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Federal Appeals Court Affirms Summary Judgment in Favor of Purchaser of Property Based on Inaccurate Environmental Representations and Warranties

In Nature Conservancy v. Wilder Corp., No. 09-2988, the U.S. Court of Appeals for the Seventh Circuit in Chicago recently affirmed the trial court’s grant of summary judgment in favor of the purchaser of land contaminated by the prior landowner.  This case concerned farmland purchased by The Nature Conservancy from Wilder for $16,350,000.

The sales contract required Wilder to remove from the property all rubbish, hazardous or toxic substances, petroleum contamination, and cattle sewage, among other things.  The contract also contained representations and warranties regarding the property by Wilder, including that there “have not been and there are not now any underground or aboveground storage tanks” on or under the property.  Prior to closing, the inspection revealed significant amounts of rubbish, trash, and toxic chemicals and substances.  The Conservancy agreed to close on the sale prior to cleanup by Wilder under a supplemental agreement, under which the Conservancy held back $75,000 of the purchase price to apply toward the cost of any cleanup that Wilder failed to perform.

The Conservancy sued in 2006 alleging that Wilder breached the warranty regarding storage tanks, failed to fulfill a number of cleanup provisions, and failed to pay real estate taxes.  In 2007, the trial court granted summary judgment to the Conservancy.  Then, the trial court reopened discovery and allowed the Conservancy to amend its complaint to seek relief for additional areas of contamination discovered during the litigation. The trial court granted summary judgment in favor of the Conservancy on the additional claim, and Wilder appealed.

On appeal, Wilder claimed that the breach of contract claim relating to the additional areas of contamination should be barred by the doctrine of laches because the Conservancy raised the claim nearly seven years after performing an environmental inspection of the land and nearly five years after Wilder vacated the property.  Under Illinois law, laches is “a neglect or omission to assert a right, taken in conjunction with a lapse of time of more or less duration, and other circumstances causing prejudice to an adverse party, as will operate to bar relief in equity.”  Essentially, Wilder alleged that it was prejudiced because the Conservancy waited too long to bring its claim.

The Seventh Circuit rejected Wilder’s argument and affirmed the trial court’s grant of summary judgment to the Conservancy.  Specifically, the Seventh Circuit found that Wilder had not proven that the Conservancy’s delay caused material prejudice to Wilder:

“Wilder’s claim of prejudice is wholly conclusory and entirely devoid of support in the record.  Wilder complains that by waiting until five years after the company vacated the property to bring the claim, ‘the Conservancy deprived Wilder of any hope of defending itself against the claim.’  Because it was not the last tenant on the property, Wilder asserts there is no way of knowing who contaminated the property. . . . But Wilder cites no evidence that it even attempted to discover what happened after it vacated the property.  The court allowed discovery on the new claim and the Conservancy identified the subsequent tenants to Wilder.  But Wilder failed to investigate any of the subsequent tenants.  It produced no testimony that witnesses could no longer recall what happened on the property.  It produced no affidavits stating that business records had been lost or destroyed during the intervening years.  It simply failed to ask either the Conservancy or any third-party witnesses any relevant questions about the years after Wilder vacated the property.”

This case is relevant to businesses that are buying or selling property and shows the importance of environmental provisions in real estate contracts.  If your business is selling property and the contract contains environmental representations and warranties, make sure that those reps and warranties are accurate.  If not, your company could be sued many years into the future based on those inaccurate environmental provisions in the contract.

Stay tuned to the Illinois Environmental Law Blog for more news and developments. To set up a free initial consultation to discuss your legal matter, please contact Chicago environmental attorney Dave Scriven-Young at (312) 239-9722 or dscriven-young@pecklaw.com.





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    The Seventh Circuit Court of Appeals recently upheld the federal government’s ability to criminally prosecute environmental activists who destroy property under the federal Animal Enterprise Terrorism Act (“AETA”).

    In United States v. Johnson, the defendants travelled from Los Angeles, California to a mink farm in Morris, Illinois. The mink farm was in the business of breeding, raising, and selling minks to fur manufacturers. At the mink farm, the defendants released approximately 2000 minks from their cages. They also removed portions of the fence surrounding the mink farm to help the minks escape, and they destroyed the minks’ breeding cards, which were needed to sell the minks to a furrier. In addition, they poured caustic substances on two farm vehicles and spray-painted the words “Liberation is Love” on a barn. The vandalism caused between $120,000 and $200,000 worth of damage. The defendants then began traveling to a fox farm in Roanoke, Illinois, which bred foxes to sell to fur manufacturers. They planned to damage the fox farm as well, but they were arrested by local law enforcement before they arrived at the fox farm. The defendants were charged in state court with possession of burglary tools and were convicted. They were sentenced to 30 months imprisonment.

    Then, the defendants were charged with violating the AETA by the federal government. Count I of the indictment alleged that they conspired to travel in interstate commerce for the purpose of damaging and interfering with the operation of an animal enterprise, and in connection with that purpose, damaged the property of an animal enterprise. Count II alleged that the defendants damaged real and personal property used by an animal enterprise. The defendants moved to dismiss the indictment against them, asserting that the AETA was facially overbroad, was unconstitutionally vague, and violated substantive due process because it labeled persons who committed the act as “terrorists”. The District Court denied the motion to dismiss.

    The Seventh Circuit affirmed the District Court’s ruling that rejected all of the defendants’ arguments. In particular, the defendants suggested that the AETA prohibited advocacy that caused damage to only intangible property such as profits or goodwill. The court rejected that argument and held that the AETA prohibited destruction of or damage to tangible items and property owned by the animal enterprise. In fact, the court looked at the legislative history of the AETA, which reinforced the conclusion that it was not intended to criminalize speech or expressive conduct that caused damage only to the animal enterprise’s profits or goodwill. Several legislators made statements indicating that, while the statute was being passed to combat the violence being perpetrated against animal enterprises as well as people and entities connected to animal enterprises, Congress was aware of the importance of protecting the First Amendment right to engage in lawful protest against animal enterprises. In particular, the court looked at a speech by Senator Feinstein stating: “I fully recognize that peaceful picketing and public demonstrations against animal testing should be recognized as part of our valuable and sacred right to free expression. For this reason, all conduct protected by the First Amendment is expressly excluded from the scope of this legislation. This law effectively protects the actions of the law-abiding protester while carefully distinguishing the criminal activity of extremists.” In summary, the court found that the text of the statute as well as the legislative history made clear that the statute does not criminalize speech or expressive conduct that causes damage only to intangible profits or goodwill of an animal enterprise.

    The Seventh Circuit had an easy task in this case, deciding to interpret the statute to criminalize destructive conduct but keeping the door open to reasonable protests that do not harm private property. Environmental activists need to be aware of this line in the sand that has been drawn by Congress and the courts.
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    2 weeks ago  ·  

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