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New York v. Shore Realty Corp.

April 4, 1985

THE STATE OF NEW YORK, APPELLEE
v.
SHORE REALTY CORP. AND DONALD LEOGRANDE, APPELLANTS



Appeal from an order of the United States District Court for the Eastern District of New York, Henry Bramwell, Judge, granting plaintiff's motion for partial summary judgment finding defendants liable for plaintiff's "response costs" under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601-9657 (1982) ("CERCLA"), and enjoining defendants to clean up a hazardous waste storage site. Held, that the district court properly awarded the State "response costs" under CERCLA and enjoined defendants based on New York public nuisance law, but that the court did not have the authority to grant injunctive relief under CERCLA.

Feinberg, Chief Judges, Oakes, and Newman, Circuit Judges.

Author: Oakes

OAKES, Circuit Judge :

This case involves several novel questions about the scope of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601-9657 (1982) ("CERCLA"), and the interplay between that statute and New York public nuisance law. CERCLA - adopted in the waning hours of the Ninety-sixth Congress, and signed by President Carter on December 11, 1980 - was intended to provide means for cleaning up hazardous waste sites and spills, and may generally be known to the public as authorizing the so-called Superfund, the $1.6 billion Hazardous Substances Response Trust Fund, 42 U.S.C. §§ 9631-9633.

On February 29, 1984, the State of New York brought suit against Shore Realty Corp. ("Shore") and Donald LeoGrande, its officer and stockholder, to clean up a hazardous waste disposal site at One Shore Road, Glenwood Landing, New York, which Shore had acquired for land development purposes. At the time of the acquisition, LeoGrande knew that hazardous waste was stored on the site and that cleanup would be expensive, though neither Shore nor LeoGrande had participated in the generation or transportation of the nearly 700,000 gallons of hazardous waste now on the premises. The State's suit under CERCLA for an injunction and damages was brought in the United States District Court for the Eastern District of New York, Henry Bramwill, Judge. The complaint also contained pendent state law nuisance claims, based on both common law and N.Y. Real Prop. Acts. Law § 841 (McKinney 1979). On October 15, 1984, the district court granted the State's motion for partial summary judgment. Apparently relying at least in part on CERCLA, it directed by permanent injunction that Shore and LeoGrande remove the hazardous waste stored on the property, subject to monitoring by the State, and held them liable for the State's "response costs," see 42 U.S.C. § 9607(a) (4) (A). In the alternative the court based the injunction on a finding that the Shore Road site was a public nuisance. Following a remand by this court on December 14, 1984, the district court on January 11, 1985, stated with more particularity the undisputed material facts underlying its decision finding defendants liable for the State's response costs and clarifying its earlier decision by basing the injunction solely on state public nuisance law. The court also modified its earlier decision by suggesting that CERCLA does not authorize injunctive relief in this case.*fn1

We affirm concluding that Shore is liable under CERCLA for the State's response costs. We hold that Shore properly was found to be a covered person under 42 U.S.C. § 9607(a); that the nonlisting by the Environmental Protection Agency ("EPA")*fn2 of the site on the National Priorities List ("NPL"), 42 U.S.C. § 9605(8) (B), is irrelevant to Shore's liability; that Shore cannot rely on any of CERCLA's affirmative defenses; but that, as suggested in the amicus brief filed for the United States and the district court's supplemental memorandum, injunctive relief under CERCLA is not available to the State. We nevertheless hold that the district court, exercising its pendent jurisdiction, properly granted the permanent injunction based on New York public nuisance law. Moreover, we hold LeoGrande jointly and severally liable under both CERCLA and New York law.

FACTS

Some of the most heated arguments on this appeal involve whether certain material facts are undisputed. After careful scrutiny of the record and district court's supplemental memorandum, we base our decision on the following facts.

LeoGrande incorporated Shore solely for the purpose of purchasing the Shore Road property. All corporate decisions and actions were made, directed, and controlled by him. By contract dated July 14, 1983, Shore agreed to purchase the 3.2 acre site, a small peninsula surrounded on three sides by the waters of Hempstead Harbor and Mott Cove, for condominium development. Five large tanks in a field in the center of the site hold most of some 700,000 gallons of hazardous chemicals located there, though there are six smaller tanks both above and below ground containing hazardous waste, as well as some empty tanks, on the property. The tanks are connected by pipe to a tank truck loading rack and dockage facilities for loading by barge. Four roll-on/roll-off containers and one tank truck trailer hold additional waste. And before June 15, 1984, one of the two dilapidated masonry warehouses on the site contained over 400 drums of chemicals and contaminated solids, many of which were corroded and leaking.*fn3

It is beyond dispute that the tanks and drums contain "hazardous substances" within the meaning to CERCLA. 42 U.S.C. § 9601(14). The substances involved - including benzene, dichlorobenzenes, ethyl benzene, tetrachlorothylene, trichloroethylene 1,1,1, - trichloroethene, chlordane, polychlorinated biphenyls (commonly know as PCBs), and bis (2-ethylhexyl) phtalate - are toxic, in some cases carcinogenic, and dangerous by way of contact inhalation or ingestion. These substances are present at the sit in various combinations, some of which may cause the toxic effect to be synergistic.

The purchase agreement, provided that it could be voided by Shore without penalty if after conducting an environmental study Shore had decided not to proceed. LeoGrande was fully aware that the tenants, Applied Environmental Services, Inc., and Hazardous Waste Disposal, Inc., were then operating - illegally, it may be noted - a hazardous waste storage facility on the site. Shore's environmental consultant, WTM Management Corporation ("WTM"), prepared a detailed report in July, 1983, incorporated in the record and relied on by the district court for its findings. The report concluded that over the past several decades "the facility ha[d] received little if any preventive maintenance, the tanks (above ground and below ground), pipeline, loading rack, fire extinguishing system, and warehouse have deteriorated." WTM found that there had been several spills of hazardous waste at the site, including at least one large spill in 1978. Though there had been some attempts at cleanup, the WTM testing revealed that hazardous substances, such as benzene, were still leaching into the groundwater and the waters of the bay immediately adjacent to the bulkhead abutting Hempstead Harbor.*fn4 After a site visit on July 18, 1983, WTM reported firsthand on the sorry state of the facility, observing, among other thing, "seepage from the bulkhead," "corrosion" on all the tanks, deterioration of the pipeline and loading rack, and fifty to one hundred fifty-five gallon drums containing contaminated earth in one of the warehouses. The report concluded that if the current tenants "close up the operation and leave the material at the site," the owners would be left with a "potential time bone." WTM estimated that the cost of environmental cleanup and monitoring would range from $650,000 to over $1 million before development could begin. After receiving this report Shore sought a waiver from the State Department of Environmental Conservation ("DEC") of liability as landowners for the disposal of the hazardous waste stored at the site. Although the DEC denied the waiver, Shore took title on October 13, 1983, and obtained certain rights over against the tenants, whom it subsequently evicted on January 5, 1984.

Nevertheless, between October 13, 1983, and January 5, 1984, nearly 90,000 gallons of hazardous chemicals were added to the tanks. And during a state inspection on January 3, 1984, it became evident that the deteriorating and leaking drums of chemicals referred to above had also been brought onto the site. Needless to say, the tenants did not clean up the site before they left. Thus, conditions when Shore employees first entered the site were as bad as or worse than those described in the WTM report. As LeoGrande admitted by affidavit, "the various storage tanks, pipe lines and connections between these storage facilities were in a bad state of repair." While Shore claims to have made some improvements, such as sealing all the pipes and valves and continuing the cleanup of the damage from earlier spills, Shore did nothing about the hundreds of thousands of gallons of hazardous waste standing in deteriorating tanks. In addition, although a growing number of drums were leaking hazardous substances, Shore essentially ignored the problem until June, 1984. See Supra note 3.

On September 19, 1984, a DEC inspector observed one of the large tanks, which held over 300,000 gallons of hazardous materials, with rusting floor plates and tank walls, a pinhole leak, and a four-foot line of corrosion along one of the weld lines. On three other tanks, flakes of corroded metal "up to the size and thickness of a dime" were visible at the floorplate level.*fn5 While defendants now claim that the large tank was not leaking, their denial is untimely; they did not formally dispute the fact before the district court rendered its October 15, 1984, order. Moreover defendants' claim that the pinhole leak a triable issue of fact. In addition, defendants do not contest that Shore employees lack the knowledge to maintain safely the quantity of hazardous chemicals on the site. And, because LeoGrande has no intention of operating a hazardous waste storage facility, Shore has not and will not apply for a permit to do so. Nor do defendants contest that the State incurred certain costs in assessing the conditions at the site and supervising the removal of the drums of hazardous waste.

CERCLA's history reveals as much about the nature of the legislative process as about the nature of the legislation. In 1980, while the Senate considered one early version of CERCLA, the House considered and passed another. See H.R. 7020, 96th Cong., 2d Sess. (1980), reprinted in 2 Legislative History of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (Superfund) 391-463 (Comm. Print 1983) [hereinafter cited as CERCLA Legislative History ]; see also 126 Cong. Rec. 26,757-99 (1980) (debate and passage of H.R. 7020), reprinted in 2 CERCLA Legislative History, supra, at 294-389. The version passed by both Houses, however, was an eleventh hour compromise put together primarily by Senate leaders and sponsors of the earlier Senate version. Unfortunately, we are without the benefit of committee reports concerning this compromise. But see infra note 12. Nevertheless, the evolution of the legislation provides useful guidance to Congress's intentions. The Compromise contains many provisions closely resembling those from earlier versions of the legislation, and the House and Senate sponsors sought to articulate the differences between the compromise and earlier versions. One of the sponsors claimed that the version passed "embodie[d] those features of the Senate and House bills where there has been positive consensus" while "eliminat[ing] those provisions which were controversial." 126 Cong. Rec. 30,932 (statement Of Sen. Randolph, reprinted in 1 CERCLA Legislative History, supra, at 685.

As explained in F. Anderson, D. Mandelker, & A. Tarlock, Environmental Protection: Law and Policy 568 (1984), CERCLA was designed "to bring order to the array of partly redundant, partly inadequate federal hazardous substances cleanup and compensation laws."*fn6 It applies "primarily to the cleanup of leaking inactive or abandoned sites and to emergency responses to spills." Id. And it distinguishes between two kinds of response: remedial action - generally long-term or permanent containment or disposal programs*fn7 - and removal efforts - typically short-term cleanup arrangements.*fn8

CERCLA authorized the federal government to respond in several ways. EPA can use Superfund resources to clean up hazardous waste sites and spills. 42 U.S.C. § 9611.*fn9 The National Contingency Plan ("NCP"), prepared by EPA pursuant to CERCLA, id. § 9605, governs cleanup efforts by "establish[ing] procedures and standards for responding to releases of hazardous substances." At the same time, EPA can sue for reimbursement of cleanup costs from any responsible parties it can locate, id. § 9607, allowing the federal government to respond immediately while later trying to shift financial responsibility to others. Thus, Superfund covers cleanup costs if the site has been abandoned, if the responsible parties elude detection, or if private resources are inadequate. see F. Anderson, D. Mandelker, & A. Tarlock, supra, at 573. In addition, CERCLA authorizes EPA to seek an injunction in federal district court to force a responsible party to clean up any site or spill that presents an imminent and substantial danger to public health or welfare or the environment. 42 U.S.C. § 9606(a). In sum, CERCLA is not a regulatory standard-setting statute such as the Clean Air Act. Id. §§ 7401-7642. Rather, the government generally undertakes pollution abatement, and polluters pay for such abatement through tax and reimbursement liability. See F. Anderson, D. Mandelker, & A. Tarlock, supra, at 569.*fn10

Congress clearly did not intend, however, to leave cleanup under CERCLA solely in the hands of the federal government. A state or political subdivision may enter into a contract or cooperative agreement with EPA, whereby both may take action on a cost-sharing basis. 42 U.S.C. § 9604(c), (d). And states, like EPA, can sue responsible parties for remedial and removal costs if such efforts are "not inconsistent with" the NCP. Id. § 9607 (a) (4) (A). While CERCLA expressly does not preempt state law, id. § 9614(a), it precludes "recovering compensation for the same removal costs or damages or claims" under both CERCLA and state or other federal laws, id. § 9614(b), and prohibits states from requiring contributions to any fund "the purpose of which is to pay compensation for claims . . . which may be compensated under" CERCLA, id. § 9614(c).*fn11 Moreover, "any . . . person" who is acting consistently with the requirements of the NCP may recover necessary costs of response." Id. § 9607(a) (4) (B); see also City of Philadelphia v. Stepan Chemical Co., 544 F. Supp. 1135, 1142-43 (E.D. Pa. 1982) (allowing a landowner to maintain a CERCLA action against a hazardous waste generator under section 9607(a) (4) (B). Finally, responsible parties are liable for "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." 42 U.S.C. § 9607(a) (4) (C).

Congress intended that responsible parties be held strictly liable, even though an explicit provision for strict liability was not included in the compromise. Section 9601 (32) provides that "liability" under CERCLA "shall be construed to be the standard of liability" under section 311 of the Clean Water Act, 33 U.S.C. § 1321, which courts have held to be strict liability, see e.g., Steuart Transportation Co. v. Allied Towing Corp., 596 F.2d 609, 613 (4th Cir. 1979), and which Congress understood to impose such liability, see S. Rep. No. 848, 96th Cong., 2d Sess. 34 (1980) [hereinafter cited as Senate Report], reprinted in 1 CERCLA Legislative History, supra, at 308, 341.*fn12 Moreover, the sponsors of the compromise expressly stated that section 9607 provides for strict liability.*fn13 See 126 Cong. Rec. 30,932 (statement of Sen. Randolph), reprinted in 1 CERCLA Legislative History, supra, at 685; id. at 31,964 (statement of Rep. Florio), reprinted in 1 CERLA Legislative History, supra, at 777; see also id. at 31,966 (Department of Justice view of Senate compromise discussing strict liability), reprinted in 1 CERCLA Legislative History, supra, at 780-81. Strict liability under CERCLA, however, is not absolute; there are defenses for causation solely by an act of God, an act of war, or acts or omissions of a third party other than an employee or agent of the defendant or one whose act or omission occurs in connection with a contractual relationship with the defendant. 42 U.S.C. § 9607(b).

Discussion

A. Liability for Response Costs Under CERCLA

We hold that the district court properly awarded the State response costs under section 9607(a) (4) (A).*fn14 The State's costs in assessing the conditions of the site and supervising the removal of the drums of hazardous waste squarely fall within CERCLA's definition of response costs, even though the State is not undertaking to do the removal. See id. §§ 9601(23), (24), (25). Contrary to Shore's claims, the State's motion for summary judgment sought such costs, and Shore had ample opportunity for discovery. That a detailed accounting was submitted only at this court's request for supplemental findings is immaterial; Shore had an opportunity to contest the accounting but failed to make anything more than a perfunctory objection.

1, Covered Persons. CERCLA holds liable four classes of persons:

(1) the owner and operator of a vessel (other- wise subject to the jurisdiction of the United States) or a facility,*fn15

(2) any person who at the time of disposal of any hazardous substance owned or operated any facil- ity 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 dis- posal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility owned or operated by another party or entity and containing such hazardous sub- stances, and

(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities or sites selected by such person.

42 U.S.C. § 9607(a). As noted above, section 9607 makes these persons liable, if "there is a release, or a threatened release which cause the incurrence of response costs, of a hazardous substance" from the facility,*fn16 for, among other things, "all costs of removal or remedial action incurred by the United ...


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