January 2010 Update: Environmental Lender Liability
January 2010 Update: Climate Change

February 2010 Update: Environmental Lender Liability

By Gabrielle Sigel and Genevieve Essig

CERCLA Case Law Developments

  • District Court Finds Owner of Leased Equipment Liable Under CERCLA
    On February 9, 2010, the United States District Court for the Northern District of Illinois held that an owner of equipment leased for use in an electroplating operation is a PRP under CERCLA as a “facility owner at the time [of cleanup].”  United States v. Saporito, No. 07-C-3169, slip op. at 15 (N.D. Ill. Feb. 9, 2010).  In Saporito, the federal government sought to recover $1.5 million it spent to clean up hazardous substances affecting soil and groundwater at the former Crescent Plating Works site on the northwest side of Chicago from defendant individuals James Saporito and Paul Carr.  During the electroplating process, items to be plated were dipped into a series of chemical baths through which an electrical current was run, and hazardous materials contained in the baths, such as sodium cyanide, hexavalent chromium, and TCE, at times splashed onto the concrete floor, ultimately reaching the soil below.  Saporito, whose dealings with Crescent Plating included his purchasing and leasing back to Crescent Plating equipment used in the electroplating process, filed a number of counterclaims against the government and moved for summary judgment on his liability.  The government moved for summary judgment on its claims that Saporito was both an owner and an operator liable under CERCLA, and moved to dismiss Saporito’s counterclaims, both of which the court granted.
      The court stated that the Crescent Plating operation and the plating lines each constituted a CERCLA “facility” because CERCLA’s statutory definition of that term separately lists a “building” and “equipment.” 


      . at 10.  Although concluding that Saporito’s liability as a past operator of Crescent Plating was a disputed question of fact, the court agreed with the government’s argument that Saporito was a “facility owner at the time of the cleanup based on his undisputed ownership of equipment used in the plating process.”


      . at 15.  Noting that the equipment Saporito leased to Crescent Plating was a “necessary part of the plating process,”


      ., the court rejected Saporito’s argument that “one who leases equipment to an independent party that uses the equipment to cause pollution is not liable as an owner under CERCLA.” 


      . at 16.  In reviewing its conclusion, the court relied on a case in which the federal government conceded CERCLA owner liability “because it ‘owned and leased the components most important to’ the operator’s process.” 


      . at 15-16,

citing Elf Atochem North America, Inc. v. U.S

      ., 868 F. Supp. 707, 709 (E.D. Pa. 1994).  The court found that this interpretation comported with the ordinary meaning of “owner,” and analogized the owner of “equipment necessary to the operation of the plating line” to a “part-owner of land.”



      The court dismissed the argument that its interpretation would “[sweep] too broadly,” causing such absurd results as a power company or city being held liable since they own the power lines used for the currents in the chemical baths or the water pipes providing water for the process. 


      .  The court reasoned, “Defendant’s equipment is similar to the power lines or water pipes in that it is necessary for the electroplating process, but under a common understanding of the word ‘owner,’ the power company and the city are not owners of the plating line.  Defendant, though, because he owned

actual components

      of the plating line, is an owner.”


      . at 17.  The court also found that Saporito had not presented sufficient evidence to qualify for the secured creditor exception to CERCLA owner liability, having failed to show that he owned the equipment “primarily to protect a security interest.” 


      . at 17-18. 

      The court then rejected a number of other defenses raised by Saporito, and dismissed his six counterclaims, five of which the court found to be “sketchy and conclusory,” and one for which the court found it lacked jurisdiction. 


      . at 28.

    • Second Circuit Holds CERCLA Settlement with State Sufficient to Allow Contribution Action

      On February 24, 2010, the United States Court of Appeals for the Second Circuit held that a PRP that has settled its CERCLA liability with a state environmental agency may seek contribution under CERCLA § 113(f)(3)(B) because state environmental agencies are not required to seek authorization from U.S, EPA for such settlements; however, a PRP who has incurred response costs and who is appropriately seeking contribution may not recover from other PRPs under § 107(a)(4)B).  Niagara Mohawk Power Corp. v. Chevron U.S.A, No. 08-3843, 2010 U.S. App. LEXIS 3859 (2d Cir. Feb. 24, 2010).  In Niagara, the Water Street Site in Troy, New York, had over the course of a century supported several manufacturing operations, including a manufactured gas plant formerly owned by Niagara.  In 2003, Niagara entered into an Order on Consent with the New York Department of Environmental Conservation (“NYDEC”) pursuant to which Niagara incurred investigation and remediation costs in return for a release from CERCLA liability to the State once its work under the Order was completed.  In this action, Niagara sought to recover costs from other PRPs who either currently or in the past owned, leased, or used the site.  Niagara’s suit had been before the Second Circuit twice before and had been remanded due to intervening Supreme Court CERCLA decisions.  In this third ruling, the appellate court held that Niagara could seek contribution under CERCLA § 113(f)(3)(B) because it had settled CERCLA liability with NYDEC, but, because it could seek contribution, it is precluded from recovery under CERCLA § 107(a). 

      In finding that Niagara’s Consent Order with NYDEC “[qualified] as an administrative settlement of liability” for purposes of § 113(f)(3)(B) contribution eligibility, the court distinguished prior Second Circuit cases addressing this issue.  Id. at *28.  Overruling the trial court, the appellate court found that a state settlement of CERCLA liability does not require “that there be a federal delegation of settlement authority to a state.”  Id.  The court found support for its conclusions in the amicus brief submitted by U.S. EPA, which opined that the role of the states in the administration of the CERCLA statute “is not only critical, it is autonomous.” Id. at *29.  Because the Order “specifically released [Niagara] from CERCLA liability,” it was a settlement pursuant to CERCLA § 113(f)(3)(B).  Id. at *27. 

      The court held, however, that it would be inappropriate for Niagara to pursue costs under CERCLA § 107(a), which it found serves a different purpose – providing an avenue of recovery for “PRPs who incur CERCLA cleanup costs without judicial or administrative intervention.”  Id. at *31.  The court observed that § 113(f)(3)(B) was added to the statute specifically for the benefit of PRPs like Niagara, i.e., those who have resolved liability through a judicial or agency-approved settlement.  The court found that, because Niagara was entitled to contribution, in order to give effect to the purposes of the CERCLA contribution provision, Niagara could not also qualify for recovery under § 107(a).

      The appellate court also overturned the district court’s grant of summary judgment in favor of the defendants, finding genuine issues of material fact with regard to their respective liabilities, and reinstated Niagara’s New York Navigation Law claim to obtain contribution for costs associated with petroleum contamination.  The court affirmed the dismissal of Niagara’s state claims for contribution, indemnity, and unjust enrichment as preempted by CERCLA’s contribution scheme.  Finally, the court found that, as a matter of law, Niagara’s “adherence” to the NYDEC Order “established its compliance with the National Contingency Plan,” and reversed the trial court’s decision that Niagara’s compliance with the NCP was subject to further proof. Id. at *61.


    • District Court Dismisses CERCLA Counterclaim for Specific NCP Compliance

      On February 22, 2010, the United States District Court for the District of Puerto Rico dismissed a defendant gas station owner’s CERCLA counterclaim in a suit brought by commercial property owners alleging RCRA violations, although it allowed the defendant’s state law indemnification counterclaim to proceed. Sanchez, et al. v. Esso Standard Oil de Puerto Rico, Inc., No. 08-2151, 2010 U.S. Dist. LEXIS 15165 (D.P.R. Feb. 22, 2010).  In Esso, defendant Esso Standard Oil owned and operated a gas station and underground storage tanks at Canovanas, Puerto Rico, as well as supplied and transported petroleum fuel products to the station; plaintiffs owned commercial stores and real property at the station.  Plaintiffs alleged a RCRA claim for imminent and substantial endangerment to public health as a result of violations of state UST standards and illegal operation of the station as a waste disposal facility.  Esso counterclaimed seeking reimbursement under CERCLA for its cost of remedial actions and for indemnification under agreements it had with plaintiffs.  In the present proceeding, plaintiffs and defendant moved to dismiss each other’s claims.  The court dismissed only Esso’s CERCLA counterclaim, retaining all other claims.

      After finding that Esso had the right to bring a CERCLA § 107(a) claim, despite Esso having “voluntarily” incurred costs and acting without prior government action, the court dismissed Esso’s CERCLA counterclaim for other pleading deficiencies.  Specifically, it found that Esso failed to sufficiently allege details as to how its remedial actions were consistent with the National Contingency Plan.  The court allowed Esso’s state law indemnification counterclaim to proceed, denying plaintiffs’ abstention and federal preemption arguments. 

      Esso maintained that plaintiffs’ complaint should be dismissed because of a lack of subject-matter jurisdiction under RCRA, 42 USC § 6972(a)(1)(A) and (B), arguing that: 1) a suit under this provision requires an ongoing violation, but the station had already passed from Esso’s ownership to a third party; and 2) plaintiffs had failed to sufficiently allege imminent and substantial endangerment to the public.  In response, the court stated that, despite no longer being an owner of the site, Esso may have continuing obligations for past discharges.  In addition, the court found that plaintiffs’ allegation that “severe benzene contamination” in the groundwater beneath the station was sufficient to allege imminent and substantial endangerment to the public health.  Thus, plaintiffs’ RCRA claims and Esso’s indemnification claim were allowed to proceed.  Id. at *19.


  • District Court Declines to Expand Definition of CERCLA “Operator” Liability

    On February 18, 2010, the United States District Court for the Southern District of West Virginia held that a tank car inspector and a tank car loader could not be held liable as operators under CERCLA for a spill which occurred after the railcar had left their control.  Veolia Es Special Services, Inc. v. Hiltop Inv., Inc., No. 3-07-0153, 2010 U.S. Dist. LEXIS 14421 (W. Va. Feb. 18, 2010).  In Veolia, a spill of coal tar light oil (“CTLO”) from a railcar occurred at a transloading facility in Westmoreland, West Virginia, and plaintiff Veolia was hired to clean it up.  When it was discovered that the operator of the facility would not pay for the cleanup, the CTLO purchaser, Marathon Petroleum Company, took responsibility for payment from that point forward.  To obtain payment for the work performed prior to Marathon’s assumption of responsibility, Veolia brought a CERCLA § 107 action against a number of entities, including Rescar, which inspected the tank car before it departed; Sloss, which loaded the tank car before it departed; and GATX, which owned the tank car.  In their motions for summary judgment, Rescar and Sloss argued that they were not covered persons under CERCLA.  The court agreed and granted their motions.

    Veolia and GATX argued that Rescar and Sloss should be considered “operators” under CERCLA.  However, the court found, as it had in prior instances, that the “plain statutory language” of the statute required that, to be liable as an operator under CERCLA, “one must have ‘at the time of disposal of any hazardous substances owned or operated any facility at which such hazardous substances were disposed of.’”  Id. at *9-10 (emphasis supplied).  Noting that no party claimed that the two defendants had control over the railcar at the time of the spill, the court rejected what it viewed as attempts “to create liability based on causation.”  Id. at *13.  In support of its decision, the court referenced, inter alia, the fact that the original House bill for CERCLA included language imposing broad liability based on causation, but that language was deleted from the final version.  Therefore, the court concluded that, because “neither Rescar nor Sloss had any ability to manage, direct, or conduct operation of the tank car” at the time the spill occurred, they could not be liable as CERCLA operators.  Id. at *18.

RCRA Case Law Developments

  • Tenth Circuit: Plaintiffs Fail to Establish Plane Deicing Practices Present “Imminent and Substantial Endangerment” Under RCRA

    On February 8, 2010, the U.S. Court of Appeals for the Tenth Circuit affirmed a district court’s denial of injunctive relief to plaintiffs seeking to prohibit certain plane deicing practices at the Denver International Airport.  The court found that plaintiffs had failed to demonstrate that the use of aircraft deicing fluid (“ADF”) at the airport may present an imminent and substantial endangerment to health under the federal Resource Conservation and Recovery Act (“RCRA”).  Crandall v. City and County of Denver, No. 08-1197 (filed Feb. 8, 2010).  In Crandall, current and former United Airlines employees brought a citizen suit under RCRA § 6972(a)(1)(B) against the City and County of Denver to obtain an injunction prohibiting full-plane deicing at Denver International Airport’s Concourse B gates and requiring other precautionary steps with regard to ADF.  When a primary constituent of ADF, propylene glycol, degrades under certain conditions, it can produce hydrogen-sulfide gas, which can be harmful at high levels.  Between 1998 and 2006, there were several reports of exposure to the gas inside Concourse B as a result of use of ADF at the Concourse B gates.  Plaintiffs argued that, although Denver had halted the practice of full-plane deicing at gates in 2005, it had done so only because of the present lawsuit and could renew the practice at will.  After trial, the United States District Court for the District of Colorado found that plaintiffs had not proven their RCRA claim.  The Tenth Circuit affirmed.

    The appellate court’s analysis centered on whether plaintiffs proved that Denver’s ADF practices “may present an imminent and substantial endangerment to health.”  Crandall, No. 08-1197, slip. op. at 10.  After reviewing precedent applying and interpreting this RCRA statutory language, the court concluded that “although the harm may be well in the future, the endangerment must be imminent,” and that “solid waste presents an endangerment if harm may result absent further remedial measures.” Id. at 15.  Applying these principles, the appellate court agreed with the trial court that at the time of trial, not only was there no imminent harm, as there was “no detectable hydrogen-sulfide gas in Concourse B” and no prospect of there being any, id. at 16; but there was also no imminent endangerment.  The court ruled that “[i]t is not enough under RCRA that in the future someone may do something with solid waste that, absent protective measures, can injure human health.” Id. at 17.  The Tenth Circuit also emphasized the trial court’s finding that, even if Denver were to resume gate deicing practices, there is no evidence that it would result in hydrogen sulfide at high enough levels to present a health hazard.