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KEMPER/PRIME INDUSTRIAL v. MONTGOMERY WATSON AMERICAS

March 31, 2004.

KEMPER/PRIME INDUSTRIAL PARTNERS, Plaintiff,
v.
MONTGOMERY WATSON AMERICAS, INC, Defendant



The opinion of the court was delivered by: RONALD GUZMAN, District Judge

MEMORANDUM OPINION AND ORDER

In its September 23,2003 Memorandum Opinion and Order denying Defendant Montgomery Watson Americas, Inc.'s First and Second Motions in Limine, this Court expressed serious doubts about the ability of Plaintiff Kemper/Prime Industrial Partners to provide evidence of damages, without which the Court would not submit the issue to the trier of fact. In response, Plaintiff filed a Memorandum Of Evidence On Damages That It Will Present At Trial ("Pl.'s Mem,"), and Defendant filed a responsive brief. For the reasons that follow, the Court finds that Plaintiff cannot offer proof of all necessary parameters of the damages calculation, and Plaintiff is barred from presenting evidence of damages at trial. The case is therefore dismissed with prejudice.

BACKGROUND

  The Court presumes familiarity with the underlying facts and lengthy procedural history of this case. In brief, at Plaintiffs request, Defendant's predecessor performed a series of investigations and issued several preliminary and final reports (collectively the " 1990 Report") about the nature and Page 2 extent of the environmental contamination of a piece of industrial property (the "Property") that Plaintiff sought to purchase. After the 1990 Report was issued, Plaintiff did purchase the Property and now sues Defendant for negligent misrepresentation due to its alleged failure to report the entire cost of remediating the contamination,

  On September 23, 2003, this Court entered a Memorandum Opinion and Order ("9/23/03 Order") in which it denied Defendant's First Motion in Limine to bar all evidence of Plaintiffs cost of remediation and Defendant's Second Motion in Limine seeking to bar the testimony of Plaintiffs damages expert. Defendant's First Motion in Limine essentially argued that the proper measure of damages in this case is the diminution in value of the land and that Plaintiff had no damages under this formulation. In the 9/23/03 Order, the Court agreed with Plaintiff that the proper measure of damages in this case was instead based on Section 552B of the Restatement of Torts 2d, which describes "Damages for Negligent Misrepresentation."

  The Court concluded that under the Restatement formulation, "plaintiff is entitled to recover only the extra cost of remediation incurred as a result of cleaning up that pollution which the defendant negligently failed to include in its report to the plaintiff."*fn1 (9/23/03 Order at 3.) Thus, to calculate its damages, Plaintiff must o Her evidence of (1) the cost of remediating the contamination listed in the 1990 Report, and (2) the total cost o ('remediating the contamination that existed on the Property at the time of the 1990 Report. If Defendant were liable for negligent misrepresentation, the second figure should be greater than the first, and the difference would represent Plaintiffs damages. Page 3

  While the Court agreed with Plaintiffs assertion of the appropriate measure of damages, it did not agree that the proper measure of damages was the full cost of remediating the property to a Tier One level, which was estimated by Plaintiffs expert Laszewski to be between $24 million and $31 million, less a remediation estimate given by Defendant of $300,000. Based on its knowledge of Plaintiff s evidence at the time of the 9/23/03 Order, the Court expressed its concern that Plaintiff did not have sufficient evidence of both parameters of damages that would allow Plaintiff's actual damages to be calculated to any reasonable degree of certainty, (9/23/03 Order at 4-5, 10.) Specifically, the Court questioned whether Plaintiff could present evidence of the cost of remediating the contamination disclosed in the 1990 Report. (Id. at 5.) The Court noted that Plaintiff had offered no expert opinion as to this calculation, "and it is clearly too late to do so now." (Id.) The Court strongly emphasized that without such evidence, the issue of damages could not be presented to a jury. (Id at 5, 10.) The Court then allowed Plaintiff to submit a memorandum describing the specific evidence on damages it intended to present at trial in order to address the issues raised in the 9/23/03 Order, and Defendant filed a response to Plaintiffs memorandum,

  After reviewing the parties' submissions, the Court concludes that its previous concerns have not been adequately addressed by Plaintiff, which offers no evidence by which a factfinder could reasonably calculate damages to any degree of certainty, or indeed that Plaintiff suffered damages at all, Page 4

  DISCUSSION

  Plaintiff "has the burden of proving damages to a reasonable degree of certainty." Telemark Dev't Group, Inc. v. Mengelt, 313 F.3d 972, 983 (7th Cir. 2002); see also Schiller & Schmidt, Inc. v. Nordisco Corp, 969 F.2d 410, 415 (7th Cir. 1992) ("For years we have been saying, without much visible effect, that people who want damages have to prove them. . . ."). An award of damages cannot be based on conjecture or speculation, Telemark, 313 F.3d at 983, 1. Remediation Costs in 1990 Report

  One necessary parameter of Plaintiff s damages is the cost of remediating the contamination that was described in the 1990 Report. That figure must be deducted from the actual cost of remediating the Property as it existed in 1990 in order to calculate Plaintiffs damages. "Clearly, some remediation would have been necessary even if the pollution were no more than what was described in defendant's allegedly negligent 1990 report. Only the difference between that cost and the full remediation cost plaintiff now claims is properly recoverable," (9/23/03 Order at 4.)

  Plaintiff argues that the only remediation cost reflected in the 1990 Report is a remediation estimate of approximately $300,000 that Defendant gave Plaintiff in May 1990. (Pl.'s Mem. at 5.) Plaintiff refers to a three-page letter from Defendant dated May 31, 1990 summarizing a meeting between the parties in which they discussed "[a]reas of concern and additional investigation techniques." (Pl.'s Ex. J, at M62.) The letter estimates $300,000 to remediate a zone within the Property that was identified as "[t]he major area of concern." (PL's Ex, ,T, at M64.) Plaintiff identifies no remediation cost estimates in either of Defendant's comprehensive reports issued in June 1990, the Environmental Assessment Report (PL's Ex. M) and the Subsurface Investigation Page 5 Report (PL's Ex. N), and Plaintiff in fact avers that "none of Defendant's reports quantified the potential liabilities or remediation costs for the Property." (PL's Mem, at 5.)

  Plaintiff argues that "Defendant failed to quantify the contamination for locations where it found contamination as well as, obviously, for locations where it completely missed contamination." (Id. at 6,) Therefore, according to Plaintiff, the only remediation cost included in the 1990 Report was the $300,000 estimate listed in the May 31, 1990 letter. Plaintiff states that Jim Martell, The Prime Group, Inc.'s Senior Vice President and the person who retained Defendant's services, "reasonably believed that there were no remediation costs associated with the contamination on the Property other than the [$300,000] estimate. . . ." (Id. at 8.) On its face, however, the estimate relates to only a certain portion of the identified contamination,*fn2 A jury could reasonably find that Defendant's June 1990 reports, which comprise over fifty pages, not including attachments, and describe numerous areas of contamination in addition to the "major area of concern" discussed in the May 31, 1990 letter, sufficiently disclosed the need for remediation costs above and beyond the $300,000 figure, even if those costs were not expressly quantified. But a jury that did so find would be wholly unable to determine the value of those additional reported remediation costs given the evidence Plaintiff will present at trial.

  Although Plaintiff does not waver from its contention that this parameter is capped at $300,000, Plaintiff also submits the report of its liability expert, Gary Vajda, who opined that the maximum potential liability that Defendant should have reported to Plaintiff, based on Defendant's work product, was $6,600,000. (Pl.'s Ex. A at 19.) Arguably, this figure could be used to Page 6 represent the cost of remediating all the contamination disclosed in the 1990 Report. Defendant responds first that under this district's Local Rules, only one expert may testily on each subject unless there is good cause shown, and Plaintiff already has a damages expert. The Court need not reach the issue of whether Vajda's testimony would be allowed under the Local Rules, however, because the Court agrees with Defendant's second argument, that Vajda.' s opinion on the maximum potential liability was purely speculative, Vajda testified that the liability values were a "guesstimate" (Def.'s Ex. 13, Vajda Dep. at 455:14, 456:12, 456:16), that he did not know what cleanup standard was used in calculating the values (id at 453:8-10, 476:7-8), and that "it's not meant to be to that degree of accuracy" (id. at 453:9-10). Vajda's calculation is admittedly based on conjecture and speculation and cannot form the basis of a damage ...


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