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Recent Ruling on Statute of Limitations in Environmental Cases for Indiana Cities and Towns

If your city or town has a brownfield, how long do you have to bring a legal claim in order to compel a cleanup or to obtain a recovery for the costs of cleanup? This question was recently addressed by the Indiana Court of Appeals and Indiana Supreme Court in a case involving the City of Elkhart and the Elkhart Redevelopment Commission (the “Commission”).

In Elkhart Foundry & Machine Company, Inc. v. City of Elkhart Redevelopment Commission, 20A03-1602-CT-02136, the Indiana Supreme Court rejected the Elkhart Foundry & Machine Company’s (the “Foundry”) argument in which the Foundry asked the Court to grant transfer (and then reverse) a recent Indiana Court of Appeal’s decision. Accelerate Indiana Municipalities (“AIM”) and International Municipal Lawyers Associations (“IMLA”) joined in supporting the arguments of the plaintiff in that case and celebrated the Court of Appeals’ ruling with many other Indiana cities and towns. The Court of Appeals held that a ten-year statute of limitations, triggered by the incurrence of costs, applied to claims involving Indiana’s Environmental Legal Action statute (the “ELA”). The Commission brought its claim against the Foundry in 2016 to recover the costs it expended in remediating the former Foundry’s property. Because the City Library had knowledge of the contamination by at least 2007—the date of several environmental studies—the Foundry contended the claim was untimely under a six-year statute of limitations, even though the Commission did not yet own the site. In other words, the Foundry claimed the statute of limitations clock began to tick before the Commission even owned the site, because the City Library had learned the site was contaminated. The Foundry argued the statute of limitations began to run from the date the Commission (or prior parties in possession) knew or should have known the site was contaminated. See Cooper Indus., LLC v. City of South Bend, 899 N.E.2d 1274, 1280 (Ind. 2009). If this were the law, the ELA would not apply to the large number of known brownfields that riddle our state, because it would not be difficult to show that someone has “known” the property was contaminated for a very long time.  Indeed, that is why brownfields are abandoned and become such a public nuisance.   

But it was the Cooper decision that ultimately led the Indiana General Assembly to pass in 2011 what would become Indiana Code § 34-11-2-11.5. This statute provides that a plaintiff may seek to recover costs incurred for a “removal action, a remedial action, or a corrective action . . . not more than ten (10) years before the date the action is brought[.].” Ind. Code § 34-11-2-11.5(b)(1). The enactment of this statute appeared to resolve the long-running debate about what statute of limitations applied to an ELA claim. See Bernstein v. Bankert, 733 F.3d 190, 218 n.16 (7th Cir. 2013). In Bernstein, the Seventh Circuit Court of Appeals commented that if the newly enacted statute of limitations “governed this litigation, the resolution of the ELA issue would be a simple affair.” Id.
However, the Indiana Court of Appeal’s decision in Schuchman/Samberg Investments, Inc. v. Hoosier Penn Oil Co., Inc., 58 N.E.3d 241 (Ind. Ct. App. 2016) (“SSI”), breathed new life into the argument that—despite the passage of the new statute of limitations—a six-year statute of limitations still applied to ELA claims. In a footnote, the Court of Appeals stated that Indiana Code § 34-11-2-11.5 is not a traditional statute of limitations, but rather imposes a “cap,” or “a limitation on the type of damages recoverable in an ELA claim in the form of a ten-year look-back period.” Id. at 246 n.5. Because the SSI case did not turn on this determination, the statement was not controlling law, but it did give the Foundry ammunition for its six-year statute of limitations argument. The Foundry also seized on this language, arguing the six-year statute of limitation still applied based on when the plaintiff (or a prior owner) knew or should have known of the contamination. The Commission argued that such an interpretation would essentially read the new statute of limitations out of existence and would only make the ELA available in the cases of newly discovered contaminated sites. In that scenario, the ELA would not be available to address the long-standing historical problem of known brownfields. The Commission also pointed out the statute plainly gives the plaintiff the right to recover ten years’ of costs, and if a six-year “knowledge-based” statute of limitations applied, there is simply no realistic way a plaintiff could recover a full ten years’ worth of costs, because no plaintiff could incur recoverable costs for six years without also knowing there was contamination. 
A couple justices questioned whether the decision of the Indiana Court of Appeals left open the possibility of “unlimited liability” as long as response costs continued to be incurred, or if a plaintiff waited a long time to take action. The Commission argued the Indiana General Assembly already balanced the competing interests of finality for polluters versus cleaning up the environment and elected to adopt a ten-year statute of limitations that was triggered by costs being incurred. This balancing of such competing public policies is typically made by legislatures. For example, there is no statute of limitations for murder or a statute of repose for common law indemnity or contribution claims. 
Ultimately, the Indiana Supreme Court denied transfer by a 3-2 vote, making the Court of Appeals’ decision the controlling law in the state of Indiana on this issue. Even so, Indiana cities and towns should carefully evaluate how quickly to bring claims related to contaminated properties, because they may want to include other claims that may be subject to a different or shorter limitations periods.

Brent W. Huber is a partner at Ice Miller LLP. His primary areas of practice are risk management, environmental law, and insurance coverage dispute resolution.  He helps clients manage their risk and minimize their uninsured loss. Brent's e-mail address is brent.huber@icemiller.com.

Robert A. “Louie” Jorczak is an associate with Ice Miller in Indianapolis. His primary areas of practice are business litigation, environmental litigation, and insurance coverage litigation.Louie’s e-mail address is louie.jorczak@icemiller.com.

This article does not necessarily represent the views of Ice Miller LLP or its clients, nor is anything contained herein intended to constitute legal advice.

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