The State of New York v. Shore Realty Corp., Donald LeoGrande
759 F.2d 1032 (1985)
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Rule of Law:
Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) § 9607(a)(1), a current owner of a facility is strictly liable for response costs associated with the release or threatened release of hazardous substances, regardless of causation. A corporate officer who actively manages the facility can be held personally liable as an 'operator'.
Facts:
- Donald LeoGrande incorporated Shore Realty Corp. ('Shore') for the sole purpose of purchasing a 3.2-acre waterfront property for condominium development.
- Before the purchase, LeoGrande was fully aware that the site was a hazardous waste storage facility containing approximately 700,000 gallons of hazardous chemicals in deteriorating tanks.
- An environmental report commissioned by Shore concluded the facility was a 'potential, time bomb,' noted existing soil and groundwater contamination, and estimated cleanup costs could exceed $1 million.
- Despite the State of New York's Department of Environmental Conservation denying Shore's request for a waiver of liability, Shore took title to the property on October 13, 1983.
- After Shore acquired the property but before it evicted the tenants, nearly 90,000 additional gallons of hazardous chemicals were brought onto the site.
- After evicting the tenants, Shore failed to take action to clean up the hundreds of thousands of gallons of hazardous waste, which continued to leak from corroding tanks and contaminate the surrounding environment.
Procedural Posture:
- The State of New York sued Shore Realty Corp. and Donald LeoGrande in the United States District Court for the Eastern District of New York.
- The complaint sought damages for response costs and an injunction to compel cleanup under CERCLA, as well as claims under New York public nuisance law.
- The district court granted the State's motion for partial summary judgment, holding the defendants liable for the State's response costs under CERCLA.
- The district court also issued a permanent injunction ordering the defendants to clean up the site.
- After a remand from the appellate court for clarification, the district court issued a supplemental memorandum basing the injunction solely on state public nuisance law.
- Shore Realty Corp. and LeoGrande, as appellants, appealed the district court's judgment to the United States Court of Appeals for the Second Circuit.
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Issue:
Does CERCLA § 9607(a)(1) impose strict liability for cleanup costs on a current owner of a facility from which there is a release or threatened release of hazardous substances, regardless of whether that owner caused or contributed to the hazardous waste's presence?
Opinions:
Majority - Oakes, Circuit Judge
Yes, CERCLA § 9607(a)(1) imposes strict liability on a current owner for cleanup costs without regard to causation. The statutory language unequivocally covers current 'owners and operators,' a separate class of liable persons from prior owners who are only liable if they owned the facility 'at the time of disposal' under § 9607(a)(2). To read a causation requirement into the provision for current owners would render CERCLA's enumerated affirmative defenses in § 9607(b), which are based on causation, entirely superfluous. The legislative history confirms that Congress considered and rejected a causation requirement in the final version of the statute. Allowing a current owner to avoid liability by proving they did not dispose of the waste would create a massive loophole, enabling responsible parties to simply sell contaminated properties to evade their cleanup obligations. Furthermore, the court holds that the injunction to clean up the site was proper under a pendent state claim of public nuisance, as Shore knew of the hazardous condition but failed to abate it. Finally, Donald LeoGrande is personally liable as an 'operator' under CERCLA because he directed and controlled all of Shore's activities related to the facility.
Analysis:
This decision is a cornerstone of CERCLA jurisprudence, establishing that land ownership status alone is a sufficient basis for strict liability for environmental cleanup costs. It firmly rejected the 'innocent landowner' argument for purchasers who acquire property with knowledge of contamination, thereby powerfully incentivizing thorough environmental due diligence prior to commercial real estate transactions. By extending liability to current owners regardless of fault, the ruling reinforces CERCLA's broad remedial purpose of ensuring that contaminated sites are cleaned up promptly. The holding on personal liability for corporate officers as 'operators' also prevents individuals from using the corporate form as a shield to evade personal responsibility for environmental harms they control.
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