ELR Citation: ELR 21319
No(s). 91-0524-BH-S (S.D. Ala. Jan 10, 1995)

The court holds that the former owner of contaminated property may not recover under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) response costs it incurred cleaning up the site from the limited partnership that currently owns the site, the partnership's general and limited partners, the company that manages the apartments on the site, or the contractor that built the apartments. The court first holds that the individuals that are limited partners in the limited partnership that owns the site cannot be liable as owners or operators of the site, because limited partners do not by virtue of being limited partners own what the limited partnership owns. The court notes that whether the limited partners would be liable for any obligations of the limited partnership depends on limited partnership law, not CERCLA. The court holds that the former owner's partnership law claim is moot. Because the partnership is not liable, there are no obligations of the limited partnership for which a limited partner can be liable under partnership law. The court rejects the former owner's claims that the limited partners' alleged authority to control the limited partnership makes them liable as operators. The control they exercised was minimal, and no disposal occurred when they are alleged to have owned or operated the site. The court also holds that the limited partners may not be held liable under CERCLA for having arranged for disposal, because there was no disposal when they were involved with the partnership. Next, the court holds that the management company for the apartment complex was not an operator of the site for purposes of CERCLA liability. Evidence provides nothing more than conclusory allegations that the company is an operator. The court holds that the management company's activities in having the parking lot repaved and having natural gas lines at the site repaired, which resulted in dispersal of hazardous substances, were not arranging for disposal of hazardous substances. Rearranging of substances does not constitute arranging for disposal. The court holds that to be disposal under CERCLA, alleged secondhand disposal must result from an affirmative act to introduce hazardous substances into another tract of the facility or vessel. Thus, for purposes of CERCLA operator liability, even were the management company an operator, there was no disposal when the company was an operator. And because there was no disposal, there was nothing to arrange that could lead to the imposition of arranger liability. Moreover, the management company never intended to dispose of hazardous substances by having the parking lot repaved and the gas lines repaired.

The court holds that the contractor's construction activities impose no arranger liability on the contractor. The court also holds that the pesticides the contractor sprayed on the site when it built the apartments were registered under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) when they were applied, thereby precluding under CERCLA §107(i) the imposition of CERCLA liability on the contractor. That EPA canceled the pesticides' registration after the alleged use does not render the contractor liable. Applying retroactivity to the contractor's situation would improperly impair rights the contractor had before it acted, increase its liability for past conduct, or impose new duties with respect to transactions already completed. Without any such clear intent in FIFRA to apply FIFRA retroactively, the court declines to apply the registration cancellation retroactively. The court next holds that the general partners in the limited partnership that owns the site are treated as the limited partners were and, thus, cannot be liable under CERCLA as owners of the site. They cannot be liable as owners or operators, because the only alleged disposals since they became general partners are the parking lot repaying and natural gas line repair. Without a disposal they cannot be liable as owners or operators, and there can be nothing for them to arrange for purposes of arranger liability. The same reasoning applies to the limited partnership itself. The court holds that even were the general partners liable, the parties established that the release was caused by an act or omission of a third party. The general partners are entitled to this statutory defense under CERCLA §107(b) because they exercised due care with respect to the hazardous substances, and took adequate precautions by contacting the U.S. Environmental Protection Agency (EPA) when hazardous substances began surfacing.

The court notes that common-law principles of tort liability provide sound guidance in the apportionment of liability. The court concludes that the harm at the site is divisible, and that appropriate equitable factors to consider in allocating response costs are the identity of the party responsible and the party's other actions with respect to the site. The court holds that in resolving the contribution claims, justice requires the former owner to bear all of the response costs. The disposal at the site results entirely from plaintiff's actions. The court holds that even assuming that the former owner had enriched the subsequent owners of the site by paying the CERCLA response costs, such enrichment was not unjust so as to support an award of restitution on the theory of unjust enrichment. Addressing the defendants' state-law counterclaims, the court holds that caveat emptor applies to the sale of the site because there was no dwelling on the site and the counterclaims are about the physical condition of the land. Caveat emptor applies to bar defendants' counterclaims because defendants remedy in this matter is the enforcement of CERCLA.

Counsel for Plaintiff
J. Daniel Berry, Diane Gildersleeve
Beveridge & Diamond
1350 I St. NW, Ste. 700, Washington DC 20005
(202) 789-6000

Counsel for Defendants
Thomas H. Benton Jr.
McFadden, Lyon & Rouse
718 Downtowner Blvd., Mobile AL 36609
(334) 342-9172