United States v. Puerto Rico Industrial Development Company
Filing
130
OPINION AND ORDER re 101 Motion for Summary Judgment. The United States' motion for summary judgment is GRANTED IN PART and DENIED IN PART. The trial scheduled to commence on February 5, 2018 (docket no. 114) is continued. It will be scheduled by separate order. Signed by Judge Francisco A. Besosa on 12/07/2017. (brc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
UNITED STATES OF AMERICA,
Plaintiff,
v.
Civil No. 15-2328 (FAB)
PUERTO RICO INDUSTRIAL
DEVELOPMENT COMPANY,
Defendant.
OPINION AND ORDER
BESOSA, District Judge.
On September 25, 2015 the United States of America (“United
States”) filed a complaint against the Puerto Rico Industrial
Development
Company
(“PRIDCO”)
pursuant
to
the
Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”),
42 U.S.C. § 9607 et seq.
(Docket No. 1.)
States filed an amended complaint.
answered the amended complaint.
Subsequently, the United
(Docket No. 8.)
(Docket No. 11.)
PRIDCO filed a third party complaint.
PRIDCO
Additionally,
(Docket No. 46.)
The United
States moved for summary judgment against PRIDCO pursuant to
Federal Rule of Civil Procedure 56 (“Rule 56”) on July 14, 2016.
(Docket No. 101.)
PRIDCO opposed the motion for summary judgment,
and requested that the Court defer resolution of this motion
pursuant
to
Federal
Nos. 116 and 117.)
Rule
of
Civil
Procedure
56(d).
The United States filed a reply.
(Docket
(Docket
Civil No. 15-2328 (FAB)
No. 127.)
2
For the reasons set forth below, the Court GRANTS IN
PART and DENIES IN PART the motion for summary judgment, and DENIES
PRIDCO’s request to defer resolution of the summary judgment
motion.
Moreover, The Court further ORDERS the United States and
PRIDCO to meet and confer with each other regarding the third party
complaint, which will be addressed at the January 16, 2018 pretrial
conference.
I.
Factual Background
This
matter
concerns
contaminated
groundwater
located
on
property belonging to PRIDCO in Maunabo, Puerto Rico (hereinafter,
“property”). 1
PRIDCO is a government instrumentality of the
Commonwealth of Puerto Rico, incorporated in 1942 to stimulate the
formation
of
local
firms
and
to
attract
foreign
(Docket No. 11 at p. 2; Docket No. 117-3 at p. 2.)
these
ends,
PRIDCO
maintains
an
infrastructure
investment.
To accomplish
development
program, and facilities for lease or sale to qualified investors.
(Docket No. 117-3 at p. 2.)
The property, which PRIDCO acquired
in 1964, is among these facilities.
(Docket No. 117-4 at p. 2.)
The property includes three industrial structures. (Docket
No. 101-4 at p. 17.)
1
Between 1969 and 2015, PRIDCO leased the
The Municipality of Maunabo identifies the property as L-283-0-06. (Docket
No. 11 at p. 2.) PRIDCO owns a second parcel of land that is also located in
Maunabo, identified as Lot-304-0-66. (Docket No. 101-15 at p. 17.) This second
parcel of land is unrelated to the CERCLA cause of action.
Civil No. 15-2328 (FAB)
3
property to: (1) System Engineering Labs (1969 through 1971);
(2) Coulter de Puerto Rico (1972 through 1980); (3) Solar Mar of
Puerto Rico (1980 through 1984); (4) Orle International Company
(1986 through 1989); (5) Puerto Rico Housing Department (1989
through 1991); (6) Municipality of Maunabo (1996 through 1998);
(7) Premium Fruit Company (1999 through 2003); (8) E.I.G. Aqua
Pura de Puerto Rico, Inc; (9) Juan Orozco, Ltd. (date of lease not
specified); and (10) Centro de Acopio Manufacturing (date of lease
not specified).
The
(Docket No. 101-15 at p. 4.)
Puerto
Rico
Aqueduct
and
Sewer
Authority
(“PRASA”)
operates four groundwater supply wells in Maunabo, providing water
to 14,000 people.
(Docket No. 101-6 at p. 12.)
One of the four
PRASA wells is located adjacent to the southern edge of the
property (hereinafter, “Maunabo well”).
(Docket No. 101-14 at
p. 17.)
Between
2001
and
2004,
PRASA
detected
volatile
organic
compounds (“VOC”), including trichloroethylene (“TCE”) and cis-1,
2-dichloroethene
customers. 2
(“cis-1,
2-DCE”),
in
the
(Docket No. 101-3 at p. 23.)
are hazardous substances.
Id.
tap
water
of
its
TCE and cis-1, 2-DCE
In 2002, PRASA discovered that
groundwater from the Maunabo well contained TCE and cis-1, 2-DCE.
2
TCE is a chlorinated solvent that degrades into cis-1, 2-DCE upon disposal
into the environment. (Docket No. 101-6 at p. 12.)
Civil No. 15-2328 (FAB)
4
(Docket No. 101-6 at p. 12.)
PRASA installed a carbon filtration
system to treat the contaminated groundwater.
at p. 3.)
(Docket No. 101-2
In response to the contamination, PRASA commenced
sampling groundwater from the Maunabo well three times a year to
verify compliance with federal and local drinking water standards. 3
Id.
The United States Environmental Protection Agency (“EPA”) and
the
Puerto
Rico
Environmental
Quality
Board
(“EQB”)
responsible for decontamination of the groundwater. 4
No. 101-6 at pp. 12—13.)
are
(Docket
The EPA confirmed that the groundwater
from the Maunabo well is contaminated primarily with cis-1, 2-DCE.
Id. at p. 26.
After further investigation, the EPA discovered
three
of
plumes
contaminated
Municipality of Maunabo.
throughout
(Docket No. 101-5 at p. 171.)
plumes are referred to as:
1-DCE.
groundwater
the
The three
(1) cis-1, 2-DCE, (2) PCE, and (3) 1,
(Docket No. 101-5 at p. 171.)
The cis-1, 2-DCE plume is
3
The Puerto Rico Department of Health (“PRDOH”) ordered PRASA to discontinue
use of the Maunabo well in 2002. (Docket No. 101-3 at p. 11.) Rather than
close the Maunabo well, however, PRASA installed carbon filtration tanks. Id.
According to CMD Smith, a firm hired by the EPA to study the contaminated
groundwater, this system “was not always effective and [. . .] contaminated
drinking water was reaching the consumers.” Id.
4
CERCLA empowers the President of the United States to “remove or arrange the
removal of, and provide for remedial action relating to such hazardous
substance, pollutant, or contaminant at any time.”
42 U.S.C. § 9604(a)(1).
President Ronald Reagan first delegated primary authority to implement CERCLA
to the EPA pursuant to Executive Order 12580 (January 23, 1987). Section 1 of
Executive Order 12580 requires the National Contingency Plan (NCP) to provide
for national and regional response teams (NRTs and RRTs) to coordinate
preparedness and response actions.
Civil No. 15-2328 (FAB)
5
located below the property, “flow[ing] southwest toward [a] river,
but is intercepted by [the Maunabo well].”
p. 26; Docket No. 101-3 at p. 14.)
(Docket No. 101-6 at
The PCE plume is located south
of the PRIDCO property near a former sugar mill.
4 at p. 18.)
property.
(Docket No. 101-
The 1, 1-DCE plume is located northwest of the
(Docket No. 101-6 at p. 12.)
Together, the three plumes
comprise the Maunabo Area Groundwater Contamination Superfund Site
(hereinafter, “site”).
(Docket No. 101-6 at p. 12.).
In 2006,
the site was listed on the EPA’s National Priorities List, a
compilation of the most contaminated sites in the United States.
(Docket No. 101-6 at p. 15.)
PRIDCO
conducted
an
independent
investigation
contaminated groundwater beneath the property.
of
the
GeoEnviroTech, the
firm hired by PRIDCO to study the cis—1, 2-DCE plume, confirmed
that
the
groundwater
substances.
below
the
property
contained
hazardous
(Docket No. 101-14 at pp. 8, 19.)
The EPA incurred response costs related to decontamination
efforts regarding the cis-1, 2-DCE plume.
These efforts have
included an investigation and the issuance of a Record of Decision
(“ROD”).
(Docket No. 101-2 at p. 3.)
The ROD sets forth a remedy
for the site, including air sparging for the cis-1, 2-DCE plume
and monitored natural attenuation for the PCE and 1, 1-DCE plumes.
(Docket No. 101-6 at p. 75.) The United States seeks reimbursement
Civil No. 15-2328 (FAB)
6
from PRIDCO “for all response costs, including enforcement costs,
incurred by the EPA in connection” with efforts to decontaminate
the cis-1, 2-DCE plume located below the PRIDCO property.
(Docket
No. 8 at p. 9.)
II.
Motion to Defer Summary Judgment
PRIDCO moves for this Court to defer resolution of the summary
judgment motion pursuant to Rule 56(d). (Docket No. 116 at p. 40.)
Rule 56(d) “allows a summary judgment motion to be denied or the
hearing on the motion to be continued, if the nonmoving party has
not had an opportunity to make full discovery.”
Catrett, 477 U.S. 317, 326 (1986).
Celotex Corp. v.
Deferment of summary judgment
adjudication is appropriate if PRIDCO “shows by affidavit or
declaration that, for specified reasons, it cannot present facts
essential to justify its opposition.”
Fed. R. Civ. P. 56(d); see
In Re PHC Shareholder Litig., 762 F.3d 138, 144 (1st Cir. 2014)
(holding that Rule 56(d) motions should be granted freely early in
the litigation).
PRIDCO premises its Rule 56(d) motion on the contested source
of contamination at the property.
Outstanding discovery requests,
PRIDCO argues, are “extremely relevant to PRIDCO’s defense” and
“may hold the key to alternative theories as to why there is
contamination at the groundwater and not at the surface soil level,
Civil No. 15-2328 (FAB)
7
and what may be the source of the contamination.”
(Docket No. 116
at p. 45.)
The Court recognizes that PRDICO may have yet to receive
relevant discovery.
At this stage, however, the issue before the
Court is one of liability.
The Court granted the United States’
motion to trifurcate this matter into a Liability Phase (“Phase
I”), a Cost Phase (“Phase II”), and a Contribution Phase (“Phase
III”).
(Docket No. 85.)
As discussed below, identifying the
source of contamination is immaterial to the prima facie liability
analysis.
See Robertshaw Controls Co. v. Watts Regulator Co., 807
F. Supp. 144, 153 (D. Me. 1992) (“Congress specifically rejected
including
a
causation
requirement
in
Section
[107].”).
Consequently, the reason provided by PRIDCO to defer summary
judgment as to liability is inapposite.
The parties will exchange
discovery pertaining to the source of contamination during Phase
II and Phase III.
Accordingly, PRIDCO’s Rule 56(d) motion is
DENIED.
III. Summary Judgment Motion
A.
Standard of Review
Summary
judgment
serves
to
assess
the
determine if there is a genuine need for trial.
Drug, Inc., 895 F.2d 46, 50 (1st Cir. 1990).
evidence
and
Garside v. Osco
The Court may grant
a motion for summary judgment “if the movant shows that there is
Civil No. 15-2328 (FAB)
8
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
A fact is “material” if it has the potential to “affect the outcome
of the suit under the governing law.”
Id.
A dispute is “genuine”
when it “could be resolved in favor of either party.”
Calero-
Cerezo v. U.S. Dep’t. of Justice, 355 F.3d 6, 19 (1st Cir. 2004).
The party moving for summary judgment has the initial burden of
“demonstrat[ing] the absence of a genuine issue of material fact”
with definite and competent evidence.
Celotex, 477 U.S. at 323;
Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir.
1994).
The movant must identify “portions of ‘the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any’” which support its motion.
Id. (citing Fed. R. Civ. P. 56(c)).
Once a properly supported
motion has been presented, the burden shifts to the non-moving
party “to demonstrate that a trier of fact reasonably could find
in [its] favor.” Santiago-Ramos v. Centennial P.R. Wireless Corp.,
217 F.3d 46, 52 (1st Cir. 2000) (internal citation omitted).
It is well-settled that “[t]he mere existence of a
scintilla
of
evidence”
is
insufficient
supported motion for summary judgment.
Inc., 477 U.S. 242, 252 (1986).
to
defeat
a
properly
Anderson v. Liberty Lobby,
Consequently, “a party opposing
summary judgment must ‘present definite, competent evidence to
Civil No. 15-2328 (FAB)
rebut the motion.’”
citation omitted).
9
Maldonado-Denis, 23 F.3d at 581 (internal
In making this assessment, the Court must
examine the entire record in the light most favorable to the
nonmoving party and draw all reasonable inferences in its favor.
Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777, 779-80 (1st Cir.
2011).
The sole issue before the Court is whether PRIDCO is
liable pursuant to CERCLA.
(Docket No. 101.)
Namely, the motion
for summary judgment requests only that the Court find PRIDCO
“liable for the cleanup costs related to the remedy selected to
address the area of contaminated groundwater at, and extending
from, the Property.”
(Docket No. 101 at p. 7.)
The cleanup costs
associated with the cis-1, 2-DCE plume and allocation of these
costs will be determined in Phase II and Phase III, respectively.
Summary judgment is particularly suitable in the CERCLA
context because dispositive decisions “may be rendered as to
liability even if there is a genuine issue as to [. . .] damages.”
United States v. Domenic Lombardi Realty, Inc., Case No. 98-591,
2001
U.S.
Dist.
LEXIS
24645,
at
*14
(D.R.I.
Jan.
25,
2001)
(citation omitted); see United States v. Barkman, Case No. 966395, 1998 U.S. Dist. LEXIS, at *32-33 (E.D. Pa. Dec. 17, 1998)
(granting summary judgment because the United States “satisfied
all elements to establish a prima facie case of liability under
Civil No. 15-2328 (FAB)
10
[CERCLA] and the Defendants have failed to establish any defense
to liability”).
An assignment of liability, the purpose of Phase
I in this case, is an appropriate precursor to determining the
amount and allocation of cleanup costs among responsible parties.
See United States v. Alcan Aluminum Corp., 990 F. 2d 711, 720 (3d
Cir. 1992); Acushnet Co. v. Mohasco, 191 F. 3d 69, 82 (1st Cir.
1999) (“district courts have considerable latitude to deal with
issues of liability and apportionment in the order they see fit to
bring the proceedings to a just and speedy conclusion.”).
B.
Legislative Background
Congress
drafted
CERCLA
to
address
the
release
or
threatened release of hazardous substances into the environment. 5
42 U.S.C. § 9601 et seq.
CERCLA permits the United States to
allocate funds from a “Hazardous Substance Superfund” to finance
cleanup efforts.
26 U.S.C. § 9507.
The United States may seek to
replenish the funds of the Hazardous Substance Superfund pursuant
to section 107 of CERCLA by bringing suit against, among others,
“any person who at the time of disposal of any hazardous substances
owned or operated any facility at which hazardous substances were
disposed of.”
42 U.S.C. § 9607(a); United States v. Bestfoods,
524 U.S. 51, 55 (1998).
5
The statutory scheme set forth in CERCLA
Jurisdiction exists in this case pursuant to 28 U.S.C. § 1331 because the
United States seeks relief pursuant to CERCLA, 42 U.S.C. § 9607, a federal
statute.
Civil No. 15-2328 (FAB)
promotes
the
11
expeditious
remediation
at
contaminated
sites,
adequate compensation to public coffers, and the imposition of
accountability.
Cir. 2001).
United States v. Davis, 261 F.3d 1, 26-27 (1st
Indeed, the essential purpose of CERCLA is to ensure
that “those responsible for problems caused by the disposal of
chemical
poisons
shoulder
the
costs
and
responsibility
remedying the harmful conditions they created.”
for
John S. Boyd Co.
v. Boston Gas Co., 992 F.2d 402, 405 (1st Cir. 1993) (quoting
Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074,
1081 (1st Cir. 1986)).
Courts
apply
and
interpret
CERCLA
expansively
accordance with these “beneficial legislative purposes.”
Water Co., 805 F. 2d. at 1081 (citation omitted).
in
Dedham
Consistent with
the expansive scope of CERCLA, the statute “sketches the contours
of a strict liability regime.”
Acushnet Co., 191 F.3d at 74 (1st
Cir. 1999); see United States v. Monsanto, 858 F. 2d. 160, 161
(4th Cir. 1988) (“We agree with the overwhelming body of precedent
that has interpreted [CERCLA] as establishing a strict liability
scheme.”).
CERCLA contains no causation element.
Prisco v. A &
D Carting Corp., 168 F. 3d 593, 606 (2d Cir. 1999) (“No causation
is
needed,
however,
to
establish
(internal citation omitted).
liability
under
CERCLA.”)
Consequently, “CERCLA appears to
impose liability on every generator of hazardous waste, although
Civil No. 15-2328 (FAB)
12
that generator could not, on its own, have caused any environmental
harm.”
United States v. Rohm & Hass Co., 939 F. Supp. 1142, 1155
(D.N.J. 1996) (holding defendants liable pursuant to CERCLA as
generators of hazardous substances).
With this framework in mind, the Court will address
whether PRIDCO is prima facie liable for the cleanup costs in
connection with the cis-1, 2-DCE plume before deciding whether the
affirmative defenses and exemptions to liability raised by PRIDCO
survive the United States’ summary judgment motion.
C.
The United States Has Established Prima Facie Liability
Pursuant to Section 107 of CERCLA
The
United
section 107 of CERCLA.
States
predicates
(Docket No. 8.)
its
complaint
on
To prevail on its summary
judgment motion, the United States must establish that there is no
genuine issue of material fact that:
(1) the property is a
facility pursuant to section 107(b) of CERCLA, (2) PRIDCO falls
within one of four categories of covered persons pursuant to
section 107(a); (3) a release or threatened release occurred on
the property; and (4) the release or threatened release caused the
United States to incur response costs that are not inconsistent
Civil No. 15-2328 (FAB)
13
with the National Contingency Plan. 6
42 U.S.C. § 107; Acushnet
Co., 191 F.3d at 75 (“By and large, a person who falls within one
of the four categories defined in [section 107] is exposed to
CERCLA liability.”).
Accordingly, the United States need only
satisfy four elements to establish prima facie liability.
See
Dedham Water Co. v. Cumberland Farms Diary, 889 F. 2d 1146, 1150
(1st Cir. 1989) (“There are four elements necessary for a prima
facie case in a private-party lawsuit under CERCLA.”); O’Neil, 682
F. Supp. at 718 n.2 (“[I]f the plaintiff is able to prove at trial
the statutory elements of section 107(a)(3), [defendant] may be
held liable without proof of knowledge or intent.”).
Liability pursuant to CERCLA “may be inferred from the
totality of the circumstances [and] it need not be proven by direct
evidence.”
Members of the Beede Site Group v. Fed. Home Loan
Mortg. Corp., 968 F. Supp. 2d 455, 460 (D.N.H. 2013); see also PCS
Nitrogen Inc. v. Ashley II of Charleston Co., 768 F. 3d 161, 177
(4th Cir. 2013) (“To be sure, PCS presented no direct evidence
that Holcombe and Fair moved or dispersed any contaminated soils.
6
The National Contingency Plan provides that cleanup measures must be cost
effective, O’Neil, 682 F. Supp. 706, 728 (D.R.I. 1988), are prescribed by
section 105 of CERCLA, 42 U.S.C. § 9605, and are published at 40 C.F.R. 300
(1987).
The burden to show that the United States’ response costs are
inconsistent with the National Contingency Plan rests with PRIDCO. See United
States v. Mottolo, 695 F. Supp. 615, 630 (D.N.H. 1988) (“Defendants have the
burden to show that governmental response costs are inconsistent with the
[National Contingency Plan].”).
Civil No. 15-2328 (FAB)
14
However, CERCLA does not require a smoking gun.”).
The Court is
satisfied that there is no genuine issue of material fact that
PRIDCO is prima facie liable pursuant to section 107 of CERCLA.
1.
The Property is a Facility
The first element of a prima facie case pursuant to
section 107 requires that the United States demonstrate that the
property is a facility.
hazardous
substance
A facility is “any site or area where a
has
been
deposited,
placed, or otherwise come to be located.”
stored,
disposed
42 U.S.C. § 101.
of,
Cis-
1, 2-DCE and TCE, the two compounds located on the property, are
classified as “hazardous substances” pursuant to section 101(4) of
CERCLA.
See Davis, 31 F. Supp. 2d at 45 (holding defendant liable
pursuant to CERCLA for the cleanup of groundwater contaminated
with
TCE).
facility,
Indeed,
stating
PRIDCO
that
“[the
concedes
that
property]
the
does
property
comply
with
is
a
the
facility definition inasmuch as the hazardous substance has ‘come
to be located’ in the groundwater beneath the property surface.”
(Docket No. 116 at p. 19.)
Consequently, the Court concludes, and
the parties concur, that no genuine issue of material fact exists
regarding the status of the property as a facility.
2.
PRIDCO is a Potentially Responsible Party
CERCLA identifies four classes of covered persons,
or potentially responsible parties (“PRP”)s: (1) the current owner
Civil No. 15-2328 (FAB)
15
or operator of a facility; (2) the owner or operator of a facility
at the time it became contaminated; (3) any person who arranges
for transport or disposal of hazardous substances; and (4) any
person
who
accepts
hazardous
transport or disposal.
substances
42 U.S.C.
for
the
purpose
of
107(a); see John S. Boyd Co.
992 F. 2d at 101 (1st Cir. 1993) (“Under CERCLA, four parties may
be responsible for the costs of an environmental cleanup.”).
In
essence, the extent to which a party is a PRP depends on its
relationship to a facility.
United States v. Bestfoods, 524
U.S. 51, 68 (1998).
PRIDCO denies that it falls within any of the four
categories of PRPs.
The United States, on the contrary, argues
that because PRIDCO is an “owner,” PRIDCO is a PRP as a matter of
law.
(Docket No. 101 at p. 11.)
Congress defined, rather
ambiguously, the term “owner” within the context of CERCLA as “any
person
owning
or
operating”
a
facility.
42
U.S.C.
§ 101(20)(A)(ii); Exxon Corp. v. Hunt, 475 U.S. 355, 363 (CERCLA
“unfortunately is not a model of legislative draftsmanship”).
PRIDCO admits that it is the “titular owner” of the property, but
denies that it is an “owner” within the meaning of CERCLA.
No. 117-9 at p. 1.)
(Docket
According to PRIDCO, the United States failed
to establish that PRDICO participated in the management of the
Civil No. 15-2328 (FAB)
property. 7
owner.
16
This failure, PRIDCO asserts, negates its status as an
(Docket No. 116 at p. 24.)
PRIDCO’s understanding of
ownership is, however, misguided.
In Chevron Mining Inc. v. United States, the Tenth
Circuit Court of Appeals rejected contentions identical to those
presented by PRIDCO.
863 F.3d 1261 (10th Cir. 2017).
In Chevron
Mining, the United States owned national forest lands in New
Mexico.
mined
Id.
the
substances.
For over a century, Chevron Mining Inc. (“Chevron”)
land,
generating
Id. at 1256-66.
significant
amounts
of
hazardous
After accepting liability for the
release of hazardous substances, Chevron sued the United States
pursuant to section 107 of CERCLA.
Id.
Chevron asserted that the
United States, as owner of the property, was required to contribute
to the cleanup costs associated with the CERCLA action.
Id.
The
United States, nonetheless, argued that “bare legal title is
insufficient to trigger owner liability.” Id. at 1275.
The Tenth
Circuit Court of Appeals disagreed, holding that “CERCLA contains
neither an express nor an implied exception to owner liability for
holders of bare title.”
7
Id.
Before filing for summary judgment, PRIDCO requested leave to file an amended
third party complaint. (Docket No. 77.) In denying PRIDCO’s request, the Court
held that “it is uncontested that defendant PRIDCO is the owner of the facility.”
(Docket No. 85 at p. 2.) PRIDCO contends that this order has no bearing on
whether PRIDCO is liable pursuant to CERCLA. (Docket No. 116 at p. 23.) The
Court need not rely on past orders in concluding that PRIDCO is the owner of
the property within the meaning of CERCLA.
Civil No. 15-2328 (FAB)
17
Just as the United States argued in Chevron Mining
Inc., PRIDCO asserts that it is immune from liability pursuant to
CERCLA because it “merely holds bare title” to the property.
(Docket No. 116 at p. 49.)
PRIDCO’s argument is unconvincing
because it cites no authority to support the proposition that bare
legal title, without more, is insufficient to trigger liability
pursuant to section 107.
Indeed, control or management of the
property is not a prerequisite for prima facie liability.
See
United States v. 175 Inwood Assocs. LLP, 330 F. Supp. 2d 213, 222
(E.D.N.Y. 2004) (“[A]n individual may be held liable as an ‘owner
or operator’ even if he did not actually participate in the
management of the site or contribute to the release of hazardous
substances.”) (citing New York v. Shore Realty Corp., 759 F.2d
1032, 1044-5 (2d Cir. 1985)).
Because the record makes clear that
there is no genuine issue of material fact that PRIDCO owns the
property, the Court holds that PRIDCO is a PRP as a matter of law.
3.
A Release of Hazardous Substances Occurred on the
Property
The third element of a prima facie case pursuant to
CERCLA concerns the release or threatened release of hazardous
substances.
pumping,
CERCLA defines “release” as “any spilling, leaking,
pouring,
emitting,
emptying,
discharging,
injecting,
escaping, leaching, dumping, or disposing into the environment
Civil No. 15-2328 (FAB)
18
(including the abandonment or discarding of barrels, containers,
and other closed receptacles containing any hazardous substance or
pollutant or contamination).”
construe
the
term
“release”
42 U.S.C. § 9601(22).
broadly.
Dedham
Courts
Water
Co.
v.
Cumberland Farms Dairy, 889 F.2d 1146, 1152 (1st Cir. 1989).
PRIDCO argues that “[i]f the Defendant’s property
is not the source of contamination, then the hazardous substances
were not ‘released.’”
(Docket No. 116 at p. 3.)
Indeed, PRIDCO
raises this argument repeatedly throughout its opposition to the
United States’ motion for summary judgment.
pp. 6–16, 27-34.)
(Docket No. 116 at
PRIDCO postulates that because “contamination
was not detected in the surface soils at the Property,” the
groundwater containing hazardous substances below the property
cannot serve as the basis for liability pursuant to CERCLA.”
at p. 7.
of
Id.
At bottom, PRIDCO places on the United States the burden
establishing
that
PRIDCO
caused
the
release
of
hazardous
substances on the property.
CERCLA is a strict liability statute, holding PRPs
responsible for the release or threatened release of hazardous
substances regardless of fault.
Courts universally recognize that
causation is not an element of a prima facie case pursuant to
section 107 of CERCLA.
See United States v. Atl. Research Corp.,
551 U.S. 128, 136 (2007) (“But even parties not responsible for
Civil No. 15-2328 (FAB)
19
contamination may fall within the broad definitions of [PRP’s] in
[section 107]”); United States v. JG-24, Inc., 331 F. Supp. 2d.
14, 62 (D.P.R. 2004) (Acosta, J.) (“[S]ince CERCLA is a strict
liability
statute,
Section
107(a)(1)
of
CERCLA,
42
U.S.C.
§
9607(a)(1), imposes liability on current owners of a facility
regardless
of
when
disposal
occurred
and
regardless
of
causation.”); Gen. Elec. Co. v. Litton Indus. Automation Sys., 920
F. 2d 1415, 1417-18 (8th Cir. 1990) (holding that in determining
liability, courts only inquire whether there has been a release or
threatened release of hazardous substances); Ascon Properties,
Inc. v. Mobil Oil Co., 866 F. 2d 1149, 1153 (9th Cir. 1998) (“We
hold that a plaintiff need not allege the particular manner in
which a release or threatened release has occurred in order to
make out a prima facie claim under section 107(a) of CERCLA.”);
City of Wichita v. Trs. of the Apco Oil Corp. Liquidating Trust,
306. F. Supp. 2d. 1040, 1049 (D. Kan. 2003) (“Because § 107 imposes
strict liability upon [potentially responsible parties] regardless
of fault, causation is not part of the liability inquiry.”).
Whether PRIDCO caused the release if hazardous substances at the
property,
thus,
is
irrelevant
to
the
prima
facie
liability
analysis.
The
hazardous
United
substances
in
States
the
argues
that
groundwater
the
below
presence
the
of
property
Civil No. 15-2328 (FAB)
20
satisfies the release or threatened release element.
101 at pp. 12-14.)
The Court agrees.
(Docket No.
The mere presence of cis-
1, 2-DCE on the PRIDCO property suffices to establish the release
element of a CERCLA claim.
See United States v. Lombardi Realty
Inc., 204 F. Supp. 2d 318, 330 (D.R.I. 2002) (holding that “the
presence
of
PCB-contaminated
soil
at
the
Site
constitutes
a
‘release.’”); see also Gould Elecs. Inc. v. Livingston County Rd.
Comm’n., Case No. 09-12633, 2012 U.S. Dist. LEXIS 167347 (E.D.
Mich., May 25, 2012) (“[T]he very presence of TCE on [defendant’s]
property, which is undisputed, illustrates that a release of that
substance has occurred because the presence of TCE in the soils
and/or
groundwater
under
[defendant’s]
‘leaching’ of that substance.”).
property
indicates
a
Furthermore, the United States
has no obligation to prove that the hazardous wastes emanated from
the property in order to establish prima facie liability.
See
Asarco LLC v. NL Indus., 105 F. Supp. 3d 1015, 1031 (E.D. Mo. 2015)
(rejecting requirement of “tracing” or “fingerprinting” hazardous
substances to establish prima facie liability).
PRIDCO attempts to distinguish the facts of City of
Wichita from those of this case.
Docket No. 116 at p. 12; 306 F.
Supp. 2d 1040. In City of Wichita, hazardous substances such as
TCE, DCE, and perchloroethylene (“PCE”) were discovered in the
groundwater throughout Wichita.
306 F. Supp. 2d at 1046.
At
Civil No. 15-2328 (FAB)
trial,
the
parties
21
submitted
regarding the groundwater.
detailed
Id.
and
complex
testimony
Ultimately, the court concluded
that because the contaminants “are not found naturally in the soil
or groundwater, and because they were found at each facility, the
inevitable conclusion is that releases occurred.”
Id.
According to PRIDCO, City of Wichita is inapposite
because that case involved an extensive level of contamination.
(Docket No. 116 at p. 12.)
PRIDCO fails to cite any statute or
precedent requiring a minimum level of contamination, or degree of
culpability, before prima facie liability attaches to responsible
parties.
In
proposition.
fact,
courts
have
expressly
rejected
such
a
See United States v. DiBiase Salem Realty Trust,
1993 U.S. Dist. LEXIS 20031 (D. Mass. Nov. 19, 1993) (“For the
purposes of liability, the statute does not generally require any
threshold
regardless
quantity
of
how
or
low
concentration
the
percentage
of
may
hazardous
be.”)
substance,
(citing
B.F.
Goodrich Co. v. Murtha, 958 F. 2d 1191, 1200 (2d Cir. 1992)).
PRDICO concedes that the cis-1, 2-DCE plume is
located below the property.
(Docket No. 11 at p. 2.)
PRIDCO,
contends, however, that “by Law, [the groundwater] does not and
cannot belong to PRIDCO.”
(Docket No. 11 at p. 2.)
PRIDCO cites
no authority to support this legal conclusion, which is contrary
to the overwhelming weight of authority.
Contaminated groundwater
Civil No. 15-2328 (FAB)
22
may serve, and has frequently served, as the basis for liability
pursuant to CERCLA.
See S. Cal. Water Co. v. Aeroject-General
Corp., Case No. 02-6340, 2003 U.S. Dist. LEXIS 26534, at *21 (C.D.
Cal. Apr. 1, 2003) (rejecting argument that plaintiff “cannot be
the ‘owner’ because it does not own the groundwater beneath its
property,” and finding that allegations that plaintiff owned wells
where hazardous substances found could support a finding that it
is a PRP) (internal citation omitted); JG-24, Inc., 331 F. Supp.
2d. at 14 ((holding defendants liable pursuant to CERCLA for
contaminated groundwater); One Wheeler Rd. Assocs. V. Foxboro Co.,
843 F. Supp. 792 (D. Mass. 1994) (finding former property owner
liable
for
response
and
contaminated groundwater).
remediation
costs
associated
with
Furthermore, Congress specifically
included “groundwater” as within the scope of CERCLA.
42 U.S.C.
§ 9601(12) (including “groundwater [. . .] within the United
States” within the definition of “environment.”).
In sum, based on the undisputed presence of cis-1,
2-DCE on the property, there is no genuine issue of material fact
as to whether the United States may satisfy the release element of
its prima facie claim.
4.
The United States Incurred Response Costs
The final element of a prima facie claim pursuant
to section 107 requires the United States to establish that a
Civil No. 15-2328 (FAB)
23
release or threatened release of hazardous substances “cause[d]
the incurrence of response costs” that are “not inconsistent with
the national contingency plan.” 42 U.S.C. § 9607(a)(4). To satisfy
this element, the “United States need only show that it has
incurred some costs.” United States v. Amtreco, Inc., 809 F. Supp.
959, 965 (M.D. Ga. 1992); United States v. Dominic Lombardi Realty
Inc., Case No. 98-5912001, 2001 U.S. Dist. LEXIS 24645, at *66
(D.R.I.
Jan.
25,
2001)
(“[A]
determination
of
the
amount
of
recoverable costs is not an element of liability.”).
Luis Santos, a Remedial Project Manager for the
Caribbean Environmental Protection Division for the EPA, declared
under penalty of perjury that the “EPA has incurred response costs
associated with its investigation of the contaminated groundwater
at the Property.”
(Docket No. 101-2 at p. 3.)
PRIDCO
failed
to “admit, deny, or qualify the facts supporting [the United
States] motion for summary judgment” regarding response costs in
Civil No. 15-2328 (FAB)
contravention of Local Rule 56(c). 8
24
According to PRIDCO, because
“the remedy of deferral is sought under Rule 56(d), no counter
statement is made as to [the response costs].”
The assertion
that the United States incurred response costs is supported by
record citations, and is not “properly controverted” by PRIDCO. 9
Accordingly, the Court deems the United States’ assertion as to
response costs to be admitted by PRIDCO, and consequently concludes
that there is no genuine issue of material fact as to the final
element of the prima facie CERCLA claim.
8 The First Circuit Court of Appeals has “repeatedly [. . .] emphasized the
importance of local rules similar to Local Rule 56 [of the District of Puerto
Rico].” Hernandez v. Philip Morris USA, Inc., 486 F.3d 1, 7 (1st Cir. 2007).
Rules such as Local Rule 56 “are designed to function as a means of ‘focusing
a district court’s attention on what is—and what is not—genuinely
controverted.’” Id. (quoting Calvi v. Knox County, 470 F.3d 422, 427 (1st Cir.
2006)). Local Rule 56 sets out the requirements for both the movant and the
party opposing summary judgment; it “relieve[s] the district court of any
responsibility to ferret through the record to discern whether any material
fact is genuinely in dispute.” CMI Capital Market Inv. v. Gonzalez-Toro, 520
F.3d 58, 62 (1st Cir. 2008); Loc. Rule 56. A party moving for summary judgment
must submit factual assertions in “a separate, short, and concise statement of
material facts, set forth in numbered paragraphs.” Loc. Rule 56(b). A party
opposing a motion for summary judgment, such as PRIDCO, must “admit, deny, or
qualify the facts supporting the motion for summary judgment by reference to
each numbered paragraph of the moving party's statement of facts.” Loc. Rule
56(c). The moving party may reply and admit, deny, or qualify the opponent's
newly-stated facts, again in a separate statement and by reference to each
numbered paragraph. Loc. Rule 56(d). Facts which are properly supported “shall
be deemed admitted unless properly controverted.” Loc. Rule 56(e); P.R. Am.
Ins. Co. v. Rivera-Vazquez, 603 F.3d 125, 130 (1st Cir. 2010). Due to the
importance of this function to the summary judgment process, “litigants ignore
[these rules] at their peril.” Hernandez, 486 F.3d at 7.
9 According to the ROD, the total estimated remedy cost for the site, including
two plumes of groundwater not in controversy, is $4,995,273. (Docket No. 1016 at p. 45.)
Civil No. 15-2328 (FAB)
25
Because there are no genuine issues of material
fact regarding the four elements of a prima facie CERCLA claim,
summary judgment as to PRIDCO’s liability for the response costs
associated with the cis-1, 2-DCE plume is GRANTED.
IV.
Affirmative Defenses and Exemptions to CERCLA Liability
CERCLA recognizes only the following statutory affirmative
“(1) an act of God; 10 (2) an act of war; (3) an act or
defenses:
omission of a third party other than an employee or agent of the
defendant, or than one whose act or omission occurred in connection
with a contractual relationship, existing directly or indirectly,
with the defendant . . .
(4)
any
combination
§ 9607(b).
§ 9607(b),
establish
of
(the “innocent landowner defense”); or
[these
three
defenses].”
42
U.S.C.
In addition to the defenses set forth at 42 U.S.C.
CERCLA
that:
also
(1)
exempts
hazardous
from
liability
substances
defendants
migrated
to
who
their
property from a contiguous property (hereinafter, the “contiguous
property defense”), 42 U.S.C. § 9607(q), or (2) they are secured
creditors
who
hold
indicia
of
ownership
merely
to
protect
a
security interest in the contaminated property (hereinafter, the
“secured creditor exemption”). 42 U.S.C. § 9601(20)(E).
10
An act of God is an “unanticipated grave natural disaster or other natural
phenomenon of an exceptional, inevitable, and irresistible character, the
effects of which could not have been prevented or avoided by the exercise of
due care or foresight.” 42 U.S.C. 9601(1).
Civil No. 15-2328 (FAB)
26
In this case, PRIDCO raised twelve affirmative defenses in
its answer to the amended complaint.
(Docket No. 11.)
The United
States moved to strike six of the twelve affirmative defenses.
(Docket No. 22.)
The Court granted the motion to strike, in part,
because PRIDCO failed to oppose the motion within the allocated
time to do so. 11
(Docket No. 25.)
Accordingly, the affirmative
defenses that remain are: (1) the secured creditor exemption, (2)
the contiguous property defense, (3) a third party caused the
contamination, (4) an act of God caused the contamination, (5) the
innocent
landowner
defense,
and
(6)
what
PRIDCO
calls
the
“divisibility of harm defense” in its effort to disclaim liability
for two of the three contaminated plumes of groundwater located
beyond its property. 12
(Docket Nos. 11 and 25.)
Nothing in the record suggests that an act of God caused the
contamination giving rise to this litigation.
Furthermore, PRIDCO
11
The following affirmative defenses were stricken: (1) the complaint failed
to state a cause of action upon which relief may be granted, (2) an indispensable
party is absent from the litigation, (3) PRIDCO does not own the plumes of
contaminated groundwater, (4) the de micromis defense shields PRIDCO from
liability, (5) the re-allegation of all defenses previously alleged and (6) the
right to supplement or amend the answer to raise additional affirmative
defenses. (Docket Nos. 11, 22 and 25.)
12
The divisibility of harm defense is immaterial because the United States
seeks only reimbursement “for costs related to the remedy selected to address
the area of contaminated groundwater at, and extending from, the Property.”
(Docket No. 101 at p. 7.) The United States is not requesting reimbursement
for costs in connection with the decontamination of the two plumes of
groundwater located beyond the property.
Accordingly, the Court deems that
PRIDCO’s “divisibility of harm” defense is irrelevant.
Civil No. 15-2328 (FAB)
27
makes no reference to an “act of God” defense in opposing the
United States’ motion for summary judgment. Accordingly, the Court
deems that PRIDCO has waived this defense, and GRANTS summary
judgment in favor of the United States as to the act of God defense.
See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)
(finding
that
unaccompanied
“issues
by
some
adverted
effort
to
at
in
a
perfunctory
developed
manner,
argumentation,
are
deemed waived”).
Having determined that PRIDCO’s act of God defense is waived,
and that its divisibility of harm defense is immaterial, the Court
will first address the propriety of granting summary judgment as
to
the
remaining
causation-based
defenses:
the
third
party,
innocent landowner, and contiguous property owner defenses.
The
Court will then determine whether summary judgment is warranted as
to the secured creditor exemption.
A.
PRIDCO’S Causation-Based Defenses
PRIDCO’s causation-based defenses each impose on PRIDCO
the burden of proving by a preponderance of the evidence that an
unrelated party was the sole cause of the release of hazardous
substances.
See e.g., Mottolo, 695 F. Supp. At 626 (“Therefore,
government agencies could not be the sole cause of the release,
and the third party defense is unavailable to [defendant].”);
United States v. 150 Acres of Land, 204 F.3d 698, 704-705 (6th
Civil No. 15-2328 (FAB)
28
Cir. 2000) (holding that proof regarding whether a third party was
the
sole
cause
of
the
release
is
dispositive
concerning
the
innocent landowner defense); Diamond X Ranch LLC v. Alt Richfield
Co., 2017 Dist. LEXIS 160845 (D. Nev. Spr. 29, 2017) (holding that
the “third party and contiguous owner defenses are not available
to Diamond X or Park Livestock” because “this defense also relies
on Diamond X not causing or contributing to the release of the
hazardous substances into the Property”).
1.
PRIDCO’s
Defenses
Third
Party
and
Innocent
Landowner
To invoke the third party defense, PRIDCO must
establish by a preponderance of the evidence that the release of
hazardous substances was due “solely” to “an act or omission of a
third party other than an employee or agent of [PRIDCO], or than
one whose act or omission occurs in connection with a contractual
relationship” and that: (1) the contamination occurred prior to
PRIDCO’s purchase of the property, (2) PRIDCO had “no reason to
know” that the property was contaminated, (3) PRIDCO “took all
appropriate inquiry into the previous ownership and uses of the
property consistent with good commercial or customary practice” in
an effort to minimize liability, and (4) once the contamination
was discovered, PRIDCO exercised due care regarding the hazardous
substances.
42 U.S.C. § 9607(b)(3); 42 U.S.C. § 9601(35)(A)-(B).
Civil No. 15-2328 (FAB)
29
The innocent landowner defense is an iteration of
the third party defense. See Diamond X Ranch, 2017 U.S. Dist. LEXIS
160845, at *55 (observing that “the third party defense” is
“also
known as the innocent landowner defense”); United States v. A & N
Cleaners & Launderers, 854 F. Supp. 229, 238 (S.D.N.Y. 1994)
(holding that “the Innocent Landowner Defense” is a “special case
of the Third Party Defense”).
This defense shields from liability
landowners who “innocently and in good faith, purchase property
without knowledge that a predecessor in the chain of title had
allowed hazardous substances to be disposed on the property.”
Domenic
Lombardi
Reality,
290
F.
Supp.
2d
ar
208
(citation
omitted); United States v. Serafini, 706 F. Supp 346, 353 (M.D.
Pa. 1988) (“Landowners cannot avail themselves of the innocent
purchaser
defense
by
closing
their
eyes
to
hazardous
waste
problems.”); United States v. 150 Acres of Land, 204 F.3d 698,
704-705 (6th Cir. 2000) (rejecting defendant’s innocent landowner
defense because third party’s contamination was not the sole cause
of the release).
PRIDCO asserts that the third party and innocent
landowner defenses are applicable because the United States “does
not have any physical or hard evidence to demonstrate that the
contamination in the cis-1, 2-DCE plume was caused by none other
than [PRIDCO].”
(Docket No. 116 at p. 36.)
It is apparent to the
Civil No. 15-2328 (FAB)
30
Court that questions regarding the source and the date of the
contamination remain.
hazardous
substances
The United States acknowledges that no
were
(Docket No. 101 at p. 8.)
Puerto
Rico
may
have
detected
within
the
surface
soil.
It posits that tropical conditions of
caused
hazardous
substances
to
“either
volatize in the high temperatures or dissolve into percolating
rain water and be carried into the groundwater, essentially washing
the oil of residual contaminants.”
Id. at p. 13.
of
P.H.
the
EPA,
Raúl
Colón,
P.E.,
At the behest
(“Colón”),
of
Caribe
Environmental Services, prepared a Final Remedial Investigation
Report and Final Feasibility Study Report concerning the Maunabo
groundwater contamination in 2012.
(Docket No. 101-16 a p. 2.)
Colón concluded that “the data collected by the EPA during the
RI/FS process . . . is not sufficient to make a determination that
the former Puerto Rico Beverage (PRB) site is a source area of the
detected chlorinated solvents.”
Id.
Concerning the date of the
contamination, Colón further stated that “the PRB parcel does not
appear to have been a former source of groundwater contamination
detected at the area.”
Id. at p. 3.
Based on the record before the Court, it would be
inappropriate at this juncture to foreclose PRIDCO from asserting
the
third
party
and
innocent
landowner
defenses.
This
is
particularly so because discovery is not yet complete, and further
Civil No. 15-2328 (FAB)
31
factual development as to the cause of the release is necessary
before
the
Court
may
determine
justified as to these defenses. 13
whether
summary
judgment
is
The Court will allow experts
from both parties to present additional information as to how the
hazardous substances came to be on the property.
Once discovery
is complete, the United States may renew its motion for summary
judgment as to these defenses.
At this time, however, the Court
DENIES the United States’ motion for summary judgment as to the
third party and innocent landowner defenses.
See Cal. Dep’t. of
Toxic Substances Control v. Farley, No. C 05-3150 PJH, 2006 U.S.
Dist. LEXIS 78607, at *21-22 (N.D. Cal. Oct. 17, 2006) (granting
plaintiff’s motion for summary judgment regarding prima facie
liability
pursuant
to
CERCLA,
but
denying
summary
judgment
concerning the innocent landowner defense).
2.
PRIDCO’s Contiguous Property Owner Defense
The contiguous property owner defense insulates
from liability landowners who “did not cause, contribute, or
consent
to
the
release
or
threatened
release”
of
hazardous
substances that have spilled onto their property from contiguous
property with which the landowner is unaffiliated. 14
13
42 U.S.C.
The Court granted the parties’ joint motion to stay discovery pending
disposition of the summary judgment motion. (Docket No. 129.)
14
Aside from requiring that PRIDCO demonstrate that liable parties are
unaffiliated with PRIDCO, the contiguous property owner defense requires that
PRIDCO establish that it took remedial measures after discovery of the
Civil No. 15-2328 (FAB)
32
9607(q)(1)(A)(i); Wilson Rd. Dev. Corp. v. Fronabarger Concreters,
Inc., 971 F. Supp. 2d 896, 913 (E.D. Mo. 2013).
PRIDCO sets forth
the same causation-based arguments regarding the applicability of
the contiguous property owner defense, asserting the need for
further
inquiry
contamination.
discussed
with
respect
to
the
source
(Docket No. 116 at p. 36.)
above,
the
Court
agrees
that
and
date
of
the
For the reasons
additional
factual
development is necessary before ruling on the propriety of granting
summary judgment as to the contiguous property owner defense.
supra Part IV(A).
See
After the completion of discovery, the United
States may renew its motion seeking summary judgment as to the
contiguous property owner defense.
At this time, however, the
Court cannot conclude that there are no genuine issues of material
fact as to the whether PRIDCO may assert this defense validly.
Accordingly, to the extent that the United States has moved for
summary judgment as to the contiguous property owner defense, the
motion is DENIED.
B.
Secured Creditor Exemption
The secured creditor exemption cannot shield PRIDCO from
liability because there is no genuine dispute that PRIDCO acquired
and
maintained
the
Maunabo
property
to
promote
economic
contaminated groundwater, such as not “imped[ing] the effectiveness or integrity
of any institutional control employed in connection with a response action.”
42 U.S.C. § 9607(q)(A)(v)(II).
Civil No. 15-2328 (FAB)
development
in
Puerto
33
Rico
rather
than
to
secure
a
property
interest. Section 101(20)(E)(i) of CERCLA (“Section 101”) excludes
from the definition of owner “a person that is a lender that,
without participating in the management of a vessel or facility,
holds indicia of ownership primarily to protect his security
interest of the person in the vessel or facility.” 43 U.S.C.
§ 9607(20)((E).
The purpose of this exclusion from liability
(known as the “secured creditor exemption”) to the otherwise strict
liability regime of CERCLA is “to shield from lability those
‘owners’ who are in essence lenders holding title to the property
as security for the debt.” 15
Waterville Indus., Inc. v. Finance
Auth. of Me., 984 F.2d 549, 552 (1st Cir. 1993).
Banks possessing
mortgages only to secure loan payments, for example, represent the
entities that Congress intended to exempt from liability.
Id. at
552 (citing In re Bergose Metal Corp., 910 F.2d 668 (9th Cir. 1990)
(finding that a municipal corporation issuing revenue bonds to
provide
funds
for
land
acquisition
in
a
sale-and-lease
back
arrangement qualified for the secured interest exception); see
e.g., United States v. Maryland Bank & Trust, 632 F. Supp. 573 (D.
15
Security interests include “a right under a mortgage, deed of trust,
assignment, judgment lien, pledge, security agreement, or lease and any other
right accruing to a person to secure the repayment of money, the performance of
a duty, or any other obligation to a nonaffiliated person.”
42 U.S.C.
§ 9601(20)(G)(vi).
Civil No. 15-2328 (FAB)
34
Md. 1986) (holding that a security interest existing solely as the
result of a loan vesting the interest holder with an indicia of
ownership was not a basis for CERCLA liability); Guidice v. BFK
Electroplating & Mtg. Co., 732 F. Supp. 556 (D. Nev. 2017)(Not
holding a mortgagee bank liable for contamination occurring before
its
purchase
of
metal
polishing
facility
through
foreclosure
pursuant to the secured creditor exemption); Ashland Oil, Inc. v.
Sonford Prods. Corp., 810 F. Supp. 36 (D. Minn. 1993) (finding no
liability where industrial lender provided loan to manufacturer
that
subsequently
declared
bankruptcy,
holding
title
to
manufacturer’s abandoned assets for less than a month).
PRIDCO invokes the secured creditor exemption on the
basis that it holds only an “indicia of ownership.”
shoulders
the
applicable.
burden
of
establishing
that
this
Id.
PRIDCO
exemption
is
United States v. Fleet Factors Corp., 901 F.2d 1550l,
1556 (11th Cir. 1990).
Fundamentally, two inquiries govern the
secured creditor exemption analysis: (1) whether PRIDCO “holds
indicia of ownership primarily to protect its security interest in
the
[property]”
and
(2)
whether
management of the {property].”
PRIDCO
participated
“in
the
In re Bergose Metal Corp., 910
F.2d 668, 671 (9th Cir. 1990).
PRIDCO
cites
Waterville
Industries,
Inc.
v.
Finance
Authority of Maine to support its status as a exempted secured
Civil No. 15-2328 (FAB)
creditor.
1993).
that
35
Docket No. 116 at p. 26; citing 984 F.2d 549 (1st Cir.
In Waterville, the First Circuit Court of Appeals held
the
Finance
Authority
of
Maine
(“FAME”),
a
state
instrumentality, qualified for the secured creditor exemption.
Id.
The court held that FAME received only “nominal title” to
contaminated property for the purpose of securing payments from a
debtor that had defaulted on loan obligations. Id. at 552 (granting
secured creditor exemption to government entity that held a “title
typical
of
the
Additionally,
ownership”
lender
FAME
once
a
promptly
its
arrangement ended.
in
lease
financing
divested
relationship
with
itself
the
transaction”).
of
“unwelcome
controlling
lease
Id. at 553.
The circumstances of this case differ substantially from
those of Waterville.
Whereas FAME held title to secure loan
payments, PRIDCO owns the property to “secure the money it has
advanced to purchase and develop the facilities it leases to its
industrial tenants” and “to protect its interest in advancing
industrial development.”
(Docket No. 117-3 at p. 2.)
PRIDCO
financed the 1964 acquisition of the Maunabo property pursuant to
a sinking fund arrangement 16 with First National City Bank in which
16
A sinking fund is “derived from particular taxes, imposts or duties, which
is to be apportioned toward the payment of the interest due on a public loan
and for the payment of the principal.” Sidney Spitzer & Co. Commissioners of
Franklin County, 188 N.C. 30, 35 (1924).
Civil No. 15-2328 (FAB)
36
PRIDCO issued a series of bonds.
(Docket No. 117-4 at p. 52.)
PRIDCO pledged to deposit revenues generated from the property
into an account exclusively to service its debt, and allocated the
remaining income into a separate account “for any proper corporate
purposes of [PRIDCO].”
That
PRIDCO
(Docket No. 117-4 at p. 52.)
held
a
separate
account
for
corporate
purposes demonstrates that ownership of the property served to
further
economic
primarily
to
development
secure
repayment
(one
of
of
a
PRIDCO’s
debt,
purposes),
which
is
the
statutory basis for invoking the secured creditor exemption.
U.S.C. § 9601(20)(E).
not
sole
42
Furthermore, PRIDCO has owned the property
for more than 60 years, and unlike FAME, has never undertaken
“prompt effort[s] to divest itself” of the property.
Indeed,
exempting PRIDCO from liability would betray the underlying policy
of the secured creditor exemption: “to protect bona fide lenders
and to avoid imposing liability on ‘owners’ who are in fact seeking
to protect from the interest opportunity normally presented by
prolonged ownership.”
Waterville, 984 F.2d at 553.
In an effort to persuade the Court to apply the secured
creditor exemption, PRIDCO also cites Monarch Tile, Inc. v. City
of Florence for the proposition that “governments often hold title
or other indicia of ownership during the duration of a long term
lease so that it can ensure that its investment is repaid.”
212
Civil No. 15-2328 (FAB)
37
F.3d 1219 (11th Cir. 2000).
In Monarch Tile, the Eleventh Circuit
Court of Appeals held that the City of Florence, which acquired
property to foster economic development, qualified for the secured
creditor
exemption.
distinguishable
from
Id.
those
The
of
facts
Monarch
of
Tile,
this
case
however,
are
because
unlike PRIDCO, the City of Florence pledged “all rents, revenues,
and income to the payment of the principal and interest on the
bonds”
Monarch Tile, Inc. v. City of Florence, Case No. 86-1511,
1999 U.S. Dist. LEXIS 9695 (N.D. Ala. Apr. 23, 1999) (emphasis
added).
Here, by contrast, PRIDCO and First National City Bank
created two accounts: one to service the bonds and the other for
“proper corporate purposes of PRIDCO.”
(Docket No. 117-4 at
p. 53.)
The
secured
creditor
exemption
is
reserved
for
government entities that hold property “primarily to ensure that
[debtors] meet their] obligations.”
910 F.2d 668, 671 (9th Cir. 1990).
In re Bergsoe Metal Corp.,
If PRIDCO held title primarily
to finance the bonds, it would have no need to maintain a separate
account for “proper corporate purposes.”
(Docket No. 117-4 at
p. 52.)
Florence,
Moreover,
unlike
the
City
of
which
was
prohibited from using the property to which it held title, Monarch
Tile, 1999 U.S. Dist. LEXIS 9695, at *4, PRIDCO freely used the
Maunabo
property.
For
instance,
PRIDCO
commissioned
Caribe
Civil No. 15-2328 (FAB)
38
Environmental Services to review available information regarding
the property prior to the publication of the ROD. (Docket No. 10115 at p. 4.)
The files reviewed by Caribe Environmental Services
demonstrate that PRIDCO: requested the Puerto Rico Electric Power
Authority
to
remove
three
discarded
transformers
from
the
property, permitted the Municipality of Maunabo to park waste
collection trucks at the property, evicted the Puerto Rico Beverage
Company from the property in 2010, compensated contractors for
work performed at the property, repeatedly visited the property,
and prohibited Aqua Pura from using groundwater at the property.
Id. at pp. 1-9.
Additional
evidence
demonstrates
that
PRIDCO
is
ineligible for the secured creditor exemption because owners that
possess
more
than
mere
“indicia
or
ownership”
generally
are
responsible “for the payment of taxes and for the purchase of
insurance.”
In
re
Bergsoe
Metal
Corp.,
910
F.2d
at
671
(“[S]ignificantly, the leases assign to [the PRP] the risk of loss
from the destruction or damage to the property.”).
its
agreement
with
First
National
City
Pursuant to
Bank,
PRIDCO
“covenant[][ed] that it will at all times carry or cause to be
carried [. . .] all risk insurance covering all building and
machinery
and
equipment
including fire insurance.”
included
in
the
Trusted
Properties,
(Docket No. 117-4 at pp. 62-63.)
The
Civil No. 15-2328 (FAB)
record
before
the
Court
39
compels
the
conclusion
that
PRIDCO
functioned as an owner and landlord, not a passive government
institution
in
possession
of
property
primarily
to
guarantee
repayment of a loan.
In addition to the factual distinctions between this
case and Monarch Tile, the Eleventh Circuit Court of Appeals set
forth a form of governmental immunity in Monarch Tile that is not
contained in the statutory language of CERCLA.
In holding that
the secured creditor exemption applied to the City of Florence,
the Monarch Tile court reasoned that:
Plainly, governments will never acquire property for the
purpose of protecting a security interest in that same
property. Governments acquire property to further some
public
purpose,
be
it
economic
development,
environmental protection, or flood control. Once those
public purposes are met, however, as it was in this case
when a tile manufacturing factory began operating on the
property, the government often holds title or other
indicia of ownership during the duration of a long-term
lease so that it can ensure that its investment is
repaid.
Monarch Tile, 212 F.3d at 1223.
This rationale places government
entities that acquire and lease property beyond the scope of CERCLA
liability, broadening the secured creditor exemption.
This Court
cannot adopt such an expansive application of the secured creditor
exemption.
Court
of
provisions
Instead, this Court will adhere to the First Circuit
Appeals’
liberally
imperative
to
avoid
that
“we
frustration
construe
of
the
[CERCLA’s]
beneficial
Civil No. 15-2328 (FAB)
40
legislative purpose [of CERCLA.]
[W]e will not interpret [section
107] in any way that apparently frustrates the statute’s goals.”
Dedham Water Co., 805 F. 2d 1074, 1081 (1st Cir. 1986).
If Congress had intended to create a blanket exemption
from liability for government instrumentalities that own property
to advance economic development, it could have done so.
For
example, Congress excluded from the definition of owner “a unit of
State or local government which acquired ownership or control
involuntarily through bankruptcy, tax delinquency, abandonment, or
other circumstances in which the government involuntarily acquires
title by virtue of its function as a sovereign.”
§ 9601(20)(D).
Also
exempted
from
liability
are
42 U.S.C.
“government
entit[ies] which acquired the facility by escheat, or through any
other involuntary transfer or acquisition, or through the exercise
of eminent domain authority by purchase or condemnation.”
42
U.S.C. 9601(35)(ii).
Tellingly, no exemption exists for government entities
that acquire property to further economic development.
See id.
On the contrary, CERCLA explicitly includes municipalities, states
and other political subdivisions within the definition of persons
potentially subject to liability.
42 U.S.C. § 9601(21); United
States v. Iron Mt. Mines, 881 F. Supp. 1432 (E.D. Cal. 1995)
Civil No. 15-2328 (FAB)
41
(holding the United States liable as an owner of contaminated site
pursuant to CERCLA). 17
The secured creditor exemption applies in this case.
Accordingly, the Court GRANTS summary judgment in favor of the
United States as to this defense.
V.
Third Party Complaint
PRIDCO filed a third party complaint against tenants that
leased
the
property
contamination.
from
PRIDCO
(Docket No. 46.)
as
possible
generators
of
Third party defendants Juan
Orozco Ltd., Inc., the Puerto Rico Housing Department, and Beckman
Coulter, Inc. filed answers to the third party complaint.
Nos. 51, 53 and 68.)
party complaint.
(Docket
Subsequently, PRIDCO moved to amend the third
(Docket No. 77.)
The Court denied PRIDCO’s
motion to amend the third party complaint, following Congress’s
directive that courts “should carefully manage cases pursuant to
this section to ensure that the [CERCLA] litigation is conducted
in an expeditious manner and it is not unduly delayed by concurrent
maintenance of third party actions.”
H.R. Rep. No. 253, 99th
Cong., 1st Sess. at 88 (1985).
17
CERCLA defines “person” as “an individual, firm, corporation, association,
partnership, consortium, joint venture, commercial entity, United States
Government, State, municipality, commission, political subdivision of a state,
or interstate body.” 42 U.S.C. § 9601(21) (emphasis added).
Civil No. 15-2328 (FAB)
42
PRIDCO seeks contribution from tenants that occupied the
property pursuant to section 9613(f)(1) of CERCLA.
at p. 10; 42 U.S.C. § 9613(f)(1).)
(Docket No. 46
PRIDCO may do so, but not in
a manner that hinders the expeditious resolution of this action.
Finding that PRDICO is prima facie liable pursuant to section
107(a)
of
CERCLA
alters
the
course
of
this
litigation.
Accordingly, the Court ORDERS the United States and PRIDCO to meet
and
confer
regarding
the
third
party
complaint
before
the
January 16, 2018 pretrial conference, at which point the parties
will set forth their respective positions regarding the third party
complaint.
VI.
CONCLUSION
For the reasons set forth above, the Rule 56(d) motion to
defer disposition of the United States’ motion for summary judgment
is DENIED.
The United States’ motion for summary judgment is
GRANTED IN PART, and DENIED IN PART.
The Court finds that PRIDCO
is prima facie liable pursuant to section 107 CERCLA, and that
PRIDCO is ineligible for the secured creditor exemption.
PRIDCO
is free to reassert the third party, innocent landowner, and
contiguous landowner defenses during Phase II and Phase III of
this litigation.
The stay (docket no. 129) is VACATED.
Consistent with the
joint case management order, the Court ORDERS the parties to confer
Civil No. 15-2328 (FAB)
43
and file proposed discovery plans for Phase II and Phase III no
later than 20 days after the filing of this opinion and order.
(Docket Nos. 24 at p. 13; Docket No. 32.)
The Court further ORDERS
the United States and PRIDCO to meet and confer with each other
regarding the third party complaint, which will be addressed at
the January 16, 2018 pretrial conference.
The trial scheduled to
commence on February 5, 2018 (docket no. 114) is continued.
will be scheduled by separate order.
IT IS SO ORDERED.
San Juan, Puerto Rico, December 7, 2017.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE
It
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