U.S. v. DOMENIC LOMBARDI REALTY

204 F. Supp.2d 318 (2002) | Cited 0 times | D. Rhode Island | June 7, 2002

Decision and Order

This matter is before the Court on the objection of defendant DomenicLombardi Realty, Inc. to a Report and Recommendation issued by UnitedStates Magistrate Judge David Martin. The Report and Recommendationconcludes that this Court should grant plaintiff United StatesEnvironmental Protection Agency's ("EPA") Motion for Summary Judgment onthe issue of defendant's liability under the Comprehensive EnvironmentalResponse, Compensation and Liability Act ("CERCLA"), which is containedin 42 U.S.C. § 9607. There are three underlying issues presented inthis matter: (1) whether CERCLA is a constitutional congressionalenactment under the Commerce Clause; (2) whether the presence ofPCB-contaminated soil on the property involved constitutes a "release" or"threatened release" as defined in CERCLA; and (3) whether defendant mayproperly avail itself of the protection afforded by the innocent landownerdefense, which is contained in CERCLA's third party defense. For thereasons setforth below, this Court adopts the Report and Recommendationinsofar as it concludes that CERCLA is a constitutional enactment underthe Commerce Clause. This Court further adopts the Report andRecommendation insofar as it concludes that the presence ofPCB-contaminated soil on the property constitutes a "release" as definedby CERCLA. The Court, however, declines to adopt the Report andRecommendation's suggestion to grant EPA's Motion for Summary Judgmentbecause there are disputed issues of material fact regarding whether theinnocent landowner defense affords defendant protection from CERCLAliability.

I. BACKGROUND

Defendant is a residential and commercial property management companyincorporated under the laws of Rhode Island, with a principal place ofbusiness in West Warwick, Rhode Island.

In 1986, defendant purchased from Armand Allen ("Allen")31 acres ofresidential property located in West Greenwich, Rhode Island ("theSite"). A house is located on the Site, and the Site is surrounded byother residential properties. Shortly after defendant purchased theproperty, however, it became the focus of investigations conducted by boththe Rhode Island Department of Environmental Management ("RIDEM") andEPA.

RIDEM and EPA Investigations of the Site The Years 1987-1988

On November 9, 1987, and May 27, 1988, RIDEM sent Notices of Violationand Order to defendant. These Notices charged defendant with, interalia, disposing of solid waste without a license and ordered defendant toperform certain cleanup activities.

RIDEM officials also inspected the Site on a number of differentoccassions. On May 12, 1988, RIDEM officials inspected the Site at whichtime they observed an area on the property that was visibly stained withoil. RIDEM officials took samples of the soil, which were sent to alaboratory for analysis. On December 17, 1988, RIDEM officials conductedanother inspection of the Site, during which time they took anothersample of the soil. This sample was also sent to the laboratory foranalysis. The laboratory's test results indicated that the soil samplestaken from the Site on May 12, 1988, and December 17, 1988, containedhazardous levels of Polychlorinated Biphenyls ("PCBs") as defined by theState of Rhode Island Rules and Regulations for Hazardous WasteGeneration, Transportation, Treatment, Storage and Disposal.

On August 17, 1988, in between the time of the May 1988 and December1988 inspections, RIDEM received a letter from Domenic J. Lombardi, Jr.("Lombardi"), the President of the defendant corporation, regarding theMay 1988 Notice of Violation and Order. In his letter, Lombardi statedthat he had never dumped hazardous material on the Site and suggestedthat the previous owner, Allen, had dumped the waste materials and,therefore, RIDEM should contact Allen about this problem.

The Year 1989

On February 17, 1989, RIDEM officials sent a third Notice of Violationand Order to defendant. Similar to the past two Notices, the February1989 Notice ordered defendant to conduct cleanup activities to remove thePCB-contaminated soil from the Site.

Shortly after receiving the February 1989 Notice, defendant initiatedcleanup activities at the Site. On August 22, 1989, RIDEM officials metwith an engineer retainedby defendant at the property to point out thelocation of the soil that contained PCBs. Defendant subsequently hired acontractor to excavate the contaminated soil.

On October 12, 1989, under RIDEM supervision, defendant's contractor,Robert Boyer, excavated the PCB-contaminated soil and consolidated itinto two piles, which were placed on polyplastic and covered with thesame. A few months after the excavation was completed, Lombardi informedRIDEM that defendant had hired James Smith ("Smith") to remove thecontaminated soil. RIDEM, however, informed Lombardi that Smith was nota licensed hazardous waste transporter and, consequently, was ineligibleto perform the job.

After receiving notice of Smith's inability to perform the removal,defendant failed to hire a licensed hazardous waste transporter and, thecontaminated soil remained on the Site.

The Years 1990-1995

On July 17, 1990, almost two years after their last inspection, RIDEMofficials conducted another inspection of the Site. During the July 1990inspection, RIDEM officials observed that the "PCB contaminated soil pileappeared to be untouched; however, the polyplastic covering the material[had] blown off leaving the pile uncovered." That same day, RIDEM sent aletter to defendant's counsel advising him of defendant's noncompliancewith the February 1989 Notice of Violation and Order.

Shortly thereafter, RIDEM conducted follow-up inspections of the Siteon July 23, 1991, and September 17, 1991; but, the condition of the soilremained the same: "[T]he piles of PCB-contaminated soil remaineduncovered." Consequently, on July 11, 1994, RIDEM requested assistancefrom EPA to address the issue of the PCB-contaminated soil.

On November 21, 1994, after conducting its own inspection of the Site,EPA sent a letter to defendant notifying defendant of its potentialliability under CERCLA and requesting defendant to perform or financecleanup activities at the Site. However, by a letter to EPA datedDecember 2, 1994, Lombardi declined to have defendant perform or financethe removal of the PCB-contaminated soil. In his letter he stated thatsince defendant had not placed the material on the property, he believedthat defendant had no duty to remove the contaminated soil.

As a result of defendant's refusal to finance the cleanup of the Site,EPA hired a contractor, O.H. Materials, Inc. ("OHM"), to remove thecontaminated soil from defendant's property. From February 1995 to April1995, OHM excavated approximately nine hundred tons of PCB-contaminatedsoil, which included the seventy tons of soil previously excavated andplaced in two piles on polyplastic, and disposed of the soil at anoff-site landfill that was licensed to accept PCBs for disposal. Todate, EPA claims it has incurred $346,129.92 in costs related to theRemoval Action in addition to $17,703.14 in interest on those costs.

Domenic Lombardi's Knowledge Regarding the Previous Owner of theSite

In a letter dated July 30, 1998, to EPA attorney, Audrey Zucker,Lombardi stated that prior to purchasing the West Greenwich property, hewas aware that the previous owner of the property, Allen, had beenoperating a junkyard on the premises. According to Lombardi, Allen hadseparated metals on the Site and sold them to a scrap yard. Lombardialso noted that the State and Local police had given Allen "a problem"because of his activities in connection with the junkyard.

In the July 1998 letter, Lombardi also stated that his investigation ofAllen's activities on the Site revealed that Allen had received"contaminated transformers" from Narragansett Electric Company, whichAllen "displace[d] into the ground." Lombardi explained that had he knownbefore defendant purchased the property that the Site had "environmentalproblems," he never would have purchased it on behalf of defendant.

He blamed his lack of knowledge regarding the Site's hazardous wasteproblem on his real estate agent, Ray Walsh ("Walsh"). In his July 1998letter, Lombardi stated that he was puzzled as to why Walsh did notinspect the Site prior to defendant's agreement to purchase it.1 Healso stated that the sale of the property occurred in "record time": Thepurchase and sale of the property took only seventeen days to complete.In his letter to EPA, Lombardi agreed to pay $50,000 to $60,0002towards EPA's removal costs but asked that the "guilty culprit," Allen,be held liable for the balance of the costs.

EPA's Lawsuit

On December 10, 1998, EPA initiated this action against defendant,seeking recovery of the costs of the Removal Action under42 U.S.C. § 9607(a), commonly known as CERCLA.3 On March 29,1999, Domenic Lombardi, in his capacity as President of Domenic LombardiRealty Inc., attempted to answer the Complaint on behalf of thecorporation by filing a Motion to Dismiss and Motion for Leave to File aCross-Complaint. United States Magistrate Judge Robert W. Lovegreen,however, denied Lombardi permission to represent the defendant realtycompany.4 On April 30, 1999, however, this writer, in the interestof justice, granted Lombardi time to refile certain documents aspleadings. On the same day, EPA filed a Consolidated Motion to StrikeDefendant's Motion to Dismiss and a Motion for Summary Judgment("Consolidated Motions"), which were referred to Magistrate JudgeMartin.5

On October 29, 1999, a hearing was held before Magistrate Judge Martinon EPA's Consolidated Motions. At this hearing, Magistrate Judge Martinordered Lombardi to obtain counsel for the defendant corporation becausethe corporation could not be represented by someone acting pro se.Shortly thereafter, Lombardi retained Attorneys Perry D. Wheeler andRichard E. Gardiner to represent the defendant corporation.6

On February 17, 2000, Magistrate Judge Martin heard oral argument onEPA's Consolidated Motions and took the matter under advisement;7and, on January 25, 2001, Magistrate Judge Martin issued a detailedReport and Recommendation concluding that this Court should grant EPA'sMotion for Summary Judgment.

The Report and Recommendation addressed five issues regardingdefendant's liability under CERCLA. First, Magistrate Judge Martinconcluded that CERCLA is a constitutional enactment under the CommerceClause. Second, he found that defendant's argument that EPA violated itsFourth Amendment rights by entering the Site without a warrant was mootbecause defendant conceded that EPA was granted permission to enter theSite. Third, Magistrate Judge Martin concluded that EPA's CERCLA claimwas not time-barred because defendant had executed an agreement tollingthe statute of limitations. Fourth, he found that EPA had successfullyproven its prima facie CERCLA cost recovery case against defendant.Lastly, the Magistrate Judge concluded that defendant failed to establishthat it was eligible to avail itself of the protection of either thethird party defense or the innocent landowner exception as set forth inCERCLA.

Defendant subsequently filed a timely objection to the Report andRecommendation. In its objection to the Report and Recommendation,defendant makes three arguments: (1) that CERCLA is not a constitutionalcongressional enactment under the Commerce Clause; (2) that the presenceof PCB-contaminated soil on the Site does not constitute a "release" or"threatened release" of hazardous waste and, therefore, EPA has failed toprove its CERCLA claim against defendant; and (3) that defendant isafforded protection from liability because it is entitled to utilize theinnocent landowner defense.

On May 29, 2001, this Court heard oral argument on defendant'sobjections and took the matter under advisement. After reviewing both theReport and Recommendation and the record in this case, this Courtconcludes (1) that CERCLA is a constitutional exercise of Congress'sCommerce Clause power; (2) that defendant's Fourth Amendment claim ismoot; and (3) that EPA has clearly established defendant's liabilityunder 42 U.S.C. § 9607(a). This Court, however, declines to adoptthe Report and Recommendation insofar as it recommends that the Courtgrant EPA's Motion for Summary Judgment. There are disputed issues ofmaterial fact regarding the availability of the innocent landownerdefense to defendant which should be resolved at trial. Accordingly,because the Court does not adopt the Report and Recommendation in itsentirety, the Court will now address each of the points of contention.

II. STANDARD OF REVIEW

A motion for summary judgment is listed as one of the motions on whicha magistrate judge may not make a final determination. See28 U.S.C. § 636(b). Therefore, this Court utilizes de novo review ofthe Magistrate Judge's Report and Recommendation. See id.

Rule 56(c) of the Federal Rules of Civil Procedure sets forth thestandard for ruling on summary judgment motions:

The judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Fed.R.Civ.P. 56(c). The critical inquiry is whether a genuine issue ofmaterial fact exists. "Material facts are those `that might affect theoutcome of the suit under the governing law.'" Morrisey v. Boston FiveCents Sav. Bank, 54 F.3d 27, 31 (1st Cir. 1995) (quoting Anderson v.Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "A dispute as to amaterial fact is genuine `if the evidence is such that a reasonable jurycould return a verdict for the nonmoving party.'" Id.

On a motion for summary judgment, the Court must view all evidence andrelated inferences in the light most favorable to the nonmoving party.See Springfield Terminal Ry. Co. v. Canadian Pac. Ltd., 133 F.3d 102,[133 F.3d 103,] 106 (1st Cir. 1997). "[W]hen the facts support plausiblebut conflicting inferences on a pivotal issue in the case, the judge maynot choose between those inferences at the summary judgment stage."Coyne v. Taber Partners, 53 F.3d 454, 460 (1st Cir. 1995). Similarly,"summary judgment is not appropriate merely because the facts offered bythe moving party seem more plausible, or because the opponent is unlikelyto prevail at trial." Gannon v. Narragansett Elec. Co., 777 F. Supp. 167,169 (D.R.I. 1991). The moving party, furthermore, bears the burden ofshowing that no evidence supports the nonmoving party's position. SeeCelotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Thus, summary judgmentis appropriate only where there is no dispute as to any material fact andonly questions of law remain. See Gannon, 777 F. Supp. at 169.

III. DISCUSSION

A. The Constitutionality of CERCLA under the Commerce Clause

1. Basic Principles

The Commerce Clause provides in relevant part that "Congress shall havethe power . . . to regulate Commerce . . . among the several states."U.S. Const. art. I, § 8, cls. 1, 3. Federal courts have interpretedCongress's power under the Commerce Clause broadly, thereby grantingCongress substantial deference in the exercise of its federal powers.See Gibbs v. Babbitt, 214 F.3d 483, 490 (4th Cir. 2000). Recent SupremeCourt jurisprudence, however, has emphasized that "even under ourmodern, expansive interpretation of the Commerce Clause, Congress'sregulatory authority is not without effective bounds." United States v.Morrison, 529 U.S. 598, 608 (2000). Although the Commerce Clause bestowson Congress significant authority to regulate certain activities,principles of federalism prevent Congress from obliterating the linebetween what is national and what is local. Id. (citing NLRB v. Jones &Laughlin Steel Corp., 301 U.S. 1, 37 (1937)). Consequently, thedetermination of whether a particular activity affects interstatecommerce sufficiently to come within the constitutional grant of power toCongress must ultimately be made by the judiciary. Morrison, 529 U.S. at614.

To aid courts in making this determination, the Supreme Court, inUnited States v. Lopez, 514 U.S. 549 (1995), established three broadcategories where Congress may exercise its Commerce Clause power.Congress may regulate (1) the channels ofinterstate commerce; (2) theinstrumentalities of commerce, or persons or things in interstatecommerce; and (3) activities that substantially affect interstatecommerce. Id. at 558-559. Utilizing this framework, courts areinstructed to make an independent evaluation to determine "whetherCongress could rationally conclude that the regulated activity affectsinterstate commerce." Gibbs, 214 F.3d at 490 (citing Lopez, 514 U.S. at557).

2. The Significance of United States v. Lopez and its progeny

Prior to the Supreme Court decisions in Lopez and Morrison, thestandards to be utilized in determining whether a regulated activityaffected interstate commerce were unclear. In 1995 in Lopez, and againin 2000 in Morrison, the Supreme Court sought to clarify the muddiedwaters of its prior Commerce Clause jurisprudence. These two decisionshighlight four key considerations courts should take into account whendeciding whether Congress has exceeded its power under the CommerceClause.

First, the Lopez Court held, and the Morrison Court affirmed, thatunder the "substantially affects" prong of the Lopez test, Congress,pursuant to its Commerce Clause power, may regulate intrastate economicactivities that substantially affect interstate commerce. Lopez, 514U.S. at 559; Morrison, 529 U.S. at 610. Second, the Court explained thata jurisdictional element limits the range of activities Congress mayregulate under the Commerce Clause to those that have a connection withor a direct effect on interstate commerce in order to establish that theenactment is in pursuance of Congress's regulation of interstatecommerce. See Morrison, 529 U.S. at 611-12. Third, both the Lopez andMorrison decisions explained the significance of congressional findings:"While `Congress normally is not required to make formal findings as tothe substantial burdens that an activity has on interstate commerce,' theexistence of such findings may `enable [courts] to evaluate thelegislative judgment that the activity in question substantially affectsinterstate commerce, even though no such substantial effect is visible tothe naked eye.'" Morrison, 529 U.S. at 612 (citations omitted). Lastly,the Supreme Court emphasized that congressional enactments that havetenuous connections to interstate commerce will not withstand judicialscrutiny. See Gibbs, 214 F.3d at 491 (noting that Lopez and Morrisonrested on the principle that "where a federal statute has only a tenuousconnection to commerce . . . the courts should not hesitate to exercisetheir constitutional obligation to hold that the statute exceeds anenumerated federal power"). These considerations provide the support forthis Court's conclusion that CERCLA is a legitimate congressionalenactment under the Commerce Clause because it regulates an activity— the disposal of hazardous waste — that substantiallyaffects interstate commerce.

3. The Disposal of Hazardous Waste Substantially Affects Interstate Commerce

In this case, the Magistrate Judge analyzed the constitutionality ofCERCLA under the third prong of the Lopez test and determined that CERCLAregulates an activity — the disposal of hazardous waste —that substantially affects interstate commerce. In its objection to theReport and Recommendation, however, defendant contends that theMagistrate Judge did not consider "whether the disposal of hazardouswaste or presence of hazardouswaste on private property has asubstantial affect [sic] on interstate commerce." Def.'s Obj. Magis.J.'s Rep. & Recomm., at 9-10. Defendant argues that the disposal orpresence of hazardous waste on the Site does not have a substantial effecton interstate commerce and, therefore, CERCLA is unconstitutional asapplied in this case. This Court, however, finds defendant's argumentdevoid of merit.

Admittedly, CERCLA contains neither legislative findings nor ajurisdictional statement which would aid the Court in ascertaining aconnection to interstate commerce. Certainly CERCLA's connection tointerstate commerce is not patently visible to the naked eye.Nevertheless, this Court concludes that local, on-site disposal ofhazardous waste substantially affects interstate commerce.

As noted previously, "`[w]here economic activity substantially affectsinterstate commerce, legislation regulating that activity will besustained.'" Morrison, 529 U.S. at 610 (citation omitted). Thedetermination of whether an economic activity substantially affectsinterstate commerce, however, requires a court to construe what is deemed"economic activity" broadly. See Gibbs, 214 F.3d at 491 (noting that "acramped view of commerce would cripple a foremost federal power and in sodoing would eviscerate national authority"). Indeed, Wickard v.Filburn, 317 U.S. 111 (1942), a case which represents both the outerlimits of Congress's Commerce Clause power and congressional regulationof an economic activity, demonstrates the broad latitude with which theSupreme Court defines the scope of this concept.

Upholding CERCLA as a constitutional enactment under Congress'sCommerce Clause power, however, does not require this Court to reach asfar as the Wickard decision. The disposal of hazardous waste on privateproperty, similar to the home-grown wheat in Wickard, is an intrastateeconomic activity that substantially affects interstate commerce. ThisCourt finds the reasoning of the Eleventh Circuit in United States v.Olin, 107 F.3d 1506 (11th Cir. 1997) instructive on this point.

a. CERCLA's Legislative History

In Olin, the Eleventh Circuit addressed the issue that is before thisCourt: Whether on-site disposal of hazardous waste substantially affectsinterstate commerce. In its decision, the Olin Court explained that itfound persuasive the findings the Committee on Environment and PublicWorks ("the Committee") made concerning a bill that contained provisionsthat were later incorporated into CERCLA. After examining CERCLA'slegislative history, the Olin Court concluded that Congress had arational basis for concluding that on-site disposal of hazardous wastesubstantially affects interstate commerce.

According to the Eleventh Circuit, CERCLA'S legislative history detailsthe exorbitant amount of money that it costs the government to handle anddispose of hazardous waste. Olin, 107 F.3d at 1511 (citing S. Rep. No.96-848, 96th Cong., 2d Sess. 2 (1980), reprinted in 1 Legislative Historyof the Comprehensive Environmental Response, Compensation and LiabilityAct of 1980, at 309 (1983)). In support of this contention, the OlinCourt refers to a 1980 report from the Office of TechnologicalAssessment, which gauged the "agricultural losses from chemicalcontamination in six states at $283 million." Id. Additionally, theEleventh Circuit found compelling the Committee's report regarding theextent of commercial damage caused by intrastate, on-site disposal ofhazardous waste. Id.

CERCLA's legislative history, the Olin Court concludes, demonstratesthat on-site disposal of hazardous waste substantially affects interstatecommerce. The Eleventh Circuit reached this conclusion not only byexamining CERCLA's legislative history but also by considering theconsequences of unregulated disposal of hazardous waste: "[T]o the extenta [company] can dispose of its waste on-site free of regulation, it wouldhave a market advantage over []companies that lack on-site options."Id. at 1511. This Court finds the reasoning set forth by the EleventhCircuit persuasive.

Congress enacted CERCLA as a comprehensive regulatory response to thegrowing problem of hazardous waste and "to provide `an array ofmechanisms to combat the increasingly serious problems of hazardoussubstance release.'" United States v. Hardage, 761 F. Supp. 1501, 1508(W.D.Okla. 1990) (citation omitted). The Committee Report examined bythe Eleventh Circuit not only details the growth of the chemical industrybut also thoroughly describes the mounting problem associated withimproperly maintained waste sites. Frank P. Grad, Treatise onEnvironmental Law § 4A.02[2][d] (Vol. 3 2001) (citing S. Rep. No.96-848, at 6 (1980)). To buttress these contentions, the Committeerelied on EPA reports that chronicled thousands of incidents involvinghazardous waste. Id. (citing S. Rep. No. 96-848, at 7 (1980)).

Thus, as one court has noted, CERCLA's legislative history demonstratesthat if left unregulated, on-site disposal of hazardous waste wouldunquestionably affect surface and groundwater, which in turn, wouldsubstantially affect the fishing and agriculture industries, as well aslivestock production, recreation, and domestic and industrial watersupplies. See Nova Chems., Inc. v. Gaf Corp., 945 F. Supp. 1098, 1103(E.D.Tenn. 1996) (quoting United States v. NL Indus., 936 F. Supp. 545,563 (S.D.Ill. 1996)); see also Hodel v. Virginia Surface Mining &Reclamation Ass'n, 452 U.S. 264, 282 (1981) (stating that "[t]he CommerceClause [is] broad enough to permit congressional regulation of activitiescausing air or water pollution, or other environmental hazards that mayhave effects in more than one State" (emphasis added)). Therefore,Congress's effort through CERCLA to preserve and protect not only ournatural resources but also the industries which thrive on those resourcesclearly has a direct nexus to interstate commerce. See Nova Chems.,945 F. Supp. at 1106.

It is important to further note that under the Commerce Clause,Congress has the power to create general regulatory schemes, likeCERCLA, that bear a substantial relation to interstate commerce. Olin,107 F.3d 1509 [107 F.3d 1506]. Contrary to defendant's contentions, thede minimis character of individual instances arising under the statuteis of no consequence. Id. at 1510 (citing Maryland v. Wirtz,392 U.S. 183, 197 n. 27 (1968)). Indeed, according to CommerceClause jurisprudence, the constitutionality of these statutes does notdepend on the individual circumstances that arise by application of thestatute. Rather, the critical inquiry is whether the regulatory schemeas a whole has a substantial affect on interstate commerce. See Gibbs,214 F.3d at 497-98. Thus, in this case, it is irrelevant that thePCB-contaminated soil has not yet resulted in environmental damage thatextends beyond either the four corners of the Site or the State of RhodeIsland. See id. at 500 ("Courts have consistently upheld Congress'sauthority to regulate private activities in order to . . . protect theenvironment."); see alsoProyect v. United States, 101 F.3d 11, 13 (2dCir. 1996). It is sufficient that CERCLA targets the disposal ofhazardous waste, which, as demonstrated by CERCLA's legislative history,has a substantial affect on interstate commerce.

Indeed, to adopt defendant's theory of Congress's Commerce Clause powerwould render Congress's federal power impotent: In this case, Congresswould be precluded from taking prophylactic measures to protect theenvironment from environmental damage caused by on-site disposal ofhazardous waste. It is the consideration of the consequences ofunregulated on-site disposal of hazardous waste and CERCLA's legislativehistory that leads this Court to conclude that Congress had a rationalbasis for concluding that the disposal of hazardous waste, intrastate orotherwise, has a substantial affect on interstate commerce.

To conclude, Congress's regulation of on-site disposal of hazardouswaste is a constitutionally permissible enactment under the CommerceClause. CERCLA, furthermore, is "reasonably adapted to the ends ofcleaning up existing environmental degradation, preventing improperdisposal of hazardous waste in the future, and recovering the cost ofresponse and remedial actions." NL Indust., 936 F. Supp. at 562 n. 21Congress need not wait until the effects of intrastate disposal ofhazardous waste reach beyond the borders of this State, let alone theSite, to regulate it under the Commerce Clause.

In any event, the disposal of PCBs into the soil at the Site in thiscase is clearly an economic activity that substantially affectsinterstate commerce. It is undisputed that the PCB-contaminated soiloriginated from the entrepreneurial activities of Allen, the previousowner of the Site, who, according to Lombardi, was separating metals onthe Site to sell to scrap yards. It is also undisputed that EPA paid toremediate the environmental damage caused by Allen. Thus, it is clear tothis Court that, in this case, the PCB-contaminated soil, whichoriginated from Allen's junkyard business, and EPA's remediation ofdefendant's Site are clearly economic activities that substantiallyaffect interstate commerce. See Nova, 945 F. Supp. at 1106 ("The releaseof hazardous waste and the remediation of hazardous waste sites areclearly economic activities.").

B. The Presence of Contaminated Soil on Property Constitutes a "Release" within the Meaning of CERCLA

In order for EPA to pursue successfully its CERCLA claim againstdefendant, it must prove (1) a release or threatened release of hazardouswaste has occurred, (2) at a facility, (3) causing EPA to incur responsecosts, and (4) the defendant is a responsible party as defined by42 U.S.C. § 9607(a). See 42 U.S.C. § 9607(a)(1-4); see alsoUnited States v. Dibiase Realty Trust, Civ. A. No. 91-11028-MA, 1993 WL729662, at *5 (D.Mass. Nov. 19, 1993). In this case, it is undisputedthat EPA has successfully proven that the Site is a facility underCERCLA; that it incurred response costs; and that defendant is aresponsible party. The only issue that is contested is whether thepresence of the PCB-contaminated soil at the Site constitutes a "release"as defined in CERCLA.

CERCLA defines a "release" as "any spilling, leaking, pumping,pouring, emitting, emptying, discharging, injecting, escaping, leaching,dumping, or disposing into the environment (including the abandonment ordiscarding of barrels, containers, and other closed receptaclescontaining any hazardous substance or pollutant or contamination)."42 U.S.C. § 9601(22). Courts have interpreted this definitionbroadly "and have consistently rejected attempts to limit CERCLA's reach. . . through restrictive interpretations of the term `release.'"Lincoln Props., Ltd. v. Higgins, 823 F. Supp. 1528, 1536 (E.D.Cal.1992); see also Dedham Water Co. v. Cumberland Farms Dairy, Inc.,889 F.2d 1146, 1152 (1st Cir. 1989); Canadyn-Georgia Corp. v. Bank ofAmerica, N.A., 174 F. Supp.2d 1337, 1346 (M.D.Ga. 2001) ("[T]he term`release' should be construed broadly in order to fulfill the goals ofCERCLA."); Amland Props. Corp. v. Aluminum Co. of America,711 F. Supp. 784, 793 (D.N.J. 1989).

In its objection to the Report and Recommendation, however, defendantattempts to persuade this Court to adopt a more restrictiveinterpretation of the term "release." Specifically, defendant arguesthat in using the phrase "from which there is a release," the plainlanguage of the statute makes clear that the release cannot have alreadyoccurred. Rather, according to defendant, it must be current and ongoingbecause the definition of "release" is in the present tense. ThisCourt, however, refuses to apply such a restrictive interpretation of theterm "release" in this case.

By its terms, CERCLA is a strict liability statute with limited andnarrow defenses. Its primary purpose is to encourage voluntary cleanupand, to achieve this goal, the statute envisions circumstances in whichthe "cleanup must be paid for by those least responsible because thosewho are most responsible lack funds or cannot be found." LincolnProps., 823 F. Supp. at 1537. Defendant's interpretation of "release,"attempts to circumvent this reality by creating a new defense, whichwould permit individuals to avoid liability by arguing that past releasesor disposals of hazardous waste do not fall within the definition of"release." As aforementioned, courts have refused to expand CERCLA'slimited defenses through restrictive interpretations of the term"release." Id. at 1536; see also United States v. 150 Acres of Land,204 F.3d 698, 705-06 (6th Cir. 2000).

In this case, defendant does not dispute that the Site containedPCB-contaminated soil, which defendant, upon RIDEM's recommendation, paidto have excavated and placed on polyplastic. A number of courts have heldthat the presence of hazardous material at a site is sufficient toconstitute a "release" for purposes of triggering CERCLA liability.See, e.g., Containerport Grp., Inc. v. American Fin. Grp.,128 F. Supp.2d 470, 482 (S.D.Ohio 2001); American Nat'l Bank & Trust Co.v. Harcros Chems., Inc., 997 F. Supp. 994, 998 (N.D.Ill. 1998) ("[T]herecord shows that the presence of hazardous substances at the sites atissue supports a conclusion that releases have occurred. . . ."); Fosterv. United States, 922 F. Supp. 642, 651 (D.D.C. 1996) (noting that thepresence of hazardous substances in the soil and groundwater constitutes a"release"); Dibiase, 1993 WL 729662, at *4 ("To trigger liability, CERCLArequires only the presence at a facility of any of CERCLA's listedhazardous substances."); Hardage, 761 F. Supp. at 1510 ("The presence ofhazardous substances in the soil, surface, water or groundwater of a sitedemonstrates a release."). The Sixth Circuit explained that the presenceof hazardous waste is sufficient to constitute a "release" because a"`release' stand[s] for the actual entry of substances into theenvironment. 150 Acres of Land, 204 F.3d at 706 (emphasis added). CERCLAdefines the "environment" as "any other surface water, ground water,drinking water supply, land surface or subsurface strata, or ambient airwithin the United States. . . ." 42 U.S.C. § 9601(8)(B) (emphasisadded).

Here, the parties do not dispute that PCB is a hazardous substanceand, it is also undisputed that PCBs entered the soil during the timeAllen owned the property. Accordingly, this Court concludes that thepresence of PCB-contaminated soil at the Site constitutes a "release."8The only common sense interpretation of this term is to include pastreleases of hazardous substances within the definition of "release." Tohold otherwise would undermine CERCLA's goal of encouraging voluntarycleanup by those in a position to do so.

C. CERCLA's Third Party Defense

CERCLA contains only three defenses to liability. See42 U.S.C. § 9607(b). Section 9607(b) provides in relevant part:

There shall be no liability . . . for a person otherwise liable who can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by — (1) an act of God; (2) an act of war; (3) an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant. . . .

42 U.S.C. § 9607(b). It is the third defense, commonly known asthe third party defense, which is the focus in this matter.

In this case, in order to invoke the third party defense therebyavoiding CERCLA liability, defendant must prove by a preponderance of theevidence (1) that a third party caused the release of hazardoussubstance; (2) that the third party was not defendant's employee oragent; (3) that the act or omission of the third party did not occur inconnection with a contractual relationship existing either directly orindirectly with defendant; (4) that defendant exercised due care withrespect to the PCB-contaminated soil; and (5) that defendant tookprecautions against foreseeable actions or omissions of third partiesSee 42 U.S.C. § 9607(b); see also Dibiase, 1993 WL 729662, at *6.

1. A Third Party's Acts or Omissions in connection with a Contractual Relationship

In the Report and Recommendation, the Magistrate Judge concluded thatdefendant did not meet the requirements of the third party defensebecause defendant had a contractual relationship as defined in42 U.S.C. § 9601(35)(a), infra, with the prior owner of the Site,Allen. The contractual relationship, according to the Magistrate Judge,was based on the defendant's 1986 contract to purchase the Site fromAllen.

Defendant argues, however, that the language of the statute requiresthat the act or omission that caused the release of the hazardoussubstance must have occurred in connection with the contractualrelationship. Defendant contends that it may avail itself of theprotection afforded by the third party defense because the defendant'scontract to purchase Allen's property was not connected, either directlyor indirectly, with the release of PCBs into the soil.

In support of its argument, defendant contends that this Court shouldfollow the Second Circuit's treatment of this issue in WestwoodPharmaceuticals, Inc. v. National Fuel Gas Distribution Corp., 964 F.2d 85(2d Cir. 1992). In Westwood, theSecond Circuit held that the "inconnection with" language of the third party defense requires thecontract to relate to the hazardous substances or allow the landowner toexert some element of control over the third party's activities. Id. at91.

Having reviewed the relevant statutory language, however, this Courtconcludes that defendant's contract to purchase the Site from Allenprecludes defendant from availing itself of the protection afforded by thethird party defense. 42 U.S.C. § 9601(35)(A) defines "contractualrelationship" for purposes of the third party defense contained in §9607(b)(3). Section 9601(35)(A) states in relevant part that "[t]he term`contractual relationship' . . . includes, but is not limited to,land contracts, deeds or other instruments transferring title orpossession. . . ." 42 U.S.C. § 9601(35)(A). The statutorydefinition of "contractual relationship," therefore, expressly includescontracts for the sale of land.

In order to give full effect to the statutory definition of"contractual relationship," this Court concludes that contracts for thesale of land preclude a defendant, such as Domenic Lombardi Realty,Inc., from availing itself of the protection afforded by the third partydefense. To adopt the interpretation set forth by the Second Circuit inWestwood would render the explicit language of the statutory definitioninoperative. See Containerport, 128 F. Supp.2d at 478 n. 8; see also Inre Hemingway Transport, Inc., 993 F.2d 915, 932 (1st Cir. 1993); GrandStreet Artists v. Gen. Elec. Co., 28 F. Supp. 291, [28 F. Supp.2d 291,]295-96 (D.N.J. 1998); Lefebvre v. Central Maine Pwr. Co.,7 F. Supp.2d 64, 70 (D.Me. 1998) (noting that a property chain oftitle can be considered a contractual relationship); Dibiase, 1993WL 729662, at *6; Steego Corp. v. Ravenal, 830 F. Supp. 42, 51-52(D.Mass. 1993).

2. The Innocent Landowner Exception to the Third Party Defense

Although the third party defense affords defendant no protection,defendant may, nevertheless, avoid CERCLA liability by utilizing theinnocent landowner defense, a narrow exception carved out of the thirdparty defense. 42 U.S.C. § 9601(35)(A) and (B), commonly known as the"innocent landowner defense," not only sets forth the definition of"contractual relationship," supra, but also details the circumstancesunder which an innocent purchaser of hazardous land may, nonetheless,escape liability.9

In this case, in order to avoid CERCLA liability utilizing the innocentlandowner defense, defendant must prove by a preponderance of theevidence (1) that it acquired the Site after the initial release of PCBsinto the soil; (2) that at the time of its acquisition, defendant did notknow and had no reason to know that any hazardous waste was deposited atthe Site; and (3) that once the presence of thePCB-contaminated soilbecame known, defendant exercised due care under the circumstances. See42 U.S.C. § 9601(35)(A)(i-iii), (B); see also Hemingway Transport,993 F.2d at 932.

Furthermore, in order to avail itself of the protective umbrella of theinnocent landowner defense, defendant must also prove that it undertookall appropriate inquiry into Allen's ownership and uses of the Site inorder to minimize liability. In making this determination, Congress hasinstructed courts to consider: (1) any specialized knowledge orexperience on the part of the defendant; (2) the relationship of thepurchase price to the value of the property if uncontaminated; (3)commonly known or reasonably ascertainable information about theproperty; (4) the obviousness of the presence or likely presence ofcontamination at the property; and (5) the ability to detect suchcontamination by appropriate inspection. See 42 U.S.C. § 9601(35)(B);see also Hemingway Transport, 993 F.2d at 932.

The Magistrate Judge concluded in his Report and Recommendation thatdefendant did not meet the requirements of the innocent landowner defensefor two reasons. First, the Magistrate Judge found that defendant hadreason to know of the existence of the PCB-contaminated soil before itpurchased the Site, and therefore, fails the lack of knowledge requirementof the innocent landowner defense. Second, he concludes that defendantdid not exercise due care with regard to the contaminated soil becausewhen the polyplastic cover blew off the contaminated soil piles, therebyexposing them to the elements, defendant did nothing to ameliorate theproblem. For those two reasons, the Magistrate Judge recommended thatthis Court grant EPA's Motion for Summary Judgment on the issue ofliability.

After reviewing the record in the light most favorable to the nonmovingparty — here, defendant Domenic Lombardi Realty, Inc., this Courtconcludes that there are disputed material facts on the issue of whetherdefendant has met the requirements of the innocent landowner defense.See Springfield Terminal Ry., 133 F.3d at 106. Specifically, there aregenuine issues of fact regarding whether defendant had reason to know ofthe PCB-contaminated soil before it purchased the Site and whetherdefendant exercised due care once the PCB-contaminated soil wasdiscovered. Accordingly, this Court must deny EPA's Motion for SummaryJudgment.

a. The Knowledge Requirement of the Innocent Landowner Defense

The Report and Recommendation asserts that defendant had reason to knowof the contaminated soil before it purchased the Site based on thefollowing "facts": (1) that defendant knew Allen, the previous owner,operated an unlicensed junkyard on the Site and that Allen, as part of hisjunkyard business, separated "metals" on the property, includingtransformers from Narraganset Electric Company; (2) that Lombardi, beforepurchasing the Site, visited the property on a number of differentoccasions and therefore should have seen the oil stained soil at theSite; (3) that Lombardi knew the "authorities" were causing problems forAllen; (4) that defendant is a commercial real estate developer andtherefore should have conducted an inspection of the Site beforeacquiring it; and (5) that defendant should have been suspicious whenAllen substantially dropped the "asking" price.

In its objection to the Report and Recommendation, however, defendantdraws this Court's attention to a number of issues, which, upon thisCourt's examination of the record, indicate genuine issues of fact.First, although Lombardi was aware that Allen was operating an unlicensedjunkyard on the premises, there is nothing in the current record tosuggest that Lombardihad reason to know that hazardous waste was on theproperty at the time his company acquired it. Second, the Report andRecommendation suggests that prior to purchasing the property, defendantcould have ascertained the existence of environmental problems at theSite by contacting State, Local, or environmental authorities. Therecord, however, indicates that it was not until RIDEM officials tooksamples of the soil in May 1988, more than a year after defendantpurchased the Site, that defendant became aware of the PCB-contaminatedsoil. Thus, the Magistrate Judge's conclusion that "surely defendantcould have ascertained from the local or state police or environmentalofficials the nature of the problems at the Site" is clearlyunsupported. Third, defendant contends that, contrary to the MagistrateJudge's finding, Lombardi made very few visits to the property beforepurchasing it and, thus, did not have opportunity to observe the oilstained soil, which was located approximately 250 feet from the back ofthe house. This Court further notes that it is unclear whether the oilstained soil was present during the times Lombardi visited the property.Fourth, this Court cannot conclude as a matter of law that defendantshould have been aware of the PCB-contaminated soil based on thesubstantial decrease in Allen's asking price. Specifically, there isnothing in record to indicate what the value of the property without thecontaminated soil might have been and, therefore, there is nothing in therecord against which to measure the significance or relevance of theSite's diminished sale price. Accordingly, based on the current state ofthe record, this Court cannot determine as a matter of law whetherdefendant had reason to know of the PCB-contaminated soil at the timedefendant acquired the Site. Obviously Lombardi's credibility is atissue here so there are material issues of fact in dispute regardingdefendant's pre-sale knowledge which must be resolved at trial by thefact finder.

Similarly, there are genuine issues of fact regarding whether defendantundertook all appropriate inquiry into Allen's ownership and uses of theproperty. As aforementioned, in order to protect itself from liabilityutilizing the innocent landowner defense, defendant must prove by apreponderance of the evidence that it undertook all appropriate inquiryinto Allen's use of the property. See 42 U.S.C. § 9601(35)(B). Thisundertaking, furthermore, must be made utilizing good commercial orcustomary practice, and the Court may consider any specialized experienceor knowledge in determining whether defendant has met its burden. Seeid. In this case, the parties dispute whether defendant is a commercialand residential property developer and management company or whether itis simply a commercial and residential property management company.Furthermore, what is good commercial or customary practice for acommercial real estate manager, or developer for that matter, has notbeen established in the record before the Court. See Advanced Tech.Corp. v. Eliskim, Inc., 87 F. Supp.2d 780, 785 (N.D.Ohio. 2000) (notingthat "[w]hat constitutes appropriate inquiry is a mixed question of lawand fact and will depend on the totality of the circumstances"). Thus,whether defendant undertook an appropriate inquiry into Allen's previousownership and use of the Site in light of the company's experience,skill, and knowledge is a disputed question of fact to be resolved attrial.

b. The Due Care Requirement of the Innocent Landowner Defense

In order for defendant to prove the due care element of the innocentlandowner defense, "defendant must demonstrate that he took allprecautions with respect to the [contaminated soil] that a similarlysituated reasonable and prudent personwould have taken in light of allthe relevant facts and circumstances." Dibiase, 1993 WL 729662, at *7.Case law analyzing this prong of the innocent landowner defenseemphasizes that under no circumstances will "no care" be considered "duecare." See id. Indeed, "[w]hile the statute does not require landownersto exercise due care before they know of the presence of hazardoussubstances, it does require that once landowners are aware of thethreat, they take some action." Containerport, 128 F. Supp.2d at 480(emphasis added).

Here, defendant argues that it has satisfied the due care requirementof the innocent landowner defense because once defendant became aware ofthe contamination, it had the contaminated soil excavated and placed onpolyplastic. Defendant further asserts that although the polyplasticcover blew off the two piles of contaminated soil, the soil could not getinto either the land or the "ambient" air.

EPA, on the other hand, argues that defendant did not exercise due carebecause although defendant excavated the contaminated soil and had itplaced on polyplastic, the piles were not removed from defendant'sproperty until five and a half years after defendant had the soilexcavated. According to EPA, sometime between the time the soil wasexcavated and EPA's Removal Action, the polyplastic that covered thePCB-contaminated soil piles blew off, thereby exposing the soil to theelements. EPA contends that the exposure of the contaminated soil to theelements not only threatened dispersal of the uncovered piles ofcontaminated soil but also left the piles readily accessible to peopleand animals.

Viewing the evidence and related inferences in the light most favorableto defendant, this Court cannot conclude as a matter of law thatdefendant did not exercise due care with regard to the contaminatedpiles. In this case, defendant did take affirmative steps to rectify theSite's hazardous waste problem. The issue is whether a similarlysituated reasonable and prudent person would have taken the same steps oradditional ones in light of all of the relevant facts and circumstances.See Dibiase, 1993 WL 729662, at *7.

In addition, even assuming, arguendo, that defendant is found liable topay for the removal of the seventy tons of contaminated soil it hadpreviously excavated and placed in two piles on the Site, that does notautomatically make defendant liable for EPA's removal of the otherapproximately eight hundred and thirty tons of previously undetected PCBson the Site. In other words, defendant may be able to take advantage ofthe innocent landowner defense for PCBs removed by EPA other than theseventy tons of contaminated soil defendant had excavated and placed onpolyplastic in October 1989. As demonstrated by the foregoing,therefore, there are issues of material fact regarding whether defendantexercised due care once it became aware of the contaminated soil, whichcannot be resolved based on the current state of the record.

IV. CONCLUSION

The determination of whether, under the particular circumstances,defendant satisfies the requirements of the innocent landowner defenseinvolves factual issues that this Court cannot resolve on the currentstate of the record. Defendant, therefore, must be given an opportunityto develop its innocent landowner defense at trial. Furthermore, in theevent that defendant is unable to prove its eligibility to utilize theinnocent landowner defense, EPA must be given an opportunity to provethe amount of damages it is entitled to recover from defendant.Therefore, in this case, the bottom line is that this Court can grantonly partial summary judgment in favor of EPA.

To clarify, the Court's grant of partial summary judgment for EPAleaves only two issues to be litigated at trial: (1) whether defendantmay utilize the innocent landowner defense to avoid CERCLA liability and(2) if defendant is found liable, what damages EPA has incurred as aresult of its Removal Action. See Russell v. Enterprise Rent-A-Car Co.of RI, 160 F. Supp.2d 239, 248-49 (D.R.I. 2001) (noting that the FederalRules of Civil Procedure permit a court to devise an appropriate orderdirecting further proceedings when judgment is not rendered upon thewhole case and material facts are disputed); Access Solutions Int'l,Inc. v. Data/Ware Dev., Inc., 70 F. Supp.2d 92, 95-96 (D.R.I. 1999)("Rule 56(d) arms the court with a tool to `narrow the factual issues fortrial.'" (citation omitted)). Accordingly, this matter will be scheduledfor trial to resolve the limited issues remaining for disposition of thismatter.

It is so ordered.

1. Walsh had conducted an inspection of another piece of propertyLombardi purchased in Scituate, Rhode Island, and that inspectionrevealed an "environmental problem that had to be taken care of beforethe property could be sold" to Lombardi.

2. Based on estimates he received regarding the removal of thePCB-contaminated soil, Lombardi believed that the removal action shouldcost between $50,000 and $60,000.

3. 42 U.S.C. § 9607(a) provides in pertinent part that: "(1) theowner and operator of a vessel or a facility, . . . from which there isa release or a threatened release which causes the incurrence ofresponse costs, of a hazardous substance, shall be liable for (A) allcosts of removal or remedial action incurred by the United StatesGovernment. . . ."

4. Lombardi unsuccessfully petitioned the First Circuit Court ofAppeals for a writ of mandamus granting him permission to represent thedefendant corporation, which a panel of the First Circuit denied on May4, 1999. The First Circuit stated that challenges to the ruling of amagistrate judge must be presented in the first instance to the districtjudge.

5. On April 30, 1999, Magistrate Judge Lovegreen recused himself fromthis case and, this writer referred the matter to Magistrate JudgeMartin.

6. On January 5, 2000, this writer granted a motion for AttorneyGardiner to appear pro hac vice.

7. Lombardi filed, on behalf of the defendant corporation, a Motionfor Summary Judgment on June 6, 1999, and two Motions for DefaultJudgment against the United States on July 30, 1999, and October 13,1999, respectively. On February 23, 2000, however, Magistrate JudgeMartin issued an order mooting all of the motions Lombardi filed whilerepresenting the defendant pro se.

8. Because this Court concludes that the presence of hazardous wasteon the Site constitutes a "release" and thus triggers CERCLA liability,the Court does not need to address the issue of whether defendant'sexcavation activities constitute a separate "release."

9. Contained in 42 U.S.C. § 9601(35)(A), the innocent landownerexception to the third party defense states in relevant part:

The term "contractual relationship," for the purpose of section 9607(b)(3) [the third party defense] . . . includes, but is not limited to, land contracts, deeds, or other instruments transferring title or possession, unless the real property on which the facility concerned is located was acquired by the defendant after the disposal or placement of the hazardous substance on, in, or at the facility, and one or more of the circumstances described in clause (i), (ii), or (iii) is also established by the defendant by a preponderance of the evidence: (i) At the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance . . . was disposed of on, in, or at the facility. . . . In addition to establishing the foregoing, the defendant must establish that he has satisfied the requirements of [42 U.S.C.] section 9607(b)(3)(a) and (b).

Back to top