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Commander Oil Corp. v. Barlo Equip. Corp.

Citation: 30 ELR 20679
No. Nos. 98-7975(L), -9075(xap), 215 F.3d 321/50 ERC 1792/(2d Cir., 06/12/2000)

The court reverses a district court decision holding a lessee that subleased property liable as an owner under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court first holds that owner liability should not automatically apply to lessees/sublessors. First, site control alone is an improper basis for the imposition of owner liability. If the lessee is the active user and polluter of the property, imposition of CERCLA liability seems particularly appropriate. But, while the imposition of liability in such situations is surely correct, imposing owner liability instead of operator liability threatens to conflate two statutorily distinct categories of potentially responsible parties. Moreover, the relationship between the lessee/sublessor and the sublessee is not the critical relationship for identifying owner liability. Rather, the focus should be on the relationship between the owner/lessor and the lessee/sublessor.

The court next holds that certain lessees may have the requisite indicia of ownership vis-a-vis the record owner to be de facto owners and, therefore, strictly liable under CERCLA. To determine indicia of ownership, the court should examine such nonexclusive factors as length of the lease, rights of the owner to determine property use, whether the owner can terminate the lease before its terms, whether the lessee can sublet the property without notice to the owner, whether the lessee must pay taxes, assessments, insurance, or other fees, and whether the lessee is responsible for repairs. Applying these factors to the case at hand, the court holds that the district court erred in holding the lessee in this case strictly liable as an owner under CERCLA. The lessee did not possess sufficient attributes of ownership over the property at issue, and the property owner retained many of the rights and obligations of ownership. Nevertheless, the court then holds that the district court properly dismissed the record owner's indemnification and state negligence, nuisance, and trespass claims against the lessee.

Counsel for Plaintiff
David E. Jacoby
Phillips, Nizer, Benjamin, Krim & Ballon
666 5th Ave., New York NY 10103
(212) 977-9700

Counsel for Defendant
Andrew J. Simons
Farrell & Fritz
EAB Plaza, Uniondale NY 11553
(516) 227-0700

Before Carbranes and Katzmann, JJ.