CERCLA: convey to a pauper and avoid cost recovery under section 107(a) (1)?

Extract

---

CERCLA: convey to a pauper and avoid cost recovery under section 107(a) (1)?

I. STATUTORY LIABILITY FOR COSTS UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980

A. Categories of Potentially Responsible Parties (PRPs)

In 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), (2) with the goal of cleaning up disposal sites and requiring those who caused the problem to pay the cost. (3) At the heart of this Article are three of CERCLA's four categories of "potentially responsible parties" obligated to pay for cleaning up disposal sites, namely 1) "the owner and operator of a ... facility," 2) owners or operators "at the time of disposal," 3) any person who arranged for disposal of hazardous substances, and 4) any person who accepted any hazardous substance for transport. (4) Liability imposed on potentially responsible parties who fit the statutory categories is described as strict, (5) retroactive, (6) perpetual, (7) and virtually unlimited in amount. (8)

There is nothing remarkable about requiring parties who deposit hazardous waste to clean it up, even decades after the deposit. CERCLA, however, also imposes personal liability on parties who, having failed to meet the Act's standards of due diligence, buy contaminated land and hold the status of owner when cost recovery is sought. (9) This liability may far exceed the value of the recovered land. (10) Mere ownership at the time costs are recovered can therefore be a devastating event for a title holder who had nothing to do with actual deposit of waste.

B. Immune Parties

CERCLA does not impose personal liability for cost recovery on all entities who would be classified under state law as "owners" of a disposal site. People who become owners involuntarily--for example, by inheritance (11)--escape statutory liability. Municipalities and government agencies have general responsibility under CERCLA for their own actions (12) but not for lands acquired through tax foreclosure or eminent domain. (13) Similarly, mortgage lenders are not liable as owners if they hold title only as security and try diligently to dispose of foreclosed land. (14) Parties who meet an "innocent landowner" standard may defend against cost recovery by showing they did not know nor had any reason to know that hazardous waste was on the land when they purchased the property. (15) Most important for the innocent landowner defense is that the buyer made an adequate inquiry to determine whether disposal had occurred. (16) This Article does not deal further with immune parties beyond noting that their immunity may be only a thin categorical line away from the hapless owner who is not immune.

Site owners may be entitled to pursue other parties for contribution or reimbursement, but that remedy is useful only if the other parties are known and solvent. (17) Purchasers may also lose their rights by taking a conveyance of land with an "as is" disclaimer. (18) This Article assumes that remedies against third parties offer no help to the affected current title owner.

C. Owners and Arrangers

The two precise categories of owner liability axe: 1) owners at the time of disposal under section 107(a)(2), (19) and 2) owners at the time response costs are incurred, made liable by section 107(a)(1). (20) The categories are distinctly different. Owners at the time of disposal carry liability for cost recovery into the indefinite future (21) and cannot escape it by conveying to a new owner; (22) site owners who bought contaminated land but were not involved in disposal are liable under section 107(a)(1) only if they still hold title when cost recovery is sought. (23) Accordingly, they can step out of the liability chain by conveying to a new owner and providing adequate disclosure. (24) This Article was prompted by this apparent ability to avoid liability by passing land title to a new owner.

Another relevant category of liability is "arranging" for disposal under section 107(a)(3). (25) Hazardous materials are legitimate products for sale and use; only when they become waste does disposal becomes an issue. Accordingly, arranger liability distinguishes between sales of hazardous materials to buyers proposing to use the materials in further production of goods and transactions disguised as sales that are in reality strategies for disposal. (26) Sellers of materials for use in further production of goods are not liable for response costs, even if the buyer dumps the raw material. (27) A seller of hazardous material may, however, be liable as an arranger if the sale is merely a disposal in disguise. (28) Often, the critical question for determining whether a transaction is a sale or a disguised disposal is whether the hazardous material has value for further use. If the material is valuable, the transaction is likely a sale and the seller has not arranged for disposal. (29) If it has no value, then the material is likely to be waste and the seller may be liable for arranging dispos...

See the full content of this document

---