Opinion ID: 3066064
Heading Depth: 2
Heading Rank: 1

Heading: Application of CERCLA to Soil and Groundwater

Text: Contamination in Nevada Does Not Offend the Commerce Clause Maryland Square’s appeal challenges the application of CERCLA to the contamination of the Site as violating the Commerce Clause, because the PCE disposal physically affected the Site and a nearby neighborhood within the state of Nevada. The district court summarily rejected this claim. Maryland Square relies primarily on the Supreme Court’s opinions in United States v. Lopez, 514 U.S. 549 (1995), and United States v. Morrison, 529 U.S. 598 (2000), the two Commerce Clause decisions of the last twenty years invalidating Congressional enactments. Neither involved environmental issues. Lopez concerned regulation of conduct VOGGENTHALER V. MARYLAND SQUARE 21 near a school and Morrison involved violence against an individual. The Constitution states that “The Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” U.S. Const. Art. I, § 8, cl. 3. This grant of authority has been separated into three broad categories. Perez v. United States, 402 U.S. 146, 150 (1971). Under its commerce power, Congress may regulate (1) “the use of the channels of interstate or foreign commerce,” (2) “the instrumentalities of interstate commerce . . . or persons or things in commerce,” and (3) “those activities affecting commerce.” Id. These categories were recognized in both Lopez and Morrison. Maryland Square contends that none of the three categories apply, but two of them do. The application of CERCLA to contaminated soil and groundwater is proper under the second and third categories as regulation of articles in commerce and activities affecting commerce. Groundwater may be regulated as an article of commerce, because any item that may be bought or sold, indeed all objects of trade, are articles of commerce. See Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dep’t of Natural Res., 504 U.S. 353, 359 (1992). The Supreme Court has expressly held that groundwater is an article of commerce, because it can be traded. Sporhase v. Nebraska, ex rel. Douglas, 458 U.S. 941, 953–54 (1982). There, the state of Nebraska, in defending a state law limiting the interstate sale of Nebraska groundwater, tried to contend that groundwater was not an article of commerce. Id. at 951–52. According to Nebraska, groundwater was not an article of commerce because Nebraska’s residents did not enjoy an unlimited ownership interest in the groundwater they withdrew and 22 VOGGENTHALER V. MARYLAND SQUARE because groundwater was essential to its citizens’ survival. Id. at 951–53. The Supreme Court rejected this argument, citing Nebraska’s efforts to limit the sale of groundwater within the state as proof that groundwater is an object of trade. Id. at 953–54 (“[The] claim that Nebraska ground water is not an article of commerce goes too far: it would not only exempt Nebraska ground water regulation from burdenon-commerce analysis, it would also curtail the affirmative power of Congress to implement its own policies concerning such regulation [of groundwater].”). Maryland Square’s position in this case, that groundwater found within a state cannot be an article of interstate commerce, is the same as the position the Court rejected in Sporhase. Indeed, the Supreme Court emphasized that the federal government has a significant interest in groundwater because groundwater is found in multistate aquifers and facilitates irrigated farming that supplies markets worldwide. Id. at 953. Congress, by making the protection of groundwater and surface water a main priority of CERCLA, acted on that federal interest. See 42 U.S.C. §§ 9605(c)(2), 9618. In addition, we deal with a dry cleaning establishment that created the contamination as part of its commercial operation, and resulted in clean up costs that burdened commerce. The clean up, as well as the business itself, substantially affect interstate commerce. Application of CERCLA is supported for those reasons as well. The Eleventh Circuit in United States v. Olin Corporation, 107 F.3d 1506 (11th Cir. 1997), recognized the economic burden of clean up costs in rejecting a challenge to CERCLA very similar to the one in this case. The chemical manufacturer in Olin contended that its on-site disposal of hazardous substances did not affect interstate VOGGENTHALER V. MARYLAND SQUARE 23 commerce because the substances never left the site. Id. at 1511. The court rejected that contention, stating that Congress, in passing CERCLA, recognized the growing economic costs of handling and disposing hazardous substances and that these costs were associated with both offsite and on-site disposal. Id. Also recognizing that hazardous substance clean up affects interstate commerce, the Second Circuit in Freier v. Westinghouse Electric Corporation, 303 F.3d 176 (2d Cir. 2002), rejected a Commerce Clause challenge to an amendment to CERCLA affecting the statute of limitations for claims resulting from exposure to hazardous substances. In upholding this amendment as an integral part of CERCLA’s regulatory scheme, the court stated that the generation and disposal of waste in connection with the operation of a business are economic activities properly regulated under the Commerce Clause. Id. at 202. The Supreme Court’s decisions in Lopez and Morrison concerning non-economic activity are not relevant here, for the Court’s holding in both depended upon the conclusion that the activities sought to be regulated were not commercial activities. See Lopez, 514 U.S. at 561 (the criminal statute prohibiting the knowing possession of a firearm in a school zone had “nothing do with ‘commerce’ or any sort of economic enterprise”); Morrison, 529 U.S. at 613 (gendermotivated violent crimes “are not . . . economic activity”). The Supreme Court has consistently held that Congress, under the Commerce Clause, can regulate commercial activities, even where the economic impact of the individual defendant’s actions were far smaller than in this case, as with home cultivation of medical marijuana. Gonzales v. Raich, 545 U.S. 1, 26–27 (2005). The Court has made no de minimus exception. Courts will not “excise, as trivial, 24 VOGGENTHALER V. MARYLAND SQUARE individual instances” of a class of activities that is within the federal power. Id. (internal quotations and citations omitted). II. Maryland Square Has Not Shown That It Qualifies for an Exception to CERCLA Liability, and It Is Clearly Responsible for Reimbursement Under Nevada State Law Maryland Square contends that even if CERCLA may be constitutionally applied, Maryland Square nevertheless should not be liable because it qualifies as a bona fide prospective purchaser under CERCLA. It also challenges its liability under the Nevada state law requiring the owners of a contaminated site and those responsible for the hazardous spill to reimburse the State after it cleans up the contamination. We deal with each contention in turn.
Qualifies as a Bona Fide Prospective Purchaser Under CERCLA CERCLA is a strict liability statute in that it does not require a party to act culpably in order to be liable for clean up. Cal. Dept. of Toxic Substances Control v. Hearthside Residential Corp., 613 F.3d 910, 912 (9th Cir. 2010). Our court has described the four elements that create liability. 3550 Stevens Creek Associates v. Barclays Bank of Cal., 915 F.2d 1355, 1358 (9th Cir. 1990). A plaintiff must establish: (1) the site containing the hazardous substances is a facility under CERCLA; (2) a release or threatened release of a hazardous substance has occurred from that facility; (3) the plaintiff incurred response costs as a result of that release or threatened release and those costs were necessary and consistent with the national contingency plan; and (4) the VOGGENTHALER V. MARYLAND SQUARE 25 defendant is in one of the categories of entities subject to the liability provisions of CERCLA § 107(a). Id. Maryland Square does not contest the first three elements. The Site is a facility under CERCLA because hazardous substances were disposed there. 42 U.S.C. § 9601(9). A hazardous substance was released when the operators spilled PCE down the drain, through the pipes and into the environment. 42 U.S.C. § 9601(22). NDEP’s response was necessary because no party had taken responsibility for the clean up. 42 U.S.C. § 9607(a). Maryland Square contends it falls within 42 U.S.C. § 9607(r)(1), the bona fide prospective purchaser exception to liability. This provision exempts from liability those who in good faith purchased a property they did not contaminate, but only provided they meet certain conditions. It states that: a bona fide prospective purchaser whose potential liability for a release or threatened release is based solely on the purchaser’s being considered to be an owner or operator of a facility shall not be liable as long as the bona fide prospective purchaser does not impede the performance of a response action or natural resource restoration. Id. The statute further provides, however, that a defendant must meet eight separate criteria to qualify as a bona fide prospective purchaser. 42 U.S.C. § 9601(40)(A)–(H). An owner seeking to qualify as a bona fide prospective purchaser must establish, among other things, that it purchased the 26 VOGGENTHALER V. MARYLAND SQUARE property after the hazardous substances were spilled, 42 U.S.C. § 9601(40)(A), made all appropriate inquiries before it purchased the property, 42 U.S.C. § 9601(40)(B), provided all legally required notices about the hazardous substances, 42 U.S.C. § 9601(40)(C), and took steps to stop any ongoing spill, prevent future spills, and limit the exposure from past spills, 42 U.S.C. § 9601(40)(D). Regulations further spell out the steps an owner must take to qualify. An owner seeking to establish that it made “all appropriate inquiries,” for example, must show that the examination was performed by an environmental professional, as defined in 40 C.F.R. § 312.10, that particular kinds of information about the property, its history and its value were collected, 40 C.F.R. § 312.22, and that various sources were consulted, 40 C.F.R. § 312.30. All of these steps must be taken prior to the purchase, but no more than a year before the purchase date. 40 C.F.R. § 312.20. The owner, furthermore, must interview past owners and operators, search for environmental cleanup liens, review government records, inspect the property, and obtain a declaration by the environmental professional no more than 180 days before the purchase date. Id. Maryland Square attempted to establish it satisfied these requirements by submitting the “Supplemental Affidavit” of Paul G. Roberts, Maryland Square’s manager. The district court did not consider this submission because it was not notarized, and for that reason concluded that Maryland Square had failed to meet its burden. The “affidavit” should have been notarized, but the district court did not give Maryland Square an opportunity to correct that deficiency. Nor did the court consider the VOGGENTHALER V. MARYLAND SQUARE 27 contents of the submission to determine whether they would have been sufficient if notarized. The parties on appeal assume the truth of the statements and address the merits of Maryland Square’s contention that the facts stated would show it qualifies as a bona fide prospective purchaser. Roberts’s submission stated that the seller, Clark County School District, disclosed the PCE contamination during the sale negotiations and that Maryland Square then retained counsel and hired Entrix, Inc., an environmental consulting firm, to review and report on the NDEP files concerning the Site. After purchasing the Site, Maryland Square hired an environmental contractor to demolish the building. The submission does not indicate that Maryland Square took any remedial steps, such as removing the soil after demolishing the building, but says only that Maryland Square followed the progress of the previous owners in drafting and submitting plans to clean up the Site, and that Maryland Square had some (mainly undescribed) correspondence with NDEP. The statements in the submission are insufficient to establish Maryland Square satisfied the requirements for bona fide prospective purchaser status. They do not establish Maryland Square met requirements of 42 U.S.C. § 9601(40)(D) to prevent further harm, because Maryland Square failed to limit human and environmental exposure to a contamination already present. The submission acknowledges Maryland Square purchased the Site with knowledge of the contamination, and subsequently demolished the building, an action that exposed the contaminated soil to the elements, but identifies no steps that it took to remove the contaminated soil or limit the spread of PCE. NDEP was then forced to remove the contaminated soil six years after the building was destroyed, thereby creating a 28 VOGGENTHALER V. MARYLAND SQUARE situation contemplated by Congress when enacting CERCLA—reimbursement of a government entity forced to clean up a site because the owner refused to take action. See 42 U.S.C. § 9607(a)(4)(A). In addition, Maryland Square’s submission does not discuss the numerous regulatory requirements for making appropriate inquiries. See 42 U.S.C. § 9601(40)(B); 40 C.F.R. §§ 312.10, 312.20 et seq. The submission, without providing necessary supporting information, merely states that Maryland Square retained Entrix, Inc. to review files and prepare a report. It does not indicate if Entrix employed a qualified environmental professional, the substance of the report, or any description of the assessment conducted. See 40 C.F.R. §§ 312.10, 312.20 et seq. Maryland Square’s submission was woefully insufficient to establish it was a bona fide prospective purchaser within the meaning of CERCLA. The district court, however, rejected the submission on the basis of its form rather than its substance, and did not give Maryland Square a chance to make any additional showing. We therefore vacate the district court’s grant of summary judgment against Maryland Square so that it may have an opportunity to cure the formal and substantive deficiencies of its prior submission and establish that it has met the statutory and regulatory requirements to qualify as a bona fide prospective purchaser. VOGGENTHALER V. MARYLAND SQUARE 29
Nevada Law Because It Owned the Property and Failed to Remove the Contaminated Soil Pursuant to Nevada law, Nevada has established an account from which it may spend money to respond to a hazardous spill, manage the clean up of a contaminated site, and remove the hazardous substance. Nev. Rev. Stat. § 459.537. Under the statute, money from the “Account for the Management of Hazardous Waste” may be spent to pay the costs of responding to a leak or spill if the person responsible did not promptly clean it up. Id. Once this money has been spent, the statute instructs NDEP to demand reimbursement from various people, including “any person . . . who owns or controls . . . the area used for the disposal of the waste, material or substance.” Id. This must include the current owner. Maryland Square, as the current owner, tries to maintain it is not responsible under the statute because it did not own the Site at the time of the PCE disposal. However, the state statute contains no exceptions, nor does it limit the reimbursement obligation to those responsible for the spill. Maryland Square also challenges the grant of injunctive relief under Nevada Revised Statutes § 445A.695, on the ground that it was not responsible for any discharges of PCE. Under this statute, NDEP may seek an injunction “to prevent the continuance or occurrence of any act or practice which violates any provision of NRS 445A.300 to 445A.730 . . . .” Id. NDEP contends that Maryland Square violated Nev. Rev. Stat. § 445A.465, a state statute that encompasses not only discharges, but also the failure to clean up a spilled contaminant that may enter the State’s waters. The statute 30 VOGGENTHALER V. MARYLAND SQUARE makes it unlawful to “[a]llow a pollutant discharged from a point source or fluids injected through a well to remain in a place where the pollutant or fluids could be carried into the waters of the State by any means.” Nev. Rev. Stat. § 445A.465(1)(d). Maryland Square allowed PCE to remain in the soil for six years, and the PCE did enter the waters of the State. The district court, therefore, correctly granted summary judgment on NDEP’s claim for injunctive relief as well.