Daily Development for
Wednesday, September 20, 2000
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu
Note that there are two
entries on the same case here. The second item strikes the editor as the more
significant, though both are valuable.
HAZARDOUS SUBSTANCES;
CERCLA; NECESSITY FOR REMEDIATION: A specific public remediation order is not
required in order for a landowner to recover costs of remediation under CERCLA;
if remediation is necessary to respond to a "palpable threat to human
health or the environment," costs of remediation are recoverable even
though the remediation was volunatry.
Carson Harbor Village v.
Unocal Corporation, No. 9855056, 2000 Daily Journal D.A.R. 10199 (9th Cir.,
Sept. 14, 2000), discussed more fully under the heading Hazardous Substances;
CERCLA
Carson Harbor was unable
to refinance property because an environmental site assessment required by a
lender revealed the presence of slag and tarlike material in a wetlands area on
the property. Elevated levels of lead were found in the material and the
surrounding soils. Carson Harbor reported the findings to the appropriate state
agencies and sought confirmation from the Regional Water Quality Control Board (RWQCB)
that no remedial action was required. Lacking that confirmation, Carson Harbor
submitted a remedial action plan (RAP) proposing a cleanup level of 1,000 ppm
total threshold limit concentration (TTLC) for lead. The RAP was approved by
the RWQCB subject to a more stringent cleanup level of 50 ppm TTLC. More than 1,000
tons of contaminated material was removed pursuant to the approved RAP. After
testing showed residual levels of lead within the established limits, the RWQCB
issued a "no further action" letter.
The U.S. District Court
for the Central District of California granted the defendants' motions for
summary judgment on the CERCLA cost recovery claim. The court highlighted the
deposition testimony of the RWQCB representative who said that he had not
ordered the cleanup and that it was "very likely" that the RWQCB
would not have required any remedial action if Carson Harbor had reported the
presence of the slag and tarlike material without presenting a remediation
plan. The RWQCB had merely accommodated the property owner's request for oversight
of a voluntary cleanup. The court therefore concluded that Carson Harbor's
remedial action was initiated voluntarily for its own business reasons, and
that Carson Harbor failed to satisfy the "necessity" element of a
CERCLA claim.
On the
"necessity" issue, the Ninth Circuit ruled that a governmental cleanup
order is not a prerequisite to a private party cost recovery claim under CERCLA.
A cleanup order can certainly establish necessity. But the absence of an order
and the fact that remedial action may be voluntary do not establish that such
action was not necessary. The Court noted that in "the private cost
recovery context, the plaintiff with no business or financial motive for
investigating and cleaning up a site will be rare indeed." The fact that
Carson harbor acted to remedy an environmental condition "as part of an
effort to secure financing is immaterial so long as there is evidence that the
contamination presented a palpable threat to human health or the
environment." Such a threat can exist even though a governmental agency
does not pursue it, given the priorities public officials must place on
allocation of resources.
"Necessity" is a
question of fact for each case. In this case, the RWQCB representative also
testified that the lead contamination from the tar and slag material presented
a threat to both surface and groundwater, and that the RWQCB generally requires
that something be done when such elevated levels of lead are found. The Court
inferred from the conduct of the RWQCB that it perceived an environmental
threat worthy of responsive action. In particular, the RWQCB did allocate
resources for oversight, did not issue the initially requested "no further
action" letter, did require a more stringent cleanup level than was
proposed, and did issue a "no further action" letter when the
established cleanup level was achieved. This was sufficient evidence to
establish a genuine issue of fact as to the existence of an environmental
threat and the necessity of the responsive action, so that summary judgment for
the defendants was not proper.
Reporter's Comment: This
Ninth Circuit decision is particularly significant and precedentsetting because
it counters a trend whereby courts have been, little by little, narrowing the
scope of CERCLA liability by making it harder for private party plaintiffs to
establish one or more of the elements of a CERCLA claim. In the Carson Harbor
case, the Ninth Circuit has dispensed with the notion that had been developing in
a number of cases that cost recovery is not available under CERCLA where there
is an ulterior, business motivation for undertaking remedial action. Instead,
as long as there is also a valid environmental reason for the action, it is
"necessary"and the existence of other motivations will not preclude a
CERCLA cost recovery claim. This will reopen the availability of a CERCLA cost
recovery remedy to private parties who usually have some underlying business or
financial motivation for undertaking voluntary remedial action.
The Reporters for this
case are Frank Gooch and Don Nanney of Gilchrest & Rutter, Santa Monica,
counsel for the plaintiffs.
HAZARDOUS SUBSTANCES;
CERCLA; "DISPOSAL" OF HAZARDOUS SUBSTANCES: Ninth Circuit rules that
former owner of contaminated property is liable for costs of removal of
hazardous substances that migrated from pollution deposits discharged onto the
site by an even earlier owner.
Carson Harbor Village v.
Unocal Corporation, No. 9855056, 2000 Daily Journal D.A.R. 10199 (9th Cir.,
Sept. 14, 2000). discussed more fully under the heading Hazardous Substances;
CERCLA; Remediation Costs."
Landowners Carson Harbor discovered
a substantial deposit of "slag and tarlike material in wetlands on their
property. Tests showed lead contamination that had passed into the ground from
this material. To recover the cost of remediating a major hazardous substance contamination
of its property, landowners sued an oil company that had conducted oil and gas
operations at the site decades earlier, and likely had first discharged this
material onto the property. In addition, landowners sued certain Partnership
Defendants who had owned the property for several years before selling it to
landowners.
With respect to the
Partnership Defendants (former owners), the trial court found that the initial
disposal of the slag and tarlike material had occurred many years before they
became the owners of the property. The trial court further concluded that any
subsequent discharge or movement of the lead contamination in the soil at the
site (during the ownership of the Partnership Defendants) was of no consequence.
The trial court (in the absence of precedent from the Ninth Circuit on the issue)
followed the majority of federal circuit courts that have rejected the
"passive migration" theory of disposal. The court instead interpreted
"disposal" within the meaning of CERCLA to require some active human participation.
The Partnership Defendants were not liable CERCLA because they are not the
current owners and they did not own the property at the time when the active
disposal took place.
On appeal: Held:
Reversed.. The Ninth Circuit faced for the first time the
"active/passive"disposal issue that has resulted in conflicting
opinions among other federal circuits as well as among district courts in the
Ninth Circuit. The court undertook a detailed review of the semantic conundrums
arising from the CERCLA definitions of the terms "disposal" and
"release," and ultimately sided with the Fourth Circuit's minority
view that the term "disposal" is broad enough to encompass
"passive migration"of contamination as well as the initial active
deposit. The Ninth Circuit panel rejected the views of the Second, Third and
Sixth Circuits that have ruled that active human participation is required for
"disposal" and any subsequent passive migration of contaminants does
not constitute disposal. In view of its holding that "disposal"
includes passive migration, the court ruled that landowners were entitled to
proceed with the CERCLA claim against the Partnership Defendants even though
the initial disposal occurred decades before the Partnership Defendants acquired
the property.
Reporter's Comment: The
Ninth Circuit decision gives new life to the "passive migration"
theory that may be of great assistance to current property owners who are
dealing with old environmental contamination and who wish to obtain recourse
under CERCLA against former owners and operators, including those who
themselves acquired their interest in the property after the initial disposal. Taken
together, these holdings of the Ninth Circuit will expand the ability of
current owners of contaminated real property to share with their predecessors
the pain of strict liability under CERCLA and associated remedial action costs.
Owners who have been discouraged from pursuing cost recovery claims due to
previous court rulings may wish to reconsider their remedies under CERCLA in
light of the Carson Harbor.
Finally, in view of the
expanded potential for former owners or operators of contaminated real property
to incur CERCLA liability, it becomes even more important for transaction
parties to negotiate and allocate environmental risk, including potential
CERCLA liability, at the time of a sale or other real estate transaction.
Editor's Comment 1: The
editor congratulates the Reporters for their significant victory, but cannot
share their joy at the policy analysis of the Ninth Circuit. It may well be
that parcing the CERCLA statute would lead to the result contended, but
obviously a number of other courts have disagreed, so the editor assumes that
the real difference is one of policy, and not one of grammatical construction.
The court stresses the
unfairness of the current landowners being stuck with the bill of remediation
while the prior owners escape (unless they made the original deposit). Of
course there is a degree of unfairness here, but the real unfairness is in the
Congressional decision to make innocent landowners of contaminated property
liable in the first place for cleanup costs that, in not paid by the
contaminator, should be borne by the public. Although misery may love company,
the editor sees not valid basis for spreading the mantle of liability to prior
innocent owners of contaminated properties.
Keep in mind that not all
prior owners become liable. The decision affects only those who had the bad
luck to own property with contamination that migrated within the property
during their ownership (albeit without their knowledge or active
participation). There is still a line of demarcation that is unfairly drawn,
but now in a different place. Modern CERCLA practice, through which new
purchasers can acquire property free of potential CERCLA liability by becoming
"innocent purchasers" after investigating for hazardous substances,
makes a lot of sense. Query, by the way. Does this ruling make such
"innocent purchasers" liable for post acquisition seepage from
hazardous substances that they did not find? The editor assumes that the answer
is no, but it is a question worth asking.
The consequence of the
decision is to create another lawyer's feeding frenzy in the Ninth Circuit as
litigants owning polluted properties rush to punish their land sellers for
seepage as to which such sellers had no knowledge or control. Oh, and on the
way, we'll undoubtedly pick up a lot of insurance carriers who also had no
knowledge or control over new environmental awareness arising decades later. Although
the editor likes to see other lawyers grow rich, he nevertheless is concerned
that this decision compounds the poor decision Congress made originally to punish
the innocent for the sins of long expired polluters.
The Reporters for this
case are Frank Gooch and Don Nanney of Gilchrest & Rutter, Santa Monica,
counsel for the plaintiffs.
Readers are urged to respond, comment, and argue with the daily
development or the editor's comments about it.
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