Bluegrass Business Law

June 24, 2007

The Zen of Dilbert:

Filed under: Business,Solo & Small Firm — G.A. Napier @ 11:54 pm

Does this experience portrayed by Scott Adams’ Dilbert cartoon seem too familiar? If so, you may need to find an attorney with the same entrepreneurial spirit that has made your business successful.

Intentional trespass – important clarifications on environmental harm for businesses to consider

Filed under: Business — G.A. Napier @ 1:12 am

The Kentucky Supreme Court gives a good synopsis of trespass law in the state in the case of Smith v. Carbide and Chemicals Corp., 2005-SC-686-CL (June 21, 2007)(to be published). In this case, the Ky Dept. of Health found trichloroethlene (TCE) and technetium-99 (Tc-99) (essentially some bad stuff) in groundwater where the plaintiff’s/appellants property was located. This happened in 1988 and again in 1990. About 10 billion gallons of contaminated water was involved, but no health problems were ever associated with the bad stuff. The landowners sued based on intentional trespass and diminution of property values.

The complaint was dismissed by the Federal District Court in Western Kentucky on summary judgment and then appealed to the Sixth Circuit Court of Appeals. The Sixth Circuit sent it over to the Kentucky Supreme Court because issues of Kentucky law never before addressed in the state were involved. The first issue was whether actual harm had to be shown to state a claim of intentional trespass. The second issue was whether the plaintiffs had a right to recovery if they could prove their property values had dropped.

As to the first issue, the Court said:

    “even if the plaintiff suffered no actual damages as a result of the trespass, the plaintiff is entitled to nominal damages.” Id. at 71 . However, in intentional trespass, in order to recover more than nominal damages, a property owner must prove “actual injury,” which we shall discuss further below. Hu heft, 313 Ky. at 90, 230 S .W.2d at 826-27.

So, they can make the claim, but can they get much by way of damages? The Court was a little less clear in their answer to this second question, which really was about the measure of damages rather than a “right to recovery”. So, yes, upon proof of actual injury, the plaintiff can recover “just compensation” for their damages. However, what constitutes actual injury is a more elusive concept. This Court noted that the former decision in Wilhite v. Rockwell International Corporation, 83 S.W.3d 516 (Ky. 2002), was more “forgiving” of the trespass than they would be in this case. This is where businesses need to perk up and pay attention.

Pointing to a subtle, yet substantial, shift in their jurisprudence in this area, the Court asserted:

    When the parcel’s groundwater is contaminated, whether by imperceptible particles or visible particles, to the extent that it cannot be used for consumption by humans, animals, or crops, there is an actual injury. When ponds and streams have to have signs posted to prevent swimming, fishing, drinking, or other otherwise normal uses, there is an unreasonable interference with one’s use and enjoyment. The amount of harm, if any, to the individual parcels, and the corresponding measure of actual or compensatory damages will depend upon the proof introduced at trial – an issue of fact. Ellison , 32 S.W.3d at 70. To the extent that the property owners prove actual or compensatory damages for the harm (the cost of restoring the property to the pretrespass condition), “the amount by which the injury to the property diminishes its total value operates as an upper limit on any damage recovery.” Id . Thus, the diminution in the property’s value due to an intentional trespass is a recognized measure of damages after, or if, an actual injury has been found.

Thus, the most cost efficient and economical advise to offer to businesses that have the risk of loosing contaminants into the environment, is to take reasonable extra precautions to prevent such losses. If a contamination event occurs, it would be more economical under this line of jurisprudence to seek early settlement of claims even in the absence of specific health hazards or documented health impairments.

June 6, 2007

Intentional intereference with contractual relationships:

Filed under: Business — G.A. Napier @ 1:26 am

The Court of Appeals addressed the tort of intentional interference in contractual relations, among other issues, in Ashland Hospital Corp. v. Calor, 2006-CA-000395-MR (June 1, 2007)(to be published).

In this appeal by a hospital from a verdict in favor of the complainant doctor, the Court stressed the necessity of a showing of “malice or wrongful conduct is essential to an intentional interference claim.” Id. at 9. But, “if the defendant has a legitimate interest to protect, the addition of a spite motive usually is not regarded as sufficient to result in liability.” Id. In this case, the appellant, Ashland Hospital, had a legitimate business interest in communicating with a billing agency, Staff Care, regarding Dr. Calor’s billing practices. Therefore, they were entitled to a directed verdict.

The case also addressed the appeal by Ashland Hospital on a defamation claim filed by Dr. Calor. Ashland Hospital was also entitled to a directed verdict in their favor on that claim for the similar reason that had a qualified privilege to communicate their concerns to Staff Care. The qualified privilege existed because both the hospital and Staff Care had a “common interest in the accuracy of Dr. Calor’s billable hours.” Id. at 6. Also, there was no evidence introduced that there was malice or that the information disclosed was not reasonable and for a proper purspose.

What this means for businesses is that information about a third party with business ties in common can be shared between companies. However, the information shared should be limited to that which advances the common interests of the businesses and not for malicious reasons.

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