Toxic Las Vegas Cleanup Decision Largely Upheld

     (CN) – The owner of a Las Vegas shopping center will get another chance to distance itself somewhat from a dry cleaner’s decades of environmental contamination, the 9th Circuit ruled.
     While operating at the Maryland Square Shopping Center from 1969 until 2000, Al Phillips the Cleaners spilled a substance called tetrachloroethylene, also known as perchloroethene or PCE, and other toxic chemicals.
     The Nevada Division of Environmental Protection (NDEP) found that the chemicals seeped into the soil and spread through shallow groundwater under an adjacent golf course and residential subdivision, contaminating wells used by the residents of the subdivision.
     In late 2008 and early 2009, two federal complaints were filed in Nevada against the current and former owners of the property.
     Maryland Square acquired the site in 2005, buying it from Herman Kishner Trust, which took over the property a year after its construction by its eponymous owner.
     Shapiro Bros. Investment Co. (SBIC) operated the dry-cleaning business there from 1969 to 1984, and then sold the business to Johnson Group, which later became DCI USA.
     In one suit, the NDEP sued the owners and operators under the Comprehensive Environmental Response, Compensation Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA). The acts hold owners of contaminated property and contributors to contamination responsible for cleaning up the waste or to responsible reimburse those who cleaned up the waste. In the other suit, Peter Voggenthaler and other homeowners affected by the spill sued under RCRA.
     NDEP sued to recover costs from the cleanup and for declaratory judgment to be reimbursed for any future clean up costs.
     While the homeowners prevailed against all of the owners in 2010, a federal judge granted the NDEP summary judgment on all claims in May 2012.
     In the homeowners’ case, Maryland Square asked for a rehearing because it claimed that it is in a different position than the previous owners since the dry-cleaning business predated its acquisition of the site.
     The homeowners countered, however, that Maryland Square caused more exposure and contamination in its demolition of the building in 2006.
     Citing a lack of jurisdiction, the trial court declined to resolve the issue of Maryland Square’s liability. Then, in December 2010, the court enjoined SBIC even though the homeowners had not sought such relief.
     The property owners then moved for another judgment against SBIC and its controlling officer, Melvin Shapiro, for indemnity. Citing a guaranty Shapiro signed in 1984, the court granted the motion as to both.
     In 2011, U.S. District Court Judge Robert Jones stayed an award of attorneys’ fees pending the appeal.
     That appellate decision finally came down Friday with a three-judge panel of the 9th Circuit largely affirming the District Court’s judgments.
     Maryland Square had claimed that application of CERCLA violated the commerce clause, but the appellate panel found that groundwater may be regulated as an article of commerce as an object of trade that may be bought or sold.
     “In addition, we deal with a dry cleaning establishment that created the contamination as part of it commercial operation, and resulted in clean up costs that burdened commerce,” Judge Mary Schroeder wrote for the panel. “The clean up, as well as the business itself, substantially affect interstate commerce. Application of CERCLA is supported for those reason as well.”
     The court concluded, however, that Maryland Square should have been given a chance to make an additional showing that it falls within the bona fide prospective purchaser exception to liability.
     Maryland Square will also have the chance on remand to show fight liability on the basis of the closure of the dry-cleaning business before it acquired the site.
     On this issue, the trial court improperly found that it lacked jurisdiction to weigh in.
     The injunction against SBIC was also erroneous since the homeowners never sought such relief.
     Shapiro meanwhile was improperly held liable on his personal guaranty “because the guaranty operated only prospectively and there was no evidence of spills occurring after he signed the guaranty,” according to the ruling.

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