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United States v. Pacific Hide & Fur Depot, Inc.

Citation: 19 ELR 20897
No. No. 83-4052, 716 F. Supp. 1341/30 ERC 1082/(D. Idaho, 02/27/1989)

The court holds that current owners of a site contaminated with polychlorinated biphenyls (PCBs) who received their interest in the property through a stock transfer are entitled to assert the innocent landowner defense in §§ 101(35) and 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court first holds that the three children of one of the earlier shareholders are entitled to the defense. The PCB releases were caused by the actions of their father, who owned and operated the scrapyard in question at the time the PCBs were deposited there. The children had no reason to suspect that PCBs were on the property, and had no knowledge of a release until the Environmental Protection Agency discovered it. The children did not participate in management of the site at any time, and worked there only sporadically as teenagers. The gift their father made to them of one share each of stock in the business is more akin to an inheritance, which is one of the enumerated circumstances in CERCLA § 101(35)(A) to be considered in determining a defendant's right to the innocent landowner defense, than to a private commercial sales transaction. Moreover, there is no evidence that the PCBs were obvious, and the defendants had no specialized knowledge concerning PCBs or hazardous waste. The court rejects the government's argument that § 101(35)(A)'s requirement for "all appropriate inquiry" mandates that some level of inquiry always be made. Congress' choice of terms such as "appropriate" and "reasonable" indicates that the level of inquiry must be made on a case-by-case, fact-specific basis. The court holds that the wife of another earlier shareholder is also entitled to the defense. She received her shares through an inheritance and had no knowledge that PCBs were on the property until cleanup efforts were made. Although she was a secretary of the corporation, the corporation had essentially ceased doing business and was in the process of dissolution. The court holds that the third earlier shareholder is entitled to the defense. Although [19 ELR 20898] he had an ownership interest in the site for a considerable period, during which his two brothers operated the site, he was absent during most of this time and had no input into management or operations. His election as director and officer was done solely to facilitate sale of the property.

The court holds that the individual defendants may be liable under CERCLA § 107(a)(2) as owners or operators during the time the hazardous substances were disposed of at the site. The innocent landowner defense is only applicable to defendants who acquired a property after the disposal or placement of the hazardous substances, and the government may be able to prove that the defendants owned or operated the site at the time of PCB disposal. The court declines to rule on whether the defendants' liability is limited to the liability they might incur as statutory trustees of the corporation or on whether the defenses listed in CERCLA § 107(b) are the only defenses available in a CERCLA action.

Counsel for Plaintiff
Ellen Wagner
Land and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 633-1711

Mark Haws, Ass't U.S. Attorney
Box 037, Federal Bldg., Boise ID 83724
(208) 334-1211

David M. Heineck
Office of Regional Counsel
U.S. Environmental Protection Agency, 1200 Sixth Ave., Seattle WA 98101
(206) 442-7660

Counsel for Defendants
William J. Keppel
Dorsey & Whitney
2200 First Bank Place East, Minnesota MN 55402
(612) 340-2660

R. B. Rock, Donald J. Farley, Robert B. Luce
Moffate, Thomas, Barrett & Blanton
P.O. Box 829, Boise ID 83701
(208) 345-2334

George Southworth
Herzog & Roche
P.O. Box 1412, Pocatello ID 83204
(208) 232-5060