United States v. CDMG Realty Co.
96 F.3d 706, 26 Envtl. L. Rep. (Envtl. Law Inst.) 21589, 43 ERC (BNA) 1294 (1996)
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Rule of Law:
Under CERCLA, "disposal" does not include the passive migration or spreading of pre-existing hazardous substances, but it can encompass the dispersal of contaminants caused by a soil investigation if that investigation was conducted negligently.
Facts:
- Sharkey's Farm Landfill operated as a municipal landfill from 1945 until 1972, receiving municipal solid waste and approximately 750,000 pounds of hazardous chemical waste from Ciba-Geigy Company and potentially millions of gallons from Koppers Chemical Company.
- Between 1966 and 1972, county and state agencies received steady complaints about odors, smoke from fires, lack of proper cover, and the presence of dead animals in the landfill.
- The landfill was closed to further disposal in 1972.
- Dowel Associates purchased a ten-acre vacant property, formerly part of Sharkey's Landfill, in December 1981.
- In September 1981, three months prior to finalizing its purchase, Dowel conducted a soil investigation involving nine drill borings, each twelve to eighteen feet into the ground, which bored through various waste materials, groundwater, and resulted in several boreholes caving during testing.
- Neither Dowel nor any other person deposited additional waste at the site during Dowel's ownership from December 1981 to 1987.
- In 1987, Dowel sold the property to HMAT Associates, fully disclosing in the contract of sale that the property was part of the Sharkey Landfill and a possible Superfund site.
Procedural Posture:
- In October 1989, the Environmental Protection Agency (EPA) and the New Jersey Department of Environmental Protection and Energy (NJDEPE) commenced actions against parties potentially liable for the costs of cleaning up the Sharkey Landfill and seeking a declaration of future liability, naming HMAT Associates as a defendant under CERCLA § 107(a)(1).
- HMAT filed a third-party suit against Dowel Associates in the United States District Court for the District of New Jersey, 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), along with state law claims.
- Dowel moved for summary judgment, arguing that prior owners are only liable under CERCLA if they actively engage in waste disposal during their ownership.
- HMAT also moved for summary judgment, contending that prior owners are liable if they fail to stop the migration of contaminants or if Dowel's soil investigation actively engaged in waste disposal.
- The district court granted Dowel's motion for summary judgment in full and denied HMAT's cross-motion, ruling that mere ownership of previously contaminated property does not trigger CERCLA liability and that Dowel's drilling activities did not cause a significant enough disturbance to constitute disposal.
- HMAT appealed the district court's rulings on its CERCLA claims to the United States Court of Appeals for the Third Circuit.
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Issue:
Does "disposal" under CERCLA, specifically 42 U.S.C. § 9607(a)(2), encompass either (1) the passive migration of pre-existing contaminants, or (2) the spread of contaminants caused by a non-negligent soil investigation?
Opinions:
Majority - Becker, Circuit Judge
No, the passive migration of contamination dumped in the land prior to Dowel's ownership does not constitute disposal under CERCLA. Yes, a soil investigation that disperses contaminants may constitute 'disposal,' but only if the investigation was conducted negligently. The court reasoned that the definition of "disposal" in CERCLA, which incorporates RCRA's definition (42 U.S.C. § 6903(3)), includes terms like "discharge, deposit, injection, dumping, spilling, leaking, or placing." While "leaking" and "spilling" can have passive meanings, the surrounding words primarily envision active human conduct. More significantly, the term "release" in CERCLA (42 U.S.C. § 9601(22)) explicitly includes "leaching," which describes the passive migration of contaminants, whereas "disposal" does not. Congress's deliberate choice to make prior owners liable "at the time of disposal" (42 U.S.C. § 9607(a)(2)), rather than "at the time of release," indicates an intent to distinguish between active placement and passive spreading. If "disposal" encompassed constant passive migration, the "at the time of disposal" clause would render the timing element effectively meaningless, making all post-contamination owners perpetually liable and rendering the separate category for "current owner or operator" (42 U.S.C. § 9607(a)(1)) redundant. Furthermore, the innocent owner defense (42 U.S.C. § 9601(35)(A)) requires that the property be acquired "after the disposal." Interpreting "disposal" to include continuous passive migration would make this defense almost universally unavailable, which Congress could not have intended. This interpretation is consistent with CERCLA's goals of facilitating cleanup and making polluters pay, as passive owners are not "polluters." Regarding the soil investigation, the court held that "disposal" can include the spreading of contaminants due to subsequent activity, not just initial introduction, and that there is no minimum threshold level of disturbance required. However, CERCLA explicitly encourages prospective purchasers to conduct "appropriate inquiry" and "appropriate inspection" (42 U.S.C. § 9601(35)(B)) to qualify for the innocent owner defense. To give effect to this encouragement and avoid deterring valuable due diligence, an "appropriate" soil investigation cannot itself trigger CERCLA liability. Therefore, a soil investigation that causes the dispersal of contaminants constitutes "disposal" only if it was conducted negligently, a rule that harmonizes CERCLA's intent to allow investigations with its environmental remediation goals. The purpose of the investigation (e.g., for construction vs. contamination assessment) is irrelevant to this standard.
Analysis:
This case significantly clarifies the scope of "disposal" under CERCLA, particularly for prior owners, by explicitly distinguishing it from "release" and insulating owners from liability for the passive migration of pre-existing contamination. It sets an important precedent that encourages environmental due diligence, as prospective purchasers can conduct soil investigations without automatically incurring liability, provided they do so non-negligently. This ruling shapes how liability is allocated among past and present landowners, emphasizing active involvement or negligence in contaminant spread, and may influence future site assessment practices and property transactions involving potentially contaminated land.
