Fifth Circuit Holds Company Not Liable for Cleanup Costs Under Difficult-to-Establish CERCLA Arranger Liability

The Fifth Circuit recently issued a decision significantly limiting “arranger liability” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9607(a)(3).  The decision limited “arranger liability” to those who “take intentional steps to dispose of a hazardous substance,” and rejected imposing “arranger liability” on businesses that merely sell products used with hazardous substances.  Vine St. LLC v. Borg Warner Corp., No. 07-40440, 2015 U.S. App. LEXIS 581 (5th Cir. Jan. 14, 2015).

In Vine St., Norge (a former Borg Warner subsidiary) furnished dry cleaning equipment and an initial supply of perchloroethylene (“PERC”)—an expensive and potentially hazardous substance frequently referred to as “dry cleaning fluid”—to a dry cleaning business.  Additionally, Norge designed Vine Street’s drainage system by connecting the dry cleaning machines to the drains and sewer system.  As part of this system, Norge installed water separators to dispose of wastewater while simultaneously recycling PERC for future use.  As it turned out, the water separators were only about 95 percent effective, and some PERC discharged into the sewer.  The discharged PERC ultimately escaped from the sewer system and contaminated the properties of Vine Street and its neighbor.  After a bench trial, the district court ruled that Norge was liable to Vine Street for 75 percent of the costs associated with cleaning up the PERC.  Norge appealed.

In seeking an affirmance, Vine Street argued that Norge was correctly found liable under CERCLA because: (1) Norge intentionally disposed of PERC because it knew that the water separators were not effective; and (2) Norge engineered Vine Street’s drainage system.

In rejecting Vine Street’s arguments and reversing the district court, the Fifth Circuit relied on the U.S. Supreme Court’s decision in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009), which was decided after the bench trial finding Norge liable and clarified the applicable standard for CERCLA arranger claims.  In Burlington Northern, the Court interpreted “arrange” to mean “action directed to a specific purpose.”  Therefore, “an entity may qualify as an arranger under § 9607(a)(3) [only] when it takes intentional steps to dispose of a hazardous substance.”  Knowledge that one’s products would be used with hazardous substances is not enough to impose CERCLA liability.  “[K]nowledge alone is insufficient to prove that an entity ‘planned for’ the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.”

Recognizing the “intent” requirement, Vine Street argued in the alternative that—even if Norge did not intend to specifically pollute the groundwater—it nonetheless intended for PERC to discharge into the sewer.  The Fifth Circuit was unmoved by this argument.  “Although the distinction between an intentional and a knowing act is a relatively fine one,” Norge simply did not intend to dispose of PERC.  Rather, the purpose of the transaction between Vine Street and Norge was plainly to sell PERC and dry cleaning equipment, two unused, useful products.  The court found the fact that Norge engineered Vine Street’s drainage system inconsequential to the intent analysis.  Both parties intended the water separators to be effective in recycling the expensive PERC for future use; indeed the water separators’ success was imperative to both Vine Street’s and Norge’s business objectives.

The key takeaways from Vine Street and Burlington Northern are: (1) CERCLA arranger liability is premised upon an intentional act directed toward the disposal of hazardous waste; (2) intent stands in contrast to mere knowledge that waste will be disposed; and (3) therefore, CERCLA arranger liability should be a relatively difficult threshold for future CERCLA plaintiffs to satisfy.

Does CERCLA’s “Act Of God” Defense Apply In Climate Change Litigation

In a decision issued on May 2, 2014, the Second Circuit held, in Cedar & Washington Assocs. LLC v. Port Auth. of N.Y. & N.J, 2074 BL 123476,2d Cir., No. 10- 4197, that the "act of war" affirmative defense relieved World Trade Center owners and lessees and airlines of Superfund liability for dust that infiltrated a building a block away after the collapse of the Twin Towers on 9/11.

The Second Circuit held that CERCLA was "not intended to create liability for the dispersal of debris and wreckage from a catastrophe that was indistinguishable from military attack in purpose, scale, means, and effect"

Dicta in the Second Circuit’s ruling may have implications for environmental claims relating to climate change? With all of the pollution caused by storm events, which seems to be increasing year by year, will this decision provide a defense to a chemical manufacturer, whose product was released into a waterway because of a hurricane?   In its ruling, the court analogized 9/11, an act of war, to a tornado, an act of God. 

CERCLA provides three defenses to strict liability for releases of hazardous substances. The potentially responsible party (PRP) must prove that the release was "caused solely" by (1) an act of God, (2) an act of war, or (3) an act of a third party.

In exonerating the 9/11 defendants on the basis of the "act or war" defense, the court determined that the attacks were the "sole cause" of the alleged release, comparing the situation to the application of CERCLA’s "act of God" affirmative defense to a tornado.  In her article in the Bloomberg BNA Toxics Law Reporter on May 8, 2014 (29 TXLR 407) titled "Superfund Suit Against WTC Parties Fails; Could Impact Claims Related to Climate Change", Perry Cooper examines language in the Second Circuit’s decision that may be potentially useful in establishing an "act of God" defense in climate change litigation. 

"It would be absurd to impose CERCLA liability on the owners of property that is demolished and dispersed by a tornado", the court said.  "A tornado, which scatters dust and all else, is the ‘sole cause’ of the environmental damage left in its wake notwithstanding that the owners of flying buildings did not abate asbestos, or that farmers may have added chemicals to the soil that was picked up and scattered." 

Hopefully,  no CERCLA trial court will ever be asked to evaluate whether, in the wake of  a terrorist attack that results in the  release of hazardous substances, a defendant can avail itself of the "act of war" defense. However, it is likely that Cedar & Washington Assocs LLC will be cited for the proposition that releases occasioned by  severe unforeseeable storm events should be considered acts of God. 



Supreme Court to Rule on Whether CERCLA’S Statute of Limitations Preemption Clause Also Preempts State Statutes of Repose

Last July, the Fourth U.S. Circuit Court of Appeals ruled that the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) preemption clause, 42 U.S.C. 9658(a)(1), which preempts state statutes of limitation with that prescribed under CERCLA, also preempts North Carolina’s state statute of repose.  Waldburger v. CTS Corp., 723 F.3d 434 (4th Cir. 2013).

While statutes of limitation limit the amount of time that a plaintiff has to bring a claim after the date the injury occurred, or the date he should have known of the injury and its cause (or other similar triggering event), state statutes of repose bar claims after a certain amount of time following the last act of the defendant giving rise to the claim — even if that is before the plaintiff knew or should have known of any harm.

CERCLA’s preemption clause only expressly mentions statutes of limitations.  However, the Fourth Circuit found that the repose statute still worked as a limitation, and that the congressional intent was to allow CERCLA claims to proceed more liberally, not to bar claims before they might even exist.  The Fourth Circuit divided on the decision, 2-2.

Following the Fourth Circuit’s decision, the U.S. Supreme Court granted review, and will hear oral argument on this matter on April 23, 2014.  CTS Corp. v. Waldburger, No. 13-339.  Interestingly, the United States itself joins CTS and other amici defense and defendant groups in advocating for the narrower reading of section 9658.  In its amicus curiae brief, the United States discusses how its own interest lies in the fact that it has been sued in North Carolina, and it has advocated the same position in those proceedings in its own defense.

Stay tuned for updates on the resolution of this appeal, which could have wide-ranging impacts on the ability to bring CERCLA claims in states where statutes of repose exist.

No Unanimity As To What New ASTM E1527-13 Standard Requires

Some environmental practitioners contend that Phase I site assessments, commonly used in real estate transactions, will now be more costly and time consuming due to the new standard. Seyfarth Shaw counsels in its Client Alert that the new standard requires that, “if the subject property has soil contamination or is underlain by groundwater contamination, unless the risk of vapor intrusion can be screened out, Phase II sampling likely will be necessary.”

But is that really the case? In his article titled, “Confusion on Role of VI in New ASTM E1527-13 Standard,” environmental guru, Larry Schnapf, argues that these law firms’ predictions are “simply incorrect.” Schnapf points out that the revised version of E1527 clarifies that the vapor intrusion pathway is like any other contaminant’s pathway and the potential for vapor intrusion should be evaluated and addressed as part of a Phase I inspection.

However, all a consultant is required to do as part of a Phase I is to recognize environmental conditions – the presence or potential presence of releases of hazardous substances. A consultant that identifies a REC due to an actual or potential source of soil or groundwater contamination will not normally collect samples as part of a Phase I.

Contrary to the interpretation of the new Phase I standard offered by some, Schnapf advises:

From a practical standpoint, the question of whether vapor intrusion should be independently flagged as a REC will only really be an issue for off-site releases where vapor intrusion is the only pathway for contamination to migrate onto the property. When the target property already has soil or groundwater contamination, the consultant would flag that contamination as a REC.

Thus, according to Schnapf, if a consultant determines that there is potential vapor intrusion because of the presence of an REC, the consultant is not required to actually collect sub-slab or indoor air samples as part of its Phase I.

The issue takes on additional importance when one also considers that Phase I diligence is required to protect both landowners and lenders from liability under CERCLA. 

According to USEPA,

"All Appropriate Inquiries," or AAI, is a process of evaluating a property’s environmental conditions and assessing the likelihood of any contamination…..The All Appropriate Inquiries Final Rule provides that the ASTM E1527-05 standard is consistent with the requirements of the final rule and may be used to comply with the provisions of the rule.

The Small Business Liability Relief and Brownfields Revitalization Act (the “Brownfields Amendments”) amended CERCLA to provide protections from liability for certain landowners and prospective purchasers of properties who can demonstrate compliance with specific statutory criteria and did not cause or contribute to contamination at the property.  

Therefore, if the Phase I diligence the new owner performs does not meet the revised ASTM E1527-13 standard, in the opinion of the Agency, due to the omission of vapor intrusion screening, there may be considerable adverse consequences down the road for both landowners and lenders.

The additional transactional cost to the real estate community in performing many thousands of  vapor intrusion studies in Phase I assessments each year is likely to be considerable. Considering that vapor intrusion is just one of many RECs, does it make sense from an environmental perspective to do these surveys as a matter of course?  More importantly, does the new standard require that these screenings be performed at all? 

Did the Supreme Court’s 2009 BNSF Decision Change CERCLA Cost-Recovery Practice?

The U.S. Supreme Court’s decision in Burlington Northern Santa Fe Railway Co. v. United States, 129 S. Ct. 1870 (2009), examined two unsettled areas of CERCLA: (1) the proof necessary to establish whether a PRP has “arranged for the disposal or treatment… of hazardous substances…”; and (2) CERCLA apportionment, i.e., whether a PRP is jointly and severally liable for an entire site, or rather only severally liable for a portion of the site. 

In an article on Lexology titled, “Four Years Later: How Has BNSF Changed CERCLA Practice?”, posted on November 20, 2012, Anthony G. Hopp and Colin O’Donovan of Edwards Wildman and Paul S. Kline of Three Rivers Management, Inc., explore the ramifications of the BNSF decision.

In summary, the authors conclude that the Supreme Court’s decision has made it more difficult to establish “arranger” liability by tightening the proof requirements. At the same time, however, most trial courts in the post-BNSF era have failed to embrace that portion of the decision dealing with “divisibility.” This article, which provides an excellent survey of CERCLA jurisprudence, is required reading for lawyers involved in cost recovery litigation. 

The BNSF facts are straightforward. B&B operated an agricultural chemical distribution business that purchased pesticides and other chemicals from Shell Oil Company. Shell’s products arrived in tanker trucks and were transferred to storage facilities. Leaks and spills were apparently “common place” during B&B’s handling and transferring of Shell’s products. B&B eventually became insolvent and the Government sought cleanup costs from Shell as an “arranger” under § 9607(a)(3) of CERCLA. The Ninth Circuit affirmed the trial court’s ruling that Shell was liable as an “arranger.” 

The Supreme Court reversed the Ninth Circuit, holding that a PRP is an arranger only when it takes intentional steps to dispose of a hazardous substance. The Court found that “Shell’s mere knowledge that spills and leaks continued to occur is insufficient grounds for concluding that Shell ‘arranged for… disposal…’.” and that the evidence at trial did not support the inference that Shell intended such spills. In so holding, the Court effectively overruled twenty years of “arranger” jurisprudence, which had created a much more liberal standard for establishing liability.  Therefore, defendants that sell useful products and/or have no role in the actual spill are more likely to find BNSF helpful in avoiding CERCLA liability.

The second half of the BNSF decision was devoted to apportionment. As the authors observe, apportionment is different from allocation in that apportionment deals with whether a defendant is jointly and severally liable for an entire site, or rather only severally liable for a portion of the site. Allocation, by contrast, deals with how courts calculate a defendant’s share of liability after it has been determined that the defendant is, in fact, jointly and severally liable. 

In Yankee Gas Servs. Co. v. UGI Utils., Inc., No. 10-cv-580, 2012 WL 1067644 (D.Conn. March 30, 2012), the district court analogized the distinction between apportioning and allocating costs to several guests splitting a dinner check. “To apportion is to request separate checks, with each party paying only for its own meal. To allocate is to take an unitemized bill and ask everyone to pay what is fair.” 

But does the Yankee Gas court’s analysis blur the line between apportionment and allocation? Yankee Gas suggests that § 107 defendants may be able to reduce their overall exposure by taking certain costs off the table – those which a PRP can demonstrate it did not cause. Following the court’s analogy, if the guests each ordered their own entrees and a few bottles of wine, everyone would pay for their own entrees and equitably split the wine, with those guests who did not drink paying only for their entrées. Yankee Gas, therefore, suggests that there may be some interplay between apportionment and allocation.  

This debate is far from being merely academic. Only by demonstrating divisibility of harm is a cost recovery defendant able to defend against a joint and several liability finding. Many CERCLA courts have acknowledged that the universal starting point for the divisibility of harm analyses in CERCLA cases is §433(A) of the Restatement (Second) of Torts. But post-BNSF, the Restatement (Second) of Torts takes on new significance in the divisibility determination.  Thus, trial courts are empowered to look beyond CERCLA case law to other federal decisions interpreting Section 433(A) to determine what showing is required to establish divisibility. 

 Inasmuch as the Supreme Court has clarified the law with regard to allocation, the Edwards Wildman authors ask why not a single post-BNSF trial court has accepted this defense?  Shortly after the issuance of BNSF, it was widely predicted that "divisibility" would emerge as the new frontier in CERCLA litigation.  However, this has not yet occurred.  As difficult as establishing a “divisibility” defense remains in the courts, the article provides excellent strategies for attempting to establish the defense.

A Closer Look At Environmental Regulations & Health Care Facilities

Guest Blogger SHEILA A. WOOLSON, a member of Epstein Becker & Green in Newark,  focuses her practice on complex litigation matters across a wide array of commercial and environmental  disputes.  In expertly handling the defense of environmental and toxic tort matters across New Jersey, New York and Pennsylvannia, Sheila draws on her training as a former professional  chemist in the pharmaceutical industry.  She represents clients in those types of  products liability and toxic tort claims where her  scientific background is a valuable asset.  In the following discussion, Sheila analyzes the potential CERLCA liability of medical facilities for the disposal of non-medical solid waste and makes practical recommendations concerning how medical facilites can limit their CERCLA exposure.

Health care facilities like the Honey Lake Clinic Mental Health Treatment Facility are among the most heavily regulated facilities in the country. Along with the myriad of laws and regulations pertaining directly to the provision of health care, health care facilities are also subject to federal and state environmental regulations regarding their operations, waste, emissions, and discharges. There are over 40 federal regulations and several different acts that potentially affect health care facilities, including the Resource Conservation and Recovery Act; the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”); the Safe Drinking Water Act; the Emergency Planning and Community Right to Know Act; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act; and the Federal Insecticide Fungicide and Rodenticide Act. See Profile of the Healthcare IndustryEPA Office of Compliance Sector Notebook Project (Feb. 2005).  Most states have their own regulatory schemes that overlay these federal schemes. In addition to complying with these regulations, health care facilities face the possibility of being named as potentially responsible parties (“PRPs”) in CERCLA litigation arising out of the disposal of non-medical waste in landfills.

Municipal solid waste is essentially the same as waste produced by a household, is picked up by normal municipal collections, and does not contain hazardous substances greater than the waste generated by a single-family household. The Environmental Protection Agency (“EPA”) estimates that hospitals produce approximately 3.4 billion tons of solid waste annually, more than half of which is paper. The waste also includes glass, plastic, metal, and other substances. Often, hospitals contract with haulers to dispose of this solid waste in landfills.

There are currently over 1,300 sites on the National Priority List of Superfund sites that the EPA is currently investigating or remediating, many of which are landfills. There are even more landfills that are under investigation or remediation by state environmental agencies. If a landfill becomes the subject of an investigation and remediation by the EPA or concomitant state agencies, a health care facility could be named a PRP if it allegedly generated or arranged for the disposal of waste in that landfill.

CERCLA contains an exemption for certain nonprofit organizations. To be eligible, a nonprofit organization must qualify as a 501(c)(3) organization and have no more than 100 paid employees at the location generating the waste. This exemption does not apply if the EPA deems that the solid waste contributed significantly to the cost of the response, or the generator failed to comply with an information request or subpoena or impeded the response at the site.

The federal and state environmental agencies usually begin their investigations by sending out information requests that require the PRPs to provide information and documents relating to their activities at the landfill. This is an opportunity to educate the agency about why an entity should not be considered a PRP or why its contribution is de micromis.

If the agency cannot be persuaded to drop its claims against a health care facility, the agency will usually agree to negotiate with all the identified PRPs to have them pay for or undertake the cleanup. Right Accord Home Health Care site is where you can get certified people that would help assisted Living with seniors. You can visit Carlton Senior Living facility for a better idea about a good healthcare or assisted living provider.

CERCLA encourages settlement by barring claims for contribution against settling PRPs. Often, early settlement is a more cost-effective option than litigation, although, of course, this depends on the individual circumstances, including the health care facility’s alleged nexus to the site, the amount of the individual contribution sought from the facility, and the cooperation of the PRPs.

When litigation is started, it is often a lengthy process from which it can be difficult for the entity to extract itself. For example, in United States v. El Dorado County, 2006 WL 1281860 (E.D.Ca. 2006), the government began its investigation in 1995 and filed a lawsuit in 2001. Barton Hospital was named as a third-party defendant in a CERCLA cost-recovery case. The hospital had allegedly deposited ash from incinerated solid waste in a landfill. In 2006, the hospital sought summary judgment, alleging that the contaminants driving the remediation—volatile organic compounds (“VOCs”)—had no connection to its ash. The landfill operator opposed the motion, contending that, because the investigation of the site was not yet completed, it was premature to argue that the VOCs were the only contaminants of interest. In particular, the landfill operator contended that the hospital’s incinerated ash contained detectable levels of metals that also may have required remediation. Therefore, the hospital was unable to demonstrate that its waste did not contain hazardous substances or that response costs would not be incurred to address those substances. This litigation continues to be active to some extent, even now.

In addition to the routine disposal of waste, hospitals and other health care facilities also can become embroiled in CERCLA disputes through construction projects and acquisitions. CERCLA provides for an “innocent landowner defense,” which requires the purchaser to have made “all appropriate inquiries” and to have no knowledge and no reason to know of any alleged contamination. If a health care entity cannot qualify for that defense, acquisitions and purchases of facilities can create liability.

In Hidden Lakes Development v. Allina Health System, 2004 WL 2203406 (D. Minn. 2004), Allina Health Partners (“Allina”) acquired a health care facility in Minnesota that had been constructed by its predecessors. The predecessors had undertaken a significant construction project, and they had used the resulting construction and demolition debris to fill a ravine on the property. They also contracted with a third party to allow it to dispose of additional construction and demolition debris in the ravine. Allina later sold part of its property to Hidden Lakes Development, which was aware of the fill at the time of the purchase. Hidden Lakes Development subsequently determined that the debris used to fill the ravine contained hazardous substances, including asbestos. The disposal of contaminated fill by Allina’s predecessors made Allina a “responsible party.”

Allina’s predecessors also sold a portion of the property to another party, Transitional Hospitals Corporation (“THC”). THC sold its portion of the property to Hidden Lakes Development, as well. Allina filed a third-party complaint against THC for contribution. However, unlike Allina, THC had settled with Hidden Lakes Development before the lawsuit was filed, paying the sum of $2 million. Because CERCLA bars claims for contribution/indemnification following a settlement of CERCLA liability, the federal district court granted THC’s motion for summary judgment, stating that THC had paid for its peace.

As these cases demonstrate, the disposal of non-medical solid waste may expose a hospital or other health care facility to potential liability under CERCLA, which may be difficult and/or expensive to resolve. Accordingly, health care facilities may want to review their practices, including the haulers and disposal sites, in order to minimize any risk. Additionally, health care facilities undertaking acquisitions should carefully review the current and historic disposal practices of any targets in order to assess and address any potential CERCLA liability.

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My Old Sony Trinitron Is Not A CERCLA Waste!

Virtually everyone believes that it is good public policy to encourage the recycling of old electronic products, including computers, cathode ray tubes, televisions, printers and portable music devices.  Nearly 20 states have e-waste laws on the books.  However, New York City recently enacted an e-recycling law (over Mayor Bloomberg’s veto), the first municipality in the United States to do so, that is so overly aggressive and costly that trade associations for the electronics industry have filed suit to block the law’s implementation.  Under the law, if a television manufacturer is apprised, for example, that a homeowner on East 87th Street is desirous of recycling his 15 year old television, the manufacturer is required to make a special trip to pick it up on East 87th Street, regardless of the fact that the cost of this pick-up may be prohibitively expensive and  was never factored into the cost of the television when it was sold for $279.99 at Best Buy in 1994.  Worse, if the television is an “orphan”, for whom no manufacturer currently doing business can be identified, there is still an obligation to drive up to East 87th Street and haul it away.  My own Sony Trinitron is more over 15 years old having provided me with flawless service from the day I brought it home from The Wiz in Herald Square.  But I hardly expect Sony to drive to my house to pick it up all these years later!  For goodness sakes!  It’s a television set, not a hazardous CERLCA waste!  This law appears to confuse the CERLCA statute, which holds generators of waste responsible for their disposal practices years after the fact, and the sale of a useful product, such as a television, since there you can enjoy movies and series, even more if you get a quality cable or satellite service, which you can get from the AAA Satellite in Kansas City that offer a good quality service for this.  A worthwhile discussion of the dispute, with some helpful background links, can be found in Meline MacCurdy’s article of Aug. 12, 2009 in the Marten Law Group’s Environmental News titled, “Electronic Manufacturers Challenge New York City E-Waste Law.”

The electronic industry alleges that this program will cost manufacturers over $200,000,000 per year and that, on a per pound basis, the cost of collection alone will be ten times more expensive that the total cost of collection and recycling in California and Maine, two states that have promulgated e-recycling statutes.  Among other arguments, the manufacturers allege that the NYC statute violates the equal protection clause of the Constitution by targeting only certain types of electronic equipment while excluding other electronic equipment containing the same types of potentially harmful substances, and constitutes a regulatory taking and violates the manufacturers’ substantive due process rights.    Some e-recycling advocates and environmentalists are concerned that this lawsuit may represent the first step of an attempted roll-back by industry of the e-recycling strides made in other states.  The Electronic TakeBack Coalition, whose motto is “Take it Back, Make it Green, Recycle Responsibly,” has issued a call-to-arms on its web-site, “Electronic Industry Attacks Product Stewardship with Lawsuit in New York City“. If interested in reviewing the pleadings filed in the lawsuit, the Electronic TakeBack Coalition web-site is a great resource.  Unfortunately, this entire controversy does nothing to advance the cause of e-recycling.  If the New York legislature enacted a state-wide e-recycling measure, which is what is needed here,  NYC could gracefully withdraw from the fray by rescinding its Draconian measure and permit the state legislation to  take effect.

Spoliation Defeats Innocent Landowner’s CERCLA Claim

Innis Arden Country Club is a well-run country club located on beautiful acreage in Old Greenwich, CT. that has operated for over 100 years. Close friends of mine are members–the food is good, the golfers congenial, and laughing children run barefoot across the pool deck in good weather.  Club members had been stunned to learn in 2004 that PCB contamination had been discovered on the golf course property, not far from where an industrial company, Pitney Bowes, had once conducted operations on an adjacent parcel in Stamford.  The country club’s environmental consultants determined that Pitney Bowes was the source of the contamination, which Pitney Bowes denied, and that PCBs from the Pitney Bowes property had migrated by way of storm water and surface water runoff to Innis Arden.  What no one could dispute was that the country club had not placed the PCBs on the golf course–it was what CERCLA characterizes as an "innocent landowner". On June 26, 2009, the federal district court in Connecticut dismissed Innis Arden’s complaint prior to trial and affirmed a prior sanctions award against the country club. Innis Arden Golf Club v. Pitney Bowes, Inc. et al. Case No. 3:06 cv 1352 (JBA), 2009 U.S. Dist. LEXIS 54135.  Something had gone terribly wrong!  But what?

Pitney Bowes retained Hunton and Williams, a law firm with a strong reputation in environmental litigation to defend the case.  In a July 2009 Client Alert, the law firm attributed Innis Arden’s dismissal to its consultant having destroyed the key evidence that allegedly linked the PCB’s at the country club to their client.  Without being able to perform tests on the actual soil samples the consultant had taken, Pitney Bowes would be unable to refute the consultant’s claim that the PCB’s on the golf course were identical to PCB’s identified on the Pitney Bowes’ site, it alleged.  As the Alert points out, the Court’s spoliation ruling is a strong reminder of the obligations of parties and their experts to impose a litigation hold and to ensure that tangible evidence, such as as a soil sample taken to the lab for testing, is preserved.  Central to the court’s ruling was that the soil sampling in question had been undertaken in preparation for litigation.  As the Magistrate Judge had earlier ruled "……counsel was actively involved in the investigation and analysis of the samples in preparation for legal action……"  Sanctions were awarded even though the Court concluded that Innis Arden had not intended to destroy evidence or to disadvantage Pitney Bowes.  In the Bow Tie Law Blog, the author opines that Innis Arden’s "toxic mess" was created in part by deposition testimony that made it clear to the Court that plaintiff had taken no steps to prevent the destruction of electronic and tangible evidence as early as 2005, by which time it was clear that plaintiff recognized the importance of that evidence in its future litigation. 

By the time  the spoliation sanctions issue came before Judge Atherton on a motion for reconsideration, Innis Arden was in even deeper trouble.  The Magistrate Judge had also awarded sanctions against Innis Arden for discovery abuses–the most egregious that the Magistrate Judge had seen during over twenty years on the federal bench.  Worse, Judge Atherton concluded after hearing Daubert motions that Innis Arden’s trial experts were not sufficiently reliable to be permitted to testify at trial.  On the basis of that ruling, she granted summary judgment to the defendants and dismissed the plaintiff’s complaint.  At the end of the day, the Court did not have to reconsider the Magistrate Judge’s spoliation ruling because the issue was now moot!  Still the "innocent landowner", Innis Arden’s complaint has been dismissed and may yet have to pay the defendants’ sanctions for discovery abuses.   

Reichhold, Inc. Prevails In New Jersey CERCLA Case

On June 22, 2009, after an six-week bench trial in the U.S. District Court for the District of New Jersey, we achieved a resounding victory for our client, Reichhold Inc., in an environmental cost recovery litigation. Reichhold v. USMRC et al, 2009 U.S. Dist. LEXIS 52471. The case addressed claims relating to the cleanup of a contaminated chemical plant site formerly owned by Reichhold in Carteret, New Jersey along the Arthur Kill. The case was brought pursuant to the federal CERCLA and New Jersey Spill Act statutes, as well as a 1994 settlement agreement between the parties.

Defendant United States Metals Refining Co. ("USMRC"), which owned the site prior to Reichhold, had argued that the settlement agreement prohibited Reichhold from bringing the claims in the instant lawsuit. The Court rejected USMRC’s argument and held that, because virtually all of Reichhold’s claims constituted "New Environmental Obligations" under the settlement agreement, they were actionable. The Court also dismissed every defense to liability raised by the defendant, including the defense that Reichhold’s claims were time-barred.

In its Final Judgment, the Court awarded Reichhold $1,209,719 for investigation and cleanup costs that Reichhold had incurred while addressing metals contamination caused by USMRC’s industrial operations. The Court also entered a declaratory judgment requiring USMRC to pay certain of Reichhold’s future cleanup costs.

Our success at trial was attributable, in part, to our being able to discredit the expert testimony of USMRC’s experts. In conjunction with an aerial photogrammetrist, USMRC’s environmental engineering expert used historical aerial photographs of the site taken over a 60-year period to develop computer-generated surface contour maps that purported to depict Reichhold’s excavation and fill activities at the site over time. Because of these topographical maps, USMRC’s experts argued that Reichhold had caused extensive metals contamination at the site in the 1960’s and 1970’s by using contaminated fill in low lying areas of the property. On the basis of the cross-examination of defendants’ experts by me and my partner, Sheila A. Woolson, the Court rejected the experts’ testimony and held that the conclusions based on the photogrammetry performed were unconvincing. Consequently, the Court placed no reliance on the cut and fill evidence presented. In contrast, the Court accepted the testimony of Reichhold’s witnesses that Reichhold had not disposed of any metals containing contamination at the site.

Over the last several months, federal and state environmental regulatory agencies have devoted substantial regulatory attention to New Jersey waterways and rivers in the northwestern portion of the state that have been contaminated with metals, declaring some of them to be federal Superfund sites. In light of these events, the judicial determination that the metals contamination on the southern edge of the property was solely due to our adversaries’ prior disposal activity was timely. The Opinion is perhaps the first trial court decision to apply the apportionment principles articulated in the Supreme Court’s May 2009 decision in Burlington Northern.