9th Circuits holds owner of property at time cleanup costs are incurred is the owner under CERCLA

On July 22, 2010, in State of California v. Hearthside Residential Corp., the court addressed a question of first impression: “whether the ‘owner and operator status under [CERCLA] is determined at the time that cleanup costs are incurred or instead the time that a recovery lawsuit seeking reimbursement is filed.” The concluded that the owner is determined at the time cleanup costs are incurred. Hearthside had purchased property known as Fieldstone Property in Huntington Beach, California with the knowledge that it was contaminated with PCBs. Hearthstone entered into a consent order with the State in which it agreed to remediate the property, then sold to the property to the California State Lands Commission. The State determined that the adjacent residential site was also contaminated with PCBs which it alleged had migrated from the Fieldstone Property. The State considered Hearthstone responsible; however, Hearthstone disagreed, contending that it was not the owner when the suit was filed. The State, therefore, contracted to remediate the property and subsequently filed a complaint against Hearthstone. Since CERCLA does not provide a clear answer to the issue of when a party is considered an owner for purposes of liability, and no case dealt with the issue directly, the court considered other aspects of the statute. The court concluded that the issue best aligns with CERCLA’s statute of limitations. Since the limitations provisions are triggered either (1) at the completion of a removal action, or (2) at the initiation of the remedial action, the court concluded that it was the intent of Congress was to have the statute of limitations “run against (and protect) the owner of the property at the time the cleanup occurs.” The court reasoned that if Hearthstone’s argument were accepted, “an owner could sell a recently cleaned piece of property to an innocent owner one day before the statute of limitations runs, with the result that the new owner would bear full cleanup liability under CERCLA if a recovery action was later timely filed.” Accordingly, the court saw this as contextual evidence of Congressional intent that the owner at the time of cleanup was to be considered the owner for the purpose of CERCLA liability. In addition, relying on the date of filing of the cost recovery action contradicts the intent to have early settlements. In essence, Hearthside’s approach would require the filing of a suit in order to determine the date of ownership. In addition, since the owner at the time of cleanup can help determine the scope of cleanup, “it follows that the same owner should be responsible for the cost of the remediation program that it had the opportunity to influence.” DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum PC (http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services. For additional information about the matters in this bulletin or in the firm’s Employment Practice, please contact Richard P. Flaum, Esq.

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