In addition to the Fourth Circuit’s decision in PCS Nitrogen Inc. v. Ashley II of Charleston (4th Cir. 2013) discussed in the previous post, another circuit court, the Ninth Circuit Court of Appeals, also considered whether a purchaser qualified as a BFPP in Voggenthaler v. Maryland Square LLC (9th Cir. 2013). The Voggenthaler case involves a release of trichloroethylene (“PCE”) from a dry cleaner that extended offsite through the groundwater under a residential neighborhood. The dry cleaner operated from 1969 to 2000 and owners and operators from that period were identified as potentially responsible parties. The owner at the time of the filing, Maryland Square LLC (“Maryland Square”) which acquired the site in 2005 after the dry cleaner ceased operations, was also named as a potentially responsible party. Maryland Square asserted that the release occurred before it acquired ownership of the property as the dry cleaner had ceased operations and that it otherwise qualified as a BFPP.
At trial Maryland Square submitted an affidavit in support of its defense, but the trial court rejected it as it was not notarized. The Ninth Circuit determined that the trial court should have allowed Maryland Square LLC to remedy the oversight and remanded the case to the trial court. The Ninth Circuit though also considered the contents of the affidavit and commented on whether Maryland Square LLC qualified as a BFPP. The Ninth Circuit first assessed whether Maryland Square LLC met “all appropriate inquiries.” The affidavit indicated that the seller to Maryland Square disclosed the PCE contamination during sales negotiations and that Maryland Square LLC hired an environmental consulting firm to review and report on the Nevada Department of Environmental Protection (“NDEP”) files concerning the site. The court notes that the affidavit does not otherwise describe how Maryland Square satisfied “all appropriate inquires.”
Additionally, the Ninth Circuit found that Maryland Square failed to meet “reasonable steps” requirement to prevent further harm: “Maryland Square failed to limit human and environmental exposure to a contamination already present. The submission acknowledges Maryland Square purchased the Site with knowledge of the contamination, and subsequently demolished the building, an action that exposed the contaminated soil to the elements, but identifies no steps that it took to remove the contaminated soil or limit the spread of PCE.” The court goes on to note that NDEP had to remove the contaminated soil six years after Maryland Square demolished the building exposing the contamination.
While the Voggenthaler court did not adopt the Fourth Circuit’s standard of appropriate care, Maryland Square did not appear to take “all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would have taken in light of all relevant facts and circumstances” as applied in Ashley II. Demolishing the building which allowed precipitation to come in contact with the contaminated soil and mobilize additional PCE for six years does not appear to be reasonable and prudent under the circumstances. Additionally, while the Ninth Circuit did not use the words “Phase I environmental site assessment” in its analysis of all appropriate inquires, if Maryland Square had performed a Phase I meeting the ASTM standard applicable at the time, E1527-05, one would have expected the affidavit to reference it and the Phase I to have been attached to the affidavit. With Maryland Square apparently having no pre-acquisition Phase I and exposing the contamination in the subsurface by demolishing the building, the Voggenthaler court’s decision that Maryland Square is not a BFPP is difficult to debate.