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United States Found Not Liable As Operator Under CERCLA For Shutdown Order

In a split decision that could have ramifications for future lawsuits involving the present pandemic, a majority panel in the Ninth Circuit held that the United States was not liable under CERCLA as an “operator” at the Lava Cap Mine Superfund Site when it ordered the mine to shut down during World War II. United States v. Sterling Centrecorp Inc., No. 18-15585 (9th Cir. Oct. 5, 2020). The decision will likely spell some relief for local, state, and federal officials that have issued similar shutdown orders across the United States during the COVID-19 pandemic.

In the decades before World War II, the Lava Cap Mine was a very productive gold and silver mine. During the War, however, the United States faced a critical shortage of copper, while gold mining was deemed “nonessential.” To redirect resources to copper mining, the United States ordered mines like the Lava Cap Mine to shut down. At no point during the shutdown did the government take physical possession of the Lava Cap Mine. In 1945, the order was rescinded and gold mining operations were allowed to continue.

The defendant in the case, Sterling, acquired the Lava Cap Mine during the 1950’s, though Sterling never conducted any mining operations there. In 1979, during Sterling’s ownership, a pollution-control dam at the site collapsed, triggering a release of contaminated waste into a local waterway.

In 2008, EPA and California filed suit against Sterling on the basis that Sterling was liable for response costs under CERCLA as an “operator” of the Lava Cap Mine Superfund Site. Sterling contested the governments’ claims and filed a counterclaim arguing that the United States was liable for response costs under CERCLA as a prior “operator” of the Lava Cap Mine during World War II.

The Ninth’s Circuit’s decision turned on the meaning of “operator” under CERCLA, which is defined by the statute circularly as “any person who at the time of disposal of any hazardous substance . . . operated any facility at which such hazardous substances were disposed of.” 42 U.S.C. § 9607(a)(2).

A majority of the Ninth Circuit panel held that Sterling was liable as an operator, but the United States was not. The majority relied on the Supreme Court’s decision in United States v. Bestfoods for the proposition that to be deemed an operator one “must manage, direct or conduct operations specifically related to pollution.” In this case, Sterling was responsible for pollution control decisions in 1979 when the pollution-control dam collapsed. The United States, in contrast, was not an “active” participant in running the facility or managing the facility’s pollution control decisions. In the majority’s view, the United States ordered the Lava Cap Mine to shut down mining operations and that was “the extent of its involvement,” which fell short of operator liability.

In a partial dissent, Judge N. Randy Smith agreed that Sterling was liable but argued that the United States was plainly an “operator” under Supreme Court precedent. Judge Smith also looked to the Bestfoods case but reached an opposite conclusion. Judge Smith stressed that in Bestfoods, the Supreme Court stated that a party is an operator when that party merely “directs the workings of, manages, or conducts the affairs of a facility,” particularly over the facility’s “polluting activities.” Here, in Judge Smith’s view, there was no question that the United States exercised control over the Lava Cap Mine’s polluting activities given that the United States had ordered those activities to terminate. The dissent, therefore, would have held the United States liable under CERCLA as an “operator.”