ELR Citation: ELR 20813
No(s). 91-9157 (2d Cir. Mar 11, 1992)

The court rules that the owner of a contaminated site may assert the third-party defense in §107(b)(3) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in a CERLCLA cost recovery action, unless a contract between the landowner and the third party relates to the hazardous substances contaminating the site or allows the landowner to exert some control over the third party's activities. The district court denied a motion for summary judgment by the purchaser of land used for gas manufacturing and storage operations in an action against the seller's successor-in-interest to recover response costs incurred in cleaning up contamination discovered after the purchaser demolished structures on the site. The district court held that the defendant had raised a triable issue of fact by asserting the third-party defense and contending that the plaintiff was the sole cause of the contamination, although the defendant did not dispute that the contract for the sale of the land was a "contractual relationship." On appeal, the court holds that the phrase "in connection with a contractual relationship" in CERCLA §107(b)(3) requires more than a mere contractual relationship between the landowner and the responsible third party. The court further holds that CERCLA §101(35)(C) does not entirely preclude previous landowners from invoking the third-party defense. Logic suggests that Congress intended §101(35)(C) merely to circumscribe the parameters of the innocent landowner exception in §101(35)(A) and (B), and not to abrogate completely the right of previous owners to raise the third-party defense set forth in §107(b)(3). The court notes that the district court may have erred in stating that the first sentence of §101(35)(C) was intended simply to underscore that the innocent-landowner exception was designed to apply only to current owners of property who otherwise would not qualify for the §107(b)(3) defense. The second sentence of §101(35)(C) makes it clear that Congress intended, subject to several conditions, that the innocent landowner exception would allow purchasers who are unaware, despite appropriate inquiry, that hazardous substances have been placed or disposed of on the property to subsequently sell the property without losing their exemption from liability caused solely by a third party in connection with such a sale.

Counsel for Appellant
Daniel M. Darragh
Eckert Seamans Cherin & Mellott
600 Grant St., 42nd Fl., Pittsburgh PA 15219
(412) 566-6000
Margaret N. Strand
Eckert Seamans Cherin & Mellott
2100 Pennsylvania Ave. NW, Ste. 600, Washington DC 20037
(202) 659-6600

Counsel for Appellee
Robert E. Blanville
Phillips, Lytle, Hitchcock, Blaine & Huber
3400 Marine Midland Ctr., Buffalo NY 14203
(716) 847-8400

Timbers, J. (before Feinberg and Miner, JJ.):