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Federation of Appalachian Housing Enterprises, Inc. v. Parker-Hannifin Corporation

United States District Court, E.D. Kentucky, Central Division, Lexington

March 19, 2014

FEDERATION OF APPALACHIAN HOUSING ENTERPRISES, INC., Plaintiff,
v.
PARKER-HANNIFIN CORPORATION, Defendant.

OPINION AND ORDER

KAREN K. CALDWELL, Chief District Judge.

This matter is before the Court on the motion to dismiss (DE 15) filed by the Plaintiff, Federation of Appalachian Housing Enterprises, Inc. ("FAHE"). With its motion, FAHE moves to dismiss the counterclaim filed against it by Defendant, Parker-Hannifin Corporation. For the following reasons, the motion will be granted in part and denied in part.

I. Background

FAHE purchased some property located in Berea from Parker. With its complaint, FAHE alleges that, after it purchased the property, it conducted an investigation to determine whether any hazardous substances were located on it. (DE 1-1, Complaint ¶ 7.) It alleges that it detected the presence of hazardous material, which was the result of Parker's past use of the property as a manufacturing facility. (DE 1-1, Complaint ¶ 9.)

FAHE states it was required under Kentucky law to notify the Kentucky Energy and Environment Cabinet of the hazardous material and that it did so. (DE 1-1, Complaint ¶ 12.) FAHE states the cabinet then ordered FAHE to perform certain remediation on the property. (DE 1-1, Complaint ¶ 13.) It asserts the purchase contract by which it bought the property requires Parker to indemnify FAHE for the remediation work. FAHE asserts it has incurred substantial costs to investigate, characterize, and remediate the property but Parker has refused to indemnify it. (DE 1-1, Complaint ¶¶ 19-20.) FAHE asserts a claim for a declaratory judgment and for breach of contract.

Parker responds with a counterclaim by which it asserts that FAHE was the party who breached the contract. (DE 11, Counterclaim.) Parker asserts a breach of contract claim against FAHE, a claim for breach of the implied covenant of good faith and fair dealing and a claim for fraud in the inducement. FAHE moves to dismiss all of these claims.

II. Analysis

For its counterclaim, Parker asserts that FAHE breached a contractual provision prohibiting it from conducting the investigation of the property. It relies on the following provision in the contract:

Purchaser shall not perform or allow any environmental or Hazardous Material testing or sampling at or around the property. Seller shall have no liability for any losses with respect to matters identified or claims or demands arising in connection with any breach of this section.

(DE 15-2, Contract ¶ 7, Continuing Obligations for Environmental Conditions.)

In its motion to dismiss, FAHE argues this provision is void because it would require FAHE to violate a Kentucky statute that requires environmental testing or sampling in certain circumstances. That statute provides:

Any person possessing or controlling a hazardous substance, pollutant, or contaminant which is released to the environment, or any person who caused a release to the environment of a hazardous substance, pollutant, or contaminant, shall characterize the extent of the release as necessary to determine the effect of the release on the environment, and shall take actions necessary to correct the effect of the release on the environment

KRS § 224.1-400(18).

It is clear that any agreement that would require FAHE to violate the law could not be enforced. "Agreements that run contrary to law, or are designed to avoid the effect of a statute, are illegal." S.J.L.S. v. T.L.S., 265 S.W.3d 804, 821 (Ky. App. 2008). Thus, to the extent that any law requires that FAHE conduct environmental or Hazardous Material testing or sampling or that FAHE permit ...


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