Source: http://www.lexology.com, September 21, 2016
By: Laurie J. Sands, Riker Danzig Scherer Hyland & Perretti LLP
In a recent case, Commonwealth of Pennsylvania Department of Environmental Protection v. Trainer Custom Chemical, —- F. Supp. 3^rd — (2016), 2016 WL 4525451, the District Court for the Eastern District of Pennsylvania found that a current owner of contaminated property is not liable under Section 107(a)(1) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) for cleanup costs incurred prior to ownership. Trainer limits current owner liability under CERCLA to only those costs incurred after the owner takes title to the contaminated site.
In 2012, Defendant Trainer Custom Chemical (“TCC”) purchased a contaminated site with knowledge of the existing contamination. During demolition of the site in 2013 and 2014, TCC uncovered piping and storage tanks that allegedly continued to leak. In 2015, the Pennsylvania Department of Environmental Protection (“PADEP”) filed suit against TCC and its principals under CERCLA seeking a determination of liability and the recovery of costs it incurred in cleaning up the site, both before and after TCC’s ownership. The Defendants did not dispute that TCC was a responsible party under CERCLA as the current owner of the site and, thus, TCC was responsible to remediate the contamination at the site. Rather, the question for the court was whether TCC was also liable for response costs incurred by the government prior to the time TCC took ownership of the site. As such, the court had to decide whether there is a “temporal” limitation on the liability of a current owner under CERCLA. That is, is a current owner’s liability under CERCLA limited to only those costs incurred after it takes title to a site? The government argued that the current owner is liable for all costs incurred in cleaning up the site, including those incurred prior to ownership.
As there were no cases addressing this issue in the Third Circuit, the Trainer court examined a Ninth Circuit case, California Department of Toxic Substances Control v. Hearthside Residential Corp., 613 F.3d 910 (9^th Cir. 2010), where the court faced this exact question. The Ninth Circuit, stating that the purpose of CERCLA is to have responsible parties pay to remediate contaminated sites, held that ownership status is determined at the time of the cleanup and not when the cost recovery suit is filed. The Ninth Circuit also found that since the statute of limitations under CERCLA begins to run at the time of the cleanup, CERCLA intended the owner at that time to be responsible for cleanup costs incurred, and not a subsequent owner.
The court in Trainer agreed with the Ninth Circuit, explaining that if current ownership for purposes of CERCLA liability under Section 107(a)(1) was not based on when the owner took title to the contaminated site, a responsible party could sell remediated property to a new owner and, if a cost recovery action is later filed, the new owner would then bear full responsibility for all cleanup costs, including those incurred prior to its ownership. The court noted that although CERCLA imposes strict liability, it does not impose limitless liability. The court could not abide the government recovering costs from a party that neither caused a release nor owned the facility when it was remediated.
Given the ruling in Trainer, a party involved in a CERCLA cost recovery action as a current owner of contaminated property should carefully analyze when the costs at issue were incurred. It should be noted that the PADEP has filed a motion to certify the decision for an interlocutory appeal to the Third Circuit.