Third Circuit Clarifies CERCLA “Operator” Liability

In Litgo New Jersey, Inc. v Commissioner of New Jersey Department of Environmental Protection, 2013 WL 3985003 (3d Cir. August 2013), the Third Ciruit Court of Appeals discussed the issue of when a party who has liability as current owner also has liability as current operator. While both the current owner and the current operator can be strictly liable under CERCLA for response costs, the issue has signifcance for allocation among responsible parties.

Appellants were parties who had purchased contaminated property with the intent to develop the proerty. They engaged in various investigation and remediation activities and sued a prior owner and the United States government to recover response costs. After a trial, the court found that the current owner and operator was liable for 70% of the costs. On appeal, one of the arguments raised by the appellants was that, while they could have liability as current owner, they could not have liability as current operator.

Appellants’ argument was based on language in the Supreme Court’s decision in United States v Best Foods, 524 U.S. 51 (1998), which could be read to indicate that to be liable as an operator one needs to be involved in activities at site that result in liability (such as generation and disposal of hazardsous waste). The Third Circuit rejected that interpretation, concluding that anyone who manages or conducts the affairs of a facility is an operator. Applellants argued that this would lead to unfair results by adding to the liability of “innocent” purchasers. The court, however, explained that the result was compelled by the language of CERCLA, which distinguishes between persons who have liability because they operated the facility at the time of disposal of hazardous substances and persons who are the current operator, without regard to whether they are there is any current disposal activity.

The decision helps clarify the meaning of the Best Foods decision. The issue often comes up in the context of lenders, who do not take title, but engage in activities that could be construed as operation. The common question, which made sense in light of Best Foods, was whether they could be liable as operator if their activities had nothing to do with hazardous substances. While most answered that question in the affirmative, this decision makes that more clear.