Consider the provisions of the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") 42 U.S.C. §§ 9601 et seq. While the name itself seems-sufficiently threatening, an examination of some of its provisions and their interpretation will confirm the strength of the legislation. CERCLA was enacted to provide the U.S. Environmental Protection Agency ("EPA") with the power and necessary tools to identify and clean up contaminated sites.

One of the most problematic areas of the legislation is the imposition of liability on, and the restitution of costs from, responsible parties. Responsible parties are defined by CERCLA § 107 to be:

1. the current owner or operator of a site;

2. any person who owned or operated the site when the disposal of hazardous substance occurred;

3. any person who arranged for the treatment, disposal, or transportation of a hazardous substance to the site from which the release has occurred or may occur; or

4. any person who transported a hazardous substance to a site from which a release or threatened release occurs.

There is strict, joint, and several liability among the responsible parties. Also, responsible parties are liable even if the contamination occurred prior to enactment of CERCLA.

CERCLA provided the setting for an encounter between the EPA and the Marine Midland Bank, N.A. ("Marine"), in the town of Southeast, Putnam County, New York in the latter part of the 1980's. In that town, there was a single one-story building (the "Building") and a parking lot, on a total of approximately 1.8 acres (the "Property"). The building was approximately 12,800 square feet in area. A floor drain traversed the entire length of the interior of the Building and supposedly emptied into a drywell under a parking lot at the rear of the property.

Marine leased the entire Property from 1970 to 1990 under its initial lease (the "Marine Lease"), but only occupied a portion of the Property with its branch office. The Marine Lease was subject to prior leases on portions of the Property, one of which was held by a dry cleaning business. The Property owner assigned all of its right, title and interest in those leases to Marine. Marine then notified the dry cleaning business to make all rent payments to Marine "as your new landlord". After extending the term of the original lease to the dry cleaner, Marine entered into a sublease with the business.

In 1978, the Putnam County Department of Health detected contamination of groundwater in wells near the property. The contamination contained the compound perchloroethylene ("PCE"). One of the owners of the dry cleaning business admitted to disposing of PCE-contaminated waste water regularly through the floor drain on the Property.

In 1983 the EPA placed the site of the wells on the superfund list. The EPA contended that it incurred $3,000,000 in response costs and commenced a recovery action against Marine and other tenants, we well as owners of the Property. United States v. A&N Cleaners and Launderers, Inc. (S.D.N.Y. 1992) 788 F.Supp. 1317. The EPA moved for summary judgment against each of the defendants under CERCLA § 107, referenced earlier. Marine opposed the motion on the grounds that, "as a lessee/ sublessor of the Property which has never held title to the Property nor participated in or controlled disposal activities, it is not a 'covered party' under § 107(a). Marine argues in the alternative that the third party and innocent landowner defenses absolve it of any liability."

The court granted the EPA's motion against Marine. The court noted, "A party need not be both an owner and operator to be liable under § 107(a); either status is sufficient to establish CERCLA liability." As to the status of owner, it held, "Mere ownership of the property on which the lease took place is sufficient to impose liability under § 107(a), regardless of any control or lack of control over the disposal activities." The court then stated, "The relevant inquiry is, then, what constituted 'ownership' in the absence of title?"

The leading case in considering lessees appears to be United States v. South Carolina Recycling and Disposal, Inc. (D.S.C; 1985) 653 F.Supp. 984. The court in A&N Cleaners referred to the definition of owner in the South Carolina cases, and stated:

'Site control' in this case meant that the lessee/sublessor as lessee of the site, maintained control over the responsibility for the use of the property and, essentially, stood in the shoes of the property owners.' ....The undisputed facts establish that Marine exercised a degree of site control over the Property, that, under this definition, confers ownership status upon it for purposes of CERCLA § 107(a).

The court went on to observe that Marine, among other things, had the right to sublet all or part of the Property, had the discretion to determine the use of the Property of its subtenants while its use of the Property was not limited, had the right to collect all rents from existing tenants, and was obligated to keep the entire premises in good condition and repair at all times.

With the exception of the power of alienation, therefore, Marine enjoyed the rights and bore the obligations of an 'owner' as the term is commonly understood. For this reason, Marine is liable as an 'owner' under CERCLA § 107(a)(2).

It is significant that although § 107(a)(2) sets forth the second category of responsible parties, i.e. owners at the time of disposal of the hazardous substance, there was no reliance upon the timing of the contamination for the purpose of finding that Marine was an owner for the purpose of § 107(a) in its entirety. In other words, the lessee could have fit within the first category found in § 107(a)(1), a current owner. A current owner's liability is not dependent upon when the contamination occurred. In fact, the A&N Cleaners court, after having found Marine to be an "owner", used the timing of the contamination for the purpose of rejecting statutory defenses to liability, rather than for the purpose of the imposition of liability in the first instance.

Thus, is seems apparent that if a lessee can be deemed to be an owner, it can be deemed to be a current owner under the first category of § 107(a). Under such circumstances, the lessee could take possession of the office building with no actual knowledge of any previous activities or contamination at the site, and then be burdened with attempting to fit into the statutory third party, or innocent purchaser defenses, to be relieved of liability.

CERCLA is certainly not the only statutory enactment with such far reaching consequences. For example, it appears that there may be no defenses in California for a lessee who is deemed to be a current owner under similar criteria pursuant to the Porter-Cologne Act, where the groundwater has been impacted or threatened. California Water Code §§ 1300 et seq. The State Water Resources Control Board had no problem finding the requisite control and knowledge of a current owner in In the Matter of the Petitioners of Arthur Spitzer, Harvey Jack Muller and Bettina Brendel, Spic & Span, Inc. And S & S Enterprises, Inc., Aratex Services, Inc., Order No. WQ 89-8 (SWRCB 1989).

A landowner is ultimately responsible for the condition of his property, even if he is not involved in day-to-day operations. If he knows of a discharge on his property and has sufficient control of the property to correct it, he should be subject to a cleanup order under Water Code Section 13304 (Logsdon, 1984) Order No. 84-6; [citations].

The Owners in this case claim that they did not know anything about activities on the Property. Although, they know that a dry cleaning business was located there, they did not know what the dry cleaners were doing with the PCE. However, they now know that there is PCE contamination in the soil and ground water at the Property. The discharge of the PCE did not cease when the dry cleaning business stopped. The discharge continues as long as the PCE remains in the soil and ground water. Therefore, the Owners do know about the discharge of pollutants on their property. (Emphasis added.)

Thus, discovery of the contamination imparts sufficient knowledge to the current owner to make him or her responsible for the cleanup. Under what circumstance will a current lessee be deemed a current owner for purposes of the Water Board? It seems that the criteria is similar to that set forth for CERCLA, as discussed above. In In the Matter of the Petitions of Wenwest, Inc., Susan Rose, Wendy's International, Inc. And Phillips Petroleum, Order No. WQ 92-13 (SWRCB 1992) the State Water Board found Wenwest to have the responsibilities of a current owner on the basis of its control of the property.