Does CERCLA's "Act Of God" Defense Apply In Climate Change Litigation

In a decision issued on May 2, 2014, the Second Circuit held, in Cedar & Washington Assocs. LLC v. Port Auth. of N.Y. & N.J, 2074 BL 123476,2d Cir., No. 10- 4197, that the "act of war" affirmative defense relieved World Trade Center owners and lessees and airlines of Superfund liability for dust that infiltrated a building a block away after the collapse of the Twin Towers on 9/11.

The Second Circuit held that CERCLA was "not intended to create liability for the dispersal of debris and wreckage from a catastrophe that was indistinguishable from military attack in purpose, scale, means, and effect"

Dicta in the Second Circuit's ruling may have implications for environmental claims relating to climate change? With all of the pollution caused by storm events, which seems to be increasing year by year, will this decision provide a defense to a chemical manufacturer, whose product was released into a waterway because of a hurricane?   In its ruling, the court analogized 9/11, an act of war, to a tornado, an act of God. 

CERCLA provides three defenses to strict liability for releases of hazardous substances. The potentially responsible party (PRP) must prove that the release was "caused solely" by (1) an act of God, (2) an act of war, or (3) an act of a third party.

In exonerating the 9/11 defendants on the basis of the "act or war" defense, the court determined that the attacks were the "sole cause" of the alleged release, comparing the situation to the application of CERCLA's "act of God" affirmative defense to a tornado.  In her article in the Bloomberg BNA Toxics Law Reporter on May 8, 2014 (29 TXLR 407) titled "Superfund Suit Against WTC Parties Fails; Could Impact Claims Related to Climate Change", Perry Cooper examines language in the Second Circuit's decision that may be potentially useful in establishing an "act of God" defense in climate change litigation. 

"It would be absurd to impose CERCLA liability on the owners of property that is demolished and dispersed by a tornado", the court said.  "A tornado, which scatters dust and all else, is the 'sole cause' of the environmental damage left in its wake notwithstanding that the owners of flying buildings did not abate asbestos, or that farmers may have added chemicals to the soil that was picked up and scattered." 

Hopefully,  no CERCLA trial court will ever be asked to evaluate whether, in the wake of  a terrorist attack that results in the  release of hazardous substances, a defendant can avail itself of the "act of war" defense. However, it is likely that Cedar & Washington Assocs LLC will be cited for the proposition that releases occasioned by  severe unforeseeable storm events should be considered acts of God. 



No Unanimity As To What New ASTM E1527-13 Standard Requires

Some environmental practitioners contend that Phase I site assessments, commonly used in real estate transactions, will now be more costly and time consuming due to the new standard. Seyfarth Shaw counsels in its Client Alert that the new standard requires that, “if the subject property has soil contamination or is underlain by groundwater contamination, unless the risk of vapor intrusion can be screened out, Phase II sampling likely will be necessary.”

But is that really the case? In his article titled, “Confusion on Role of VI in New ASTM E1527-13 Standard,” environmental guru, Larry Schnapf, argues that these law firms' predictions are “simply incorrect.” Schnapf points out that the revised version of E1527 clarifies that the vapor intrusion pathway is like any other contaminant’s pathway and the potential for vapor intrusion should be evaluated and addressed as part of a Phase I inspection.

However, all a consultant is required to do as part of a Phase I is to recognize environmental conditions – the presence or potential presence of releases of hazardous substances. A consultant that identifies a REC due to an actual or potential source of soil or groundwater contamination will not normally collect samples as part of a Phase I.

Contrary to the interpretation of the new Phase I standard offered by some, Schnapf advises:

From a practical standpoint, the question of whether vapor intrusion should be independently flagged as a REC will only really be an issue for off-site releases where vapor intrusion is the only pathway for contamination to migrate onto the property. When the target property already has soil or groundwater contamination, the consultant would flag that contamination as a REC.

Thus, according to Schnapf, if a consultant determines that there is potential vapor intrusion because of the presence of an REC, the consultant is not required to actually collect sub-slab or indoor air samples as part of its Phase I.

The issue takes on additional importance when one also considers that Phase I diligence is required to protect both landowners and lenders from liability under CERCLA. 

According to USEPA,

"All Appropriate Inquiries," or AAI, is a process of evaluating a property's environmental conditions and assessing the likelihood of any contamination.....The All Appropriate Inquiries Final Rule provides that the ASTM E1527-05 standard is consistent with the requirements of the final rule and may be used to comply with the provisions of the rule.

The Small Business Liability Relief and Brownfields Revitalization Act (the “Brownfields Amendments”) amended CERCLA to provide protections from liability for certain landowners and prospective purchasers of properties who can demonstrate compliance with specific statutory criteria and did not cause or contribute to contamination at the property.  

Therefore, if the Phase I diligence the new owner performs does not meet the revised ASTM E1527-13 standard, in the opinion of the Agency, due to the omission of vapor intrusion screening, there may be considerable adverse consequences down the road for both landowners and lenders.

The additional transactional cost to the real estate community in performing many thousands of  vapor intrusion studies in Phase I assessments each year is likely to be considerable. Considering that vapor intrusion is just one of many RECs, does it make sense from an environmental perspective to do these surveys as a matter of course?  More importantly, does the new standard require that these screenings be performed at all? 

Did the Supreme Court's 2009 BNSF Decision Change CERCLA Cost-Recovery Practice?

The U.S. Supreme Court’s decision in Burlington Northern Santa Fe Railway Co. v. United States, 129 S. Ct. 1870 (2009), examined two unsettled areas of CERCLA: (1) the proof necessary to establish whether a PRP has “arranged for the disposal or treatment… of hazardous substances…”; and (2) CERCLA apportionment, i.e., whether a PRP is jointly and severally liable for an entire site, or rather only severally liable for a portion of the site. 

In an article on Lexology titled, “Four Years Later: How Has BNSF Changed CERCLA Practice?”, posted on November 20, 2012, Anthony G. Hopp and Colin O’Donovan of Edwards Wildman and Paul S. Kline of Three Rivers Management, Inc., explore the ramifications of the BNSF decision.

In summary, the authors conclude that the Supreme Court’s decision has made it more difficult to establish “arranger” liability by tightening the proof requirements. At the same time, however, most trial courts in the post-BNSF era have failed to embrace that portion of the decision dealing with “divisibility.” This article, which provides an excellent survey of CERCLA jurisprudence, is required reading for lawyers involved in cost recovery litigation. 

The BNSF facts are straightforward. B&B operated an agricultural chemical distribution business that purchased pesticides and other chemicals from Shell Oil Company. Shell’s products arrived in tanker trucks and were transferred to storage facilities. Leaks and spills were apparently “common place” during B&B’s handling and transferring of Shell’s products. B&B eventually became insolvent and the Government sought cleanup costs from Shell as an “arranger” under § 9607(a)(3) of CERCLA. The Ninth Circuit affirmed the trial court’s ruling that Shell was liable as an “arranger.” 

The Supreme Court reversed the Ninth Circuit, holding that a PRP is an arranger only when it takes intentional steps to dispose of a hazardous substance. The Court found that “Shell’s mere knowledge that spills and leaks continued to occur is insufficient grounds for concluding that Shell ‘arranged for… disposal…’.” and that the evidence at trial did not support the inference that Shell intended such spills. In so holding, the Court effectively overruled twenty years of “arranger” jurisprudence, which had created a much more liberal standard for establishing liability.  Therefore, defendants that sell useful products and/or have no role in the actual spill are more likely to find BNSF helpful in avoiding CERCLA liability.

The second half of the BNSF decision was devoted to apportionment. As the authors observe, apportionment is different from allocation in that apportionment deals with whether a defendant is jointly and severally liable for an entire site, or rather only severally liable for a portion of the site. Allocation, by contrast, deals with how courts calculate a defendant’s share of liability after it has been determined that the defendant is, in fact, jointly and severally liable. 

In Yankee Gas Servs. Co. v. UGI Utils., Inc., No. 10-cv-580, 2012 WL 1067644 (D.Conn. March 30, 2012), the district court analogized the distinction between apportioning and allocating costs to several guests splitting a dinner check. “To apportion is to request separate checks, with each party paying only for its own meal. To allocate is to take an unitemized bill and ask everyone to pay what is fair.” 

But does the Yankee Gas court’s analysis blur the line between apportionment and allocation? Yankee Gas suggests that § 107 defendants may be able to reduce their overall exposure by taking certain costs off the table – those which a PRP can demonstrate it did not cause. Following the court’s analogy, if the guests each ordered their own entrees and a few bottles of wine, everyone would pay for their own entrees and equitably split the wine, with those guests who did not drink paying only for their entrées. Yankee Gas, therefore, suggests that there may be some interplay between apportionment and allocation.  

This debate is far from being merely academic. Only by demonstrating divisibility of harm is a cost recovery defendant able to defend against a joint and several liability finding. Many CERCLA courts have acknowledged that the universal starting point for the divisibility of harm analyses in CERCLA cases is §433(A) of the Restatement (Second) of Torts. But post-BNSF, the Restatement (Second) of Torts takes on new significance in the divisibility determination.  Thus, trial courts are empowered to look beyond CERCLA case law to other federal decisions interpreting Section 433(A) to determine what showing is required to establish divisibility. 

 Inasmuch as the Supreme Court has clarified the law with regard to allocation, the Edwards Wildman authors ask why not a single post-BNSF trial court has accepted this defense?  Shortly after the issuance of BNSF, it was widely predicted that "divisibility" would emerge as the new frontier in CERCLA litigation.  However, this has not yet occurred.  As difficult as establishing a “divisibility” defense remains in the courts, the article provides excellent strategies for attempting to establish the defense.

My Old Sony Trinitron Is Not A CERCLA Waste!

Virtually everyone believes that it is good public policy to encourage the recycling of old electronic products, including computers, cathode ray tubes, televisions, printers and portable music devices.  Nearly 20 states have e-waste laws on the books.  However, New York City recently enacted an e-recycling law (over Mayor Bloomberg's veto), the first municipality in the United States to do so, that is so overly aggressive and costly that trade associations for the electronics industry have filed suit to block the law's implementation.  Under the law, if a television manufacturer is apprised, for example, that a homeowner on East 87th Street is desirous of recycling his 15 year old television, the manufacturer is required to make a special trip to pick it up on East 87th Street, regardless of the fact that the cost of this pick-up may be prohibitively expensive and  was never factored into the cost of the television when it was sold for $279.99 at Best Buy in 1994.  Worse, if the television is an "orphan", for whom no manufacturer currently doing business can be identified, there is still an obligation to drive up to East 87th Street and haul it away.  My own Sony Trinitron is more over 15 years old having provided me with flawless service from the day I brought it home from The Wiz in Herald Square.  But I hardly expect Sony to drive to my house to pick it up all these years later!  For goodness sakes!  It's a television set, not a hazardous CERLCA waste!  This law appears to confuse the CERLCA statute, which holds generators of waste responsible for their disposal practices years after the fact, and the sale of a useful product, such as a television.  A worthwhile discussion of the dispute, with some helpful background links, can be found in Meline MacCurdy's article of Aug. 12, 2009 in the Marten Law Group's Environmental News titled, "Electronic Manufacturers Challenge New York City E-Waste Law."

The electronic industry alleges that this program will cost manufacturers over $200,000,000 per year and that, on a per pound basis, the cost of collection alone will be ten times more expensive that the total cost of collection and recycling in California and Maine, two states that have promulgated e-recycling statutes.  Among other arguments, the manufacturers allege that the NYC statute violates the equal protection clause of the Constitution by targeting only certain types of electronic equipment while excluding other electronic equipment containing the same types of potentially harmful substances, and constitutes a regulatory taking and violates the manufacturers' substantive due process rights.    Some e-recycling advocates and environmentalists are concerned that this lawsuit may represent the first step of an attempted roll-back by industry of the e-recycling strides made in other states.  The Electronic TakeBack Coalition, whose motto is "Take it Back, Make it Green, Recycle Responsibly," has issued a call-to-arms on its web-site, "Electronic Industry Attacks Product Stewardship with Lawsuit in New York City". If interested in reviewing the pleadings filed in the lawsuit, the Electronic TakeBack Coalition web-site is a great resource.  Unfortunately, this entire controversy does nothing to advance the cause of e-recycling.  If the New York legislature enacted a state-wide e-recycling measure, which is what is needed here,  NYC could gracefully withdraw from the fray by rescinding its Draconian measure and permit the state legislation to  take effect. 

Spoliation Defeats Innocent Landowner's CERCLA Claim

Innis Arden Country Club is a well-run country club located on beautiful acreage in Old Greenwich, CT. that has operated for over 100 years. Close friends of mine are members--the food is good, the golfers congenial, and laughing children run barefoot across the pool deck in good weather.  Club members had been stunned to learn in 2004 that PCB contamination had been discovered on the golf course property, not far from where an industrial company, Pitney Bowes, had once conducted operations on an adjacent parcel in Stamford.  The country club's environmental consultants determined that Pitney Bowes was the source of the contamination, which Pitney Bowes denied, and that PCBs from the Pitney Bowes property had migrated by way of storm water and surface water runoff to Innis Arden.  What no one could dispute was that the country club had not placed the PCBs on the golf course--it was what CERCLA characterizes as an "innocent landowner". On June 26, 2009, the federal district court in Connecticut dismissed Innis Arden's complaint prior to trial and affirmed a prior sanctions award against the country club. Innis Arden Golf Club v. Pitney Bowes, Inc. et al. Case No. 3:06 cv 1352 (JBA), 2009 U.S. Dist. LEXIS 54135.  Something had gone terribly wrong!  But what?

Pitney Bowes retained Hunton and Williams, a law firm with a strong reputation in environmental litigation to defend the case.  In a July 2009 Client Alert, the law firm attributed Innis Arden's dismissal to its consultant having destroyed the key evidence that allegedly linked the PCB's at the country club to their client.  Without being able to perform tests on the actual soil samples the consultant had taken, Pitney Bowes would be unable to refute the consultant's claim that the PCB's on the golf course were identical to PCB's identified on the Pitney Bowes' site, it alleged.  As the Alert points out, the Court's spoliation ruling is a strong reminder of the obligations of parties and their experts to impose a litigation hold and to ensure that tangible evidence, such as as a soil sample taken to the lab for testing, is preserved.  Central to the court's ruling was that the soil sampling in question had been undertaken in preparation for litigation.  As the Magistrate Judge had earlier ruled "......counsel was actively involved in the investigation and analysis of the samples in preparation for legal action......"  Sanctions were awarded even though the Court concluded that Innis Arden had not intended to destroy evidence or to disadvantage Pitney Bowes.  In the Bow Tie Law Blog, the author opines that Innis Arden's "toxic mess" was created in part by deposition testimony that made it clear to the Court that plaintiff had taken no steps to prevent the destruction of electronic and tangible evidence as early as 2005, by which time it was clear that plaintiff recognized the importance of that evidence in its future litigation. 

By the time  the spoliation sanctions issue came before Judge Atherton on a motion for reconsideration, Innis Arden was in even deeper trouble.  The Magistrate Judge had also awarded sanctions against Innis Arden for discovery abuses--the most egregious that the Magistrate Judge had seen during over twenty years on the federal bench.  Worse, Judge Atherton concluded after hearing Daubert motions that Innis Arden's trial experts were not sufficiently reliable to be permitted to testify at trial.  On the basis of that ruling, she granted summary judgment to the defendants and dismissed the plaintiff's complaint.  At the end of the day, the Court did not have to reconsider the Magistrate Judge's spoliation ruling because the issue was now moot!  Still the "innocent landowner", Innis Arden's complaint has been dismissed and may yet have to pay the defendants' sanctions for discovery abuses.   

Reichhold, Inc. Prevails In New Jersey CERCLA Case

On June 22, 2009, after an six-week bench trial in the U.S. District Court for the District of New Jersey, we achieved a resounding victory for our client, Reichhold Inc., in an environmental cost recovery litigation. Reichhold v. USMRC et al, 2009 U.S. Dist. LEXIS 52471. The case addressed claims relating to the cleanup of a contaminated chemical plant site formerly owned by Reichhold in Carteret, New Jersey along the Arthur Kill. The case was brought pursuant to the federal CERCLA and New Jersey Spill Act statutes, as well as a 1994 settlement agreement between the parties.

Defendant United States Metals Refining Co. ("USMRC"), which owned the site prior to Reichhold, had argued that the settlement agreement prohibited Reichhold from bringing the claims in the instant lawsuit. The Court rejected USMRC's argument and held that, because virtually all of Reichhold's claims constituted "New Environmental Obligations" under the settlement agreement, they were actionable. The Court also dismissed every defense to liability raised by the defendant, including the defense that Reichhold's claims were time-barred.

In its Final Judgment, the Court awarded Reichhold $1,209,719 for investigation and cleanup costs that Reichhold had incurred while addressing metals contamination caused by USMRC's industrial operations. The Court also entered a declaratory judgment requiring USMRC to pay certain of Reichhold's future cleanup costs.

Our success at trial was attributable, in part, to our being able to discredit the expert testimony of USMRC's experts. In conjunction with an aerial photogrammetrist, USMRC's environmental engineering expert used historical aerial photographs of the site taken over a 60-year period to develop computer-generated surface contour maps that purported to depict Reichhold's excavation and fill activities at the site over time. Because of these topographical maps, USMRC's experts argued that Reichhold had caused extensive metals contamination at the site in the 1960's and 1970's by using contaminated fill in low lying areas of the property. On the basis of the cross-examination of defendants' experts by me and my partner, Sheila A. Woolson, the Court rejected the experts' testimony and held that the conclusions based on the photogrammetry performed were unconvincing. Consequently, the Court placed no reliance on the cut and fill evidence presented. In contrast, the Court accepted the testimony of Reichhold's witnesses that Reichhold had not disposed of any metals containing contamination at the site.

Over the last several months, federal and state environmental regulatory agencies have devoted substantial regulatory attention to New Jersey waterways and rivers in the northwestern portion of the state that have been contaminated with metals, declaring some of them to be federal Superfund sites. In light of these events, the judicial determination that the metals contamination on the southern edge of the property was solely due to our adversaries’ prior disposal activity was timely. The Opinion is perhaps the first trial court decision to apply the apportionment principles articulated in the Supreme Court's May 2009 decision in Burlington Northern.