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Wond Family Kapalama, LLC v. Continental Tire The Americas, LLC

United States District Court, D. Hawaii

May 23, 2018

WOND FAMILY KAPALAMA, LLC a Hawai`i limited liability company, Plaintiff,
CONTINENTAL TIRE THE AMERICAS, LLC, an Ohio limited liability company, Defendant. CONTINENTAL TIRE THE AMERICAS, LLC, an Ohio limited liability company, Third-Party Plaintiff,
MELIM LTD., Third-Party Defendant.


          Leslie E. Kobayashi United States District Judge

         Before the Court is Third-Party Defendant Melim, Ltd.'s (“Melim”) “Motion to Dismiss Defendant Continental Tire the Americas, LLC's Third-Party Complaint, Filed on August 21, 2017 [Dkt. 42]” (“Motion”), filed on December 20, 2017. [Dkt. No. 88.] On February 16, 2018, Plaintiff/Counterclaim Defendant Wond Family Kapalama, LLC (“Wond Family”) and Defendant/ Counterclaimant/Third-Party Plaintiff Continental Tire the Americas, LLC (“Continental Tire”) each filed its memorandum in opposition. [Dkt. nos. 106, 107.] Melim filed its reply on February 26, 2018. [Dkt. no. 109.] This matter came on for hearing on March 12, 2018. On April 30, 2018, this Court issued an entering order (“EO”) ruling on the Motion. The instant Order supersedes that EO. Melim's Motion is hereby denied for the reasons set forth below.


         On December 28, 2016, Wond Family filed its Complaint against Continental Tire. Melim is not a party to the Complaint. Wond Family brings this action pursuant to the Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9607, et seq., and the Hawai`i Environmental Response Law (“HERL”), Haw. Rev. Stat. Chapter 128D.[1] [Complaint at ¶ 1.] Wond Family is the fee owner of the real property at issue in this case - Tax Map Key No. (1)1-5-021:024 (“the Property”). On or about February 12, 1959, Clarke Investment Corporation (“Clarke Investment”), as sublessor, and Melim Service & Supply Co., Ltd. (“Melim Service”), as sublessee, entered into a written sublease of the Property. According to the Complaint, it was amended or assigned on or about December 29, 1975, such that The General Tire and Rubber Company (“General Tire”) was the sublessee. The assigned/amended document is referred to as “the Sublease.” Continental Tire is the successor sublessee under the Sublease because General Tire is its corporate predecessor. Wond Family is the successor sublessor under the Sublease because Kapalama Associates LLC (“Kapalama Associates”) acquired Clarke Investment's interest, and Wond Family acquired both the fee interest in the Property, as well as Kapalama Associates' rights, including Kapalama Associate's claims against Continental Tire. [Complaint at ¶¶ 17-21.]

         The Sublease expired on October 31, 2012, and Continental Tire stopped paying rent at that time. However, Continental Tire ceased business operations on the Property prior to 2012. For most of the time covered by the Sublease, Continental Tire and/or its predecessors operated tire and automobile services on the Property. This involved the use of hydraulic hoists, underground lines, and tanks. The Complaint alleges Continental Tire and its predecessors also disposed of hazardous substances on the Property during the Sublease term. [Id. at ¶¶ 23-26.] Covenant 19 of the Sublease states:

That at the end of the said term, or other sooner determination of this lease, the Lessee will peaceably and quietly deliver up to the Lessors possession of the land hereby demised, together with all erections and improvements upon or belonging to the same, by whomsoever made, in good repair, order and condition, reasonable wear and tear excepted.

[Id. at ¶ 22.]

         Wond Family commissioned a Phase I environmental site assessment (“ESA”) report by Bureau Veritas North America, Inc. (“Bureau Veritas”) concerning the Property (“Phase I Report”), and the August 12, 2011 report identified certain environmental conditions, including “the likelihood of contamination from prior automotive repair and services conducted on the premises.” [Id. at ¶¶ 27-28.] The Phase I Report recommended that a Phase II ESA study be conducted. [Id. at ¶ 29.]

         Although it denied any obligation to conduct environmental testing on the Property, Continental Tire retained ENPRO Environmental (“ENPRO”) to perform a Phase II ESA study. The investigation began on September 14, 2012. [Id. at ¶ 33.] The Phase II ESA testing was completed on November 8, 2012, and ENPRO released a report dated December 11, 2012 (“Phase II Report”). ENPRO detected benzo(a)pyrene and lead levels in excess of HDOH's Tier 1 Environmental Action Levels for commercial/industrial use (“Tier 1 C/I EALs”) and recommended excavating the soil in immediate vicinity of the locations where those contaminant levels were found. [Id. at ¶¶ 35-38.]

         Bureau Veritas reviewed the Phase II Report for Wond Family and provided a comment letter dated February 20, 2013. The comment letter was provided to HDOH. [Id. at ¶ 39.]

         Continental Tire commissioned ENPRO to conduct a Phase III remediation of the Property in accordance with the Phase II Report. The remediation was conducted from February 13 to 21, 2013. After the remediation work, ENPRO found no further concentrations of contaminants in excess of Tier 1 C/I EALs and recommended no further remedial action. The remediation work and ENPRO's findings are described in a March 12, 2013 report (“ENPRO Phase III Report”). [Id. at ¶ 40.]

         Wond Family commissioned Bureau Veritas to test the excavation areas, and Bureau Veritas's sampling detected petroleum (TPH-RRO) and benzo(a)pyrene at levels exceeding HDOH Tier 1 Unrestricted EAL. Bureau Veritas advised further remediation and testing was necessary. [Id. at ¶ 41.] Wond Family's counsel informed Continental Tire he disagreed with the Continental Tire's opinion that HDOH would issue a No. Further Action (“NFA”) determination, and he asserted carryover rent continued to accrue. [Id. at ¶ 44.]

         On September 23, 2013, HDOH issued a letter informing Continental Tire that it: determined the Phase II Report to be deficient; rejected the Phase II Report based on numerous technical errors; rejected the ENPRO Phase III Report because the Phase II Report was inadequate to determine the necessary remedial actions; refused to issue a NFA determination for ENPRO's soil removal; and required a full site characterization of the Property. [Id. at ¶¶ 46-47.]

         In March and April 2014, Kevin S. Kennedy Consulting, LLC (“Kennedy Consulting”) conducted a follow-up site investigation for Continental Tire. [Id. at ¶ 48.] Kennedy Consulting's May 20, 2014 Follow-Up Site Investigation Report (“Follow-Up Report”): noted lead and total petroleum hydrocarbons as lube oil range organics (“TPH-ORO”) in amounts exceeding the HDOH Tier 1 C/I EALs; noted mercury, lead, TPH-O, polychlorinated biphenyls (“PCBs”), and semi-volatile organic compounds (“SVOCs”) in amounts exceeding the HDOH Tier 1 Unrestricted EALs; and requested a Conditional NFA determination, with the implementation of an Environmental Hazard Management Plan (“EHMP”) for the Property. [Id. at ¶¶ 50-51.]

         In a July 21, 2014 letter, HEER informed Continental Tire it reviewed the Follow-Up Report, and it could not grant a Conditional NFA determination at that time. However, HEER stated the issue could be revised after either the entire site was capped (“Capping Remedy”), with an HDOH-approved EHMP for the Property, and/or soil excavation to a depth of two feet below ground surface ...

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