Escaping CERCLA Liability: The Interim Owner Passive Migration Defense Gains Circuit Recognition

Michael S. Caplan

Editors' Summary: This Article addresses CERCLA's language and structure as it pertains to the liability of interim landowners for passive migration of hazardous substances. The author argues that CERCLA's language, structure, and policies compel the conclusion that passive migration of hazardous substances during ownership does not trigger CERCLA liability. The author first addresses the language of CERCLA, and concludes that the CERCLA definition of "disposal" does not include the passive migration of hazardous substances. The definition of disposal requires active human conduct, and Congress explicitly referred to the concept of passive migration in the CERCLA definition of release. Next, the author asserts that imputing a passive meaning to disposal negates the purpose of the innocent landowner defense. If disposal included passive migration, there would be no time after the disposal of hazardous substances when one might innocently acquire a facility. Last, the author argues that rejecting passive migration as a basis for interim owner liability is in accord with the congressional objectives of CERCLA. Interim landowners who solely permit migration of wastes should not be held liable, but interim landowners who knowingly transfer contaminated property can still be liable under CERCLA and state civil and criminal law. And operators, prior owners who actively disposed of hazardous wastes, arrangers, and transporters of hazardous wastes will all remain strictly liable for the cleanup costs of a contaminated site.

Michael Caplan practices environmental law in the Baltimore office of Piper & Marbury LLP. Mr. Caplan received his B.A., with honors, from Northwestern University and his J.D., with honors, from the University of Maryland School of Law. Prior to joining Piper & Marbury LLP, Mr. Caplan served as a law clerk to Chief Judge Alan M. Wilner on the Court of Special Appeals of Maryland.

[28 ELR 10121]

The liability net of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) has expanded to such an extent that the mere mention of the imposition of CERCLA's strict and joint liability often sends targeted parties straight to the settlement table. Relief for certain defendants may be within sight. In United States v. CDMG Realty Co.,¹ the Third Circuit rebuffed the all-encompassing application of CERCLA liability and permitted past owners of a contaminated facility to escape liability when their sole connection to the site was the migration of hazardous substances during their ownership. Recently, the CDMG Realty opinion impressed the Second Circuit, and, "rather than reinventing the wheel," the Second Circuit simply adopted the Third Circuit's reasoning.²

This newfound foothold in the circuit case law eliminates a large segment of the traditional potentially responsible parties (PRPs).³ Historically, many courts have held liable past owners of facilities where migration of hazardous substances took place during their tenure.⁴ This Article analyzes [28 ELR 10122] CERCLA's language and structure as it pertains to liability for passive migration of hazardous substances and explores the policy implications of imposing liability on otherwise innocent interim owners of contaminated property. Specifically, this Article will focus on CDMG Realty, in which the Third Circuit emphatically disagreed with the long-standing circuit precedent that CERCLA's use of the term "disposal" included passive conduct.

Overview of a Private Right-of-Action Under CERCLA

After Love Canal,⁵ a political climate was created that spurred Congress to study the legal system's ability to handle the dangers of contaminated land. A review of the environmental law in place was found wanting. In 1980 with a Republican Administration about to assume power, Congress hastily enacted CERCLA, the most comprehensive and complex statute aimed at the dangers posed by hazardous waste sites.⁶ CERCLA authorizes a cause-of-action to recover response costs⁷ incurred in remedying an environmental hazard, and permits liable parties to obtain contribution from other liable parties.⁸

There are four elements to prima facie CERCLA liability: (1) hazardous substances were disposed at a facility, defined as any place where hazardous substances have come to be located; (2) there has been a release or threatened release of a hazardous substance into the environment; (3) response costs have been incurred as a result of the release or threatened release; and (4) the defendant is among the four classes of responsible parties.⁹

The four classes of responsible parties are: (1) the current owner and operator of a vessel or a facility; (2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed; (3) any person who arranged for disposal or treatment, or arranged for transport for disposal or treatment of hazardous substances at the facility; and (4) any person who accepts or accepted hazardous substances for transport to disposal or treatment facilities.¹⁰

Historical Theory on Imposing Liability on Past Owners

The Common Factual Scenario

The typical contaminated facility is a parcel of land that, over the years, has had a litany of commercial owners. A common factual scenario is that a single owner, in the distant past, improperly disposed of hazardous substances at the facility. Subsequently, the land is sold, and, as the land is transferred from owner to owner, the contamination is permitted to spread.¹¹ Often, intervening owners have neither actively disposed of hazardous substances at the site nor been aware of the presence of the contamination. Finally, the present owner assumes control of the contaminated facility, discovers the contamination and performs a cleanup. When the present owner seeks contribution for costs incurred, discovery requests are propounded to determine the complete chain of title from the initial polluter to the present owner of the property. Most of the past owners have disappeared or become insolvent, but usually a few have survived with resources that the current owners seek to tap to help fund the cleanup.

After obtaining the chronological list of the owners of the contaminated property, the CERCLA plaintiff next attempts to pigeon-hole the former owners into one of the statutory responsible party classifications. Clearly, the facility owner who first disposed of the hazardous substances is subject to CERCLA liability.¹² Likewise, the current owner is subject to liability.¹³ The fulcrum for determining liability for the intermediate owners, who passively permitted contaminants to migrate, turns on what it means to own land "at the time of disposal."¹⁴

The Nurad Decision

Nurad, Inc. v. Wm. E. Hooper & Sons Co.¹⁵ is the oft-cited support for the position that intermediate landowners of [28 ELR 10123] contaminated facilities must be held liable under CERCLA for passive migration of hazardous substances. In 1990, Nurad, the current owner of a contaminated property, filed a CERCLA suit seeking reimbursement for cleanup costs from former owners of the contaminated facility and, claiming that the former owners owned the facility at the time of the disposal of the hazardous substances.¹⁶ The record demonstrated that the former owners of the site owned the facility at a time when underground chemical storage tanks at the property were leaking.¹⁷

Although the prior owners argued that CERCLA liability cannot be imposed for purely passive conduct (i.e., permitting wastes to leak from the underground storage tanks), the Nurad court disagreed. Citing prior circuit precedent,¹⁸ the court held that disposal included both active and passive conduct. Additionally, the court based its interpretation of disposal on the two following separate grounds: CERCLA's language, and the fundamental purposes of CERCLA.¹⁹ With respect to the language of CERCLA, the court observed that the terms "spill" and "leak" contained in the definition of disposal "readily admit" a passive component, because such events may occur without any active human participation.²⁰ The policy reasons that compelled the court, however, have had a tremendously persuasive effect on later courts facing the identical issue.²¹ The court stated:

Under the district court's view, an owner could avoid liability simply by standing idle while an environmental hazard festers on his property. Such an owner could insulate himself from liability by virtue of his passivity, so long as he transfers the property before any response costs are incurred …. The district court's view thus introduces the anomalous situation where a current owner, such as Nurad, who never used the storage tanks could bear a substantial share of the cleanup costs, while a former owner who was similarly situated would face no liability at all. A CERCLA regime which rewards indifference to environmental hazards and discourages voluntary efforts at waste cleanup cannot be what Congress had in mind.²²

Moreover, the Nurad court emphasized that it is ownership at the time of disposal, not culpability or responsibility for contamination, that triggers CERCLA liability.²³ Such a decision, the court observed, was made at the congressional level.

Although the language at the time of disposal has a straightforward application to owners of facilities who actively disposed of hazardous substances, Nurad provided precedent in the CERCLA legacy that the phrase "at the time of disposal" must be given an expansive definition to effectuate the policies behind the creation of the statute.

Re-Analyzing the Interim Landowner Liability—The CDMG Realty Decision

Background of the CDMG Realty Decision

In 1980, Dowel Associates entered into a land purchase contract to acquire a 10-acre plot of land that was previously part of the Sharkey Farm's Landfill in Morris County, New Jersey.²⁴ The Sharkey Landfill had operated as a municipal landfill from 1945 until 1972. Later environmental studies of the landfill revealed substantial contamination.

During Dowell's ownership of the site, no party actively deposited waste at the facility. In 1987, Dowell sold the property to HMAT Associates, fully disclosing that the property was part of the Sharkey Landfill and that the site was under investigation by both federal and state agencies. In October 1989, the U.S. Environmental Protection Agency and the New Jersey Department of Environmental Protection and Energy commenced actions against PRPs, including HMAT. Although Dowel was not named in the original suit, HMAT filed a third-party suit against Dowel, seeking contribution, pursuant to CERCLA, as a former owner of the property at the time of disposal. As the basis for the contribution action, evidence was introduced which demonstrated that buried wastes migrated during Dowell's ownership of the facility.²⁵

CERCLA's Definition of Disposal

The inception of any statutory analysis must begin with the plain language of the statute itself.²⁶ CERCLA defines disposal by adopting the definition used in the Resource Conservation and Recovery Act (RCRA).²⁷ RCRA provides the following definition:

The term "disposal" means the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water so that such solid waste or hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.²⁸

[28 ELR 10124]

As evinced in the Nurad opinion, courts that have held that disposal includes passive conduct have focused on the words "leaking" and "spilling," which do not necessarily denote active conduct.²⁹ When viewed in its entirety, however, other courts have found a predominantly active connotation.³⁰ These courts conclude, using a linguistic analysis, that "leaking" and "spilling" are intended to convey active, not passive, conduct. Although leaking and spilling can have passive meanings, they can also clearly portray active conduct.³¹ For example, puncturing a hole in a drum of hazardous wastes causes the leaking of the container. Similarly, when one turns a drum of chemicals upside-down, the person is spilling the chemicals on the ground. Because the plain language of the definition of disposal is unclear, other canons of statutory interpretation are necessary to ascertain CERCLA's use of the term.

Applying the doctrine of noscitur a sociis, which states that the meaning of a particular term in a statute may be ascertained by reference to surrounding words in the statute,³² the CDMG Realty court held that, because disposal is defined with primarily active words, leaking and spilling should be read to require some active human conduct.³³ Accordingly, the CDMG Realty court sliced through this Gordian Knot in CERCLA analysis by reviewing the defining words in context and using a well-established doctrine of statutory construction.³⁴

Comparing CERCLA's Use of the Terms Disposal and Release

A second linguistic reason for concluding that "disposal" does not include the passive migration of waste is revealed when comparing the definition of disposal with that of "release." CERCLA defines release as follows:

The term "release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any hazardous substance or pollutant or contaminant).³⁵

As the CDMG Realty court points out, the definition of release must be broader than that of disposal, because "disposing" is included within the definition of release.³⁶ A closer review of the terms used in disposal and release reveals that release appears to indicate both active and passive conduct, while disposal is limited to only active conduct.³⁷

Release specifically includes the term "leaching." Disposal does not. Webster's Third International Dictionary defines leaching as "the process or an instance of separating the soluble components from some material by percolation."³⁸ The word leaching is commonly used in the environmental context to describe the movement of contaminants in landfills and is a significant cause of groundwater contamination. "Congress's use of the term 'leaching' in the definition of 'release' demonstrates that it was aware of the concept of passive migration in landfills and that it knew how to explicitly refer to that concept."³⁹

In addition to Congress' inclusion of the term leaching, a separate ground can be distilled from the term release to support the conclusion that disposal does not include passive migration of hazardous substances. In United States v. Petersen Sand & Gravel, Inc.,⁴⁰ one of the original sources of the passive migration defense theory, the court observed that disposal is triggered when wastes may enter the environment. In other words, disposal is an act that precedes a waste's entry into the environment. Contrast disposal with release, which is triggered when wastes actually do enter the environment. Accordingly, there are two distinct and separate [28 ELR 10125] phases to trigger different aspects of CERCLA liability. "The kind of migration of substances contemplated by 'passive' disposal, however, is itself an entering of the environment; it is not a predicate to entering the environment."⁴¹ Congress could have imposed owner liability on a release but specifically decided to restrict liability on ownership at the time of disposal. Because passive migration presents the situation that the contaminants have already entered the environment, the occurrence of migrating substances is a release not a disposal. Therefore, an analysis of the term release buttresses the proposition that, linguistically, the definition of disposal does not include the passive migration of contaminants.

CERCLA's Structure

With the enactment of the 1986 Superfund Amendments and Reauthorization Act (SARA),⁴² Congress codified the innocent landowner defense. The defense provides that owners of contaminated property can assert a defense to CERCLA if they can establish, among other things, that they acquired the site "after the disposal of hazardous substances" and that: (1) they did not have actual or constructive knowledge of the presence of hazardous substances when the land was acquired; (2) they are a government entity acquiring the property through an involuntary transfer; or (3) the land was acquired through an inheritance or bequest.⁴³

Again, the term disposal is subsumed within another CERCLA definition. To qualify for the innocent landowner defense, the party must demonstrate that it acquired the property after the disposal of hazardous substances.⁴⁴ The purpose of the defense appears plain—it was designed to protect owners from liability who bought a facility after it was contaminated, provided they had no knowledge of the contamination. Imputing a passive meaning to disposal negates the purpose of the defense.

Clearly, CERCLA is a difficult statute to interpret.⁴⁵ However, CERCLA § 107 imposes liability on owners at the time of disposalwhen a release occurs. SARA creates a defense for parties who acquire property after the disposal of hazardous substances. At the reauthorization of CERCLA, Congress presumably was aware that many landfills have a waste migration problem. Because wastes spread over time, there may be no time after the disposal of hazardous substances when one might acquire a facility should the term disposal include the passive spreading of contaminants.⁴⁶ It is illogical that Congress, in reauthorizing CERCLA, would create an essentially useless defense.⁴⁷

Exculpating Interim Owners Is Consistent With CERCLA's Policies

Congress enacted CERCLA with the following two principal goals in mind: assuring that those responsible for pollution pay the costs, and facilitating the cleanup of hazardous waste sites.⁴⁸ Rejecting passive migration as a basis for interim owner liability is in accord with both congressional objectives.

Making Responsible Parties Bear the Costs of Pollution

In Nurad, the court was concerned that refusing to give disposal a passive definition would be at odds with CERCLA's strict liability scheme of making polluters pay for the costs of cleanup. That argument, however, begs the underlying question: Who did Congress intend to hold strictly liable when it used the phrase "at the time of disposal"? If the interim landowner did not own the property during the disposal of hazardous substances, then it is not a "polluter" according [28 ELR 10126] to the congressionally imposed liability scheme, and must be permitted to escape CERCLA liability.

The CDMG Realty court rejected the proposition that a "polluter" includes an interim landowner who allowed passive migration to occur on its watch. "Those who owned previously contaminated property where waste spread without their aid cannot reasonably be characterized as polluters."⁴⁹ This may be a strained interpretation of a "polluter." An owner with knowledge of spreading contaminants arguably is exacerbating a pollution problem by taking no action to halt the migration. Regardless of such a distinction, the heart of the issue is whether Congress intended to extend CERCLA liability to passive conduct on the part of the interim landowner.

In interpreting CERCLA, courts must recognize that statutes were created with limits and ends.⁵⁰ The language and structure of CERCLA demonstrates that disposal contains a temporal element and interim owners who solely permit migration of wastes should not be held liable. The internal stopping point contained within the language of CERCLA evinces congressional intent to limit the imposition of strict liability to parties who actively disposed of waste.⁵¹ This limitation has absolutely nothing to do with culpability, rather it springs from policy considerations and the specific boundaries contained within the statute itself.⁵²

The Nurad policy argument that "an owner could avoid liability simply by standing idle while an environmental hazard festers on his property,"⁵³ was eliminated by the CDMG Realty court. First, CERCLA will still impose liability on interim landowners who transfer a facility without disclosing their knowledge of the contamination. The statute explicitly provides that a party who has actual knowledge that a facility is contaminated, and then sells the property without environmental disclosure, will be held liable as a CERCLA responsible party.⁵⁴ Second, criminal liability may be imposed on interim landowners for failure to report a release of hazardous substance above set threshold amounts.⁵⁵ Third, the innocent owner defense, if applicable to intermediate landowners, is not available to persons who obtained actual knowledge of a release and did not disclose the information to a subsequent purchaser.⁵⁶ Fourth, CERCLA creates strong incentives for purchasers to conduct thorough investigations before acquiring the property, with the result that liability risks and costs are factored into the transaction, making the transfer of contaminated facilities more difficult.⁵⁷ Fifth, intermediate owners may bear significant costs if the selling price is reduced because of contamination.⁵⁸ And lastly, state-law provisions traditionally prevent a malevolent owner from victimizing buyers when failing to disclose known dangerous latent defects.⁵⁹ "The only prior owners who will not pay any cleanup costs are those who bought and sold the land with no knowledge that the land is contaminated."⁶⁰

Facilitating the Cleanup of Contaminated Sites

As the CDMG Realty court observed, its holding will not undermine the goal of facilitating the cleanup of contaminated sites. Present owners and operators, prior owners who actively disposed of hazardous wastes, parties who arranged for the disposal of wastes, and transporters of the hazardous wastes will all remain strictly liable for the costs of cleanup of the contaminated site. In fact, eliminating the passive intermediate landowner from the equation will make cases more manageable, reduce transaction costs, and will enable courts to perform CERCLA liability allocation more efficiently. The concerns raised in Nurad are simply overstated.⁶¹

Conclusion

The CDMG Realty court's analysis of the meaning of disposal for purposes of CERCLA liability in conjunction with the review of the structure and policies of CERCLA establishes a compelling argument that the interim landowner who permits passive migration of hazardous substances during ownership does not trigger CERCLA liability. With the apparent conflict in the federal circuits on whether disposal has a passive component, the issue may find its way to the U.S. Supreme Court for review.⁶² What is certain, however, is that the interim owner defense for passive migration liability now has a strong presence in the circuit case law.

1. 96 F.3d 706, 26 ELR 21589 (3d Cir. 1996).

2. ABB Indus. Sys., Inc. v. Prime Tech., Inc., 120 F.3d 351, 358 (2d Cir. 1997).

3. Arguably, the Fifth Circuit in Joslyn Mfg. Co. v. Koppers Co., 40 F.3d 750, 25 ELR 20476 (5th Cir. 1994), was the first federal circuit decision to adopt the rationale that passive conduct does not necessarily trigger CERCLA liability. In Koppers, the Fifth Circuit refused to find a past owner liable in a contribution action despite the fact that the past owner was a sophisticated purchaser who was aware of the site's contamination before its purchase. Because there was no evidence to indicate that hazardous wastes were disposed during the past owner's ownership of the site, the Fifth Circuit found it unnecessary to apply Nurad, Inc. v. Wm. E. Hooper & Sons Co., 966 F.2d 837, 22 ELR 20936 (4th Cir. 1992), cert. denied sub nom. Munaw v. Nurad, Inc., 506 U.S. 940 (1992). In response to the plaintiff's argument that it would be bad policy to permit the past owner to escape liability through its passivity, the court replied that it would be worse to "allow a polluter to escape a portion of its liability by conveying the property while ignoring the contamination which it caused." Joslyn, 40 F.3d at 762, 25 ELR at 20482.

4. The following decisions have held that the migration of hazardous substances constitutes disposal: Nurad, 966 F.2d at 837, 22 ELR at 20940; In re Hemingway Transp., Inc., 108 B.R. 378 (Bankr. D. Mass. 1989), aff'd, 126 B.R. 650 (D. Mass. 1991), aff'd, 954 F.2d 1, 22 ELR 20719 (1st Cir. 1992); United States v. Waste Indus., 734 F.2d 159, 164-65, 14 ELR 20461, 20463 (4th Cir. 1984); United States v. Price, 523 F. Supp. 1055, 1071, 11 ELR 21047, 21054 (D.N.J. 1981), aff'd, 688 F.2d 204, 12 ELR 21020 (3d Cir. 1982); State ex rel. Howes v. Peele, 876 F. Supp. 733, 745 (E.D.N.C. 1995); New York v. Almy Bros., Inc., 866 F. Supp. 668, 676, 25 ELR 20540, 20544 (N.D.N.Y. 1994); In re Tutu Wells Contamination Litigation, 846 F. Supp. 1243, 1282 (D.V.I. 1993); Lincoln Properties, Ltd. v. Higgins, 823 F. Supp. 1528, 1536 (E.D. Cal. 1992); CPC Int'l, Inc. v. Aerojet-General Corp., 759 F. Supp. 1269, 1278, 22 ELR 20022, 20025 (W.D. Mich. 1991); Stanley Works v. Snydergeneral Corp., 781 F. Supp. 659, 664 (E.D. Cal. 1990); United States v. Ottati & Goss, Inc., 630 F. Supp. 1361, 1399, 16 ELR 20763, 20764 (D.N.H. 1985).

5. Love Canal refers to a 16-acre contaminated site where chemicals were buried. In 1978, after heavy rains, the chemicals resurfaced and the site gained national attention. See ROBERT V. PERCIVAL ET AL., ENVIRONMENTAL REGULATION 279-80 (2d ed. 1996).

6. WILLIAM H. RODGERS, JR., ENVIRONMENTAL LAW 680 (2d ed. 1994) ("[CERCLA] sped through Congress in a lame-duck session a few weeks after the national elections that brought Ronald Reagan to the White House.").

7. Response costs must be "necessary" and "consistent with the National Contingency Plan." 42 U.S.C. § 9607(a)(4), ELR STAT. CERCLA § 107(a)(4).

8. There is a divergence in opinion among the federal courts about whethera PRP is limited to a contribution action under CERCLA § 113(f) or can bring an action to recover response costs under CERCLA § 107(a). The following decisions have held that a PRP is limited to a § 113 action: United States v. Colorado & E. R.R., 50 F.3d 1530, 1536, 25 ELR 20309, 20312 (10th Cir. 1995); United Tech. Corp. v. Browning-Ferris Indus., Inc., 33 F.3d 96, 103, 24 ELR 21356, 21359 (1st Cir. 1994), cert. denied, 513 U.S. 1183 (1995); Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 764, 24 ELR 21254, 21256 (7th Cir. 1994); Borough of Sayreville v. Union Carbide Corp., 923 F. Supp. 671, 678, 26 ELR 21389, 21392 (D.N.J. 1996). The Justice Department advocates this rule. See, e.g., Town of Windsor v. Tesa Truck, Inc., 919 F. Supp. 662, 680 (S.D.N.Y. 1996). The following decisions have permitted a PRP to pursue a § 107 action: Pneumo Abex Corp. v. Bessemer & Lake Erie R.R., 936 F. Supp. 1250, 1253 (E.D. Va. 1996); United States v. SCA Servs. of Ind., Inc., 849 F. Supp. 1264, 1284, 24 ELR 21437, 21455 (N.D. Ind. 1994). In many instances, a party seeking contribution and/or cost recovery had not been adjudicated a responsible party at the time the lawsuit is filed.

9. 42 U.S.C. § 9607(a), ELR STAT. CERCLA § 107(a).

10. Id.

11. The U.S. Environmental Protection Agency has published its recognition that rain, groundwater movement, and wind causes waste in landfills to migrate over time. See OFFICE OF REMEDIAL RESPONSE, U.S. EPA, SUPERFUND EXPOSURE ASSESSMENT MANUAL 8 (1988).

12. 42 U.S.C. § 9607(a)(2), ELR STAT. § 107(a)(2).

13. Id. § 9607(a)(1), ELR STAT. CERCLA § 107(a)(1).

14. Id. § 9607(a)(2), ELR STAT. CERCLA § 107(a)(2).

15. 966 F.2d 837, 840, 22 ELR 20936, 20939 (4th Cir. 1992).

16. Id.

17. Id. at 846, 22 ELR at 20940.

18. In a prior opinion, the Fourth Circuit rejected a definition of disposal that would limit its meaning to active human conduct. United States v. Waste Indus., 734 F.2d 159, 164-65, 14 ELR 20461, 20463 (4th Cir. 1984). The Waste Industries court held that Congress intended the definition of disposal to have a range of meanings including the settling of hazardous waste and its subsequent movement through the environment. Although Waste Industries interpreted the term disposal in the context of the Resource Conservation and Recovery Act (RCRA), the Nurad court held that CERCLA's use of the term disposal was identical to RCRA's use of the term. Nurad, 966 F.2d at 845, 22 ELR at 20939.

19. Nurad, 966 F.2d at 844, 22 ELR at 20939.

20. Id. at 845, 22 ELR at 20939.

21. See, e.g., Pantry, Inc. v. Stop-N-Go Foods, Inc., 796 F. Supp. 1171, 1178, 23 ELR 20250, 20254 (S.D. Ind. 1992), vacated by joint motion, 934 F. Supp. 295 (S.D. Ind. 1994) ("The Fourth Circuit persuasively considered and rejected [the district court's] 'strained' reading of the term 'disposal.'"). Nurad's policy language is cited frequently in the federal reports to support the passive reading of disposal. See, e.g., New York v. Almy Bros., Inc., 866 F. Supp. 668, 676, 25 ELR 20540, 20544 (N.D.N.Y. 1994); Lincoln Properties, Ltd. v. Higgins, 823 F. Supp. 1528, 1537 (E.D. Cal. 1992).

22. Nurad, 966 F.2d at 845-46, 22 ELR at 20939. In fact, one of the prior owners in the Nurad case had been instructed by its insurance carrier to empty the tanks more than 20 years earlier and this recommendation was ignored.

23. Id. at 846, 22 ELR at 20939.

24. United States v. CDMG Realty Co., 875 F. Supp. 1077, 1080, 25 ELR 20930, 20933 (D.N.J. 1995).

25. Id.

26. American Tobacco Co. v. Patterson, 456 U.S. 63, 68 (1982).

27. "The terms disposal, hazardous waste, and treatment shall have the meaning provided in § 1004 of the Solid Waste Disposal Act." 42 U.S.C. § 9601(29), ELR STAT. CERCLA § 101(29).

28. Id. § 6903(3), ELR STAT. RCRA § 1004(3).

29. See, e.g., CPC Int'l, Inc. v. Aerojet-General Corp., 759 F. Supp. 1269, 1278, 22 ELR 20022, 20025 (W.D. Mich. 1991); United States v. Price, 523 F. Supp. 1055, 1071, 11 ELR 21047, 21054 (D.N.J. 1981), aff'd, 688 F.2d 204, 12 ELR 21020 (3d Cir. 1982); United States v. Waste Indus., 734 F.2d 159, 14 ELR 20461 (4th Cir. 1984).

30. Even the Nurad court observed that the words defining disposal appear "to be primarily of an active voice." Nurad, 966 F.2d at 845, 22 ELR at 20939 (citing Ecodyne Corp. v. Shah, 718 F. Supp. 1454, 1457, 20 ELR 20172, 20174 (N.D. Cal. 1989)).

31. See Robert L. Bronston, The Case Against Intermediate Owner Liability Under CERCLA for Passive Migration of Hazardous Waste, 93 MICH. L. REV. 609, 615 (1994).

32. The textual rule noscitur a sociis literally means "it is known by its associates." See 73 AM. J. JURIS. 2d, Statutes § 213.

33. CDMG Realty, 875 F. Supp. at 1079, 25 ELR at 20932. The application of noscitur a sociis is certainly not an anomaly. The U.S. Supreme Court has long held that the doctrine is a valid, and necessary, statutory interpretation tool:

It is a rule laid down by Lord Bacon, that copulatio verborum indicat acceptationem in eodem sensu, the coupling of words together shows that they are to be understood in the same sense …. "In the construction of statutes, likewise, the rule noscitur a sociis is very frequently applied; the meaning of a word, and, consequently, the intention of the legislature, being ascertained by reference to the context[.]"

A second cannon of statutory interpretation supports the conclusion that disposal is to be limited to active conduct. Under the analogous rule of ejusdem generis, when general words follow a designation of particular subjects or classes of things, the general words will ordinarily be presumed to apply to the same class of things and include only things of the same kind, class, character, or nature as those specifically enumerated. See 73 AM. J. JURIS, 2d, Statutes §§ 214-216. The district court in United States v. Waste Indus., 556 F. Supp. 1301, 13 ELR 20286 (E.D.N.C. 1982), rev'd, 734 F.2d 159, 14 ELR 20461 (4th Cir. 1984), applied this doctrine to the definition of disposal to determine leaking to encompass unintentional but active conduct. The appeals court rejected this construction. Waste Indus., 734 F.2d at 159, 14 ELR at 20461. See also Bronston, supra note 31, at 616.

34. Although the CDMG Realty court was the first federal circuit court to apply noscitur a sociis to CERCLA's definition of the term disposal, the doctrine had been previously applied in this context. See Ecodyne Corp., 718 F. Supp. at 1457, 20 ELR at 20173.

35. 42 U.S.C. § 9601(22), ELR STAT. CERCLA § 101(22).

36. See also United States v. Petersen Sand & Gravel, Inc., 806 F. Supp. 1346, 1351, 23 ELR 20480, 20482 (N.D. Ill. 1992) (deciding whether passive migration of contaminates was disposal, court compared definitions of disposal and release and held that "[a] 'release' includes a 'disposal,' but a 'disposal' does not include a 'release.' In some way, therefore, 'release' must be more inclusive than 'disposal'"); Redwing Carriers, Inc. v. Saraland Apartments, Ltd., 875 F. Supp. 1545, 1560-63, 25 ELR 21319, 21325 (S.D. Ala. 1995), aff'd in part, rev'd in part, 94 F.3d 1489 (11th Cir. 1996) (noting that Congress must have intended a difference between a disposal and release).

37. Included within release is not only the gerund form of disposal, but also spilling and leaking, two words which are already subsumed within the definition of disposal and which gave credence to the proposition that disposal includes passive conduct. See Petersen, 806 F. Supp. at 1351 n.2, 23 ELR at 20482 n.2 ("it is not possible to interpret these two definitions without some degree of inconsistency … what is clear is that 'release' was meant to be more inclusive than 'disposal.'").

38. WEBSTER'S THIRD INTERNATIONAL DICTIONARY, Unabridged 1282 (Philip Babcock Gove & the Merriam-Webster Editorial Staff eds., 1986).

39. CDMG Realty, 96 F.3d at 715, 26 ELR at 21591.

40. Petersen, 806 F. Supp. at 1351, 23 ELR at 20482.

41. Id.

42. Pub. L. No. 99-499, 100 Stat. 1613 (1986).

43. 42 U.S.C. §§ 9607(b)(3), 9601(35), ELR STAT. CERCLA §§ 107(b)(3), 101(35).

44. The innocent landowner defense is predicated on purchasing the property "after the disposal or placement." 42 U.S.C. § 9601(35)(A), ELR STAT. § 101(35)(A) (emphasis added). Because "placement" may denote a one-time event of introducing contaminants into the property, the argument that a defendant need only demonstrate that the property was purchased after disposal or placement has facial appeal especially in light of the innocent landowner defense's use of the disjunctive. However, because the definition of disposal includes the term placing, the CDMG Realty court held that the innocent owner defense's mention of placement is merely redundant. CDMG Realty, 96 F.3d at 716n. 7,26 ELR at 21592. Few courts have elected to grapple with this issue.

45. Lansford Coaldale Joint Water Auth. v. Tonolli Corp., 4 F.3d 1209, 1221, 23 ELR 21534, 21539 (3d Cir. 1993) ("Congressional intent may be particularly difficult to discern with precision in CERCLA, a statute notorious for its lack of clarity and poor draftsmanship ….").

46. The question whether intermediate landowners are permitted to invoke the innocent landowner defense was not answered by the CDMG Realty court. The court did note, however, that the innocent landowner defense's apparent limitation to current owners supports the conclusion that disposal does not encompass passive migration because prior owners would be in a significantly worse position than current owners: "They would be liable for passive migration of waste even if they had no reason to know of the waste's presence." CDMG Realty, 96 F.3d at 717, 26 ELR at 21592. The Second Circuit has, however, unequivocally rejected the premise that the innocent landowner defense is not available to prior owners. Westwood Pharmaceuticals, Inc. v. National Fuel Gas Distribution Corp., 964 F.2d 85, 91, 22 ELR 20813, 20816 (2d Cir. 1992). In ABB Industrial Systems, the Second Circuit held that such interpretation of the innocent landowner defense "does not undermine the strength of the [CDMG Realty] court's other arguments, which we find persuasive." ABB Indus. Sys., Inc. v. Prime Tech., Inc., 120 F.3d 351, 356 (2d Cir. 1997).

47. The CDMG Realty court argued that if disposal includes passive migration, it "would be a rather complicated way of making liable all people who owned or operated a facility after the introduction of waste into the facility." CDMG Realty, 96 F.3d at 715, 26 ELR at 21592. Query whether there are facts under which a prior owner could escape liability even if disposal includes passive migration. For example, imagine that a drum of hazardous waste is buried at the site before the property is transferred to an interim owner, but nothing spills or leaks from the drum until years later after the property has been acquired by a subsequent purchaser. Does the interim owner escape liability because contaminants did not physically move into the subsurface outside the drum during his tenure or has the disposal of the hazardous substances continued during his tenure? In ABB Indus. Sys., 120 F.3d at 351, the court, in summarizing the CDMG's holding, made no mention of this aspect of the CDMG's opinion. Id. at 356. Certainly, however, the innocent landowner defense would rarely be applied if it was unavailable to those who owned property while previously disposed contaminants were merely migrating in the subsurface. See United States v. Petersen Sand & Gravel, Inc., 806 F. Supp. 1346, 1352, 23 ELR 20480, 20482 (N.D. Ill. 1992).

In Stanley Works v. Snydergeneral Corp., the court rejected the "innocent owner" defense outright and held that owners are liable for passive migration. The court stated that "while it is no doubt more likely that the innocent purchaser defense will succeed in circumstances involving passive disposal, this will not always be the case." Stanley Works v. Snydergeneral Corp., 781 F. Supp. 659, 664 (E.D. Cal. 1990). However, if passive disposal moves through the environment, there would be no circumstance where the innocent landowner defense would be applicable in such circumstances. See Petersen, 806 F. Supp. at 1352 n.3, 23 ELR at 20482 n.3.

48. CDMG Realty, 96 F.3d at 717, 26 ELR at 21593; see also B.F. Goodrich v. Betkoski, 99 F.3d 505, 515 (2d Cir. 1996).

49. CDMG Realty, 96 F.3d at 717, 26 ELR at 21593.

50. Redwing Carriers, Inc. v. Saraland Apartments, Ltd., 875 F. Supp. 1545, 1560, 25 ELR 21319, 21325 (S.D. Ala. 1995), aff'd in part, rev'd in part, 94 F.3d 1489 (11th Cir. 1996) ("A court's job is to find and enforce stopping points no less than to implement other legislative choices.").

51. CDMG Realty, 96 F.3d at 717, 26 ELR at 21593.

52. United States v. Petersen Sand & Gravel, Inc., 806 F. Supp. 1346, 1352, 23 ELR 20480, 20483 (N.D. Ill. 1992).

53. Nurad, 966 F.2d at 845, 22 ELR at 20939.

54. 42 U.S.C. § 9601(35)(C), ELR STAT. CERCLA § 101(35)(C) states:

If the defendant obtained actual knowledge of the release or threatened release of a hazardous substance at such facility when the defendant owned the real property and then subsequently transferred ownership of the property to another person without disclosing such knowledge, such defendant shall be treated as liable under section 9607(a)(1) of this title and no defense under section 9607(b)(3) of this title shall be available to such defendant.

55. Id. § 9603, ELR STAT. CERCLA § 103.

56. Id. § 9601(35)(C), ELR STAT. CERCLA § 101(35)(C).

57. CDMG Realty, 96 F.3d at 718, 26 ELR at 21593. The innocent landowner defense requires that parties conduct all appropriate inquiry before acquiring the property. The First Circuit held that a developer that acquired land where contamination was later discovered "would be held to an especially stringent level of preacquisition inquiry—on the theory that an acquiring party's failure to make adequate inquiry may itself contribute to a prolongation of the contamination." In re Hemingway Transp., Inc., 993 F.2d 915, 933, 23 ELR 20953, 20960 (1st Cir. 1993). Courts generally impose a stringent requirement on owners of land who attempt to invoke the defense. See United States v. A & N Cleaners & Launderers, Inc., 842 F. Supp. 1543, 24 ELR 21336 (S.D.N.Y. 1994) (requiring a landowner to inquire about the disposal practices of previous operators to satisfy the all appropriate inquiry standard).

58. CDMG Realty, 96 F.3d at 717, 26 ELR at 21593 ("And, many of these owners will pay for the pollution: if they disclose the fact that the land contains waste, their selling price will reflect the cost of CERCLA liability."). (Emphasis in original.)

59. United States v. Petersen Sand & Gravel, Inc., 806 F. Supp. 1346, 1353, 23 ELR 20480, 20483 (N.D. Ill. 1992); Bronston, supra note 31, at 638.

60. CDMG Realty, 96 F.3d at 717-18, 26 ELR at 21593.

61. Petersen, 806 F. Supp. at 1352, 23 ELR at 20483.

62. The distinction that Nurad involved leaking tanks and CDMG Realty dealt with leaching contaminants is irrelevant for purposes of a conflict among the circuits. The underlying rationale for both decisions is whether Congress intended CERCLA's use of the term disposal to include passive conduct.