Home » Case Summaries » 2011 » Team Enterprises, LLC v. Western Investment Real Estate Trust, 647 F.3d 901 (9th Cir. 2011)

 
 

Team Enterprises, LLC v. Western Investment Real Estate Trust, 647 F.3d 901 (9th Cir. 2011)

 

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Opinion

Summary

Plaintiff-Appellant Team Enterprises, LLC (Team), the operator of a dry-cleaning store, sued several entities,[1] including Defendant-Appellee R.R. Street & Co. (Street), the manufacturer of a device that distills perchlorethylene (PCE) from dry-cleaning wastewater. Team sought contribution for the cost of remediating PCE-contaminated land under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),[2] and under several state laws. The United States District Court for the Eastern District of California granted Street’s motion for summary judgment on all claims.[3] Team appealed the grant of summary judgment for four of those claims—two claims under CERCLA’s arranger liability provision,[4] a claim under California nuisance law,[5] and another claim under California trespass law.[6] The United States Court of Appeals for the Ninth Circuit reviewed de novo, and affirmed the district court’s grant of summary judgment on all four claims.

From 1980 to 2004 Team’s dry-cleaning store in Modesto, California utilized PCE, a hazardous chemical, in its dry-cleaning process, which generated PCE-laden wastewater. To recycle some of the PCE, Team used Street’s equipment, the “Puritan Rescue 800 filter-and-still combination equipment” (Rescue 800), which filters PCE from the wastewater and then discharges the remaining PCE-laden water into a bucket—which Team then routinely poured down a sewer drain, thus contaminating nearby land. The California Regional Water Quality Control Board ordered Team to pay for site remediation, and Team subsequently sought contribution for those costs from defendants, including Street. Street moved for summary judgment, and the district court granted Street’s motion.[7] Team appealed the district court’s grant of summary judgment of four claims, alleging Street: 1) arranged for PCE disposal under CERCLA because Street implicitly intended for dry cleaners to dispose of PCE, 2) arranged for PCE disposal under CERCLA because it controlled the PCE disposal process, 3) assisted in the creation of a chemical nuisance, and 4) committed trespass by contaminating the Modesto land.

The Ninth Circuit first addressed Team’s claims under CERCLA. The court began by noting that CERCLA imposes strict liability for environmental contamination upon four classes of “covered persons.”[8] Because CERCLA allows covered persons to seek contribution for cleanup costs,[9] Team could defeat summary judgment and seek contribution from Street if it established that a genuine dispute existed over whether Street arranged for the disposal of PCE.

Team first argued that Street was liable under CERCLA because Street intended for dry-cleaners to dispose of PCE. The court highlighted that the seller of a hazardous product has not necessarily displayed the intent required to have “arranged” for disposal of that hazardous product, even if the seller knows the product will be disposed in the future.[10] The court believed this echoed the “useful product” defense to arranger liability.[11] Augmenting both of these theories, the court held that the seller of a product which uses or generates hazardous waste may only be subject to CERCLA’s arranger liability if the seller entered the transaction with the specific aim to dispose of a hazardous substance.[12]

Team next argued that because Street’s design of the Rescue 800 did not eliminate all PCE from dry-cleaning wastewater, Street implicitly intended for users of the Rescue 800 to pour the remaining PCE down the drain. The Ninth Circuit failed to find such an implied intention in Street’s product design.[13] Team also argued that Street’s intent could be inferred from its failure to warn users about the risks of improper disposal. The Ninth Circuit disagreed, reasoning that such a holding would unreasonably expand the scope of arranger liability.

Team’s third CERCLA argument proposed that Street had incurred arranger liability because Street exercised control over the PCE disposal process. The Ninth Circuit held that Team must show that Street exercised actual control over the PCE disposal since Street had no legal authority to exercise control over Team. The court dismissed each of Team’s three arguments as insufficient to impute arranger liability to Street. First, the court found no arranger liability for the seller of a hazardous chemical who required buyers to transfer the chemical in a way that often caused spills.[14] Second, the court noted that the manual instructed disposal into a bucket, not the drain, so Street lacked actual control of Team’s chosen disposal method. Finally, the court reasoned that alleged dumping of PCE by Street employees at a different Team location had no bearing on whether Street actually controlled the PCE disposal in Modesto—where the contamination in question occurred.[15]

The Ninth Circuit next addressed whether Street could be liable under California nuisance law.[16] The court identified two avenues of potential liability: 1) when an individual affirmatively instructs the polluter to improperly dispose of the hazardous substance; and 2) when an individual assists in the creation of a nuisance by manufacturing or installing a faulty waste disposal system. The court found both theories of liability inapplicable to Street, noting that Street did not instruct Team to dispose of PCE into drains, sewers, or on the ground—only into a bucket. Additionally, the court observed that the Rescue 800 was a filtration system, not a disposal system.

Last, the court turned to Team’s claim under California trespass law.[17] The court noted that although California law recognizes “invasion by pollutants” as a species of trespass,[18] an unauthorized invasion is the sine qua non of a trespass claim.[19] Team failed to present evidence that either the Rescue 800 or PCE entered Team’s Modesto store without consent. Furthermore, if the instant contamination constituted trespass, then Team would have illogically trespassed against itself when its employees poured the PCE-laden wastewater down the drain.

In summary, the Ninth Circuit affirmed the district court’s award of summary judgment for defendants on both arranger liability theories under CERCLA, and on both theories under California’s nuisance and trespass laws.

In a special concurrence, Judge St. Eve of the Northern District of Illinois, sitting by designation, recommended an alternative plain-meaning construction of CERCLA’s arranger liability provision. Judge St. Eve noted that CERCLA only extends arranger liability to individuals who “owned or possessed” the hazardous substances[20] Because Street never owned or possessed the PCE at issue, Street should not qualify as an arranger under CERCLA. The concurring judge acknowledged, however, that Ninth Circuit precedent precluded such a plain-meaning approach in this case.[21]

Footnotes    (↵ returns to text)

  1.  In addition to R.R. Street & Co., defendants included several property management companies, as well as the manufacturers of several chemicals used in the dry-cleaning process.
  2.  Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 26 U.S.C. §§ 4611–4662, 42 U.S.C. §§ 6911a, 9601–9675 (2006).
  3.  Team Enterprises, LLC v. W. Inv. Real Estate Trust, No. CV F 08-0872 LJO SMS, 2010 WL 3133195, at *18 (E.D. Cal. Aug. 9, 2010).
  4.  42 U.S.C. § 9607(a)(3) (2006) (rendering liable “any person who . . . arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances”).
  5.  See Cal. Civ. Code § 3479 (West 2012) (defining “nuisance”).
  6.  See Capogeannis v. Superior Court, 15 Cal. Rptr. 2d 796, 799 (Cal. Ct. App. 1993) (defining trespass as “an invasion of the interest in the exclusive possession of land”) (citations and internal quotation marks omitted); Martin Marietta Corp. v. Ins. Co. of N. Am., 47 Cal. Rptr. 2d 670, 681 (Cal. Ct. App. 1996) (concluding that “unauthorized entry” is the essence of a cause of action for trespass) (citations omitted). Under California law, wrongful “invasion by pollutants” may also constitute trespass. Martin Marietta Corp., 47 Cal. Rptr. 2d at 682.
  7.  Team Enterprises, LLC, 2010 WL 3133195, at *18.
  8.  See Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. § 9607(a) (2006). “Covered persons” includes persons or entities who “arrange[] for the disposal or treatment” of hazardous substances. Id. § 9607(a)(3).
  9.  See id. § 9613(f) (“Any person may seek contribution from any other person who is liable or potentially liable under section 9607(a) . . . during or following any civil action under section 9606 . . . [or] 9607 of [title 42].”).
  10.  See Burlington N. & Santa Fe Ry. Co. v. United States, 129 S. Ct. 1870, 1879 (2009) (finding that the ordinary meaning of the word “arrange” implies purposeful action, and individual must take intentional steps towards the disposal of hazardous substances to be subject to arranger liability).
  11.  Id. at 1878–79. See Freeman v. Glaxo Wellcome, Inc., 189 F.3d 160, 164 (2d Cir. 1999); Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313, 1318–19 (11th Cir. 1990) (noting that the “useful product” defense allows sellers of hazardous products to avoid arranger liability by showing that the product was sold for a useful purpose, rather than an attempt to avoid liability for hazardous waste).
  12.  This burden of proof rests with the plaintiffs. Team Enterprises, LLC v. W. Inv. Real Estate Trust (Team), 647 F.3d 901, 909 (9th Cir. 2011).
  13.  At worst, the court said, the design indicated that Street was “indifferent to the possibility that Team would pour the remaining PCE down the drain.” Id.
  14.  Burlington N. & Santa Fe Ry. Co., 129 S. Ct. at 1875, 1883–84.
  15.  The alleged dumping by Street occurred at a different Team dry-cleaning store located in McHenry, California. Team, 647 F.3d at 911.
  16.  See Cal. Civ. Code § 3479 (West 2012).
  17.  See Capogeannis v. Superior Court, 15 Cal. Rptr. 2d 796, 799 (Cal. Ct. App. 1993).
  18.  Martin Marietta Corp. v. Ins. Co. of N. Am., 47 Cal. Rptr. 2d 670, 682 (Cal. Ct. App. 1995).
  19.  Id. at 681.
  20.  Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. § 9607(a)(3) (2006).
  21.  See Pakootas v. Teck Cominco Metals, Ltd., 452 F.3d 1066, 1082 (9th Cir. 2006).
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