Page 10 - Commercial Litigation

S10 | MONDAY, AUGUST 10, 2015 | Commercial Litigation
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Oil Spill Law
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maintain eligibility to recover from the Fund. The state must thereafter search for other parties to hold liable. It is much harder to find parties besides the landowner to clean up a property, since lessees and sub-lessees could be long gone from the site, dissolved, or with- out assets. Infamous is the recent bankruptcy of Getty Petroleum Marketing and the multi- tude of properties it was allowed to abandon from cleanup.13 Often the state simply does not expend the effort to chase a polluter when low-hanging fruit such as the deed holder to a property is readily identifiable.
Since the Court of Appeals first recog- nized, in State v. Green,14 that a “faultless” landowner could be liable for spills on its property, courts in this state have taken the former approach to hold the landowner liable.
It Isn’t Easy Applying Green
The Court of Appeals first addressed Navi- gation Law §181(1) in White v. Long.15 The court left open the question of whether a faultless landowner is a discharger under the statute, but noted that the Appellate Division had imposed discharger liability on landown- ers irrespective of whether they contributed to the discharge.16 The court determined, however, that where such landowner is deemed a discharger for purposes of liabil- ity under §181(1), it should not be precluded from recovery under §181(5) against those who have actually caused or contributed to discharge. The court reasoned that the availability of a cause of action against the parties responsible incentivizes a current landowner to expend resources to effect cleanup as quickly as possible.17
Six years later, in Green, the Court of Appeals recognized that a landowner could be held liable as a discharger without hav- ing actually caused or contributed to an oil spill. The issue before the court was whether the Fund could recover damages against the owner of a trailer park on which a tenant spilled kerosene from a tank used to heat her mobile home.18 The court asserted that “interpreting the term ‘discharger’ to include landowners ... is consistent with the statu- tory intent,” as it “ensures that a responsible party is readily available to reimburse the State for its cleanup costs.”19 However, it held that liability arises only where the landowner could control activities occurring on its prop- erty and had reason to believe that petroleum products would be stored there.20 Finding that the owner had control over activities occur- ring on the trailer park, the court held that its “failure, unintentional or otherwise, to take any action in controlling the events that led to the spill or to effect an immediate cleanup
renders it liable as a discharger.”21
The Court of Appeals stated that limiting discharger liability to landowners with knowl- edge and control would sufficiently “ensure that landowners are not in all instances liable for spills occurring on their property.”22 How- ever, it made a palpable leap by holding that the owner had control over the activities on its property—including the maintenance of its tenant’s above-ground kerosene tank—by virtue of its position as “owner and lessor of the trailer park.”23 The court offered only very narrow and discrete examples of situa- tions where a landowner lacks the requisite knowledge or control: when it “falls victim to a ‘midnight dumper,’ or an errant oil truck that spills fuel.”24 It did not provide full or con- crete parameters to determine a landowner’s liability for cleanup of spills on its property. Since Green, the Appellate Division has applied discharger liability to the owners of property used as filling stations regardless of the degree of control they actually exercised over the property. In State v. Robin Operat- ing, the court found the landowners strictly liable for cleanup because they “leased the property with full knowledge that it would be used as a gasoline service station and retained control over activities occurring on the property.”25 Likewise, in State v. B & P Auto Service Center, the court rejected the landowners’ defense that it lacked con- trol over its property under the terms of a 15-year triple net lease.26 The court found it dispositive that the owner had the ability to control the terms of the lease.27 However, the dissent in this case asserted that the defendant landowner should not be liable because its tenant was granted exclusive possession and use of the property as well as ownership of the tanks.28 The dissent also stated that the clear absence of statu- tory language imposing strict liability upon landowners under §181(1), as well as the Court of Appeals’ express refusal “to impose liability based solely on ownership of con- taminated land,” is at odds with the public policy considerations for imposing liability on a landowner with a triple net lease on the property.29 As the Court of Appeals did in Green, the Appellate Division has gone to great lengths to find that landowners meet
the test for discharger liability.
In State v. Speonk Fuel,30 the Court of
Appeals substantially broadened the reach of Green to impose liability on a current land- owner for a discharge that occurred before it purchased the property. The court stated that discharger liability is “predicated ... on a responsible party’s capacity to take action to prevent an oil spill or to clean up con- tamination resulting from a spill.”31 The state argued that Speonk had the ability to control events at the property because Speonk was in the position to negotiate an escrow to clean the site as a condition to closing, but did
nothing. The court held that although the purchaser had no control over the property at the time that the discharge occurred, it is “sufficient for purposes of liability here that, with knowledge of its vendor’s discharge of oil and the need for cleanup, [the purchaser] did nothing.”32 The dissent pointed out that failure to prevent a discharge may be close to causing a discharge, but if the Legislature had intended to impose liability for failure to clean up, it would have said so.33
In subsequent cases, the Appellate Divi- sion has held landowners liable where they had knowledge of a spill but refused to effect cleanup. In State v. C.J. Burth Services,34 the defendants owned real property on which they operated an automobile repair shop. When it was discovered, five years after their purchase, that the property contained sev- eral leaking underground storage tanks, the DEC demanded that they perform remedia- tion, but they refused to take any action. Relying on the language of Speonk, the court held that the defendants were liable because they knew of the spill and the need for a cleanup but did nothing.35 However, the court did say that the operator of a petroleum dispensing system is the party most likely to be in a position to stop the discharge and to effect a cleanup.36 Similarly, in Matter of Huntington & Kildare v. Grannis, the court held that the former and present owners of property used as a retail gas station—but not the underground storage tanks—were liable to clean up a spill where they were both aware of a discharge but failed to take any remedial action.37 Lastly, in State v. Slezak Petroleum Products,38 the court imposed lia- bility for off-site petroleum contamination on the owner of property used as a gas station. The court noted that the defendant declined to undertake remediation despite demands from the DEC, and rejected the defendant’s argument that other parties may have been responsible for the discharge. However, notably, Slezak was also the owner of the petroleum dispensing system.39
A Call for Legislative Action
Although New York courts have estab- lished factors to determine whether a fault- less landowner is a discharger under the Law, they have repeatedly inferred satisfaction of such factors—including control and capac- ity to act—merely by virtue of its ownership status. As such, the standards in the case law are both circuitous and unworkable. The Court of Appeals has thus far offered only two extremely narrow circumstances (and only in dicta) where the landowner would not be liable. No case has offered any further clarity as to when an owner would lack the requisite control over the property or the ability to pre- vent spills or effect cleanup. If the Legislature intended to limit landowner liability beyond
the “midnight dumper” or “errant oil truck” scenarios, then it should set forth a consistent standard for determining what those limits are. Otherwise, the courts will most likely continue to apply a flawed, lopsided test to impose discharger liability on nearly every owner of contaminated property, and perhaps a litany of other persons remotely involved in the discharge the petroleum.
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1. N.Y. Nav. Law §172(11).
2. See Consol. Edison Co. of New York v. Dep’t of Envtl. Conservation, 71 N.Y.2d 186, 189, 524 N.Y.S.2d 409, 410 (1988); Scott Owens, Comment, “State v. Green: Redefin- ing the Environmental Responsibility of Landowners in New York State,” 8 Alb. L. Envtl. Outlook J. 108, 116-17 (2002).
3. See generally National Oceanic and Atmospheric Administration, Office of Response and Restoration, Exxon Valdez Oil Spill, http://response.restoration.noaa. gov/oil-and-chemical-spills/significant-incidents/exxon- valdez-oil-spill (last visited July 13, 2015).
4. See generally Mireya Navarro, “Between Queens and Brooklyn, an Oil Spill’s Legacy,” N.Y. Times, Aug. 3, 2010, available at www.nytimes.com/2010/08/04/sci- ence/earth/04newtown.html.
5. See Consol. Edison Co. of N.Y., 71 N.Y.2d at 189, 524 N.Y.S.2d at 410; Owens, supra note 2, at 118 (citing Governor’s Program Memorandum, Oil Spill Prevention/ Control, N.Y.S. Legis. Ann. 1985, at 48).
6. See N.Y. Envtl. Conserv. Law §17-1003(4) (defining “fa- cility” for the purposes of Article 17, Title 10 of the ECL).
7. N.Y. Envtl. Conserv. Law §§17-1005, 17-1007, 17-1009 & 17-1015; Consol. Edison Co. of N.Y., 71 N.Y.2d at 190, .
8. N.Y. L. 1985, c. 35, §12; see Owens, supra note 2, at 118 (citing Governor’s Program Memorandum, supra note 5, at 48).
9. 6 N.Y.C.R.R. §§612.1, 613 & 614.
10. See White v. Long, 85 N.Y.2d 564, 568-69, 626 N.Y.S.2d 989, 990-91 (1995) (discussing the passage of and legislative intent behind Navigation Law §181(5)).
11. See N.Y. Nav. Law §188 (stating that recovery from the Fund is conditioned on the Administrator being granted the right to seek satisfaction from the “discharg- er or other responsible party” for any cleanup costs or damages).
12. See N.Y. Nav. Law §181-a(1)(b).
13. In re Getty Petroleum Mktg., No. 11-15606 (S.D.N.Y. Bankr.).
14. 96 N.Y.2d 403, 729 N.Y.S.2d 420 (2001). 15. 85 N.Y.2d 564, 626 N.Y.S.2d 989 (1995). 16. Id. at 568, 626 N.Y.S.2d at 991.
17. Id. at 569, 626 N.Y.S.2d at 991.
18. Green, 96 N.Y.2d at 405, 729 N.Y.S.2d at 422. 19. Id. at 407, 729 N.Y.S.2d at 424.
20. Id.
21. Id., 729 N.Y.S.2d at 423.
22. Id.
23. Id.; see also State v. B & P Auto Serv. Ctr., 29 A.D.3d 1045, 1048, 814 N.Y.S.2d 367 (3d Dep’t 2006) (stating that the court in Green held that Navigation Law §§172(8) and 181(1) are “sufficiently broad to include defendants who, by virtue of their status as landowners alone, are in a position to control the site and the source of the discharge” (emphasis added)).
24. 96 N.Y.2d at 407, 729 N.Y.S.2d at 424.
25. 3 A.D.3d 767, 768-69, 773 N.Y.S.2d 135, 136 (3d Dep’t 2004).
26. 29 A.D.3d 1045, 1047, 814 N.Y.S.2d 367, 369 (3d Dep’t 2006).
27. Id.
28. Id. at 1049, 814 N.Y.S.2d at 370-71.
29. Id. at 1050, 814 N.Y.S.2d at 372.
30. 3 N.Y.3d 720, 786 N.Y.S.2d 375 (2004).
31. Id. at 724, 786 N.Y.S.2d at 378 (emphasis added). 32. Id.
33. Id. At 725, 786 N.Y.S.2d at 378.
34. 79 A.D.3d 1298, 915 N.Y.S.2d 174 (3d Dep’t 2010). 35. Id. at 1301, 915 N.Y.S.2d at 177.
36. Id. At 1300, 915 N.Y.S.2d at 176.
37. 89 A.D.3d 1195, 1197, 932 N.Y.S.2d 558 (3d Dep’t 2011). 38. 96 A.D.3d 1200, 947 N.Y.S.2d 189 (3d Dep’t 2012). 39. Id. at 1201, 1205, 947 N.Y.S.2d at 193-94.
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