A recent decision from the United States District Court for the Northern District of Illinois has provided a new perspective on who could be held liable for a release of hazardous substances as an “owner” under CERCLA. See United States v. Saporito, No. 07-C-3169 (N.D. Ill. Feb. 9, 2010). In a February 9, 2010 decision, the Honorable Rebecca R. Pallmeyer found an owner of equipment leased for use in an electroplating operation to be a “current owner” within the meaning of CERCLA, which resulted in his being liable for the $1.5 million U.S. EPA had expended to remove hazardous liquids and sludge from the former site of the electroplating business.
Crescent Plating Works (“Crescent Plating”) was an electroplating business located on the northwest side of Chicago which operated at least two electroplating lines. Beginning in the late 1990s, Crescent Plating began receiving complaints about releases of hazardous waste allegedly caused by the facility. Between 2001 and 2003, inspectors from the Chicago Department of Environment (“DOE”) and the Metropolitan Water Reclamation District observed spillage and leakage from one of the electroplating lines and from broken pipes at the plant. The inspectors also noted that the concrete floor of the plant was badly cracked and corroded and that the soil beneath the floor was visible. In addition, owners of the neighboring building reported seepage, which appeared to be migrating from Crescent Plating. Eventually, in 2004, the U.S. EPA authorized a removal action, during which it was discovered that two large areas of the concrete floor had corroded to the point of exposing the soil. The Agency also found many vats, tanks, and containers on site holding plating sludges and liquids.
In 2007, the United States brought a CERCLA cost recovery action against Paul Carr and James Saporito. Carr, who held a high management position at Crescent Plating and may have been an owner of the overall operation, eventually settled with the United States. Saporito, however, whose dealings with Crescent Plating included at least his purchasing and leasing back to Crescent Plating certain equipment used in the electroplating process, denied he was liable for the removal costs the government had incurred and refused to settle. The United States moved for summary judgment against Saporito, contending that he was liable under CERCLA as a “facility owner at the time of the cleanup based on his undisputed ownership of equipment used in the plating process.” Saporito, slip op. at 15.
The District Court agreed, concluding that Saporito qualified as an “owner” of a facility under CERCLA and was therefore jointly and severally liable for the removal costs the government sought to recover. In arriving at this conclusion, the Court noted that the definition of “facility” in CERCLA included “equipment” and the cost recovery provisions of §107(a) of CERCLA, 42 USC §9607(a), impose joint and several liability on an owner of a “facility” for “all costs of removal or remedial action incurred by the United States Government . . . .” The court stated, “There is no dispute that both the Crescent Plating operation and the plating lines themselves each constitute a ‘facility’ under CERCLA; the first is a ‘building’ and the second is ‘equipment,’” Id. at 10. The court rejected Saporito’s argument that one who leases equipment to someone who then uses it to pollute cannot be liable as an owner under CERCLA, relying on a case in which the court held the federal government responsible for cleanup costs based on the government’s concession that “because it ‘owned and leased the components most important to’ the operator’s process, it was an owner under CERCLA.” Id. at 16. The court found that this interpretation comported with the ordinary meaning of “owner,” reasoning:
[A]n owner of equipment necessary to the operation of the plating line is no less an “owner” than a partowner of land…. In fact, the equipment owner is arguably more culpable: a landowner might not inquire into how her land is being used, but an equipment owner is likely to know exactly what her equipment can do.
Id. at 16. The court dismissed concerns that its interpretation would “[sweep] too broadly,” id., finding determinative the fact that Saporito “owned actual components of the plating line.” [Emphasis original.]
The court went on to reject a number of defenses raised by Saporito, as well as to dismiss his multitudinous counterclaims, which the court found to be “sketchy and conclusory.” Id. at 28.
This decision appears to expand dramatically the universe of those who may be considered “Potentially Responsible Parties” under CERCLA by including lessors of equipment used by businesses which may be experiencing releases of hazardous substances. Whether this decision is a harbinger that other courts will find equipment lessors liable as owners of a facility under CERCLA, however, is uncertain. First, the court in Saporito did not address the issue of whether the “facility” that Saporito owned, the equipment in one of the plating lines, was distinct from the “facility” that was the subject of the government’s removal action, the plant where Crescent Plating conducted its business. Also, the legal authority the court relied on to reach its decision that Saporito was an “owner” was not compelling, as it was based on a concession rather than considered legal reasoning. Accordingly, we will monitor the docket in this matter to see if an appeal is filed. In the meantime, those in the equipment leasing business may want to review the terms of their equipment leases to determine if they address this potential liability risk. The terms to be reviewed include, but should not be limited to, provisions on the lessee’s insurance obligations, the lessee’s indemnity obligations, and the lessee’s obligations to employ best practices.