Shell Oil Co. v. Meyer
| Decision Date | 30 December 1998 |
| Docket Number | No. 79S04-9801-CV-043,79S04-9801-CV-043 |
| Citation | 705 N.E.2d 962 |
| Parties | SHELL OIL COMPANY, Union Oil Company, Appellants/Cross Appellees, (Defendants Below), v. Richard and Kim MEYER, Gary and Bridget McDaniel, Jim and Terri McDonald, Dan and Vivian McDaniel, Alvin and Verna Mae Casad and Helena Byers, Appellee/Cross Appellants (Plaintiffs Below). |
| Court | Indiana Supreme Court |
This case deals with the liability of refiners under Indiana's Underground Storage Tank Act (the "Act") for costs of corrective actions for leaks in tanks at retail gasoline stations owned by independent retailers. Specifically the principal issue presented is under what circumstances a major oil company is an "operator" of underground storage tanks located at an independent station that bears its brand. The term "operator" is defined in the Act to mean persons "in control of or having responsibility for the daily operation" of a tank. IND.CODE § 13-11-2-148 (1998). We hold that a refiner, such as the defendants Shell Oil Company ("Shell") and Union Oil Company of California ("Unocal"), is not an operator of an independent station bearing its brand merely because the refiner's brand creates practical leverage over the station's owner or operator. However, under the facts of this case we affirm the trial court's conclusion that Shell was an operator until 1963.
The plaintiffs in the case are six families who own or live in houses in West Point, a town in Tippecanoe County. There is no municipal drinking water system in West Point and all of the families rely on groundwater. The first indication of a problem with the water supply appeared in February or March of 1989 when plaintiff Kimberly Meyer noticed that the tap water in her home smelled of petroleum. She notified the Tippecanoe County Health Department, which alerted the Indiana Department of Environmental Management ("IDEM"). In June 1989, laboratory tests of water from the Meyer residence detected a number of contaminants, including benzene, a known carcinogen. IDEM installed a carbon filter on the Meyers' well in late July 1989 to make the water safe to use. Over the course of the next year, carbon filters were installed on the wells of each of the six families. Environmental testing eventually concluded that gasoline from a retail station on the northwest corner of Washington and Main streets in West Point was the source of the groundwater contamination.
Fred Smith purchased the station in West Point in 1946. At that time it was changed from a Standard brand station to Shell and assumed the conventional appearance of a Shell station. At the time Smith bought the station, his principal occupation was as a "commissioned agent" or "commissioned driver" for Shell. 1 In this capacity, Smith delivered gasoline from Shell's bulk plant in Lafayette to farmers and to the West Point station and to one other that he owned. As a "commissioned driver" Smith had a desk at the bulk plant where he picked up orders. He owned the truck, but Shell owned the tank on the back of the truck. Shell owned the gasoline Smith delivered and retained title to it until payment was remitted by the purchaser to Shell.
In 1963, Murphy Enterprises ("Murphy"), owned by Bill Murphy, bought the Lafayette bulk plant from Shell and became a "jobber" for Shell. At this point, Smith became a commissioned driver for Murphy and Murphy took ownership of the tank on the back of Smith's truck. Murphy purchased product from Shell and stored it at the bulk plant. In 1971, Murphy changed suppliers from Shell to Unocal. At that time, Murphy entered into a written contract with Unocal, apparently the first written agreement documenting any of these arrangements. Murphy's affiliation with Unocal ended in 1980 when the bulk plant was sold.
Although Smith owned the West Point station, he never managed it. Over the years he had oral arrangements with a number of "lessees" who typically operated combination gasoline stations and automotive service shops. These arrangements were informal and few lasted more than a year or two. The lessee/station manager typically paid the bulk plant directly for the gasoline Smith delivered to it. However at least one of Smith's lessees paid him for the gasoline at the time of delivery. In these "leases" Smith's "rent" was based on the volume of gasoline sold by the station ("so many cents per gallon").
Fred Smith distributed gasoline from the bulk plant until his death in 1979. His wife, Margaret Smith, continued to own the West Point gasoline station until 1981 when it was sold to Robert Van Meter. The site was not operated as a gasoline station after 1981 and Van Meter removed the underground storage tanks from the ground in October 1989. At the time the Landowners filed suit in 1993, the property was still owned by Van Meter and housed Van's Wholesale Auto Body Shop.
The General Assembly passed the Indiana Underground Storage Tank Act 2 in 1987. The Act generally provides for the regulation of underground storage tanks ("USTs") and the prevention and remediation of pollution from tanks. It contains specific provisions designed to correct contamination from leaking underground storage tanks ("LUSTs"). These "corrective action" provisions are quite similar to provisions of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 to 9675 (1994 & Supp. II 1996), designed to clean up hazardous waste. The Act gives IDEM authority to promulgate rules to enforce its provisions, including the ability to require owners and operators of underground storage tanks to take corrective action. IND.CODE §§ 13-23-1-2 & 13-23-13-1 (1998). Indiana's Act has some provisions not commonly found in the statutes of the 45 states that have underground storage tank legislation. One significant difference is that Indiana's law does not limit the ability to seek corrective action to the state department of environmental management. Rather, the Act includes a provision for recovery of corrective action costs and attorneys fees by a private party who successfully prosecutes a claim against an owner or operator. Id. § 13-23-13-8.
Unlike the corrective action provisions, the regulatory provisions in Indiana's Act are loosely based on the federal Resource Conservation and Recovery Act ("RCRA"). 42 U.S.C. §§ 6901 to 6992k (1994 & Supp. II 1996). RCRA was first enacted by Congress in 1978 as an amendment to the Solid Waste Disposal Act. Provisions specifically dealing with petroleum storage were added in 1984. RCRA provides a comprehensive regulatory scheme governing the treatment, storage and disposal of solid and hazardous wastes. Indiana's Act contains a definition of "operator" identical to the one found in RCRA and in the UST laws of some other states. The Act's provision governing liability for costs, however is unlike RCRA's citizen suit provision. RCRA allows suits against a past or present "generator," "owner" or "operator" only where the release presents "an imminent and substantial endangerment to health or the environment." 42 U.S.C. § 6972(a)(1)(B) (1994 & Supp. II 1996). Once a site has been cleaned up, private parties may not recover costs from owners or operators under RCRA. See Meghrig v. KFC Western, Inc., 516 U.S. 479, 116 S.Ct. 1251, 134 L.Ed.2d 121 (1996). In contrast, Indiana's law expressly anticipates payment of costs...
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