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United States v. Manzo

279 F. Supp.2d 558 (D. N.J. 2003)

ENVIRONMENTAL LIABILITY—A court analyzes the criteria for asserting a divisibility defense in a hazardous waste cleanup case.

The United States Environmental Protection Agency (EPA) and the New Jersey Department of Environmental Protection (NJDEP) investigated a sixty acre site and found a number of areas contaminated with hazardous substances. The two agencies divided the site into five different areas for investigation. Within one of those areas was discovered “seven waste oil lagoons ‘the Lagoons,’ a filter-clay pile and over one hundred drums for waste storage.” In another area, they found extensive PCB and lead contamination. The remaining areas contained contamination that resulted, “at least in part, from uncontrolled runoff and discharges from the area in which the Lagoons were located (the Uplands).” The owner of the site was aware of the filter-clay pile, the drums, and the Lagoons when he purchased the land. “He also knew that the Lagoons contained waste oil and sludge and that oil and tar were spilling out of some of the drums.” During his ownership, both he and a related party “engaged in earth-moving activities on the Site.”

The government filed an action against the owner, a related company and other parties under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). Cross claims and a third-party complaint for contribution were then filed. The State of New Jersey then filed suit to recover its response costs pursuant to the New Jersey Spill Compensation and Control Act. That suit was consolidated with the CERCLA action.

In an earlier visit to the Court, it was held that all of the defendants were jointly and severally liable for response costs, but that a bench trial was necessary as to the current owner’s divisibility defense to joint and several liability.

Prior to the current property owner acquiring the site, including the Uplands, it was owned and operated for an oil refining and a road-oiling business. One of the parties involved in that operation owned a factory about two miles away where it would receive waste motor oil mixed with water from various companies. It would process that material and produce oil sludge and acid sludge. The byproducts of this refining business “included water mixed with traces of oil and caustic silicate, oil sludge, acid sludge and filter clay.” Those products were then sent to the Uplands where one prior company created the Lagoons for disposal and storage. The Lagoons were arranged in a way that waste water would flow into the ground and down-grade toward other parts of the site. It was not uncommon for some of the Lagoon walls to break, usually due to heavy rain, causing spills of varying magnitudes. The operator’s employees tried to maintain the Lagoons and repair breaches. Apparently, they were successfully with respect to five of the seven Lagoons, but not as to the other two.

An unrelated individual then purchased the land from these processing companies. It appears that he did not touch the Lagoons during his ownership and that the Lagoons did not overflow during that time. Two years later, the property was sold to the current property owners.

The current owners, after purchasing the property, broke through and leveled four of the Lagoons after mixing their contents with sand and gravel. They then used some of the resulting material to build roads to their landfill. They also used some to cover the top of their landfill. The situation at the property deteriorated, including by reason of the property owner having “moved and possibly punctured some of the drums during the excavation of the Lagoons.” Clearly, some of the drums leaked into the ground and many were crushed and buried.

With that as background, the current property owner and its related entities put forth a divisibility defense claiming, in the alternative: “(1) they [were] not responsible for any of the harm at the Site…; (2) at most, one-eleventh of the harm [was] attributable to them…; (3) the harm [could] be divided on the basis of the volume of floating oil remaining in the Lagoons when [they] first purchased [the lot with the Lagoons]...; and (4) they [were] not liable for any of the harm to [some of the geographic locations] within the Site.”

To prove divisibility, a defendant must establish that none of the hazardous substances found at a site are fairly attributable to them. With that in mind, the Court rejected the current property owner’s contention that only water escaped from the Lagoons during their ownership because that was not supported by the evidence. The “evidence that the property owner presented that natural attenuation bio-degradation may have reduced contamination on certain parts of the Site” was also rejected because the proofs showed that the processes only reduced the contamination, but did not eliminate it. Consequently, it was clear to the Court that the current property owner had some responsibility and was not entitled to a zero percent apportionment.

The property owner’s theory that it was only liable for one-eleventh of the remediation costs was based on evidence of various reported incidents of contaminated material overflowing the Lagoons. The Court did not accept that theory because it ignored evidence that contaminated liquid and sediments were constantly migrating throughout the site; that the property owner and its affiliates may have physically transported contaminated material through their earth-moving activities; and contaminated material also leaked from the drums and filter-clay pile.

“Courts have held that single harms can be divided on a volumetric basis where two or more defendants conducted similar activities to produce the same contaminants.” Unfortunately for the property owner in this case, this apportionment method “can be neither ‘theoretical nor arbitrary,’ [because] volumetric apportionment is not possible where there is insufficient evidence to determine the volume of waste each defendant contributed. It also is inappropriate where independent factors, such as relative toxicity, migratory potential, or synergistic capacities of hazardous substances, might have had a substantial effect on the harm to the environment.” The Court found six flaws in the basis upon which the property owners argued the applicability of the volumetric apportionment theory to this case.

Lastly, the Court rejected allocating liability on a geographic basis because showing that the current property owners owned “only a portion of the site alone [was] insufficient to establish that the harm is capable of apportionment.” Further, the geographic apportionment method did not address the defendant’s “and its affiliate’s liability as transporters in the conduct of their earth-moving activities which, when combined with natural drainage patterns at the Site, contributed to the spread of contaminants throughout the Site.”


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