No good deed goes unpunished: the CERCLA liability exposure unfortunately created by pre-acquisition soil testing.

• Author: Scheller, Jennifer L.
• Position: Comprehensive Environmental Response, Compensation, and Liability Act of 1980

TABLE OF CONTENTS INTRODUCTION A. CERCLA Overview B. The Soil Testing Controversy I. CERCLA LIABILITY FOR PRE-ACQUISITION SOIL TESTING A. Pre-acquisition Soil Testing as Disposal B. Soil Testers as Operators II. A LIABILITY EXCEPTION? III. A LEGISLATIVE SOLUTION CONCLUSION INTRODUCTION

A small business owner looking to open another convenience store in an urban area found a site that appeared perfect. She enlisted her attorney to prepare the paperwork to complete the deal, only to be advised that there might be a problem. The attorney informed her that a federal statute, the Comprehensive Environmental Response, Compensation and Liability Act (1) ("CERCLA"), makes property owners liable for the costs of cleaning up hazardous waste on their property. The attorney explained that in the 1950s and 1960s, there had been a lawn and garden store in the building on the property. Given the lax regulation of the storage and disposal of herbicides during this period, the site could be contaminated with hazardous waste and expensive remediation of the soil might be required in the future. (2) A quick check revealed that the property was not a current target of federal enforcement, but if that changed, the current owner of the site would be liable for the cleanup costs under CERCLA. The attorney said the only way to accurately assess whether the site is contaminated is to conduct an environmental assessment, but conducting the assessment could actually create liability if soil testing disturbs the contamination. (3) The business owner decided to purchase a previously undeveloped lot instead.

The preceding hypothetical illustrates some of the problems associated with developing brownfields--previously developed land that is or might be contaminated by hazardous waste. (4) Fear of CERCLA liability (5) often causes developers to seek property, known as greenfields, that have never been used for industrial purposes before, leaving many brownfields idle and unremediated. (6) The result of greenfield development is sprawl and urban decay. (7) For those willing to consider redeveloping brownfields, environmental assessments are a popular way to avoid, or at least assess, CERCLA liability. (8) Unfortunately, soil testing can also spread contamination. (9) This Note addresses an unnecessary legal complication to the already complex task of brownfield redevelopment: the fact that the widely used environmental assessment can create CERCLA liability for soil testing companies and those who hire them if soil testing spreads hazardous waste. Following a brief overview of the CERCLA scheme, this Introduction discusses the federal courts' disagreement over whether soil testing creates CERCLA liability. The remainder of the Note explains why soil testers and those who hire them are liable under CERCLA and advocates a legislatively created exemption from CERCLA liability.

1. CERCLA Overview

   CERCLA was created after it became clear that the Resource Conservation and Recovery Act ("RCRA") (10) was inadequate to address sites already contaminated with hazardous waste. (11) CERCLA gives the Environmental Protection Agency ("EPA") the power to respond to an actual or threatened release of a hazardous substance by cleaning up the waste itself, then suing the statutorily-defined potentially responsible parties ("PRPs") for reimbursement of the response costs. (12) It also permits parties that incur response costs to seek reimbursement or contribution from PRPs. (13) CERCLA imposes strict liability, (14) jointly and severally, on responsible parties, although courts can apportion liability in appropriate circumstances. (15) CERCLA liability depends on proving four basic elements: 1) hazardous substances were disposed of at a facility; 2) there has been a release or threatened release of a hazardous substance from the facility into the environment; 3) the release or threatened release requires the expenditure of response costs; and 4) the defendant is a PRP. (16) The PRPs are: 1) the facility's current owner or operator; 2) the facility's owner or operator at the time of disposal of any hazardous substance; 3) any person who arranged for the disposal, treatment, or transportation by another entity of hazardous substances ("arranger"); and 4) any person who transported hazardous substances to facilities selected by another person ("transporter"). (17) Liability can be avoided completely only if the PRP proves one of CERCLA's narrowly-defined defenses: that the release was caused by an act of God, an act of war, or the act or omission of a third party. (18)

   Two of the statute's limitations on liability create special incentives to conduct environmental assessments. The innocent landowner defense, part of the third party defense, allows current owners to escape liability completely if they can show that they "did not know and had no reason to know" the site was contaminated with hazardous waste when they purchased the property. (19) In order to meet this standard, the owner must conduct "all appropriate inquiries ... into the previous ownership and uses of the facility." (20) CERCLA now contains a new partial limitation on liability; the liability of "bona fide prospective purchasers" is limited to a lien on the property for unrecovered government costs up to the increase in the property's value from the cleanup. (21) Although bona fide prospective purchasers can know that the property is contaminated when they buy it, they must still conduct "all appropriate inquiries" into the previous ownership and uses of property. (22) Thus, CERCLA encourages inspection and testing of sites.

2. The Soil Testing Controversy

   Courts that have ruled on the issue of CERCLA liability for soil testing are divided on two questions: whether soil testers or those who hire them are PRPs and, if they are PRPs, whether any exemption from liability applies. When determining whether soil testers and prospective purchasers are PRPs, courts are split on two subquestions: whether soil testing is a disposal and whether the parties are operators, arrangers, or transporters. (23)

   Some courts have concluded that soil testing can make testers and those who hire them PRPs. For example, the Third Circuit, in United States v. CDMG Realty Co., (24) held that the testing the defendant had ordered would ordinarily constitute a disposal because the text of CERCLA states that disposal includes discharging or placing hazardous wastes "into or on any land or water," even if hazardous material was already present. (25) The court also held that there was no threshold level of contamination that needed to be reached before liability would attach. (26) The court did not decide whether the testing company was an owner, operator, transporter or arranger, but asserted it was a PRP and left the precise basis for liability to the district court. (27) Likewise, the Western District of Missouri, in K.C. (1986) Limited Partnership v. Reade Manufacturing, (28) found that a reasonable trier of fact could conclude that the testing company was a CERCLA operator, (29) and that a disposal of hazardous wastes occurred during testing, thus establishing CERCLA liability. (30)

   On the other hand, Blasland, Bouck & Lee, Inc. v. City of North Miami concluded that a testing company was not a PRP. (31) The Blasland court determined, with little explication of its reasoning, that an environmental testing company that conducted aquifer studies was not an operator because "engaging in clean-up activities at a facility does not qualify as the type of 'operation' CERCLA contemplates." (32) Blasland also concluded that the testing did not result in a disposal because it did not move wastes to an uncontaminated part of the property. (33)

   Courts are also split on whether the statute should be read to exempt soil testing from liability. In CDMG Realty, the Third Circuit created such an exemption when it held that soil testing must be conducted negligently to constitute a disposal under CERCLA. (34) The court reasoned that because prospective purchasers cannot establish the innocent landowner defense unless they conduct an appropriate inquiry into possible contamination, (35) Congress must have intended soil testing to be exempt from CERCLA liability. (36) The court concluded, however, that liability still could be imposed if the testing was conducted negligently, because such testing would not be an appropriate investigation under CERCLA. (37)

   The Western District of Missouri explicitly rejected the Third Circuit's negligence liability standard and refused to create any exemption to CERCLA liability for pre-acquisition soil testing. (38) The court relied on the lack of an express exception in the statute. (39) It reasoned further that the innocent landowner defense would still have continued applicability because soil tests would not be "appropriate" or required in every case and would not create liability unless testing actually spread contamination. (40)

   This Note argues that CERCLA, as it is currently written, requires courts to hold parties liable for pre-purchase soil investigations that spread or mix contamination because to conclude otherwise would stretch CERCLA beyond its breaking point. Part I argues that both those who order pre-acquisition soil testing and those who conduct the tests are PRPs if the testing spreads existing contamination. Part II argues that the statute does not allow for the judicial creation of a soil testing liability exception. Part III acknowledges the policy problems created by testing liability and advocates a legislative solution to exempt pre-purchase soil testing from CERCLA liability.

   1. CERCLA LIABILITY FOR PRE-ACQUISITION SOIL TESTING

   This Part argues that pre-acquisition soil investigation, when it disturbs existing contamination, makes the prospective purchaser and the testing company a PRP under CERCLA. Specifically, section I.A argues that pre-acquisition soil testing...