Massachusetts Supreme Judicial Court Clarifies Statute of Limitations for Contaminated Property Damage Claims but Raises Questions of Application
Plaintiffs with property damage claims under the Massachusetts clean-up law have more time to bring their claim than might be expected under the three-year statute of limitations according to a recent ruling by the top Massachusetts court. The Supreme Judicial Court ruled that the statute of limitations begins running when the plaintiff knows that there is damage to the property that is “permanent” and who is responsible for the damage, pointing to the phases of investigation and remediation in Massachusetts’ regulatory scheme as signposts for when a plaintiff should have that knowledge. Grand Manor Condominium Assoc. v. City of Lowell, 478 Mass. 682 (2018). However, the Court left considerable uncertainty about when the statute of limitations might begin for arguably more temporary property damages such as lost rent.
In this case, the City of Lowell owned property that it used first as a quarry and then as a landfill in the 1940s and 50s before selling the property in the 1980s to a developer. The developer constructed a condominium project on the site and created a condominium association soon thereafter. As part of work to install a new drainage system in 2008, the contractor discovered discolored soil and debris in the ground. Subsequent sampling indicated that the soil was contaminated and that a release of hazardous materials had occurred. The condo association investigated in early 2009, and MassDEP issued notices of responsibility to both the condo association as well as the city in May 2009. The city assumed responsibility for the cleanup and worked the site through the state regulatory process known as the Massachusetts Contingency Plan (MCP). In the city’s MCP Phase II and III reports in June 2012, it concluded that the contamination was from the city’s landfill operations, that it would not be feasible to clean up the contamination, and proposed a pavement cap and a deed restriction.
The condo association and many of its members filed suit in October 2012 for response costs under Chapter 21E, § 4 and damage to their property under G.L. c. 21E, § 5(a)(iii). At trial, the jury awarded the plaintiffs response costs under Section 4 but found that the plaintiffs had failed to prove that their property damage claim was brought within the three-year statute of limitations for such claims under G.L. c. 21E, § 11A. The Supreme Judicial Court took the case on direct appellate review.
Section 11A provides that an action to recover damage to real property “be commenced within three years after the date that the person seeking recovery first suffers the damage or within three years after the date the person seeking recovery of such damage discovers or reasonably should have discovered that the person against whom the action is being brought is a person liable…” Quoting Taygeta Corp. v. Varian Assocs., Inc., 436 Mass. 217, 226 (2002), the Court summarized this as a requirement that the claim must be brought within three years of when plaintiff “discovers or reasonably should have discovered  the damage, and  the cause of the damage.”
The Court quickly agreed that “the damage” referred to in Section 11A was, for these purposes, the property damages of Section 5 and moved on to the plaintiffs’ contention that the limitations period should not run until they discovered or reasonably should have discovered that the damage was “permanent” or, in other words, not reasonably curable. Until that time, they argued, they could not know if they had a property damage claim because the site could be fully remediated.
The Court examined the application of the statute of limitations in the context of the statutory scheme for investigating and remediating sites in Massachusetts. The Court found that the primary purpose of Chapter 21E is to clean up environmental contamination and to ensure responsible parties pay for the costs of that cleanup. As a result, the statute prioritizes “performance and financing of cleanup efforts, and then considers the calculation of property damage that cannot be cured by remediation and remediation cost recovery.”
In interpreting the statute of limitations, the Court crystalized the question as “whether the word ‘damage’ in § 11A(4) refers specifically to damage under § 5, that is, damage that cannot be cured and compensated by the cleanup and cleanup cost recovery processes defined by the MCP and §§ 4 and 4A, such that the limitations period does not begin to run until the plaintiff knows there is residual damage not subject to remediation and compensation.” In order to have knowledge that a plaintiff has suffered damage that is not curable by the MCP remediation process, the MCP process must have run sufficiently to know that § 5 damages exist – that there is contamination that will not be addressed through remediation leaving the property at a diminished value. Since the liable party is required to determine the extent of the damage in Phase II and evaluate available remedies in Phase III of the MCP, as the Court noted, “[i]t would make little sense to require the plaintiff to independently determine whether residual property damage exists prior to the completion of these reports.” As a result, the Court concluded that the statute of limitations did not start to run until the plaintiff became aware that the site would not be fully remediated in the Phase II and III reports in June 2012 months before they filed their lawsuit. Exactly what constitutes full remediation remains to explored in further cases, as the range of outcomes from achieving background conditions, implementing deed restrictions, reaching temporary solutions, or even leaving just a few molecules of contamination left behind could impact this analysis.
The Court contended that this interpretation of the statute of limitations provides a “prescribed and predictable period of time” within which claims would be time barred, given that there are timetables associated with the production and submission of MCP Phase II and III reports. Under normal circumstances, the Court expected that a plaintiff will know it has a claim within five years of notifying MassDEP of contamination.
Despite the Court’s pronouncement that it had provided predictability for these types of claims, the statute of limitations for non-permanent property damages, such as lost rental value, or for sites where there is a long-term temporary solution in place, remain uncertain. Lawyers and clients evaluating how and when to bring claims for temporary and permanent damages will need to carefully evaluate a range of potential options in pursuing a preferred single case for property damage without unacceptable risk that an uncertain statute of limitation may have run.