Name: Gerald J. Petros
Age: 41
Position: partner, vice-chair of Litigation Department at Hinckley, Allen & Snyder LLP
Background: Arrived at Hinckley, Allen & Snyder in 1983; American Bar Association Section on Litigation; ABA Environment Litigation Section; Rhode Island Bar Association.
Education: Amherst College, BA (1980); Boston College Law School, JD (1983)
Residence: South Kingstown
Family: Married, three sons
GERALD J. PETROS: ‘We want to make sure the state provides appropriate assistance for business…(so far) the state has been…responsive.’
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Over the last year, Gerald J. Petros has been involved in a series of commercial litigation cases – each having a dramatic impact on the business community. Ranging from a case in which Textron fought the federal EPA, to the plight of small businesses targeted for the costs of cleaning a Superfund site, to a complex case that held up several possible downtown development projects for more than two years, and an ongoing situation in which he is working to protect the rights of business owners impacted by the Route 195 Relocation project.
PBN: How did you get involved in Textron v. Aetna Casualty & Surety?
PETROS: We were asked to file a friend-of-the-court brief on behalf of several local and national businesses, including Providence Energy, Narragansett Electric Company and Charter Oil — because of the importance of that case to manufacturers and businesses both inside and outside of Rhode Island.
Explain the details of the case, which dates back 13 years when the EPA sued Textron, alleging the company polluted dozens of sites, including one near an aircraft factory in New York.
The case involves a site that was owned by Textron, where Textron had manufactured for many years and had disposed of waste through a treatment process at that site. It turned out there were some problems with that treatment process which involved a neutralization lagoon and as a result, some groundwater was contaminated. When the EPA sued Textron, Textron asked its insurance carriers to provide coverage for those claims and those carriers refused. That’s how the suit began.
What is the time frame of the case?
The manufacturing operations took place in the 1960s, 1970s and into the 1980s. The lawsuit by the EPA began in 1987.
At what stage was the case when you became involved?
Textron had lost in Rhode Island Superior Court on a summary judgment. The insurance carriers had successfully argued that the standard pollution exclusion precluded insurance coverage in this case. Textron appealed to the Rhode Island Supreme Court. That is when I became involved on behalf of these other companies in filing a friend-of-the-court brief.
This took place in Rhode Island because Textron has its world headquarters here?
Textron argued that because its insurance policies were purchased and negotiated here, this is where the lawsuit should take place.
You were successful in your efforts – what was your argument?
The main question in the case involved the standard pollution exclusion. The question was whether that pollution exclusion barred coverage for environmental claims in a case like this, where the policyholder had at least argued factually that it made good faith efforts to dispose of its waste properly and notwithstanding those efforts, it incurred these environmental liabilities. The carriers argued that there should not be coverage under those circumstances. Textron argued that the pollution exclusion only barred coverage when a policyholder or an insured acted recklessly or intentionally in disposing of hazardous waste, which then in turn resulted in the environmental liability. That question has been litigated in probably 40 of the 50 states throughout this states and half of the courts have come down in favor of the insurance carriers and half have come down in favor of companies and manufacturers. The Rhode Island Supreme Court sided with the manufacturers and businesses of Rhode Island and outside of
Rhode Island and ruled that the plain language of the policy was ambiguous and therefore should be construed in a way that provides coverage for companies and businesses in Rhode Island.
That decision on the part of the Rhode Island Supreme Court – is that the argument that you had intended to make all along?
Our thrust in getting involved in the case was in offering some support to the Supreme Court in determining the meaning of the pollution exclusion. That meaning will determine dozens of cases to follow, in deciding whether companies will get coverage or will not get coverage. Essentially, that pollution exclusion has a terms that says; ‘There is no coverage for pollution claims unless the claim arises out of a sudden and accidental event.’ Insurance carriers have argued that that language means unless the event is abrupt, instantaneous, there is no coverage. Companies and manufacturers have argued that so long as the event is unexpected – regardless of whether it is abrupt or gradual – there should be coverage. The Rhode Island Supreme Court agreed that the proper interpretation of that clause is that if the event is in fact unexpected, unforeseen, not intentional, then there should be coverage. The effect of that decision will be, that first of all, many businesses and companies that face huge economic burdens as a result of these environmental claims will now have recourse against their insurance carriers to get reimbursed for these claims. And second, it will ensure that there are private funds available to clean up hazardous waste sites in this state and outside of the state.
It sounds like this decision impacts businesses of all sizes.
Very much so. It could affect a small business that has an underground storage tank that has leaked. It could affect a large manufacturer that has been disposing of waste at an approved waste site for decades – and then, suddenly finds out that that site is a Superfund site and the EPA is demanding hundreds of thousands of dollars.
On Sept. 15, 1999, the U.S. Court of Appeals for the First Circuit ruled on behalf of your clients in a Superfund liability case involving Sullivan’s Ledge in New Bedford.
I got involved with the case years ago, on behalf of Nortek and AFC Cable two local companies in Rhode Island and Massachusetts. Nortek had an interest in AFC, which had a facility in New Bedford. Sullivan’s Ledge is a Superfund site located in New Bedford. It is essentially an old landfill at which industrial waste was disposed for decades – probably from the 1920s until the 1970s. In the 1980s, after Congress passed the Superfund law, Sullivan’s Ledge became a Superfund site and the EPA came in and began to direct a cleanup. Essentially, about 12 or 13 large companies took over responsibility for the cleanup because they had disposed of much of the waste that was found at the site. These companies were spending in the neighborhood of $50 million to clean up the site. They, in turn, sued a number of other parties, alleging that those other parties had also sent waste to the site, including our clients, Nortek and AFC Cable. That case went to trial before Judge Keeton in the United States District Court. Nortek and AFC successfully argued before Judge Keeton that the waste that they sent to the site was first of all very small in amount, second, innocuous in nature. It included zinc and copper – fairly common elements that we take in our cereal and vitamins every day. Finally, they argued that neither copper nor zinc contributed in any way to the cleanup costs that were being incurred at the Sullivan’s Ledge site. The plaintiffs in that case said that it didn’t matter. As long as AFC sent any hazardous waste to the site, they should be made to pay millions of dollars in cleanup costs. Judge Keeton decisively rejected that argument and found that, given the fact that AFC’s waste was so de-minimus in nature, and that it was not contributing to the incurrence of cleanup costs at that site, that AFC and Nortek should not be made to pay any cleanup costs. That decision was appealed to the First Circuit and the First Circuit affirmed Judge Keeton’s ruling and in doing so made law in this area that has reverberated around the country in both the defense and prosecution of these Superfund actions.
And what does this decision mean to a small business owner?
Prior to the Sullivan’s Ledge decision, companies often had to roll over whenever a Superfund claim was presented to them. They knew that if they sent any waste to the site, regardless of how little or innocuous, they were potentially liable for hundreds of thousands of dollars. The Sullivan’s Ledge case puts concepts of fairness back into Superfund, which is otherwise a rather Draconian strict liability statutory scheme. It says that, no, if a business sent waste to a site that was simply not the cause of problems at that site, they either shouldn’t have to pay anything to clean up that site or should pay a commensurate amount – and not be liable for hundreds of thousands of dollars because one drum of waste got to that site from the company.
We seem to hear often of problems with regard to these Superfund sites.
Most of these sites were not Superfund sites when the manufacturers were sending their waste to them. As a matter of fact, what is striking to the owners and operators of these businesses is that most of these sites were approved by the states they are in these are sites that were often recommended by the Department of Environmental Management as safe sites to dispose of waste, and then years later – after Superfund is passed – they become Superfund sites and suddenly these same companies are asked to spend huge amounts of money to clean up these sites.
The next case we’re going to discuss involves Capital Properties and at least four issues, centering on a land condemnation controversy and subsequent tax assessment matter. Could you first describe Capital Properties?
Initially, there was P&W Railroad, which goes back more than 100 years. Eventually, Capital Properties was formed to hold railroad land that was excess to the railroad operation. It was land that was not needed for railroad tracks or freight or cars. So for a while, it was part of P&W Railroad and then it became the parent company of P&W Railroad and then it spun off from P&W Railroad. Today, they are entirely separate companies – both are traded publicly.
So what exactly is Capital Properties?
It is a real estate holding and development company — the largest landowner in Capital Center.
Let’s talk about what became a highly complex case – or series of cases.
The land that was condemned now forms the riverbeds for the two relocated rivers, right outside of Citizens Plaza. The issue started out as a run of the mill condemnation case. The land to move the rivers in Capital Center was taken in 1987. Capital Properties filed a condemnation action to recover the fair market value for that land. It took a long time for that condemnation action to be resolved. Ultimately, in 1997 Judge Darigan issued a judgment in the condemnation action in favor of Capital Properties in the amount of approximately $10.5 million. Now, under a prior agreement between the City of Providence and the state, the city had agreed to pay half of that condemnation judgment.
Not knowing what it would be?
Not knowing what it would be. Within a few months after that condemnation judgment came down, the city unilaterally went out in Capital Center and revalued every piece of property owned by Capital Properties in Capital Center, in some cases doubling or tripling the assessments. And then applied those new values retroactively for six years back to 1991 and then sent Capital Properties a new tax bill for $14 million including interest, penalties and retroactive tax — all within three months of the condemnation judgment coming down. Capital Properties obviously objected to those actions as being selective, arbitrary and illegal – and filed a suit to have those taxes declared illegal. At the same time, the City of Providence also claimed that it, not Capital Properties, actually owned Parcel 9 – the parcel right across from the mall and the Westin Hotel. At the same time, the city said that if it did not own Parcel 9, it was going to condemn it because it was a blighted parcel. All of these things followed in short order after the condemnation judgment. Eventually, you had four cases: the condemnation case; the tax case; and these two new condemnation cases involving Parcel 9. They were all consolidated by the Rhode Island Supreme Court and sent to Judge Needham to sort out. Judge Needham came out with a decision in which he affirmed the condemnation judgment on the relocated rivers property that Judge Darigan had issued and perhaps more importantly, he found that the city’s actions in reassessing all of the property owned by Capital Properties in Capital Center, were arbitrary, selective and illegal. He struck down all of those taxes. He also found that Capital Properties and not the city, owned Parcel 9 and that the city had no right to take Parcel 9. Clearly, it was not a blighted parcel. The Supreme Court affirmed Judge Needham’s decision about half a year later.
Whom are you representing in regards to this issue to Route 195?
Six or seven of the 80 property owners who are affected by the relocation of 195.
You are working to make sure they are compensated fairly?
There are three predominate interests that need to be protected for all of the property owners involved in the case. Number one, they want to be fairly compensated for the real estate that is being taken from them. They are entitled to that as a Constitutional right. Second, many of these businesses need to be relocated. We want to make sure that the state provides appropriate assistance for businesses like that. Up until now, the state has been very responsive.
