In the 1980s and 1990s, judges usually began CERCLA cases discussing that CERCLA was a remedial statute that Congress intended to be broadly construed. Judges seemed afraid of the problem of toxic wastes and often uncritically accepted government arguments that cast a wide liability net that caught a wide range of defendants. Even in private cost recovery and contribution actions, courts did not hesitate to discard venerable legal doctrines such as successor liability and piercing the corporate veil to accommodate CERCLA’s “polluter pay” doctrine.
The high-water mark for liberal CERCLA liability was reached in 1996 when the Court of Appeals for the Second Circuit joined a half-dozen federal appeals court decisions and adopted a more relaxed federal common law approach for parent liability. Beginning with the 1998 Supreme Court decision in U.S.V. Bestfoods (524 U.S. 51), courts have exhibited an increasingly willingness to critically examine CERCLA’s liability framework. For example the Supreme Court decisions in Cooper Industries v. Aviall Services, Inc., 543 U.S. 157 (2004) and BNSF v United States, 556 U.S. 599(2009) overruled several decades of CERCLA jurisprudence.
Earlier this month we discussed Stratford Holdings LLC v Fog Cap Retail Investors LLC and Footlocker Retail, Inc. that limited private cost recovery by narrowly construing the meaning of the phrase “necessary costs of response”. Now comes Alprof Realty LLC v. Corporation Of The Presiding Bishop Of The Church Of Jesus Christ Of Latter-Day Saints (the “Church”), 2012 U.S. Dist. LEXIS 131046 (E.D.N.Y. 9/12/12) where a federal district court adopted an exceedingly narrow interpretation of a CERCLA “facility” that would have been unfathomable in the 1980s or 1990s.
In this case, the plaintiffs alleged that their properties had been contaminated with VOCs and that had migrated from the Church’s property onto the plaintiffs’ properties. In 2004, the Church’s environmental consultant excavated contaminated soil and removed 12,430 gallons of a petroleum/water mixture from the western edge of the Church property. The Church’s consultant also collected samples from the plaintiffs’ property which revealed extensive groundwater contamination.
In November 2009, plaintiffs filed a complaint asserting a variety of state and federal claims. The court initially dismissed several common law claims but granted the plaintiffs leave to re-plead that claim. After the amended complaint was filed, the Church filed a First Amended Answer to Plaintiffs Complaint and Counterclaims for contribution and cost recovery under CERCLA, common law contribution and unjust enrichment. The plaintiffs responded with a motion to dismiss all of the Church’s counterclaims while the Church sought to dismiss the restitution claim.
In their restitution claim, the plaintiffs’ allege that the Church had breached a duty to remediate the contamination. However, the court said the plaintiffs could not maintain a restitution claim when they had not actually performed any cleanup. The plaintiffs asserted that they had incurred approximately $50,000 to retain an environmental consultant to investigate the contamination as well as attorney fees to identify responsible parties. The plaintiffs claimed that the hiring of a consultant and attorneys was a necessary prerequisite to remediate the contamination. However, the court noted that the plaintiffs acknowledged that the Church had hired at least three environmental consultants to assess the extent of the contamination, including the contamination on the plaintiffs’ property, and did not allege that this investigation was a sham or even deficient. Accordingly, the Court said it was implausible that any additional expenditure on consultants and attorneys was immediately necessary to satisfy the requirements of public health, or safety. As a result, the court granted the Church’s motion to dismiss the plaintiffs’ restitution claim.
It certainly is plausible that the Church did not fully delineate the extent of the contamination on the plaintiffs’ properties and that the plaintiffs’ investigation costs could have been reasonably construed to have been necessary costs. While this aspect of the ruling was a victory for the Church, this narrow view of what type of costs needed to be pled to pursue the restitution claim served to telegraph how the court was going to handle the CERCLA counterclaims.
To grant a motion to dismiss, a court must find that the complaint does not contain sufficient facts to state a plausible claim for relief. The court must assume the facts alleged in the complaint are true. As the Supreme Court explained in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the “plausibility standard” is not akin to a “probability requirement.” The pleading must contain something more than a statement of facts that merely creates a suspicion of a legally cognizable right of action on the assumption that all the allegations in the complaint are true. In other words, factual allegations must be enough to raise a right to relief above the speculative level. The court is to ask if there is more than a sheer possibility that a defendant has acted unlawfully. Finally, a court is not bound to accept legal conclusions as true.
The court did not refer to the Iqbal/Twombly test and evaluate the counterclaims on a “plausibility” basis but appeared to apply the evidentiary standard used for a motion for summary judgment. Compounding this curious procedural anomaly, the court then adopted an exceeding narrow definition of a CERCLA “facility” that is inconsistent with 30 years of CERCLA jurisprudence.
The court began its analysis stating that there was no dispute that the Church property was a facility. The court also found that it was indisputable that contamination had spread to the Alprof property. Then, the court veered off course. The Church rightly argued contends that a facility is defined by the physical boundaries of the contamination and therefore the Alprof property and Church property constituted a single facility. The plaintiffs, on the other hand, argue that the migration of contamination from its source across property lines does not render separate properties—that have always been separately owned and operated—part of a single CERCLA facility. This may be the approach followed under the New York Superfund law but not CERCLA.
The operative language in the CERCLA definition of a facility is “(A) any building, structure, installation, equipment, pipe or pipeline (including any pipe into a sewer or publicly owned treatment works), well, pit, pond, lagoon, impoundment, ditch, landfill, storage container…..or (B) any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located” [emphasis added].
There is no suggestion in this definition that a facility depends on the ownership or relationship of individual parcels to each other. Yet despite the plain language of the definition, the court decided that a facility had to be under common ownership. In so holding, the court said accepting the Church’s position would lead to the “absurd result in which every neighboring landowner whose property has become contaminated by migrating hazardous substances could be held liable under CERCLA for the cost of cleaning up the entire area of contamination as soon as a party who causes the contamination sells its property.” But this is the very reason why Congress added the Contiguous Property Owner (CPO) defense when it amended CERCLA in 2002.
The court said the cases relied on by the Church did not establish that a CERCLA facility must always be defined to include the entire area of contamination, and they particularly do not stand for the proposition that an unrelated neighboring property onto which contamination spreads becomes part of the CERCLA facility. However, a close reading of these cases belies this conclusion. These were sweeping decisions broadly construing the definition of facility that were not dependent on the specific relationship between the properties, the parties, and the contamination in determining the boundaries of a CERCLA. The fact that the parcels had been originally under common ownership did not influence those courts. There is no other way to say this- the court misunderstood and misconstrued the CERCLA definition of facility.
To support its conclusion, the court extracted language from an MGP case stating that “[s]eparate parcels should be considered as a single facility if they `cannot be reasonably or naturally divided into multiple parts or functional units [,]’ . . . [but] where parcels are naturally divisible into parts or functional units they should not be considered as a single facility.” Again, this represents a fundamental error in what is an operable unit. EPA often elects to divide complex CERCLA facilities into operable units for administrative purposes to make the investigation and remediation more effective. An operable unit is part of the larger CERCLA Facility and an operable unit is not a separate CERCLA Facility.
The court’s concern about the unfairness of CERCLA was well placed. No one questions that CERCLA is unfair. However, the court rewrote the statute to reach what it felt was to prevent an unfair result. But it is not the court’s job to rewrite the statute. Congress was aware of how broadly courts were construing CERCLA when it amended CERCLA in 1986 and 2002. Instead of changing the key definitions or the broad liability framework, Congress added narrowly tailored defenses to the statute. What the court should have done is to deny the plaintiffs’ motion to dismiss and give the plaintiffs the opportunity to plead the various defenses that Congress added to the statute in 1986 and 2002 to mitigate the law’s unfairness.