CERCLA Investigations That Really Are At Risk

Site owners who conduct environmental investigations of potential releases of hazardous substances in the expectation that they will be able to recover their costs from the party whose operations gave rise to that threatened release may be surprised by the outcome in a recent federal district case in Georgia, Stratford Holding, LLC v. Fog Cap Retail Investors LLC. There, a site owner brought CERCLA and state law claims against a tenant and subtenant for dry cleaning operations after the owner’s sampling showed over 2 ppm of tetrachloroethylene (PCE), in soil and 56 ppb in groundwater.

The court granted a motion to dismiss all claims on the ground that the sampling costs were not response costs. According to the court, the investigatory costs were not “necessary” since the site owner reported the releases to the State of Georgia environmental regulators and those regulators did not order any remediation and declined to include the property on the State’s Hazardous Site Inventory: “a plaintiff may recover costs for initiating a response only where an actual and real threat to human health or the environment exists prior to the initiation of the response.”

It is not clear if the site owner pointed out that the PCE in groundwater was at levels substantially in excess of the Maximum Concentration Level but one might think that having a hazardous substance in the groundwater above the MCL should be sufficient to establish at least a “real threat to human health or the environment.” While the result in this case seems tethered to a dubious rationale, the holding does suggest that private parties seeking to recover environmental investigatory and remedial costs may want to follow a prudential rule of incurring investigatory costs only if they are compelled to do so by law or by the direction of regulators.

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