In Valbruna Slater Steel Corp. v. Joslyn Manufacturing. Co., No. 1:10-CV-044 JD, 2018 WL 446645 (N.D. Ind. Jan. 16, 2018), the court took the unusual step of allocating Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) liability to a party who played no part in contaminating the site at issue.
CERCLA allows potentially responsible parties who pay for cleanup costs to seek contribution for those costs from other potentially responsible parties. 42 U.S.C. § 9613. These contribution claims are commonly referred to as Section 113(f) claims. Courts apportioning costs under Section 113(f) typically do so by analyzing six equitable factors created by then-Senator Al Gore. Envtl. Transp. Sys., Inc. v. ENSCO, Inc., 969 F2d 503, 508 (7th Cir. 1992). These “Gore” factors are:
- The ability of the parties to demonstrate that their contribution to a discharge, release or disposal of a hazardous waste can be distinguished.
- The amount of the hazardous waste involved.
- The degree of toxicity of the hazardous waste involved.
- The degree of involvement by the parties in the generation, transportation, treatment, storage or disposal of the hazardous waste.
- The degree of care exercised by the parties with respect to the hazardous waste concerned, taking into account the characteristics of such hazardous waste.
- The degree of cooperation by the parties with federal, state or local officials to prevent any harm to the public health or the environment.
Courts, however, are not limited to using the Gore factors and are permitted to consider any equitable factor they deem appropriate. Id. In Valbruna, the court found the Gore factors’ usefulness was limited because “[t]hey focus primarily on apportioning liability between two or more polluting parties,” a circumstance not facing the court. Valbruna, 2018 WL 446645, at *4.
Defendants Joslyn Manufacturing Company, Joslyn Corporation and Joslyn Manufacturing Company, LLC (collectively, “Joslyn”) owned a contaminated steel processing site near Fort Wayne, Ind., from 1929 until 1981. The property was later acquired by Plaintiffs Valbruna Slater Steel Corporation and Fort Wayne Steel Corporation (collectively, “Valbruna”) through a bankruptcy auction. To recover the costs it spent to remediate the property, Valbruna sued Joslyn under Section 107(a) of CERCLA. The court held that Joslyn was strictly liable to Valbruna for more than $2 million in remediation costs. Id. In response, Joslyn filed a counterclaim, seeking an equitable contribution from Valbruna.
Had the court strictly applied the Gore factors, Valbruna would have escaped liability, leaving Joslyn responsible for the full amount. Joslyn owned, operated and contaminated the site for more than 50 years, while Valbruna did not contribute to the contamination at all. Joslyn refused to accept liability for the contamination or participate in the cleanup efforts. Counting against Valbruna, however, was the fact that it “was well aware that the Site suffered from serious environmental issues prior to purchasing it.” Id. at *4.
Rather than strictly applying the Gore factors, the court based its decision on other equitable considerations and allocated 75 percent of the costs to Joslyn and 25 percent to Valbruna. Joslyn received the lion’s share because it was the sole polluter and because of its “blatant avoidance of liability and refusal to assist with some cleanup despite knowing it was responsible for contaminating the Site.” Id. at *7. Even though Valbruna was not responsible for any of the contamination, the court still found that it was equitable to allocate it a portion of the costs because it voluntary assumed some of the risk when it knowingly purchased a contaminated property at a reduced price.
This case should serve as a caution for individuals who knowingly (and even strategically) purchase contaminated property with plans to remediate it. Although such a party might not be allocated any portion of the costs under the Gore factors, courts remain free to allocate liability based on other factors like the assumption of risk or the possibility of windfall to a party who purchases a contaminated property at reduced price but does not pay any remediation costs.