Seeking 80 percent of remedial costs from each of two potentially responsible parties and “inflexibility” in pre-litigation negotiations are sufficiently unreasonable to trigger attorneys’ fees under the Massachusetts cleanup statute, Chapter 21E, according to the Massachusetts Appeals Court in a recent decision.

Chapter 21E provides for a pre-litigation negotiation process in Section 4A that requires notice and good faith negotiations in advance of filing suit. As a “stick” to ensure compliance with its requirements, this provision allows a court to award attorneys’ fees to a party if the other party acts improperly. Specifically, the statue allows a grant of attorneys’ fees when the following conditions occur:

  • The plaintiff may recover attorneys’ fees when the court finds that the person against whom the civil action has been brought is liable; and one of the following is true:
    • the defendant failed without reasonable basis to make a timely response to the notification; or
    • the defendant did not participate in negotiations in good faith; or
    • the defendant failed to enter into or carry out an agreement to pay its equitable share (or perform response actions) without reasonable basis.
  • The defendant may recover attorneys’ fees when:
    • the plaintiff did not participate in negotiations or dispute resolution in good faith;
    • the plaintiff had no reasonable basis for asserting that the defendant was liable; or
    • the plaintiff’s position with respect to the amount of the defendant’s liability was unreasonable.

Chapter 21E, Section 15, contains a different attorneys’ fees provision that allows recovery of attorneys’ fees when a person advances the purposes of Chapter 21E, which is not discussed in this alert.

In the recent case of R.M. Packer Co. v. Marmik, LLC, 88 Mass. App. Ct. 654 (2015), the plaintiff, R.M. Packer Co., had delivered diesel to an underground storage tank that overflowed, causing a release of about 800 gallons of diesel. Packer cleaned up the fuel release at a cost of $300,000, which was covered by insurance. Packer then issued 4A demand letters to both the owner of the tank, Marmik, LLC, and the user of the tank, Dockside Marina, seeking 80% of it costs from each of them. The parties were unable to come to an agreement regarding these claims, and Packer initiated suit against both defendants seeking recovery under Chapter 21E, common law negligence, and Chapter 93A.

After an eight-day bench trial, the judge found in favor of Dockside on all claims and awarded Dockside attorneys’ fees in the amount of $66,409.50. The judge awarded fees on the basis that the plaintiff had no reasonable basis for asserting that the defendant was liable because, as found by the judge: (a) Dockside had ordered gasoline (not diesel); (b) the gasoline was to be supplied to a different tank; (c) Dockside had properly reported to Packer the levels of product in both the gasoline and diesel tanks; (d) Packer’s employee mistakenly delivered diesel, not gasoline; and (e) Packer’s employee should have first measured the level in the diesel tank but did not.

The subsequent appeal involved only the award of attorneys’ fees to Dockside. The Appeals Court affirmed, but on a different basis. In its opinion, the Appeals Court first considered the basis on which the trial court had awarded fees and stated that, if Dockside was an operator of the tanks, then Packer would have had a reasonable basis for asserting Dockside’s liability. After describing the reasons that Dockside may be considered an operator and the fact that MassDEP had issued a Notice of Responsibility to Dockside for the spill, the Appeals Court stated that it did not need to decide this issue.

Instead, the Appeals Court upheld the award of attorneys’ fees based on §4A(f)(3), “the plaintiff’s position with respect to the amount of the defendant’s liability was unreasonable.” In doing so, the Appeals Court focused on the statement of the trial judge that “‘Packer’s insistence that Dockside contribute eighty percent of the clean up costs … when Packer knew well that Dockside was blameless in this instance’ was alarming. Particularly when that demand is considered with the similar one made to Marmik (together significantly exceeding the actual cost of remediation), and Packer’s inflexibility despite its own responsibility for the spill.” While it is not clear in this case whether Packer’s initial demands to Dockside and Marmik for a combined total of 160% of response costs would have been sufficient to support an award attorneys’ fees, when these “alarming” initial demands are combined with Packer’s “inflexible” position during negotiations, the Appeals Court felt the line of “reasonableness” has been crossed.