In a noteworthy ruling, the United States District in the Northern District of Illinois held that an owner of industrial equipment leased to the operator of a plating facility is strictly liable as a current owner of a “facility” under Section 107(a) of Superfund (also known as CERCLA). United States v. Saporito, 2010 WL 489703 (N.D. Ill Feb. 9, 2010) (“Saporito“).
In Saporito, the federal government sought to recover over $1.5 million in cleanup costs at the site of a former plating facility. The government sought summary judgment against Saporito, on the grounds that he was a current owner of a facility within the meaning of CERCLA, “based on his undisputed ownership of equipment used in the plating process.” Saporito opposed the motion on the grounds that there was no evidence that the equipment he owned and leased to the operator was connected to any release or threatened release of hazardous substances causing the cleanup, and because the equipment had been leased to someone who actually operated the plating facility.
The District Court rejected both arguments, holding that CERCLA is a strict liability statute that did not require proof of a connection between the property owned by the defendant and the incurrence of CERCLA cleanup costs. The court, relying on ELF Atochem North American, Inc. v. United States, 868 F. Supp. 707, 709 (E.D. Pa. 1994), held that the plating line owned by Saporito was “no less a facility than the land on which it operated.” The court further observed that just as CERCLA extends liability to a landowner who may not even be aware of pollution-producing activities of its lessee, it similarly extends to owners of equipment “whose lessee is using the equipment in a similar manner.”
Saporito also argued that if he is an owner of a CERCLA “facility” and thus a current owner PRP, he should be entitled to a defense for owners who are protecting a security interest. The District Court rejected that argument as well, finding that Saporito’s ownership interest was not “primarily to protect a security interest,” a necessary element of the defense.
The District Court’s ruling, if upheld on appeal, has the potential to significantly broaden the scope of CERCLA liability. CERCLA’s broad definition of “facility” explicitly encompasses “equipment,” so that aspect of the court’s ruling is not controversial. CERCLA, however, only holds liable the current owner of a facility “from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance . . . . “ 42 U.S.C. 9607(a). Thus, the District Court appeared to err in holding that the government did not have to establish that the equipment owned by Saporito (the plating line) was connected to the release or threatened release of a hazardous substance giving rise to response costs that the government sought to recover. The court confused the fact that, once liability is established, CERCLA holds such parties strictly liable, with the requirement that to establish liability based on ownership of a “facility” the CERCLA plaintiff must show that such facility caused the release or threatened release at issue. Once a party qualifies as a liable party under Section 107(a) liability is strict in the sense that there is no need to prove negligence or fault. However, that does not mean that a CERCLA plaintiff need not link the “facility” to the release or threatened release giving rise to the cleanup costs.
Accordingly, we predict that unless resolved out-of-court this case should be reversed on appeal. The court in this case was likely influenced by the fact that Saporito had been at certain times involved in the operation of the plating operation, and was not merely an owner of equipment leased to an unconnected third-party operation. Nevertheless and despite the flaw in its reasoning, the Saporito decision makes clear that owners of industrial equipment leased to third-parties should consider taking steps to mitigate potential CERCLA liability, especially in instances where a plaintiff can establish that the equipment in question played a role in the release of hazardous substance causing contamination. In such instances the owner of the equipment, even if not involved in the operations of the plant, could be held liable as the current “owner” of a CERCLA “facility” under a proper reading of CERCLA’s strict liability scheme.
It would be interesting to know to what degree the owner of the equipment was involved in its operation or maintenance and the facts around the releases that caused the contamination. Were there no other PRP’s from which the EPA could recover costs?
Comment by Gary Heard — February 24, 2010 @ 11:05 am
In this case the EPA appears to have settled with the current operator, leaving Saporito as the only non-settling party. The opinion does not specify the apportionment of the $1.5 million, if any, between the current operator and Saporito. On the summary judgment motion there appears to have been a dispute as to Saporito’s continuing involvement at the site. That is what makes the opinion interesting. The court avoided the disputed issue and held Saporito liable simply because he owned the plating line. There was no evidence that he had any continuing operation or maintenance obligation. There also is no finding in the opinion that the release that led to the cleanup costs came from the plating line, and it is there that I believe the court erred.
Comment by Steven C. Russo — February 26, 2010 @ 2:16 pm
Saporito must have been mystified. Costly defense as well.
Comment by Gary Heard — March 5, 2010 @ 11:07 am