In a ruling last month (California Department of Toxic Substances Control v. Jim Dobbas, Inc., et al), the United States District Court for the Eastern District of California held that the Department of Toxic Substances Control (DTSC) was an "operator" under CERCLA Section 107(a)(2), and thus may be held liable for costs surrounding a botched site cleanup.
This ruling means those private parties whose liability under CERCLA arises from sites where government agencies have taken an "operator" role may be able to obtain contribution or cost recovery from that government agency. However, that agency must have demonstrated inadequate or mismanaged remediation efforts.
The site is a former wood preservation operation located in Elmira, California. Amongst others, DTSC's actions over the last 30 years included efforts to repair and restart the groundwater extraction and treatment system, completion of a remedial investigation for site soils, preparation of the Removal Action Workplan in October and November 2011, and groundwater monitoring.
DTSC brought an action under CERCLA to recover clean-up costs from Dobbas and others. Dobbas counterclaimed that DTSC mismanaged the cleanup efforts and sought contribution and cost recovery from DTSC pursuant to §§ 9607 and 9613. Plaintiff moved to dismiss and strike portions of Dobbas's Answer. DTSC argued it is not an operator under CERCLA and further, it enjoys sovereign immunity due to its government agency status.
According to the court, DTSC's actions in directing site clean-up formed sufficient grounds for denying its motion to dismiss the counterclaim. Quoting United States v. Bestfoods, the Eastern District stated "an operator must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." Courts had previously used a narrower standard when deciding if an entity had exhibited control over a site. However, when DTSC relied upon these decisions, the Eastern District pointed out that these decisions were prior to the Bestfoods decision. As to DTSC's immunity assertion, the Ninth Circuit has previously clarified that CERCLA includes a waiver of sovereign immunity. Therefore, Dobbas' counterclaim survived.
For More Information
It is important to keep in mind that this decision is not the final word on the issue, and it is likely the Ninth Circuit will see an appeal. This case will continue to be monitored in order to keep you informed. For more information on how this ruling might impact your business concerns, please contact your Polsinelli attorney or the author of this alert: