United States District Court, D. Alaska
MEMORANDUM OF DECISION AND ORDER
L. GLEASON UNITED STATES DISTRICT JUDGE.
an action alleging environmental pollution that is brought by
Gavora, Inc. against the City of Fairbanks pursuant to the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (“CERCLA”), 42 U.S.C.
§§ 9601-9675. The case relates to environmental
contamination at and around the Shopper's Forum Mall,
located at 1255 Airport Way in Fairbanks, Alaska (the
“Property”). Gavora is the current owner of the
Property; it seeks an order requiring the former owner, the
City of Fairbanks, to pay for 66% or more of all past and
future clean-up costs. The City asserts that its responsibility
for the clean-up costs is far less.
Inc. initiated this action on June 16, 2015. On September 20,
2016, the Court granted summary judgment in part to Gavora
under CERCLA § 107(a). The City then filed an amended
answer seeking equitable allocation of past and future
response costs at the Property under CERCLA §
113(f). The case proceeded to a four-day bench
trial in Fairbanks, Alaska beginning on May 22, 2017.
Rule of Civil Procedure 52(a) provides that “[i]n an
action tried on the facts without a jury . . . the Court must
find the facts specially and state its conclusions of law
separately.” Having considered all the testimony, the
exhibits admitted into evidence, and the parties'
submissions and arguments, the Court now makes the following
Findings of Fact and Conclusions of Law and
FINDINGS OF FACT
or around 1938, the City acquired the Property.
1961, the City leased a portion of the Property to Tice
Electric Co. Tice or a sublessee operated a self-service
laundry operation beginning in or around 1961 that operated
in the Tice Center that was then located at the north end of
the Property. The self-service laundry included coin-operated
dry cleaning machines.
self-service laundry operation continued at the Tice Center
until approximately 1966.
laundry operation that included dry cleaning then began
shortly thereafter in a former annex building that was then
located just south of the former Tice Center location. That
operation was in existence when Gavora acquired the master
lease in 1976. Gavora had previously acquired all of the
shares of the prior master leaseholder, B & B Company, in
1974. (Ex. S).
Gavora's lease with the City was valid until 2016. The
lease accorded Gavora a contractual right to purchase the
Property from the City at fair market value at any time
during the term of the lease. (Ex. Q at 4).
Beginning in 1976, Gavora subleased part of the Annex
building at the southern end of the Property to dry cleaners
that operated there until approximately 2001 (or perhaps
2002). (Ex. L). There have been no dry cleaning operations on
the Property since that time.
no time did either the City or Gavora conduct dry cleaning
operations on the Property. The City owned its utilities
between 1961 and 1997 and received property tax revenue for
the Property. It also received rent from Gavora. Gavora, in
turn, received rent from the dry cleaning operators.
(tetrachloroethylene) and TCE (trichloroethylene) are
chlorinated solvents and environmental contaminants.
cleaning operations may cause PCE and TCE contamination in
the groundwater and soil. There is PCE and TCE contamination
at the Property, which the Court finds is due to the dry
cleaning operations that took place there from 1961 until
approximately 2001. A substantial majority of the
contamination is due to the dry cleaning operations that were
in the Annex from 1976 until 2001. The percentage of the
overall contamination that was caused by the Annex operation
is not capable of precise quantification. Based on the
evidence presented at trial, the Court estimates that between
80% and 90% of the total on-site PCE and TCE contamination
was from operations at the Annex from 1976 to approximately
1992, PCE and TCE were discovered in the soil and groundwater
at Fairview Manor, a large commercial property located north
of the Property on the other side of Airport Way. Fairview
Manor was owned by the City at that time. (Ex. 6 at 4).
direction of the groundwater flow at the Property is from
southeast to northwest.
Beginning in the 1990s, the City actively worked with a
consultant and the Alaska Department of Environmental
Conservation (ADEC) to address the contamination at Fairview
Manor. Patrick Smith, the Development Manager for the City of
Fairbanks, and Larry Crouder, the City Engineer, were both
active participants in that process. To the extent Mr. Smith
testified he was not actively involved in that process, the
Court found that testimony not credible.
1999, monitoring wells were installed near the southern edge
of the Fairview Manor property, just across the street and
downgradient from the Property. The wells demonstrated that
the contaminants at the Fairview Manor “originate from
an upgradient, off-site source(s).” (Ex. 6 at 4). The
City was informed of that fact at that time.
Property is an upgradient off-site location relative to
Fairview Manor. At trial, Mr. Smith's testified that he
did not know this fact until recently. The Court finds this
testimony not credible, given Mr. Smith's long career
with the City of Fairbanks, first as the right-of-way
manager, and then as the property and development manager.
Knowledge of underground water movement would appear to be
essential in those jobs, particularly with the Chena River
flowing directly through Fairbanks, to the north of Fairview
Based upon the Court's consideration of all the evidence
presented at trial, the Court finds that in 1999, Pat Smith
knew, or at the very least should have known, that it was
likely there was PCE and TCE contamination at the
Shopper's Forum Property as a result of the longstanding
dry cleaning operations at that site and Mr. Smith's
knowledge of the PCE and TCE contamination found downgradient
to the Property at Fairview Manor.
October 13, 2000, ADEC added the Shopper's Forum Property
to its database of contaminated sites. An undated entry in
ADEC's file indicated that “assessment and
historical review indicate releases have occurred from at
least two historic drycleaners that have operated on the
property.” It also indicated that samples from the
Annex at the south end of the Property “detected high
concentrations of PCE and TCE in soil and groundwater.”
And “[t]here appears to have been a smaller release
from the former drycleaner located along the north end of the
property.” (Ex. 13 at 1).
a letter dated March 7, 2001 from ADEC to the City's
Fairview Manor consultant, which was copied to City Engineer
Larry Crouder, ADEC agreed with the City's consultant
that the source of the PCE and TCE contamination at Fairview
Manor was from an off-site contaminant source. The letter
specifically referenced “the location of a dry cleaning
company up-gradient” as a reason for concurring in the
City consultant's assessment. (Ex. 8 at 2).
letter dated April 19, 2001 from the City's Fairview
Manor consultant addressed to the City of Fairbanks, to the
attention of Patrick Smith, indicated that Mr. Smith had
discussed with the City's consultant on that project that
the City might choose not to make public the fact that the
City knew that there was PCE/TCE contamination in the area,
citing, among other reasons “contractual circumstances
and/or concerns.” (Ex. 9 at 2). The letter specifically
confirmed that there was contamination to the southwest of
the Fairview Manor property. The consultant recommended that
the “City of Fairbanks should ask to be kept routinely
informed of any contamination/remediation projects”
regarding “suspected offsite sources” adjacent to
the Fairview Manor property. (Ex. 9 at 3).
Later that same year, in September 2001, Gavora indicated its
intent to exercise its option to purchase the Property from
the City. (Ex. 10). Mr. Smith prepared a memorandum to the
Mayor regarding the proposal, in which he opined that the
City had been subsidizing Gavora because the rent paid by
Gavora under the lease was substantially below fair market
a letter dated March 29, 2002 from Gavora to the City's
Mayor, Mr. Paul Gavora wrote about the upcoming commercial
appraisal that the parties had agreed would be used to value
the Property for the intended sale. In that letter, Mr.
Gavora noted that “[t]he industry standard for
commercial appraisals includes . . . environmental
concerns.” He stressed that “the instructions
provided to MAI appraiser, Mr. King, must be consistent with
industry standards and mutually agreed upon.” (Ex. Z at
Shortly thereafter, the City-retained appraiser valued the
Property. Patrick Smith, on behalf of the City of Fairbanks,
wrote to the appraiser and directed that “[t]he
appraisal shall be performed under the Uniform Standards of
Appraisal Practice” (USPAP). (Ex. AB).
approximately April 2002, Mr. Smith met with the appraiser
for approximately half an hour to discuss the Property, but
at no time did he advise the appraiser that there was likely
environmental contamination at the Property from the dry
cleaning operations. The appraiser indicated that he had had
“in-depth discussions of the property and valuation
issues with Mr. Pat Smith of the City of Fairbanks.”
(Ex. 11 at 11). The appraisal included “a specific
assumption” that there was no environmental
contamination on the Property. (Ex. 11 at 13). The USPAP
recognizes that appraisers are not experts in detecting
environmental contamination and notes that an appraiser
“becomes aware of contamination through disclosure by
the client.” If such a disclosure is made, the USPAP
requires an appraiser to identify that fact in the appraisal.
(Docket 64-1 at 164-65).
June 2002, ADEC had prepared a Site Characterization Plan for
Fairview Manor regarding PCE and TCE as a follow up to the
detection of these solvents at that property. The report
concluded that the former and current dry cleaners at the
Property was one potential source for the contamination at
Fairview Manor. It also identified a former service station
located to the east of Fairview Manor and the sanitary sewer
lines as potential sources. (Ex. 12 at 15).
Real Estate Purchase Agreement for the Property between the
City and Gavora was signed on May 14, 2002. The City
cooperated with Gavora to expedite the closing, as a result
of which Gavora was able to defer $157, 000 in taxes. (Ex.
Real Estate Purchase Agreement specified that Gavora had done
“due diligence” prior to the purchase, and had
“inspected the property, [was] familiar with its
condition, and accept[ed] same ‘as is, where
is'.” (Ex. AM at 2).
City did not disclose to Gavora the likelihood of
environmental contamination in the form of PCEs and TCEs on
the Property prior to the sale, although the City knew, or at
least should have known, of that likelihood.
There was no evidence presented that Gavora had the Property
tested for environmental contamination prior to its purchase.
It is unclear why Gavora did not take steps to insure that
the Property did not have environmental contamination prior
to purchasing it.
ADEC sent out Potentially Responsible Party (PRP) letters to
Gavora, the City, and Tice Electric on June 5, 2009. (Ex.
AN). An internal ADEC email written at that time stated
“[s]ince we have not linked the contamination to
dry-cleaning operations ...