Common Sense Prevails in Case of BSK Enterprises, Inc. v. Beroth Oil Co.

In a victory for common sense, the North Carolina Court of Appeals recently 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.

In the case of BSK Enterprises, Inc. v. Beroth Oil Co., a release from an underground storage tank on Beroth’s property contaminated groundwater, which then migrated onto B.S.K.’s property. After the North Carolina Department of Environmental Quality supervised an investigation 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, and which it had no obligation to actually install if the case succeeded.

The Court rejected B.S.K.’s argument that capping the landowner’s damages at the reduction of the value of the property was inconsistent with North Carolina’s statutes and common law, concluding “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.” Troutman Sanders LLP filed an amicus brief on behalf of the NC Chamber which only weighed in on this limited portion of the appeal. We are pleased that the Court of Appeals appreciated and agreed with the points we made in our brief that allowing the plaintiff to recover cleanup costs far in excess of the value of the plaintiff’s property – and when the plaintiff had no legal obligation to clean up the property – would have produced a windfall to the plaintiff.

The Court, however, in dicta did indicate that when property is held for residential use, the owner might, under limited circumstances, be able to recover damages in excess of the property value. The NC Chamber believes windfalls should not be permitted regardless of whether property is held by a business or by individuals.

Gary J. Salamido
Vice President, Government Affairs
North Carolina Chamber

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