Bob's Beverage, Inc. Ullman Oil, Inc. v. Acme, Inc. James Bares, Individually and in His Capacity as President and Shareholder of Acme, Inc., Albatross, Ltd. Benjamin H. Merkel Henry Merkel
Docket: 00-3045
Court: Court of Appeals for the Sixth Circuit; September 4, 2001; Federal Appellate Court
Bob's Beverage, Inc. and Ullman Oil, Inc. (Appellants) appealed the district court's ruling that found no liability against Albatross, Ltd. and the Merkel Defendants (Benjamin H. Merkel and Henry Merkel). The Appellants contended that the court erred by denying their cost recovery claim against the Merkel Defendants. The U.S. Court of Appeals for the Sixth Circuit affirmed the district court's decision.
The case originated from property at 9812 East Washington Street in Chagrin Falls, Ohio, purchased in 1960 by Raymond and Nancy Hitchcox, who constructed a warehouse and septic system on the land. In 1974, they leased the property to Acme, Inc., led by James Bares, which operated until around 1980. Acme's manufacturing used hazardous chlorinated solvents and caustic soda, initially discharging wastewater into the septic system. Over time, Acme transitioned to discharging untreated wastewater directly onto the property’s surface.
Additionally, Acme stored hazardous waste materials, including spent solvents, in leaking 55-gallon drums outside the facility. These materials contaminated the soil and groundwater, identified as a hotspot for chlorinated volatile organic compounds (CVOCs) during an EPA investigation. Following the cessation of operations, Acme abandoned the leaking drums on the property.
On September 3, 1981, Huntington National Bank acquired the Property and sold it to the Merkel Defendants around August 13, 1982. The Merkel Defendants did not perform any environmental investigations prior to their purchase, during which they noticed approximately twenty-five 55-gallon drums on the site. They used the Property for automobile storage and found an inoperable septic system that did not meet government standards. Two years later, while upgrading the system, they discovered a greasy film in the septic tank, indicating improper prior use for waste disposal. The system had been modified to bypass dry wells and discharge directly into a stream. No environmental assessments were conducted during the septic upgrade, although soil was disturbed in the area where the drums had been stored.
In September 1987, the Merkel Defendants removed six drums of waste oil. They sold the Property to Bob's Beverage, Inc. in May 1988, which conducted no environmental assessment despite owning adjacent land. Ullman Oil, Inc. began operating the Property shortly thereafter, also unaware of subsurface fuel oil contamination. In November 1988, contamination with CVOCs and heavy metals was detected in the drinking water of the Property and nearby areas, prompting Ullman to notify the Ohio EPA and provide alternate water supplies. Bob's Beverage entered a Consent Order with the Ohio EPA for a Remedial Investigation and Feasibility Study, which has been completed but not yet resulted in a final remedy.
The Appellants filed a complaint on March 12, 1997, against the Merkel Defendants for violations of CERCLA. Following a denied motion to dismiss and cross claims against the Acme Defendants, all parties sought summary judgment, which the district court denied due to unresolved factual issues regarding hazardous waste disposal. A trial on the CERCLA claims occurred from February 22-24, 1999, leading to a December 1, 1999 judgment against the Acme Defendants for $411,467.44, while the court found the Merkel Defendants not liable. The Appellants subsequently appealed this finding.
On appeal, the Appellants contend that the trial court wrongly denied their cost recovery claim against the Merkel Defendants. The appellate court reviews legal conclusions and mixed questions of fact and law de novo, while factual findings by the district court are reviewed for clear error. To establish a prima facie cost recovery claim under CERCLA 107(a), the plaintiff must demonstrate: 1) a release or threatened release of hazardous substances at a facility; 2) that this release caused the plaintiff's response costs; 3) the response costs were necessary and consistent with the National Contingency Plan; and 4) the defendant is a potentially responsible party (PRP).
The district court found, and it was undisputed, that the Property qualifies as a 'facility' under CERCLA. However, it concluded that any release during the Merkel Defendants' ownership did not lead to the Appellants' response costs. The Appellants argued that CERCLA does not require proof of actual environmental harm at the liability stage, referencing relevant case law. Nonetheless, the court clarified that the inquiry focuses on whether the defendant's actions caused harm to the plaintiff via response costs. The court found no evidence linking any release by the Merkel Defendants to an increase in the Appellants' costs, noting that the release of CVOCs might have even slightly reduced their response costs.
As the Appellants failed to show that the Merkel Defendants' actions affected their costs, they could not prove their cost recovery claim, leading to an affirmation of the district court's decision. Even if causation could be established, the Appellants would not prevail under the fourth prong of cost recovery, as their arguments regarding Disposal were unsuccessful. The definition of PRPs under CERCLA includes current owners/operators, those who owned or operated a facility during disposal, generators, and arrangers of hazardous waste disposal.
Appellants allege that the Merkel Defendants are liable under CERCLA for disposals of hazardous substances at a facility they owned. They claim two instances of disposal: first, that the replacement of a septic tank constituted a disposal, and second, that the failure to remove known contaminants resulted in passive migration of chlorinated volatile organic compounds (CVOCs), which also amounted to a disposal. Under CERCLA, a disposal involves active human conduct leading to hazardous substance entry into the environment, distinct from a broader definition of release. The court clarified that cross-contamination by a former owner/operator can be considered a disposal.
The court found the Appellants’ claims unsupported. The first claim regarding the septic tank replacement was dismissed due to a lack of evidence showing that the Merkel Defendants caused additional contamination, as CVOCs were already present. The second claim regarding passive migration was also rejected, referencing a prior ruling that passive migration does not meet the definition of disposal under CERCLA. Consequently, the district court's finding of no liability for the Merkel Defendants was affirmed. The Appellants based their claims on 42 U.S.C. § 9607(a), as they were deemed innocent landowners under 42 U.S.C. § 9607(b)(3).
