Recent Court of Appeals Decision Highlights: The Importance of Timely Assertion of Claims in Environmental Litigation

Because lawsuits over environmental contamination often revolve around allegations of improper activities that can be years, even decades, old, the statute of limitations is an important and frequently relied upon defense in such cases. Statutes of limitations enacted by the legislature generally set a fixed time period, such as three or six years, within which a party must bring its claim. The effectiveness of the statute of limitations as a defense in environmental litigation, however, is often limited by the .discovery rule. recognized by the courts. Under this rule, even if the acts of the defendant occurred outside the prescribed time period, the plaintiff still may be able to maintain its claim if it can convince the Court that it did not discover what the defendant had done until more recently. In an important development for litigants in environmental cases, however, the Michigan Court of Appeals recently concluded that certain time limits on lawsuits included in Michigan's Natural Resources and Environmental Protection Act (.NREPA.) are not merely a statute of limitations, but rather a .statute of repose,. a more firm deadline on the filing of a claim which is not subject to this discovery rule.

In Shields v. Shell Oil Company, the Michigan Court of Appeals considered the effect of the time limits on a claim by Daniel Shields against Shell Oil Company. In particular, the Shields case involved a provision in NREPA that states, .For recovery of response activity costs and natural resources damages that accrued prior to July 1, 1991, the limitation period for filing actions under this part is July 1, 1994.. Because of a relatively simple set of undisputed facts, it was clear that the actions that caused the environmental contamination at issue occurred prior to the July 1, 1991, date set forth in the statute.

Shield.s son had purchased a gas station from Shell in October of 1987. As part of that transaction, Shell removed its underground storage tanks on the property, and Shields later installed new storage tanks in an area that Shell had exposed when removing its tanks. In October of 1991, while negotiating a sale of the gas station to a third party, Shields had the property tested for pollution. Soil samples taken at the site revealed gasoline contamination outside of the area that Shell had excavated when it removed its storage tanks. There was, however, no contamination in the area near the new underground storage tanks. An environmental consultant retained by Shields concluded that Shell's old tanks caused the pollution prior to their removal. Because the parties agreed that the contamination at issue was present at the time Shields purchased the property from Shell in 1987, the trial court dismissed Shields' claim on the ground that it was barred by the statutory time limit. The Court of Appeals recently affirmed this ruling.

The Court of Appeals interpreted the time limit imposed in the statute as being not merely a statute of limitations subject to the discovery rule and other exceptions, but rather as a statute of repose. The Court stated that statutes of repose typically provide that a party may not file an action after a specific date and further explained that .[t]his approach to filing deadlines is so firm that, unlike a statute of limitations, a statute of repose may bar a claim even before an injury or damage occurs,. rendering the date of plaintiff.s discovery of its claim .irrelevant.. Accordingly, the Court of Appeals upheld the trial court.s ruling, because the plaintiff had not filed its claim by the date prescribed in the statute and there could be no exception to that requirement.

While the Michigan Supreme Court often has the last word on important questions of statutory interpretation like that addressed in Shields, the ordinary time for appeal to that court has now passed without further action by the parties. Accordingly, it appears that the Court of Appeals. decision will now stand as binding precedent in all proceedings in Michigan courts. Potential environmental litigants should note the importance of the holding in this case in particular, as well as the importance of statutes of limitation or repose more generally. If you believe you may have a claim related to environmental contamination, you should consult with legal counsel to ensure that you assert your claim within the time periods set by law. If you fail to do so, you may later learn--like the plaintiff in Shields--that you no longer have a claim.