(CN) - A Coca-Cola subsidiary doesn't have to reimburse Los Angeles for the cost of cleaning up soil polluted with copper, lead, mercury and other contaminants, the 9th circuit ruled Monday.
During a 1995 investigation of the former San Pedro Boat Works, located at Berth 44 in the Port of Los Angeles, the city found that the soil and groundwater contained a host of contaminants, including "volatile organic compounds, petroleum hydrocarbons, polychlorinated biphenyls, polycyclic aromatic hydrocarbons, copper, lead, mercury, and chromium."
BCI Coca-Cola had bought the land in 1993 from Pacific American, according to the ruling. The contaminants were presumably the result of decades of repairing and rebuilding ships and boats at the berth, for which the Board of Harbor Commissioners issued a revocable permit in 1965, the ruling states.
In 2002 and 2003 the city removed the contaminated soil from the property through a dredging project. Los Angeles then filed a claim under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to get back the money it spent cleaning up the berth.
U.S. District Judge Audrey Collins ruled in 2007 that Pacific American, and therefore BCI Coca-Cola, could not be held liable for the cleanup because it was not an "operator" of the boatworks under federal environmental law. A jury subsequently found that Pacific American did not own the assets of the boatworks, and Judge Collins dismissed the city's claims.
Though all of the city's claims relied on the theory that BCI Coca-Cola was liable as a successor-in-interest to Pacific American, the jury had determined that Pacific American never owned any of the assets of the boatworks. As such, a final judgment in BCI Coca-Cola's favor held that BCI Coca-Cola's ownership of Pacific American did not make it liable for the costs.
The federal appeals panel in Pasadena affirmed, finding that the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and state law make it clear that a "permittee, as the holder of a possessory interest, cannot be ... an 'owner' under CERCLA."
As the act is unclear as to the definition of an "owner," the three-judge panel looked to the common law to determine BCI Coca-Cola's liability, or lack thereof.
Unaccompanied by ownership rights, revocable permit holders have only possessory interest in property governed by their permits under California law, Judge Carlos Bea wrote for the court.
"Given this common law distinction between ownership interests and possessory interests, and the juxtaposition of 'owner' and 'operator' in CERCLA - where 'operator' liability has been construed expansively in this circuit and others - we conclude that Congress intended to give 'owner' its common law meaning," Bea continued. "We here hold that 'owner' liability under CERCLA does not extend to holders of mere possessory interests in land, such as permittees, easement holders, or licensees, whose possessory interests have been conveyed to them by the owners of real property, which owners continued to retain power to control the permittee's use of the real property."
The panel also affirmed the District Court's grant of summary judgment to BCI Coca-Cola on the city's public nuisance claims, finding that "as Pacific American did not know or have reason to know of the pollution or contamination, it cannot be liable for public or private nuisance."
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.