It’s The Difference Between Oil And Water.

Old Landfill Leaches Nastiness into Groundwater.

In 1979 Campbell County obtained a permit for a 160-acre sanitary landfill.  The County built the landfill with three disposal areas and the Phase II Disposal Area was built without a bottom liner.  It just wasn’t required back then.  The County closed the Phase II area in 1995, but before it did, it installed a system for monitoring the groundwater.

In 1998, something bad showed up in the groundwater. The county did what it was supposed to and filed Ground Water Protection Standards with the Department of Environmental Quality. DEQ approved those standards in 2001. A year later monitoring wells showed two items that were present in amounts that exceeded the protection standards. That lead to more monitoring wells which showed the flow of the goop heading in an unexpected direction – north about 2,000 feet into a “manufactured home community” that the Royals owned and that affected the wells there. Among the contaminates in the groundwater were benzene and other liquid hydrocarbons.

In October 2002, the DEQ issued a notice of violation to the county and the county entered a consent order. The consent order required Campbell County to notify landowners or residents on the land over the contaminate plume and to create a corrective action program. 

The Royals got their letter in September 2003 and sued Campbell County in May 2005.

The Lawsuit

In their motion for judgment, the Royals said the contamination was a “discharge of oil” in violation of the aptly named Oil Discharge Law and that it damaged their property in violation of Article I, Section II of the Constitution of Virginia.

As one might expect, the County denied there had been a discharge of oil and that the Royals’ property had been taken or damaged.

Discovery followed and then both sides moved for summary judgment. The Royals argued that the County discharged oil into state waters and they asserted that the County’s operation of the landfill had damaged their property and they had not been compensated – an inverse condemnation.  The County responded that the Oil Discharge Law did not apply in the context of the County’s operation of the landfill.

The trial court held an evidentiary hearing and various experts testified that the leachate (the technical term for “goop”) contained industrial solvents, chlorinated solvents, and non-chlorinated solvent, such as benzene.

After the hearing, the trial court issued an opinion that no material facts remained in dispute as to the migration of benzene from the landfill onto the Royals’ property. Because benzene is a liquid hydrocarbon, and therefore within the definition of “oil,” the County was liable for damages. It went on to find that the migration damaged or diminished the value of the Royals property. The Royals got their summary judgment and an eight day trial on damages only got them a jury verdict for $9 million.  The County’s post-trial motion to set aside the verdict went to an oily grave and the Royals’ picked up their attorneys’ fees and costs.

The County beat its collective feet to 100 North Ninth Street and got an appeal for their trouble.

Pick your regulation – Is it the based on the oil or the place it came from?

The County assigned several errors, but one issue resolves the case. Which regulatory scheme – the Virginia Waste Management Act or the Oil Discharge Law – controls the operation of a closed landfill? Because that’s the interpretation of statute, a pure question of law, the SCV reviews it de novo.

The VWMA authorizes the Virginia Waste Management Board to supervise and control waste management activities in the Commonwealth. What you see is what you get. The Board takes the job of cleaning up and abating hazards seriously and puts out an extensive set of regulations to get that done. It has to deal with landfills that existed before it was formed and now have problems.

The Board issued the Solid Waste Management Regulations concerning the gases that form in a landfill, including requiring a monitoring network to track the migration of the stuff and that includes groundwater monitoring. The SCV spends four full pages outlining the regulatory scheme for supervising landfills. Among those requirements is liner to prevent seepage and migration of leachate (goop, in my terms).

The Oil Discharge Law, which is part of Article II of the Water Control Law, is under the State Water Control Board. The Oil Discharge Law is older than the VWMA and originally applied to discharges of oil in the context of oil refineries and vessels into state waters. In later years the General Assembly amended the law to cap damages in the absence of negligence, gave the Water Control Board the authority to abate and contain an oil discharge by an unknown party and imposed a reporting requirement on a “person, firm or corporation owning or operating a facility, vessel, or vehicle from which there is a discharge of oil.”

The section of the Oil Discharge Law that the trial court used to find the County liable addresses “any operator of any facility, vehicle or vessel from which there is a discharge of oil into or upon state waters...” In the context of the Oil Discharge Law, a facility is “any development or installation within the Commonwealth that deals in, stores or handles oil, and includes a pipeline.”

Based on the regulatory scheme, the Supremes remind us that the VWMA and its implementing regulation (SWMR) govern the operation of a solid waste disposal facility (which is what Phase II is) and impose requirements to protect groundwater and prevent seepage of goop into the groundwater. In her opinion, Chief Justice Kinser reviews the “extensive and all-embracing coverage” of the CWMA and SWMR and concludes that the General Assembly intended that the VWMA exclusively govern what happened at Phase II.

When an appellate court tells you one set of law governs something exclusively, they are also telling you that if bet on the other horse it’s not looking good. I bet this is the point where the Campbell County Attorney’s hopes went up and the lawyer for the Royals started to get queasy.

“The Oil Discharge Law does not contemplate the passive, gradual seepage of leachate and landfill gas into groundwater beneath a solid waste disposal facility.” OK, now we know; it’s about the place – the facility – that is the source.  Landfills aren’t vehicles, vessels, or refineries and the clean up procedures under the Oil Discharge Law don’t fit a slow leak from an old dump.  The Supremes reverse the trial court holding the County liable.

Inverse Condemnation, What Inverse Condemnation?

The Supremes don’t end their analysis there.  The Royals say they still are entitled the jury’s award of damages even if the trial court made a mistake in holding the County liable under the Oil Discharge Law. The County didn’t appeal its liability for the inverse condemnation.  The County said that the Royals failed to proceed on their inverse condemnation claim during the damages trial.  It comes down to the only jury instruction the Royals offered on damages.

That instruction had four items for the jury to consider when they evaluated the damages. The four items are almost a verbatim recitation of the Oil Discharge Law’s provision on damages. The Chief Justice drives home that the mirror image language must mean that the jury instruction pertains to the Oil Discharge Law claim and not the inverse condemnation claim. Nor does the jury instruction have the right measure of damages for an inverse condemnation (the diminution of value of the property by reason of the change, or the before and after change in the value).

Without the Oil Discharge Law, there’s no basis for the jury award.  The Royals abandoned their inverse condemnation claim when they didn’t submit a jury instruction on it. Bye, bye $9 million.  Final judgment for the County.

The Dissent

Justice Powell, with Justice Lemons joining, offered an interesting dissent. In her opinion, the Oil Discharge Law is supplemental to the VWMA and SWMR. She highlights the purpose of the Water Control Law, of which the Oil Discharge Law is part, to supplement existing laws. She also notes that the GA exempted certain categories of unintentional discharges of oil and that landfills weren’t on that list.  Without the exclusivity that the Chief Justice sees in the regulatory scheme, the Royals could keep their summary judgment and award of damages.

A Citizen’s Claim and a Municipal Corporation’s Healthy Immunity

In Jean Moreau & Associates, Inc. v. Health Center Commission for the County of Chesterfield, d/b/a Lucy Corr Village, a municipal corporation defeats a contract claim that didn’t follow the procedure required by the Virginia Public Procurement Act and also is held to be immune from a quantum meruit claim because acting in a governmental capacity.

The Public’s Health and Welfare

Chesterfield County established its Health Center Commission to operate nursing homes, hospitals, or heath center facilities. The HCC runs Lucy Corr Village, a nursing-care facility that has been expanded to include an assisted-living facility. But it didn’t make money, in fact it lost about a million and half bucks a year and Chesterfield County subsidized the loss to keep the village solvent. 

HCC set out to add an independent-living facility to Lucy Corr so that it would become a continuing care retirement center – a multi-level care facility on one campus – that be self sufficient and wouldn’t need the County’s subsidy.

In 2004, HCC awarded Jean Moreau a five-year contract plan and develop the independent-living facility.  Jean Moreau would get a monthly payment along with a development fee and a marketing fee. All together Jean Moreau would earn about $2.25 million on the deal. Two years in to the five-year deal, HCC decided to discontinue the contract, on two months notice. 

Jean Moreau – a real person and the president of the corporation – wrote HCC and claimed HCC owed her company the development fee that had been deferred until bond financing.  She said she was giving HCC a “heads up” that she intended to seek a legal remedy.

HCC responded 10 days later that the company had been compensated fairly, but if she disagreed she should have her lawyer submit the amount owed in writing and provide the contractual term that gives rise to the obligation. Moreau submitted nine invoices for work done in the 2005-2006 fiscal year, which HCC paid.

Almost three months after that, on October 4, 2006, Moreau’s lawyer sent a letter to one of HCC’s members stating that Moreau was willing to mediate the claim for the deferred development fees.  In January 2007, HCC responded that it disagreed with the Moreau’s claim for more money and that she had not provided the basis for mediation. 

The Law Suit

Moreau sued for declaratory judgment, asserting claims for breach of contract and quantum meruit. She wanted the $2.25 million. HCC filed a plea in bar contending that Moreau hadn’t submitted a claim according to the Virginia Public Procurement Act.  It also claimed that the quantum meruit claim was barred by sovereign immunity because HCC was created by Chesterfield County and the development of the independent-living facility was a governmental function.  After an evidentiary hearing, the trial court sustained the plea in bar.

Moreau’s first letter was held to be a notice of a claim, not the claim itself.  Either Moreau didn’t file a claim or the October 4 letter was too late as it was more than 60 days after the notice. As for the quantum meruit claim, the trial court said that HCC didn’t have absolute immunity (like a county), but that it did have immunity because it was acting in a governmental capacity (like a municipality).  Moreau appealed.

Claims Against a Local Government

The Public Procurement Act tells local governments the procedures that they must follow to buy things from the private sector.  It also tells the private sector how to claim money it’s owed from a contract with the government.  The key provision is that the vendor has to submit its claim within 60 days of the final payment from the government. If the vendor doesn’t make its claim to the local government, it can’t run to the court.  First you claim, and if your claim isn’t resolved then you get to involve a judge.

Moreau’s first letter was just a notice of a potential claim and the October letter was too late because it was more than sixty days after HCC’s final payment.  Moreau had argued that the payments were marked as final so how was she to know they were. But the Procurement Act doesn’t require the government to notify you that this is the last money you’re going to get.  HCC had sent two letters, one in May and one in June, that told Moreau that after it paid the 2005-2006 invoices it wasn’t going to pay more. Because Moreau didn’t comply with the “mandatory, procedural requirements” of the Procurement Act and file her claim within 60 days of HCC’s final payment, Justice Millette agrees with the trial judge and Moreau’s out of court..

You Can’t Sue the Sovereign, unless It Lets You

Virginia believes in sovereign immunity. It really, really does.  That immunity lets government function without “burdensome interference” and protects the treasury and public property. It’s been that way since the Colonies.

Sovereign immunity applies in two different ways. The Commonwealth and its counties have absolute immunity. Municipal corporations (cities, towns, and other government corporations) are immune when they are performing government functions, but not when they are exercising proprietary functions, like running a water system. In addition, sovereign immunity doesn’t shield the Commonwealth and its subdivisions from liability for its valid contracts, but it does shield them from tort claims.  What about a quasi-contract claim like quantum meruit?

In an earlier unrelated suit, the SCV had previously held that HCC was a valid municipal corporation, so that was part of the analysis was a given. However, HCC claimed it had absolute immunity.

 Years before, the SCV had held that a redevelopment and housing authority was like a municipality exercising a governmental function when it develops housing. Virginia Electric & Power Co. v. Hampton Redevelopment and Housing Authority, 217 Va. 30 (1976). HCC claimed it was immune because developing the independent-living facility was like developing a housing project.

Also, in 1997 the Attorney General’s office had issued a formal opinion that entities created by counties have absolute immunity. Since counties have it, the entities that they create must also have it. Right? 

The Court specifically rejects this logic because a municipal corporation created by a county would have sovereign immunity but one created by a municipality would not. It’s the nature of an entity, whether it is an arm or agency of the Commonwealth, that determines if it is entitled to absolute immunity. HCC must be analyzed to determine whether the independent-living facility was a governmental or proprietary function.

The trial court listed 8 factors indicating that developing the assisted-living facility was a governmental function.  Moreau argued that the independent-living facility was different from the nursing facility in Carter. The trial court disagreed and so does the SCV. HCC was chartered to provide hospital or health care facilities.  Those facilities, by law, include continuing care facilities and facilities for the residence or care of the elderly.  That’s what an independent living facility is.

The SCV had previously ruled that HCC’s provision of nursing services was a governmental service. Carter v. Chesterfield County Health Comm’n, 259 Va. 588 (2000). Since the independent-living facility is a health facility, and therefore a governmental function, HCC has immunity and Moreau’s quantum meruit claim dies. 

The Dissent

Justice McClanahan concurs that Moreau was barred in her claim because she didn’t file her claim within 60 days.  She dissents from the idea that municipalities are immune from quantum meruit claims. Sovereign immunity protects government from tort claims. She cites cases where the SCV had allowed quantum meruit claims when a locality had accepted benefits for which it had the power to contract. She focused on the implied contract part of the claim. In her view, the decision to accept benefits without paying for them is ministerial and involves no act of discretion and the distinction between governmental and proprietary acts does not tell the tale. Further, if the housing authority’s provision of housing is proprietary then so is the provision of housing in an assisted-living facility. She would let the quantum meruit claim proceed.