A federal district court declined to dismiss a RCRA 7002 action brought by a foreclosing lender against the owner of an adjacent dry cleaner in Forest Park National Bank & Trust v Ditchfield, 2012 U.S. Dist. LEXIS 103007(N.D. Ill. 7/24/12). The court also granted summary judgment on the bank’s CERCLA cost recovery claim.
One reason this case is interesting is because the property that the bank foreclosed on was next to the dry cleaner that was the source of the contamination. Despite the fact that the existence of contamination was widely known within the community, it appears that the bank did not perform any due diligence on the property prior to foreclosing on the property. Another interesting aspect of the case is that the court allowed the bank’s claim that the contamination posed an imminent and substantial endangerment even though there were no completed exposure pathways.
In this case, the defendants had been operating a dry cleaning business in River Forest, Illinois since 1978. The defendants initially used a “transfer unit” that consisted of a separate washer and dryer. During this period, the defendant used approximately 100 gallons of Perc per month. Both the washer and dryer used a distillation process to collect and return used Perc to the Perc tank located at the base of the transfer unit. The distillation generated spent filtering agent and sludge that the defendant stored in 55-gallon drums that were located on plastic reinforced shelving near the rear entrance. Occasionally, the defendant disposed the spent filtering agent in the dumpster in the parking lot that was located near the property boundary of the residential property that the plaintiff eventually took title to through foreclosure. In 1992, the defendants replaced its equipment with a “dry-to-dry” machine. After the change, the defendants used only 50 gallons of Perc per year.
For reasons unknown to the court, the defendants performed a phase 1 in 2001 that recommended a Focused Site Investigation Report (FSIR). The sampling detected a plume of PCE-contaminated groundwater that was approximately 270 feet long, 90 feet wide, and 10 feet deep with the highest concentrations at 350 parts per million (ppm). The FSIR suggested the source of the contamination was believe to be a above-ground storage tank that had been used by the former owner and located outside the rear exit or possibly a nearby gas station.
In 2004, the defendant sought to enroll in the IEPA dry cleaner remediation program but IEPA rejected the initial application because the IEPA determined that the FSIR inadequately characterized the extent of the contamination. Over the next five years, the defendants’ consultant submitted a number of supplement reports that were rejected by IEPA. In 2009, defendant collected additional samples that found 940 ppm beneath the floor of the dry cleaner. The defendants submitted a revised Focused Site Investigation Report and Remedial Objectives Report (“FSIR-ROR”) that IEPA rejected and asked for additional investigation in order to further characterize the extent of the contamination. The follow-up investigation in November 2009 revealed Perc contamination up to 14,000 ppm in the soil beneath the dry cleaner, 800 ppm under a business immediately adjacent to the dry cleaner and 430 ppm beneath a restaurant further to the east.
Defendants submitted another revised FSIR-ROR in January 2010 that recommended that all saturated soils be remediated. Again, IEPA rejected the FSIR-ROR and asked for additional investigation to further characterize the extent of the contamination. The next round of sampling detected saturated soils near the back door. Yet another revised FSIR-ROR was submitted in November 2010 which recommended remedial measures be taken inside the dry cleaner, the business to the east, in the soil near the restaurant, and in the soil near the back door.
The dry cleaner site attracted the attention of the federal government in 2009 after a teacher at the school across the street from the dry cleaner contacted the USEPA. Indoor air and sub-slab samples at the school and a nearby children’s gymnasium revealed trichloroethylene (“TCE”) and methylene chloride exceeding long-term screening levels. After reviewing the sampling results, the Agency for Toxic Substances and Disease Registry (ATSDR) recommended follow-up investigation. Following another round of sampling in early 2010, ATSDR recommended installation of a vapor mitigation system at the gym. The sampling at the residence detected elevated levels of methylene chloride but since the home was vacant, ATSDR did not recommend any immediate actions. However, the agency recommended that the home not be occupied until potential exposure from potential vapor intrusion was evaluated.
USEPA installed the vapor mitigation system and then entered into a settlement agreement with the defendants where the defendants agreed to reimburse USEPA approximately $39K in past response costs. The settlement agreement did not address the contamination at the residence
Plaintiff FPNB foreclosed on the residential property near the defendants’ property in 2009. After taking possession of the property, the bank retained a consultant to perform a phase 2. The sampling detected PCE concentrations exceeding the IEPA Tier 1 soil and groundwater remediation objectives. FPNB then filed its lawsuit. After discovery, both parties moved for summary judgment.
The defendants first argued that the plaintiff had no standing to bring its lawsuit because it had not offered any evidence of damages such as appraisals reflecting a decline in value of the property or any proof of withdrawn offers due to the contamination. However, the court said that common sense dictated that the contamination would deter potential buyers of the residential property, especially in light of the ATSDR had recommendations.
The plaintiff brought two RCRA 7002 claims.The first alleged that the defendant was in continuing violation of RCRA by failing to comply with certain RCRA generator requirements such as maintaining waste disposal records, annual hazardous waste reports and preparing a written closure plan. The court found that while there was question of material fact as to what generator obligations applied to the defendants, it was unclear that the court could order the defendants to remediate the site if FPNB could prove such regulatory violations.
The second RCRA 7002 claim alleged that the defendant had contributed to an imminent and substantial endangerment. The defendants asserted that because of the EPA settlement, the plaintiff was barred by the ban on pre-enforcement review of CERCLA section 113(h). However, the court said that the pre-enforcement ban applied to actions under CERCLA section 104s or 106. Since the settlement agreement had been entered pursuant to CERCLA § 122, the court said § 113(h) did not apply. Moreover, the court noted that the settlement did not address any contamination at the residence and there was no evidence that the litigation was delaying or will delay the completion of an ongoing cleanup action. Indeed, the court said the evidence suggested that the bank’s lawsuit sought to jumpstart a cleanup and seemed to be serving the very gap-filling purpose that RCRA 7002 was designed to achieve.
The defendants also claimed that the plaintiff had not established that the defendants had”contributed to” the contamination. However, the court found that there indisputable evidence that there was substantial Perc contamination where defendants have operated a dry cleaning business and it was not unreasonable to infer that considerable amounts of Perc may have been improperly released or disposed during the use of the transfer unit. The court also noted that the defendants had admitted that they sometimes disposed used filtering agent in the municipal dumpster in the parking lot near the property line of the bank’s property. Moreover, since the defendants had alleged that the contamination was caused by the prior owner of the dry cleaner, the court found it curious that the defendants had failed to seek contributions from the prior owners.
The court said that summary judgment is known as the “put up or shut up” time in a lawsuit. The court said that the only evidence that the defendants offered that the contamination was caused by a prior operator was their sworn testimony and this scant evidence was simply insufficient from which reasonable jury might find the defendants did not at least “contribute to” the Perc contamination at the Site during the 35 years they operated the business.
Defendants also contend that the bank had failed to show that the contamination posed an “imminent” endangerment because there were no completed exposure pathways. The defendants pointed out that the residence was unoccupied so no one was breathing contaminated vapors, the village ordinance prohibited consumption of groundwater so no one could drink contaminated groundwater and the property was largely paved which prevented exposure to contaminated soil. However, the court held “imminence” did not require an existing harm but only an ongoing threat of future harm, and there was sufficient evidence to conclude there was a reasonable prospect of future harm
On the “substantial endangerment” prong, the court said that a thorough assessment of the contamination at residential property had not yet been conducted. The court said that it was only in early 2010 that sampling indicated that the contamination had begun to migrate through the soil across the property line shared with the dry cleaner, and that it was quite possible that additional air samples might reveal pollutant exceedences requiring installation of vapor mitigation systems. The court found there was a genuine dispute about a material fact–the extent of the contamination at the residential property. Thus, the court denied both parties’ motions for summary judgment on the “endangerment” claim.
On the CERCLA claim, the defendants simply argued that the bank’s investigation costs were not “necessary”, contending there must be an actual and real threat to human health or the environment for a response cost to be deemed “necessary”. The court said the modest investigative costs “necessary” to help determine the magnitude of the threat presented by the Perc plume, particularly given the residential nature of the property. Besides, the court noted, the defendants had failed to establish that they should not be held liable under CERCLA. Accordingly, the court granted summary judgment to FPNB on its CERCLA cost recovery claim.