On March 14, 2011, the Ninth Circuit affirmed a district court ruling that found that BCI Coca-Cola Bottling Co. ("BCI") was not liable as an owner under CERCLA. In Los Angeles v. San Pedro Boat Works, the city of Los Angeles sued BCI to recover response costs it had incurred to remediate contaminated sediments in Los Angeles Harbor. According to the complaint, the City alleged that the activities of BCI's predecessor-in-interest, Pacific American, Inc. ("Pacific-American") contributed to the sediment contamination in the harbor. Pacific-American did not own the boat works facility outright but rather operated that facility pursuant to a permit that had been issued by the city of Los Angeles. In support of its CERCLA claims, the City argued that because Pacific-American owned the permit, it was an "owner" under CERCLA. The City also argued that Pacific-American was liable as an "operator" under CERCLA. The district court found that BCI was neither an "owner" or "operator" under CERCLA. The City appealed the district court's finding that BCI was not an "owner" under CERCLA; however, for reasons that are not clear from the record, the City did not appeal the "operator" liability determination.
On appeal, the Ninth Circuit noted that CERCLA does not define "owner". The Ninth Circuit acknowledged that some courts have evaluated CERCLA ownership liability by examining whether the holder of the property interest possessed "site control" over the facility. For example, the court noted that the Second Circuit had established a multi-factor test for evaluating CERCLA owner liability, that included, among other things, an evaluation of whether a party was responsible for (i) the payment of taxes and insurance or (ii) making structural and other repairs. See Commander Oil Corporation v. Barlo Equip. Corp., 215 F.3d 321 (2nd Cir. 2000). The Ninth Circuit rejected that analysis, however, instead looking to the law of the state where the land at issue is located to determine whether a party is an "owner" under CERCLA. According to the Ninth Circuit, California courts have found that there is a relevant distinction between absolute title to real property and less-than fee-title possessory interest in real property. The Ninth Circuit held that rather than applying the nebulous and flexible analytical framework relied upon by the Commander court, the Ninth Circuit would instead apply California law to find that a holder of a permit for a specific use of real property is not the "owner" of that real property especially where, as occurred in this case, the fee title owner retained the power to control the permittee's use of the real property. As such, the Ninth Circuit affirmed the district court's dismissal of the City's CERCLA claims against BCI.