Pichowicz v. Hoyt, et al. CV-92-388-M 03/31/99 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Nicholas and Joan Pichowicz, Plaintiffs, and NH VT Health Service Intervenor-Plaintiff,

v. Civil No. 92-388-M

Pearl Hoyt, et al.,1 Defendant.

O R D E R

Following entry of default judgment,2 a damages hearing was

1 Plaintiffs negotiated a settlement of all claims against the other defendants.

2 Defendant Pearl Hoyt was properly served on September 4, 1992, and thereafter wrote to plaintiffs' counsel advising that she had no assets (and, at least implicitly, that she did not care to defend). Plaintiffs' counsel thereupon took the initiative to notify potentially liable insurance companies of the facts of suit, service on the insured (Mrs. Hoyt), and potential coverage, in an effort to induce an appearance on Defendant Hoyt's behalf. Default was entered in December of 1993. Plaintiffs' counsel continued to notify potential carriers of the progress of the matter, but obtained no appearance, even with a reservation of rights. It was not until after a partial settlement was negotiated with other defendants that Hoyt (through an insurance carrier) sought to appear and strike the default entered over four years earlier. The motion to strike was denied, essentially for the reasons set forth in plaintiffs' objection and supporting memorandum (document no. 161). Defendant proffered no reasonable explanation for her default (document no. 160) (and no reasonable explanation was given for her carrier's failure to enter an earlier appearance); the timing of the motion was obviously extraordinarily late; the plaintiffs settled with the other defendants relying on finality with respect to liability issues given the four year old Hoyt default; and, while defendant arguably sketched a plausible theory of defense, it is not a strong one and, that factor (plausible defense) does not outweigh the other factors militating against setting aside the default. See e.g. Coon v. Grenier,

(1st Cir. 1989) . held pursuant to Federal Rule of Civil Procedure 55( b ) (2).

Plaintiffs claim damages of two different types — personal injury

and contamination of their real property — resulting from

hazardous waste migration from the shopping plaza previously

owned by defendant to their residence. Plaintiffs say they

suffer from a number of medical conditions caused by prolonged

exposure to Tetrachloroethene (PCE) , Trichloroethene (TCE) , and

1, 2 , Dichloroethene (DCE) , albeit at relatively low levels, from

the well water they drank and were otherwise exposed to over a

number of years. They also claim that the volatile organic

compounds in the groundwater beneath their property, and in the

wells previously used for household consumption, stigmatized and

lowered the value of their real property.

____________________________ Discussion

Having considered the testimony, evidence, and exhibits

proffered at the damages hearing the court finds that plaintiffs

have met their burden of establishing, by a preponderance of the

evidence, damage to their property caused by the discharge of

volatile organic compounds which migrated from defendant's

property to the groundwater beneath plaintiffs' residential

property and into wells previously used by them for drinking and

other household purposes. However, plaintiffs have not met their

burden of proof with regard to causation as it relates to their

medical conditions, and so have not proven that the personal

2 injuries they describe are the result of exposure to those

contaminants.

Medical Injuries

Nicholas Pichowicz and Joan Pichowicz believe, and therefore

assert, that their current physical and psychological ailments

are the product of chronic exposure to low levels of PCE, TCE,

and DCE in their residential wells over an extended period of

time preceding 1984 (when the wells were no longer used for

household purposes). In 1989, the New Hampshire Department of

Environmental Services tested plaintiffs' wells and detected the

presence of VOCs in excess of safe drinking water standards,

which has been determined to be 5 parts per billion ("ppb"). The

contaminants found, PCE, TCE, and DCE, are generally associated

with dry cleaning and degreasing operations. Indeed, a dry

cleaning establishment operated on defendant's property for a

number of years, up gradient from plaintiffs' residence. The

groundwater flow and other hydrogeologic data support the

conclusion, for purposes of determining causation, that VOCs were

discharged into the environment on defendant's property and, over

a number of years, migrated from the septic system to the

leachfield and into the groundwater, eventually reaching and

contaminating plaintiffs' wells. The court so finds. The court

rejects defendant's thesis that another source could have

generated the major share of contaminants, and finds that

defendant's property was the major source of contamination and

3 she is more than fifty percent liable for the ensuing damages

(N.H. Rev. Stat. Ann. 507:7.e).

The evidence establishes that the level of contamination was

comparatively low. However, little credible evidence was

presented regarding the actual levels of contamination before

1989. But even extrapolating from that evidence in a manner

favorable to plaintiffs, it is clear that the water to which they

were exposed contained, at most, between 20 and a few hundred

parts per billion of VOCs. While that amount exceeds established

safe drinking water standards, the adverse health risks

scientifically associated with exceeding that standard relate to

liver damage and cancer, conditions plaintiffs do not have. No

reliable evidence was presented from which the court can conclude

that those relatively minor exposure levels probably caused the

myriad illnesses complained of by plaintiffs.

In Mr. Pichowicz's case, he attributes chronic headaches,

memory loss, depression, numbness, tremors, lack of balance, and

depression to his pre-1984 consumption and use of contaminated

well water. Mrs. Pichowicz claims somewhat milder effects. The

first difficulty however, is that Mr. Pichowicz was examined in

1985 by a neurologist. Dr. Richard Levy. Dr. Levy concluded that

with a few exceptions related to classical cluster headaches,

carpal tunnel syndrome, and peripheral neuropathy, the

examination was normal. His review of more current records led

to essentially the same conclusion.

4 A second difficulty is more significant, however.

Plaintiffs have not shown medical causation. Dr. Robert

Feldman's opinion, that exposure to these contaminants over

several years at levels of 100 ppb "to a reasonable degree of

medical certainty" caused the neurologic impairments plaintiffs

complain of, is rejected as insufficiently supported and

unpersuasive. While anecdotal observation may well suggest a

hypothesis — that a causal link might exist between exposure to

VOCs in drinking water and neurological impairment — that link

was not proven by a preponderance of the evidence, which is

plaintiffs' burden.3

As Dr. Levy explained, Mr. Pichowicz's neurologic

examination in 1985 was essentially normal, and what problems

were detected (cluster headaches, carpal tunnel syndrome and

peripheral neuropathy) have many potential and plausible causes.

Given the very low levels of VOC exposure, there is simply no

adeguate basis in this record to conclude, scientifically or from

an evidentiary point of view, that plaintiffs have met their

burden of proving a causal relationship between their current

medical complaints and the low level contamination of their well

water during the late seventies and early eighties. (The record

reveals other far more likely causes of many of these conditions

— accidents, physical injuries, family stress, etc.) More than a

3 Parenthetically, the court notes that it has considered Dr. Feldman's testimony, notwithstanding significant doubt as to its admissibility under Fed. R. Evid. 702.

5 clinical differential diagnosis based on an unproven hypothesis

is required to meet that causation burden.

In any event, the court adopts Dr. Laura Green's credible

expert testimony as representing the current state of scientific

knowledge. Among other things. Dr. Green testified that: these

chemicals, in the small concentrations reflected in the record,

are not neurotoxic; they have not been scientifically

demonstrated to be neurotoxic; and the levels at which plaintiffs

were exposed fall far below even that level of concentration

established by the Occupational Safety and Health

Administration's standard for workplace exposure (above which

there is a risk of a demonstrated narcotic but not a demonstrated

neurotoxic effect). In short, the court concludes, based on all

the evidence and, in particular. Dr. Green's testimony, that

plaintiffs have not proven, by a preponderance, that the medical

conditions about which they complain, and may well suffer from,

are causally linked to their limited exposure to PCE, TCE, or 1,

2, DCE, before 1984. While Dr. Feldman's clinical observations

and hypotheses linking chronic low level exposure to neurological

manifestations cannot be dismissed as scientifically implausible,

neither the toxicology literature, nor Dr. Feldman's own work, as

presented in this record, suggests more than a basis for further

scientific inquiry into and investigation of the question. The

evidence in this record, however, is entirely insufficient to

establish a causal connection, much less establish it by a

preponderance, between extended exposure to low levels of VOCs in

6 drinking water and the neurologic symptoms and conditions

plaintiffs report. The evidence does not establish by a

preponderance that these low levels of PCE, TCE, and 1, 2, DCE,

are neurotoxic, or that they caused the ailments at issue.

Accordingly, no damages are awarded for personal injury.

Property Damage

There is little guestion that residential property sitting

on groundwater contaminated by volatile organic compounds, and

that has been the subject of governmental testing, investigation,

and some remediation measures, becomes devalued in the

marketplace. Having found the reguisite causation — the

contaminants originated from defendant's property and migrated

via the septic system and leachfield to the groundwater and then

to plaintiffs' wells — the court concludes that defendant is

liable for that diminution in value.

The parties submitted evidence on that element of damage in

writing in the form of competing expert appraisals. The

appraisals relate only to the plaintiffs' principal residence, as

of September 10, 1996. However, plaintiffs also claim property

value losses associated with condominiums and a small office

building they built on subdivided parcels of their property.

Mrs. Pichowicz, as landowner, testified that of twelve

condominium apartments they built, eight were sold before the

contamination was revealed, for amounts exceeding $80,000 each.

After the contamination was discovered (1989), the four remaining

7 condominiums did not move, and eventually sold in 1990 and 1994

for an average approximate price of $45,000. The office

building, she testified, was offered for sale at $275,000 prior

to knowledge of the groundwater contamination, and eventually

sold, after notice, for only $72,932.50.

The professional appraisals differ substantially on two

basic points — the value of plaintiffs' residential property

absent the contaminated groundwater, and the discount in value

appropriate to reflect what both experts acknowledge as market

stigma resulting from the contamination (reguiring substantial

price concessions to sell the asset) . Plaintiffs' expert values

the property absent contamination at approximately $400,000,

while defendant's expert sets that value at $295,000. While both

numbers probably err to some degree in favor of the client,

plaintiffs' expert's assessment is more persuasive, and the court

finds that a fair value for the residential property absent

contamination is $400,000.

Plaintiffs' expert suggests a discount in value of 50% due

to the groundwater contamination and the concomitant stigma and

negative effect on marketability. Defendant's expert says 20% to

25% is a more realistic, and fact based, reflection of the

diminution occasioned by this particular groundwater pollution.

While a discount of 20% to 25% is at the low end of ranges

represented in some comparable situations, the court agrees that

a low end discount range is appropriate in this case because the

contamination is not severe, the remediation reguired (filtering drinking water and maintaining monitoring wells) is neither

extensive nor expensive, and the contamination is not permanent

and will eventually be substantially remedied with little or no

effort reguired by plaintiffs or subseguent owners (the

concentrations of VOCs are very small and the groundwater flow

will increasingly dilute those concentrations — no injection of

diluting water, or pumping groundwater through filters, or other

extensive recovery measures have been, nor will likely be

reguired to address the situation). Lending institutions of

course also play a vital part in facilitating the sale of real

property, and many harbor ill-informed biases with respect to

lending on any property dubbed as "contaminated." But in this

case only a modest investment of reason and knowledge will likely

produce financing for gualified purchasers of this property,

without much difficulty. The court finds that, under all the

circumstances pertaining here, a discount in value fairly

reflecting the loss occasioned by the stigma arising from the

known contamination is 25%.

Applying that discount to the fair value of plaintiffs'

residential property absent contamination yields a loss of

$100,0 0 0 .

As mentioned, expert appraisers for both sides agree that a

loss in value certainly accompanies any real property discovered

to be contaminated. It is egually clear, then, that plaintiffs

suffered measurable economic losses when they sold the four

condominiums after discovery of the groundwater contamination. and when they sold the small office building they developed.

But, those losses are not so great as plaintiffs suggest. It is

by now common knowledge that after 198 9 (when the contamination

was discovered) the real estate market, in particular, and the

New Hampshire economy in general, suffered a very serious

downturn. Five major banks failed and property values plummeted.

Some substantial portion of the diminished value of plaintiffs'

remaining condominiums and office building was no doubt due to

those unrelated market conditions. (And, of course, the mere

fact that plaintiffs put the office building up for sale at

$275,000, does not persuasively establish its value at that

level.)

But it is not necessary to dwell on the difficulties of

sorting those mixed factors out, because plaintiffs actually sold

the remaining condominiums and office building into a free and

open market. Therefore, the fair market value of those

properties (including a reduction due to stigma) is established:

$72,932.50 for the office building and $45,000 (on average) for

each of the four remaining condominiums. Considering the lost

value discount discussed above (25%), those sale prices reflect

only 75% of the fair market value of the properties absent the

contamination. So, the total loss on the four condominiums is

found to be $60,000 ($60,000 value on each unit, absent

contamination, less average actual sale price of $45,000 =

average loss of $15,000 on each of four condominiums). The

office building was sold for $72,932.50. Applying the same

10 analysis, the loss occasioned by the stigma arising from the

discovery of contamination is $24,311 (fair market value absent

contamination would have been $97,243, and the difference of

$24,311 represents the 25% loss attributable to contamination

stigma).

In addition, plaintiffs incurred some modest remediation

expenses (filters, plumbing, etc.) for which the court awards

$21,000.

Accordingly, the court determines the total damages suffered

by plaintiffs to be, and hereby awards. Two Hundred Five Thousand

Three Hundred Eleven Dollars ($205,311.00), plus applicable

interest, and costs. Judgment shall be entered in favor of

plaintiffs and against defendants in that amount.

SO ORDERED.

Steven J. McAuliffe United States District Judge

March 31, 1999

cc: Linda J. Argenti, Esg. Joseph G. Abromovitz, Esg. M. Ellen LaBrecgue, Esg. Peter S. Wright, Jr., Esg. Thomas H. Richards, Esg.

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