Pa. Dep't of Envtl. Prot. v. Trainer Custom Chem., LLC, 17-2607
| Decision Date | 05 October 2018 |
| Docket Number | No. 17-2607,17-2607 |
| Citation | 906 F.3d 85 |
| Parties | PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION, Appellant v. TRAINER CUSTOM CHEMICAL, LLC; James Halkias; Jeremy Hunter |
| Court | U.S. Court of Appeals — Third Circuit |
Alexandra C. Chiaruttini, Chief Counsel, Douglas G. White, Supervisory Counsel [ARGUED], Brian G. Glass, Pennsylvania Department of Environmental Protection, 2 East Main Street, 4th Floor, Norristown, PA 19401, Counsel for Appellant
Lloyd R. Hampton [ARGUED], Hampton & Hampton, 400 Broad Street, Route 61, Ashland, PA 17921, Counsel for Appellees Trainer Custom Chemical, LLC and Jeremy Hunter
Joseph A. Malley, III, Law Office of Joseph A. Malley III, 15 East Second Street, P. O. Box 698, Media, PA 19063, Counsel for Appellees Trainer Custom Chemical, LLC and James Halkias
Before: JORDAN, SHWARTZ, and KRAUSE, Circuit Judges
We are asked in this interlocutory appeal to decide whether the owner of a piece of land is liable for the costs of an environmental cleanup that took place there before the owner acquired it. Our answer is yes.
Trainer Custom Chemical, LLC ("Trainer") acquired a property known as the Stoney Creek Site (the "Site") for $20,000, after Pennsylvania's Department of Environmental Protection ("PADEP") had already incurred over $818,000 in environmental cleanup costs at the Site. The cleanup costs continued to mount following Trainer's acquisition of the property, both because of pre-existing pollution and because buildings on the Site were demolished by one or both of Trainer's principals, Jeremy Hunter and James Halkias, which caused further contamination.
PADEP sued Trainer, Hunter, and Halkias for violations of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 - 28,1 and Pennsylvania's Hazardous Sites Cleanup Act ("HSCA"), 35 Pa. Stat. §§ 6020.101-.1305, and sought to recover all of its response costs related to the Site, regardless of when those costs arose. At summary judgment, the District Court drew a temporal line, holding Trainer liable under both statutes for the response costs incurred after Trainer took ownership of the Site but not for the costs that arose before. Although the Court directed the parties to proceed to trial on damages, PADEP disagreed with the temporal distinction drawn by the Court and filed this interlocutory appeal.
We conclude that a current owner of real property is liable under both CERCLA and HSCA for all response costs in an environmental cleanup, including costs incurred before the owner acquired the property. Accordingly, we will affirm in part, vacate in part, and remand for further proceedings consistent with this opinion.
The Site is located in Trainer Borough, Delaware County, Pennsylvania. In 2007, it was owned by Stoney Creek Technologies ("SCT"), which primarily used it for making corrosion inhibitors, fuel additives, and oil additives. Buildings and equipment used in creating SCT's products were located on the Site, including a laboratory and a water treatment facility. SCT also kept various hazardous substances at the Site, including about three million gallons of flammable or combustible chemicals that posed a threat of release, and over seventeen million pounds of other chemical inventory, which included flammable, combustible, and corrosive chemicals.
PADEP investigated the environmental risk at the Site and determined in 2007 that "there is a release or threat of release of hazardous substances or contaminants, which presents a substantial danger to human health or the environment[.]" (App. at 34.) Accordingly, PADEP and the United States Environmental Protection Agency ("EPA") initiated removal actions.2
SCT was in financial trouble and could not afford the expenses involved in the cleanup. One such expense was for the electricity to power pollution control and security equipment, including a vaporized nitrogen system. The nitrogen system was necessary to minimize the threat of fire posed by the flammable and combustible chemicals on the Site. Due to lack of payment, the power company was going to shut off the electricity to the Site, so PADEP assumed responsibility for paying the electrical bills.
The same financial straits that had apparently led SCT to fall behind in paying for electricity also led it to become delinquent in paying real estate taxes. Consequently, the Tax Claim Bureau of Delaware County forced a sale of the Site. In what was evidently a coordinated effort, Hunter and Halkias purchased the property and put its title in Trainer's name. Hunter signed the purchase agreement, the recitals of which plainly stated that the Site had ongoing "environmental issues ... [and] environmental remediation." (App. at 53.) Despite that warning, on October 4, 2012, Halkias tendered a cashier's check for $20,000 and a handwritten note indicating that the deed to the property should be made out to Trainer Custom Chemical LLC. The next day, Halkias and Hunter officially formed Trainer Custom Chemical LLC by filing a Certificate of Organization with the Pennsylvania Department of State. On October 9, 2012, the deed to the Site was executed and put in Trainer's name.
The EPA and PADEP completed their removal actions at the Site on December 12, 2012.3 But that was not the end of the problems there. After Trainer acquired the Site, either Hunter or Halkias or both – they point the finger of blame at each other – demolished many of the Site's structures. Regardless of who was responsible, it is undisputed that metals and other salvageable materials reclaimed from the Site were sold for at least $875,000 to JK Myers Contracting, a business that Halkias had registered with the Pennsylvania Corporations Bureau in April 2012.
In June 2014, PADEP received two reports assessing environmental concerns at the Site. One noted that "[t]he [ ]EPA has acknowledged that hazards still exist at the Site[.]" (App. at 61.) The report further said that, during a recent visit to the Site, PADEP "observed active demolition activities being conducted on several structures throughout the Site[,]" and "[s]everal storage tanks were observed to be cut open and unknown contents were noted to be spilling onto the ground." (App. at 62.) The other report indicated that buildings on the Site had asbestos-containing materials that needed to be removed before demolition.
PADEP sued Trainer, Halkias, and Hunter under CERCLA and HSCA to recover the costs incurred in cleaning up the Site. The complaint was in six counts: separate ones against each of the three defendants under CERCLA § 107(a), 42 U.S.C. § 9607(a), and, again, separate ones against each of them under HSCA §§ 701 and 702, 35 Pa. Stat. §§ 6020.701, 6020.702.
Eventually, PADEP moved for summary judgment, arguing that the defendants should be jointly and severally liable for all of the environmental response costs. In total, those costs were $932,580.12, through November 2015. The most significant charges were payments for electricity amounting to $818,730.50 through June 2009, before Trainer acquired the Site. PADEP also bore other response costs after Trainer took ownership.
The District Court granted summary judgment in part and denied it in part. The Court noted that PADEP's claims against Halkias and Hunter were based on a theory of piercing Trainer's corporate veil, so the initial question it sought to answer, and the question before us in this interlocutory appeal, is whether Trainer was liable for violations of CERCLA and HSCA. With respect to CERCLA liability, "the Court [held] [Trainer] liable for any response costs incurred after [Trainer] took ownership of the Site, but not for costs incurred beforehand." (App. at 99-100.) As to CERCLA damages, it denied summary judgment because there was a genuine dispute of material fact concerning the amount of damages for which Trainer was liable. The Court reached the same conclusions with respect to HSCA liability and damages.
PADEP disagreed with the District Court's decision to grant summary judgment only in part. It sought an order certifying for interlocutory appeal the issue of whether federal and Pennsylvania law "make an owner liable for response actions and response costs attributable to an identified release of hazardous substances which continues at the time of that person's ownership, regardless of when such actions or response costs were taken or incurred." (App. at 114-15.) The District Court granted certification, and PADEP then petitioned us for permission to appeal, which we gave pursuant to 28 U.S.C. § 1292(b).
"Congress enacted CERCLA ‘to promote the timely cleanup of hazardous waste sites and to ensure that the costs of such cleanup efforts were borne by those responsible for the contamination.’ " Litgo N.J. Inc. v. Comm'r N.J. Dep't of Envtl. Prot. , 725 F.3d 369, 378 (3d Cir. 2013) (quoting Burlington N. & Santa Fe Ry. Co. v. United States , 556 U.S. 599, 602, 129 S.Ct. 1870, 173 L.Ed.2d 812 (2009) ). Section 107(a)(4)(A) of CERCLA gives states "the right to recover costs incurred in cleaning up a waste site from ‘potentially responsible parties’ (PRPs)—four broad classes of persons who may be held strictly liable for releases of hazardous substances that occur at a facility." Litgo N.J. Inc. , 725 F.3d at 378. Those four classes of PRPs are: the owner or operator of a facility, 42 U.S.C. § 9607(a)(1) ; anyone who owned or operated the facility when there was a disposal of a hazardous substance, id. § 9607(a)(2) ; anyone who arranged for the disposal or treatment, or arranged for the transport for disposal or treatment, of hazardous substances at the facility, id. § 9607(a)(3) ; and anyone who accepted hazardous substances for transport to sites selected...
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