You are the president and majority shareholder of Painters, Inc., a custom painting company. You started the company in your garage, and quickly relocated to a larger facility where you accept work from manufacturers for custom paint finishing. Because of the continued success of your company, you decided to expand again.
Working through a commercial real estate broker, you locate two buildings on a piece of property formerly owned by a dairy which went bankrupt. The building on the south side of the site was the former ice cream plant, and the building on the north side housed the former milk plant. The two buildings are very close to each other, separated only by an alley. The closing on the property goes smoothly and you are the proud owner of a new location for your paint facility.
The property is much larger than you need, but through the same real estate broker that helped you acquire the property, you arrange to sell the ice cream plant to another company which intends to use the facility for the production of frozen yogurt. Before the sale of the property, the purchaser of the ice cream plant asks if you would mind moving two drums which are partially filled with an unknown, sweet-smelling substance located on the south side of the alley. If you cannot get it done, the buyer states that he will simply have the drums disposed of properly. You do not know what the contents of the drums could be, but you cannot imagine that the contents of the drums could be hazardous given that the building housed an ice cream plant, so you agree to move the drums to your side, out of the buyer's way.
It has been three years since the drums were moved, and you are comfortably settled into your new location doing an even better business than you had anticipated. Your neighbor who owns the frozen yogurt plant seems to be doing well and you have become friends. Recently, however, he notifies you that as part of a refinancing plan for his business, he had to test the groundwater under his property for contamination, and he found extremely high levels of pesticides in the water. You explain that you will cooperate with the investigation, but you have never used pesticides on your facility, so you could not possibly be involved with the release.
A month later, representatives of your state EPA organization show up and request permission to drill groundwater wells and take soil samples on your site. The representatives inform you that the purpose of the sampling and wells is to determine from where the pesticide in the groundwater originates. You allow the EPA representatives to sample and to install the wells. About a month after the sampling and well installation, EPA representatives inform you that they want to meet with you. At the meeting, EPA representatives inform you that the source of the pesticide in the groundwater is the two corroded and leaking drums from the alley.
The EPA representative asks how the drums became located on your property. You explain to the EPA representative that the bankrupt dairy abandoned the drums on the property now owned by the frozen yogurt plant. You explain that you moved the drums onto your property when the current owner asked you to move the abandoned drums out of his way before his acquisition of the real estate. This, you explain, was your only contact with the drums, and you certainly had no idea that the dairy had abandoned pesticides on the property.
About a month later, you receive a notification from EPA that you are being held responsible for the cost of removing the drums, excavating the soils from the alley, and removing the contamination from the groundwater, all pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675. EPA claims that you are a responsible person because you disposed of hazardous substances at your property, namely pesticides. You immediately contact your attorney for environmental matters. You know that EPA must be mistaken, because you never improperly disposed of anything. Your attorney informs you that he will discuss the matter with EPA, perform the necessary research, and advise you of the accuracy of EPA's position. About a week later, your attorney provides you with the following analysis.
To hold you responsible for CERCLA liability, EPA must prove that you are a "responsible party" as defined by 42 U.S.C. § 9607(a)(1)-(4) which states:
[n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section --
(1) the owner and operator of a . . . facility,
(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,
(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, . . . of hazardous substances owned or possessed by such person, by any other party or entity, at any facility . . . owned or operated by another party or entity and containing such hazardous substances, . . .
(4) . . . [is a responsible party].
For purposes of CERCLA, "disposal" is defined as:
[t]he discharge, deposit, injection, dumping, spilling, leaking, or placing of any . . . hazardous waste into or on any land . . . so that such . . . hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.
42 U.S.C. § 6903(3).
In your case, you ordered your employees to move the drums, later found to contain hazardous substances, from one location to another on the site while you owned the property. Under a fact pattern almost identical to this one, the court held in New York v. Almy Brothers, 866 F. Supp. 668 (N.D. N.Y., 1994), that simply moving drums from one location to another, even when the person who moved the drums was not the person who abandoned the drums, was enough to constitute "disposal" for purposes of CERCLA liability. In this case, your attorney explains, the court is likely to hold that you disposed of hazardous substances when you relocated the drums in the alleyway, or arranged for such relocation, so that the drums would not interfere with the new owner's activities. As the court in Almy Brothers stated, "[I]t is irrelevant whether or not the movement of the drums itself resulted in a release. The [defendants] disposed of these drums when they left them in the alleyway and allowed them to deteriorate in such a way that the chemicals they contained 'might' enter the environment."
Your attorney explains that courts have struggled with CERCLA's provisions to impose liability on what would otherwise seem like innocent people. The court's justify their holdings by citing to legislative history to find that CERCLA's fundamental goal is "overwhelmingly remedial" and, on that basis, interpret its provisions liberally in favor of liability. United States v. Fleet Factors Corp., 821 F. Supp. 707, 712 (S.D. Ga. 1993).
In Fleet Factors, the defendant argued that it was not responsible for damages caused by drums containing hazardous wastes which were on the property before its ownership. The court in Fleet Factors held that "[d]isposal may occur even though the potentially liable party did not introduce the disposed of substances to the site." CERCLA's definition of "disposal" expressly encompasses the "placing of any . . . hazardous waste . . . on any land." 42 U.S.C. § 69033(3) [as incorporated into CERCLA by 42 U.S.C. § 9601(29)].
You ask your attorney if you could argue that nothing you did "caused" the release of the hazardous substances into the environment. You simply moved the drums from one side of the alley to the other. Your attorney explains that the courts have ruled that an owner may not avoid liability by ". . . standing idle while an environmental hazard festers on his property." Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 845 (4th Cir. 1992).. As the Nurad court held "[t]he trigger to liability under § 9607(a)(2) is ownership or operation of a facility at the time of disposal, not culpability or responsibility for the contamination." Thus, the Nurad court concluded that "§ 9607(a)(2) imposes liability not only for active involvement in the dumping or placing of hazardous waste at the facility, but [also] for ownership of the facility at a time that hazardous waste was spilling or leaking." Nurad, 966 F.2d at 846.
Your attorney explains that had the drums been left on the south side of the alley, where they were originally abandoned by the dairy, liability probably would not have attached to you. Because the drums were not leaking at the time of the sale of the ice cream plant, you would have neither owned the property at the time of disposal, nor would you have been the party doing the disposal. However, at least for purposes of CERCLA liability, since you owned the property onto which the pesticide leaked after you moved the drums, the courts will likely hold you liable since, according to the court, you "disposed" of the material.
My recommendation to clients is never acquire property that has drums of anything located on it, leaking or not. Insist that the prior owner remove the drums before you acquire title. Never store mystery material with the expectation that it is not hazardous. If it turns out to be a hazardous substance, and it is leaking onto your property, chances are a court will find that you are somehow liable for its cleanup if it leaks into the environment. In this case, something as simple as moving the drums from the south side of the alley to the north side of the alley constituted disposal for this unlucky owner. The courts are stretching the CERCLA definition of "responsible party" to attach liability to even a broader spectrum of people and companies. The more creative the courts, the more cautious industry must become to avoid this web of liability.