The US District Court for the Northern District of Illinois recently held that an owner of industrial equipment which was leased to the operator of a plating facility was strictly liable as the current owner of a facility under Section 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act 1980 (commonly known as 'Superfund').(1)
In Saporito the federal government sought to recover over $1.5 million in clean-up costs at the site of a former plating facility. The government sought summary judgment against Saporito on the grounds that he was the current owner of a facility within the meaning of Superfund "based on his undisputed ownership of equipment used in the plating process". Saporito opposed the motion on the grounds that: (i) no evidence existed that the equipment which he had owned and leased to the operator was connected to the release or threatened release of hazardous substances; and (ii) the equipment had been leased to the person who had actually operated the plating facility.
The court rejected both arguments, holding that Superfund is a strict liability statute which requires no proof of a connection between the property owned by the defendant and the incurrence of Superfund clean-up costs. The court, relying on ELF Atochem North American Inc v United States,(2) held that the plating line owned by Saporito was "no less a facility than the land on which it operated". The court further observed that just as Superfund extends liability to a landowner that may be unaware of the polluting activities of its lessee, it similarly extends to an owner of equipment "whose lessee is using the equipment in a similar manner".
Saporito argued that as the owner of a Superfund facility (ie, a current owner and potentially responsible party), he should be entitled to a defence for owners that protect a security interest. The court also rejected this argument, finding that Saporito's ownership interest was not "primarily to protect a security interest", which is a necessary element of such defence.
If upheld on appeal, the court's ruling could significantly broaden the scope of Superfund liability. Superfund's broad definition of 'facility' explicitly encompasses equipment; thus, this aspect of the ruling was not controversial. However, Superfund holds liable only the current owner of a facility "from which there is a release, or a threatened release, which causes the incurrence of response costs, of a hazardous substance".(3) Thus, the court appeared to err in holding that the government did not have to establish that the equipment owned by Saporito (ie, the plating line) was connected to the release or threatened release of a hazardous substance, giving rise to the costs which the government sought to recover. The court confused the fact that once liability has been established, Superfund holds the parties strictly liable with the requirement that to establish liability based on ownership of a facility, the plaintiff must show that such facility caused the release or threatened the release in question. Once a party qualifies as liable under Section 107(a), there is no need to prove negligence or fault. However, the plaintiff must still link the facility to the release or threatened release which gave rise to the clean-up costs.
It is predicted that unless this case is resolved out of court, the decision will be reversed on appeal. The court in this case was likely influenced by the fact that Saporito had at certain times been involved in the plating operation and thus was not merely an owner of equipment leased to an unconnected third-party operation. Nevertheless, and despite the the court's flawed reasoning, the Saporito decision clarifies that owners of industrial equipment leased to third-parties should consider taking steps to mitigate potential Superfund liability, especially in instances where a plaintiff can establish that the equipment in question contributed to the release of hazardous substances which caused contamination. In such instances the owner of the equipment, even if not involved in the plant's operations, could be held liable as the current owner of a Superfund facility under the proper reading of Superfund's strict liability scheme.