ENVIRONMENT: Appeals court interprets statute of limitations for environmental claims

The Michigan Court of Appeals recently issued a decision interpreting the limitations period for environmental contamination claims. This case helps to clarify an ambiguous statute of limitations provision under the Michigan Environmental Code.

The Michigan Environmental Response Act, now known as Part 201 of the Natural Resources and Environmental Protection Act (PA 451 of 1994), has been significantly amended over the last 10 years. Specifically, the statute was amended in 1991 to provide a limitations period upon which environmental claims under the statute must be filed.

The statute generally allows the state or private parties to seek cost recovery for expenses and liabilities incurred as part of a contamination clean up. Thus, if individuals paid costs they shouldn’t have had to incur, or if a person incurred more than their fair share of clean-up expenses, they could seek recovery of the costs from other liable parties.

Essentially, the statutory amendments provided a somewhat complicated three-year or six-year overlapping limitations period, depending upon when costs were expended or clean-up actions were undertaken/completed.

The Michigan Court of Appeals determined that a purchaser of a contaminated gas station from the Shell Oil Co. could not recover clean-up costs against Shell if Shell could prove that the hazardous substances existed at the property prior to the expiration of the limitations period.

Thus, since Shell could prove that contamination at the property had occurred prior to July 1991 (the statutory amendment date), the purchaser of the station needed to file their lawsuit prior to July 1, 1994 to recover any of those costs.

This limitations period was enforceable even if the purchaser did not know about the contamination until after 1991. The court determined in this case that the limitations period provided in the statute was actually a period of repose. Periods of repose act as an absolute bar to a lawsuit regardless of intervening factors, such as an inability to discover the contamination.

This recent case will greatly alter cost recovery efforts not only by private parties, but also by the State of Michigan, as the state frequently attempts to assess fines, penalties and other costs associated with contamination claims prior to 1991. This decision is also important because many private party contamination claims are a result of contamination which occurred well before 1991. As such, these claims would also be time-barred.

Joseph Quandt is a partner with the Traverse City law offices of Menmuir, Zimmerman, Kuhn, Taylor and Quandt. His practice focuses on environmental and business matters. He is also a professor of environmental law at the Thomas M. Cooley Law School in Lansing. Prior to private practice, he was an enforcement specialist with the Michigan Department of Environmental Quality.

This article is intended to address information of general interest. It does not provide, nor is it intended to provide, any legal advice regarding any particular situation or subject. BIZNEWS