Long Beach Unified School Dist. v. Dorothy B. Godwin California Living Trust

Decision Date14 July 1994
Docket NumberNo. 92-56562,92-56562
Citation32 F.3d 1364
Parties, 93 Ed. Law Rep. 1163, 24 Envtl. L. Rep. 21,279 LONG BEACH UNIFIED SCHOOL DISTRICT, Plaintiff-Appellant, v. DOROTHY B. GODWIN CALIFORNIA LIVING TRUST, et al., Defendants, and Mobil Oil Corporation, Powerine Oil Co., Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Mark C. Allen, III, Wise, Wiezorek, Timmons & Wise, Long Beach, CA, for plaintiff-appellant.

Gary J. Smith and Theresa Cho, Beveridge & Diamond, San Francisco, CA, for Mobil Oil Corp.

John F. Cermak, Jr., Rodi, Pollock, Pettker, Galbraith & Phillips, Los Angeles, CA, for Powerine Oil Co.

Appeal from the United States District Court for the Central District of California.

Before: KOZINSKI and TROTT, Circuit Judges, and WILLIAMS, * District Judge.

KOZINSKI, Circuit Judge.

We must decide whether the holder of an easement burdening land which contains a hazardous waste facility is, by virtue of that interest alone, liable for cleanup costs as an "owner" or "operator" under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Sec. 9601 et seq.

I

Appellant, Long Beach Unified School District ("the district"), bought land from the Dorothy B. Godwin California Living Trust and the Grover Godwin California Trust ("the trusts"). Before the sale, this land was leased to the Schafer Bros. Transfer and Piano Moving Company ("Schafer Bros."), which maintained a waste pit on it.

The district knew about this pit before closing the deal because the trusts' site assessment had revealed the contamination, ER 4, and had estimated that decontamination would cost $249,000. Id. As a condition of the sale, the district required the trusts to put $250,000 in escrow for cleanup. ER 5.

This amount turned out to be not nearly enough. Though it paid for an expert evaluation of the site, nothing was left to even start a cleanup. And so, apparently through its own short-sightedness, the school district was left holding a rather contaminated bag. It responded, as people with toxic waste-ridden property are wont to, by bringing a CERCLA action in federal district court. 1

Happily, the obvious CERCLA defendants--the seller and the tenant who polluted the land--both settled, SER 1-2, agreeing to pay a substantial share of the anticipated cleanup costs. See SER 8-10. 2 The case continues against the two remaining defendants, Mobil Oil Corp. and Powerine Oil Co. (collectively "M & P"). Their tie here is not that they helped pollute the property--plaintiff never even alleges this. Rather, each held an easement to run a pipeline across the property and the district says this makes them automatically "owners" or "operators" under 42 U.S.C. Sec. 9607. ER 7.

M & P filed 12(b)(6) motions to dismiss for failure to state a claim, ER 24, 28, which the district court granted. ER 62. We review such decisions de novo, accepting the plaintiff's allegations as true and construing them in the light most favorable to the district. Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1152 (9th Cir.1989).

II

CERCLA liability has been described as "a black hole that indiscriminately devours all who come near it." Jerry L. Anderson, The Hazardous Waste Land, 13 Va.Envtl.L.J. 1, 6-7 (1993). For example, CERCLA has been read as a strict liability statute. See, e.g., General Elec. Co. v. Litton Indus. Automation Sys., Inc., 920 F.2d 1415, 1418 (8th Cir.1990); United States v. Monsanto Co., 858 F.2d 160, 167 & n. 11 (4th Cir.1988); New York v. Shore Realty Corp., 759 F.2d 1032, 1044 (2d Cir.1985); Violet v. Picillo, 648 F.Supp. 1283, 1290 (D.R.I.1986); United States v. Conservation Chem. Co., 619 F.Supp. 162, 204 (W.D.Mo.1985). It has been applied retroactively, see, e.g., United States v. Northeastern Pharmaceutical & Chem. Co., 810 F.2d 726, 733, 737 (8th Cir.1986); United States v. Shell Oil Co., 605 F.Supp. 1064, 1073 (D.Colo.1985); Ohio ex rel. Brown v. Georgeoff, 562 F.Supp. 1300, 1314 (N.D.Ohio 1983), a policy that has attracted criticism. See, e.g., Anderson, 13 Va.Envtl.L.J. at 19 ("[M]uch of the roulette wheel nature of CERCLA's liability results from its retroactivity"); see also Developments in the Law--Toxic Waste Litigation, 99 Harv.L.Rev. 1458, 1540-42 (1986) (though retroactive application is the best approach to spreading cleanup costs, Congress should recognize the limits of what retroactivity can accomplish). And it has corroded the corporate veil, see, e.g., United States v. Carolina Transformer Co., 739 F.Supp. 1030, 1036-38 (E.D.N.C.1989), a policy that also has drawn criticism. See, e.g., Anderson, 13 Va.Envtl.L.J. at 39; Lynda J. Oswald, Strict Liability of Individuals Under CERCLA: A Normative Analysis, 20 B.C.Envtl.Aff.L.Rev. 579 (1993). But see Joslyn Mfg. Co. v. T.L. James & Co., 893 F.2d 80 (5th Cir.1990) (refusing to pierce corporate veil to reach parent company).

Nevertheless, CERCLA liability is not unlimited. Specifically, the statute imposes no liability under 42 U.S.C. Sec. 9607(a) unless four elements are satisfied:

(1) the waste disposal site is a "facility" ...; (2) a "release" or "threatened release" of any "hazardous substance" from the facility has occurred ...; and (3) such "release" or "threatened release" has caused the plaintiff to incur response costs.... In addition, the defendant must fall within one of four classes of persons subject to CERCLA's liability provisions.

Ascon Properties, 866 F.2d at 1152 (citations omitted).

Defendants do not contest that the waste pit is a facility, that it releases hazardous substances or that plaintiff must incur response costs. This dispute turns on the final element--whether defendants fall within one of four classes subject to liability under the statute: (1) present owners and operators of a hazardous waste facility; (2) past owners or operators of such a facility; (3) arrangers of hazardous waste disposal; and (4) transporters of such waste. 42 U.S.C. Secs. 9607(a)(1)-(4).

It's undisputed that M & P were never involved in dealing with or transporting hazardous substances, so sections (a)(3) and (a)(4) clearly don't apply. If defendants are covered, it must be under section (a)(1) or (a)(2). As a result, the question is whether M & P, as holders of an easement burdening the polluted property, qualify as "owners" or "operators" of the hazardous waste facility.

Obviously "owner" and "operator" are distinct concepts, else Congress wouldn't have used two words. Like other courts, we read these categories in the disjunctive. See, e.g., United States v. Fleet Factors Corp., 901 F.2d 1550, 1554 n. 3 (11th Cir.1990); Tanglewood East Homeowners v. Charles-Thomas, Inc., 849 F.2d 1568, 1573 (5th Cir.1988); Guidice v. BFG Electroplating & Mfg. Co., 732 F.Supp. 556, 561 (W.D.Pa.1989); Artesian Water Co. v. Government of New Castle County, 659 F.Supp. 1269, 1280-81 (D.Del.1987), aff'd, 851 F.2d 643 (3d Cir.1988); United States v. Maryland Bank & Trust Co., 632 F.Supp. 573, 578 (D.Md.1986). In other words, a party may be liable either as an owner or as an operator (or both, of course). We therefore consider whether M & P fall into either of these categories.

A. The holder of an easement can clearly be an operator under CERCLA. For example, CERCLA expressly includes pipelines in its definition of "facility." 42 U.S.C. Sec. 9601(9). As a result, when a party uses the easement to operate a pipeline that releases hazardous materials, 3 it is liable as an operator provided the other statutory elements are satisfied. 4 In this respect, an easement holder is no different from anyone else.

But the district doesn't allege that M & P's pipelines are leaking toxic waste, nor is there anything on the record to suggest this is the case. Rather, the district merely points to the fact that defendants' pipelines crossed Schafer's waste pit and claims this put defendants "in a position to prevent" the contamination. ER 7.

This allegation is not sufficient to render the defendants operators under the statute. To be an operator of a hazardous waste facility, a party must do more than stand by and fail to prevent the contamination. It must play an active role in running the facility, typically involving hands-on, day-to-day participation in the facility's management. See Edward Hines Lumber Co. v. Vulcan Materials Co., 861 F.2d 155, 157-58 (7th Cir.1988) (supplier is not operator because he cannot control work at plant, choose employees, direct their activities or set prices, while its limited veto, in and of itself, is not enough to make it an operator); New York v. Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir.1985) (defendant "is in charge of the operation of the facility in question, and as such is an 'operator' within the meaning of CERCLA"); cf. In re Bergsoe Metal Corp., 910 F.2d 668, 672 (9th Cir.1990) (secured creditor not liable under 9601(20)(A) unless he engages in "some actual management"); 40 C.F.R. Sec. 300.1100 (EPA rule indicating that secured lenders are only liable if they actually participate in facility's management). Exercising the right to pass a pipeline over someone's property is as far removed from active management of the property as one could get, short of having no connection to the property at all. This is much less than the active control we require before someone will be held liable as an "operator" under CERCLA.

B. In the alternative, the district argues that, as holders of easements across the facility, M & P are the property's "owners." We suspect the district would be less eager to call someone else an owner of its property if there were gold there, rather than a toxic waste pit. It's human nature, we suppose, to be more generous with one's misfortunes.

CERCLA gives no definition of "owner" and therefore does not tell us whether parties owning an interest that is much less than a fee--such as an easement--are to be...

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