Source: https://m.openjurist.org/96/f3d/706/united-states-v-cdmg-realty-co-e-cdmg-hmat-and-k-h-le-and-nsk-and-usa
Timestamp: 2019-11-21 00:52:53
Document Index: 463102753

Matched Legal Cases: ['§ 9601', '§ 9607', '§ 107', '§ 9607', '§ 107', '§ 9607', '§ 9613', '§ 9607', '§ 9607', '§ 9607', '§ 9607', '§ 9607', '§ 6903', '§ 6903', '§ 9607', '§ 9607', '§ 9601', '§ 9607', '§ 9601', '§ 9601', '§ 9601', '§ 9607', '§ 9607', '§ 9601', '§ 9607', '§ 9607', '§ 9607', '§ 9607', '§ 9603', '§ 9601', '§ 9601', '§ 6903', '§ 6903', '§ 6903', '§ 9601', '§ 9601', '§ 9601', '§ 9601', '§ 9607', '§ 9607', '§ 9607', '§ 9601', '§ 9607', '§ 9601', '§ 9601', '§ 9601']

96 F3d 706 United States v. Cdmg Realty Co E Cdmg Hmat & K-H Le & Nsk & Usa | OpenJurist
96 F. 3d 706 - United States v. Cdmg Realty Co E Cdmg Hmat & K-H Le & Nsk & Usa
96 F3d 706 United States v. Cdmg Realty Co E Cdmg Hmat & K-H Le & Nsk & Usa
96 F.3d 706
43 ERC 1294, 65 USLW 2215, 26 Envtl.
L. Rep. 21,589
This appeal requires us to determine the meaning of the word "disposal" in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq. Plaintiff HMAT Associates, the current owner of contaminated property, was sued by the United States under CERCLA for the costs of cleaning up the site. HMAT sought contribution from Defendant Dowel Associates, the company that sold the land to HMAT, on the ground that Dowel was a prior owner "at the time of disposal," see id. § 9607(a)(2). HMAT concedes that no one dumped waste at the property during Dowel's ownership, but offers two reasons why "disposal" took place during Dowel's tenure. HMAT first advances a "passive" disposal theory: that "disposal" occurred because contamination dumped in the land prior to Dowel's purchase of the property spread during Dowel's ownership. HMAT also offers an "active" disposal theory: that a soil investigation conducted by Dowel to determine whether the land could support construction caused the dispersal of contaminants, and that this constitutes "disposal."On cross-motions for summary judgment, the district court ruled in favor of Dowel. The court rejected HMAT's argument that the spread of contamination unaided by human conduct can confer CERCLA liability and held that any disturbance of contaminants caused by Dowel's soil testing was too insignificant to amount to "disposal." HMAT appeals the court's grant of Dowel's summary judgment motion and the denial of its own motion.
In October 1989, EPA and NJDEPE commenced actions against parties potentially liable for the costs of cleaning up the Sharkey Landfill and seeking a declaration of future liability. HMAT, as the current owner of the property, was named as a defendant under CERCLA § 107(a)(1), 42 U.S.C. § 9607(a)(1). Dowel was not sued. However, HMAT filed a third-party suit against Dowel, seeking contribution from Dowel as a former owner of the property "at the time of disposal" pursuant to CERCLA §§ 107(a)(2) and 113(f). HMAT also pled state law claims.
As we have noted, the district court granted Dowel's motion in full and denied HMAT's cross-motion. The court reasoned that mere ownership of previously contaminated property does not trigger liability under CERCLA, and that, even accepting HMAT's version of the facts, Dowel's drilling activities did not cause a significant enough disturbance to trigger liability. HMAT appeals the district court's rulings on its CERCLA claims (although it accepts the district court's conclusion that Dowel is not liable under state law). We exercise plenary review over the district court's summary judgment rulings. See, e.g., United States v. Capital Blue Cross, 992 F.2d 1270, 1271-72 (3d Cir.1993).1
CERCLA is a broad and complex statute aimed at the dangers posed by hazardous waste sites. Among other things, CERCLA provides a cause of action to recover "response costs" incurred in remedying an environmental hazard, 42 U.S.C. § 9607, and allows those liable for response costs to seek contribution from other liable parties, id. § 9613(f). A plaintiff must meet four elements to establish CERCLA liability: (1) that hazardous substances were disposed of at a "facility"; (2) that there has been a "release" or "threatened release" of hazardous substances from the facility into the environment; (3) that the release or threatened release has required or will require the expenditure of "response costs"; and (4) that the defendant falls within one of four categories of responsible parties. Id. § 9607(a); see United States v. Alcan Aluminum Corp., 964 F.2d 252, 258-59 (3d Cir.1992). If these requirements are met, responsible parties are liable for response costs regardless of their intent. See id. at 259 ("CERCLA imposes strict liability on responsible parties.").
The parties agree that the first three requirements are met. Their dispute concerns whether Dowel is a responsible party. CERCLA makes four classes of people liable for response costs or contribution: the current owner or operator of a facility, 42 U.S.C. § 9607(a)(1); any person who owned or operated the facility "at the time of disposal" of a hazardous substance, id. § 9607(a)(2); any person who arranged for disposal or treatment, or arranged for transport for disposal or treatment of hazardous substances at the facility, id. § 9607(a)(3); and any person who accepts or accepted hazardous substances for transport to sites selected by such person, id. § 9607(a)(4). HMAT contends that Dowel is liable as a person who owned or operated the facility "at the time of disposal" of a hazardous substance.
Id. § 6903(3). Focusing on the breadth of this definition, HMAT reads "disposal" to encompass the passive migration of contaminants. HMAT offers no evidence that any passive migration has occurred here but asks us to take judicial notice that waste tends to spread once it is put in the ground, See Office of Remedial Response, United States Environmental Protection Agency, Superfund Exposure Assessment Manual 8 (1988) [hereinafter Superfund Manual ] (waste in landfills tends to migrate due to, inter alia, rain, groundwater movement, and wind) and waste therefore must have spread during the six years Dowel owned the property. Several courts have been sympathetic to this argument. See United States v. Waste Indus., Inc., 734 F.2d 159, 164-65 (4th Cir.1984) (migration of hazardous substances can constitute disposal under RCRA); CPC International, Inc. v. Aerojet-General Corp., 759 F.Supp. 1269, 1278 (W.D.Mich.1991) (the unchecked spread of contaminated groundwater qualifies as disposal under CERCLA); Stanley Works v. Snydergeneral Corp., 781 F.Supp. 659, 662-64 (E.D.Cal.1990) (ongoing migration of hazardous substances constitutes disposal under CERCLA); United States v. Price, 523 F.Supp. 1055, 1071 (D.N.J.1981) (spreading of hazardous substances constitutes disposal under RCRA), aff'd, 688 F.2d 204 (3d Cir.1982); cf. Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 845-46 (4th Cir.) (leaking from tanks that were deposited prior to the defendants' ownership constitutes disposal subjecting the defendant to CERCLA liability), cert. denied sub nom. Mumaw v. Nurad, Inc., 506 U.S. 940, 113 S.Ct. 377, 121 L.Ed.2d 288 (1992); State of New York v. Almy Bros., Inc., 866 F.Supp. 668, 676-77 (N.D.N.Y.1994) (gradual leaking from drums deposited prior to the defendants' ownership constitutes disposal under CERCLA); In re Hemingway Transport, Inc., 108 B.R. 378, 382 (Bankr.D.Mass.1989) (leaking drums constitute CERCLA disposal), aff'd, 126 B.R. 650 (D.Mass.1991), aff'd, 954 F.2d 1 (1st Cir.1992).
We are unpersuaded. A thorough examination of the text and structure of CERCLA convinces us that the passive migration of contaminants alleged here does not constitute disposal. Our conclusion is based on the plain meaning of the words used in the disposal definition and is supported by the structure of CERCLA's liability scheme. We also believe that our interpretation is consistent with CERCLA's purposes.2B. The Language
The definition of disposal begins with "the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water." 42 U.S.C. § 6903(3). Courts holding that passive migration can constitute disposal have focused on the words "leaking" and "spilling," terms that generally do not denote active conduct. See CPC International, Inc. v. Aerojet-General Corp., 759 F. Supp. 1269, 1278 (W.D.Mich.1991); United States v. Price, 523 F.Supp. 1055, 1071 (D.N.J.1981), aff'd, 688 F.2d 204 (3d Cir.1982).
We think there is a strong argument, however, that in the context of this definition, "leaking" and "spilling" should be read to require affirmative human action. Both "leaking" and "spilling" also have meanings that require some active human conduct. "Leak" can be defined as "to permit to enter or escape through a leak." Webster's Third New International Dictionary, Unabridged 1285 (Philip Babcock Gove & the Mirriam-Webster Editorial Staff eds., 1986) [hereinafter Webster's ]. Similarly, "spill" can mean "to cause or allow to pour, splash, or fall out." Id. at 2195. Meaning derives from context, hence the constructional canon noscitur a sociis, which states that one may infer meaning by examining the surrounding words. The words surrounding "leaking" and "spilling"--"discharge," "deposit," "injection," "dumping," and "placing"--all envision a human actor. In the context of these other words, then, Congress may have intended active meanings of "leaking" and "spilling." See Ecodyne Corp. v. Shah, 718 F.Supp. 1454, 1457 (N.D.Cal.1989); Robert L. Bronston, Note, The Case Against Intermediate Owner Liability for Passive Migration of Hazardous Waste, 93 Mich. L.Rev. 609, 616 (1994).
But we need not address this question in the broad terms of whether disposal always requires active human conduct. Even if it does not, we conclude that the passive migration at issue in this case cannot constitute disposal. While "leaking" and "spilling" may not require affirmative human conduct, neither word denotes the gradual spreading of contamination alleged here. A common definition of "leak"--and the one most favorable to HMAT--is "to enter or escape through a hole, crevice, or other opening." Webster's, supra at 1285. This definition requires that a substance "leak" from some opening. For example, the definition would encompass the escape of waste through a hole in a drum.3 But HMAT has offered no evidence of leaking drums. Compare, e.g., Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 846 (4th Cir.) (the plaintiff presented evidence showing that tanks had leaked), cert. denied sub nom. Mumaw v. Nurad, Inc., 506 U.S. 940, 113 S.Ct. 377, 121 L.Ed.2d 288 (1992). And there is no other evidence that waste escaped from any opening during Dowel's ownership.
Most importantly, the definition of "release" includes the term "leaching," which is not mentioned in the definition of "disposal." "Leaching" is "the process or an instance of separating the soluble components from some material by percolation." Webster's, supra at 1282. Leaching of contaminants from rain and groundwater movement is a principal cause of contaminant movement in landfills, see Superfund Manual, supra at 8, and is the predominant cause of groundwater contamination from landfills, Edward Repa & Charles Kufs, Leachate Plume Management 2 (1985). The word "leaching" is commonly used in the environmental context to describe this migration of contaminants. See, e.g., Steven Ferrey, The Toxic Time Bomb: Municipal Liability for the Cleanup of Hazardous Waste, 57 Geo. Wash. L.Rev. 197, 207 n. 34 (1988) ("Leachate is liquid or water soluble contaminated substances that migrate away from the point source of contamination in groundwater or surface water, often influenced by rain and normal water table activities. Such a phenomenon is described as 'leaching' of contaminants.").4 Congress's use of the term "leaching" in the definition of "release" demonstrates that it was aware of the concept of passive migration in landfills and that it knew how to explicitly refer to that concept.
Our conclusion that the meaning of the words in the "disposal" definition cannot cover the passive migration alleged in this case is buttressed by the language of CERCLA's liability provision. If the spreading of contaminants is constant, as HMAT would have us assume, characterizing liable parties as "any person who at the time of disposal ... owned or operated any facility," 42 U.S.C. § 9607(a)(2), would be a rather complicated way of making liable all people who owned or operated a facility after the introduction of waste into the facility. See Snediker Developers Ltd. Partnership v. Evans, 773 F.Supp. 984, 989 (E.D.Mich.1991); Ecodyne Corp. v. Shah, 718 F.Supp. 1454, 1457 (N.D.Cal.1989); In re Diamond Reo Trucks, Inc., 115 B.R. 559, 565 (Bankr.W.D.Mich.1990). Furthermore, there would be no need for the separate responsible party category of current owner or operator, id. § 9607(a)(1). See Ecodyne Corp., 718 F.Supp. at 1457. Although CERCLA is not written with great clarity,5 we will not impute to Congress an intent to set up a simple liability scheme through a convoluted methodology.
Our conclusion that the language of CERCLA's definition of "disposal" does not include the passive migration alleged here is also supported by a significant aspect of CERCLA's liability scheme, the innocent owner defense. Since the 1986 Superfund Amendments and Reauthorization Act (SARA), Pub.L. No. 99-499, 100 Stat. 1613 (1986) (codified at 42 U.S.C. §§ 9601-9675), CERCLA has exempted certain "innocent owners" from liability.
CERCLA provides a defense to liability if the defendant can prove that the release or threatened release was caused solely by an act or omission of a third party. 42 U.S.C. § 9607(b)(3). The defense is generally not available if the third party causing the release is in the chain of title with the defendant. See id. § 9601(35)(A). However, the defense is available in such circumstances if the person claiming the defense is an "innocent owner." To establish the innocent owner defense, the defendant must show that "the real property on which the facility is located was acquired by the defendant after the disposal or placement of the hazardous substance on, in, or at the facility" and that "[a]t the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the facility."6
Because CERCLA conditions the innocent owner defense on the defendant's having purchased the property "after the disposal" of hazardous waste at the property, "disposal" cannot constitute the allegedly constant spreading of contaminants. Otherwise, the defense would almost never apply, as there would generally be no point "after disposal." See United States v. Petersen Sand and Gravel, Inc., 806 F.Supp. 1346, 1351-52 (N.D.Ill.1992); In re Diamond Reo Trucks, Inc. v. City of Lansing, 115 B.R. 559, 566 n. 3 (Bankr.W.D.Mich.1990); Bronston, supra at 627-28. We think it unlikely that Congress would create a basically useless defense.7
The innocent owner defense's apparent limitation to current owners also supports the conclusion that "disposal" does not encompass the passive spreading alleged here. The provision establishing the innocent owner defense states: "Nothing in this paragraph or in section 9607(b)(3) of this title [, which provides the causation defenses including the third party defense,] shall diminish the liability of any previous owner or operator who would be otherwise liable under this chapter." 42 U.S.C. § 9601(35)(C). This language certainly suggests that the innocent owner defense is unavailable to prior owners or operators.8
While the question whether the innocent owner defense is available only to present owners is not before us--and we do not decide the issue--we note that such a limitation makes sense only if passive spreading of waste in a landfill is not included in disposal. If passive migration is excluded from "disposal," past owners will generally only be liable as owners "at the time of disposal" when they have committed or allowed affirmative acts of disposal on their property. They would thus have little need for the innocent owner defense, which requires, inter alia, that a defendant did not "cause[ ] or contribute[ ] to the release or threatened release," 42 U.S.C. § 9601(35)(D); "exercised due care with respect to the hazardous substance concerned," id. § 9607(b)(3)(a); and "took precautions against foreseeable acts or omissions of any such third party [causing the release] and the consequences that could foreseeably result from such acts or omissions," id. § 9607(b)(3)(b). On the other hand, if prior owners were liable because waste spread during their tenure and the innocent owner defense is available only to current owners, prior owners would be in a significantly worse position than current owners: they would be liable for passive migration of waste even if they had no reason to know of the waste's presence. We do not believe that this was Congress's intent.
Congress enacted CERCLA with two principal goals in mind--to facilitate the cleanup of potentially dangerous hazardous waste sites, Tippins Inc. v. USX Corp., 37 F.3d 87, 92 (3d Cir.1994), and to force polluters to pay the costs associated with their pollution, United States v. Alcan Aluminum, 964 F.2d 252, 257-58 (3d Cir.1992). See United States v. USX Corp., 68 F.3d 811, 814 (3d Cir.1995). Our holding is clearly consistent with the latter purpose. Those who owned previously contaminated property where waste spread without their aid cannot reasonably be characterized as "polluters"; excluding them from liability will not let those who cause the pollution off the hook. And, many of these owners will pay for the pollution: if they disclose the fact that the land contains waste, their selling price will reflect the cost of CERCLA liability. If they have knowledge of contamination and do not disclose it to a transferee, they are liable for response costs even after the transfer. 42 U.S.C. § 9601(35)(C).9 The only prior owners who will not pay any cleanup costs are those who bought and sold the land with no knowledge that the land is contaminated.
And our holding will not undermine the goal of facilitating the cleanup of potentially dangerous hazardous waste sites. Even if owners of previously contaminated land can evade liability by transferring the land, ample incentives remain to promote cleanup. See United States v. Petersen Sand and Gravel, Inc., 806 F.Supp. 1346, 1353 (N.D.Ill.1992); Bronston, supra at 637-40.10 Present owners and operators remain strictly liable for the costs of cleanup, 42 U.S.C. § 9607(a)(1), as do some prior owners, id. § 9607(a)(2), people who arranged for disposal, id. § 9607(a)(3), and transporters of hazardous substances, id. § 9607(a)(4). Moreover, a number of provisions ensure that contamination will be discovered and the fact of contamination disclosed if the land is transferred. CERCLA imposes criminal liability (including prison sentences) for failure to report a "release" of hazardous substances above a certain threshold. See id. § 9603. As mentioned, if an owner transfers land that it knows to be contaminated without disclosing the contamination, it remains liable even after the transfer. Id. § 9601(35)(C). In addition, the innocent owner defense encourages potential buyers to investigate the possibility of contamination before a purchase. See id. § 9601(35)(B) (in order to claim the innocent owner defense, a defendant must have undertaken all appropriate inquiry).
We disagree with the district court's reading of "disposal." Under 42 U.S.C. § 6903(3), "disposal" is defined in part as the "discharge" or "placing" of waste "into or on any land or water." "Disposal" thus includes not only the initial introduction of contaminants onto a property but also the spreading of contaminants due to subsequent activity. See Webster's, supra at 644 (defining "discharge" in part as "to set at liberty," "release from confinement, custody, or care," "pour forth," or "emit"); id. at 1727 (defining "place" in part as "cause to rest or lie"); Kaiser Aluminum & Chemical Corp. v. Catellus Development Corp., 976 F.2d 1338, 1342-43 (9th Cir.1992) ("CERCLA's definition of 'disposal' expressly encompasses the 'placing of any ... hazardous waste ... on any land.' 42 U.S.C. § 6903(3). Congress did not limit the term to the initial introduction of hazardous material onto property."); Tanglewood East Homeowners v. Charles-Thomas, Inc., 849 F.2d 1568, 1573 (5th Cir.1988) ("[T]his definition of disposal does not limit disposal to a one-time occurrence--there may be other disposals when hazardous substances are moved, dispersed, or released during landfill excavations and fillings.").12
Although the cases cited above involved a greater disturbance of contaminants than that alleged here, the dispersal of contaminants need not reach a particular threshold level in order to constitute "disposal." "Disposal" consists of "the discharge ... or placing of any solid waste or hazardous waste into or on any land or water." 42 U.S.C. § 6903(3) (emphasis added). There is no exception for de minimis disturbances. Cf. United States v. Alcan Aluminum Corp., 964 F.2d 252, 260 (3d Cir.1992) ("[C]ourts that have addressed this issue [whether the term "hazardous substance" includes any quantitative requirement] have almost uniformly held that CERCLA liability does not depend on the existence of a threshold quantity of a hazardous substance."). The fact that a defendant's dispersal of contaminants is trivial may provide a ground to allocate less liability to that defendant, but it is not a defense to liability.
Given this evidence, a genuine dispute remains as to whether Dowel's drilling caused the dispersal of contaminants. A factual dispute is genuine if the evidence is such that a reasonable factfinder could find in favor the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). HMAT's evidence that Thor's equipment went through waste, soil, and groundwater and that several boreholes "caved", in combination with its expert's opinion, is sufficient to support a finding that a dispersal of contaminants occurred. Dowel's evidence, that despite the contact between its equipment, waste, soil, and groundwater, its boring method caused no mixing, is sufficient to support the opposite finding. Thus summary judgment in favor of either party is inappropriate.
CERCLA's innocent owner defense encourages prospective property buyers to conduct soil investigations. The innocent owner defense requires, inter alia, that "[a]t the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the facility." 42 U.S.C. § 9601(35)(A)(i) (emphasis added). CERCLA provides explicit guidance on how a defendant is to establish that it had "no reason to know" of a prior disposal:
Id. § 9601(35)(B). CERCLA thus contemplates that prospective purchasers "undertake[ ] ... all appropriate inquiry" and will engage in "appropriate inspection."
In order to give effect to the innocent owner defense and its requirement that prospective purchasers engage in appropriate inquiry and inspection, an "appropriate" soil investigation cannot itself trigger CERCLA liability. Otherwise, prospective purchasers who by diligently inspecting for contamination cause the dispersal of any contaminants will find themselves liable for causing a "disposal." And the innocent owner defense would offer such prospective purchasers no protection: if they buy the property after discovering contamination, they will be ineligible for the defense because they will not be "innocent" (i.e., they will "know and ha[ve] reason to know" of a prior disposal, id. § 9601(35)); if they do not buy the property, they will be ineligible for the defense because they will not be "owners" (i.e., they will not have "acquired the facility" as required by 42 U.S.C. § 9601(35)(A)). In order to give the defense effect, then, an "appropriate" soil investigation cannot constitute disposal.
But a party cannot escape liability for performing a soil investigation negligently and thereby unnecessarily spreading pollution. Several CERCLA provisions suggest that persons otherwise insulated from CERCLA liability may nonetheless become liable if they act negligently. In order to take advantage of a third-party defense (i.e., that a release was caused solely by a third party), a defendant must show that "he exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance, in light of all relevant facts and circumstances." Id. § 9607(b)(3)(a). And another provision, 42 U.S.C. § 9607(d)(1), insulates from liability actions consistent with the National Contingency Plan unless they are negligently performed:
Id. § 9607(d)(1). These provisions are themselves inapplicable to the issue at hand. However, they express a useful principle for determining when an action that is exempted from liability becomes so inconsistent with CERCLA's purposes that it is no longer so insulated, and this informs our judgment. We conclude that only "appropriate" soil investigations--i.e., those that do not negligently spread contamination--fall outside the definition of "disposal." Such a rule best harmonizes CERCLA's clear intention to allow soil investigations and its goal of remedying hazardous waste sites.
We have found other potential sources of congressional intent unhelpful. Its legislative history, which is sparse and often inconsistent, see Robert L. Bronston, Note, The Case Against Intermediate Owner Liability for Passive Migration of Hazardous Waste, 93 Mich. L.Rev. 609, 619 & n. 46 (1994), does not shed light on the meaning of "disposal." We have also found that the structure and language of RCRA, from which CERCLA borrows its "disposal" definition, is not very useful
See also Michelle L. Washington, Note, A Proposed Scheme of Municipal Waste-Generator Liability, 100 Yale L.J. 805, 808 (1990) ("One of the many problems posed by landfills is 'leaching,' the migration of contaminated liquid or water-soluble substances away from their point of origin."); see also, e.g., "Land Disposal Restrictions", EPA Proposed Rule, 61 Fed.Reg. 2338 (1/25/96) ("TCLP [Toxicity Leaching Procedure] is the Agency's method of simulating the movement or leaching from waste management units to groundwater...."); Scribner v. Summers, 84 F.3d 554, 557 (2d Cir.1996) ("The Scribners maintain that Jasco trespassed on their property because of the migration or leaching of barium particles across Jasco's property onto the Scribner's property."); McClellan Ecological Seepage Situation v. Perry, 47 F.3d 325, 330 (9th Cir.) ("MESS alleges ... that contaminants from the inactive pits continue to leach downward into groundwater beneath the Base."), cert. denied, --- U.S. ----, 116 S.Ct. 51, 133 L.Ed.2d 16 (1995)
Because of the great haste with which CERCLA was passed, inconsistencies and redundancies pervade the statute. See United States v. Alcan Aluminum Corp., 964 F.2d 252, 258 n. 5 (3d Cir.1992) (citing 1 A Legislative History of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, Senate Committee of Environment and Public Works, S. Doc. No. 97-14, 97th Cong., 2d Sess.1983, pp. 785-87)
As an alternative to showing lack of reason to know of the contamination, the defendant can also claim the defense in two other circumstances: (1) "The defendant is a government entity which acquired the facility by escheat, or through any other involuntary transfer or acquisition, or through the exercise of eminent domain authority by purchase or condemnation" or (2) "The defendant acquired the facility by inheritance or bequest." 42 U.S.C. § 9601(35)(A)(ii) & (iii)
A defendant asserting the innocent owner defense or any third-party defense must also show that "(a) he exercised due care with respect to the hazardous substance concerned ... and (b) he took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions." id. § 9607(b)(3); see also id. § 9601(35)(A).
Despite this plain language, the Second Circuit has suggested that the innocent owner defense is available to prior owners. See Westwood Pharmaceuticals, Inc. v. National Fuel Gas Distrib. Corp., 964 F.2d 85, 91 (2d Cir.1992). We need not decide that issue in this case
[I]f the defendant obtained actual knowledge of the release or threatened release of a hazardous substance at such facility when the defendant owned the real property and then subsequently transferred ownership of the property to another person without disclosing such knowledge, such defendant shall be treated as liable under section 9607(a)(1) of this title and no defense under section 9607(b)(3) of this title shall be available to such defendant.
42 U.S.C. § 9601(35)(C). By its plain language, this provision appears to create a substantive basis of liability. But see Catherine S. Stempien, Sins of Omission, Commission, and Emission: Does CERCLA's Definition of "Disposal" Include Passive Activities?, 9 J. Envtl. L. & Litig. 1, 21-24 (1994) (arguing that 42 U.S.C. § 9601(35)(C) is not an independent basis of liability but is only a prohibition on claiming the innocent landowner defense for certain persons who are otherwise liable under CERCLA). Even if this provision does not create an independent basis of liability, state common law protects land purchasers from the intentional concealment of hidden defects. See United States v. Petersen Sand and Gravel, Inc., 806 F.Supp. 1346, 1353 (N.D.Ill.1992).
In Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837 (4th Cir.), cert. denied sub nom. Mumaw v. Nurad, Inc., 506 U.S. 940, 113 S.Ct. 377, 121 L.Ed.2d 288 (1992), the Fourth Circuit held that leaking from tanks placed in the ground prior to the defendant's ownership constitutes disposal in part because of the incentives that a contrary rule would create:
Although the soil test commissioned by Dowel occurred in September 1981, three months before Dowel closed on the purchase of the property, Dowel has not argued to this Court that it was not an owner at the time the soil test occurred. We are confident that insofar as the soil test constitutes "disposal," which we discuss below, Dowel is a responsible party. Because the parties have not briefed the issue, however, we will leave the precise basis of liability to the district court. We note several possibilities for it to consider: Dowel might be an owner because it had already entered a purchase contract at the time of the testing; an operator because it controlled the source of the contamination; a transporter because its agent moved the contaminants, see Kaiser Aluminum & Chemical Corp. v. Catellus Development Corp., 976 F.2d 1338, 1343 (9th Cir.1992) ("CERCLA defines 'transportation' as 'the movement of a hazardous substance by any means....' Because Ferry necessarily moved the contaminated soil when it excavated and graded the property, this aspect of its conduct falls within 9601(26)'s definition of 'transportation.' ") (citation omitted); or an arranger because it arranged for a process that (perhaps) necessitated disposal, but cf. Amcast Industrial Corp. v. Detrex Corp., 2 F.3d 746, 751 (7th Cir.1993) ("[I]n the context of the shipper who is arranging for the transportation of a product, 'disposal' excludes accidental spillage because you do not arrange for an accident except in the Aesopian sense illustrated by the staged accident."), cert. denied, 510 U.S. 1044, 114 S.Ct. 691, 126 L.Ed.2d 658 (1994)
See also Burlington Northern R.R. Co. v. Woods Industries, Inc., 815 F.Supp. 1384, 1392 n. 12 (E.D.Wash.1993) ("That the facility was contaminated when Hansen acquired it is not a defense to liability ... given Hansen's subsequent role in dispersing contaminated building materials at the site."); Ganton Technologies, Inc. v. Quadion Corp., 834 F.Supp. 1018, 1022 (N.D.Ill.1993) ("[T]his court follows Kaiser and holds that "disposal" is not limited to the initial introduction of contaminants into a site."); Portsmouth Redevelopment & Housing Authority v. BMI Apartments Assoc., 827 F.Supp. 354, 357-58 (E.D.Va.1993) (General allegations that defendants "moved some dirt around in the course of constructing the apartment buildings now on Site" are legally sufficient to overcome a 12(b)(6) motion)