Firm Held Liable for Permanent Land Damage : Environment: $1.2 million awarded for ‘post-cleanup stigma’ even though company was removing toxic soil.
A Los Angeles jury has ordered an electronics company to pay $1.2 million in damages to a landowner for contaminating the dirt under its facility, saying the toxic problems have given the property a “stigma” that has permanently reduced its value.
The award was made to Seal Beach-based Bixby Ranch Co. against Spectrol Electronics and three co-defendants, including United Technologies, a conglomerate in Hartford, Conn. United Technologies owned Spectrol at the time of the contamination.
The decision is believed to mark the first time in the United States that a landowner has won damages from a tenant for permanently impairing the property’s value. A United Technologies spokesman would not comment because the decision is being appealed. Most previous pollution cases have resulted in property owners merely being reimbursed for cleanup costs and lost rental income.
“I think this (decision) could mean that a lot more developers are going to be suing their tenants for damages,” said Jack Rodman, managing partner in the Los Angeles office of real estate consultants Kenneth Leventhal & Co.
“If nothing else, you’re going to see a lot more tenants use a lot more caution if there are chemicals on the premises,” he said.
But the verdict would discourage investments in a variety of companies using chemicals and solvents--from print shops to dry cleaners--and could bankrupt firms willing to admit their mistakes and clean up their mess, according to a trade group representing small business.
“It is one more blow to business owners everywhere,” said J. Drew Hiatt, a lobbyist and executive vice president of the National Business Owners Assn. in Washington.
The verdict was handed down by a Los Angeles County Superior Court jury last month. The plaintiffs announced the verdict in a press release Wednesday shortly after United Technologies asked for a new trial.
Spectrol, which makes switches and other electronic components, leased a new building in City of Industry from Bixby Ranch in 1965. Inspectors discovered soil and water contamination at the nine-acre site in 1980 and blamed it on the solvents that Spectrol used to clean its machinery.
United admitted its responsibility and agreed to pay for the cleanup. Toxics turned up again in 1987 and United again agreed to clean them up--a job that could take until 1997 to complete, according to court documents.
Spectrol moved out in 1990 after the unit was sold by United Technologies, but the conglomerate remained liable for the cleanup. Bixby then sued in 1992, claiming that no other company would rent a building that sat on land that was still contaminated.
Adding the unusual twist, Bixby asked for additional damages because the toxics had “permanently stigmatized” the property’s reputation and had hurt its resale value.
The jury awarded Bixby $400,000 for lost rental income and $865,000 for what its lawyers call the property’s “permanent post-cleanup stigma.”
“We can’t rent the property out now, and the only way we could sell it is if we marked it way down,” said attorney Lawrence Teplin of Cox, Castle & Nicholson, which represented Bixby.
