A State Agency v. Hearthside Residential Corp..

• Decision Date: 22 July 2010
• Docket Number: No. 09-55389.,09-55389.
• Citation: 613 F.3d 910
• Parties: State of CALIFORNIA DEPARTMENT OF TOXIC SUBSTANCES CONTROL, a State Agency, Plaintiff-Appellee, v. HEARTHSIDE RESIDENTIAL CORPORATION, a Delaware Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

613 F.3d 910

State of CALIFORNIA DEPARTMENT OF TOXIC SUBSTANCES CONTROL, a State Agency, Plaintiff-Appellee,

v.HEARTHSIDE RESIDENTIAL CORPORATION, a Delaware Corporation, Defendant-Appellant.

No. 09-55389.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted June 9, 2010.

Filed July 22, 2010.

Edmund G. Brown, Jr., Attorney General, Donald A. Robinson (argued), Supervising Deputy Attorney General, Los Angeles, CA, for the plaintiff-appellee.

Marc C. Forsythe, Goe & Forsythe, LLP, Irvine, CA, for the defendant-appellant.

Appeal from the United States District Court for the Central District of California, Valerie Baker Fairbank, District Judge, Presiding. D.C. No. 8:06-cv-00987-VBF-MLG.

Before: DOROTHY W. NELSON and RONALD M. GOULD, Circuit Judges, and JAMES S. GWIN, District Judge. ^*

OPINION

GOULD, Circuit Judge:

This appeal presents a question of first impression whether “owner and operator” status under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9607(a)(1), is determined at the time that cleanup costs are incurred or instead at the time that a recovery lawsuit seeking reimbursement is filed. We hold that the owner of the property at the time cleanup costs are incurred is the current owner for purposes of determining CERCLA liability.

I

In 1999, Hearthside Residential Corporation (“Hearthside”) bought an undeveloped tract of wetlands known as the Fieldstone Property in Huntington Beach, California. The Fieldstone Property was adjacent to several residential parcels (“Residential Site”) that Hearthside never owned or occupied. When Hearthside purchased the Fieldstone Property, it knew that the property was contaminated with polychlorinated biphenyls, or PCBs, a man-made substance considered toxic to humans and animals.

In 2002, Hearthside entered into a consent order with the State of California Department of Toxic Substance Control (“Department”) by which Hearthside agreed to remediate the PCB contamination on the Fieldstone Property. The Department determined that the adjacent Residential Site was also contaminated with PCBs, which the Department alleged had leaked onto the Residential Site from the Fieldstone Property. The Department considered Hearthside responsible for investigating and remediating the Residential Site in addition to the Fieldstone Property, but Hearthside disagreed that it bore responsibility for the Residential Site and limited its cleanup to the Fieldstone Property. The Department certified that the Fieldstone Property cleanup was complete on December 1, 2005, and within the same month Hearthside sold the Fieldstone Property to the California State Lands Commission.

Following Hearthside's disclaimer of responsibility for the PCBs on the Residential Site, the Department itself contracted to clean those parcels and incurred cleanup expenses between July 2002 and October 2003. In October 2006, the Department filed a complaint against Hearthside seeking, in relevant part, reimbursement for the Residential Site cleanup on the basis of (1) the Department's allegation that the Fieldstone Property was the source of the Residential Site contamination, and (2) Hearthside's ownership of the Fieldstone Property at the time the Residential Site was cleaned. Under the Department's view, Hearthside was the “owner” of the contamination source at the time of the cleanup, and thus was responsible for the remediation costs under CERCLA. See 42 U.S.C. § 9607(a). Hearthside disputed liability, arguing that “owner” status was determined at the time the recovery suit was filed-not at the time cleanup costs were incurred-and that Hearthside was not responsible for the Residential Site cleanup costs because it sold the Fieldstone Property before the Department filed suit.

The district court granted partial summary judgment in favor of the Department on the limited issue of whether Hearthside was an “owner and operator” of the Fieldstone Property. ¹ After finding a “dearth of meaningful or controlling case law,” the district court concluded that the purposes of CERCLA support a holding that “owner” status is determined at the time a response-recovery claim accrues, not at the time the lawsuit is initiated. The district court also granted the parties' joint request that the question be certified for immediate appeal, and we exercised our discretion to permit the appeal. See 28 U.S.C. § 1292(b). We review pure questions of law decided on summary judgment de novo. Bjustrom v. Trust One Mortgage Corp., 322 F.3d 1201, 1205 (9th Cir.2003).

II

CERCLA imposes “strict liability for environmental contamination” upon four classes of potentially responsible parties. Burlington N. & Santa Fe Ry. Co. v. United States, --- U.S. ----, 129 S.Ct. 1870, 1878, 173 L.Ed.2d 812 (2009). CERCLA liability is joint and several, meaning that a responsible party may be held liable for the entire cost of cleanup even where other parties contributed to the contamination. Fireman's Fund Ins. Co. v. City of Lodi, 302 F.3d 928, 945 (9th Cir.2002). The party saddled with the cleanup costs may, in turn, sue other potentially responsible parties for contribution. Id.

At issue here is one type of potentially responsible party: “the owner and operator of a vessel or a facility.” 42 U.S.C. § 9607(a)(1). We interpret this category to refer to “current” owners or operators. See Carson Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d 863, 881 (9th Cir.2001) (en banc); accord, e.g., United States v. Capital Tax Corp., 545 F.3d 525, 530 (7th Cir.2008); ITT Indus., Inc. v. BorgWarner, Inc., 506 F.3d 452, 456 (6th Cir.2007). CERCLA's definition of “owner,” however, does not specify the proper date from which to measure ownership. See 42 U.S.C. § 9601(20). In this regard, the statute is silent. It is the measurement date that is at issue in this appeal.

A

There is no controlling or persuasive precedent that answers the precise question before us. Both parties direct us to cases containing a rule statement phrased in their favor. The cases marshaled by the Department state that ownership is measured from the cleanup date, but a review of those decisions reveals that the statements were made in passing, where the critical date was not in dispute. See, e.g., AM Int'l, Inc. v. Int'l Forging Equip. Corp., 982 F.2d 989, 997 (6th Cir.1993) (stating in passing that property ownership is measured “at the time of its cleanup” in a case where the ownership date was not at issue); Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 840-41, 845 (4th Cir.1992) (stating that the current owner is the one who “undertakes the task of cleaning up the environmental hazard,” though the ownership date was not at issue because the same owner both cleaned up the property and filed the reimbursement suit). ² We regard these statements as dicta rather than as “an intended choice of a rule,” and therefore decline to accord them persuasive weight. See Pakootas v. Teck Cominco Metals, Ltd., 452 F.3d 1066, 1082 (9th Cir.2006).

The same can be said of the Eleventh Circuit's opinion in United States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir.1990), which Hearthside heavily relies upon in support of its view that ownership is measured from the date a recovery action is filed. In Fleet Factors, the owner at the time the United States filed its recovery lawsuit was exempt from liability under CERCLA because it was a county government that had involuntarily acquired the title to the contaminated property. Id. at 1555 (citing 42 U.S.C. § 9601(20)(A)(iii)). While the Eleventh Circuit did state that it “construe[s] the present owner and operator of a facility as that individual or entity owning or operating the facility at the time the plaintiff initiated the lawsuit by filing a complaint,” id. at 1554, the thrust of the court's analysis was its interpretation of the phrase “immediately beforehand” in CERCLA's ownership definition, as that provision fixes liability when the current owner is a state or local government immune from cleanup liability, id. at 1555. Thus, because the county government could not be held liable, the Eleventh Circuit had no occasion to decide the question now before us: Which of two potentially responsible parties-one that owned the property when the recovery claim accrued and the other that owned it when suit was filed-is the “current owner” under CERCLA? Instead, the Eleventh Circuit's statement of law was made casually, without analysis, and as “a prelude to another legal issue that command[ed] the panel's full attention,” and we do not find the statement persuasive. ³ See United States v. Johnson, 256 F.3d 895, 915 (9th Cir.2001) (en banc) (Kozinski, J., concurring). As with the other cases cited by the parties that contain a bare rule statement and no supporting analysis, we do not believe Fleet Factors squarely considered this issue and we decline to adopt its language. See id.

B

In determining in the first instance when current-ownership status is measured under CERCLA, we observe that the definition of “owner and operator” is silent on the date from which ownership is measured. See 42 U.S.C. § 9601(20). Because the plain text of the statute does not admit of a clear answer to this dispute, we look to the statutory context and CERCLA's purposes to determine how Congress intended ownership to be measured. ⁴ See, e.g., Carson Harbor Vill., 270 F.3d at 880 (describing CERCLA as a complex regulatory regime that requires us to “examine the statute as a whole, including its purpose and various provisions”).

Considering first the broader context of CERCLA liability, we conclude that the Department's view that ownership is measured at the time of cleanup best aligns with CERCLA's statute of limitations. The parties agree, as they must, that the applicable statute of limitations for a cost-recovery action is triggered (1) at the completion of a “removal” action, or (2)...