On November 17, 2021, the Court of Appeals for the First Circuit affirmed a decision of the lower court that the Puerto Rico Industrial Development Company (PRIDCO) was prima facie liable under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et seq., that it could not avail itself of the contiguous property owner defense, and that the selected response action was not arbitrary or capricious.  The decision is particularly noteworthy in that the only identified contamination was in the groundwater under PRIDCO’s property, with no evidence that the source of the contamination was any activity on PRIDCO’s property.  Nevertheless, the Court held that because the movement of groundwater constitute a continuous “release,” CERCLA liability attached.

PRIDCO owns property that is located in the southeastern coastal area of Puerto Rico in the Municipality of Maunabo.  PRIDCO leased several buildings on the Property to tenants, who have used the buildings for a variety of manufacturing industries.  Maunabo Well #1 is located downgradient and next to the southern border of the Property.  Tetrachloroethene (“PCE”), trichloroethene (“TCE”), and cis-1,2-dichloroethene (“cis-1, 2-DCE”) were found both in the tap water of users of the well and in the groundwater associated with the well.  The EPA has classified these volatile organic compounds as hazardous substances under CERCLA. 

The EPA added the Maunabo Area Ground Water Contamination Superfund Site (Site) to the National Priorities List in 2006.  After completing its Final Remedial Investigation/Feasibility Study Report, the EPA issued its Record of Decision (ROD), which selected the air sparging remedy for the PRIDCO plume.  

The EPA determined that the Site “contained three distinct plumes of contaminated groundwater.”  One of these plumes is located under PRIDCO’s property and contains TCE and cis-1, 2-DCE.  Although this plume is located in the groundwater under PRIDCO’s property, no sampling results have shown these contaminants in the property’s soil. 

After initiating a lawsuit against PRIDCO for recovery of its response costs, the United States sought summary judgment as to PRIDCO’s liability.  The parties also filed cross-motions for summary judgement as to the applicability of PRIDCO’s claimed statutory innocent landowner defense and contiguous property owner exception and the propriety of the selected removal and remedial actions.   Ultimately, the district court granted summary judgment in favor of the government, finding that it had met its burden of proving PRIDCO’s prima facie liability.  The court also ruled that PRIDCO had failed to prove the innocent landowner defense or the contiguous property owner exception or that the ROD was improper.  Subsequently, the district court entered an amended final judgment, which awarded the government approximately $5.5 million in past response costs and declared that the government was also entitled to future response costs as well.

On appeal, PRIDCO contested the district court’s ruling on liability, the applicability of the contiguous property owner exception, and the remedy selection. 

Prima Facie Liability

To be liable under CERCLA, the United States was required to establish that (a) the property constituted a facility as defined by 42 U.S.C. § 9601 (9); (b) PRIDCO was the owner of the facility; (c) there was a release, or threatened release, of a hazardous substance’ from the facility; and (d) as a result, the United States incurred response costs not inconsistent with the national contingency plan.  The Court first noted that the Property met the statutory definition of facility and that PRIDCO was the owner.  Therefore, for liability purposes, the government simply had to prove that there was a “‘release” of hazardous substances from the property.  By contrast, the Court noted that if liability had been premised on one of the three other classes of potentially responsible parties (i.e., past owners and operators, arrangers, and transporters), then the government would have been required to prove that there had been a “disposal.”

CERCLA broadly defines a “release” as “any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment.” 42 U.S.C. § 9601 (22).  A “release” includes passive migration whereas a disposal does not.  Applying the statutory definition to the facts of the case, the Court thus concluded that there had been a release from the property because groundwater flows, and in this case the flowing groundwater “is contaminated with at least two hazardous substances.”  Contaminated soil, or even the identification of a source, is not required.  Rather, the statute simply requires that the contaminant “has come to be located” on the property.   Because the property’s groundwater was contaminated, the Court affirmed the lower court’s holding that PRIDCO was prima facie liable. 

Contiguous Property Owner Exception

The Court also affirmed the district court’s ruling that PRIDCO had failed to meet its burden of proving the contiguous property owner exception to CERCLA liability, which allows property owners to avoid liability if the source of the contamination is a contiguous property.  The Court noted that this exception required that PRIDCO meet eight statutory requirements, one of which is that it not be affiliated with any other person who is potentially liable for the release at issue.  The Court found that PRIDCO had failed to meet its burden because PRIDCO had failed to identify the actual source of the contamination.  Because PRIDCO could not prove the cause, it could not prove that it was unaffiliated with whoever caused the release.

Remedy

Finally, in approving the remedy, the Court also ruled that the government adequately considered alternative remedies, the selected remedy was not arbitrary or capricious, and the district court properly limited its review of the remedy to the administrative record.   

This case highlights the difficulties that current owners of contaminated property have in escaping CERCLA liability even when the property is not the source of the contamination.  And while there are limited defenses available to parties who did not spill or discharge hazardous substances, there are significant hurdles to overcome in being able to take advantage of them. 

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