In a victory for common sense, the North Carolina Court of Appeals rejected a landowner’s attempt to recover $1.4 million in damages for environmental cleanup costs for a property that would only have had a value of $108,500 in the absence of the contamination – given that the landowner had no legal obligation to clean up the contamination. BSK Enterprises, Inc. v. Beroth Oil Co., No. COA15-189 (N.C. Ct. App. March 2, 2016). The Court of Appeals concluded “where the cost of remediation greatly exceeds or is disproportionate to the diminution in value of the property, the measure of damages should be the diminution in value cause by the contamination.” The link to the opinion can be found here.

In Beroth, a release from an underground storage tank on Beroth’s property contaminated groundwater, which then migrated onto B.S.K.’s property. The North Carolina Department of Environmental Quality (“DEQ”) supervised an investigation of the release and approved a cleanup strategy in which Beroth would remediate the primary areas of contamination. B.S.K argued that it was entitled to more and sought to recover the cost for an additional, self-designed groundwater treatment system that was solely for the benefit of its own property. As noted, B.S.K. had no obligation to actually install that system if its case succeeded.

The Court rejected B.S.K.’s argument that capping the landowner’s damages at the diminution of the value of the property was inconsistent with North Carolina’s statutes and common law. Nevertheless, the decision makes clear that windfall damages may not be awarded when a commercial property incurs environmental damage.

DISCLAIMER: Troutman Sanders LLP filed an amicus brief in this case on behalf of the N.C. Chamber.