Citizens Suit Remedies Can Expand Contaminated Site
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1 [2,300 words] Citizens Suit Remedies Can Expand Contaminated Site Exposures By Reed W. Neuman Mr. Neuman is a Partner at O Connor & Hannan LLP in Washington. His is RNeuman@oconnorhannan.com. Property owners and business managers long have faced the risk of actions brought by governmental or private entities to respond to conditions at sites contaminated by hazardous substances. Historically, the traditional theories of public and private nuisance law, later augmented by strict liability approaches, were employed to abate hazardous site conditions. In the recent past, contaminated site abatement actions predominantly have taken the form of government-lead administrative or judicial claims to compel cleanup and/or to recover costs incurred to perform cleanup actions. Even more recently, private parties typically facing some share of liability themselves have assumed a significant role in commencing cleanup actions, whether at owned sites (against predecessors, tenants, neighbors, etc.) or to address conditions at third-party disposal or treatment sites. These claims typically invoke the response action and cost recovery authorities granted to government agencies and to private parties under the federal Superfund 1
2 statute (officially, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, 42 U.S.C et seq.) and its state-law analogues. The conduct of cleanup actions under the Superfund scheme including the conscription of virtually defenseless responsible parties to perform and finance cleanups, and how those parties play the game to minimize their ultimate allocated costs has become all too familiar. However, site owners and parties tied to contamination may face a new, unexpected threat: a claim seeking a court order to clean up the property, brought by parties having an interest in adjoining property, under the citizens suit provisions of the Resource Conservation and Recovery Act ( RCRA, 42 U.S.C. 6972), the federal statute regulating hazardous waste management. Developing case law suggests that citizens suit remedies may be available to private parties to compel cleanup actions under RCRA not only as to on-site conditions but also conditions causing adverse impacts in adjoining areas. Such remedies are available not only to true citizens groups seeking a cleaner community, but also to those whose interests in adjoining property are threatened or damaged by contamination. Moreover, the careful plaintiff can avoid the upfront expense and shared liability typically facing a responsible party working through the CERCLA cleanup and contribution regime. Availability of RCRA s Citizen Suit Authority to Abate Imminent Hazards. Fundamentally, Congress enacted RCRA as a comprehensive system for regulating the generation, storage, movement and disposal of hazardous waste. The RCRA enforcement 2
3 scheme includes authorization for government actions to abate any imminent hazards arising from past or present waste management activities. While Congrees designed RCRA primarily to address ongoing waste management, its terms do not preclude application to abandoned, inactive sites. Nonetheless, Congress designed the CERCLA scheme to address cleanup needs at the nation s large inventory of inactive, abandoned and unpermitted waste sites, which typically fell outside the federal regulatory system. As a complement to the government enforcement scheme, Section 7002 of RCRA empowers virtually anyone to bring a citizen s suit in the federal district courts against any person who has contributed to the handling or disposal of solid or hazardous waste that may present an imminent and substantial endangerment to health or the environment. Following expiration of a mandatory 60-day waiting period, plaintiffs can proceed with the suit should the government not gear up an action of its own. This authority is extremely broad, and provides a powerful tool for those seeking to abate contamination threatening community resources it is, in essence, a federal statutory nuisance authority. It also can provide the prospective plaintiff with an interest in impacted property an attractive alternative to the cumbersome Superfund cleanup and cost recovery process. The RCRA citizens suit provisions authorize plaintiffs to seek injunctive relief and the imposition of civil penalties, free of several of CERCLA s familiar claim perfection restrictions. In addition, Section 7002 allows the award of attorneys fees and other litigation costs, benefits not normally available to the claimant pursuing cleanup or 3
4 cost recovery claims under Superfund. Furthermore, whereas CERCLA claimants routinely are themselves subject to liability for the subject cleanup, recovery under CERCLA typically is reduced to account for the claimant s own contribution exposure. Moreover, because RCRA plaintiffs typically are not themselves undertaking a cleanup, they are not required to document adherence to CERCLA s National Contingency Plan rules for performing cleanups. In addition, RCRA sanctions extend to contamination from production of petroleum materials, which is expressly exempted from CERCLA. These provisions thus present an opportunity for creative private litigants with private property-based claims to make cleanup demands while sidestepping traditional barriers to recovery on damages or contribution issues. Nonetheless, although Section 7002 speaks to abating threats to health and the environment, individual plaintiffs or groups still must establish minimal prerequisites of standing to invoke federal court jurisdiction. Under most federal environmental statutes, citizens suits typically are brought by public interest groups often neighbors or local resource users seeking to protect aesthetic and recreational uses harmed or threatened by contamination. Such groups must still meet the constitutional requirements of standing, however, and they have not always found it easy to do so. Most famously, in Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992), the Supreme Court held that the Defenders of Wildlife lacked standing because the aesthetic damage they complained of was not an injury-in-fact 4
5 the Defenders of Wildlife failed to show that its members had definite plans to use or visit the region in question. Lujan did confirm, however, that aesthetic and recreational uses can create cognizable, legal interests. Recent cases suggest that 7002 may become a favorite tool of public interest groups wherever the courts take a broad view of standing. C.f., Citizens for a Better Environment v. Caterpillar, Inc., 30 F. Supp. 2d 1053 (C.D. Ill. 1998) (distinguishing Lujan on the grounds that the instant plaintiffs had concrete plans to use the resource at issue); but c.f., Sierra Club, et al., v. EPA, 292 F.3d 895 (D.C. Cir. 2002) (prescribing procedural burdens necessary to establish standing claims). Prosecuting Private Party Interests in Contaminated Property. To be sure, the RCRA citizen suit provision confers a public policy benefit, allowing eligible parties to augment the government s efforts to prevent or abate what amount to public nuisances at contaminated sites. A pending RCRA 7002 citizens suit filed in New York, however, illustrates a novel approach that may ultimately prove more significant to parties potentially liable for conditions at contaminated sites. DMJ Associates, L.L.C. ( DMJ ) a partnership formed expressly for the purpose of buying and re-selling interests in distressed real estate alleges that subsurface contamination migrating from a former hazardous waste processing facility presents an imminent hazard to a neighboring property in which DMJ holds a security interest (i.e., a note). DMJ Associates v. Capasso, No (E.D.N.Y. filed Dec. 10, 5
6 1997). DMJ has brought suit against the owners and operators of the former processing facility, as well as a group of generators that allegedly shipped hazardous wastes there. DMJ which itself has spent no money up front to investigate or remediate the contamination is seeking an injunction requiring cleanup of the allegedly impacted property. Should the court award the requested relief, the cleanup undoubtedly will enhance the value of DMJ s investment. Such a result no doubt will encourage speculators to purchase inexpensive, contaminated properties, use RCRA 7002 to compel other parties to conduct a cleanup, then sell the properties at a profit. As it readily concedes, DMJ was incorporated with the intention of bringing just such a case, knowing that it would be testing the limits of RCRA s citizens suit provisions; indeed, its original counsel who crafted the suit has written a series of articles for law journals and the trade press on the use of the imminent hazard authority. See, e.g., Adam Babich, RCRA Imminent Hazard Authority: A Powerful Tool for Businesses, Governments, and Citizen Enforcers, 24 Envtl. L. Rep. (Envtl. L. Inst.) (1994). The DMJ suit is in its preliminary stages. As with the public interest cases discussed above, the standing of the plaintiff to maintain the action is a critical threshold legal issue in the suit. While courts long have recognized that economic interests, such as property ownership, generally are sufficient to create standing, it remains an open question whether the type of security interest DMJ holds is sufficient, by itself, to support its claims. 6
7 To confer standing, courts routinely have required claimants to demonstrate the existence of three elements: (1) injury-in-fact to the plaintiff; (2) that the injury is fairly traceable to the defendant s conduct; and (3) that the injury can be redressed by the court. The generator-defendants in the DMJ litigation have argued that the plaintiff has not suffered an injury-in-fact because DMJ purchased its security interest at a sharply reduced price and with full knowledge of the contamination and of the diminished value of the collateral. Put another way, DMJ has not been injured because it got exactly what it paid for. Moreover, the generator-defendants have argued that, even if DMJ has been injured, the injury is not fairly traceable to their acts, for two reasons: first, any injury is self-inflicted (buying an interest in a contaminated property having little apparent market value) and does not satisfy the requirements of standing; second, DMJ has failed to show a connection between contamination at the adjacent facility and the property that secures its notes. DMJ has responded that it is not required to present evidence that proves the flow of groundwater between the two properties at a preliminary stage of the litigation. It also has argued that it has been injured because, while the contamination was present when it purchased the notes, the contamination continues to migrate. DMJ has contended that this contamination impairs the collateral securing its notes and denies it the full benefits of the bargain it made. These issues currently are before the court on cross-motions for summary judgment. 7
8 Interplay With Government Enforcement Actions. When citizen suits seeking abatement of environmental hazards are allowed to go forward, they can significantly complicate and create tensions with response actions undertaken by government or private party groups pursuant to CERCLA or analogue authorities. As the Superfund action most likely will be played out on the agency s administrative record typically resulting in the agency s selection of an appropriate cleanup remedy the abatement relief sought from the courts in the citizens suit action may lead to unpredictable and inconsistent results. In the DMJ case, things got more interesting with the commencement in 2001 by the New York Department of Environmental Conservation (DEC) of an investigation of conditions at the waste processing facility, citing among other things data suggesting the subsurface migration of contaminants from that property. Upon concluding the study, DEC may order remedial action to be taken, which could include measures to capture and treat migrating contamination, or perhaps to contain its further spread. A group of parties identified by DEC as having a transactional relationship with the processing facility including the generator-defendants in the DMJ action consented to a DEC administrative order to conduct the required study, and potentially to conduct whatever remedial work that study may indicate is necessary. Among other things, that study will determine at least three key issues: whether there is a plume migrating from the facility; whether and to what extent it is impacting off-site areas, including the neighboring property in which DMJ has an interest; and 8
9 whether those conditions warrant a remedial action. At the same time, assuming the court finds that plaintiff has shown sufficient standing to continue the suit, the court will be asked to determine whether contamination from the waste facility has caused or threatened an imminent and substantial endangerment to the neighboring property warranting the imposition of corrective measures. Clearly, the questions DEC will determine, and the environmental data and expert judgments to be made thereon, are closely aligned with if not identical to the issues on which the court may be asked to rule. As a result, the generator-defendants moved to stay the DMJ suit pending DEC s determination of the existence and sources of any migration and the need for any response action. As a general rule, federal environmental citizen suit provisions (including RCRA 7002) bar such suits if an authorized government agency is diligently prosecuting an action to abate the condition or violation. In the DMJ litigation, DEC commenced its study after DMJ had initiated the citizen suit. As a result, the generator-defendants (which group includes a significant number of the parties obligated to perform the study under the DEC consent order) asked the court to exercise its discretion and abstain from further proceedings in the DMJ litigation until DEC completes its process. Mindful that DEC may well order relief similar if not identical to what the court could order again, assuming the plaintiff has standing and with neither the court nor the parties of a mind to try to stop the DEC process, the defendants asked the court to consider the potential wastefulness of litigating these issues on two tracks, with possibly inconsistent results. 9
10 Notwithstanding the above, the Court recently denied the stay request, and ordered the parties to proceed with discovery and other pre-trial preparation sin the suit, while the DEC-directed environmental study at the neighboring site gets underway. Among other things, still to be determined is the extent to which all discovery can proceed before completion of that study, particularly including expert discovery on the presence, causes and risks associated with any contaminant plume emanating from the neighboring property. What Does the Future Hold? If DMJ is found to have standing, and succeeds in forcing a cleanup of the neighboring site despite or as a corollary to any action DEC may require, it stands to reap the benefits of substantial appreciation in the property s value from the cleanup. This case thus may create powerful financial incentives to invest in contaminated property for the purpose of bringing a RCRA 7002 citizens suit. Indeed, a favorable ruling for DMJ could foster the development of an industry of repeat plaintiffs. As noted above, RCRA 7002 allows plaintiffs like DMJ to avoid cleanup costs they normally would be forced to incur before being able to bring a CERCLA contribution action. Furthermore, by owning only a security interest in the property, DMJ may have avoided the indicia of ownership that trigger CERCLA s strict liability for the owners and operators of contaminated facilities. Consequently, RCRA citizens suits may allow plaintiffs to avoid paying any share of the costs of cleanup. Of course, there are legal and practical limitations to the liability presented by RCRA Fundamentally, RCRA is not a cleanup statute. In its opinion in Meghrig 10
11 v. KFC Western, 516 U.S. 479, 483 (1996), the Supreme Court made clear that RCRA was not designed to govern the cleanup of toxic waste sites or to compensate parties that have incurred cleanup costs. Consequently, courts have concluded that RCRA does not allow the recovery of private damages or cleanup costs, finding that such remedies are more properly addressed by CERCLA and/or state statutory or common law. As noted above, plaintiffs also cannot bring claims under RCRA 7002 if the government is already taking action at the site, and must give ninety (90) days notice to the authorities and the responsible parties before bringing suit. Nonetheless, as the courts proceed to define the parameters of these claims, RCRA 7002 may become an increasingly significant source of liability for owners of contaminated property, and for parties who generated hazardous waste. Aggressive plaintiffs from both public interest groups and the ranks of property speculators are currently in court, seeking to establish favorable rulings on these issues and to create new law that will favor these suits. Even where and perhaps especially where the government has indicated no interest in pursuing cleanup of a property, it is important that potential exposures arising from such actions be evaluated with care. (The author represents one of the generator-defendants in the DMJ Associates v. Capasso, et. al. action.) blt.standing.neuman 11
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