Type: Law Bulletins
Date: 08/10/2010

CERCLA Owner / Operator Liability Is Determined When Cleanup Costs Are Incurred

In a matter of first impression, the U.S. Court of Appeals for the Ninth Circuit has held that, for the purposes of CERCLA liability, an owner or operator is determined at the time cleanup costs are incurred, and not when the lawsuit is filed.

On July 22, 2010, the Ninth Circuit issued an opinion in State of California Department of Toxic Substances Control v. Hearthside Residential Corp., 2010 WL 2853762.  Hearthside owned contaminated property in Huntington Beach, California, that the California Department of Toxic Substances Control (the “Department”) determined to be the source of PCB contamination of a neighboring property.  Hearthside disclaimed responsibility for the neighboring property contamination, and the Department contracted for the cleanup of that property between 2002 and 2003.  In 2005, Hearthside sold its property, and in 2006 the Department brought suit against Hearthside seeking reimbursement for the remediation costs of the neighboring property.  The Department alleged that Hearthside was an owner under CERCLA, 42 U.S.C.A. § 9607(a), because Hearthside owned the property that was the contamination source at the time the Department incurred the cleanup costs.  Hearthside claimed it was not responsible for those costs because it was not an owner or operator at the time the suit was filed.

Under CERCLA, it is clear that owners and operators are strictly liable for contamination.  42 U.S.C.A. § 9607(a).  However, the statute is silent as to when ownership is determined.  When presented with the issue, the district court could not find any persuasive case law to aid in its decision.  After noting that there was a “dearth of meaningful or controlling case law,” the district court held that under CERCLA owner status is determined at the time the claim accrues, not at the time the lawsuit is filed.  The parties jointly request the issue be certified to the Ninth Circuit.  The Ninth Circuit noted that “[t]here is no controlling or persuasive precedent” addressing the issue of what point in time owner or operator status is to be determined.  The court dismissed the cases cited by the parties as dicta, finding that none of those cases addressed the question directly.

The Ninth Circuit determined that ownership is measured at the time of cleanup, not at the time a lawsuit is filed, and found Hearthside responsible for the cleanup costs.  The court looked to various CERCLA provisions for guidance, and determined that generally, the purpose of the statute is to measure ownership at the time of cleanup.  Specifically, the court looked to CERCLA’s statute of limitations provision, which is triggered at the time of cleanup.  See 42 U.S.C.A. § 9613(g)(2).  The court reasoned that, because statutes of limitations are meant to protect defendants by providing notice and predictability, it is reasonable to assume that Congress intended the statute to run against the owner of the property at the time cleanup occurs.  To hold that an owner is determined at the time a lawsuit is filed would undermine the purpose of the statute of limitations, and would encourage owners to delay cleanup until they could sell the property, contravening CERCLA’s purposes of promoting settlement and efficient cleanup.

For more information about CERCLA owner / operator liability, please contact Heidi Trimarco or any member of Taft’s environmental practice group.

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