Failure To Timely Report Release Raises Triable Issue Sufficient to Preclude Summary Judgment

Ameripride Services. v. Valley Indus. Services, 2011U.S. Dist. LEXIS 55634 (E.D.Ca. 5/12/11) discussed how delays or failure to comply with CERCLA reporting requirements may impact a claim for contribution or cost recovery.

In this case, Texas Eastern Overseas, Inc (TEO) conducted industrial dry cleaning at a facility until 1983 when it sold the property to a predecessor of AmeriPride Services. While working on a trench as part of an expansion project in 1983, employees of AmeriPride employees smelled fumes that they identified as PCE. The discovery of PCE fumes was not reported to any authorities and concrete was placed over the contaminated soil. In August 2001, PCE was detected in water from two nearby wells. The California Regional Water Quality Control Board (“RWQCB”) issued a number of abatement orders to AmeriPride who incurred over $18MM in response costs. Ameripride sought cost recovery from TEO. Interestingly, TEO had been dissolved but was reinstated under a receivership in a separate proceeding to allow the plaintiff to pursue TEO’s insurance policies.  See In re Texas Eastern Overseas, 2009Del.Ch. LEXIS 198 (Del. Ch. 11/30/09)’ aff’d. by 998 A.2d 852 (2010).

Ameripride and TEO filed motions for summary judgment. AmeriPride sought 100% of its costs asserting that all of the contamination pre-dated its ownership. TEO argued that Ameripride was at least partially responsible because wastewater discharged by AmeriPride contained PCE from washing of uniforms and industrial clothing contaminated with solvents. TEO pointed to a number of discrete spill incidents. TEO also alleged that the leaking sewer system aggravated the pre-existing PCE contamination by mobilizing PCE in the soil so that it migrated into the groundwater.

TEO also alleged that AmeriPride’s costs had not been incurred consistent with the National Contingency Plan (NCP) by failing to report the discovery of PCE in 1983. Specifically, TEO pointed to 40 C.F.R. § 300.700(c)(5)(iv) where one of the indicia of “substantial compliance” with the national contingency plan was reporting of releases as set forth in 40 C.F.R. § 300.405.

The court noted that parties seeking cost recovery or contribution have to demonstrate “substantial compliance” with the NCP. The court agreed that a party whose failure to timely report a release caused contamination to become worse should bear the costs of the increased costs. However, the court said that noncompliance with the reporting requirement by itself would not render the incurrence of response costs inconsistent with the national contingency plan.

The court also said that TEO’s broad interpretation would undermine the goals of CERCLA. The court explained that if TEO’s approach was adopted, if a party failed to report a discharge and this delayed a cleanup, the party would be forever barred from recovering response costs. The court reasoned this would diminish if not wholly eliminate a party’s incentive to clean the site. Moreover, the court said this would also make a violation of reporting requirements a more extreme violation of CERCLA than discharge of pollution itself since even a party responsible for the majority of pollution can bring a contribution claim against another party to recover the small fraction of costs attributable to the second party. TEO’s interpretation would have the effect of removing a key incentive for the non-reporting party to remediate the site, thereby frustrating CERCLA’s primary purpose.

Instead, the court said the failure to report could be one factor that may be evaluated together with other violations in determining substantial compliance. Finally, the court suggested that the failure to timely report that results in delayed cleanup and exacerbated contamination should more properly be considered by a court when allocating liability in a contribution action. The court then held that the reporting requirement created a triable question as to whether TEO was 100% responsible and denied AmeriPride’s argument for summary judgment.

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