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18 ELR 20133 | Environmental Law Reporter | copyright © 1988 | All rights reserved City of Philadelphia v. Stepan Chemical Co. No. 81-0851 (E.D. Pa. July 28, 1987)The court holds that Philadelphia, as the owner of a municipal landfill at which two employees accepted bribes to allow unlawful hazardous waste disposal, is liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Liability attaches through mere ownership of the facility, either currently or at the time of disposal. Causation or knowledge of the hazardous condition is not required. The court holds that voluntary cleanup by a liable party does not relieve it of further liability. Because Congress created a rule of strict liability and specific defenses to that rule, the court does not evaluate whether holding Philadelphia liable would be fair or unfair. The court holds that the third-party defense to CERCLA liability in CERCLA § 107(b)(3) is not available to Philadelphia. This is a statutory defense, and Congress did not incorporate the common law principle that an employer is liable only for the negligent acts of its employees done within the scope of their employment. Congress limited the third-party defense to situations where the defendant has no connection at all to the third party. Here, the employees accepted bribes and permitted the disposal of hazardous wastes during their working hours while they were on the job. The court observes that in the 1986 CERCLA Amendments, Congress qualified the third-party defense by excluding certain land contracts, but left its applicability to a case such as this unaffected. [Prior decisions in this case appear at 12 ELR 20915 and 14 ELR 20007.] Counsel for Plaintiff Counsel for Defendant Ditter, J.: Memorandum and Order Presently before me are defendants' motions for partial summary judgment in a suit brought under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A. §§ 9601 et seq. (1983 & Supp. 1987).[1] Plaintiff is the City of Philadelphia, the owner-operator of a landfill. Defendants are generators of toxic waste unlawfully placed at this property. The facts are fully set forth in my earlier opinion, City of Philadelphia v. Stepan Chemical Co., 544 F. Supp. 1135 [12 ELR 20915] (E.D. Pa. 1982). In brief, Philadelphia owned and operated a municipal landfill on Enterprise Avenue. To protect against unauthorized dumping the City employed security guards. Unfortunately, during 1974 and 1975 two City employees, a watchman and a machine operator, accepted bribes from two waste transporters who deposited hazardous wastes generated by defendants at the site. In 1979, the City discovered the illegal dumping and the contamination it caused. The City cleaned up the hazardous substances at its own expense and then brought this action to recover the clean-up costs and other damages from defendants. Through their motion for partial summary judgment, the defendants are attempting to establish the City's responsibility for a portion of those costs and damages. 1. "Covered Persons" Section 107(a) of CERCLA establishes four categories of "covered persons," that is, those who are liable for costs incurred as a result of a release or threatened release of hazardous substances.[2] 42 U.S.C.A. § 9607(a) (Supp. 1987). Defendants assert the City must share responsibility as a current owner or operator of a facility[3] or as owner or operator of a facility when hazardous substances were dumped there. It is undisputed that the City owned the Enterprise Avenue property both when hazardous substances were put there and at the time of the clean-up.[4] Thus, the City satisfies the requirements of subsections (1) and (2), and is therefore a covered person.[5] The City nevertheless argues that it is not responsible as an owner or operator for several reasons. The City first asserts that CERCLA does not impose liability where an owner of a facility did not create the hazardous condition and where it exercised due care to avoid the disposal of hazardous substances. It is well established, however, that CERCLA imposes strict liability. See, e.g., State of New York v. Shore Realty Corp., 759 F.2d 1032 [15 ELR 20358] (2d Cir. 1985); City of Philadelphia v. Stepan, supra. Under section 107(a)(1) and (2), mere ownership of a facility where hazardous substances are located is sufficient. United States v. Maryland Bank & Trust Co., 632 F. Supp. 573 [16 ELR 20557] (D. Md. 1986). A current owner is a covered person even if hazardous substances were dumped on the property prior to its ownership. United States v. Tyson, No. 84-2663 [17 ELR 20527] (E.D. Pa. Aug. 22, 1986). Obviously, a requirement that covered persons under section 107(a) be limited to those who caused, created, or knew of the creation of a hazardous condition would be inconsistent with the statute.[6] Moreover, a causation requirement would make superfluous the statutory defenses, which serve as a substitute for such a requirement. 42 U.S.C.A. § 9607(b)(3)(1983). Shore Realty, supra; Jersey City Redevelopment Authority v. PPG Industries, 655 F. Supp. 1257 [17 ELR 20763] (D.N.J. 1987) (lack of knowledge of a hazardous site does not remove a person from thescope of section 107(a)). The City also seeks to avoid coverage under section 107(a) because its clean-up was voluntary. Besides having no support in the statute, such a limitation on liability might create a situation where a party with a high degree of culpability could escape fiscal responsibility by voluntarily undertaking the clean-up operation. Finally, the City argues that it is unfair and in contradiction of congressional intent to hold an innocent landowner liable. In support of this contention, the City focuses on language in my previous opinion where I stated that the City was not responsible for creating the hazardous site and noted the view of one commentator that a party should not be liable for clean-up costs where it had little or no connection with the creation of the problem. City of Philadelphia v. Stepan, 544 F. Supp. at 1142-43, quoting Dore, The Standard of Civil Liability for Hazardous Waste Disposal Activity: [18 ELR 20134] Some Quirks of Superfund, 57 Notre Dame Lawyer 260, 276 (1981). By definition, strict liability holds innocent persons liable. Congress imposed strict liability under CERCLA in order to facilitate the clean-up of hazardous substances while minimizing the costs to the public. Congress included within the coverage of CERCLA persons who simply have an ownership interest in property where hazardous substances are found. Congress did, however, establish three statutory defenses designed to alleviate the harshness of this rule. Because Congress created a rule of strict liability and defenses to that rule, it is unnecessary, indeed improper, for me to analyze whether section 107(a) applies to the City on my perception of what is fair or unfair. See also Tyson, supra. That Congress intended to hold innocent landowners liable under CERCLA is also supported by the Superfund Amendment and Reauthorization Act of 1986 ("SARA"), P.L. 99-499, 100 Stat. 1613 (1986). See Red Lion Broadcasting Co. v. Federal Communications Commission, 393 U.S. 367, 380-81; (1969) (subsequent legislation declaring intent of an earlier statute is entitled to great weight in judicial statutory interpretation). For purposes of the statutory defenses, Congress amended the definition of contractual relationship to create a defense for persons who purchase property after the disposal of hazardous substances on the property and who did not know or had no reason to know that hazardous substances were on the property at the time of purchase. 42 U.S.C.A. § 9601(35)(A)(Supp. 1987). The clear intent of this amendment is to provide a defense for one category of covered persons whom Congress perceived to be innocent. Any fairness qualifications are properly made in connection with the statutory defenses, not the definition of covered persons. The issue addressed in my prior opinion was whether the City could maintain a civil action to recover its clean-up costs. There I concluded that the City could maintain the suit particularly since it did not create the hazard. This question is distinct from the question of whether the City shares liability under CERCLA and in that regard my prior decision is not controlling. Moreover, I have found no cases adopting the position of the commentator quoted in my earlier decision. The brief answer to all the City's contentions about fairness is that Congress did not put that qualification into section 107's definition of covered persons.[7] As the statute expressly provides, the liability of covered persons is limited only by the statutory defenses of section 107(b). I will now consider whether any of them are applicable to the City. 2. Third Party Statutory Defense Congress provided three statutory defenses to the liability of a covered person under CERCLA. Under section 107(b), a covered person is released from liability if he can establish that -- the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by -- (1) an act of God; (2) an act of war; (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 (except where the sole contractual arrangement arises from a published tariff and acceptance for carriage by a common carrier by rail), 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; or (4) any combination of the foregoing paragraphs. 42 U.S.C. § 9607(b) (emphasis added). Here, the first two defenses are inapplicable. Defendants contend the third party defense of paragraph (3) is also unavailable since City employees were a cause of the release or threat of release of hazardous substances at the Enterprise Avenue site. The City asserts that section 107(b) embodies common law principles of vicarious liability. Thus, it argues, the third party defense is available if its employees acted beyond the scope of their employment when they accepted bribes and permitted hazardous substances to be disposed of at the landfill. Defendants counter that the third party defense is a statutory defense distinct from common law principles of vicarious liability. In the alternative, they assert the City employees acted within the scope of their employment. The legislative history of CERCLA shows that Congress imposed strict liability on the theory that one engaged in the manufacture, transportation, or disposal of hazardous substances is engaged in an abnormally dangerous or ultrahazardous activity. 126 Cong. Rec. 26788 (1980) (statement of Rep. Jeffords); 126 Cong. Rec. 26782 (1980) (statement of Rep. Gore), reprinted in, 2 A Legislative History of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (SUPERFUND), 346-47 (1983) (hereinafter cited as SUPERFUND). As initially proposed before the House of Representatives, CERCLA would have provided a defense from liability where the release or threatened release was caused solely by "an act or omission of a third party if the defendant establishes that he exercised due care with respect to the hazardous waste . . . ." H.R. 7020, § 3071(a)(1)(C), 96th Cong., 2d Sess. (1980), reprinted in 1 SUPERFUND, supra, at 3. Representative Gore introduced an amendment to this provision that was eventually enacted. In presenting his amendment, Representative Gore noted that at common law a person engaged in ultrahazardous activity was an insurer against any and all consequences. He also focused on section 522 of the Second Restatement of Torts which imposes liability on a person engaged in ultrahazardous activity where harm is caused by unexpected conduct of a third person and on section 416 which imposes liability on an employer of an independent contractor engaged in work involving a peculiar risk of harm. He noted the substantial deviation from these principles created by the initial third party defense which relieved a covered person from liability if he exercised due care and if the harm was caused by a third party. 126 Cong. Rec. 24338-39 (1980) (statement of Rep. Gore), reprinted in 3 SUPERFUND, supra, at 292-95. As enacted, the third party defense moved closer to common law rules of strict and vicarious liability for ultrahazardous activity by limiting application of the defense to situations where "the third party is not an employee or agent of the defendant, or where the third party's act or omission does not occur in connection with a contractual relationship." 126 Cong. Rec. 26783 (1980) (statement of Rep. Gore), reprinted in 2 SUPERFUND, supra, at 350. Representative Gore noted that, as passed, the third party defense "would permit a defendant to escape liability for damages caused by the act or omission of a third party who has no connection whatsoever with the defendant." Id. (emphasis added). As the legislative history to CERCLA makes clear, the section 107(b) defenses are strictly statutory defenses that do not mirror common law. Thus, common law principles are incorporated in the third party defense only if it was Congress' intent to do so. There is no evidence that Congress intended to include the common law principle that an employer is liable only for the negligent acts of its employees done within the scope of their employment. Congress limited the third party defense to situations where the responsible party has no connection to the third party. A scope of employment limitation is inconsistent with a "no connection" requirement. Here, the employees accepted bribes and permitted the disposal of hazardous wastes during their working hours while they were on the job. Obviously, a connection existed between the City and its employees even if they exceeded their authority.[8] Moreover, the third party defense has been narrowly construed in other situations by broadly defining what qualifies as a "contractual relationship." See, e.g., United States v. Argent Corp., 21 ERC 1354 [14 ELR 20616] (D.N.M. 1984) (lessor/lessee relationship is a contractual relationship that precludes lessor from using any of the "extremely limited affirmative defenses"). See also Comment, Developments in the Law of Toxic Waste Litigation, 99 Harv. L. Rev. 1458, 1546 ("contractual relationship" should be read to [18 ELR 20135] include any business relationship). I, therefore, conclude that "employee" for purposes of the third party defense is not qualified by a common law "scope of employment" limitation. My interpretation of the third party defense provision is supported by the SARA amendments wherein Congress expressly excluded from the definition of "contractual relationship" land contracts if the purchaser is without knowledge of the existence of hazardous substances on the property and can also satisfy certain requirements. 42 U.S.C.A. § 9601(35) (Supp. 1987). The fact that Congress has already refined the third party defense is all the more reason why a court should not read an additional loophole into the statute.[9] In creating the new exception, Congress established a variety of details and requirements for its applicability which a court is in no position to match. To adopt a scope of employment exception without the benefit of appropriate safeguards could seriously undermine CERCLA's goal of prompt clean-up of hazardous substances at the expense of parties designated by Congress. While my decision may have harsh consequences for the City,[10] I am required to follow the express language of the statute and the intent of Congress. Congress imposed liability under CERCLA on a broad scale to facilitate prompt clean-up of hazardous substances. To permit the City to employ the third party defense would not only contravene the language of the statute but would also create an opportunity for covered persons to defeat its purposes. It is the role of Congress, not the courts, to create such an exception. I will, therefore, grant defendants' motion for partial summary judgment. 1. Previously, I held that the City should maintain a private action under CERCLA. City of Philadelphia v. Stepan Chemical Co., 544 F. Supp. 1135, 1139-40 [12 ELR 20915] (E.D. Pa. 1982). 2. This section provides: (a) Covered persons; scope . . . Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section -- (1) the owner and operator of a vessel or a facility, (2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of, (3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, and (4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels, or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance, shall be liable for -- (A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; (B) any other necessary costs of response incurred by any other person consistent with the national contingency plan; (C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release; and (D) the costs of any health assessment or health effects study carried out under section 9604(1) of this title. 3. "Facility" includes any landfill or "any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located" 42 U.S.C.A. § 9601(9) (1983). Clearly, the Enterprise Avenue site is a facility. 4. In their memorandum, defendants note that the City transferred the site to the Philadelphia Industrial Development Corporation in January of 1986. The City, however, is still a "current owner" since it owned the site at the time of a release and when clean-up costs were incurred. 5. Because the City is suing defendants under section 107(a), it does not dispute that there was a release of hazardous substances at the Enterprise Avenue site which caused the incurrence of response costs. 6. The City also argues that the express language of the definition of "owner or operator" requires participation by the owner in the management of the facility. This provision, however, is limited to owners holding title primarily to protect a security interest. 42 U.S.C.A. § 9601(20)(A) (1983), amended by, 42 U.S.C.A. § 9601(20) (Supp. 1987). 7. Defendants also argue that plaintiff is responsible as a past and current operator of a facility. A decision of this issue, however, is unnecessary since I conclude that the City is an owner of a facility for purposes of CERCLA. 8. Congress did, however, expressly include the principle of vicarious liability embodied in Restatement (Second) of Torts § 416 whereby an employer is liable for the acts of an independent contractor where the activity involves a peculiar risk of harm. See 126 Cong. Rec. 26783 (1980) (Statement of Rep. Gore), reprinted in, SUPERFUND, supra, at 349. This principle, however, expands the scope of liability. 9. See D. Hayes, Superfund II: A New Mandate 28 (BNA 1987) (the amendment was a response to decisions such as United States v. Maryland Bank and Trust Co., 632 F. Supp. 573 [16 ELR 20557] (D. Md. 1986)). 10. At this time, I take no position on the effect of the City's level of culpability on the issue of apportionment of damages. 18 ELR 20133 | Environmental Law Reporter | copyright © 1988 | All rights reserved |