CERCLA's rock and hard place: a look at the interpretive conundrum created by the "innocent landowner" provision.

• Author: Close, Jeffery C.
• Position: ENVIRONMENTAL AND LAND USE LAW

Widely regarded as a hastily drafted statute that is riddled with vagaries and contradictions, (1) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) (2) may have no provision that is more ill-conceived than what is commonly known as the "innocent landowner defense." It is widely accepted that this provision--added in 1986--was Congress' attempt to integrate an environmental due diligence requirement into CERCLA's then-existing third-party defense. However, rather than doing so with some measure of clarity, Congress instead created an inescapable conundrum in which courts are forced to either deviate from the plain language of the third-party defense itself or render other, related provisions meaningless and unnecessary. Predictably, the result has been inconsistency in the courts and uncertainty outside of them. Courts have been forced to ignore one rule of statutory interpretation or another, (3) and practitioners have been left to either guess which approach their jurisdiction will take or hope that a binding interpretation on which they rely is not overturned.

One fix would obviously be for the U.S. Supreme Court to grant certiorari if and when it is requested on this issue and simply choose which language it would rather the courts disregard. However, a statutory amendment is clearly the more apt solution. This article examines CERCLA's "innocent landowner" provision and proposes such an amendment. It first provides a background discussion of CERCLA liability and the third-party defense generally. It then explains the terms of the 1986 innocent landowner amendment and the split of authority that has resulted. Finally, this article proposes the aforementioned amendment and examines how it would not only effectuate what many believe was Congress' original intent, but also answers once and for all whether it is entirely necessary for "subsequent purchasers" to perform environmental due diligence in order to qualify themselves for CERCLA's third-party defense.

Background: CERCLA Liability and the Third-party Defense

CERCLA was enacted in 1980 in response to the growing number of environmental tragedies brought about by the industrial pollution of the 20th century. Among other things, it establishes four classes of "covered persons" (also known as potentially responsible parties or PRPs) that are liable for costs associated with releases or threatened releases of hazardous substances (collectively "releases") and subject to administrative orders and injunctions requiring actions to address such releases. The four classes of PRPs include 1) persons who currently own or operate a "facility" (4); 2) persons who owned or operated a facility at the time of a "disposal" (5); 3) persons who arranged for treatment or disposal of hazardous substances at a facility (6); and 4) persons who transported hazardous substances for disposal or treatment at a facility of their choosing.

As a number of courts have been quick to note, CERCLA has limited defenses that are narrowly applied. (7) One such defense, commonly known as the "third-party defense," is codified at 42 U.S.C. [section] 9607(b)(3) and requires a PRP to plead and prove a) that the release or threat of release at issue was caused solely by the acts or omissions of a third party; b) that such acts or omissions did not occur in connection with a contractual relationship existing directly or indirectly between the PRP and the third party; c) that the PRP has exercised due care with regard to the contamination; and d) that the PRP took reasonable precautions against foreseeable acts or omissions of the third party.

As illustrated most clearly by its fourth element, the third-party defense plainly contemplates situations in which a potentially responsible party is associated with a facility prior to release and is, thus, able to take measures to prevent the release and/or measures to promptly mitigate any damages that result. For example, if an owner of a particular facility fences that facility and posts "no trespassing" signs, only to have a "midnight dumper" trespass and dispose of hazardous substances on his or her property, that owner would likely qualify for a third-party defense, so long as the owner could show that, after learning of the contamination, he or she undertook reasonable measures to identify and, if necessary, address any threats the contamination might have posed (i.e., that he or she exercised "due care").

What is much less clear, however, is whether the defense, at least as originally drafted, (8) applied in cases where the current owner did not purchase or otherwise become associated with the facility until years--perhaps decades--after any release had taken place. On one hand, such "subsequent purchasers" were often in a position to satisfy the black letter of the law. That is, they could often plead and prove that any release or threatened release was solely caused by the acts or omissions of a previous owner or tenant. (This was particularly true with respect to owners who, after taking possession of the facility, neither conducted nor allowed operations that could have caused a release and confirmed that their inaction had not allowed any "release" to continue. (9)) In addition, even in cases when subsequent purchasers acquired the property directly from a third party who caused a release, the purchaser could plead and prove a) that the only contractual relationship that ever existed between the purchaser and the release-causing third party was their buyer-seller relationship, and b) that it would have been impossible for any release-causing acts or omissions to have occurred in connection with this relationship because, at the time of any such acts or omissions, the relationship did not yet exist. Third, well-advised purchasers often position themselves to plead and prove that they have exercised due care...