Philadelphia Electric Company v. Hercules, Inc. and Gould, Inc. Case Brief

Summary of Philadelphia Electric Company v. Hercules, Inc. and Gould, Inc., Hercules, Inc., Appellant 762 F.2d 303; 1985 U.S. App. [1985]

Facts: Before October 1971, the Pennsylvania Industrial Chemical Corporation (PICCO) owned some land near the Delaware River in Chester, Pennsylvania. It operated a hydrocarbon resin manufacturing plant on the land. During the time the land was owned by PICCO, the company deposited and/or buried resins and their by-products into a pond it had created, and into other areas on the land.

In 1971, PICCO sold its facility to Gould and ceased operations. Gould did not conduct any resin operations, but instead leased tanks to ABM Disposal Services Company, which used them to store large quantities of waste materials, but no resins.

In mid-1973, the Philadelphia Electric Company (PECO), which operated a plant on an adjoining piece of land, wanted to purchase the land from Gould. Prior to the purchase, a PECO representative inspected the site several times, to include walking tours along the Delaware River and the “PICCO pond." PECO saw that ABM was sloppy in the way in which it conducted business, and chose to acquire the property in March of 1974, before ABM was able to clean up its spills.

PECO acquired the property and conducted no operations, but leased a portion of the land to American Refining Group, Inc.

In 1980, the Pennsylvania Department of Environmental Resources (DER) discovered that resinous materials similar to the ones produced by PICCO were seeping from the banks of the Delaware River at the site and that the PICCO pond was contaminated with the same material. DER sent a letter to PECO requesting clean-up of the resinous materials and PECO developed a plan which required that the remaining pond resin would be moved to a landfill and the PICCO pond area would be backfilled and re-graded. The cost for the clean-up of the pond was $338,328.69, with an additional $7,578 for cleaning up resin materials found on other parts of the land, and $67,500 was lost in rental revenue from American Refining while the clean-up was taking place.

In 1981, DER was satisfied with the clean-up, but stated that further testing indicated that resins were still leaching into the Delaware River from their land. PECO refused to spend any additional money on clean-up and on February 16, 1982, instituted suit against Gould and Hercules, which had acquired the remaining assets of PICCO in 1973, in exchange for Hercules stock. The suit was based upon the principles of public and private nuisance. Hercules cross-claimed against Gould.

History: The district court ruled that Hercules was liable as PICCO’s corporate successor and because the transaction was a de facto merger. A jury trial was held in July 1983. The district court entered judgment for PECO against Hercules in the amount of $394,910.14, and judgment for Gould on Hercules’ cross-claim. The court also issued an injunction ordering Hercules to clean-up the remaining resin pollution on the land. Hercules appealed.

Issue: Did appellee have a cause of action against appellant for public and private nuisance?

Ruling: No. The U.S. Court of Appeals for the Third Circuit vacated the injunction and reversed the judgment against appellant Hercules.

Rule/Analysis: The relationship of Hercules and PECO was that of a vendor and remote vendee of land. It was argued that a vendee has no cause of action against a vendor in private nuisance, as the relationship is governed by the rule of caveat emptor. The court found that Hercules could not, as a matter of law, be held liable to PECO on the theory of private nuisance.

Public nuisance is defined as “an unreasonable interference with a right common to the general public." If PECO had suffered damage to its land or its operations as a result of the pollution, it might have had a claim for public nuisance. But the site was the cause of the pollution, not the result of it.

Summary: The fact that Hercules was liable was not an issue. The question was, “To whom was Hercules liable?" Under the doctrine of caveat emptor, Hercules owed only a limited duty to Gould, and in turn, to PECO. It was conceded that this duty was not violated, and as such PECO could not recover in private nuisance for the violation of a duty Hercules owed to others [i.e. its neighbors].

The public nuisance question was whether or not PECO had a standing to bring an individual action for damages or injunctive relief for interference with a public right. In order to recover damages in an individual action for a public nuisance, one must have suffered harm of a kind different from that suffered by other members of the public exercising the right common to the general public that was the subject of interference. PECO had been specially harmed, but only in the exercise of its private property rights. PECO suffered no “particular damage" in the exercise of a right common to the general public [i.e. the right to water that isn’t polluted] and therefore lacked a standing to sue.

Based on these facts, the appellate court reversed judgment against appellant and vacated the injunction against same.

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