CERCLA Operator Liability: A Tragedy in One Act
The principle of "polluter pays" for environmental contamination and the activity of land development have always been uneasy bedfellows. The most recent example of a sleepless night can be found in the New Jersey federal district court case of Bonnieview Homeowner’s Association v. Woodmont Builders, LLC. In a foreshadowing of things to come, Judge Deberoise’s opening line, in that case says:
This matter involves a dispute over the environmental contamination of an area of land in Montville, New Jersey, where a fruit orchard was operated in the mid-twentieth century and which was later developed into a residential neighborhood.
There is not a single well-read developer that doesn’t understand that by the end of the opinion, this is a tragedy of epic proportions.
The facts of Bonnieview HOA are the ones that every developer fears. A seemingly innocuous parcel of ground is ripe for development in the lovely city of Montville, New Jersey. At some point in the past, the property had been an apple orchard, though a Phase I Environmental Site Assessment failed to note that the orchards may have used pesticides which may have contaminated the soils.
The developer of the site, in an effort to provide the finest of “natural homesites” with a “great place to raise children” removed the topsoil from the site, stockpiled it, built the homes and returned the topsoil to the site for the lawns. No testing of the soils was done before or during the process, but, as luck (and tragedy) would have it, the soils were heavily contaminated with metals and pesticides.
The Plaintiff homeowner’s association, after discovering the facts, brought action against the developers and others contending that:
[B]y clearing the topsoil, stockpiling it, then spreading it over the Residential Lots, the Defendants caused the pesticide contamination to spread “ubiquitously across the Residential Lots” and into areas previously not contaminated, and to be extended from the surface into the subsurface soil.
Liability under CERCLA, the federal statute that requires cleanup of contaminated property, for a person operating on the property (such as a developer) requires that the operations occur at a time during which there was a disposal of a hazardous substance. In this case, there was no question that the pesticides in the soil constituted a hazardous substance. The open question was whether the mere movement of the previously contaminated soils constituted “disposal.” The Court conducted an analysis of the case law and found:
Woodmont Builders’ movement of the contaminated soils on the Residential Lots may be considered a “disposal” under CERCLA.
Ironically, the members of the Plaintiff homeowner’s association that had moved soils to put in swimming pools, driveways, etc. were also found to be liable for response costs.
It is important to note that the Court acknowledged that the developers were not liable as arrangers (due to the recent holding of Burlington Northern Railroad) but found that the developers were liable based on operator liability, which does not require knowledge of the presence of a contaminant for liability to be imposed.
There are several other interesting aspects of the case, but the fact that a developer (or a homeowner) who moves around soil that turns out to be contaminated can be responsible for response costs is the most problematic. Environmental attorneys who practice in the area of CERCLA are not particularly surprised at the outcome, but I haven't met a developer yet who isn't shocked. It is yet another instance where the “polluter pays” principle means (tragically) very little.
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