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Owner During Cleanup is the "Current Owner" for Purposes of CERCLA, 9th Circuit Says

By Rachel Loftspring

On July 22, 2010, the U.S. Court of Appeals for the 9th Circuit, on a question of first impression, considered which of two potentially responsible parties--one that owned a property when a recovery claim accrued and the other that owned that same property when a suit was filed--constitutes the “current owner” for the purposes of determining liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).  See 42 U.S.C. § 9607(a)(1).  The Court held that the owner of a property when cleanup costs are incurred is the “current owner,” affirming the lower court’s ruling.  See California v. Hearthside Residential Corp.9th Cir., No. 09-55389, 7/22/10.

The case arose from a 1999 purchase by defendant Hearthside Residential Corporation (“Hearthside”) of an undeveloped tract of wetlands adjacent to several residential parcels, which it never owned.  Hearthside knew when it bought the property that it was contaminated with the toxic substance, polychlorinated biphenyl (“PCB”).  Three years later, Hearthside entered into an agreement with the State of California Department of Toxic Substance Control (“Department”) to remediate the PCB contamination on the property.  The two parties disagreed, however, on whether Hearthside was also responsible for investigating and remediating the adjacent residential parcels.  Because Hearthside disclaimed responsibility of the residential parcels, the Department contracted to clean the residential parcels itself, incurring cleanup expenses between July 2002 and October 2003.  On December 1, 2005, the Department certified that Hearthside’s cleanup was complete and Hearthside sold the property.  In October 2006, the Department filed suit against Hearthside seeking reimbursement for the costs associated with its cleanup of the residential parcels. 

The U.S. District Court for the Central District of California granted partial summary judgment for the Department, finding that, for the purposes of CERCLA, “owner” status is determined at the time a response-recovery claim accrues, not when a lawsuit is initiating, thereby making Hearthside liable under CERCLA.  The parties then filed a joint request that the question be certified for immediate appeal, which the court granted.  On appeal, the 9th Circuit noted that while “owner” under CERCLA has been defined, the statute is silent on the proper date from which to measure ownership.  With the plain text of the statute silent, the 9th Circuit looked to statutory context and purpose.  The 9th Circuit reasoned, among other things, that because CERCLA includes a statute of limitations that is triggered (1) at the completion of a “removal” action, or (2) at the initiation of an on-site “remedial” action, there is strong contextual evidence that Congress intended the owner at the time of cleanup to be the “current owner.”  Statutes of limitations are intended to protect defendants, and it is therefore reasonable to assume that Congress meant the statute of limitations to run against the owner of the property at the time cleanup occurs, thereby protecting through “predictability and promptness” such a party from stale claims.  To interpret CERCLA otherwise could, according to the 9th Circuit, incentivize an owner of property adjacent to recently cleaned property to sell to an innocent owner shortly before the statute of limitations runs, resulting in that new owner inheriting full cleanup liability under CERCLA if a recovery action was later timely filed. 

With this reasoning, the 9th Circuit affirmed the district court, holding that current ownership for purposes of liability under CERCLA is measured from the time the recovery action accrues and not when a suit is filed.  Because Hearthside was the owner at all times relevant to the remediation of the site, the 9th Circuit deemed it the current “owner” under CERCLA and remanded the case for further proceedings consistent with its opinion.