Archive for the tag 'Statute of Limitations'

US Supreme Court to Decide Whether CERCLA Limitations Provisions Preempt State Law Statutes of Repose

SteveK January 21st, 2014

On January 10, 2014, the United States Supreme Court granted certiorari in CTS Corporation v. Waldburger, a case involving an issue which has divided courts as to the effect on state statutes of repose of CERCLA’s preemptive federal provision setting the earliest permissible commencement date for the running of the state “limitations period” for certain state-law causes of action.  The Fourth Circuit, agreeing with the Ninth Circuit’s position, held that state limitations statutes and statutes of repose are equally preempted by the federal provision.  However, the Fifth Circuit and South Dakota Supreme Court have previously held to the contrary, deciding that the language of the federal statute, which does not mention “repose” periods at any point, according to its plain language preempts only state “limitations” periods.

The dispute revolves around 42 U.S.C § 9658, a unique federal provision which imposes a federal criteria for the commencement of the limitations period governing state-law causes of action.  This statute provides that, in any state action for “personal injury, or property damage” arising from a “hazardous substance, or pollutant or contaminant, released into the environment from a facility” (as those terms are defined elsewhere in CERCLA), if the

applicable limitations period for such action (as specified in the State statute of limitations or under common law) provides a commencement date which is earlier than the federally required commencement date, such period shall commence at the federally required commencement date in lieu of the date specified in such State statute.

42 U.S.C. § 9658(a)(1).  The phrase “applicable limitations period” is in turn defined as the “period specified in a statute of limitations during which” the relevant state claims must be brought.  42 U.S.C. § 9658(b)(2).

This federal commencement date operates as an “enhanced discovery rule,” delaying the beginning of the limitations period until “the plaintiff knew (or reasonably should have known) that the personal injury or property damages . . . were caused or contributed to by the hazardous substance or pollutant or contaminant concerned.”  42 U.S.C. § 9658(b)(4)(A).  In other words, the state statute of limitations is not triggered until the plaintiff knows, or reasonably should know, of both the injury itself and its causal connection to the hazardous substance at issue.

In this particular case, CTS Corporation operated an electronic component manufacturing plant in Asheville, North Carolina for a period of years.  The manufacturing process required the use and storage of various toxic substances on-site.  After selling the plant and surrounding unimproved property in 1987, the unimproved portion was developed into a residential area overlooking the former plant site.  The purchasers of several of these homes contend that the soil and groundwater on their land is contaminated by chemicals left there by CTS, bringing a one-count complaint alleging violation of North Carolina’s nuisance law.  CTS in turn moved to dismiss the complaint on the ground that North Carolina’s 10 year statute of repose eliminated their cause of action long before they filed their complaint.

The district court agreed with CTS, holding that the statute of repose applied, and that the above-cited CERCLA provision applies only to statutes of limitation, and not to statutes of repose.  The court noted that “[t]he clear language of the statute . . . is limited to a state’s statute of limitations,” and makes no reference to statutes of repose.  The substantive differences between these two categories of statutes were also noted – whereas a “statute of repose is a substantive limitation, and is a condition precedent to a party’s right to maintain a lawsuit,” a statute of limitations is a “procedural device that operates as a defense to limit the remedy available from an existing cause of action.”

The Fourth Circuit, in a divided decision, reversed, holding that “the discovery rule articulated in § 9658 . . . preempts North Carolina’s ten year” statute of repose.  The court acknowledged that CERCLA is a “remedial statute” designed to facilitate the cleanup of hazardous waste sites and attribute the costs thereof to responsible parties.  In this vein, the court described how after CERCLA’s enactment, Congress “established a study group to examine the adequacy of existing common law and statutory remedies in providing legal redress for harm . . . caused by the release of hazardous substances into the environment.”  That study group concluded that the long latency periods common to such environmental claims were poorly suited to limitations statutes running from the time of the defendant’s last act or from the plaintiff’s initial exposure to harm.  Accordingly, the group recommended that states “adopt the rule that an action accrues when the plaintiff discovers or should have discovered the injury or disease and its cause,” and “repeal . . . statutes of repose which, in a number of states have the same effect as some statutes of limitation in barring [a] plaintiff’s claim before he knows that he has one.”  Congress intervened in 1986 by passing § 9658 rather than wait for the states to amend their own laws.

Examining the statute’s language, the Fourth Circuit acknowledged that the district court  could reasonably view § 9658 not to reach statutes of repose because it mentions limitations statutes five times but does not mention statutes of repose at all.  However, the majority concluded that the provision was ambiguous in this sense, especially given that the North Carolina repose statute at issue appears in a section of the North Carolina  Code entitled “Limitations, Other than Real Property.”  Additionally, the majority noted that “a historical analysis reveals that both scholars and courts have often used the terms interchangeably.”  In light of this ambiguity, as well as the recommendations of the study group and the “remedial” intent underlying CERCLA, the court found it probable that Congress intended for “statutes of limitations” to encompass statutes of repose.  CTS subsequently  petitioned the United States Supreme Court for certiorari.

As pointed out in CTS’s petition, the Fourth Circuit’s decision here “deepens a conflict in the state and federal appellate courts,” with the Fourth and Ninth Circuits on one side of the split and the Fifth Circuit and the South Dakota Supreme Court on the other.  Additionally, the case presents significant federalism concerns, given states’ traditional authority to dictate the limitations on their own tort causes of action – given the significantly heightened encroachment on this traditional state prerogative established by the Fourth Circuit’s interpretation (which, by triggering both repose and limitations statutes simultaneously, effectively renders state repose statutes impotent in these cases), clarity in the law is critical.

But perhaps the more compelling arguments that CTS presents on the merits pertain to an alleged conflict between the Fourth Circuit’s position and prior Supreme Court precedent.  First,  CTS argues that the holding in this case “conflicts with the cardinal rule of statutory construction that plain statutory terms should carry their plain meaning.”  The petitioner points out that “[i]n the absence of a contrary indication, [the Court assume[s] that when a  statute uses . . . a term [of art], Congress intended it to have its established meaning,” yet the Fourth Circuit “identified no legal authority indicating that the phrase ‘statute of limitations’ had a legal meaning encompassing a statute of repose when Congress enacted § 9658 in 1986”; rather, these terms were widely distinguished in the cases from that era.

Second, CTS argues that after finding an ambiguity which does not in fact exist, the Fourth Circuit improperly resolved that ambiguity by relying on CERCLA’s general remedial purpose.  Although the study group on whose recommendations § 9658 was at least in part predicated concluded that limitations and repose statutes should be loosened, this fact does not mean that Congress adopted that particular recommendation wholesale – in fact, Congress declined to adopt most of the group’s recommendations.  Accordingly, according to CTS, the Fourth Circuit was wrong to suggest that “whatever furthers [§ 9658’s] primary objective must be the law.”

Finally, CTS continues, even if the phrase “statutes of limitations” is determined to be ambiguous, the Fourth Circuit erred by disregarding the presumption against federal preemption when resolving that ambiguity.  According to that doctrine, “when the text of a pre-emption clause is susceptible of more than one plausible reading, courts ordinarily accept the reading that disfavors pre-emption.”  Under such a presumption, the Fourth Circuit should have construed any ambiguity to avoid preemption, rather than the other way around.

Despite the nuanced arguments presented in the petition (and the counterarguments set forth in Waldenburger’s opposition), at its core this case turns on whether statutes of repose are deemed to fall within the ambit of § 9658’s “statute of limitations’ language.  If the Court determines that CTS’s “plain language” argument controls, then the statute’s failure to mention statutes of repose would appear to be dispositive of the issue.  However, if Waldenburger’s discussion of the potential overlap in definitions between these two categories of statutes takes hold, the deeper analysis that this would require may very well result in the Fourth Circuit’s position being vindicated.

by: Andrew Miller, Associate

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.

N.J. App. Div. Holds that the Spill Act has a 6 Year Statute of Limitation in Private Cost Recovery Actions

SteveK September 30th, 2013

On August 23, 2013, the Appellate Division handed down its decision in Morristown Associates v. Grant Oil Co. Plaintiff in that case, the owner of a shopping center in Morristown, brought claims against prior owners of a dry cleaning business located within the shopping center for contribution to environmental remediation costs caused by contamination on Plaintiff’s
property.  Plaintiff alleged that fill pipes to an underground storage tank (“UST”) underneath the dry cleaning business were corroded to the point that fuel would regularly leak into the ground before ever reaching the tank itself.

Despite Plaintiff’s claims for contribution from entities who delivered
fuel dating as far back as 1988, the trial court applied a six-year statute of
limitations, barring all claims which would have accrued before that time.

Plaintiff appealed on the basis that the Spill Act does not entail a statute of limitations, or in the alternative, that the “discovery rule” set forth in Lopez v. Swyer, 67 N.J. 267 (1973) would preserve all claims.

The complaint alleged that the corroded fill pipes leaked contaminants into the soil and groundwater from 1988 to 2003 (after which the owner converted the system to gas), and that the oil companies and prior owners of the business failed to inspect the pipes and adjoined UST to ensure they were not leaking.  However, the trial court granted summary judgments limiting plaintiff’s claims to events of contamination occurring within six years of the date of its complaint.
Plaintiff asserted that it first became aware of the UST under the dry cleaning facility in its shopping center in 2003, when it was informed about soil and groundwater contamination by an adjacent property owner that discovered oil in a monitoring well, and the dry cleaner on Plaintiff’s property was identified as the source.  According to Plaintiff, prior to
that point, it was unaware that any UST existed at that facility.  When the UST was removed in 2004, the tank itself was fully intact, but the fill and vent pipes leading to it were corroded, which allegedly was caused by improperly designed air conditioning venting placed above the pipes in question.  It was estimated that somewhere in the neighborhood of 9,500 to 11,500 gallons of oil had been spilled between 1988 and 2003.

A former officer of the managing company that operated the shopping center testified that he never saw anything to indicate that there was a UST or any environmental problems at the dry cleaners.  He only became aware of a possible environmental issue in 2003 when the company next to the cleaners identified oil in its monitoring well.  However, documents revealed that in 1999 a different UST located under a supermarket in Plaintiff’s shopping center had leaked and required remediation.  Plaintiff’s property management company at the time (different from the
current management company) handled the problem by hiring a contractor to remove a 1,000-gallon UST.  The current managing company, however, stated that its files contained no reference to the
1999 UST issue, nor anything from the DEP regarding environmental problems on the property.

Despite the Appellate Division’s holding in Pitney Bowes v. Baker Inds., Inc., 277 N.J. Super. 484, 488-89 (App. Div. 1994), pertaining to the unavailability of a statute of repose defense to a Spill Act contribution claim, the Court here held that the policies underlying a statute of limitations justify application of the six-year period for “[e]very action at law for trespass to real property, for any tortious injury to real or personal property . . . [and] for any tortious injury to the rights of another not stated” elsewhere in that Title.  N.J.S.A. 2A:14-1.  The Court reasoned that

[a] statute of repose is strictly applied to bar a claim without any regard to when the claimant discovered or could reasonably have discovered the harm.  That is, the Lopez discovery rule is not available to relax application of a statute of repose.  In contrast, the discovery rule is applicable to a statute of limitations, and it mitigates the harsh and unjust result that would follow by barring the door of the courthouse to a blameless, injured person who is unaware that he has suffered an injury.

Applying a statute of limitations to a claim for private contribution under the Spill Act does not prevent a diligent plaintiff from recovering the costs of cleanup and remediation from other responsible parties [. . .] .  It merely requires that a claimant file a timely action after it discovered or should have discovered the grounds for its claim.  Unlike the statute of repose, the statute of limitations is not ‘patently repugnant or inconsistent’ with the purpose of the Spill Act. (quotations and citations
omitted).

Accordingly, although the court held that the “discovery rule” should apply to statute of limitations defenses under the Spill Act, that under the facts of this case Plaintiff should have discovered the presence of the contamination at issue in 1999, when the supermarket’s leaking UST was removed.  Because the complaint was filed in 2006, the court limited Plaintiff’s claimed damages to those which occurred within six years of the date of the complaint.

This decision presents numerous areas for conflicts among the various matters that relate to Spill Act cost recovery claims, including whether thre can be a contribution right until actual remedial costs are incurred, and whether the limitation of actions would apply to Spill Act claims that arise from condemnation proceedings where actions would not accrue until such time as the court determined escrow is exhausted. This decision also may conflict with the policy grounds upon which the Pitney Bowes decision was based: the need for those responsible for pollution to pay for its cure.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.

SUMMARY OF DEVELOPMENTS IN CERCLA AND NJ SPILL ACT: 2011

SteveK January 16th, 2012

This is a summary of some of the significant decisions of 2011 in CERCLA and N.J Spill Act litigation. ( Some of the decisions were previously reviewed in this blog.)

CERCLA

Arranger and Operator Liability:

In Nu-West Mining Inc. v. United States,786 F.Supp 2d 1082 (D.C. Idaho, 2011) the Federal District Court held that the U.S. Government was liable as both an arranger and operator under CERCLA at a site in the Caribou-Targhee National Forest that had been leased to a mining company. The court concluded that the permitting, inspection and oversight functions at four mines were sufficient involvement and control of the operations by the U.S. to impose liability.

The Court reviewed the law on arranger and operator liability.

A party is considered an arranger under CERCLA according to Burlington Northern & Santa Fe Railway Co. v. United States (BNSF), 129 S. Ct. 1870 (2009) when it “takes intentional steps to dispose of a hazardous substance.” Id. at 1879. Mere knowledge that spills would occur did not amount to “intent.” Further, the Court held that the analysis “requires a fact-intensive inquiry that looks beyond the parties’ characterization of the transaction as a ‘disposal’ or ‘sale’ and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLA’s strict-liability provisions.” Id.

For a party to be considered an operator of a facility under CERCLA  it must “manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste,  or decision about compliance with environmental regulations.” United States v. Bestfoods 524 U.S. 51, 66-67 (1998). If a party had the authority to control the cause of the contamination at the time of disposal, and actually exercised that control, then it is considered an operator. Id., citing, Kaiser Aluminum & Chem. Co. v. Catellus Dev. Corp., 976 F. 2d 1338, 1341 (9th Cir. 1992).

The Government began leasing mineral rights in the National Forest to various mining companies.  In accordance with the leases the Government inspected the mines to monitor the environmental conditions, properly disposing of mining waste, and to confirm royalty payments. The lease also required the lessees to “[prospect] diligently and to meet certain ore production requirements, and to pay a royalty fee.”  The Government also issued Special Use Permits so that rock waste dumps could be constructed on National Forest Lands adjacent to the leased lands. The Government also required the lessees to obtain “approval of plans for mining, waste disposal, and reclamation.”

The mine sites were determined to be contaminated with selenium, a naturally occurring chemical element that is found in a rock layer between phosphate ore zones. The mines were operated from 1960 until the 1990s. When the contamination was discovered in the 1990s, the lessee, Nu-West entered into Administrative Orders with the Government to remediate the sites. Nu-West claims to have spent over $10 million dollars and seeks to recoup those costs. In a motion for partial summary judgment Nu-West argued that the Government was an owner, arranger and operator under CERCLA. The motion did not address or resolve any defense to which the Government may be entitled, or any issue of damages.

The Court found that the Government not only owned the source of the contamination, it also had the authority to control the disposal of mining waste at the dump sites. The Court specifically noted that the lease provided that “no mining waste disposal could occur without its approval.” Further, the Court found that the Government exercised control over the disposal, and “showed its intent that disposal take place” by directing how the dumps should be covered.  The Court rejected the Government’s argument that it was acting in purely in a regulatory capacity, finding that its actions constituted a waiver of its sovereign immunity.” Citing, U.S. v. Shell Co. 294 F. 3d 1045, 1052-54 (9th Cir. 2002.); 42 U.S.C. §9620(a)(1) Accordingly, the Government was held as an arranger.

The Court also found there to be operator liability because the Government managed design and location of the dumps. In addition, the Government regularly inspected the dumps to ensure compliance with the mining plans and waste disposal guidelines.

In a subsequent motion reported at 2011 U.S. Dist. LEXIS 70854, the Court denied Nu-West’s motion for summary judgment on the Government’s counterclaim, seeking a ruling that the Government would not be entitled to legal fees. The Court was unable to conclude what costs may be “enforcement costs”  which a government may recover, as opposed to “necessary cost of response” which is what a private party may recover.

This case clarifies some of the issues on Governmental liability for actions at CERCLA sites, including that the Government can be liable when it is controlling the operations for its own benefit, not just in the use of its police power or in its sovereign capacity.

 

Owner Liability

In Los Angeles v. San Pedro Boat Works, 635 F. 3d 440 (9th Cir. 2011,) the Court held that the holder of a “revocable permit”  for a ship-berth in Los Angeles harbor had a mere possessory interest which did not arise to an ownership interest under CERCLA.

In this case, contamination arose from ship repairing activities that took place in Los Angeles Harbor. Pacific American purchased a revocable permit from the Harbor Commission in 1969 and held the permit for approximately 10 months. San Pedro Boat Works, a wholly owned subsidiary of Pacific American, was assigned the permit from Pacific American in 1970. San Pedro Boat Works was subsequently sold. Pacific American was acquired by BCI-Coca-Cola Bottling Company of Los Angeles in 1993.

Contamination was discovered in 1995 at the berth. The City cleaned up the contamination and commenced suit against San Pedro and Coca-Cola to recover the costs. San Pedro filed for bankruptcy shortly after suit was filed.

In deciding in favor of Coca-Cola, the Court first looked to CERCLA, but concluded that the definition of owner was tautological: an owner is “any person owning a facility.” 42 U.S.C. §9601(20)(A)(ii). The Court elected to rely upon the common law of the jurisdiction which distinguished title ownership from possessory interest.  It concluded that the “holder of a permit for a specific use of real property is not the owner of that real property.”  The Court, therefore, concluded that the permit holder was not the owner under CERCLA.  The Court rejected the test applied by the Second Circuit in Commander Oil Corp. v Barlo Equip, Co. 215 F. 3d 321 (2nd Cir. 2000) for de facto ownership: 1) whether the lease is for an extensive term and admits of no rights in the owner/lessor to determine how the property is used; 2) whether the lease cannot be terminated by the owner before it expires; 3) whether the leasee has the right to sublet all or some of the property without notifying the owner; 4) whether the lessee is responsible for payment of all taxes, assessments, insurance an operation and maintenance costs; and 5) whether the lessee is responsible for making all structural repairs. Id. at 330-331.

As a result there is a conflict as to what test is to be applied in the analysis of what constitutes an owner where the concepts of control over the operations and activities are at issue. The Ninth Circuit has focused on the common law, and has held this way both for the holder of an easement, see, Long Beach Unified School Distric v. Dorothy B. Godwin Cal. Living Trust, 32 F 2d 1364 (9th Cir. 1994), and now for a permit. Although the 2nd Circuit test was determined to create a “nebulous and flexible analytic framework” by the 9th Circuit, the Circuits are split on what test is to be applied.  It is unclear how the actual results would vary.

Arranger Liability

In Team Enterprises LLC v. Western Investment Real Estate Trust 2011 U.S.  App LEXIS 19881, the 9th Circuit concluded that the manufacturer of a dry cleaning machine was not liable for contribution to environmental cleanup costs under CERCLA.  Thea Plaintiff, a dry cleaner, used dry cleaning equipment manufactured by R.R. Street & Co. (Street) for their operations. The PCE-laden residue from the operations was deposited into a bucket for reuse; however, some was poured down the drain and leaked into the soil.

The Court analyzed whether a party can be considered an arranger under CERCLA where the equipment was sold for legitimate business purposes and was not created with the intent and purpose of disposing of hazardous waste. The Court took into account the requirement under BNSF that a party “must take intentional steps to dispose of a hazardous substance” to be considered an arranger. Supra, 129 S. Ct at 1879.

The Court also rejected the argument that Street had “exercised control over the disposal process” by designing the equipment that required the dry cleaner to dispose of the wastewater into the sewer.  The Court concluded that the instructions that suggested that the waste be poured into a bucket (which, according to the Plaintiffs, left no alternative but for the operator to pour that waste into the drain) did not present anything more than a suggestion or “recommendation;” there was no directive or other manner of control. Even the argument that Street knew that was how dry cleaners handled the residual waste was unavailing.  The Court affirmed the decision from the lower court that the facts do not support the requisite intent to dispose of waste as set forth by the Supreme Court in BNSF.

Arranger and Divisibility

The Lower Fox River cleanup litigation continues to provide interesting issues and analysis of a variety of issues under CERCLA.  There were a number of decisions in the case in 2011, the most significant one being Appleton Papers, Inc. et. al. v. George Whiting Paper Co., 776 F. Supp 2d 857 (E.D. Wis. 2011).

The Court had previously held that the Plaintiffs were not entitled to contribution for the expenses they had and will incur for cleanup costs “because they knowingly took that risk that the product that they mobilized [PCBs] would have long-lasting environmental consequences.” Id. at 859. Defendants sought to have the Court require that Appleton reimburse them for the costs they have incurred for their investigation and remediation at the site.  The Court conducted a thorough analysis and crafted a decision that placed most of the responsibility on the Plaintiff, except with regard to Operable Unit -1 (OU-1) which was upstream.

First, the Court addressed arguments that the Plaintiff should be liable as a successor to an arranger for the disposal of pollutants in OU-1. The predecessor, Appleton Coated Paper Company (ACPC) made carbon paper which utilized PCBs. ACPC sold waste from their processes through a broker that was used by other companies for making paper. The waste paper (known as “broke”) was recycled by the acquiring companies which resulted in PCBs being discharged into the Fox River Site.  Defendants argue that in this manner, ACPC arranged to dispose of a hazardous substance, thus making them liable for contamination at OU-1, even though their own discharges did not wind up in OU-1.  The Court conducted a thorough analysis of arranger liability under BNSF and concluded that although they did “enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance;” however, there was insufficient evidence to support the conclusion that ACPC had the intent to dispose of the waste along with “the particular knowledge that non-trivial amounts of the broke waste product would inevitably end up in the river.” Id. at 864. The Court concluded that there were questions of fact, but indicated that it was unlikely that there would be sufficient evidence to support such a claim.

The Court also rejected that argument that all the operable units at the site were intertwined, and thus, Plaintiff could not obtain contribution from the Defendants (and therefore they were entitled to reimbursement) for costs for OU-1. The Court, however, confirmed a prior ruling that the costs for OU-2 through 5 fall squarely and completely on the Plaintiffs on the basis of fault, and that fault was such an overriding factor that is outweighed by any basis to impose equitable shares on the Defendants.  The Court then went on the wrestle with particular costs, including deciding that the costs that have been incurred were not outside the statutory limitations periods.

Subsequent Work Causing Release

In Saline River Properties LLC v. Johnson Controls, 2011 U.S. Dist. LEXIS 119516 the U.S. District Court for the Eastern District of Michigan, addressed whether a developer could be liable under CERCLA for conducting  development activities that may have moved contamination on the site and required additional cleanup.  Johnson Controls had owned property that it was remediating under a state issued administrative order.  Plaintiff became the operator of the property and at some point destroyed the building slab which Johnson alleges resulted in the migration of contaminants that would not have otherwise occurred.  The Court concluded that although passive migration would not have resulted in liability, there were questions of fact as to whether this action caused a release.

Citizens’ Suits

In Pakootas v. Teck Cominco (Pakootas II), 2011 U.S. App. LEXIS 10931 the 9th Circuit ruled that environmental groups, Indian tribes and other non-EPA parties may not bring a citizens’ suit to enforce the penalty provisions of CERCLA.

Pakootas II is part of the continuing dispute concerning the pollution of the Columbia River. The pollution originated from mining operations in British Columbia. Teck Cominco Metals, a Canadian mining company operated a smelter north of the U.S. –Canadian border which generated and disposed of slag into the Columbia River. Negotiations between the EPA and Teck Cominco American, Inc. faltered on issues of Canadian sovereignty and jurisdiction. The EPA eventually issued a unilateral administrative order (Order) directing Teck to investigate the nature and extent of contamination in the Upper Columbia River basin, and to evaluate remedial options.  Teck did not comply and the EPA took no enforcement actions, nor did it seek penalties.

Plaintiffs, later joined by the Confederated Tribes of the Colville Reservation and the State of Washington, pursued a citizens’ suit seeking:  (1) a declaration that Teck had violated the Order; (2) injunctive relief compelling Teck to comply with the Order; (3) penalties for non-compliance with the Order;  and(4) attorney fees and costs.

After Teck’s motion to dismiss the case based upon the argument that EPA could not apply CERCLA extra-territorially was denied, Teck and the EPA entered into a “contractual agreement” to address the contamination at the site.  As part of the agreement, the EPA agreed to a covenant not to sue Teck for penalties or injunctive relief relating to non-compliance with the Order, subject to its satisfactory performance of its obligations under the agreement.

Plaintiffs amended their complaint and dismissed the claims for injunctive and declaratory relief, but continued to assert the claims for penalties for non-compliance with the Order. The 9th Circuit affirmed the dismissal of the suit concluding that the penalty provisions are a “hammer” to be wielded exclusively by the EPA to compel compliance. Further, the Court aptly noted that if Teck were compelled to pay the penalties to Plaintiffs prior to the agreed upon remediation,” it might find it economically advantageous to walk away from the further cleanup efforts…” which would have a perverse result, and would not further the intent to compel site remediation.

 

Section 113 & Private Nuisance Claims

On August 13, 2011, the Federal District Court for the District of New Jersey continued to clarify the limits of Section 113 claims under CERCLA and  also addressed common law claims of a subsequent property owner in Queens West Development Corporation v. Honeywell International, Inc. 2011 U.S. Dist. LEXIS 91795. Plaintiff acquired property formerly operated by Warren Chemical Works, which was subsequently acquired by Honeywell. The property was contaminated from discharges of substantial amounts of creosote, coal tar, and related substances. The property was to be redeveloped by plaintiff for residential, commercial and recreational uses. Plaintiff claimed to have incurred over $16 million in investigation and remediation costs, and anticipated total response costs that would be equal to or exceed $20 million. Defendant moved for dismissal of various counts of the complaint including claims in Count Two of the Complaint, under Section 113 of CERCLA, claims in Count Three for common law private nuisance, and claims in Count Four for restitution.  In deciding the case, the Court addressed the intersection between claims under Section 107 of CERCLA and Section 113. The Court noted that the case presented a unique issue: “whether a party that voluntarily undertakes a cleanup action can maintain a claim for contribution under § 113(f)(3)(B), when it has simultaneously asserted a claim for cost recovery under § 107(a).” The Court noted that courts have explained that Section 107 “authorizes the United States, a state, or `any other person’ to seek reimbursement for all removal or remedial costs associated with the hazardous materials on the property, provided that those actions are consistent with the National Contingency Plan,” and that the United States Supreme Court held in Atlantic Research that the “plain language” of § 107 “authorizes cost-recovery action by any private party, including PRPs.” As a result, a private party is not required to establish its own liability in order to assert a claim under  Section 107. Section 113(f)(3)(B), however, allows the assertion of a right of contribution only “to PRPs that have settled their CERCLA liability with a [S]tate or the United States through either an administrative or judicially approved settlement.” Since Plaintiff had voluntarily incurred the response costs, is not a PRP, and did not enter into an approved settlement or resolved all their liability to the U.S. or the State of New York, they could not maintain the  Section 113 claim. Thus, the Court dismissed the  Section 113 claim contained in the Second Count.

The Court next addressed the claims for private nuisance. As the proceeding was in New Jersey, but involved New York property, the Court considered the law of private nuisance in both jurisdictions. The Court concluded that the law was the same, and that although a private nuisance “consists of an interference with one’s interest in the private use and enjoyment of land” it only applies to interference with use of adjoining land, not to subsequent owners of the same property.

Finally, the Court refused to dismiss the restitution claim. Defendants argued that it should be dismissed since it is preempted by CERCLA. The Court refused to dismiss the claim, however, since it remained an alternative common law claim that would survive if the Plaintiff fails to prove the claim under Section 107 of CERCLA.

Case to Watch: Sackett

Sackett v. EPA is a case that is scheduled for argument before the U.S. Supreme Court this term. Although it is not a CERCLA case, it may have a significant impact on enforcement of federal environmental statutes.  The primary issue presented by Sackett is whether pre-enforcement review is available for EPA administrative orders. Pre-enforcement review refers to the ability of the recipient of such an order to obtain judicial review of the order without having to wait to be sued by the EPA. This is not applicable to CERCLA since CERCLA has an express provision prohibiting pre-enforcement review. 42 U.S.C. §9613(h).

The Court will consider whether a bar to pre-enforcement review can be implied into the Clean Water Act (CWA), as has been argued by the EPA, and whether such an implied ban would violate the due process clause of the U.S. Constitution.

In Sackett the plaintiffs had filled a wetland area on their 0.63 acre parcel without a CWA permit. The EPA issued an administrative compliance order requiring that the fill be removed and that the wetland be restored.  The Sacketts petitioned the EPA for a hearing to challenge the wetland determination. After the EPA refused, the Sacketts filed suit.  The District Court dismissed the suit and the Sacketts appealed to the 9th Circuit.  Before the 9th Circuit they argued (1) that the Administrative Procedures Act (APA) allows pre-enforcement review of CWA compliance orders; and (2) that pre-enforcement review is required by due process.

The Circuit Court rejected both arguments. It rejected the argument under the APA essentially finding that pre-enforcement review is not provided for in the CWA and that the presumption in favor of judicial review is overcome where “congressional intent to preclude judicial review is fairly discernible in the statutory scheme.” Sackett v. EPA 622 F. 3d 1139,1143 (9th Cir, 2010). The Court concluded that pre-enforcement review would frustrate the goal of addressing environmental problems quickly and would negate the EPA’s statutorily created choice between filing a suit or acting unilaterally through an administrative order.

The 9th Circuit rejected the due process arguments finding that it had been satisfied because: (1) judicial review was available once the EPA brings an enforcement action; (2) the Sacketts could have sought to obtain a §404 permit to fill the property, which would be reviewable by the district court if denied; and (3) the court, not the EPA, can impose penalties under the CWA based upon a range of factors. [1] The decision could have far reaching implications, even effecting CERCLA if the Supreme Court reverses on the basis of due process. [2]

 

NEW JERSEY SPILL ACT

Primary Jurisdiction

In Magic Petroleum, Inc. v. Exxon Mobil, 2011 N.J. Super. Unpub. LEXIS 2021, the New Jersey Appellate Division dismissed, without prejudice, Magic’s claim for contribution of remedial costs against Exxon due to NJDEP’s primary jurisdiction of the remedial investigation at the plaintiff’s property. Plaintiff had been the subject of an administrative consent order (ACO) to investigate and remediate contamination at its property resulting from leaking underground storage tanks.  Plaintiff contended that the majority of the contamination came from the neighboring Exxon station and refused to comply with its obligations under the ACO until the NJDEP required Exxon to participate in the investigation. Magic litigated its obligations under the ACO through administrative proceedings, and was required to follow the order. Magic, however,  continued to refuse to conduct the investigation, insisting that the investigation should be imposed upon and shared by Exxon. The NJDEP eventually took over the investigation of the plaintiff’s property. Magic then commenced a contribution action against Exxon.

Exxon filed a motion to stay or dismiss the proceedings, without prejudice, pending the NJDEP’s investigation and remediation of the Magic property, arguing that the NJDEP’s efforts must precede any decision by the court. The trial judge dismissed the case, deferring to the NJDEP’s primary jurisdiction. The Appellate Division affirmed.  The Appellate Court noted that under the doctrine of “primary jurisdiction” a court may defer to an agency where the resolution of an issue is within the special competence of the agency. The court further noted that private contribution rights under the Spill Act require the court to allocate responsibility for remediation costs, but that the initial determination of whether a party is responsible can be decided by the NJDEP, and that “only the DEP can define the contaminants, determine the extent of the discharge, identify the authorized forms of investigative testing, and permissive methodology of cleanup.” Furthermore, “to be entitled to reimbursement and contribution under the Spill Act, a party must obtain written approval under from the DEP of the investigation and proposed remedial action.”  Accordingly, the court concluded that these decisions were within the scope of the special expertise of the DEP and should be determined prior to the case being able to proceed.

This decision demonstrates that a responsible party under the Spill Act that does not conduct investigation and remediation, but allows it to be done by the State, does so at its peril. To do so may have a significant impact in the party’s ability to pursue a contribution claim against other responsible parties, as it allows the NJDEP to determine and define the scope of the investigation, remediation, and possibly to potentially influence any future contribution claim or allocation. It is interesting to consider the effect of the Site Remediation Reform Act (SRRA) on the statements by the court that the DEP will define the contaminants, the extent of the discharge, the forms of investigation and the method of cleanup. Under the SRRA these determinations can be made by a Licensed Site Remediation Professional (LSRP), in accordance with the regulations for site investigation and remediation, referred to the Tech. Regs.  Accordingly, it may not be that the DEP has to make these decisions. This points, again, to the importance of the party seeking contribution to address and control the response in order to be able to develop the information, and assert and control the contribution claim.

Nexus

In NJDEP v. Ofra Dimant, et.al 418 N.J. Super 530 (App. Div. 2011), cert. granted, 208 N.J. 381 (2011), the New Jersey Appellate Division recently confirmed that liability under the Spill Act, requires a connection between the discharge of a contaminant and the contamination of the environment of that contaminant that was caused by the discharge. In that case, the defendants included succession of owners and operators of a dry cleaning establishment. The contamination in the groundwater included the well-known dry cleaning chemical, PCE, as well as the byproducts of its degradation: TCE and DCE.  There was evidence that the PCE was related to the dry cleaning operations. All but one of the direct defendants settled with the State.  The remaining defendant went to trial. The trial judge found that although there were discharges or releases of PCE during the stewardship of the remaining defendant, there was no proof that those discharges went through the asphalt and contaminated the environment.  Since there was no nexus between the discharge and the remediation, the claims against the defendant were dismissed. The State also sought leave to amend the complaint to add certain other prior operators. The denial of that motion by the trial judge was affirmed as being made too late in the case; in fact, it was made near the end of the trial.  This case affirms the need for the State or any plaintiff in a Spill Act case to demonstrate a nexus; and further reaffirms that there is no liability for passive migration of contaminants during the ownership of property.

NRD Common Law Claims – Limitations of Actions

In New Jersey Dep’t of Env. Protection v. Exxon Mobil Corp, 405 N.J. Super 395 (App. Div. 2011) the court held that the State’s common law strict liability claims for NRDs were not barred by the general ten-year statute of limitations applicable to actions commenced by the State. N.J.S.A. 2A:14-1.2. The court, reversing the trial court, held that an exception to the ten-year statute, specific to environmental laws, known as the Extension Statute, N.J.S.A. 58:10B-17.1, applies not only to statutory environmental laws, but also to common law causes of action implementing environmental programs.
The Extension Statute provides:

b. (1) Except where a limitations provision expressly and specifically applies to actions commenced by the State or where a longer limitations period would otherwise apply, and subject to any statutory provisions or common law rules extending limitations periods, any civil action concerning the payment of compensation for damage to, or loss of, natural resources due to the discharge of a hazardous substance, commenced by the State pursuant to the State’s environmental laws, shall be commenced within five years and six months next after the cause of action shall have accrued.

Exxon argued that the Extension Statute’s use of the term “environmental laws” after a listing of 9 prior statutes,  limited the extension to statutory causes of action. The Appellate Division, however, looked to legislative history and concluded that the legislature intended to expand the scope of the authority of the DEP, not to limit it. As a result, NJDEP has the ability to pursue common law causes of action, along with the strict liability provision of Spill Act, in matters involving NRDs; neither of which will be constrained by the general ten-year statute. This decision may be important as common law remedies and damages may be broader and may permit the State to seek to present their case before a jury as there is some question whether there is a right to a jury trial under the Spill Act.

 

In a separate decision, the Appellate Court also ruled on the State’s claim for an interlocutory payment by Exxon Mobil for natural resource damage assessment costs of approximately $1 million.  The costs represent the invoices of five experts that prepared reports for DEP regarding the claimed natural resource damages under the Spill Act. The Court affirmed the trial court’s denial of the interim payment since there is a significant dispute as to the reasonableness of the costs and whether they are duplicative of defendant’s efforts. The panel concluded that the award of such costs is best reserved until resolution of the factual issues at trial.

NRD : Use of Resource Equivalency Analsyis (REA)

In  NJDEP v. Union Carbide, (Middlesex County, MID-L-5632-07, March 29, 2011) the trial Court rejected for the second time the State’s effort to employ a resource equivalency analysis (REA) or habitat equivalency analysis (HEA) to place a value on the loss of use of groundwater as a natural resource. The trial court had previously rejected REA in NJDEP v. Essex Chemical, (Middlesex County, Docket No.: MID-L-5685-07, July, 2010). The trial court concluded that the expert had not conducted a proper analysis of the particular services that were claimed to have been lost by the public due to the contamination, other than the remedial costs which were being conducted by the defendant. The court also ruled that there was no basis to compel the defendants to cleanup more expeditiously since the entire remedial endeavor had been with the approval and oversight of the NDJEP, albeit a different arm than the Office of Natural Resources and Recovery (ONRR). Finally, the court rejected the State’s nuisance claim since the plaintiff’s had not satisfied their burden of showing that the contamination of the groundwater interfered with the public’s use or enjoyment of the resource, further noting that the groundwater in question was never available to the public since it was below private property; therefore. “Plaintiffs have not shown how the public has been deprived of anything.” [Slip. Op. p. 13]


[1] Similar issues were addressed by the N.J. Supreme Court in In the Matter of the Directive to Kimber Peteroleum, 110 N.J. 69 (1988)

[2] It may be questionable whether the Court would go so far, considering it refused to consider a similar challenge regarding CERCLA administrative orders in General Electric v. Jackson, 595 F. Supp. 2d 8 (D.D.C. 2009).

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.


The N.J. App. Div. rules that common law causes of action for NRD are subject to extended statute of limitations for environmental cleanup, and in a separate decision, that NRD assessment cost reimbursement must await the end of the case.

SteveK June 1st, 2011

As a follow up to the recent post on the trial court in NJDEP v. Saint-Gobain, the New Jersey Appellate Division has taken a contrary view, which now governs the issue in New Jersey. In a published opinion in the ongoing litigation regarding Exxon Mobil’s Bayway and Bayonne facilities, New Jersey Dep’t of Env. Protection v. Exxon Mobil Corp, the court held that the State’s common law strict liability claims for NRDs were not barred by the general ten-year statute of limitations applicable to actions commenced by the State. N.J.S.A. 2A:14-1.2. The court, reversing the trial court, held that an exception to the ten-year statute, specific to environmental laws, known as the Extension Statute, N.J.S.A. 58:10B-17.1, applies not only to statutory environmental laws, but also to common law causes of action implementing environmental programs
The Extension Statute provides:
b. (1) Except where a limitations provision expressly and specifically applies to actions commenced by the State or where a longer limitations period would otherwise apply, and subject to any statutory provisions or common law rules extending limitations periods, any civil action concerning the payment of compensation for damage to, or loss of, natural resources due to the discharge of a hazardous substance, commenced by the State pursuant to the State’s environmental laws, shall be commenced within five years and six months next after the cause of action shall have accrued.
Exxon argued in that the Extension Statute’s use of the term “environmental laws” after a listing of 9 prior statutes limited the extension to statutory causes of action. The App. Div, however, looked to legislative history and concluded that the legislature intended to expand the scope of the authority of the DEP, not to limit it. As a result, NJDEP has the ability to pursue common law causes of action, along with the strict liability provision of Spill Act, in matters involving NRDs; neither of which will be constrained by the general ten-year statute. This decision maybe important as common law remedies and damages may be broader and may permit the State to seek to present their case before a jury as there is some question whether there is a right to a jury trial under the Spill Act.

 

In a separate decision the Appellate Court also ruled on the State’s claim for an interlocutory payment by Exxon Mobil for natural resource damage assessment costs of approximately $1 million.  The costs represent the invoices of five experts that prepared reports for DEP regarding the claimed natural resource damages under the Spill Act. The Court affirmed the trial court’s denial of the interim payment since there is a significant dispute as to the reasonableness of the costs and whether they are duplicative of defendant’s efforts. The panel concluded that the award of such costs is best reserved until resolution of the factual issues at trial.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department

 

In NRD claim, trial Court dismisses common law causes of action of nuisance and trespass under the statute of limitations as they are not “environmental laws” and there was no “continuing tort.”

SteveK May 20th, 2011

In NJDEP v. Saint Gobain Plastics Corp. DiFrancesco, Bateman succeeded in having the State’s common law claims for natural resource damages (NRD) dismissed under New Jersey’s 10 year statute of limitations for the State’s assertion of claims: N.J.S.A. 2A:14A-1.2.  Contamination was discovered at defendant’s property in 1991. The defendant entered into an Administrative Consent Order and commenced site remediation immediately. The remedial efforts have continued to date.  The State was aware of the discharge in 1991, but did not institute a claim for NRD until 2005. Although defendant was previously held liable under the New Jersey Spill Act, the defendants sought summary judgment on the State’s common law claims for nuisance and trespass.  Judge LaConte of the Superior Court of Passaic County ruled in favor of defendant, holding that the common law claims for NRD do not constitute claims under the “State’s environmental laws” as defined in N.J.S.A.  58:10B-17.1.c., and therefore, the limitations period would not be extended for 5 years and 6 months from January 1, 2002 as provided for in section N.J.S.A.  58:10B-17.1.b. The Court concluded that since the statute extending the time for filing referred to nine specific statutes, and then referred to ,”… any other law or regulation by which the State may compel a person to perform remediation activities on contaminated property…” that the prior language demonstrated the intent of the legislature to limit the extended time period to statutes, not common law causes of action that may be used for purposes other than environmental protection.

Judge LaConte also rejected the State’s alternative theory that the continued presence and alleged migration of contaminants in the ground water constituted a continuing tort. The Court concluded that the “curative action” occurred when the seepage pit was removed in1991 and, as a result, no “new” contamination occurred. As a result, Judge LaConte ruled that “[a]lthough the effects of the discharge are still present…and may persist for decades, the alleged nuisance and trespass caused by the defendants no longer continued after 1991.” The Judge observed that if the tort was deemed to continue until the “end of remediation, long after the cause of the contamination had been removed, it would provide plaintiffs with an almost infinite amount of time to file common law causes of action.” In fact, he noted, this would even provide the State more time to file common law claims than had been extended by the legislature in N.J.S.A. 58:10B-17.1.

The decision is presently unreported. A copy can be obtained from Steven A. Kunzman, who represents Saint-Gobain in the matter.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department

 

 

District Court Dismisses CERCLA Suit as Time Barred

SteveK September 30th, 2010

On September 21, 2010, Judge Freda Wolfson of the U.S. District Court for New Jersey dismissed the claims of the United States against Rohm and Haas due to the limitations periods contained in CERCLA.  The U.S. agreed that the suit was untimely; however, argued that the limitations periods contained in CERCLA should be tolled due to a change in law on whether oversight costs are recoverable, and for other equitable reasons.

The defendants (including predecessors) had disposed of industrial wastes at the site between 1950 and 1965. After site investigation, the site was listed on the NPL in 1984. An ACO was entered into with the NJDEP in 1991 and RI/FS was completed in 1992. Substances were removed from the site  from 1991 through 1995 and the EPA issued a Baseline Risk Assessment finding the site no longer posed a risk to human health or the environment in 1996. A Record of Decision (ROD) was issued in September of 1996. A PRP letter was issued to the defendant in 1997 after which the parties entered into a Consent Order which explicitly excluded any reimbursement of oversight costs, which were defined as “future response costs incurred by EPA in monitoring and supervising [Morton’s] performance …”  The Consent Order did not contain a tolling agreement.  The monitoring of the site was completed in 2001 and the site was taken off of the NPL in 2002. Six years later the EPA wrote to the defendant demanding payment of oversight costs.  Shortly thereafter the parties entered into a tolling agreement from November 2008 to March of 2009.  The complaint was filed in October of 2009. In the complaint, the U.S. sought the recovery of oversight costs, although the government did reserve its rights to seek other costs.

There are two potential limitations periods under CERCLA that could apply to the claims. The first is a 3 year period for commencement of a removal action which starts to run after completion of the removal,  and a 6 year period for a remedial action, which commences with the initiation of physical on-site construction of the remedial action. The Court acknowledged that case law provides that the 3 year period begins to accrue upon issuance of the ROD, which in this case was issued in 1996. The 6 year statute began to run in 1991 when defendant began to remove hazardous substances from the site.  The government, however, argued that it was barred from bringing the action for oversight costs by the Third Circuit’s 1993 decision in U.S. v. Rohm and Haas 2 F.3d 1265 (3rd. Cir. 1993) which was subsequently overturned  by U.S. v. DuPont, 432 F.3d 161 (3rd Cir. 2005). The government argued that its claims could not have accrued as it could not have been brought until the decision in DuPont was issued in December 2005.

The court rejected the government’s argument in part due its statement that costs other than oversight costs might be included. According to the court, that constituted a concession that the claim for the other costs could have been brought as they were not precluded and resurrected by the decision of the 3rd Circuit. The court reasoned, further, that the application of periods for limitations should not be governed by the uncertainties of changing laws.  The court noted that other jurisdictions had rendered decisions contrary to the 1993 Rohm and Haas decision, so that it would have been appropriate to take actions to preserve the claims.

The court then considered whether the claims could proceed under the doctrine of equitable tolling. The court, again, ruled in favor of defendants finding that the government had not acted diligently in pursuing or preserving its claims. The court pointed to such actions as the failure to include a reservation and tolling of the claims for oversight and future costs in the Consent Order, the failure to initiate proceedings with the knowledge of favorable decisions on the ability to recover oversight costs from other jurisdictions, and then waited over three years from the issuance of the DuPont decision to institute its action. As the court stated: “Such behavior does not bespeak of due diligence in preserving one’s claim.”

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department

9th Circuits holds owner of property at time cleanup costs are incurred is the owner under CERCLA

SteveK August 17th, 2010

On July 22, 2010, in State of California v. Hearthside Residential Corp., the court addressed a question of first impression: “whether the ‘owner and operator status under [CERCLA] is determined at the time that cleanup costs are incurred or instead the time that a recovery lawsuit seeking reimbursement is filed.” The concluded that the owner is determined at the time cleanup costs are incurred.

Hearthside had purchased property known as Fieldstone Property in Huntington Beach, California with the knowledge that it was contaminated with PCBs. Hearthstone entered into a consent order with the State in which it agreed to remediate the property, then sold to the property to the California State Lands Commission. The State determined that the adjacent residential site was also contaminated with PCBs which it alleged had migrated from the Fieldstone Property. The State considered Hearthstone responsible; however, Hearthstone disagreed, contending that it was not the owner when the suit was filed. The State, therefore, contracted to remediate the property and subsequently filed a complaint against Hearthstone.

Since CERCLA does not provide a clear answer to the issue of when a party is considered an owner for purposes of liability, and no case dealt with the issue directly, the court considered other aspects of the statute. The court concluded that the issue best aligns with CERCLA’s statute of limitations. Since the limitations provisions are triggered either (1) at the completion of a removal action, or (2) at the initiation of the remedial action, the court concluded that it was the intent of Congress was to have the statute of limitations “run against (and protect) the owner of the property at the time the cleanup occurs.” The court reasoned that if Hearthstone’s argument were accepted, “an owner could sell a recently cleaned piece of property to an innocent owner one day before the statute of limitations runs, with the result that the new owner would bear full cleanup liability under CERCLA if a recovery action was later timely filed.” Accordingly, the court saw this as contextual evidence of Congressional intent that the owner at the time of cleanup was to be considered the owner for the purpose of CERCLA liability.  In addition, relying on the date of filing of the cost recovery action contradicts the intent to have early settlements. In essence, Hearthside’s approach would require the filing of a suit in order to determine the date of ownership.  In addition, since the owner at the time of cleanup can help determine the scope of cleanup, “it follows that the same owner should be responsible for the cost of the remediation program that it had the opportunity to influence.”

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

District Court holds the Statute of Limitations for NRD claims under CERCLA is triggered by constructive knowledge of injury by Trustee.

SteveK July 17th, 2010

On July 13, 2010, in Commissioner of the Department of Planning and Natural Resources v. Century Alumina, LLC, et.al., the Federal District Court from the St. Croix division of the Virgin Islands, held that an action to recover natural resource damages (NRD) must be commenced within 3 years of the constructive knowledge of the injury by the trustee.

The plaintiff trustee brought the claim against a number of industrial entities for the release of contaminants onto a number of industrial tracts at various times which injured the land as well as groundwater and the Caribbean Sea.  The defendants moved for summary judgment seeking dismissal of the claims under CERCLA’s limitation of actions provision, which provides that an action for NRD must be commenced within 3 years following “the date of the discovery of the loss and its connection with the release in question.” Although the statute does not state what is meant by “discovery” the court relied upon numerous prior decisions as to other statutes and other aspects of CERCLA to conclude that it is based upon the constructive knowledge of the trustee. The court went on to clarify that the knowledge of the agency, including the knowledge of any prior trustee, would be imputed to the present trustee.  Accordingly, the determination of whether there was NRD related to the discharges would require an analysis of when the trustee knew or should have known that there was an injury to the natural resource related to the discharges, which would commence the running of the time for bringing an action. With this ruling in hand, the court analyzed the facts as to each site and each defendant, dismissing some claims and allowing others to continue.

This case demonstrates that there courts will take a rational approach in considering the relationship between knowledge of a discharge of contaminants and the commencement of NRD claims. The interests of the government to pursue recovery of NRD, while important, will not allow the government to be inattentive to their statutory obligation to act promptly to seek to enforce these rights.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.