In a 2-1 decision last week, the Michigan Court of Appeals declined to dismiss a lawsuit against Dow Chemical in connection with dioxin contamination in the soils of the Tittabawassee River flood plain. Henry v. Dow Chemical Co., LC No. 03-047775-NZ (Mich. Ct. App. June 1, 2017).  Affirming the lower court’s denial of Dow’s motion for summary disposition, the Court of Appeals rejected the argument that the plaintiffs’ claims for negligence and nuisance were barred by the applicable statute of limitations even though the public was made aware of potential dioxin contamination in the river from Dow’s operations as early as 1984.  The Court’s analysis, which was accompanied by a dissenting opinion, turned on the fact that Dow failed to support its motion with evidence that the floodplain soils on the plaintiffs’ property were contaminated as far back as the 1980s. 

The case relates to Dow’s operations at a plant on the banks of the Tittabawassee River in Michigan. In the early 1980s, Dow’s operations were associated with toxic dioxin contamination of the River, its runoff, and flood waters.  Decades later, in 2002, the Michigan Department of Environmental Quality (MDEQ) published reports with soil sampling results that indicated that dioxin was pervasive in the soils of the Tittabawassee flood plain.  Further investigation by MDEQ indicated that Dow’s operations were the likely source of the dioxin. In 2003, the plaintiffs, downstream property owners in the river’s flood plain, commenced an action for negligence and nuisance alleging that they had been deprived of the use and enjoyment of their properties that had purportedly diminished in value as a result of the dioxin contamination in the soils.

After a decade of procedural wrangling between the parties, Dow moved for summary disposition on the basis that the plaintiffs’ claims were barred by the applicable three-year statute of limitations for claims involving property damage. Dow contended that the plaintiff’s claims accrued in the 1980s when, as the plaintiffs conceded, the public was first made aware of the presence of dioxins in the Tittabawassee River.  The trial court, however, denied Dow’s motion, holding that plaintiffs’ claims did not accrue until 2002 when MDEQ issued notices regarding the soil contamination that resulted in the plaintiffs’ suffering damages as a result of the dioxin contamination.

Dow appealed the interlocutory order, but the Court of Appeals affirmed. The Court of Appeals explained that, under Michigan law, a claim accrues when the plaintiff is harmed rather than when the defendant acted.  Here, the Court of Appeals explained, Dow “[did] not put forth any evidence to prove that its activities caused the direct harm of soil contamination to plaintiff property owners as early as it caused harm, in other forms, with its initial contamination of the waters of the Tittabawassee River.”  In other words, Dow failed to demonstrate in support of its motion that the plaintiffs had been harmed by its conduct outside of the three-year limitations period.  But the court went further, adding that the plaintiffs’ claims did not accrue until the final element, damages, arose from Dow’s conduct.  In the court’s view, the claims accrued in 2002 when MDEQ issued notices and restrictions regarding the soil contamination on plaintiffs’ properties, which had the effect of diminishing the value of the plaintiffs’ properties.

Judge Michael F. Gadola dissented. Judge Gadola criticized the majority for applying a variation of the “discovery rule,” a doctrine that holds that a claim does not accrue until a plaintiff becomes aware of the purported harm, which has been squarely rejected by Michigan courts.  In Judge Gadola’s view, the MDEQ notice in 2002 “marked the discovery by plaintiffs of the extent of the harm and the level of damages.”  The event was therefore irrelevant for purposes of a statute of limitations analysis.

At bottom, the disagreement between the majority and dissenting opinions appears to stem from the majority’s discussion regarding when, in its view, plaintiffs’ claims accrued. Yet at this procedural posture, i.e. Dow’s motion for summary disposition, such a discussion was arguably unnecessary.  The burden was on Dow to establish as a matter of law that the plaintiffs’ claims accrued outside of the limitations period, which the majority found it failed to establish.  The majority’s additional commentary regarding the effect of the MDEQ notices makes this case an interesting case to follow in the likely event of an appeal to the Michigan Supreme Court.