Commander Oil Corp. v. Barlo Equipment Corp.

215 F.3d 321, 30 Envtl. L. Rep. (Envtl. Law Inst.) 20679, 50 ERC (BNA) 1792, 2000 U.S. App. LEXIS 13102, 2000 WL 758167
CourtCourt of Appeals for the Second Circuit
DecidedJune 12, 2000
DocketDocket Nos. 98-7975, 98-9075
StatusPublished
Cited by48 cases

This text of 215 F.3d 321 (Commander Oil Corp. v. Barlo Equipment Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commander Oil Corp. v. Barlo Equipment Corp., 215 F.3d 321, 30 Envtl. L. Rep. (Envtl. Law Inst.) 20679, 50 ERC (BNA) 1792, 2000 U.S. App. LEXIS 13102, 2000 WL 758167 (2d Cir. 2000).

Opinion

JOHN M. WALKER, Jr., Circuit Judge:

This dispute requires us to decide whether the lessee of a 75’ X 250’ parcel of land in Uniondale, New York, may be held liable as an “owner” for purposes of allocating the costs of remediation imposed by the Environmental Protection Agency (“EPA”) under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 (“CERCLA”).

Defendant Bario Equipment Corp. (“Bario”) appeals from a judgment of the United States District Court for the Eastern District of New York (Jacob Mishler, Judge), finding it liable under CERCLA to plaintiff Commander Oil Corp. (“Commander Oil”) as an “owner” of the parcel by virtue of its status as the parcel’s lessee/sublessor. Although we conclude that a lessee may, under some circumstances, be held hable under CERCLA as an “owner,” we conclude that, under the circumstances of this case, Bario was not an “owner” within the meaning of CERCLA. Accordingly, we reverse the judgment of the district court in substantial part.1

BACKGROUND

In 1963, Commander Oil became the owner of two lots in Nassau County, lots 7A and 7B, after Commander Oil merged with Lawrence J. Bennett, Inc., the lots’ record owner. Lot 7A contained office and warehouse space; 7B, the parcel at issue in this case, housed twelve above-ground petroleum storage tanks and was used by Commander Oil as a fuel depot and “throughput” facility at least until 1967. In 1964, Commander Oil leased the office and warehouse space on lot 7A to Bario, which was in the business of buying, manufacturing, and distributing petroleum-handling equipment. In 1969, Commander Oil leased lot 7B to Pasley Solvents & Chemicals, Inc. (“Pasley”), which used the site to repackage solvents purchased in bulk and to reclaim and revitalize used solvents. Under Pasley’s lease, Commander Oil retained the use of three oil storage tanks on lot 7B.

The arrangement at the heart of the present dispute arose in 1972 when Commander Oil consolidated its leases. Under a single new lease, Commander Oil rented both lots 7A and 7B to Bario, which in turn subleased 7B to Pasley. This arrangement simplified Commander Oil’s bookkeeping and also delegated responsibility to Bario for basic maintenance and pay[325]*325ment of taxes on both lots. The nature of the sublease from Bario to Pasley is fiercely contested. Bario characterizes itself simply as a rent conduit and the lease and sublease of 7B as a bookkeeping measure implemented entirely at Commander Oil’s behest. Bario claims that the new arrangement did not change the actual relationship between the three parties and that Pasley continued to treat Commander Oil as its lessor. Commander Oil paints a substantially different picture, referring to instances of Barlo’s alleged involvement with Pasley’s activities on 7B, and to the fact that Bario derived a profit, albeit a small one, from the sublease arrangement. We need not resolve this dispute, however, because it does not affect the legal result.

In 1981, an investigation by the Nassau County Department of Health (“DOH”) led to the discovery of contamination on lot 7B. The DOH referred the matter to the New York State Department of Environmental Conservation, which charged Pas-ley in Nassau County District Court with violating the Nassau County Fire Prevention Ordinances. Pasley agreed to drain its tanks, remove solvents it had stored on the lot, and vacate the premises.

Six years later, the EPA ordered Commander Oil to conduct an investigation and a feasibility study to determine the extent of the contamination and to propose a plan for its remediation. In 1988, the EPA sought reimbursement from Commander Oil and other defendants for response costs incurred by the federal government in remediating the site. On January 26, 1996, Commander Oil and other defendants entered into a consent decree in which “Commander agreed to design and implement response actions at the site and to reimburse the United States for past and future response costs incurred in connection with the Site.” (Consent Decree ¶ 20). In turn, Commander Oil received contribution for these costs from certain defendants, who ultimately settled for $1,849,127.91.

In 1990, Commander Oil filed this action, demanding contribution or indemnification for additional costs from Barb and Pasley. Commander Oil’s complaint seeks, inter alia, indemnification or contribution under CERCLA, contractual indemnification, and damages for various state-law claims including trespass, negligence, nuisance, and waste.

On June 12, 1997, the district court granted partial summary judgment to both Commander Oil and Barb. For purposes of establishing CERCLA liability, the only contested issue was whether Barb was an “owner” within the meaning of 42 U.S.C. § 9607(a)(1). The district court held that Barb was an owner within the meaning of § 9607(a)(1) by virtue of its “authority and control” over lot 7B. In so holding, the district court implicitly rejected Barb’s argument that “owner” in § 9607(a)(1) means “record owner” and instead ruled that “a lessee who has control over and responsibility for the use of the property is the owner of the property” for CERCLA purposes. The district court also denied Commander Oil’s claims for contractual indemnification, permitted Barb to amend its answer in order to plead a statute of limitations defense to Commander Oil’s various state-law claims, and, in the same order, dismissed the claims as time barred.

The district court subsequently held a bench trial to apportion liability as between Barb, Commander Oil, and Pasley. Following trial, the district court ruled that although Pasley was responsible for all response costs, the costs had to be allocated between Commander Oil and Barb because Pasley was “financially irresponsible.” The district court rejected Commander Oil’s request for full indemnification from Barb under CERCLA on the ground that Commander Oil was not an “innocent landowner” within the meaning of 42 U.S.C. § 9607(b)(3). Nevertheless, the district court ruled that Commander Oil could recover 25% of its costs from Barb under 42 U.S.C. § 9613(f)(1). Accordingly, the district court entered judg[326]*326ment against Bario in the amount of $802,915 plus 25% of “any future restoration costs.”

Bario appeals from that judgment, arguing that its status as a lessee/sublessor did not make it an “owner” within the meaning of CERCLA and that the district court’s apportionment of liability was clearly erroneous. Commander Oil cross-appeals claiming that the district court erred in dismissing its claims for contractual indemnification and in permitting Bario to amend its pleadings to assert a statute of limitations defense to Commander Oil’s state-law causes of action.

DISCUSSION

We are called upon in this case to resolve yet another ambiguity within CERCLA’s miasmatic provisions. CERC-LA creates a regime of broad-ranging liability, permitting the government to recover its remediation expenses directly from parties responsible for pollution, see 42 U.S.C. § 9607

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Bluebook (online)
215 F.3d 321, 30 Envtl. L. Rep. (Envtl. Law Inst.) 20679, 50 ERC (BNA) 1792, 2000 U.S. App. LEXIS 13102, 2000 WL 758167, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commander-oil-corp-v-barlo-equipment-corp-ca2-2000.