ELR Citation: ELR 20760
No(s). 93-5163 (3d Cir. Sep 21, 1994)

The court holds that a general release that a commercial landlord executed in favor of its tenant bars the landlord's suit under §107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) against the tenant to recover response costs the landlord incurred cleaning up hazardous substance contamination of a cistern on the leased premises. In 1981, the parties exchanged reciprocal, general releases to settle a claim regarding responsibility for repairs and maintenance at the premises. The court first holds that on its face, the release was not limited to specifically described claims. Its language evidences an intent on the landlord's part to release all claims based on events occurring "from the beginning of the world" to the date of the release's execution. The court interprets the release's language referencing claims the parties "hereinafter may have" to mean that the parties wished to release not only those claims of which they were aware at the time, but also those they might subsequently discover based on their relationship before the release's execution. To read the language following the phrase "more particularly" in the release's second paragraph—which references claims arising from the particular dispute—as establishing the outer perimeters of the release would require the court to disregard the release's first paragraph and attribute no significance to the fact that the parties chose to execute a general release. Thus, the court holds that the landlord's CERCLA claim against the tenant comes within the release's literal scope. The court next holds that it will apply New Jersey release and contract law as the choice of law applicable to the landlord's claims that the release should not be enforced as written. Turning to the merits of the landlord's claims, the court declines to consider extrinsic evidence that allegedly conflicts with the release's express terms, because the release is not ambiguous. The release clearly covers future unknown liabilities based on events occurring before its execution. Even if the court were allowed to consider extrinsic evidence, the evidence that the landlord tendered would not alter the court's conclusion regarding the release's scope. The court holds that the landlord failed to support its claim that a party may not release a CERCLA claim without executing a document that specifically references CERCLA liability. Also, the court finds no implied limitation on the authority conferred in §107(e)(1) for private risk allocation that would provide special protection against inadvertent waivers of CERCLA claims. To the contrary, the court finds in §107(e)(1) a policy favoring private ordering of ultimate risk distribution and believes that the policy favors court enforcement of the parties' intention as evidenced by the terms of the release. The court next holds that the tenant had no affirmative duty to disclose its knowledge of the cistern's condition before the exchange of releases. The relationship between a landlord and tenant is not a definite fiduciary relationship, and the parties dealt at arm's-length. Nothing in the record suggests that they expressly, or impliedly by their conduct, reposed trust and confidence in one another. Nor is there anything about the transaction between them or the circumstances under which the parties negotiated the release that necessarily calls for perfect good faith and full disclosure. The court next holds that the landlord failed to raise a genuine issue of material fact regarding its claim that the parties were laboring under a mutual mistake of fact when they exchanged their releases. The landlord proffered no evidence tending to show that it or the tenant entered their settlement agreement and exchanged their general releases based on an affirmative understanding that there were no environmental problems on the premises. The court next rejects the landlord's contention that it would be bad public policy to allow a release obtained for $2,000 to extinguish over $860,000 in CERCLA liability, because the consideration for the landlord's lease was not simply a $2,000 payment. In order to terminate their commercial relationship without leaving any loose ends, one party paid the other $2,000 and they executed reciprocal, general releases. Moreover, when parties may legally allocate risks between themselves, in the absence of special circumstances, courts do not, as a prerequisite to enforcement, retroactively assess whether the original bargain was fair. The court also rejects the landlord's argument that extinguishing the tenant's liability based on the release would run counter to CERCLA's goal of encouraging voluntary cleanup efforts. Although the releasor of CERCLA liability normally will have a disincentive to initiate remedial action, Congress has authorized private risk allocation under §107(e)(1).

Counsel for Appellant
Abraham C. Reich
Fox, Rothschild, O'Brien & Frankel
2000 Market St., 10th Fl., Philadelphia PA 19103
(215) 299-2000

Counsel for Appellee
Bruce W. Clark
Dechert, Price & Rhoads
Princeton Pike Corporate
P.O. Box 5218, Princeton NJ 08543
(609) 520-3200

BEFORE: SLOVITER, Chief Judge, and STAPLETON, Circuit Judge, and RESTANI,^* Judge, United States Court of International Trade.