Developers Beware of CERCLA Ruling

The United States District Court recently denied the innocent landowner defense to a developer because the developer moved contaminated soil. Lewis Operating Corporation purchased a property in Chino, California. Environmental due diligence was conducted by a reputable firm, and environmental concerns were not noted for the property. The land was purchased for the purposes of developing a mixed use commercial and residential project.

In 2003, during grading, a pile of munitions was uncovered and work was stopped to deal with the problem. It was found that in 1943 a US Army Air Force aircraft crashed at the site effecting about 3,000 square feet of the site. The crash site was to be “cut” soil, and the cut soil was then to be used as fill on another portion of the site. When the munitions were discovered the area was cordoned off immediately and local authorities were contacted. Visible ordnances were removed. Private contractors were then hired to remove the soil to another fill site which contained other fill material. The following month the developer contacted the Army Corps of Engineers to help clean up the crash site. The Corps assessed the developer’s eligibility for the Formerly Used Defense Sites Program and eventually declined to help. The developer then met with the California Department of Toxic Substances Control to discus cleanup. The DTSC approved a plan to remediate about 10,000 cubic yards of soil. The DTSC eventually removed all ordnances and explosives in the fill areas. Over 45,000 tons of soil were processed through a soil screening plant. In December 2004 the remediation was completed.

The developer sued the United States Department of the Army to recover about $3.2M in costs to clean up the crash site. The developer argued that the Army should bear all the clean up costs on the basis that the developer was not responsible because they were “innocent landowners” under a provision of the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). The only question left for the court was to decide if the developer was an innocent landowner under CERCLA. The court found that the Army did not “solely” cause the “release” of hazardous materials on the property because the developer actively spread contaminated soil from a 3,000 square-foot test site to more than 16 acres of land (fill sites). Thus the developer did not qualify as an innocent landowner.