On February 10, 2009, the Appellate Division, Third Department, upheld a jury award of $6,325,000 in penalties against three defendants - property owner, gas supplier and station operator - as being not excessive and well within the bounds of the Navigation Law, where the defendants failed to respond to a discharge at the site. State of New York v. LVF Realty Co., Inc., ___ N.Y.S.2d ___. Slip Op. 01103, February 10, 2009.
Sunoco was the owner of the subject gas station from 1941- 1985. LVF Realty ("LVF") bought the station in 1985 and owned it at the time of the case. Sun Super Service Centers ("Sun Service") leased the property in 1980 and has been the tenant and operator of the site since then.
In 1983, Sunoco installed 4 fiberglass underground storage tanks ("USTs"), removed two steel USTs and abandoned 2 steel USTs in place. LVF purchased the underground storage system, described as the four fiberglass USTs, when he purchased the site in 1985. Sunoco continued to supply gasoline to the station and to own the gasoline dispensers onsite. During a 1992 renovation, LVF discovered four steel tanks and excavated the tanks. An anonymous tip led the DEC to discover that the soil around the steel tanks was heavily contaminated and the additional petroleum product discharges were emanating from the fiberglass tanks.
None of the defendants, responded to the DEC's requests for investigation of the contamination from 1993 through 1999, and DEC thus undertook the investigation itself and remediation. The State then sued to recover its costs and to impose statutory penalties.
The court awarded the State its costs of investigation and remediation as a matter of law and, in a separate trial, the jury awarded $6 million in penalties against Sunoco; $250,000 in penalties against LVF Realty; and $75,000 in penalties against Sun Super Service Centers.
On appeal, the court found that legally sufficient evidence supported the jury verdict because all defendants were aware of the contamination emanating from the tanks and failed to investigate and clean up. The state presented expert testimony that Sunoco was responsible for the contamination at the former steel tank bed and that Sunoco left residual petroleum products in the steel tanks when it abandoned them. Unlike the case with Sonoco, the jury did not find that LVF or Sun Service caused the contamination. Rather, the jury awarded penalties against these two defendants for their failure to investigate and clean up the contamination. These penalties were not excessive, the appeals court held, because of the defendants' inaction despite DEC's repeated requests for the defendants to investigate from 1993 through 1999.
Moreover, the court found that these penalties were not excessive because, under the Navigation Law, the State is entitled to a penalty of $25,000 per day for continuing violations.