Despite a recent $5.5 million jury verdict against a group of prominent Charlestonians, legal wrangling continued this week over financial responsibility for cleaning up a polluted section of the Ashley River waterfront.
The land in Charleston's Neck Area has been targeted for extensive redevelopment and the city's future growth, but it's also part of the city's industrial past, when chemical and phosphate fertilizer plants lined the river. The late phosphate magnate J. Ross Hanahan, for whom the city of Hanahan was named, was part of that legacy, and that's why some of his descendants were sued.
On one side of the litigation is a Canadian fertilizer company. On the other, well-known Charleston-area residents who were directors and shareholders of Ross Development Corp., including Judge Mikell Scarborough, Charleston County's master-in-equity; attorney T. Heyward Carter Jr., past president of the Lowcountry Open Land Trust; and members of the Hanahan and Carter families.
At issue is the estimated $11 million expense of a federally ordered cleanup of lead and arsenic contamination on parts of the 43-acre property where Planters Fertilizer and Phosphate Company once stood. Ross Development sold the property to Columbia Nitrogen Corp. in 1966, and only decades later did the pollution of the land and the costs to clean it up become clear.
With U.S. Environmental Protection Agency cleanup sites, the costs typically fall to the last owners of the land, and they may turn around and pursue prior owners for money.
In this case, PCS Nitrogen (now part of Potash Corp.) acquired the land when it acquired Columbia Nitrogen. PCS Nitrogen was pursued for cleanup costs when plans to redevelop the land got underway, and lost a ruling in 2007.
In 2009, PCS Nitrogen sued the Ross Development directors, claiming that when they became aware that Ross could be liable for some cleanup costs, they "fraudulently distributed all of Ross's assets to the shareholders of Ross, including themselves."
As the litigation was unfolding, the Neck Area redevelopment team led by Cherokee Investment Partners, of North Carolina, defaulted on loans secured by the properties.
The development plans went quiet during the recession, and recently MeadWestvaco Land Development acquired the defaulted loans when the properties went into foreclosure, putting the company in position to become the new developer.
On July 31, a Charleston jury ruled that Ross Development's directors breached their fiduciary duty and should pay to PCS Nitrogen all of the money that was distributed, amounting to $5,555,158.
After nearly five years of litigation, however, the story doesn't end there.
On Tuesday both sides were back in federal court to argue over whether PCS Nitrogen could pursue Ross Development's shareholders for the same money, which could potentially give the company another possible avenue to collect the same award.
"What the jury awarded us were damages from the directors, without regard to any tracing of assets," said Sandra Kaczmarczyk, a Washington, D.C., lawyer representing PCS Nitrogen. "For the directors, we are seeking to recover (the award) against their personal assets."
The company was seeking an additional ruling aimed at reversing the distributions of funds to shareholders.
Charleston lawyer Trenholm Walker, representing the Ross Development defendants, said PCS Nitrogen already has a ruling through which they could pursue "every penny" of the money distributed, and argued that the evidence doesn't support, and the statute of limitations precludes, PCS Nitrogen's "fraudulent distribution" claims against shareholders.
As the federal case of PCS Nitrogen vs. Ross Development and named individual defendants plays out, appeals of the jury verdict are also expected.
There are additional lawsuits related to the PCS Nitrogen cleanup, involving Ross Development Corp.'s insurance company, and Ashley II, a company that in the mid-2000s was leading efforts to redevelop the Neck Area.
U.S. District Court Judge Margaret B Seymour did not rule on the "fraudulent distribution" issue Tuesday but directed lawyers for both sides to prepare briefs on some of the issues in contention.
Reach David Slade at 937-5552.
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