This breach of contract action arises from a series of agreements relating to real property located at 2497 Adam Clayton Powell Jr. Boulevard in Manhattan (the “Property”) that was contaminated by an oil spill (the “Spill”) originating from non-party ExxonMobil’s adjacent gas station.
In February 2010, the Plaintiff, 2497 Realty Corp., executed the Contract of Sale of Membership Interests in 2497 Holding LLC, the no-party entity that owns the property, the buyer being Defendant, 2497 Partner LLC (the “Contract”).The parties thereafter amended the Contract to give Defendants sole control over remediation of the Property and settlement negotiations with ExxonMobil. The amendments also created a distribution plan (the “Waterfall”) for any proceeds received from a settlement agreement with ExxonMobil. In June 2011, ExxonMobil settled with 2497 Holding LLC for $1,500,000 (the “Settlement Agreement”).
In the instant action, commenced in 2014, the Plaintiff alleged that the Defendants breached the Contract by failing to make distributions pursuant to the Waterfall. The key issue in dispute is whether, per the Contract, the Property has been remediated to “its highest and best use under applicable zoning laws, as the Purchaser shall determine in its sole and absolute discretion.” Both parties have commissioned expert reports that document the remediation of the Property.
The Defendants filed a motion to preclude environmental experts, Andrew Lockwood and Derek Ersbak from testifying at trial. The Defendants argued that (i) the subject reports contain impermissible legal conclusions that reach the ultimate issue in the case; (ii) the Plaintiff’s experts are not qualified to opine on the “highest and best use” of the Property; and (iii) the subject reports fail to satisfy the disclosure requirements of Commercial Division Rule 13(c).
Geology Expert Witnesses
Andrew Lockwood is a graduate of SUNY Potsdam, where he studied geology. He is a licensed Professional Geologist in New York and a licensed Environmental Professional in Connecticut. Moreover, he has over thirty (30) years of experience managing environmental remediation, including the investigation and remediation of land contaminated by gasoline, radiation, and poly fluoroalkyl substances (PFAS).
Derek Ersbak is a graduate of SUNY Binghamton, where he studied biology. He is a licensed Professional Geologist in New York with twenty (20) years of experience in environmental due diligence, environmental compliance and state and federal remedial programs, including the federal Superfund cleanup law, New York’s Brownfield Cleanup Program, and regulations promulgated by New York City’s Office of Environmental Remediation.
Discussion by the Court
The necessity of expert testimony in this case is beyond dispute as the subject matter—involving a technical analysis of environmental remediation efforts—is clearly beyond the ken of the typical juror. Moreover, the Court found unavailing the Defendants’ arguments that the Plaintiff’s expert geologists are not qualified to opine on the real estate development concept of “highest and best use,” and that the Contract grants the Defendants sole discretion to determine the highest and best use of the Property.
The Defendants accurately observed, however, that the Plaintiff’s Reports also includes opinions that veer into contract interpretation and other legal conclusions. Since no expert witness is permitted to testify on matters of contract interpretation or other purely legal issues, the Court held that questions put to Lockwood and Ersbak at trial should be limited to the environmental condition of the Property without requesting opinions on particular legal obligations of the parties under the Contract.
The Defendants further contended that the Plaintiff’s Reports and the testimony of Lockwood and Ersbak should be precluded because the expert disclosure provided by the Plaintiff did not comply with Commercial Division Rule 13(c) in that the Plaintiff’s Reports fail to list Ersbak and Lockwood’s recent publications and experience as expert witnesses. Moreover, the Defendants also took issue with Ersbak and Lockwood’s joint authorship of the Reply Report. The Court held that these arguments are without merit because there is no bar to jointly authored reports and preclusion of expert testimony based on noncompliance with Commercial Division Rule 13(c) is a question of judicial discretion.
Held
The Court denied Defendants’ motion to preclude the testimony and reports of the Plaintiff’s environmental experts, Andrew Lockwood and Derek Ersbak.
Key Takeaway:
The Plaintiff’s experts’ opinions are in keeping with the First Department’s reading of the contract language. They do not opine on the issue of what is or is not the theoretical highest and best use of the Property. Rather, they opine on the environmental remediation of the Property—an appropriate issue for expert testimony that is within their area of expertise—taking as their starting point the First Department’s aforementioned analysis of the Contract’s terms, the Property’s current zoning for commercial use, and the Defendants’ current use of the land for commercial purposes.
Case Details:
| Case Caption: | 2497 Realty Corp. V. Fuertes |
| Docket Number: | 151947/2014 |
| Court: | Supreme Court of New York, New York County |
| Order Date: | August 21, 2024 |
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