After a corporate landowner did as the law required by paying its cleanup costs for violation of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), it thought it was off the hook. But the district court ordered the landowner to pay the cleanup costs twice—once to the general contractor and once to a subcontractor. Fortunately, the Second Circuit reversed in Price Trucking Corp. v. Norampac Industries, Inc., 2014 WL 1012835 (2d Cir. Mar. 18, 2014). The Second Circuit’s opinion is sure to leave property owners relieved but subcontractors concerned.
Norampac Industries, Inc., owned a parcel of land in Erie County, New York. Testing revealed that contaminants exceeded maximums set by the New York Department of Environment Conservation (“DEC”), and Norampac agreed to investigate and remedy the contamination. In October of 2007, Norampac entered into a contract with AAA Environmental, Inc., to conduct the cleanup work. Later, AAA Environmental subcontracted with Price Trucking Corporation to transport and dispose of the contaminated soil. All parties agreed that Price Trucking completed the work in accordance with all contracts, laws, and regulations.
Although Norampac fully paid AAA Environmental for its work at the property, AAA Environmental did not do the same for its subcontractor, Price Trucking. Unable to collect from AAA Environmental, Price Trucking sued Norampac. The Second Circuit phrased this issue of first impression: “Whether CERCLA creates direct liability between owners and subcontractors with respect to cleanup on a CERCLA site when the owner has paid a general contractor in full for the subcontractor’s work.” Id. at *3. Norampac argued that CERCLA liability is satisfied when the cleanup is complete and when the landowner has made its payments pursuant to the applicable contracts. Price Trucking alternatively argued that the liability on the part of the landowner persists until all parties who contribute to a cleanup operation are paid for the costs of their work. The Second Circuit agreed with Norampac.
The court reviewed the purposes of CERCLA: “(1) to encourage the timely cleanup of hazardous waste sites; and (2) to place the cost of that cleanup on those responsible for creating or maintaining the hazardous condition.” Id. CERCLA accomplishes these purposes by imposing liability on a wide range of individuals and by holding these individuals strictly liable for violations. Accordingly, the court held, “CERCLA’s purposes are served when landowners and others who profit from hazardous activities are made to bear the costs of accidents on their land.” Id. at *6. Once the cleanup is complete and the costs of cleanup are paid, “liability under the statute is discharged.” Id. “There is no need—and CERCLA is not designed—to hold the responsible party perpetually liable as a surety in any dispute relating to the cleanup between or among contractors, subcontractors, employees, or suppliers.” Id.
This case provides comfort to individuals or businesses who are strictly liable under CERCLA’s regime—they are responsible for paying the cleanup costs once but only once. As the court stated, “CERCLA does not create an additional system of insurance for the benefit of all contractors, subcontractors, employees, or suppliers who work on a cleanup operation.” Id. at *8. But the court declined to decide whether CERCLA permits cost-recovery actions by private contractors and subcontractors. Although the court left the issue to another day, it did note that other courts addressing the issue have held that contractors could bring cost-recovery actions under certain circumstances not present in the instant dispute.