ELR Citation: ELR 21314
No(s). C 89-1709 SC (D. Ariz. Apr 5, 1993)

The court holds that a trustee who is authorized to control the use of trust property and knowingly allows such property to be used for hazardous waste disposal can be liable under §107(a)(2) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cleanup costs that exceed the trust's assets, however, the court also holds that when a trustee has no power to control the use of trust property, liability is limited to the extent that the trust assets can indemnify the trustee. The city of Phoenix sought recovery of response costs it incurred in cleaning up a contaminated landfill it received from a trustee that had purchased the property with trust assets. The court first finds that the federal policies supporting CERCLA require it to fashion a uniform federal rule of decision, crafted from existing common law on trustee liability, to decide the case. Relying on federal common law, the court holds that the extent of the trustee's personal liability depends on whether the trustee had power to control the use of trust property at the time it was used for the disposal of hazardous substances. Characterizing hazardous waste disposal as an ultrahazardous activity for which §107(a)(2) effectively codifies the common-law rule of strict liability, the court finds that imposing personal liability for a trustee's tort is appropriate. The court then states general rules governing the extent of trustee's personal liability under CERCLA as owners of contaminated property, which are consistent with the stated position of the U.S. Environmental Protection Agency (EPA or the Agency) on these issues. EPA's position on CERCLA enforcement, contained in the Agency's lender liability rule, are entitled to deference.

Applying the applicable rule to the case, the court holds that either the trustee's decision to purchase the disposal site as a trust asset or its decision to continue leasing the landfill for use as a facility for the disposal of hazardous substances is sufficient to impose unlimited personal liability on the trustee. If the city can prove at trial that such substances were disposed of at the landfill during the trustee's ownership, the trustee will be liable under CERCLA §107(a)(2), regardless of the amount of trust assets available to indemnify the trustee.

Counsel for Plaintiff
Marty Callahan, Ass't City Attorney
City Attorney's Office
251 W. Washington St., Ste. 800, Phoenix AZ 85003
(602) 262-6761

Counsel for Defendants
Robert Raven
Morrison & Forester
345 California St., San Francisco CA 94104
(415) 677-7000