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Court finds “appropriate care”

In 3000 E. Imperial, LLC, Plaintiff, v. ROBERTSHAW CONTROLS CO, et al. Defendants, No. CV 08-3985 PA, 2010 U.S. Dist. Lexis 138661 (C.D. Cal. Dec. 29  2010), a Federal District Court in California found a contaminated property purchaser to have exercised “appropriate care” and, in turn, to have satisfied the Bona Fide Prospective Purchaser (“BFPP”) defense when they excavated underground tanks soon after learning that the tanks contained hazardous substances. This decision comes on the heels of Ashley II (finding the purchaser did not exercise “appropriate care”), which I wrote about earlier this week.

Imperial Knowingly Bought Contaminated Property

3000 E. Imperial, LLC (“Imperial”) bought a contaminated site in November, 2006.  Prior to the purchase, the court explained, Imperial learned that the site was contaminated but it didn’t yet characterize the contamination’s nature and extent (the court stayed silent on the method or appropriateness of “all appropriate inquiries“).   After it bought the property, Imperial’s consultants continued with environmental investigations and published a report in September, 2007, noting TCE (an industrial solvent known for being toxic) and benzene contamination in the soil and groundwater, and that leaks from a 9-tank underground storage tank (“UST”) nest caused the contamination.

Imperial Cleaned the Site and Sued for its Cleanup Costs

Eventually, Imperial spent about $1.2 million dollars cleaning the site.  It then sued the former owners for the costs of cleanup.  The former owners, among other things, argued that Imperial should help pay because as the current owner Imperial was also a PRP.  And, the argument continued, Imperial did not take “appropriate care” because it left the USTs in place for 2 years after it purchased the site.

The Court Found Imperial Took Appropriate Care After the Purchase

The court disagreed with the former owner’s argument, noting (1) Imperial’s compliance with the state agency’s environmental cleanup program as well as (2) Imperial’s actions soon after learning of the UST contamination.  On the first point, the court noted that Imperial was complying with the California Department of Toxic Substances Control’s voluntary cleanup program by performing cleanup as directed by DTSC.  And that California had found Imperial to qualify for the state version of “appropriate care” – a different standard than set in CERCLA’s 42 U.S.C. sec. 9601(40)(D).  The court turned to the CERCLA “appropriate care” standard, which requires Imperial to take reasonable steps to (1) stop any continuing release; (2) prevent any threatened future release; (3) prevent or limit exposure to previously released hazardous substances.  Under this standard, the court found Imperial to have taken “appropriate care” by sampling the USTs about six months after purchase and emptying the USTs soon after they gained knowledge (through sampling) of their contents, even though Imperial didn’t actually excavate the tanks for about a year afterwards.  The court reasoned as follows:

Plaintiff had the contents of the USTs sampled in May 2007.  In September 2007 Plaintiff’s environmental consultant reported that the TCE was detected in those samples.  In October 2007 Plaintiff had the contents of the USTs removed and placed into twenty 55-gallon drums, which were then removed from the Property. TCE was later found to be present in an oily layer that floated on top of the liquid withdrawn from the USTs.  Since Plaintiff had the USTs emptied soon after learning that they contained a hazardous substance, the Court finds that the Plaintiff took reasonable steps to stop any continuing leak or to prevent any future leaks of TCE from the USTs. It was not unreasonable for Plaintiff to leave the USTs in the ground at that time, given that they were empty. Defendant contends that Plaintiff should have also excavated the USTs in 2007 to prevent the possibility of surface water infiltration, which could mix with any TCE left in the USTs and then leak into the ground. However, Defendant has not provided any evidence suggesting why Plaintiff would have had reason to believe that the USTs were not emptied  of TCE in 2007. In fact, when the nine USTs were excavated in 2009 only one of them was observed to have an oily layer on top. Although some TCE was later detected inside that UST its contents consisted almost entirely of water, which suggests that very little TCE had been left inside since 2007. The Court finds that Plaintiff took reasonable steps to prevent further release of hazardous substances, thus entitling it to bona fide prospective purchaser status.

Other Articles (Providing a Link to the Case) and Additional References

Another article briefly summarizes the case, focusing on other points it addressed. Namely, whether the leaking from the UST occurred during the time when the prior owner held the property and, in turn, whether the leaking was a “disposal” and whether the harm it caused could be divisible.  See Dispute as to When and Underground Storage Tank Began Leaking.

See EPA’s “Common Elements” Guide for, among other things, an introduction to and further citations related to the BFPP Defense.

My short article on the Ashley II decision, which addressed the BFPP defense and the forthcoming ASTM Guide on Continuing Obligations.

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