As Flaster Greenberg environmental attorneys well know, a retrofit of a retail space from one tenant to another can trigger a number of unexpected and surprising events. Such was the case in a supposedly routine renovation of a large retail space in a Paramus, New Jersey, shopping center.
Our attorneys represented the owner of the shopping center, which had entered into a 20-year lease of the site with a national retail big-box chain. The big-box claimed that in attempting to retrofit the 50,000 square-foot space (created from numerous smaller retail spaces) to conform as closely as possible to its interior brand design, it had discovered the presence of wide-spread asbestos and incurred millions of dollars in remediation costs due to the presence of asbestos and its need to design and build a second internal retrofit of the retail space. Additionally, it claimed that our client had misrepresented during the lease negotiations and in the lease, itself, that the retail space was asbestos-free. Because the chain had been readying the space for the busy Thanksgiving and Christmas holiday shopping season, the asbestos removal and re-retrofit caused a slow-down in the renovation schedule, forcing substantial additional charges to be incurred in order to finish the space on time for the holiday season.
From the outset, the space seemed to be a curious choice for this particular retail chain. It was clear that the existing building could not be renovated to make the interior look like the signature brand which characterized the rest of the stores in the retail chain. The building included a roof-top parking deck, and of necessity, there was flame-retardant material (asbestos) below the base of the parking deck, a sealed area which was not part of the leased space. The local municipality, fearing any possible adverse effect on the required flame retardant buffer between the retail space and the roof-top parking lot, refused to allow the chain to alter and raise the interior ceiling level. This decision precluded the big-box from creating its signature brand of high industrial-level ceilings in the interior retail space. Within these limits, the big-box designed and built a new and different type of interior.
Our attorneys reviewed tens of thousands of documents supplied by the tenant’s asbestos contractor, asbestos monitor and the national chain. Their investigation brought several interesting facts to light:
- In the past, asbestos removal had taken place on seven separate occasions in and throughout all spaces of the shopping center. The reports (which included confirmatory testing) of the asbestos removal activities specifically confirmed asbestos removal had taken place in all the former spaces that made up the 50,000 square-foot space leased to the national tenant.
- Be that as it may, the national chain claimed that the large internal ceiling areas contained asbestos and presented detailed diagrams of where the asbestos was found. These detailed diagrams included the numbers designated for each asbestos sample taken and the sample locations.
- Upon confirming that all the asbestos samples were retained by the asbestos contractor, demand was made for the retained asbestos samples for further testing by our own expert. Upon receipt, testing by our expert revealed that almost 100 percent of the asbestos samples tested at 20 percent Chrysotile, which would have been the formulation at the time of installation (“pure Vodka”). If any little specs of asbestos had been left in the ceiling after removal activities had been completed, the samples should have tested out at 2 to 5 percent Chrysotile (a little amount of Vodka and plenty of orange juice), but not anywhere near “pure Vodka.” Given the amount of asbestos that had previously been remediated and removed, the amount of asbestos conceivably left in the ceiling would have been minimal and non-friable specs.
- Depositions of the asbestos contractor and monitor staffs clearly established that the laboratory reports generated were fraudulent (based upon the time and many hours that would have been required to complete the “point counts”) and could not have taken place at the times, or by the persons, as reported in the laboratory records. The only reasonable conclusion: whoever recorded the results knew in advance that the samples would test out as “pure Vodka.”
- Subsequently, we found the likely location of the “pure Vodka” used by the asbestos contractor for “testing,” had been taken from the easily accessible “Electric Room” on the roof-top parking level.
- Documentation from the national chain confirmed our suspicions that the first retrofit attempted was deemed to be aesthetically unacceptable before completion, and a decision was internally made to re-design it.
As a result of the information garnered during our attorneys’ investigation in the discovery phase, the case was resolved. Our client paid out no money and only made a minor concession to the national chain on the back end of the lease. The concession was made to avoid the additional costs of litigation and trial. Subsequently, our attorneys sued the insurance carrier on behalf of the client. The insurance carrier had previously denied coverage. The recovery from the insurance carrier was more than 80 percent of the legal fees and expenses incurred to defend the action by the national chain and 100 percent of the legal fees and expenses incurred to bring the action against the insurance carrier.
According to our attorneys, one of the lessons to be learned is to keep asking questions and to keep digging until the “facts” make sense. When facts come out that are not within “the realm of reasonability,” consider other motivations, for example, the perfect storm of a disreputable contractor and the mutuality of interest with others in taking a gambit (whether justified or not) for the almighty dollar.
- Franklin Riesenburger