One of the West Coast's largest advertising agencies is enmeshed in a legal battle with one of the state's most powerful utilities over the cleanup of a piece of land in Venice that once reeked from toxic soil.
The land in question is a lot at 340 Main St., designated site of the new world headquarters for the Chiat/Day ad agency.
But nearly three years after plans were drawn for what was supposed to be a showcase building, the 35,000-square-foot lot is nothing more than a pit covered by a black tarpaulin.
Excavation began and was quickly halted in May, 1986, when workers discovered a foul-smelling, black muck in the dirt. The lot, it turned out, had been the site early in this century of a plant that manufactured gas from coal, a process that leaves a tar-like byproduct. It had been operated by a predecessor to Southern California Edison from 1905 to 1916 and then by Southern California Gas.
County and state health inspectors determined that the soil was toxic and ordered an expensive cleanup. More than 5,000 tons of contaminated dirt were excavated and removed.
Now, Chiat/Day, in a lawsuit filed in Superior Court, is fighting with Edison over how much of the cleaning bill the utility should foot and whether Edison should have warned Chiat/Day about the site earlier--even though the electric utility sold the site more than 70 years ago.
Edison, without admitting liability, put up $1.5 million for removal of the contaminated dirt when it was first discovered. But Chiat/Day attorneys argue that it is not enough. Southern California Gas has also contributed $1.75 million for the cleanup.
It is the first time Edison has been taken to court over one of its old gas plants, according to Edison officials. But because the utility once operated at least 16 of these facilities, the outcome of the suit could have implications for toxic cleanup elsewhere.
In a 47-page complaint, Chiat/Day and its partner, Venice Operating Corp., which is handling the development project, allege that Edison reneged on promises to pay for the cleanup and to help Chiat/Day obtain financing for its building.
The plaintiffs demand that Edison reimburse them for loss of value of the property and the costs of: toxic soil removal; construction delays; rental and move to temporary office space, and attorney and consultant fees.
The suit alleges that Edison hid the fact that the property was contaminated and failed to disclose what the land had once been used for.
Chiat/Day and Venice Operating Corp. are demanding more than $5 million in costs and $10 million in punitive damages.
The lawsuit came after two years of negotiations, which broke down last August, between the advertising firm and the power company.
The suit was filed Dec. 20, and Edison must respond by Jan. 30.
Edison Rejects Claims
Tom Gilfoy, assistant general counsel for Edison, said the damages claimed by Chiat/Day are "grossly exaggerated." He said Edison should not be held responsible for "consequential damages" that the ad agency claims it suffered because of the delay in constructing its headquarters.
"In addition, we believe that whatever responsibility we may have has been more than covered by the $1.5 million already spent and that we may even be entitled to some of that back," Gilfoy said.
"That's the impasse."
Gilfoy also rejected the claim that it had been Edison's duty to warn Chiat/Day or any other potential buyer of the property of the dangers that the land might pose. He pointed out that more than 70 years have passed since Edison owned the land and operated the gas plant, and he said that Chiat/Day's own research would have sufficiently alerted the agency as to what the property had been used for.
"It is hard to say we had a duty to warn them about something they already knew about," Gilfoy said. "That's a long time to go back and still hold someone responsible."
But attorneys for Chiat/Day and the Venice Operating Corp. contend that a public utility that has contaminated land has the obligation to report it.
They also contend that federal statutes, such as the Comprehensive Environmental Response Compensation and Liability Act of 1980, require companies or individuals to pay for cleaning up pollution they have caused.
And plaintiffs' attorneys suggest that Edison cooperated at first with token cleanup to appease members of the Venice community who were alarmed at the prospect of an open pit of toxic muck left sitting on a prominent corner of the town.
"Edison made these promises (to pay for the excavation) with the intent to induce plaintiffs to commence and cooperate with Edison in a media campaign aimed at (defusing) public outcry over Edison's polluting behavior . . . ," the suit alleges.
Several people on Chiat/Day's side suggested Edison may be taking a hard line in this case because, if held completely accountable for decades-old toxics, Edison could face numerous cases involving other sites.