Daily Development for Friday, November 9, 2001
By: Patrick A.
Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu
HAZARDOUS SUBSTANCES; STATE REMEDIATION STATUTE;
"RELEASE:" Unintentionally
allowing prior and unknown environmental contamination to migrate and spread
underground does not constitute the "releasing" of hazardous
substances under state environmental remediation act
White Oak Funding, Inc. v. Winning,341 N.J. Super. 294, 775
A.2d 222 (2001).
The operators of a photocopying service purchased property
formerly used for a fuel oil distribution business. It knew about the prior business and it knew there had been an
above-ground oil tank that had been removed prior to its inquiry into the
purchase of the property. The photocopy
business conducted no environmental testing prior to its purchase. It "did not consider the possibility of
any contamination problem from the former fuel oil business." Eventually, it sold the property to a
florist.
The florist failed and its mortgage went into
foreclosure. The purchaser of the
property at the foreclosure sale subsequently learned that the property was
contaminated. Expert testimony was to
the effect that the contamination existed at the time the photocopy business
purchased the property and that limited environmental testing would have
revealed the contamination. Expert
testing was also to the effect that "without remediation efforts, fuel oil
contamination will become more extensive and widespread over time." Under that theory, the contamination
migrated and spread, such that by the time the florist purchased the property,
the contamination was more extensive and widespread than when the photocopy
business had originally purchased it.
Under the New Jersey "Spill Act:" "Any person
who has discharged a hazardous substance, or is in any way responsible for any
hazardous substance, shall be strictly liable, jointly and severally, without
regard to fault, for all cleanup and removal costs no matter by whom
incurred." The Act defines "discharge" to mean "any
intentional or unintentional action or omission resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying or dumping of hazardous
substances into the waters or onto the lands of the State."
The claimant purchaser at the foreclosure sale contended
that the photocopy business operators were liable as dischargers because they
"committed an unintentional omission resulting in a releasing of the fuel
oil during their ownership of the property." The omission, according to that theory, consisted of their
"utter failure to conduct environmental due diligence before purchasing
the property, and subsequent failures to report the contamination to DEP or
take any steps to contain the spreading fuel oil."
The claimant pointed to the definition of
"release" in the Comprehensive Environmental Response, Compensation,
and Liability Act (CERCLA).
The Court, however, rejected that definition as being
broader than that encompassed in the Spill Act. "If it had been the legislature's intent to include within
the scope of the statute a continued flowing or issuing out of past discharges,
then the statutory definition would so state." Consequently, according to
the Court, "[i]mposition of Spill Act liability as a discharger requires
some act or omission of human conduct which causes a hazardous material not
previously present to enter the waters or land."
Comment 1: From the standpoint of common sense distribution
of liability, at least from a landowner's side, what a welcome relief. Perhaps
this authority will be useful in diverting the reach of similar state statutes
elsewhere. Note that one of the most
common forms of contamination is petroleum products, which in general are not
covered by CERCLA, and actions typically involve state law claims.
Comment 2: Of course, environmentalists will argue that
CERCLA ought to be the model for state law policy as well - where environmental
liability sticks like glue to anyone who comes within a whiff of the
contaminated property. Note that the
modern "good faith purchaser" exception is a late addition to the
statute, and not part of the CERLCA model.
Further, an environmentalist might also argue that in this
case we shouldn't feel too sorry for the photocopy storeowners. Their decision not to be concerned about
possible contamination because the tanks were above ground was pretty dumb,
wasn't it. It does seem that if someone
is in the fuel oil business, even with tanks above ground, there is a
significant danger of contamination and a good faith investigation should have
produced that information.
On the other hand, shouldn't we hold the foreclosure sale purchaser to the same standard? Likely there was a public record demonstrating that there had been a fuel oil business at this location. A standard "Phase One" would have triggered further inquiry and the purchaser wouldn't have been in this pickle.
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