Due and Don't Care Under CERCLA: An Emerging Standard for Current Owners

Robert Emmet Hernan

Editor's Summary: CERCLA § 107 contains a third-party affirmative defense provision for owners of hazardous waste sites who exercised due care. Despite the abundance of CERCLA litigation, until recently no clear understanding of due care had yet emerged. But now, a series of New York federal court opinions suggest that due care turns on the owner's actions at the time the owner becomes aware of the contamination. This Article surveys the due care case law and focuses on the recent New York decisions. The Article concludes that to benefit from the protection of the due care affirmative defense, a site owner should notify appropriate governmental authorities as soon as the owner learns of possible contamination and cooperate with authorities to determine the scope of the contamination, endeavor to limit the spread of contamination, and remain personally involved in the investigation and remediation.

The author is an Assistant Attorney General in the Environmental Protection Bureau of the New York State Department of Law, and was counsel for the state in several of the cases discussed below, including A & N Cleaners, Lashins, and New Windsor. He was also one of the counsel for the state in the Love Canal litigation. The opinions and analysis expressed in this Article are those of the author and do not in any way reflect the opinions, positions, or policies of Attorney General Dennis C. Vacco or the New York State Department of Law.

[27 ELR 10064]

After 15 years of Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) jurisprudence, one would have thought that there existed a clear standard for determining the due care required of a current owner under CERCLA § 107's affirmative defense provision. Until recently only a handful of cases had turned on theissue and no clear line had been drawn, but several New York cases decided this past summer have helped draw the proverbial line in the sand between due and don't care for current owners.

In most CERCLA cases involving due care, courts focus on what the owner knew, and did or did not do. The recent New York cases concentrated on another dimension: when the owner learns of the contamination, what is being done about that contamination, and who is doing it?

As a result of several key cases where no care was found and several recent cases where due care was found, there finally appears to be an emerging standard for due care applicable to current owners of hazardous-waste sites.

Statutory Framework

CERCLA § 107 imposes strict liability on responsible parties "notwithstanding any other provision or rule of law and subject only to the defenses set forth in subsection (b) of this section."¹ Subsection (b) provides, in relevant part, that

There shall be no liability … for a person otherwise liable who can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by … (3) an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant … if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance, in light of all relevant facts and circumstances, and (b) he took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions; ….²

In other words, with less convoluted grammar, a current owner of a hazardous-waste site has an affirmative defense only if the owner has no contractual relationship with someone else responsible for the release and the current owner exercised all due care, taking reasonable precautions. An otherwise liable party bears the burden of proving, by a preponderance of the evidence, that it is entitled to this third-party defense.³

[27 ELR 10065]

While this Article concentrates on the standard applicable to the due care provisions of the third-party defense under § 107(b)(3), a brief digression through the "innocent purchaser" provisions of § 101(35) is necessary because there exists some confusion here. Courts and commentators often discuss the due care provisions by citing cases that rely on the analytically distinct innocent purchaser provisions, and discuss the innocent purchaser provisions by citing cases that rely on the due care provisions.

Innocent Purchaser Provisions

As originally written in 1980, "CERCLA imposed strict liability on all owners of contaminated property regardless of the circumstances of their ownership."⁴ Before the 1986 Superfund Amendments and Reauthorization Act (SARA), the § 107(b)(3) third-party defense provided purchasers of contaminated property with little comfort, because the deed through which they acquired the property was often deemed to be evidence of a contractual relationship with a responsible party, precluding the assertion of the third-party defense.⁵

Congress added the definition of "contractual relationship" in SARA to grant some relief to truly innocent purchasers of contaminated property.⁶ As explained in the legislative history, Congress added the so-called innocent purchaser exception to provide protection against CERCLA liability for purchasers of property, that unbeknownst to them, was a hazardous-waste site:

[Section 101(35)] is intended to clarify and confirm that under limited circumstances landowners who acquire property without knowing of any contamination at the site and without reason to know of any contamination (or as otherwise noted in the amendment) may have a defense to liability under section 107 and therefore should not be held liable for cleaning up the site if such persons satisfy the remaining requirements of section 107(b)(3).⁷

The innocent purchaser provisions of CERCLA § 101(35) are applied in the following situation. If the release or threat of release was caused by someone in connection with a contract, deed, or other instrument between that party and the current owner, then the current owner generally loses the § 107(b)(3) third-party affirmative defense. The current owner can recapture that defense, however, if "the real property on which the facility concerned is located was acquired by the defendant after the disposal or placement of the hazardous substance on, in, or at the facility," and the defendant establishes by a preponderance of the evidence that at "the time the defendant acquired the facility, the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the facility."⁸ Section 101(35)(B) then sets forth certain factors to be considered in determining whether the defendant should have known of the condition. These are the "due diligence" requirements.

Thus, the innocent purchaser provisions of § 101(35) in effect give back to purchasers of contaminated property the § 107(b)(3) affirmative defense (taken away because of their relationship by deed to a responsible party), if the purchaser meets the stringent due diligence requirements set forth in § 101(35)(A) and (B).⁹

If a current owner is not contractually related to anyone who caused the release, the innocent purchaser provisions of § 101(35)(A) are not applicable, and the current owner is required only to satisfy the due care provisions of § 107(b)(3). That is the situation addressed in this Article.¹⁰

The Current Owner Case Law: Don't Care

The affirmative defense under § 107(b)(3) requires the current owner to prove that it exercised due care "in light of all relevant facts and circumstances" and took precautions against foreseeable acts or omissions of others. When the CERCLA legislation was debated, the House Committee on Interstate and Foreign Commerce, in its report, stated that the phrase due care was intended to encompass the conduct that a "reasonable and prudent person would have taken in light of all relevant facts and circumstances."¹¹ Because the due care analysis turns tightly on the specific facts, it is more critical to detail the facts of the relevant cases than otherwise would be necessary.

The seminal case of New York v. Shore Realty Corp.¹² is instructive on the issue of an owner's due care affirmative defense under § 107(b)(3). Shore Realty involved CERCLA and common-law public nuisance claims against the current [27 ELR 10066] owner of a hazardous-waste site. The property in question was purchased by a corporation, defendant Shore Realty Corp., which had been incorporated and was, in effect, controlled by defendant LeoGrande (collectively referred to as defendant owner). The defendant owner entered into an agreement to purchase the property in July 1983 and took title in October 1983.¹³ Before closing on the property in October 1983, defendant owner knew that tenants at the site used it for storing hazardous waste and a report prepared for the defendant owner indicated that there were potentially serious environmental problems at the site which would be costly to clean up.¹⁴ With this information, defendant owner attempted to get a waiver of liability from the New York State Department of Environmental Conservation (DEC) for the conditions. The DEC denied the waiver. Then, in October 1983, defendant took title to the property. The tenants continued to use the site until January 1984, when defendant owner evicted them and took possession of the site.¹⁵

Between October 1983 and January 1984, nearly 90,000 gallons of hazardous chemicals were added to tanks on the site; leaking drums of chemicals were also brought onto the site in this period. When defendant Shore Realty assumed possession of the property, it was as bad as before or worse. And while defendant made some improvements at the site (sealed pipes and valves and continued cleanup of damage from earlier spills), defendant still left hundreds of thousands of gallons of hazardous chemicals in deteriorating tanks and ignored the large number of leaking drums.¹⁶

On appeal of the district court's decision, the Court of Appeals for the Second Circuit found that defendant was liable under CERCLA as a current owner, and then addressed defendant's affirmative defense of due care under § 107(b)(3). Defendant argued that it had nothing to do with the bringing of hazardous substances to the site and that it "exercised due care since taking control of the site."¹⁷ In analyzing whether defendant owner satisfied the due care affirmative defense, the court noted that it was reaching that defense irrespective of whether defendant had a contractual relationship with a responsible party.¹⁸ The court then found that "Shore was aware of the nature of the tenants' activities before the closing and could readily have foreseen that they would continue to dump hazardous waste at the site."¹⁹ "In light of this knowledge" the court held that the due care affirmative defense failed.²⁰ The Second Circuit, thus, held that the circumstances surrounding the purchase of a property, and in particular the prospective purchaser's knowledge about environmental conditions at the site, are relevant and central facts in determining whether a current owner of a hazardous-waste site can meet its burden under the § 107(b)(3) due care affirmative defense, irrespective of whether a contractual relationship exists between the owner and some third-party.²¹

The reason for considering the circumstances surrounding the purchase, for purposes of a § 107(b)(3) due care defense, is that otherwise a "huge loophole in CERCLA's coverage" would develop.²² "It is quite clear that if the current owner of a site could avoid liability merely by having purchased the site after chemical dumping had ceased, waste sites certainly would be sold, following the cessation of dumping, to new owners who could avoid the liability otherwise required by CERCLA."²³ The court in Shore Realty found such a result diametrically opposed to the broad remedial purposes behind CERCLA.

In United States v.A & N Cleaners & Launderers, Inc.,²⁴ a dry cleaning operation's disposal of hazardous substances, including perchloroethylene and trichloroethylene, in a small shopping mall resulted in contamination of groundwater. The current owners purchased the shopping mall in 1979, at which time defendant Marine Midland Bank had a lease for the entire property and was subleasing a space to the dry cleaner. The local health authorities investigated the site in 1978, the DEC and the U.S. Environmental Protection Agency (EPA) conducted investigations, and the site was listed on the federal national priorities list (NPL) in 1982.²⁵

The United States brought an action under CERCLA against Marine Midland Bank, the dry cleaners, and the current owners.²⁶ The parties filed motions for summary judgment. The court granted the government's motion for summary judgment on liability against the dry cleaners, Marine Midland, and the current owners. The court denied the current owners' motion for summary judgment on their due care affirmative defense.²⁷

Following the denial of summary judgment, the court conducted a hearing, limited to consideration of the current owners' affirmative defense under CERCLA § 107(b)(3). As a result of the hearing, the court concluded that the current owners were unable to claim the protection of CERCLA's affirmative defenses.²⁸ The court found that the dumping of certain hazardous substances had stopped before [27 ELR 10067] the current owners had purchased the property in 1979;²⁹ that the contamination of the area's drinking water was widely known;³⁰ that on several occasions governmental agencies requested access to defendants' property to test for contamination;³¹ that the owners included an attorney, who specialized in real estate law and who was also the town's attorney for a relevant period, and a builder engaged in the construction business;³² that in 1985 one of the defendant owners heard of a potential soil contamination at another property he owned and he knew enough to hire an engineer to conduct an investigation at that other property;³³ and, significantly, that from 1979 to 1988 the owners made no inquiries of the tenant about its disposal activities or of the governmental agencies about the contamination on their property.³⁴

While expressing misgivings about some of the wide-reaching effects of CERCLA's strict liability provisions, the court nevertheless found that "Congress intended CERCLA's liability scheme to provide incentives for private parties to investigate potential sources of contamination and to initiate remediation efforts."³⁵ Specifically, the due care defense requires that "a defendant demonstrate that it took necessary steps to prevent foreseeable adverse consequences arising from the pollution on the site."³⁶ Of particular concern to the court was the fact that the defendants did not make any inquiries about the disposal practices of the dry cleaner, nor did the defendants ask environmental officials about the status of the property. The court held that the owners should have made such inquiries as soon as they had information regarding the investigations into the contamination of the drinking water and the possible disposal of hazardous substances.³⁷ Further, the court found that

due care would have required that they take some steps to ascertain the nature of any environmental threats associated with this disposal. Such steps could have included hiring an engineer to test the soil on their property, as Petrillo [one of the owners] did in 1985 …, contacting EPA, [DEC], [New York State Department of Transportation], or the Putnam County Department of Health to discuss a the [sic] problem, cleaning up the Property themselves and thereafter seeking recovery of their response costs, or taking such other actions which, in light of a full evaluation of the relevant facts and circumstances, were appropriate.³⁸

Finally, in response to the owners' argument that the government had an affirmative obligation to notify the owners of the problems, the court held that "it is no defense to insist that, in the course of its ongoing testing, the Government should have notified the [current owners] that there was a problem on the Property, since Congress has seen fit to shift the public responsibility of locating contamination onto the shoulders of individual property owners."³⁹

In United States v. DiBiase,⁴⁰ the government moved for partial summary judgment on the issue of the liability of the sole trustee of a trust that owned a hazardous-waste site. In granting the government's motion for summary judgment, finding defendant DiBiase jointly and severally liable, the court held that DiBiase's affirmative defenses, both that he exercised due care as required under § 107(b)(3) and that he qualified as an innocent landowner under § 101(35)(A)(i), were insufficient as a matter of law. Analyzing, first, the due care provisions of the affirmative defense, the court found that DiBiase was notified in 1980 of the presence of hazardous materials on the property (10 years after buying the property) and that he took no action to assess the site, build fences, or take other precautions. Moreover, the dangerous conditions at the site were widely known. The court found that DiBiase's "attempt to shield himself with his asserted ignorance of the nature of the hazard is futile."⁴¹ Also inadequate as an excuse for not doing more was DiBiase's argument that he understood the state environmental agency would conduct an investigation and advise him further. With regard to this last argument, the court found that from first learning of the hazard, the owner undertook "not one affirmative act of substance on his part to investigate or ameliorate the conditions in the sludge pits."⁴² The court concluded, "He is implicitly trying to shift his personal responsibility for the pits to the [state environmental agency]."⁴³

Based on these facts, the court found that "DiBiase simply did nothing, even after concededly becoming aware of the hazardous wastes in 1980"; that he "took no precautions and undertook no investigation of the pits"; and that "in no circumstances can 'no care' be considered 'due care.'"⁴⁴

On much the same ground, the court also found the innocent landowner defense inapplicable. Since DiBiase knew or had reason to know that hazardous substances were on the site, he was precluded by law from asserting this defense.⁴⁵

In Kerr-McGee Chemical Corp. v. Lefton Iron & Metal Co.,⁴⁶ the U.S. Court of Appeals for the Seventh Circuit reversed a lower court decision and held that the current owner, which had not dumped any of the contaminants on the site, was liable because it knew there were contaminants on the property when it bought the property, the contract acknowledged the contaminants, the property was taken [27 ELR 10068] "as is," and yet the owner took no action to control the pollution or clean up the site. The fact that plaintiff's predecessor was the source of the pollution was immaterial. The Seventh Circuit found that "the evidence at trial showed that although Lefton Land [the current owner] was aware of the wood preservatives on the site, it made no attempt to remove those substances or to take other positive steps to reduce the threat posed by the creosote."⁴⁷ One factor relied on by the court in finding Lefton liable was that "Lefton took no action to clean up the site even after the Illinois Environmental Protection Agency and the United States Environmental Protection Agency undertook preliminary investigations of the site."⁴⁸ The court found that the defendant would not be absolved of "any responsibility to take affirmative measures to control the pollution on the site."⁴⁹

In Idylwoods Associates v. Mader Capital, Inc.,⁵⁰ the current owner acquired the contaminated property after the dumping of hazardous substances arguably had ceased. After acquisition and after the owner learned of the contamination at the site, some illegal dumping of unknown wastes occurred, contaminants migrated off-site, and drums at the site deteriorated and leaked. The owner did not erect any warning signs, retain security personnel to prevent trespassers, or erect a fence. The owner did construct a berm to contain wastes, but it was knocked down. Under the circumstances, the court found that the current owner had failed to satisfy the due care provisions of the third-party defense because it "failed to cooperate in sealing off the area, and did not engage in any affirmative action to guard against a potentially dangerous situation, allowing over ten years to go by while various environmental agencies investigated the situation, during which time foreseeable weather conditions caused the hazardous waste to migrate."⁵¹

Under these cases, then, the "relevant facts and circumstances" of the due care defense include what the defendant current owner knew about any contamination or pollution problems, and what the defendant did in light of what it knew about the contamination. In Shore Realty, the owner knew that the site was contaminated before closing and the owner's efforts to correct conditions were limited to sealing pipes and cleaning up earlier spills. In addition, the environmental conditions worsened after defendant took title to the property. In A & N Cleaners, the owner had information about contamination on or about its property and it made no inquiries about a dry cleaner's disposal practices or about the government's investigations. In DiBiase, the owner knew of the contamination and did not bother even to fence the property or take other precautions. In Kerr-McGee, the owner took no positive steps to control the contaminants on site. In Idylwoods, construction of a berm, which was then knocked down, was not enough to contain the hazardous waste on site or enough to qualify for the due care defense.

In each of these cases, a little knowledge, and little or no action, was a dangerous thing. The fact that the government was investigating the contamination did not relieve the owner of the duty to take some affirmative steps of due care. Finally, in each, there was evidence of deteriorating conditions during the owner's tenure.

The Current Owner Case Law: Due Care

When the current owner does take some affirmative steps to control the contamination, at least on its own property, then the due care defense can be satisfied. For example, in Lincoln Properties, Ltd. v. Higgins,⁵² county sewer lines were found to contain dry cleaning solvents and the sewer lines were leaking contaminants into the groundwater. On learning of the contamination of the sewer lines and certain wells, the owner of these facilities, the county, took affirmative action: it tested wells, performed videotaped inspections, sealed a contaminated well, removed contaminated wells from service, and was in the process of assuring that wells would not contribute to any migration of contaminants. On these facts, the court found that the county had exercised the requisite due care and taken precautions against foreseeable acts or omissions to satisfy the third-party defense. Thus, the county recognized its duty to at least investigate and, if necessary, clean up its own property, even if it did not proceed to investigate or clean up the wider area of contamination. Here a little knowledge, and some affirmative steps to investigate and/or prevent further harm, was sufficient to satisfy the due care defense.⁵³

In several recent New York cases, the current owners prevailed on the due care defense. Those cases clarify the difference between due and don't care for current owners under § 107(b)(3). They do so by addressing the relevance to the due care requirement of an investigation or remediation being conducted at the time the current owner learns of the contamination.

In New York v. Lashins Arcade Co.,⁵⁴ a small shopping arcade in Westchester County was contaminated by dry cleaning solvents disposed of at the site in the 1960s and 1970s. The solvents continued to be released into the environment in the 1980s and 1990s, although there was evidence that the plume and level of contamination had stabilized. The dry cleaning operation had ceased by 1971, and several persons owned the site between 1971 and 1987. The Second Circuit found that before buying the property, the current owner was informed that there were chemicals in the ground on the property, that there was a groundwater contamination problem, and that the property's well required a carbon filter because of the contamination.⁵⁵

[27 ELR 10069]

The court also found that after buying the property and discovering that the property was being investigated by the state because of the contamination, the ownermaintained the filter that was on the property's well, including taking samples of the well for analysis; told the arcade's tenants not to discharge hazardous substances into the waste or septic systems; included a provision to that effect in subsequent leases; and inspected the tenants' premises periodically.⁵⁶ This conduct was found to constitute due care under the circumstances.

The court reasoned that once the government had commissioned a remedial investigation/feasibility study (RI/FS), "it would have been pointless to require Lashins to commission a parallel investigation once it acquired the Arcade and became more fully aware of the environmental problem."⁵⁷ This reasoning was based on the affirmative steps that the owner had taken.⁵⁸

Another decision rendered last summer further clarifies the defense. In Town of New Windsor v. Tesa Tuck Inc.,⁵⁹ a district court granted the New York State Department of Transportation (DOT) summary judgment on the issue of the affirmative due care defense under CERCLA § 107(b)(3). The DOT is the current owner of Stewart International Airport, which it has owned since 1982. Between 1955 and 1976 the town of New Windsor owned and operated a landfill adjacent to the airport. Sometime during that operation, the town encroached on the airport property and hazardous substances were disposed of at the landfill, including on the encroachment. No one discovered the encroachment until the town began to investigate the landfill in the late 1980s. The town entered into a consent order with the DEC in 1989 and a state assistance contract in 1990. Pursuant to the order and contract, the town, which was a potentially responsible party (PRP) as owner and operator of the landfill, agreed to investigate and remediate the landfill with financial assistance from the state under the state's Environmental Quality Bond Act.⁶⁰

The DOT was not informed of, and did not learn of, the encroachment until January 1992, which was after the town had completed the RI/FS, the state had issued its record of decision (ROD), and the town had begun to design the remediation of the landfill.⁶¹ As the court found, "when DOT was notified of the encroachment, the town had already investigated and begun to remediate the site, under the supervision of the DEC."⁶² At that point, the DOT fully cooperated with the town and the DEC by reviewing and providing comments on the ongoing remedial design plans, offering to provide fill material for the town's landfill from another existing landfill site on the airport property, and assisting the town in getting permission from the lessee of the encroached-on section of the airport so that the town could remove the materials that had been dumped on the airport property.⁶³ Under these undisputed facts the court found that the DOT had satisfied the due care defense.

Finally, in Redwing Carriers, Inc. v. Saraland Apartments, Ltd.,⁶⁴ the defendant was the current owner of property it had purchased in 1984, 12 years after the plaintiff had last buried hazardous substances there. When the owner learned from a government agency that tar seeps were present on the site, the owner approved a maintenance plan to remove the tar seeps. EPA then conducted a preliminary investigation and entered into a consent order with the plaintiff PRP to remove the tar seeps. All of these developments occurred within a year of the owner's acquisition of the property. The court found that the current owner had done nothing to exacerbate conditions at the site. Under these circumstances, the court affirmed that the current owner had satisfied § 107(b)(3)'s third-party defense.

The fact that an investigation or remediation of the site is being undertaken either when or shortly after the current owner learns of the contamination was deemed relevant to the owner's due care defense in the Lashins, New Windsor, and Redwing Carriers decisions. This fact can count in the owner's favor if the owner has taken affirmative steps to ensure that there is no further deterioration of the conditions and/or fully cooperates with the government. This consideration is especially appropriate when the investigation or remediation is being conducted by a PRP, as in New Windsor and Redwing Carriers.

The Emerging Standard

The dilemma facing courts, as well as governments and property owners, is where to draw the line between what are and what are not a current owner's due care obligations in these Superfund cost recovery cases. Requiring the current owner to conduct or pay entirely for the investigation and for the remediation would render the defense worthless or, more accurately, too expensive. However, relieving the current owner of any obligation to investigate and/or take some affirmative steps to control the contamination would obliterate the liability Congress attached to current owners.

Congress unquestionably provided for the strict liability of current owners under CERCLA even when the owners did not actively dispose of hazardous substances. In addressing an owner's liability, it has been found that CERCLA was intended not only to hold responsible those whose activities created the contamination, but "to provide incentives for private parties to investigate potential sources of contamination and to initiate remediation efforts."⁶⁵ Indeed, a major objective of CERCLA's liability scheme is to "assure an incentive for private parties, including those who may themselves be subject to liability under the statute, to take a leading role in cleaning up hazardous waste facilities as rapidly and completely as possible."⁶⁶ Moreover, CERCLA's provision for current owners is "modelled after common law tort liability rules that seek to [27 ELR 10070] control the social cost of hazardous waste contamination by controlling the behavior of landowners and other relevant actors."⁶⁷ Such liability rules are consistent with the "polluter pays" principle because a landowner that allows hazardous substances to be released or to migrate from its property is indeed a polluter that should pay.⁶⁸ Certainly landowners are often in the most advantageous position to discover the presence of hazardous substances, to report that presence to the authorities, and to address the contamination on their property.

While courts consistently have examined what the owner knew, and did or did not do, the recent cases have sharpened the focus on another dimension: at the time when the owner learns of the contamination, what is being done about that contamination, and who is doing it? Based on the developing case law, especially A & N Cleaners, Lashins, and New Windsor, the following suggestions are offered as ways of further clarifying this developing standard for a current owner's due care obligations.

At a minimum, an owner should contact the appropriate governmental authorities as soon as the owner has information that her or his property may be contaminated and the owner should fully cooperate with the government in attempting to address the environmental problems attributable to the property. The owner should also do all that is reasonably necessary to prevent further deterioration of conditions on the property pending the completion of whatever investigations are needed to determine the appropriate remedy. Removing or containing leaking drums seems clearly necessary. Not so clear, and still to be developed by further case law, is the issue of what specific, affirmative steps are necessary to address groundwater contamination conditions, especially when the contamination is migrating from the property.

In addition, consideration should be given to the stage of the investigation or remediation at which the owner learns of the possible contamination and to who is doing the investigation and/or remediation. The earlier in the process of investigation and remediation that the owner learns of the contamination, the more active the owner should become. Thus, for example, if the owner is the first to learn of the contamination, before any government or other investigation is started, the owner may have an obligation to undertake or participate in an investigation to determine what contribution the property is making to the problem. If the owner learns of the contamination only after the RI/FS is completed and the remedy is being implemented, then it may be sufficient for the owner to provide access to the site, necessary information, and other assistance, and to continue to insure that no further deterioration of the conditions occurs.

Finally, in A & N Cleaners, Kerr-McGee, and DiBiase, the courts rejected arguments by current owners that they were somehow excused from taking affirmative action because a governmental agency already was taking action. Based on the reasoning implicit in these cases, and entirely consistent with CERCLA's objective to relieve governments, and public purse, of cleanup costs, the following factor can be considered. If the investigation or remedy is being conducted by the government, with public funds, then perhaps the owner may have a heavier burden to participate to some extent in the investigation or remedy. If the investigation or remedy is being undertaken by another PRP, then the owner's obligations would be lessened substantially.

Such considerations are derived from and consistent with the recent decisions. For instance, the Second Circuit's holding in Lashins can be read as follows: if a defendant played no role in the events that led to the hazardous-waste problem and came on the scene after public authorities were well along in a program of investigation and remediation, then due care is satisfied if the current owner takes steps to address the contamination problem on its property.⁶⁹ As we have seen, the owner took several affirmative steps to prevent further disposal from occurring on its property. The Second Circuit decision in the Lashins case should not be read to hold that once the government begins an investigation at a hazardous-waste site, the current owner is relieved of any obligations. Such a reading would create a Catch-22 for the governments in Superfund cost recovery cases. Here is the Catch-22: It is often the case that a property becomes known as a source or possible source of releases of hazardous substances only because the government conducts an investigation. Yet if the very fact that an investigation is being conducted would relieve the owner of any obligation to take any affirmative step to investigate even its own property or to otherwise cooperate with the government, then the due care defense would be allowed to swallow the current owner liability provisions. Current owners would be encouraged, once they suspected or even learned of a possible contamination attributable to their property, to turn a blind eye, not to ask any questions, certainly not to report the contamination, but to wait until the government discovers the contamination and begins an investigation. At that point, according to this problematic reading of Lashins, the owner would be relieved of any obligation. Such a result would be unfortunate, and clearly not what Congress intended by including current owners as one of the categories of PRPs.

The New Windsor case holds that when the current owner learns of the contamination after the RI/FS has been completed and after the remedial actions have been selected and are being designed and implemented by a PRP, then fully cooperating with the government, as the owner did by providing information and access, reviewing remedial plans, and offering fill material, was sufficient and the current owner was not required to undertake or pay for the cleanup. And in Redwing Carriers the owner took affirmative steps to control the tar seeps while the government obtained an order directing the company that created the problem to clean it up.

Conclusion

All of these cases are trying to find ways of preserving the due care defense without destroying the current owner liability provisions. While due care under CERCLA may remain elusive for current owners, as it has in tort law generally, at least the recent CERCLA case law is identifying the channel markers for steering a middle course.

1. 42 U.S.C. § 9607(a), ELR STAT. CERCLA § 107(a) (emphasis added); see, e.g., New York v. Shore Realty Corp., 759 F.2d 1032, 1042, 15 ELR 20358, 20362 (2d Cir. 1985); United States v. Stringfellow, 661 F. Supp. 1053, 1062, 17 ELR 21134, 21136 (C.D. Cal. 1987); United States v. Price, 577 F. Supp. 1103, 1113-14, 13 ELR 20843, 20847 (D.N.J. 1983).

2. 42 U.S.C. § 9607(a), ELR STAT. CERCLA § 107(a) (emphasis added). While the defense speaks of "solely" causing, paragraph 4 of § 107(b) refers to "any combination of the foregoing paragraphs." Therefore, the provisions of § 107(b) have been read to apply to situations where damages were caused by multiple acts by a single party or a number of acts by several third parties. See New York v. Lashins Arcade Co., 91 F.2d 353, 360, 26 ELR 21506, 21509 (2d Cir. 1996). In effect, if the defendant owner is contractually related to anyone who caused any part of the damage, then that defendant loses the § 107(b) affirmative defense, unless it is recaptured through § 101(35), as discussed below.

3. See, e.g., City of New York v. Exxon Corp., 766 F. Supp. 177, 195, 22 ELR 20145, 20151 (S.D.N.Y. 1991); Washington v. Time Oil Co., 687 F. Supp. 529, 531, 18 ELR 21376, 21377 (W.D. Wash. 1988); Price, 577 F. Supp. at 1114, 13 ELR at 20847.

4. United States v. Shell Oil Co., 841 F. Supp. 962, 973, 24 ELR 20877, 20881 (C.D. Cal. 1993).

5. See, e.g., United States v. Pacific Hide & Fur Depot, Inc., 716 F. Supp. 1341, 1347, 19 ELR 20897, 20900 (D. Idaho 1989) ("Under this statute, Congress set down a strict rule that any instrument transferring title or possession of the facility would be a 'contractual relationship' barring the use of the defense unless certain enumerated conditions were met.").

6. 42 U.S.C. § 9601(35), ELR STAT. CERCLA § 101(35).

7. H.R. REP. NO. 962, 99th Cong., 2d Sess. 186 (1986), reprinted in 1986 U.S.C.C.A.N. 3279; see also Shell Oil, 841 F. Supp. at 973, 24 ELR at 20881 (The current owner liability provision "became controversial as a result of several cases in which apparently 'innocent' landowners were held liable for response costs greatly in excess of the value of the land. In response to this controversy, Congress introduced a so-called 'innocent landowner' defense to liability inSARA." (citation omitted)).

8. 42 U.S.C. § 9601(35)(A), ELR STAT. CERCLA § 101(35)(A).

9. See, e.g., Westwood Pharmaceuticals v. National Fuel Dist., 964 F.2d 85, 89-91, 22 ELR 20813, 20816 (2d Cir. 1992); United States v. A & N Cleaners & Launderers, Inc., 854 F. Supp. 229, 238 (S.D.N.Y. 1994) (A&N III); Pacific Hide, 716 F. Supp. at 1346-48, 19 ELR at 20900; H.R. CONF. REP. NO. 962, 99th Cong., 2d Sess. 186-87 (1986), reprinted in 1986 U.S.C.C.A.N. 3276, 3279-80. The Westwood case stands for the proposition that a seller of a property who did not know that the property was contaminated when sold is not precluded from raising the third-party defense merely because the seller is contractually related to the buyer by deed. Rather, the seller (National Fuel) was entitled to try to prove that the release of hazardous substances was caused solely by the construction and operation activities of the buyer (Westwood) and not in connection with the sale of the property. This results from holding that the seller is precluded from raising the defense "only if the contract between the landowner and the third party somehow is connected with the handling of hazardous substances" or "if the contract allows the landowner to exert some control over the third party's actions." Westwood, 964 F.2d at 89, 22 ELR at 20816 (emphasis added). Just what was meant by "somehow" remains to be fathomed.

10. Of course, if the current owner is contractually related to a responsible party through a deed or similar instrument, but the current owner satisfies the innocent purchaser provisions and thereby regains the chance to make out the defense under § 107(b), then the current owner still has to satisfy the due care requirements.

11. H.R. REP. NO. 1016, 96th Cong., 2d Sess. 34 (1980), reprinted in 1980 U.S.C.C.A.N. 6137.

12. 759 F.2d 1032, 15 ELR 20358 (2d Cir. 1985).

13. Id. at 1038-39, 15 ELR at 20359-60.

14. Id. Even in 1983, purchasers of commercial property in New York undertook pre-purchase environmental studies of properties when there was indication of actual or potential contamination.

15. Id. at 1039, 15 ELR at 20360.

16. Id.

17. Id. at 1048, 15 ELR at 20365.

18. The court did suggest that it appeared that defendant owner had a contractual relationship with the previous owners, because defendant owner assumed some of the environmental liability of the previous owners. Id. at 1048 n.23, 15 ELR at 20366 n.25.

19. Id. at 1049, 15 ELR at 20366 (emphasis added). Because the court found Shore Realty liable as a current owner under § 107(a)(1), it did not reach the issue of whether disposal occurred during Shore Realty's ownership, which would trigger liability under § 107(a)(2) as an owner at the time of disposal.

20. Id.

21. Perhaps the following distinction can be drawn between the importance of a current owner's knowledge for purposes of analyzing the innocent purchaser and the due care components of the third-party defense. In an innocent purchaser analysis, constructive knowledge of contamination before purchase can result in loss of the defense; in a due care analysis, actual knowledge of contamination before purchase can result in loss of the defense.

22. Id. at 1045, 15 ELR at 20363.

23. Id.

24. 854 F. Supp. 229 (S.D.N.Y. 1994).

25. Id. at 232-35.

26. The state of New York intervened as plaintiff in the action subsequent to the decisions on the summary judgment motions.

27. United States v. A & N Cleaners & Launderers, Inc., 788 F. Supp. 1317 (S.D.N.Y. 1992) (A&N I); see also United States v. A & N Cleaners & Launderers, Inc., 842 F. Supp. 1543, 24 ELR 21336 (S.D.N.Y. 1994) (A&N II) (the court denied a second motion for summary judgment by the United States, which argued that the owners were precluded from asserting the affirmative defense.).

28. A&N III, 854 F. Supp. at 231.

29. Id. at 242.

30. Id. at 234-35.

31. Id. at 235.

32. Id. at 232.

33. Id. at 235.

34. Id.

35. Id. at 239.

36. Id. at 238.

37. Id. at 243.

38. Id. at 243-44 (emphasis added).

39. Id. at 244.

40. No. 91-11028-MA, 1993 WL 729662 (D. Mass. Nov. 19, 1993).

41. Id. at *7.

42. Id.

43. Id.

44. Id.; see also United States v. DiBiase, 45 F.3d 541, 25 ELR 20807 (1st Cir. 1995). The First Circuit affirmed a consent decree between the government and another potentially responsible party (PRP) for 85 percent of the response costs, leaving the current owner liable for the remaining 15 percent of costs. In rejecting the owner's objections to the consent decree, the court reasoned that while the other PRP played the leading role and the current owner, "who came on the scene later, played an appreciably less prominent role," nevertheless, "an actor cast in a bit part is not to be confused with a mere spectator, whose only involvement is to lounge in the audience and watch events unfold." Id. at 545, 25 ELR at 20808.

45. DiBiase, 1993 WL 729662, at *8.

46. 14 F.3d 321, 24 ELR 20369 (7th Cir. 1994).

47. Id. at 325, 24 ELR at 20371 (emphasis added).

48. Id. at 325 n.3, 24 ELR at 20370 n.3 (emphasis added).

49. Id.

50. 915 F. Supp. 1290, 26 ELR 21027 (W.D.N.Y. 1996).

51. Id. at 1302, 26 ELR at 21032. Interestingly, the court also found that the current owner was not liable as an owner at the time of disposal, under § 107(a)(2), on the ground that "passive" releases did not constitute "disposal." Id. at 1311, 26 ELR at 21037. Nevertheless, the current owner lost the due care defense in part because of its failure to control or stop the "passive" releases.

52. 823 F. Supp. 1528 (E.D. Cal. 1992).

53. See also HRW Systems, Inc. v. Washington Gas Light Co., 823 F. Supp. 318, 349, 23 ELR 21586, 21600 (D. Md. 1993) (A current owner was granted the due care affirmative defense and the court found that it was the conduct of defendant after it learned of the contamination that was relevant to this defense.).

54. 91 F.3d 353, 26 ELR 21506 (2d Cir. 1996).

55. Id. at 356-58, 26 ELR at 21507-08. Because the court found that the current owner was not contractually related to any responsible party, the innocent purchaser provisions of the third-party defense were held to be inapplicable. Id. at 360, 26 ELR at 21510.

56. Id. at 358, 361 n.6, 26 ELR at 21508, 21510 n.6.

57. Id. at 361, 26 ELR at 21510.

58. Id. at 362, 26 ELR at 21511.

59. 92 Civ. 8754, 1996 WL 413426 (S.D.N.Y. July 17, 1996).

60. N.Y. ENVTL. CONSERV. LAW § 52-0303 (McKinney 1996); id. § 27-1313(5)(g).

61. For a description of the facts and dates covering the steps in the investigation and ROD and remedial design, see the same court's decision of March 14, 1996. Town of New Windsor v. Tesa Tuck, Inc., 919 F. Supp. 662, 667, 26 ELR 21230, 21231 (S.D.N.Y. 1996).

62. New Windsor, 1996 WL 413426, at *5.

63. Id. at *1, *4-*5.

64. 94 F.3d 1489 (11th Cir. Sept. 12, 1996).

65. Foster v United States, 922 F. Supp. 642, 656, 26 ELR 21327, 21332 (D.D.C. 1996).

66. New York v. Exxon Corp., 633 F. Supp. 609, 617, 16 ELR 20850, 20853 (S.D.N.Y. 1986); Foster, 922 F. Supp. at 656, 26 ELR at 21332.

67. Michael J. Gergen, The Failed Promise of the 'Polluter Pays' Principle: An Economic Analysis of Landowner Liability for Hazardous Waste, 69 N.Y.U.L. REV. 624, 627 (1994); see also RESTATEMENT (SECOND) OF TORTS §§ 351-353, 822-840A (1977); New York v. Shore Realty, 759 F.2d 1032, 1050-52, 15 ELR 20358, 20366-68 (2d Cir. 1985).

68. Gergen, supra note 67, at 624-27, 632-33.

69. See New York v. Lashins Arcade Co., 91 F.3d 353, 362, 26 ELR 21506, 21510-11 (2d Cir. 1996).