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Amalgamated Bank of Chicago v. Kalmus and Associates

December 26, 2000

AMALGAMATED BANK OF CHICAGO, ETC.,
PLAINTIFFS-APPELLEES,
V.
KALMUS AND ASSOCIATES, INC.,
DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County No. 98 L 422 Honorable David G. Lichtenstein, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Cahill

Defendant Kalmus & Associates, Inc., appeals a judgment against it for breach of contract and damages of $541,291.74. At issue is the meaning of an agreement defendant signed and the obligation undertaken to eliminate the contamination caused at the site defendant leased from plaintiff Amalgamated Bank of Chicago. A second issue is the amount of damages awarded by the trial court. We affirm.

Plaintiff sued defendant on January 13, 1998. Count I alleged breach of contract for failure to comply with a cleanup agreement and lease requirements that the property be returned in the same condition as received. Count II alleged a common law wrongful possession claim. Count III alleged a holdover claim. Count IV alleged a holdover after notice claim. Count V sought prejudgment interest.

The court entered judgment for plaintiff on count I after a bench trial. The court entered judgment for defendant on all remaining counts. Damages were assessed at $541,291.74. Plaintiff did not cross- appeal the judgment for plaintiff on counts II through V.

The following evidence was received at trial.

Plaintiff is the trustee of a land trust that holds title to a commercial building in Broadview, Illinois. Defendant is an electronic circuit board manufacturer. Defendant leased the Broadview building from March 1989 through April 1994 under a triple net lease. A triple net lease requires the tenant to pay insurance, taxes and utilities in addition to rent. The parties extended the lease by agreement until April 1996.

Defendant found a 9- to 12-inch hole in the concrete floor while moving out of the building in March 1996. The hole was caused by copper chloride that had leaked in solution from an etching machine. The solution ate through the floor and spread to the "gravel stone base coarse" under the floor. The soil and gravel stone were contaminated with copper and the groundwater was contaminated with chlorides.

The parties entered into an agreement on June 24, 1996, that set out the steps defendant was to take to remove the contamination. This agreement, the wording of which is at the heart of defendant's appeal, read in part:

"1. Kalmus shall take those steps necessary at the Premises to enable it to obtain from the Illinois Environmental Protection Agency a 'no further remediation' letter which letter shall indicate in essence that, based on the industrial/commercial use of the property, the copper and chloride residual does not require further remediation under the Illinois Environmental Protection Act.

2. Upon receipt of such 'no further remediation' letter, Bank fully and unconditionally releases and forever discharges Kalmus *** from any and all claims, demands, and causes of action of any nature which Bank has or claims to have or hereafter accrue against Releases arising out of or relating to i) Kalmus' use of cupric chloride on the Premises; or ii) the existence of copper or chloride or any combination thereof on or beneath the Premises.

***

4. It is expressly understood that Bank is not releasing its claim that it is entitled to holdover rent until such 'no further remediation' letter is received. However, by executing this Agreement, Kalmus does not admit that it is liable to Bank for such holdover rent. Said claim shall be addressed by the parties separate and apart from this Agreement."

Paul Gearen, president of a real estate firm that arranges the lease and purchase of commercial real estate, testified for plaintiff. Gearen testified that a "no further remediation" (NFR) letter from the Illinois Environmental Protection Agency (the agency) was required because environmental issues are important in commercial real estate transactions. As owner of the property, plaintiff, not defendant, was required by law to sign an agency report of contamination asking for an NFR letter. An agency report of contamination describes the steps to be taken to clean up contaminated sites. An NFR letter is prima facie evidence that the steps taken compled with the agency regulations and that no further steps are needed. The NFR letter is recorded and becomes part of the chain of title of the property.

The agency has developed guidelines for cleaning contaminated sites. These guidelines are known as the Tiered Approach to Corrective Action Objectives (TACO). TACO guidelines direct that an environmental risk analysis be conducted under a three tier approach.

Under tier 1, a landowner consults an agency table to see what concentration of a contaminant is allowed, given the use of the property. The owner then removes enough of the contaminant to comply with allowable levels. Defendant's environmental engineer, James Huff, testified that tier 1 certification may still be obtained even if levels of concentration are higher than those allowed by the tables, so long as an "engineered barrier" is put in place to "limit exposure to, or control migration of, the contamination." A concrete floor is one example of an engineered barrier. Tier 1 is the easiest certification to receive from the agency.

Wayne Smith, a Pioneer Environmental, Inc., senior project manager, testified for plaintiff. Smith said that Pioneer was an environmental consulting firm that ultimately performed the cleanup that enabled plaintiff to receive a "no further remediation" letter. Smith said that if tier 1 objectives are not met, an additional analysis under tier 2 or 3 or additional remediation is needed.

A tier 2 or tier 3 analysis is required when concentrations of the contaminant left at the site are higher than those listed in the tables. To obtain a "no further remediation" letter under either tier 2 or 3, a more rigorous review of the risk posed by the contaminant must be done. Several issues, including possible migration of the contaminant, are considered. Certification under either tier 2 or 3 is more time consuming. It may result in restrictions on the use of property. There are three types of restrictions: (1) an industrial/commercial restriction; (2) the requirement of an engineered barrier; and (3) a safety plan to alert and address worker exposure hazards. A tier 3 analysis is more complex than tier 2 and subjects the property to more rigorous review by the agency.

Evidence at trial established that the tier 1 table lists two acceptable concentrations for a copper contaminated industrial site. Smith explained that, within the industrial/commercial objective, there are two groups of people who may be exposed to contamination: the industrial/commercial worker and the construction worker. For an industrial/commercial worker, the acceptable concentration is 82,000 milligrams per kilogram. The acceptable concentration for a construction worker is 8,200 milligrams per kilogram (mg/kg). The concentration for construction workers is substantially less than that for an industrial/commercial worker because the construction worker is presumed to engage in invasive work into the soil and may be subject to greater exposure.

James Huff, an environmental engineer, undertook the remediation effort for defendant. Huff testified that he believed it was his task to clean the site to ensure no concentrations of copper higher than 82,000 mg/kg and so meet the objective for an industrial/commercial worker. Huff testified that no part of the contaminated area showed a contamination higher than 82,000 mg/kg. Huff's remediation report prepared for the agency showed that he excavated a 22-foot by 34-foot area of concrete flooring and tested samples of the exposed area. Samples from in and around the exposed area were tested. Where not already exposed, samples were removed by coring through the concrete. A total of 247 square yards of concrete and soil were removed. Tests showed that remaining ...


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