Jeutter, Trustee v. Fiber Industries, Inc. et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
CEDAR CREEK FIBERS, LLC
DEBTOR
CASE NO.
03-00838-8-ATS
SHAWNA Y. STATON, TRUSTEE
Plaintiff
v.
FIBER INDUSTRIES, INC., WELLMAN,
INC., CELANESE CORPORATION,
CELANESE FIBERS, INC., HOECHST
CELANESE CORPORATION, CNA HOLDINGS,
INC., MONSANTO COMPANY
Defendants.
ADVERSARY PROCEEDING NO.
S-05-00128-8-AP
ORDER ALLOWING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION TO DISMISS
The matter before the court is the motion to dismiss pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable
by Rule 7012 of the Federal Rules of Bankruptcy Procedure, filed by
defendants Celanese Corporation, Celanese Fibers, Inc., Hoechst
Celanese Corporation and CNA Holdings, Inc. (collectively, "Celanese").
A hearing took place in Raleigh, North Carolina on January 10, 2006.
Cedar Creek Fibers, LLC filed a petition for relief under chapter
7 of the Bankruptcy Code on January 29, 2003, and Shawna Y. Staton was
appointed trustee. On July 1, 2005, Ms. Staton filed the instant
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1 The parties agree that the motion to dismiss before the court
does not address the new claims added by the amended complaint, so that
even if the motion is allowed in full, those two claims would remain.
2
adversary proceeding against the defendants, alleging causes of action
for violation of the North Carolina Oil Pollution and Hazardous
Substances Control Act ("OPHSCA"), negligence, nuisance and trespass.
On June 13, 2005, prior to filing the complaint in this court, Ms.
Staton filed a motion to extend time to file complaint in the Superior
Court of North Carolina in Cumberland County and obtained a summons
from that court. Pursuant to Rule 3(a) of the North Carolina Rules of
Civil Procedure, Ms. Staton was allowed an additional 20 days in which
to file her complaint. On January 9, 2006, Ms. Staton filed an amended
complaint, which added claims for breach of contract and negligence res
ipsa loquitor.1
Celanese’s motion to dismiss sets forth several bases for
dismissal: first, it contends that the North Carolina statute of repose
bars all claims. Second, it contends that the North Carolina statute
of limitations bars the OPHSCA and negligence claims. Finally,
Celanese maintains that the plaintiff cannot meet the elements of her
claims for negligence, nuisance and trespass as a matter of law.
For purposes of deciding a motion to dismiss for failure to state
a claim upon which relief may be granted under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, the court must accept the plaintiff’s
factual allegations as true, drawing all reasonable inferences in the
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2 This allegation appears in the complaint, but was not restated
in the amended complaint. The court does not believe that this
allegation is contested.
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plaintiff’s favor. Ibarra v. United States, 120 F.3d 472, 474 (4th
Cir. 1997). Because the rules require only notice pleading, courts
construe a plaintiff’s allegations liberally. In addition, the court
may not consider materials outside the pleadings without converting the
motion to one for summary judgment under Rule 56 of the Federal Rules
of Civil Procedure. See Rule 7012, Fed. R. Bankr. P.
Because the court must construe the facts in the light most
favorable to the plaintiff, the facts set forth herein are as alleged
in the amended complaint. On June 13, 2002, Cedar Creek Fibers d/b/a
Fayetteville Fibers, Inc. purchased a 19-acre lot of commercial
property at 3224 Cedar Creek Road in Fayetteville, North Carolina, from
Wellman, Inc. d/b/a Fiber Industries, Inc. Wellman purchased the
property in 1988 from Celanese Fibers and Hoechst Celanese Corporation.2
CNA Holdings is the successor by merger of Celanese Corporation,
Celanese Fibers, and Hoechst Celanese Corporation.
While Celanese owned the property, it operated a manufacturing
facility and maintained underground concrete sumps. Also during its
ownership, a plume of groundwater contamination was identified on the
site. When Wellman owned the property, a release of Tetrachloroethene
to soil and groundwater originating from a chemical sewer sump was
discovered at the facility. The release resulted in contaminating the
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groundwater with perchloroethylene and its associated degradation
products, trichloroethene (TCE), dichloroethenes (DCEs), and vinyl
chloride in violation of the North Carolina groundwater quality
standards. The history of the property is replete with on-going
transactional relationships between all defendants, including a
contractual relationship with regard to ownership and operation between
Fiber Industries and/or Wellman and Celanese during the process of
transferring the property to and from Celanese.
Cedar Creek Fibers purchased the property in 2002 with the
understanding that Wellman would remediate the known contamination on
the site. The property has not been remediated and contamination
remains. The tax value of the property in 2002 was $5,170,633, but
after a year of extensive marketing efforts, the trustee was able to
sell the property in 2004 for only $580,000. The trustee brought this
action to recover the devaluation of the property.
Statute of Repose
Celanese contends that all of the trustee’s claims must fail under
North Carolina’s 10-year statute of repose, North Carolina General
Statute § 1-52(16). That statute provides, in relevant part, that "no
cause of action shall accrue more than 10 years from the last act or
omission of the defendant giving rise to the cause of action."
Celanese contends its last act occurred on January 25, 1988, when it
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sold the property to Wellman, while the complaint was not filed until
July 1, 2005.
The trustee contends that although Celanese may have sold the
property in 1988, its relationship to Wellman and Fiber Industries
resulted in continuing contacts with, and possibly ownership or
operation of, the property. While the allegations of ownership and
operation may not have been artfully drafted, they are sufficient to
withstand a motion to dismiss. The trustee has established that
Celanese may have had a continuing relationship with the property
between 1988 and 2002 that could result in liability for the
environmental contamination. It is possible that these allegations
will not be supported by evidence after the parties have engaged in
discovery, but for purposes of a Rule 12(b)(6) motion, the trustee has
sufficiently alleged an act or omission by Celanese within 10 years
prior to the filing of the complaint. Accordingly, the motion to
dismiss all counts under the statute of repose will be denied.
Statute of Limitations
Celanese next contends that the OPHSCA and negligence claims must
be dismissed because they were not filed within the 3-year statutes of
limitations set forth in North Carolina General Statutes §§ 1-52(2) and
1-52(5), respectively. The statutes of limitations for both OPHSCA and
negligence claims begin to run when the plaintiff knew or had reason to
know that the property was contaminated. Cedar Creek Fibers was aware
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3 The amended complaint alleges that "Cedar Creek Fibers
purchase[d] subject property with the understanding that Wellman . . .
would remediate the known contamination . . . ." Amended Complaint at
¶ 28.
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of the contamination when it purchased the property on June 13, 2002.3
Thus, the limitations period began to run on that date, and expired on
June 13, 2005.
The plaintiff initially filed an action in the Superior Court of
North Carolina in Cumberland County, following the North Carolina Rules
of Civil Procedure. Rule 3(a) of the North Carolina rules provides for
the filing of a motion to extend the time to file a complaint for 20
days. If the motion is allowed, the summons issued, and the complaint
filed within the 20-day period, then a plaintiff has initiated an
action effective on the date the summons was issued and the motion to
extend time was filed and allowed. The complaint was filed within 20
days, though it was filed with this court and not in the state court
where the action was initiated.
Section 1334 of Title 28, United States Code, provides that the
federal district courts have original, but not exclusive jurisdiction
over civil proceedings arising under title 11, or arising in or related
to cases under title 11. 28 U.S.C. § 1334(b). Because jurisdiction
also lies with the state courts for such proceedings, it would have
been permissible for the trustee to file this action in the state
court. She did initiate this proceeding in the North Carolina courts,
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following North Carolina procedural rules. Under those rules, the
trustee’s action was filed within the applicable limitations period.
The fact that she then chose to file her complaint in this court,
rather than in the state court in which the action was initiated, does
not change the fact that the trustee took appropriate steps to extend
her filing deadline. Accordingly, the complaint was filed within three
years of the date of the sale, and the causes of action for OPHSCA and
negligence are not barred by the applicable statutes of limitations.
Negligence
Celanese contends that the trustee’s negligence claim must be
dismissed because there is no duty of care owed by a former owner of
property to a future owner. The plaintiff contends that because it
alleged the elements of negligence, including the duty of care, the
defendants’ arguments are outside the scope of a Rule 12(b)(6) motion.
This argument misses the essence of Rule 12(b)(6); that is, if the
facts alleged do not give rise to a claim under the law, the claim must
be dismissed. The trustee has not alleged any facts to establish a
basis for a duty owed from Celanese to the trustee other than as a
prior property owner. Even if the allegations about a continuing
relationship with Wellman and Fiber Industries are true, Wellman and
Fiber Industries’ relationship to the trustee is also as prior property
owners.
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The plaintiff has cited to no case law in which a prior property
owner is held to owe a duty of care to a subsequent property owner.
The defendants, however, have provided substantial authority to the
contrary. See Stanford v. Owens, 46 N.C. App. 388, 265 S.E. 2d 617
(1980) (affirming dismissal of negligence claim where no duty owed to
subsequent landowner at time of alleged negligent acts); Wellesley
Hills Realty Trust v. Mobil Oil Corp., 747 F. Supp. 93, 100 (D. Mass.
1990) (dismissing negligence claim based on alleged duty, owed to
subsequent owners of property, to properly dispose of hazardous
wastes); Triffler v. Hopf, 1994 U.S. Dist. LEXIS 16158, *34 (N.D. Ill.
1994) (granting summary judgment in favor of defendants, finding "no
legal authority that would support ‘the imposition of a duty on an
owner of land to maintain his or her property in a certain condition or
to refrain from any activity affecting the property which would extend
to future owners of the land’") (citations omitted); Ameritrust Co.
Nat’l Assoc. v. The Lamson & Sessions Co., 1992 U.S. Dist. LEXIS 22647,
*13 (D. Ohio 1992) (allowing motion to dismiss negligence claim,
finding "no authority for the proposition that a landowner who engages
in hazardous waste disposal on his property owes a duty to subsequent
owners of the property"). The court is not willing to create new law
imposing a duty of care that has never before existed in North Carolina
common law (or the common law of any other state), and concludes that
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there is no duty of care owed by the defendants, as prior landowners,
to the plaintiff.
The trustee also suggests that the duties arising from OPHSCA
somehow create a duty of care under a traditional negligence analysis.
OPHSCA is a strict liability statute, and "North Carolina courts
proceed with great caution before permitting a strict liability statute
to operate as negligence per se." Rudd v. Electrolux Corp., 982 F.
Supp. 355, 366 (M.D.N.C. 1997) (citing Hurley v. Miller, 113 N.C. App.
658, 666-667, 440 S.E. 2d 286, 291 (1994)). While the plaintiff has
not alleged negligence per se, the elements of negligence per se are
similar in nature to those of simple negligence, except that in
negligence per se, the breach of a statutory duty is, in certain
circumstances, sufficient to prove negligence as well. In negligence
per se, the duty of care is created by the statute or ordinance as
opposed to the common law. Certainly if courts are reluctant to extend
the duties imposed by a strict liability statute to operate as
negligence per se, the same care should be applied in extending those
statutes to create a duty of care for simple negligence. This court
declines to extend the duties imposed by OPHSCA to create a duty of
care under common law negligence.
Finally, even if the plaintiff could establish a duty of care owed
by the defendants, at least one court in this district has held that
plaintiffs may not recover damages for negligence for the diminution in
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4 The phrasing of this allegation is curious, given that Cedar
Creek did not own the property, nor would it have been able to use and
enjoy the property, prior to the alleged contamination.
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value of their land. See Grant v. E.I. Du Pont De Nemours and Co.,
Inc., 1995 U.S. Dist. LEXIS 15345, *23 (E.D.N.C. 1995) (citing Zopfi v.
City of Wilmington, 273 N.C. 430, 160 S.E.2d 325 (1968)). The
plaintiff has alleged damages only with respect to the decreased value
in the property, and thus there are no sustainable damages to support
the negligence claim. Because the court finds that there is no duty of
care owed by the defendants to the plaintiff and that the plaintiff
cannot prove recoverable damages, the negligence claim will be
dismissed.
Nuisance
The plaintiff alleged that the contamination of the soil, surface
water and groundwater on the Cedar Creek Property with hazardous
substances constitutes an unreasonable and substantial invasion of
Cedar Creek’s use and enjoyment of their property, in that it was no
longer able to use and enjoy the property for the same purposes and to
the same extent as it could prior to the contamination caused by the
defendants.4 Thus, the plaintiff alleges, the contamination constitutes
a permanent nuisance that has resulted in injuries and damages to the
property. Again, the only damage alleged by the plaintiff is
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5 Plaintiffs may recover the depreciation in market value in cases
of permanent nuisance only where eminent domain is involved or where
the landowner and the defendant both consent to that remedy. Rudd, 982
F. Supp. at 371. Where there is no consent, the landowner’s remedy
lies in abatement. Id.
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diminished property value, which the defendants contend is not
recoverable in an action for nuisance.
"It is well settled that a reduction in property value, standing
alone, cannot give rise to an action for nuisance per accidens."
Grant, 1995 U.S. Dist. LEXIS 15345, *17 (citing Zopfi, 273 N.C. 430,
160 S.E.2d 325, 330 (1968); Twitty v. State, 85 N.C. App. 42, 54, 354
S.E. 2d 296, 304 (1987)). The plaintiff’s own cases show that
proof of interference requires proof of substantial
annoyance, material physical discomfort, or injury to the
health or property of the adjoining landowner. (Citations
omitted) . . . . The anticipated injuries must be more than
conjectural and amount to actual interference with her use
and enjoyment of the property. Mere diminution in market
value will not suffice.
Rudd, 982 F. Supp. 355, 369 (citations omitted) (emphasis added).
Because the plaintiff has not alleged any damages other than diminished
market value, the cause of action for nuisance must be dismissed.5
In addition, it is doubtful North Carolina courts would sustain
an action for nuisance against a prior landowner. Nuisance is
recognized as interference with the property of an adjoining landowner.
See Rudd, 982 F. Supp. at 368 ("a nuisance is the improper use of one’s
own property in a way which injures the land or other right of one’s
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neighbor."). Other courts have specifically rejected nuisance claims
in this context. See Philadelphia Electric Co. v. Hercules, Inc., 762
F.2d 303, 313 (3rd Cir. 1985) (finding no cases permitting "a purchaser
of real property to recover from a seller on a private nuisance theory
for conditions existing on the very land transferred"); Triffler, 1994
U.S. Dist. LEXIS 16158, *24 (following Hercules and noting that not one
court "has found that a nuisance claim can be properly maintained
against prior owners or occupiers of land").
Because the plaintiff cannot show recoverable damages or a proper
claim for nuisance against Celanese, the nuisance claim will be
dismissed.
Trespass
The plaintiff alleges in her amended complaint that the ongoing
or continuing contamination of the property with hazardous substances
constitutes unauthorized and unlawful entries on the property,
constituting a renewing trespass on the property. This claim must fail
for the same reason the negligence and nuisance claims must fail: there
is no sustainable action for trespass against a prior landowner. The
Triffler court considered the Restatement (Second) of Torts definition
of "continuing trespass," "the actor’s failure to remove from land in
the possession of another a thing which he has tortiously . . . placed
on the land . . . ." Triffler, 1994 U.S. Dist. LEXIS 16158, * 23
(citing Restatement (Second) of Torts, § 161). The court concluded
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that "[a] prior land owner can simply not be held liable under a theory
of continuing trespass for items he left on his own property. Nor, can
it properly be said that Exxon or the other defendants acted
‘tortiously’ by either introducing or failing to remove the allegedly
leaking tanks." Triffler at 23. Other courts have reached the same
conclusion. See Moore v. Texaco, Inc., 244 F.3d 1229, 1233 (10th Cir.
2001); Patton v. TPI Petroleum, Inc., 356 F. Supp. 2d 921, 930-31 (E.D.
Ark. 2005); Lilly Indus., Inc. v. Health-Chem Corp., 974 F. Supp. 702
(S.D. Ind. 1997).
In a slightly different context, the Rudd court determined that
where the trespass is initiated from a neighboring property, a prior
owner of the neighboring property does not have liability to a third
party for trespass. Instead, it is the "current property owner’s
responsibility to clean up the contamination in order to stop the
trespass. Under the common law, liability, if any, falls entirely on
the current property owner." Rudd, 982 F. Supp. at 371. The Rudd
court further found that "[w]hile there is no North Carolina case on
point, it is believed that the North Carolina Supreme Court would apply
these same common law principles." 982 F. Supp. at 371.
Based on these principles, the court agrees that no action lies
against Celanese for trespass, and the claim for trespass will be
dismissed.
CONCLUSION
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Based on the foregoing, the defendants’ motion to dismiss pursuant
to Rule 12(b)(6) of the Federal Rules of Civil Procedure (made
applicable to this proceeding by Rule 7012 of the Federal Rules of
Bankruptcy Procedure) is DENIED to the extent the defendants contend
that the complaint is barred by the statute of repose and statutes of
limitations, and ALLOWED as to the claims for negligence, nuisance and
trespass. As agreed by the parties, this order does not address the
claims for breach of contract or negligence res ipsa loquitor. Those
claims, as well as the
plaintiff’s claim for strict liability under OPHSCA, remain for further
proceedings.
SO ORDERED.
DATED: January 24, 2006
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