Reversal of Fortune: The Ninth Circuit and Passive Migration as CERCLA "Disposal"

Thaddeus R. Lightfoot
The Environmental Law Group, Ltd.

Introduction

Congress enacted the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675, in 1980 to address the problems posed by disposal of hazardous substances. CERCLA gives the U.S. Environmental Protection Agency plenary authority to respond to the release or threatened release of hazardous substances into the environment. Among the parties potentially responsible for such releases are persons that owned or operated a facility "at the time of [hazardous substance] disposal." CERCLA § 107(a)(2), 42 U.S.C. § 9607(a)(2). CERCLA incorporates the "disposal" definition from the Resource Conservation and Recovery Act (RCRA). See CERCLA § 101(29), 42 U.S.C. § 9601(29).

In the last ten years, five federal circuit courts have considered whether the movement of hazardous substances through soils and groundwater, known as "passive migration," constitutes "disposal" under CERCLA. The subject is critical for former owners who do not actively dispose of hazardous substances during their tenure at a contaminated site. Contaminants in soil and groundwater tend to spread. If passive migration constitutes disposal, CERCLA plaintiffs could easily establish that a former owner or operator owned or operated a site "at the time of disposal." Most former owners or operators would then be liable under CERCLA Section 107(a)(2). However, if some affirmative action by the former owner or operator is necessary to constitute disposal, proving CERCLA liability under Section 107(a)(2) becomes considerably more difficult.

This article discusses the split in the federal circuits regarding passive migration as disposal. The article begins by surveying the positions of the Second, Third, Fourth, and Sixth Circuits on the question. Then the article focuses on the Ninth Circuit's odyssey in Carson Harbor Village, Ltd. v. Unocal Corp., 227 F.3d 1196 (9th Cir. 2000), rev'd en banc, 270 F.3d 863 (9th Cir. 2001), analyzing the initial and en banc opinions. As the article explains, the Ninth Circuit ultimately adopted the interpretation of the Second and Third Circuits. The article concludes that the Second, Third, and Ninth Circuits have yet to decide whether passive migration constitutes disposal in cases where hazardous substances began leaking from a tank or drum before a former owner purchased a property, and then continued to spread while the former owner occupied the site.

Passive Migration As CERCLA "Disposal":
A Brief Circuit Court History

The first federal court of appeals to consider the CERCLA liability of former owners or operators was Nurad, Inc. v. Wm. E. Hooper & Sons, 966 F.2d 837 (4th Cir.), cert. denied sub nom. Munaw v. Nurad, Inc., 506 U.S. 940 (1992). In Nurad, the current site owner filed a CERCLA cost recovery action against a number of parties including Mumaw, a former owner who allegedly owned the property "at the time of disposal." Id. at 840. The current owner alleged that passive migration occurring during Mumaw's occupancy constituted "disposal" under CERCLA. The district court held that Mumaw was not liable because he did not actively manage leaking underground storage tanks, so "no 'disposal' of hazardous wastes took place on [his] watch." Id. at 844. The court of appeals reversed. Id. The court found that some terms in CERCLA's disposal definition were "primarily of an active voice," but others "readily admit to a passive component." Id. at 845. As a result, disposal may occur when hazardous waste leaked or spilled "without any active human participation." Id. CERCLA Section 107(a)(2), the court concluded, "imposes liability not only for active involvement in the 'dumping' or 'placing' of hazardous waste at the facility, but for ownership of the facility at the time that hazardous waste was 'spilling' or 'leaking.'" Id. See also Crofton Ventures Ltd. v. G&H Partnership, 258 F.3d 292, 299-300 (4th Cir. 2001) (holding that the district court erred in limiting CERCLA's disposal definition "to active conduct of the defendants," and that the leaking of buried drums constitutes "disposal" for purposes of establishing liability under CERCLA Section 107(a)(2)).

In 1996, the Third Circuit in United States v. CDMG Realty, 96 F.3d 706 (3d Cir. 1996), distinguished Nurad and held that passive migration of hazardous substances at a landfill site does not constitute CERCLA "disposal." The CDMG court first found that the terms "leaking" and "spilling" have meanings that require some active human conduct, and that the words surrounding "leaking" and "spilling" in the disposal definition - such as "discharge" and "deposit"- involve a "human actor." Id. at 714. However, because the court found that passive migration did not constitute "leaking" or "spilling," it did not determine whether the CERCLA disposal definition always requires "active human conduct." Id. A "leak" connotes an escape from a vessel through an opening, and the CDMG Realty court found that there was no evidence of any leaking during the former owner's term at the site. Similarly, CDMG Realty held that "spilling" suggests "a rapid torrent, not gradual passive migration over the course of several years." Id. The court also correctly held that CERCLA's "release" definition was broader than the definition of "disposal" and that the release definition included the term "leaching," which describes the migration of contaminants away from a point source. Because CERCLA includes the term "leaching" in the release definition but not in the disposal definition, the court concluded that Congress in enacting CERCLA "was aware of the concept of passive migration in landfills and . . . knew how to explicitly refer to that concept." Id. at 715.

The CDMG Realty court found that its interpretation was consistent with CERCLA's liability provision. Had Congress intended to include passive migration as disposal, the court reasoned the statute would make all current and former facility owners or operators liable. As a result, "there would be no need for the separate responsible party category of current owner or operator." Id. at 715. In addition, the court held that the innocent owner defense supported its interpretation of the "disposal" definition, because the defense was available only if a defendant purchased the property "after the disposal." If disposal included passive migration, "the defense would almost never apply, as there would generally be no point 'after disposal.'" Id. at 716. Finally, the CDMG Realty court opined that its holding was consistent with CERCLA's "polluter pay" policy because "[t]hose who owned previously contaminated property where waste spread without their aid cannot reasonably be characterized as 'polluters.'" Id. at 717.

Relying upon CDMG Realty, the Second Circuit in ABB Indus. Sys. v. Prime Tech., Inc., 120 F.3d 351 (2d Cir. 1997), held that passive migration does not constitute disposal under CERCLA. Rather than "reinventing the wheel," the Second Circuit simply summarized and adopted the Third Circuit's rationale in CDMG Realty. Id. at 358. For the reasons set forth in CMDG Realty, the Second Circuit held that CERCLA disposal does not include the "gradual spreading of hazardous chemicals already in the ground," id., and that "prior owners and operators of a site are not liable under CERCLA for mere passive migration." Id. at 359.

The Sixth Circuit reached the same conclusion in United States v. 150 Acres of Land, 204 F.3d 698 (6th Cir. 2000). Citing CDMG Realty and ABB Industrial Systems, the Sixth Circuit rebuffed the passive migration as disposal theory in favor of "the better view" that the CERCLA disposal definition envisioned "spills occurring by human intervention." 204 F.3d at 705. The 150 Acres of Land court offered three reasons for its holding: 1) the words in the disposal definition other than "spilling" or "leaking" are active terms, so even the potentially passive words "should be interpreted actively"; 2) "release" is defined more broadly than "disposal" under CERCLA, because "disposal is included within release"; 3) CERCLA's statutory scheme suggests that "'disposal' [should] stand for activity that precedes the entry of a substance into the environment and 'release' [should] stand for the actual entry of substances into the environment." Id. at 706. If human activity was not involved in "whatever movement of hazardous substances occurred on the property," a former owner is not liable under CERCLA Section 107(a)(2). Id. See also Bob's Beverage, Inc. v. Acme, Inc., 264 F.3d 692, 697-98 (6th Cir. 2001) (citing 150 Acres of Land in rejecting passive migration theory and denying CERCLA cost recovery claim against former owner where there was no evidence that human conduct resulted in additional contamination of the property).

The Ninth Circuit Reverses Itself:
Carson Harbor Village, Ltd. v. Unocal Corp.

In one of the most recent and unusual passive migration cases, the Ninth Circuit initially held in a two-to-one decision that passive migration of hazardous substances constituted CERCLA disposal, and then reversed itself in an en banc opinion. The case, Carson Harbor Village, Ltd. v. Unocal Corp., 227 F.3d 1196 (9th Cir. 2000), rev'd en banc, 270 F.3d 863 (9th Cir. 2001), first increased the split in the circuits by adopting the sweeping position that all passive migration constitutes disposal under CERCLA. The Ninth Circuit then dramatically narrowed the split by withdrawing the initial decision and determining that the migration of tar-like substances through soil does not meet CERCLA's disposal definition.

The Initial Carson Harbor Opinion

Carson Harborinvolved a CERCLA cost recovery action by the current owner of a mobile home park against several parties, including the former owner. 227 F.3d at 1199. The district court held that the former owner was not liable under CERCLA, because there was no evidence of disposal when the former owner held the property. The Ninth Circuit initially reversed, holding that CERCLA disposal "includes passive migration" and allowing the claim against the former owner to proceed. Id. at 1210.

In the initial Carson Harboropinion, the Ninth Circuit observed that the circuits were split on the question whether passive migration constituted disposal under CERCLA. Id. at 1206 & n.16. Stepping boldly into the breach, the court found that the terms "discharge," "spill," and "leak" used in the disposal definition had "well-recognized passive meanings," and that "[s]ince the prescribed definition includes passive migration by its own terms, we are bound to give effect to that definition." Id. at 1206-07. In addition, the court observed that, consistent with CERCLA's remedial objectives, it should construe the disposal definition broadly and reject the "strained reading" that disposal required "active human conduct." Id. at 1207. Citing Nurad, the initial Carson Harbordeclared that construing "disposal" to include passive migration is "entirely consistent with [CERCLA's] liability regime." Id. Although it termed the CDMG Realty opinion "thoughtful," the Ninth Circuit found that the Third Circuit's rationale "conflicts with the plain meaning of the passive terms included in the [disposal] definition" and was inconsistent with "the well established principle that remedial statutes are to be broadly construed to effectuate their salutary purposes." Id. at 1208-09. As a result, the Ninth Circuit held that the CERCLA "disposal" definition includes the passive migration of tar and slag material through soil. Id. at 1210.

The initial Carson Harbor opinion embraced Nurad, squarely rejected CDMG Realty, ABB Industrial Systems, and 150 Acres of Land, and widened the acknowledged circuit split over passive migration. The Ninth Circuit's decision was controversial. One commentator declared that the opinion "simply pushes the statutory definitions and structure too far," and reopened the entire passive migration debate. Ranen Schechner, Note, Putting The Remedial Cart Before The Statutory Horse: The Ninth Circuit Reopens Debate On CERCLA's Definition Of Disposal, 29 B.C. ENVTL. AFF. L. REV. 69 (2001). After the initial Carson Harbor opinion, it appeared that only a Supreme Court decision could harmonize the federal circuit courts on the passive migration question. See id. at 109-10 (calling for the Supreme Court to "grant certiorari to the next [CERCLA] section 107(a)(2) case that comes up for review and answer the question of passive disposal").

The Carson Harbor en banc Opinion

In February 2001, five months after issuing the initial opinion, the Ninth Circuit granted a motion for rehearing en banc and withdrew the initial opinion. 240 F.3d 841 (9th Cir. 2001). Counsel argued the case before eleven Ninth Circuit judges in June 2001, and the court filed its an en banc opinion on Oct. 24, 2001. 270 F.3d 863 (9th Cir. 2001). The en banc opinion applied the "the plain meaning of the terms used to define 'disposal'" and concluded that there was no "disposal" during the former owner's possession because "the movement of contamination . . . cannot be characterized as a 'discharge, deposit, injection, dumping, spilling, leaking, or placing.'" Id. at 877-78. The Supreme Court, apparently convinced that the Ninth Circuit adequately harmonized the split in the circuits, denied a petition to review the Carson Harbor en banc opinion. 122 S.Ct.1437.

The en banc opinion reviewed federal circuit court precedent addressing the passive migration issue and found that the decisions "cannot be shoehorned into the dichotomy of a classic circuit split," but evinced "a more nuanced range of views, depending in large part on the factual circumstances of the case." Id. at 875. "[T]he cases fall in a continuum, with the Sixth Circuit taking an 'active-only' approach in 150 Acres of Land; the Third Circuit, in CDMG Realty and the Second Circuit, in ABB Industrial Systems, addressing only the spread of contamination . . . [and] the Fourth Circuit in Nurad, concluding that 'disposal' includes passive migration, at least in the context of leaking underground storage tanks." Id. at 876-77. The Ninth Circuit then analyzed the plain meaning of a CERCLA "disposal," which involves a "discharge, deposit, injection, dumping, spilling, leaking or placing of solid or hazardous wastes on a property." Id. at 878. Because "one can find both 'active' and 'passive' definitions for nearly all of these terms in any standard dictionary," the court rejected "the absolute binary 'active/passive' distinction used by some courts" in favor of a factual analysis that examines whether "any of the terms fit the hazardous substance contamination at issue?" Id. at 878-79 (emphasis original).

Applying its fact-based test, the Ninth Circuit found the on-site contamination included tar and slag materials that moved through the soil by way of "gradual 'spreading,' 'migration,' 'seeping,' 'oozing,' and possibly 'leaching.'" Id. at 879. Such migration did not fall within the plain meaning of "'discharge, . . . injection, dumping, . . . or placing." Id. Similarly, the migration of tar and slag materials did not constitute a "deposit," "spilling," or "leaking," because a gradual spreading of contamination is not a deposit by a person, or a spill or leak from a vessel or container. Id. As a result, the court held that the gradual passive migration of contamination through soil is not a "disposal" for purposes of imposing liability under CERCLA Section 107(a)(2). Id.

The Carson Harborcourt found that its en banc opinion was consistent with the CERCLA purposes of ensuring prompt cleanups and requiring that responsible parties bear the cleanup costs. Id. at 880-81. By concluding that disposal does not include passive soil migration but may include other passive migration, the court ensured that it could hold prior owners "responsible for migration of contaminants that results from their conduct and for passive migration" falling within the plain meaning of CERCLA's disposal definition. Id. at 881 (emphasis original). In contrast, if it interpreted CERCLA to exclude all passive migration, "there would be little incentive for a landowner to examine his property for decaying disposal tanks, prevent them from spilling or leaking, or to clean up contamination once it was found." Id.

In addition, the court found its interpretation avoided creating internal inconsistencies within CERCLA. If all passive migration constituted disposal, the statute need not distinguish among former and current owners or operators. Id. (citing CDMG Realty, 96 F.3d at 715). Had Congress intended "disposal" to include "only releases caused by affirmative human conduct," the statute would have employed "a straightforward causation requirement" rather than a strict liability regime that applies to any person that owned or operated a facility "at the time of disposal." Id. The court also declared that its interpretation of "disposal" preserved the role of the innocent landowner defense. If the court held that subsoil passive migration constituted disposal, the innocent landowner defense "would only be available to a small portion of the landowners who have no actual culpability in the disposal of hazardous substances." Id. at 882-83. However, if it held that "disposal" included only actions caused by affirmative human conduct, all landowners able to present an innocent landowner defense would already be excluded from liability. Id. at 883. Instead, the Ninth Circuit declared that its interpretation of the "disposal" definition ensured "that a PRP with minimal responsibility - such as an owner without culpability but outside the technical parameters of the innocent owner defense - does not get stuck with more than his fair share of financial responsibility for cleanup." Id. at 884.

Because the Ninth Circuit relied upon the plain meaning of the statute, the court opined that its inquiry into CERCLA's legislative history need only determine that "there is no clearly contrary congressional intent." Id. The court found no contrary intent in CERCLA as originally enacted in 1980, observing that the legislative history "confirmed that both EPA and the legislators understood that hazardous substances legislation would deal with a wide range of disposal events, not predicated upon an 'active/passive' dichotomy." Id. at 886. The Ninth Circuit also found that its interpretation of the disposal definition was consistent with the legislative history of the 1986 Superfund Amendments and Reauthorization Act (SARA). SARA added the innocent landowner defense to CERCLA, and the court noted the floor statements of the member of Congress who authored the defense confirmed that the innocent landowner provisions were "unavailable to anyone who contributed, actively or passively, to the release of [a hazardous] substance." Id. at 887.

In the Carson Harbor en banc opinion, the Ninth Circuit describes the passive migration cases as a "continuum," with the Sixth Circuit's decision in 150 Acres of Land at one end and the Fourth Circuit's Nurad opinion at the other. CDMG Realty and ABB Industrial Systems occupy the center in the range of passive migration opinions. Implicit in the Ninth Circuit's discussion is that Carson Harbor's factual examination of whether "the terms fit the hazardous substance contamination at issue" carves out a new location on the passive migration continuum. In truth, the Ninth Circuit's approach merely applies the analysis that the Third Circuit advanced in CDMG Realty, and the Second Circuit adopted in ABB Industrial Systems. All three courts of appeal decided that the gradual spreading of hazardous substances does not constitute a CERCLA "disposal." Similarly, all three courts found they need not decide the question of whether the disposal definition always requires active human conduct. Finally, each of the courts notes that Nurad involved leaking underground storage tanks, but there was no evidence of "leaking" or "spilling" during the former owner's tenure in the cases they decided. See Carson Harbor, 270 F.3d at 876, 879; ABB Industrial Systems, 120 F.3d at 357-58 & n.3; CDMG Realty, 96 F.3d at 714. See also Crofton Ventures, 258 F.3d at 299-300 (in which the Fourth Circuit citing Nurad, held that the district court erred in limiting CERCLA's disposal definition "to active conduct of the defendants," and that the leaking of buried drums constitutes "disposal" for purposes of establishing liability under CERCLA Section 107(a)(2)).

Conclusion

The Ninth Circuit, after opening a fissure in the federal courts of appeal on the passive migration issue, reversed itself in Carson Harbor and effectively narrowed the split. As a result, the Second, Third, and Ninth Circuits hold that passive migration of contaminants through soil is unlikely to constitute "disposal" under CERCLA. In such circumstances, former landowners will not be liable unless there is evidence during the former owner's tenure of a discharge, deposit, injection, dumping, spilling, leaking, or placing of hazardous substances at the property. The Sixth Circuit goes even further, holding that a former landowner is liable under CERCLA only if there is actual human activity involved in the movement of hazardous substances the occurred on the property during the ownership period. Only the Fourth Circuit holds that passive migration alone constitutes disposal under CERCLA. Even Nuradand Crofton Ventures, however, involved hazardous substances leaking from containers such as underground storage tanks or buried drums.

Given the decisions in Carson Harbor, ABB Industrial Systems, and CDMG Realty, there is a presumption against passive migration as disposal under CERCLA in the Second, Third, and Ninth Circuits. These circuits, however, have yet to address the most difficult passive migration case. The case arises when hazardous substances begin leaking from a tank or drum beforea former owner purchased the property, and then continue to leak while the former owner occupied the site. Will the Second, Third, and Ninth circuits apply the Sixth Circuit's rationale in 150 Acres of Land, hold that "human activity" is a prerequisite for CERCLA disposal, and determine that the former owner is not liable? Or will the courts adopt the Fourth Circuit's approach in Nurad and Crofton Ventures, find that the continued spreading of hazardous substances from the tank or drum is a "leak" constituting a "disposal," and hold the former owner liable under Section 107(a)(2)? Fully twenty-two years after Congress enacted CERCLA, the question of passive migration as disposal remains a conundrum. One piece of the puzzle is clear: several federal courts of appeal are likely to continue to wrestle with the issue well into the future.

Thaddeus R. Lightfoot is a founding partner and managing officer of The Environmental Law Group, Ltd., Minneapolis. He has taught at the University of Minnesota School of Law, and is a former trial attorney with the Environmental Enforcement Section, Environment Division, United States Department of Justice, Washington, DC. Mr. Lightfoot's e-mail address is tlightfoot@envirolawgroup.com