Developer Held Liable for Residential Cleanup Costs

(CN) - A real estate developer that bought a contaminated tract of wetlands in Huntington Beach, Calif., is responsible for the cleanup costs of neighboring residential areas, the 9th Circuit ruled, even though it sold the land before getting billed by the state.

California's Department of Toxic Substances Control had sued Hearthside Residential Corp., seeking reimbursement for the costs of cleaning up residential property near Hearthside's land, both of which were contaminated with the toxic substance polychlorinated biphenyls.

Hearthside bought its Fieldstone property knowing that it was contaminated. The state regulatory agency told Hearthstone that if it was going to clean up its own land, it also had to clean up the contaminated areas surrounding it, since its land was the source of contamination.

Hearthside refused, choosing instead to clean its own land and sell it before the department could react. The state agency hired another company to clean up the neighboring lands and billed Hearthside for it.

U.S. District Judge Valerie Fairbank found Hearthside responsible because it owned the land when the department sought reimbursement, even though Hearthstone later sold the property.

A three-judge panel for the 9th Circuit agreed, ruling that the land's "owner and operator" when cleanup costs are incurred is liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

"If Hearthside's argument were adopted as law, then an owner could sell a recently cleaned piece of property to an innocent buyer one day before the statute of limitations runs, with the result that the new owner would bear full cleanup liability," Judge Ronald Gould wrote for the Pasadena-based panel.

The ruling marks the first time the court has decided when owner status under CERCLA is determined.

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