Leak House

Like the saga of Jarndyce v. Jarndyce, a legal case that spanned generations in Charles Dickens’s novel Bleak House, the cooperative at 8 West 13th Street engaged in a long-term legal dispute. A succession of board members, faced with what they saw as an injustice, refused to back down. For 20 years. And lost hundreds of thousands of dollars in fines and legal fees.

The question of the day, then, is: when do you fight for your rights – whether it involves a city or state agency or simply another building with a gripe – and when do you offer compromise?

The Story Begins

In 1987, the super at Butterfield House, a building at 12 West 13th Street that sits next to 8 West 13th, noticed that oil was collecting in the building’s underground parking garage drains and seeping through the wall adjacent to 8 West 13th. Butterfield House used only steam heat, not oil. Two years later – no one can explain the delay – the leak was reported to the New York State Department of Environmental Conservation (DEC). The DEC assigned a spill investigator, Anthony J. Sigona, now in the private sector, who notes: “The oil was seeping into the sump drainage system for the parking garage. It was black oil and a typically weathered petroleum oil mixture.” It appeared to him to be No. 4 oil, which was later confirmed.

At the time, 8 West 13th Street wasn’t using No. 4, but No. 6, which it stored in a 3,000-gallon underground tank. The co-op abandoned that tank in favor of an aboveground tank that stored No. 4 oil, but not until September 1988. Ironically, the Butterfield House oil then started testing out as No. 2.

Sigona began investigating tanks at nearby buildings, hitting 8 West 13th on September 13, 1989. There he discovered what he considered “a likely source for the oil seepage,” according to a DEC letter. Ettagale Blauer, who has served on the board since 1992 and been president since 2004, vividly remembers her first meeting with Sigona. “He came, he demanded a lot of things, and he threatened fines,” she says today. “He said there was a problem. It was quite frightening. After threatening the building with fines, he then said, ‘I’m not threatening you.’ That I remember very well, because I did feel threatened.”

The board was involved but not overly concerned. The building didn’t use No. 4 oil at the time of the leak, and wasn’t using No. 2 now. The facts seemed on the side of the co-op.

Sigona, of the DEC, saw things differently. His review of DEC records found that the now-unused underground tank had not had its required “tightness testing” – checking a tank and its pipes for leaks -– in years. Howard Kupferberg, principal at LCC Realty and the co-op’s manager, was surprised at the request. “I have never had any agency come to me in 40 years asking for tightness testing on any tank,” he says. “I’ve managed more than a hundred properties, and never has anyone come to me other than a bank,” which requires such tests of a property’s physical plant during the loan-application process (see box on page 13 regarding the DEC’s contradictory rules on tightness testing).

Some might have viewed this as a warning sign: the DEC is after us; let’s pay attention and tread carefully. But even though the tank failed the test and was found to have leaked No. 6 oil, the board was confident of its facts and, since the Butterfield oil was No. 2, thought that was enough.

The co-op, of course, complied with the request: the underground tank was filled and formally abandoned on October 2, 1990. Before this, the board had engaged an environmental engineer to develop a plan “to examine and, if necessary, clean up the oil spilled from the fuel oil tank.”

Meanwhile, the DEC appears to have never made a definitive determination about the source of the Butterfield House oil. Its documents are rife with such phrases as “our belief that the oil contamination is likely to have been caused by” 8 West 13th Street. Sigona, of the DEC, says that being tentative is part of the process. “You’re just going on the evidence you have. You can’t say with 100 percent certainty that the oil came from 8 West 13th.”

This was an ominous sign. Indeed: rather than depending on the facts to set them free, the board, or its professionals, should probably have taken note of the DEC position, possibly by researching similar cases. In short, the directors needed to be more proactive.

The Facts in the Case

What was the evidence for blaming 8 West 13th? There was proximity, and the underground tank was leaking. There’s also the fact that oil flows from “what’s called up-gradient to down-gradient,- basically, uphill to downhill,” says Sander Sternig, president/CEO and chief environmental engineer of VTEQ/Volumetric Techniques, a testing and remediation firm used by the state and many building-owners.

A 1993 DEC document said that the investigation “did not locate an oil contamination or up-gradient discharges, other than” at the co-op. But complicating matters, the DEC did not investigate other possible culprits on the block, including the Forbes Building. Also, the underground Minetta Creek runs below the affected properties and could have carried oil from a remote location. “Buried streams, groundwater, utilities – all these things can make product move,” says Marc Godick, senior vice president of the hazardous materials group at the environmental engineering firm AKRF.

Sigona, of the DEC, discounts the Minetta Creek hypothesis. “What about the basement at the [up-gradient] New School?” Sigona asks. “Why weren’t they getting any odor problems or anything? If the Minetta [Creek] is still flowing, where else did the oil flow” after Butterfield House? (Speaking generally of groundwater and not of the Minetta Creek specifically, Sternig says that the oil can have simply flowed freely until ending at Butterfield House.)

The biggest question of all, however, is how 8 West 13th Street could be the culprit when it wasn’t storing No. 2 oil in the underground tank, and the seepage at Butterfield House, next door, was No. 2.

“Oil separates, and light oil floats to the top,” argues Sigona. “Number 6 oil is heavier than No. 2. When you have a spill of fuel oil, the lighter fractions flow first, and they’re the ones that impact the person next door. If you had a spill of heavy oil, the lighter oil could flow to the next-door neighbor and leave the heavy oil behind.” Godick, speaking generally and not about this site, agrees that this phenomenon is possible, but both he and Sternig suggest it’s much more likely with No. 4 oil.

Guilty Until Proven Innocent

The board believed – and this view was apparently not contradicted by its manager or attorney – that, although there was a great deal of circumstantial evidence against them, there was also much room for reasonable doubt. Yet while such doubt might give you a “not guilty” verdict in court, another standard, called “preponderance of evidence,” applies here, a point someone should have noted.

Once receiving a violation notice, you’re entitled to a hearing in Albany conducted by an impartial administrative law judge assigned through DEC’s Office of Hearings and Mediation Services. The board hired a firm with environmental-law expertise, Sive, Paget & Riesel, and it corresponded with the DEC’s regional attorney, Paul A. Gallay.

The process dragged on. In its sixth year, Kupferberg, the manager, and Sigona, of the DEC, were still trading letters over the DEC’s demands for monitoring wells in the basement, which the board worried would damage the 84-year-old building’s foundations.

A turning point came in 2001, year 12, when Assistant Attorney General Judith S. Karpen wrote to the 8 West 13th Street Tenants Corp. to conclude, “The State has determined that you are liable … for cleanup and removal costs incurred by the New York Environmental Protection and Spill Compensation Fund in connection to” the Butterfield House cleanup. The state demanded $371,818.94, which included a $250,000 penalty. Still, the board did not relent, certain of its position and not being advised to compromise. In 2002, Kupferberg wrote to the new DEC commissioner, Erin M. Crotty, appealing the decision. The case limped along for a few more years.

In the end, however, the board was forced to back down. “Things had been quiet for some time,” Kupferberg says. Then, in 2007, the co-op needed to repair its elevator. It did not have an underlying mortgage, so the board decided to take out one and obtain extra money for the elevator work. “We applied for a mortgage, and when the environmental report came back, the bank said, ‘There’s a spill-number open,’” recalls Kupferberg. “So the bank came to us and said, ‘No can do.’”

The co-op finally negotiated a settlement with the state. “We whittled them down from $370,000 to $150,000,” with no admission of guilt, reports Kupferberg. “We did the best we could. I determined, with counsel, of course, that to litigate this would cost us a lot of money, and we couldn’t afford to go through protracted litigation for a year or two of three. And it was necessary to get financing to replace all the mechanical systems in our elevator.”

The Dickens, You Say

Why hadn’t some settlement offer been made during these first two years? Board president Blauer says: “It’s not like it was a straightforward thing. The state would seem to drop it for years, and so we always assumed, well, that was it. It’s very rare for these things to have a clear-cut conclusion where the DEC comes back and says, ‘We found the real source and it’s over!’ I don’t believe it’s their nature to come back to you and say that. So it just went away, as far as we knew. There was no benefit to us to say [to the DEC], ‘Hey, wait a minute, where does this stand? Did you forget about us?’”

Ron Hollander, a veteran Manhattan attorney in private practice who is unaffiliated with the case, suggests that boards should, in fact, take a more proactive approach than this board did. “You’re dealing with the city and state, who have unlimited pockets. The cost is not an issue for them – they have to win for political reasons. Remember, the city and state are fighting many people in the same situation, and they can’t be known for [backing down] if you fight them.”

“I’m surprised that no one, over a 20-year period, asked for some type of hearing or brought some type of lawsuit to bring it to a head,” adds attorney Mark Hankin, a partner in Hankin & Mazel, who was not involved in the case. “What was possibly happening here was that the board was changing over the years and the matter was quelled as the boards changed, but this matter could have been resolved much more quickly.”

Hankin cites an example from his own experience of a co-op board that was accused of discrimination in judging an apartment resale. After reviewing the matter, it was clear no one had committed an act of racism and that the charges were groundless. Hankin spoke to a representative of the Human Rights Commission (HRC), who told him that the HRC was only looking for a “nominal” amount of money to resolve the case.

“Everybody on the board stood up and said, ‘But we didn’t do anything wrong,’” Hankin recalls. “I said, ‘We’re with you, and we’re here to defend you as long as you want to go on, but you should know that, clearly, our legal fees are going to be in excess of this monetary amount that they’re seeking.’

“There’s no admission of liability when we do the stipulation, and it’s not as though anybody’s going to say that the payment was made because they did something wrong. The stipulation would say that the payment was made for convenience. I had to recommend that they settle. In the final analysis, it was worth paying because the legal fees to defend them would have been so much more. It’s just a matter of dollars and sense.”

Indeed: it’s important to recognize at some point that, though your cause may be just, the bureaucracy doesn’t believe so. Therefore, unless you have unlimited resources yourself, you’re not going to win.

And yet, pride takes over. “I think there are situations people get into where they can’t back down,” Hollander says. “It becomes the Hatfields and the McCoys. It’s about, ‘I can’t stop this fight, I’ve put too much into it.’”

Such cases, like Dickens’s Jarndyce v. Jarndyce, take on an inertia of their own. That must be avoided. Although your professionals should advise you when to cut your losses, don’t rely entirely on them. Do your own cost-benefit analysis and employ a dollop of common sense. Constantly review the situation and don’t think that, because nothing has happened, the case has gone away.

“Every time the board changes, they should take a fresh look at the situation,” Hollander, the attorney, says. “Look at it with no blame on the last board. It was a good decision when they made it; maybe it’s not so good now.”

That’s often easier said than done. “We wanted to settle it, but what was being offered [by the state] was unreasonable,” says Blauer, the board president. “Any settlement included an open-ended admission of guilt, essentially in perpetuity.”

“An interesting answer on the board’s part,” suggests Hollander, “would have been to say, ‘We’ll pay a share of the cost.’ The AG just wants to look good. When you settle, you don’t lose – you settle.”

In other words, nobody wins, nobody loses, nobody’s totally satisfied. But nobody is broke.

===HABITAT SIDEBAR===

RULES ARE RULES, AREN’T THEY?

Want to follow the rules? Sometimes that’s hard to do when the rules contradict each other. For example, one part of the Department of Environmental Conservation (DEC) rule on oil tank tightness says, “No periodic tightness testing is required on a tank and piping system storing No. 5 or No. 6 fuel oil.” But then, another part of the rule says no testing is required “on a tank and piping system which has a capacity of 1,100 gallons or less….” The tank at 8 West 13th Street was over 1,100 gallons, so it did have to be tested. But it was No. 6 oil, so it didn’t have to be tested. Which is it?

A DEC spokesperson in Albany, when asked about the conflicting rules, clarified that testing is required for tanks above 1,100 gallons even if they burn No.6. Confused? Don’t worry. You’re not alone in being confounded by this contradiction. A major New York oil company executive wrote in the Mann Report that, tanks “servicing heating systems that burn no. 6 oil are not currently subject to the State tank tightness testing requirements.” The rules are clearly unclear even to industry veterans. -

—Frank Lovece

===HABITAT SIDEBAR===

All Hands on DEC

How do you tell if you have a leak? Sander Sternig, president and CEO of VTEQ, a major environmental firm, says that with aboveground tanks, “You will see if there’s a leak if there is wetness along the side of the tank, or if you see a puddle. In that particular case, you can throw Speedy Dry on it; cap the piping, if that’s an issue; or get the tank repaired if it’s not too badly corroded. Aboveground is fairly simple.”

Any oil spill (also called a leak or a discharge, interchangeably) has to be reported to the
New York State Spill Hotline (800-457-7362) within two hours of discovery, except those that meet all of the following criteria: the quantity is known to be less than five gallons; the spill is contained and under the control of the spiller; the spill has not and will not reach the state’s water or land; and the spill is cleaned up within two hours of discovery.
The state considers a spill not to have affected land if it occurs on a paved surface, such as asphalt or concrete. So, a spill in a dirt basement is considered to be on affected land and has to be reported. You can find a web page with details on the Department of Environmental Conservation’s (DEC) Spill Response and Remediation FAQ page:

http://www.dec.ny.gov/chemical/8692.html

The department’s Guide to Enforcement Hearings spells out your rights and options when the DEC serves you with a formal complaint: http://www.dec.ny.gov/regulations/2440.html

—Frank Lovece