UST Liability May Extend to Former Owners

With the current proliferation of class-action or multi-party lawsuits based on MTBE (methyl tertiary butyl ether) contamination, marketers should not automatically consider themselves safe from legal liability for contamination at locations they may have sold years ago. By the same token, they should not deem themselves without recourse against those from whom they may have purchased contaminated sites. Several recent court decisions help explain the law in these situations.

A decision earlier this year by a Rhode Island court highlights the long reach of the federal Resource Conservation and Recovery Act (RCRA) to prior owners of underground petroleum storage tanks (USTs). The case of Raymond K. Hoxsie, Trustee et al. vs. Exxon Corp. et al. involved a former service-station site owned by Exxon and leased to several dealers from about 1960 to 1984.

Exxon sold the property in 1985, but before doing so, it removed the USTs at the location. The buyer from Exxon resold the property to Hoxsie in 1986. In 1994, nearly 10 years after the tanks were removed and the property sold by Exxon, the adjacent landowner discovered gasoline contamination migrating off the site. Hoxsie brought suit under the individual "citizen suit" provision of RCRA, seeking an injunction from the court that would require Exxon to complete the necessary remediation.

Exxon moved to dismiss the case. Two of its arguments for dismissal were: (1) It should not be held liable because it removed the USTs before the applicable provisions of RCRA were enacted by Congress; and (2) The contamination did not meet the "imminent and substantial endangerment" requirement for suits by private citizens under RCRA. The court ruled against Exxon on both arguments.

In response to Exxon's first argument, the court held that under RCRA, "past owners of USTs have continuing obligations to take corrective action following the confirmed release of a regulated substance."

As for Exxon's second defense, the court focused on the phrase "may present an imminent and substantial endangerment" in RCRA. In the court's opinion, the use of the qualifying term "may" in the statute indicates that Congress intended to give the courts "expansive" authority to address risks posed by regulated substances.

Therefore, the court broadly defined the terms cited by Exxon, stating that "imminent" means "a threat which is present now, although the impact of the threat may not be felt until later;" and an endangerment is "substantial" if there is "some reasonable cause for concern that someone or something may be exposed to a risk of harm ... if remedial action is not taken." Thus, a jury may find that the existence of contamination in excess of state environmental standards meets the RCRA requirements.

The decision in the Raymond K. Hoxsie case is not an aberration. It is consistent with, and was partly based on, prior decisions by other courts in Illinois, Pennsylvania and New York.

So, the first principle to keep in mind is UST owners have a continuing duty under RCRA to remediate petroleum contamination that occurred or began during their ownership of the USTs ? regardless of whether the leaks causing the contamination predated RCRA ? as long as the contamination poses an existing danger to people or the environment.

It is important to note, however, that the legal basis for the decision by the Hoxsie court was federal law ? RCRA ? not state law. Suits brought against prior property owners under state laws alone may not achieve the same result.

The more limited reach of state laws was illustrated earlier this year in Bendik et al. v. Hudson Oil Co. Inc. et al. That case was brought in an Ohio federal court against prior property owners of contaminated property. However, unlike the claim in the Hoxsie case, which was based on the federal RCRA statute, the claims in the Bendik case were based solely on Ohio state law theories (for breach of contract, negligence and trespass). The federal court in Bendik dismissed all of the claims against the prior property owners, holding that the state law causes of action raised by the plaintiffs did not provide a basis for liability.

Of course, there may well be states other than Ohio that have enacted laws on which to base claims against prior owners of contaminated property. Still, petroleum marketers should keep in mind the second principle: In any case against prior property owners for UST contamination, the current property owner-plaintiff should consider including at least one claim for cleanup costs based on the "citizen suit" provision of RCRA.