Temporary contamination – Ain’t that a non-compensable shame?

Posted on December 12, 2013 by Jeff Civins

A “stigma” is a mark of shame.  When applied to real estate, stigma refers to an unfavorable quality in a property that makes it less attractive.  Whether a landowner may recover stigma damages for temporary contamination that has been remediated in accordance with state law is an issue the Texas Supreme Court will consider when it hears oral argument in early December in the case of Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch

In that case, the lower appellate court had affirmed the decision of the trial court, following a jury trial, awarding the plaintiff almost $400,000 in damages attributable to an alleged diminution in value resulting from temporary contamination.  In arguing for reversal, Houston Unlimited has asserted that this decision recognizes a new cause of action in Texas – for stigma damages absent permanent physical injury.  Because of the ramifications of this holding, a number of Texas trade associations have filed amicus briefs in support of Houston Unlimited.1 

Houston Unlimited operated a metal-processing facility that had failed to comply with various regulatory requirements relating to the management of solid waste and storm water.  Its operations also had resulted in leaks to the adjoining Mel Acres Ranch.  The Texas Commission on Environmental Quality (“TCEQ”) cited Houston Unlimited for these violations and required it to investigate the contamination on the ranch.  

Houston Unlimited stopped the leaks and instituted steps to prevent future leaks. Its investigation showed that there was no ongoing contamination and that only one sample result – for copper in one pond – showed an excess of a TCEQ action level, which a month later had fallen below the action level. The ranch nonetheless sued for trespass, nuisance, and negligence, alleging that it had suffered permanent damage, measured by a loss in market value of the property.

The jury found that there had been no permanent nuisance or trespass, but nonetheless awarded the ranch stigma damages.  Houston Unlimited asserts that a majority of jurisdictions reject this theory of recovery and that the decision of the lower court disregards the TCEQ’s regulatory determination as well as prior case law.  The Court’s determination – whether temporary contamination ain’t a non-compensable shame – will have significant ramifications for other pollution damage cases in Texas and possibly elsewhere.  

The blogger’s firm, Haynes and Boone, represents one of those associations – The Texas Oil & Gas Association – in this matter.



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