Should a party—for example, a town or developer—that buys contaminated property be immune from Superfund liability if the party does no more than allow preexisting contamination to seep throughout their property? Another federal circuit may be about to answer "yes."

Circuit courts are split on the question of whether interim owners1 may be liable under CERCLA based on the passive movement of preexisting contamination on their property during their period of ownership. Keeping this debate alive, on February 13, 2001, the Ninth Circuit granted rehearing en banc of its panel’s ruling that owning property during a period of passive migration is owning "at the time of disposal," as required to establish liability of former owners under CERCLA § 107(a)(2). Carson Harbor Village, Ltd. v. Unocal Corp., 227 F.3d 1196 (9th Cir. 2000), reh’g granted, 240 F.3d 841 (9th Cir. 2001). If the Ninth Circuit departs from the panel’s decision and joins a majority of circuit courts, then current owners, future developers, and EPA would be unable to share cleanup costs with financially viable interim owners who knowingly allowed hazardous substances to further enter the environment during their watch.

In 1993, Carson Harbor discovered that a portion of its property was contaminated with a slag-and-tar-like material and that the material and surrounding soils contained elevated levels of lead and petroleum hydrocarbons. After completing cleanup, Carson Harbor brought a CERCLA cost recovery action against the previous property owner and others. The district court granted summary judgment in favor of the defendants. Carson Harbor Village, Ltd. v. Unocal Corp., 990 F. Supp. 1188 (C.D. Cal. 1997). The district court found that while Carson Harbor presented evidence suggesting that waste may have spread during the previous owner’s tenure, Carson Harbor failed to show that the previous owner affirmatively introduced contaminants into the environment as required by CERCLA’s definition of "disposal."

Carson Harbor appealed the district court’s ruling and in a 2-1 decision a Ninth Circuit panel reversed the dismissal of Carson Harbor’s claim for cleanup costs. The panel found the district court erred in holding that, because the previous owner was not actively involved in depositing the waste, the spread of contamination into surrounding soil did not constitute a "disposal." The Ninth Circuit panel, like the Fourth Circuit in Nurad, Inc. v. William Hooper & Sons, Co., 966 F.2d 837 (4th Cir. 1992), concluded that CERCLA’s definition of disposal, which adopts the definition of "disposal" in the Resource Conservation and Recovery Act, includes terms that have "well-recognized passive meanings" ("discharge," "spill," and "leak"), thus active human participation is not required to constitute disposal under CERCLA.

In holding that "disposal" encompasses the passive movement of waste, the panel refused to follow post-Nurad decisions of the Second, Third, and Sixth Circuits which all construed "disposal" to require active conduct.2 The panel also acknowledged that even the district courts in the Ninth Circuit are divided in their interpretation. The Ninth Circuit’s grant of rehearing en banc potentially signals that the court may depart from the panel’s interpretation and possibly align itself with the majority of circuit courts that have held that "disposal" requires active conduct.

Notably, after the Ninth Circuit’s decision for rehearing en banc in Carson Harbor, the Fourth Circuit again embraced the "passive disposal" theory in Crofton Venture Ltd. Partnership v. G & H Partnership, __ F.3d __, 2001 WL 829885 (4th Cir. 2001), and found that the district court erroneously dismissed CERCLA counts because the court mistakenly construed "disposal" too narrowly and required evidence showing defendants had placed or dumped hazardous substances at the site.

Congress intended that those "responsible for any damage, environmental harm, or injury from chemical poisons [may be tagged with] the cost of their actions." United States v. Bestfoods, 524 U.S. 51, 55–56 (1998) (quoting S. Rep. No. 848, 96th Cong., 2d Sess. at 13, reprinted in 1980 U.S.C.C.A.N. 6119) (alteration by the Court). "The remedy that Congress felt it needed in CERCLA is sweeping: everyone who is potentially responsible for hazardous-waste contamination may be forced to contribute to the costs of cleanup." Id. at 56 n.1 (emphasis in original) (quoting Pennsylvania v. Union Gas Co., 491 U.S. 1, 7 (1989)).

Interpreting "disposal" as requiring active participation may frustrate Congress’ goal of making responsible persons pay the costs of cleaning up sites contaminated with hazardous substances. CERCLA’s broad remedial purpose indicates that Congress intended liability to attach to parties that fail to properly address contamination on their property. The "active disposal" theory suggests that Congress intended different standards of liability for current owners as compared to interim owners: imposing liability on current owners regardless of fault but imposing liability on interim owners only after an analysis of whether they "actively" disposed. Under such an interpretation, interim owners would escape liability even where the interim owner knew or should have known that their property was contaminated and the waste was spreading. As the Carson Harbor panel noted, exempting such a party from liability seems inconsistent with CERCLA’s liability scheme.

The "active disposal" theory may also provide an incentive to property owners that discover contamination on their property to transfer their property in an attempt to escape "current" owner liability. This outcome contradicts Congress’ intent that CERCLA provide an incentive for property owners to responsibly manage contaminated property.

Exempting interim owners under the "active disposal" theory is at odds with CERCLA’s polluter pays principle. Under such a theory, EPA and current owners may not look to share cleanup costs with interim owners who knowingly allowed hazardous substances to further enter the environment. This places the burden of paying for that share on the current owner or on the taxpayer in the case of an insolvent current owner. Exempting interim owners may also frustrate brownfields redevelopment: fewer brownfields projects will be undertaken if potential developers can’t look to previous owners to share in the cost of cleanup.

The "active disposal" theory seems to arise from cases where courts are concerned that the wrong parties were being pulled into CERCLA’s liability scheme. Courts have mistakenly focused on the interim owner’s knowledge of the preexisting contamination in determining whether that party "owned at the time of disposal." These equitable considerations are not a part of the definition of disposal and are more properly considered in determining whether the interim owner may avail itself of one of CERCLA’s defenses to liability. Under CERCLA §§ 107(b)(3) and 101(35)(A), otherwise liable defendants may avoid liability altogether by establishing the third party or innocent landowner defense. Defendants may also avoid the imposition of joint and several liability by establishing that they caused only a divisible portion of the harm. Finally, in a contribution action under CERCLA § 113(f), cleanup costs may be allocated among liable parties based on equitable factors, including the parties’ relative degrees of fault.

The "passive disposal" theory emanates directly from the language of the statute and is in line with Congress’ goals in enacting CERCLA. Interpreting the definition of "disposal" as encompassing the passive spreading of waste is consistent with the broad remedial purposes of CERCLA and encourages the redevelopment of contaminated property as potential developers can be assured that cleanup costs will be shared amongst all the responsible parties.

1. Interim property owners purchased contaminated property and have since transferred that property.

2. United States v. 150 Acres of Land, 204 F.3d 698 (6th Cir. 2000) (leaking from rusting industrial drums is not a disposal); ABB Industrial Systems, Inc. v. Prime Technology, Inc., 120 F.3d 351, 357–59 (2d Cir. 1997) (underground spreading of chemicals is not a disposal); and United States v. CDMG Realty, 96 F.3d 706, 712–18 (3d Cir. 1996) (passive spreading of chemicals within a landfill is not a disposal).