Becker's Iowa Environmental Law Update : Iowa Environmental Lawyer & Attorney : Charles Becker : Belin McCormick P.C. Law Firm : IA Regulatory Compliance, Site Cleanups

When it rains, it pours, and right now there’s a veritable typhoon of Superfund liability cases.

On September 30, 2009, the federal district court in Georgia ruled on several summary judgment motions in Scarlett & Associates, Inc. v. Briarcliff Center Partners, L.L.C. The primary question was whether a property management service could be liable for remedial costs under CERCLA and/or RCRA. The Court said yes to both.

The property in question was a strip mall that housed a leaking dry cleaning facility. The contamination was identified in the early to mid-1990s and a release notification was issued on June 27, 1994. Since that time, the plume has continually migrated and expanded. When the owner of the center failed to make its payments, AmSouth Bank of Florida took over operation of the center.

In September of 1995, AmSouth retained Faison and Associates to undertake certain property management services, which they did until September of 1997.

What Faison could not do:

1) Manage any tenant operations;

2) Assert control over which tenants were permitted to lease space;

3) Evict tenants; or

4) Assert control over any hazardous substances handled by a tenant.

What Faison could do:

1) Attempt to rent and renew rentals space to tenants approved by AmSouth;

2) Collect rent and maintain common areas;

3) Make repairs;

4) Pay utilities and taxes for AmSouth;

5) Ensure that the operators of the dry cleaning business complied with EPA’s reporting requirements on dry cleaning facilities covering PCE emissions, equipment monitoring and repair, and accounting of PCE consumption.

AmSouth successfully argued that its indicia of ownership was for the sole purpose of protecting its security interest, so it had no liability pursuant to the Secured Creditor Exemption under Superfund. Faison, its agent, wasn’t as lucky.

With respect to the CERCLA claim, the court found that, to be liable, Faison needed to be actually involved in the operations involving leakage or disposal of a hazardous waste. The Court found that there was evidence that Faison “played at least a minimal role in managing the dry cleaner’s operations specifically related to pollution.”  That role was that Faison had sent the dry cleaner a letter advising it of some reporting requirements (not release related) to EPA. Based on this act and Faison's general management actions, the court found that there existed a question of whether Faison had operator liability under CERCLA.

The Court then considered RCRA liability. While CERCLA is designed to address past releases, the intent of RCRA is to regulate the ongoing use of hazardous materials and to require cleanup from those operations.   That is, the party, at the time that suit is filed, must be involved in an ongoing violation of a RCRA requirement, i.e., there must be a current violation.  But, in this case, Faison had been off of the site for years prior to commencment of the suit.  So why was Faison liable under RCRA?

The Court held that the existing plume was continuously expanding and was, therefore, a “current violation.” Although the Court specifically found that Faison did not contribute to the past or present handling, storage, treatment, transportation or disposal of PCE, its management role on behalf of AmSouth was sufficient to support a finding that it was operating a hazardous waste treatment, storage and disposal facility.

Looking at the activities of the management company, the short time period of oversight, and the length of time since the company worked on the property, I believe that most would say that this is a very disturbing holding. Obviously, the “polluter pays” principle is nonexistent but, more importantly, what message is being sent? One message is that if a property manager is aware of any contamination at a site being managed, there are only two options: 1) Don’t manage the property, or 2) Have an iron-clad indemnification from your customer (and if it’s anyone other than a bank or Microsoft, good luck with that).

But what if the property manager doesn’t know about the releases?  Short answer – it doesn’t matter. In this case, the court found that there were active releases from the dry cleaner between 1995 and 1997, but there was no evidence that Faison was aware of those releases.  However, nothing in the opinion or the law requires knowledge for operator liability. All that is required is that there be a release of a hazardous substance during the manager’s watch which is still migrating (I have yet to see a plume that hasn’t migrated) and is not remediated at the time of the action (which can be years after the manager has ceased managing).

Regardless of the final outcome, I would suggest that this is bad policy.  We need property managers to be able to do their job without fear of being drawn into Superfund liability.  We are in an era where it is permissable for banks and land purchasers to be sheilded from environmental liability.  Surely we can afford similar protection to property managers.

RELATED POSTS: City Superfund Liability Goes Down the Drain

                            CERCLA Operator Liability: A Tragedy in One Act
 

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Many thanks to Michael Foti at Attorney.org for including this blog in the list of "Top Environmental and Land Use Law Blogs."  The primary focus of Attorney.org is to raise awareness and take stands on pressing issues in an effort to fight for change.  They have decided to focus some of their resources on the environment and land use and have spent what appears to be a considerable amount of time researching the available law blogs. 

If you like to see good writing on very current environmental issues, take a look at the list that Attorney.org has put together.  The posts by those authors will make you laugh and make you cry.  But most of all, they'll make you think.  And in this environmental age, there's a lot of thinking--and acting--that needs to be done.

I'm proud to be included in the list and I would encourage you to look at all of the others found there. They deserve your attention and support.

RELATED POST: Best Environmental Law Blogs

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In September of 2009, the federal district court for the Eastern District of California issued a ruling in Adobe Lumber, Inc. v. Hellman.  If the holding catches on, it should scare the sewage out of every city in the country.

The facts are fairly unremarkable as Superfund facts go. Between 1974 and 2001, a shopping center, owned by Adobe Lumber,  housed a dry cleaning business. A floor drain from the dry cleaners connected to the sewer system for the City of Woodland, California through a waste pipe. The dry cleaning operators used the floor drain to dispose of waste water containing perchlorethylene, which is a hazardous substance under CERCLA.  In 2001, it was determined that PCE from the dry cleaning establishment had contaminated the soils and groundwater. So far, not too surprising. 

The interesting aspect of the case is that the plaintiff chose to include the City in the lawsuit. The plaintiff''s claim against the City was that the contamination was a result of the leakage of PCE from the sewer system and that the sewer system was

especially likely to leak due to … its age, the large number of joints, grout (mortared) joints and defects in the sewer system and that the city’s management and maintenance of the sewer system was re-active, minimal, and inadequate.

In suing the City, the plaintiff sought declaratory relief and cost recovery under CERCLA as well as several other theories. The plaintiff moved for summary judgment on the CERCLA claim under the theory that the City, as the owner and operator of the sanitary sewer system, had liability for any leaking hazardous substances from those facilities. 

The court first addressed the question of whether the sewer pipes constituted a “facility” under CERCLA. The court noted that the term “facility enjoys a broad and detailed definition.” (For those who don’t read a lot of cases, this kind of language is a bad sign). The court then found that the sewer pipes can be deemed a facility because the statutory language identifies a facility as any site or area where a hazardous substance has been disposed of or comes to be located. The court could find no language to exclude the city’s sewer system, so it held that the pipe was a “facility” under CERCLA.

The court then went on to determine whether the city was an owner or operator of the facility. This one, however, was easier because there was no question but that the city owned the sewer system.

Finally, the city asserted the innocent landowner defense. The elements of that defense are that the defendant must prove that: 1) the release or threat of release of hazardous substances was caused solely by the acts of a third party, and 2) the defendant exercised due care with respect to the hazardous substances and took precautions against foreseeable third acts or omissions. The Court found that neither of the elements were satisfied.

First, the court found that the dry cleaners did not constitute the “sole” cause because the City allowed the sewer lines to degenerate to the state which allowed the releases to occur. 

Second, the court found that though the dry cleaner's conduct clearly violated state and local law, that did not render the conduct unforeseeable as a matter of law. The evidence showed that the City did not take steps to remedy the leaks in the sewer system until 2004 even though it was aware that several dry cleaners did operate in the area. The court found that it was foreseeable that the City would be aware that PCE could be illegally discharged from these facilities and the City was required to take “reasonable steps” to prevent ongoing contamination, which the City did not do until 2004. Therefore, the City was the “owner” and “operator” of a “facility” that allowed the release of a hazardous substance.

I believe it is safe to say that the City was surprised at the outcome.

There is still a long way to go and appeals to be had, but, based on the cases cited by the court, there is every reason to believe that the City will ultimately be one of those parties who gets allocated some of the response costs for this clean up. It will be interesting to see if the Burlington Northern case lets them get out for a low percentage.

The real import to this case, in my mind, is that it, once again, highlights the idea that the “polluter pays” under CERCLA is often not true. The environmental regulatory schemes under both federal and many state laws are much less concerned with who caused a hazardous release than they are with who can be easily located to pay for the clean up of a hazardous release. And while that may be expedient, it is a far cry from making the polluter pay as that phrase is understood by most people.

RELATED POSTS: The SCARLETT Letter of Operator Liability

                            CERCLA Operator Liability: A Tragedy in One Act
 

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When it comes to polling consumers about their environmental beliefs, I admit to being a skeptic. People just don't tell the truth. They want to, but they just can’t help themselves.

Ask a consumer if he/she supports prohibiting air pollution from an industrial facility and you will get roughly the same response as if you asked them if the United States is the greatest country on earth. Sierra Club, Greenpeace and hundreds of other environmental groups have done an excellent job of making it “un-American” to be anything other than an unqualified supporter of everything green. The problem is that a large majority of consumers don’t really seem to mean it. What they mean is that so long as it does not cost them any money, they will be supportive. A recent study done by Grail Research entitled “The Green Revolution” provides some illuminating poll results along these lines.

In September of 2009, Grail Research polled 600 consumers about their purchases, or possible purchases, of green products.  There are many significant points made in the Report, but let me focus on a few of the more interesting findings:

1.  85% of those polled stated that they have bought green products.  However, only 8% of consumers buy green for a majority of their purchases (these 8% are referred to as "Dark Green" consumers);

2.  93% said that a company being perceived as green was important to their purchasing decision, yet about 80% were unable to identify green companies;

3.  15% of those polled were non-green consumers and, for 70% of them, their top reason for not going green was that the products were too expensive. Of the remaining 85%, a sizable majority will consider a green product only if it is superior or at least on par with its conventional counterpart;

4.  Of the various reasons given by consumers for not buying green (too expensive, the recession, don't feel a need, not easily available, green is a fad, and the product reviews aren't good), price and the economic recession are the main factors preventing consumers from buying green products in new categories.

I know there are a lot of ways to interpret polling results, but to me, these answers suggest that lip service is being paid to being green, with the pocketbook voting otherwise.  Put another way, consumers apparently want to buy green, but they need to know the cost of doing so.

Is it a bad thing that people are green primarily when it doesn't cost them anything? Not necessarily.  Especially in this economy, it's consumer nature.  But do we have to ignore that nature?  These findings indicate  that advancing an environmental agenda is likely to be a lot more successful if there is an economic advantage (which is often the case) rather than lamenting that the end of the world is near or that your puppy is going to die.   It's just a thought.

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