Last week the Third Circuit held that the owner of a remediated site could be liable under CERCLA § 107(a) for environmental response costs incurred before it acquired the property. Pa. Dep’t of Envtl. Prot. v. Trainer Custom Chem., LLC., __ F.3d __, No. 17-2607, 2018 WL 4844077 (3d Cir. 2018). In its opinion reversing the district court’s grant of partial summary judgment in advance of trial, the court concluded that “all costs” in § 107(a)(4)(A) means an owner is “indeed liable for all response costs, whether incurred before or after acquiring the property.” Id. at *5. Our blog post discussing the district court’s decision, 204 F. Supp. 3d 814 (E.D. Pa. 2016), can be found here. 

Under CERCLA, when a government agency responds to a release of hazardous substances, it may recover “all costs of [the] removal or remedial action” from responsible parties, including “the owner and operator” of the remediated site. 42 U.S.C. § 9607(a). In this case, the Pennsylvania Department of Environmental Protection and EPA initiated response actions in 2007 at the site of a chemical manufacturing plant. Trainer Custom Chem., 2018 WL 4844077 at *1. When the company that owned the site fell into financial trouble and could no longer afford to cover the cleanup costs, the Department began paying the electric bills. Id. at *2. Through June 2009, the Department spent over $818,000 on electricity. Id. In 2012, a few months before the Department and EPA finished the removal actions, Trainer Custom Chemical, LLC purchased the property, and in the years that followed, it caused new releases of hazardous substances at the site. Id.

The Department brought this action under CERCLA and Pennsylvania’s Hazardous Sites Cleanup Act (“HSCA”) against Trainer and its individual owners, seeking response costs incurred before and after Trainer took ownership in 2012. Id. Trainer argued that it was liable only for costs incurred after it owned the site, and not for costs incurred before. Trainer Custom Chem., 204 F. Supp. 3d at 823. The District Court agreed. Id. at 825. Relying on the Ninth Circuit’s decision in Cal. Dep’t. of Toxic Substances Control v. Hearthside Residential Corp., 613 F.3d 910 (9th Cir. 2010), the court found that ownership under § 107(a) “is measured at the time of cleanup,” not at the time a recovery action is brought. Id. at 823–24. Because Trainer did not own the site when the Department incurred the electric costs, Trainer was not an “owner” from whom the government could recover those costs. Id. at 825.

The Third Circuit reversed. Unlike the district court, the court of appeals did not discuss the meaning of “owner,” noting that Trainer had conceded that point: “[A]ll parties and the district court agree that Trainer is the owner of the site and, pursuant to CERCLA § 107(a)(1), is at least liable for environmental response costs incurred after it took ownership.” Trainer Custom Chem., 2018 WL 4844077 at *5. Taking that concession as its “starting point,” the only question remaining was the scope of costs for which Trainer was responsible. Id. And the answer to that question was clear from the text of the statute, according to the court, as it allows the government to recover “all costs.” The phrase “all costs,” wrote Judge Jordan, means just that; it does not distinguish between costs incurred before ownership and those incurred after. Id. Indeed, the court further bolstered its conclusion in this regard by noting that defenses such as the bona fide prospective purchaser defense, the innocent owner defense, and even principles of apportionment imply that costs for remedial efforts incurred prior to ownership are included in the definition.  Id. at *5 - 6.

The court also concluded that Trainer was liable under the HSCA for the same reasons it was liable under CERCLA. Id. at *4, 6.  However, the court was careful to note that no party argued that the definition of "owner" was different as between HSCA and CERCLA, leaving open the possibility that such a distinction might exist so as to give rise to a different conclusion.  Id. at *4, n.6

Based on those conclusions, the Third Circuit affirmed the district court’s order as to Trainer’s liability for response costs incurred after it acquired the property. Id. at *7. It reversed the court’s order as to Trainer’s liability for response costs incurred before it acquired the property. Id. And it remanded for further proceedings consistent with its opinion. Id. However, although the court held Trainer liable for pre-ownership costs, Trainer may be able to limit that liability on remand. The court stated that its opinion does not “change [Third Circuit] precedent addressing divisibility in a § 107 cost recovery action.” Id. at *4 n.5. Nor does it “affect established precedent concerning CERCLA damages” and their apportionment among PRPs. Id. at *7.

Looking beyond this case, the opinion also left open the issue addressed in Hearthside: whether the term “owner” in § 701(a) includes individuals who take ownership after the government completes its response action. Because “Trainer did not dispute that it, as owner and operator of the site, was a responsible party under CERCLA,” the court concluded that there was “no need” for it “to turn to Hearthside to determine again whether Trainer was a current owner of the Site.” Id. at *6 n.12 (alterations adopted). That conclusion suggests that the Ninth Circuit’s temporal ownership distinction may be available in future cases for individuals who take ownership after response actions are complete but before the government has filed its recovery lawsuit.

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