, can be held strictly liable. (Transcript, March 25, 2003, p. 6.) This interpretation, however, contradicts the express language of the statute; see Marsala v. Bridgeport, 15 Conn.App. 323, 326, 544 A.2d 191 (1988) ("there is no room for statutory construction where the legislative intent is clear"); which provides a private a cause of action by the transferee as against the transferor. Accordingly, because the plaintiff has not prevailed on its underlying claim, and the defendants were not the transferors in the 1993 transaction, the plaintiff is not entitled to recover attorneys fees or costs in this action.
In the absence of controlling authority, but with due regard to the analyses of other courts, this court begins its analysis of the proper interpretation of Section 22a-134b with consideration of the statute's language. See General Statutes § 1-2z. While the court agrees with Judge Thompson that the drafting of the provision leaves something to be desired, it does not necessarily follow that the language is ambiguous. This court finds nothing in the statute's text to support a conclusion that it provides a cause of action for anybody other than the transferee in the transaction at issue. The first clause clearly entitles the transferee to damages resulting from a violation by the transferor of certain Transfer Act provisions. Conversely, there is no language in the remaining clause that broadens the spectrum of persons or entities entitled to such damages, although the nature of the liability ("strict," "without regard to fault") and the extent of the liability ("remediation costs," "direct and indirect damages") are clarified.
Having determined that the statutory language with regard to who has a cause of action is not ambiguous, the question of the proper interpretation is largely answered. Nevertheless, there are several additional factors that persuade this court that only a transferee has a claim. Foremost is the Connecticut Supreme Court's view, quoted above, that Section 22a-134b was "enacted to protect purchasers of property from being liable for the subsequent discovery of hazardous waste." Northeast CT Economic Alliance, Inc. v. ATC Partnership, supra, 272 Conn. 40. If the purpose of the law was to protect purchasers of contaminated or formerly contaminated properties it makes sense to place the remedial cause of action in the hands of the purchaser, but not necessarily in others' hands. Similarly since it is the duty of the transferor to provide Forms I-IV to the transferee the failure to do so is a logical basis for establishing cause of action with the transferee to remedy the failure. The logical basis is not so apparent for a cause of action for another party. Finally, this court does not agree with several important facets of the analysis in K.V.L. Corp. First, as pointed out earlier, this court is much more in agreement with Judge Wolven's conclusion that the statute's text is not ambiguous. Second, K.V.L. Corp. relied heavily on the conclusion while there was a clear legislative intent to protect purchasers that "there is no indication in the legislative history or elsewhere in the statute that the legislature's intent was to protect only direct purchasers." K.V.L. supra, 106. This court finds no support in the legislative history or the general rules of statutory construction for divining intent by means of inferences drawn from something not in the legislative history. Third, this court disagrees with the K.V.L. court that restricting causes of action under Section 22a-134b to transferees would encourage a transferor to "structure a series of transactions" to limit Transfer Act liability. K.V.L., supra, 107 n. 8. Such a nefarious structuring would probably have to involve the participation of the transferee, which seems unlikely. Moreover, if the purpose of the Transfer Act is being undercut by such activities the more appropriate remedy is legislative amendment.
The legislative history of the Transfer Act indicates an intent to "protect individuals who are planning to purchase a piece of property that has been used for hazardous waste treatment or storage." S. Proc. 1802 (May 1, 1985).
While an argument could be made that because the other recipient of Forms I-IV is the DEP a cause of action should lie with it, that issue is not before the court.
The motion to strike Count V is granted.
C. Connecticut Unfair Trade Practices Act
The plaintiffs allege, in their Count VI, that the defendants violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a, et seq. (CUTPA). The defendants have moved to strike this count contending that a single act cannot be the basis for a CUTPA claim, that the alleged violative acts did not occur in the defendants' trade or commerce, or were incidental to their business.
CUTPA provides that no person shall engage in unfair methods of competition or unfair or deceptive acts or practices in the conduct of any trade or commerce. The Connecticut Supreme Court has determined that a practice is unfair when:
(1) the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) . . . it is immoral, unethical, oppressive, or unscrupulous; (3) . . . it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.
Ventres v. Goodspeed Airport, 275 Conn. 105, 155 (2005) [quoting Hartford Electric Supply Co. v. Allen-Bradley Co., 250 Conn. 334, 362 (1999)]. The court finds that the revised complaint alleges a series of acts as the basis for its CUTPA claim. Several of the acts alleged are connected with the 2002 sale, and the sale of real property is part of CUTPA's definition of trade or commerce. The motion to strike Count VI is denied.
D. Recklessness
In Count X the plaintiffs allege that the "[d]efendants knew or should have known that the unlawful disposal, storage or discharge of . . . hazardous materials constituted a serious danger to others, or knew sufficient facts as would disclose such a danger to a reasonable person." Revised Complaint, ¶ 102. The plaintiffs continue by alleging that defendants acted "in reckless disregard" of the rights and safety of others by maintaining Oysterbend Properties as an illegal treatment storage and disposal facility, stored dredged and contaminated materials on the site for a year and crushing drums on site.
These allegations are insufficient to support a cause of action for reckless activity with its attendant claim for punitive damage.
Recklessness is a state of consciousness with reference to the consequences of one's acts. It is more than negligence, more than gross negligence . . . The state of mind amounting to recklessness may be inferred from conduct. But, in order to infer it, there must be something more than a failure to exercise a reasonable degree of watchfulness to avoid danger to others or to take reasonable precautions to avoid injury to them.
* * *
The result is that willful, wanton, or reckless conduct tends to take on the aspect of highly unreasonable conduct, involving an extreme departure from ordinary care, in a situation where a high degree of danger is apparent . . . It is at least clear . . . that such aggravated negligence must be more than any mere mistake resulting from inexperience, excitement, or confusion, or more than mere thoughtlessness or inadvertence, or simply inattention.
Dubay v. Irish, 207 Conn. 518, 532-33 (1988) (citations and quotation marks omitted). Overall, the revised complaint fails to set forth allegations of fact reflecting the conscious state of mind of the defendants about the consequences of their acts necessary to sustain a claim of recklessness. Bishop v. Kelly, 206 Conn. 614 (1988) (recklessness requires a conscious choice of a course of action either with knowledge of the serious danger to others involved, or with knowledge of the facts which would disclose this danger to any reasonable man).
The motion to strike Count X is granted.
E. Negligence
Count XI alleges a claim of common-law negligence. Defendants contend the count should be stricken on the grounds that the doctrine of caveat emptor (let the buyer beware) bars a negligence claim. In this case, the defendants argue that there is no allegation that the plaintiffs were unaware of contamination on the property and without such an allegation caveat emptor should apply, citing French Putnam, LLC v. County Environmental Services et al, Superior Court, judicial district of Stamford-Norwalk at Stamford, CV 98 0166445 (July 21, 2000, D'Andrea, J.) ( 27 Conn. L. Rptr. 684). However, while there is no such direct allegation the court may infer it from the allegation that the plaintiffs were told the property was "all clean." More importantly, it is a well-recognized exception to the rule of caveat emptor where the vendor conceals a condition and has reason to believe the vender will not discover it. CT Page 2701 Restatement (Second) Torts § 353, Farah v. Acker, Superior Court, judicial district of Hartford-New Britain at Hartford, CV 95 0555890 (May 27, 1998, Lager, J.). The motion to strike Count XI is denied.
F. Ultrahazardous or Abnormally Dangerous Activity
In Count XIII plaintiffs allege that use, storage, treatment, disposal or discharge of hazardous materials by the defendants at Oysterbend Properties was an abnormally dangerous activity. Under Connecticut law a defendant may be held strictly liable for engaging in an activity so dangerous that it is unsafe despite the exercise of due care. Caporale v. C.W. Blakeslee Sons, Inc., 149 Conn. 79 (1961). Liability without fault, i.e. strict liability, may be imposed when there is involved an instrumentality or material which causes harm, the use of such instrumentality or material involves a degree of probable injury, regardless of its lawful use or the exercise of due care, and a relationship exists between the danger and the harm. Id., 82-83, 85.
As pointed out by the defendants, strict liability for abnormally dangerous activities has been found by Connecticut courts only in cases of blasting, pile driving and explosives research activities. See Vaillancourt v. Town of Southington, Superior Court, judicial district of New Britain X03 CV01 0510816, complex litigation docket (May 7, 2002, Aurigemma, J.) ( 39 Conn. L. Rptr. 191). In Green v. Ensign-Bickford Co., 25 Conn.App. 479, 486 (1991), the Appellate Court listed factors [drawn from Restatement (Second) Torts § 520] to be considered in determining whether an activity is abnormally dangerous. These include (1) a high degree of risk of harm, (2) likelihood the harm will be great, (3) harm cannot be eliminated by exercise of due care, (4) an uncommon activity, (5) appropriateness of activity at the place it is carried on, and (6) extent to which activity's value is outweighed by its danger.
The single allegation of abnormal activity by the defendants is the dredging and storing of contaminated materials from the Norwalk River on the Oysterbend Property which were then used, disposed of or discharged. The storage and handling of hazardous waste materials has usually been held not to be an abnormally dangerous activity. See Vaillancourt v. Town of Southington, supra; Goodrich v. Jennings, Superior Court, judicial district of Stamford-Norwalk at Stamford, CV 96 0150074 (May 22, 1997, Mintz, J.); Arawana Mills Co. v. United Technologies, Inc. 795 F.Sup. 1238 (D.Conn. 1992); Nielsen v. Sioux Tools, Inc., 870 F.Sup. 435 (D.Conn. 1994); Bernbach v. Timex Corp., 989 F.Sup. 403 (D.Conn. 1996). While there are Connecticut Superior Court cases which hold that disposal of hazardous wastes may be an abnormally dangerous activity; see e.g. Mather v. Birken Mfg. Co., Superior Court, judicial district of Hartford at Hartford, CV 96 0564862 (December 8, 1998 Hennessy, J.) ( 23 Conn. L. Rptr. 443), this court is not persuaded that disposal of hazardous waste per se is an abnormally dangerous activity. See McDonald v. Timex Corp., 9 F.Sup.2d 120, 122-23 (D.Conn. 1998). There are a plethora of state and federal statutes and regulations designed to reduce or eliminate the danger of disposing of hazardous materials, and a similar number of statutes and regulations, including the previously discussed Transfer Act, premised on the condition that such disposal can be done in a safe manner. Therefore, this court does not believe the allegations of the revised complaint set forth an abnormally dangerous activity, and the motion to strike this count is granted.
G. Violation of the Common Interest Ownership Act
In Counts XIV and XV the plaintiffs allege that defendants violated two provisions of the Common Interest Ownership Act, specifically General Statutes §§ 47-264 and 275.
Section 47-264.
Plaintiffs allege a violation of Section 47-264(19) which requires a condominium public offering statement to "contain or fully and accurately disclose . . . all unusual and material circumstance, features and characteristics of the common interest community and the units." Plaintiffs claim in Count XIV that defendants failed to disclose "the environmental condition of Oysterbend Properties," and that such failure was wilful. Revised Complaint ¶¶ 128-129.
Plaintiffs also allege, in Count XV that defendants violated General Statutes § 47-275 which states a declarant of a public offering statement gives an implied warranty to a purchaser that a unit and the common elements "are suitable for the ordinary uses of real property of its type."
Defendants contend that the revised complaint contains no factual allegations that defendants knew of and failed to disclose any unusual or material circumstances or any restriction on any "ordinary uses" of the property.
The objections raised by defendants appear to go more to matters of proof than allegations. A fair reading of the revised complaint sets forth a transaction by which plaintiffs came into ownership of real property with some impairment from contamination not disclosed in the public offering statement. Whether the facts required the defendants to disclose the contamination and whether the facts support a statutory violation will be determined at a later date. The motion to strike Counts XIV and XV is denied.