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Supreme Court of Canada denies Leave to Appeal in the latest dry cleaner Contamination Case

Written by Marc McAree, Willms & Shier Environmental Lawyers LLP

On April 11, 2019, the Supreme Court of Canada denied the dry cleaner’s application for leave to appeal from the Ontario Court of Appeal’s decision in Huang v Fraser Hillary’s Ltd. 1

Huang confirms that Ontario courts are inclined to measure and assess damages in contaminated land lawsuits based on the cost to remediate contamination and that the statutory cause of action in Ontario’s Environmental Protection Act (“EPA”), 2 s. 99(2) is alive-and-well. Huang is the latest decision in what we expect will be an increasing number of claims brought pursuant to EPA, s. 99(2).

Fraser Hillary’s Limited (“FHL”) owns a dry cleaning business in Ottawa that has operated since 1960 near two neighbouring commercial properties owned by Eddy Huang. David Hillary is the president and sole corporate director of FHL. Mr. Hillary also owns a residential property situated near the FHL property. 3

Spills of dry cleaning solvents containing tetrachloroethylene (“PCE”) and trichloroethylene (“TCE”) were known to have occurred between 1960 and 1974 at FHL’s dry cleaning business. In 1974, FHL bought new equipment and deployed new practices that the trial court and Court of Appeal held virtually eliminated any possibility of spills thereafter. 4

In 2002, Mr. Huang discovered TCE at his nearby commercial properties. He sued FHL and Mr. Hillary.5 Mr. Huang relied on five causes of action that plaintiffs typically plead in contaminated land lawsuits:

  • liability pursuant to EPA, s. 99(2)
  • nuisance
  • strict liability
  • negligence
  • trespass.

Trial Decision

At trial, the Ontario Superior Court of Justice found that

  • FHL was liable pursuant to EPA, s. 99(2) as the owner and controller of a spilled pollutant. The trial court held that EPA, s. 99(2) applies prospectively to permit compensation for spills that happened before the statutory cause of action was promulgated into law in 1985.6
  • FHL was liable in nuisance because the TCE present at Mr. Huang’s property caused an interference with Mr. Huang’s use and enjoyment of land that was both substantial and nontrivial.7
  • FHL was not liable in negligence, trespass or strict liability.
  • Mr. Hillary was not liable under any cause of action. 8

The trial court considered various clean up options in assessing and awarding damages to Mr. Huang based on the cost to remediate his commercial properties. 9

Court of Appeal Decision

FHL appealed the trial court decision to the Ontario Court of Appeal.

Mr. Huang cross-appealed specific aspects of the trial court decision including that: (i) FHL was not liable in negligence, trespass, or strict liability, and (ii) Mr. Hillary was not liable as a nearby residential property owner.

Footnote

1 Huang v Fraser Hillary’s Ltd, 2018 ONCA 527, leave to appeal to SCC refused, 38282 [Huang ONCA].

2 Environmental Protection Act, RSO 1990, c E19, s 99(2) [EPA].

3 Huang v Fraser Hillary’s Ltd, 2017 ONSC 1500 at paras 1-4 [Huang ONSC]

4 Huang ONSC at para 23; Huang ONCA at para 7.

5 The claim against Mr. Hillary was in his personal capacity as the owner of a nearby residential property at 36 Cameron Avenue, not as a corporate director and officer of FHL; Huang ONSC at para 19.

6 Huang ONSC at paras 84, 97

7 Huang ONSC at para 124

8 Huang ONSC at paras 52-55, 61, 103, 147, 169.

9 Huang ONSC at paras 185-93.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

This article has been republished with the permission of the author. It was first published on the Willms & Shier Environmental Lawyers LLP website and can be found here.


About the Author

Marc McAree, B.A. (Hons.), LL.B., M.E.S., is a partner at Willms & Shier Environmental Lawyers LLP and certified as an Environmental Law Specialist by the Law Society of Ontario. Marc provides advice and solutions to a wide range of clients to overcome their environmental law and litigation issues.  Marc has significant environmental law expertise in contaminated land/brownfields clean ups, transactions and litigation, and environmental compliance and approvals.  Marc also helps clients reduce and manage environmental risks and liabilities. Marc is recognized for his excellence representing clients in environmental civil litigation at all levels of Ontario Courts, defence of clients against environmental regulatory prosecutions, and appearances before Ontario’s Environmental Review Tribunal and other administrative law decision-makers on appeals and other hearings.  Marc has particular experience litigating soil and groundwater contaminant impacts, nuisance and odour issues.

Disagreement on Human Health Impacts from former Wood Treatment Facility in Edmonton

On February 26th, the Alberta Environmental Appeals Board (AEAB) issued a Report with recommendations related to Orders issued by the Alberta Environment Ministry for the remediation of a former wood preservative facility in Edmonton.

The site had been owned by Domtar Inc. and had been used to treat wood with preservatives from 1924 through to 1987. The property was purchased by a Cherokee Canada Inc. in 2010. Cherokee planned on remediating the site and developing a residential neighbourhood.

The AEAB report deals with a dispute between Cherokee and the Alberta Environment Ministry on whether the property that housed the wood treated facility is remediated and if it poses a hazard to human health. The AEAB report concludes “there is no immediate risk to these residents and other people.”

The Board also concluded the Alberta Environment had no basis for issuing Enforcement Orders against Cherokee. The Board stated that more clean-up of the site is needed, but none of it is an emergency as claimed by the Alberta Environment Ministry.

John Dill, a managing partner at Cherokee, stated in an interview with Global News: “I’m pleased that the decision confirms that the site is safe for the neighbourhood and its residents. We’re anxious to put an end to any further uncertainty by following the process that’s been set out, suggested by the board and minister.”

If Cherokee had not appealed the Order and won, it would have faced a very significant cost in removing and disposing of the contaminated material. The company estimated the cost to conform to the Orders to be in the at least $52 million.

March 7th Alberta Environment Press Release

On March 7th, the Alberta Ministry of the Environment and Parks released the results of analytical tests performed on soil samples taken at the former wood treatment plant along with findings from a human health risk assessment. The risk assessment concludes that contamination at the site is hazardous to human health.

Officials from the Alberta Ministry of Alberta and Parks conducted sampling at analysis of the soil at site of the former wood treatment plant at various times between 2017 and 2018. The sampling program consisted of sampling surface soil and subsurface soils at more than 1,039 locations at the property and collecting/analyzing over 1,457 soil samples.

The results from the analysis of the soil samples indicate 183 samples have levels of contamination that exceed human health guidelines for dioxins and furans. Of these, 96 per cent are located in fenced-off areas. A number of other contaminants of concern for human health are identified in these reports. Remediation of those locations remains the responsibility of the companies previously ordered by Alberta Environment and Parks to clean up the site.

Google Maps view of the Site and Surrounding Properties

Dr. Deena Hinshaw, Chief Medical Officer of Health for Alberta stated: “Our highest priority is the health and safety of residents, and we will continue to work towards minimizing any potential health risks to local residents. While these reports show that there are hazards in the areas, these risks are being addressed through the protective measures already in place until remediation of the soil is undertaken.”

Human Health Risk Assessment

Alberta Health issued the finding of the Human Health Risk Assessment. It made a preliminary comparison of the rates of cancer, miscarriages and birth defects in the surrounding neighbourhoods. This initial analysis found no difference between rates in the area near the former Domtar site compared with other parts of the province, with the exception of three types of cancer.

Among people who had lived in the area for 10 or more years, there were:

  • 34 cases of breast cancer in women (16 to 31 cases would have been expected)
  • 14 cases of endometrial cancer in women (three to nine cases would have been expected)
  • 22 cases of lung cancer in men (six to 14 cases would have been expected)

No differences in any childhood cancers were found compared with other parts of the province.

This data on its own does not indicate why there are higher rates for these three types of cancer in the area. Many factors could contribute to an increased risk of cancer, including but not limited to medical history, medication use and tobacco use. Alberta Health will, therefore, be working immediately with federal experts to conduct a field epidemiology investigation to try and identify what population health factors might have contributed to higher rates of these three cancers.

The Alberta Environment press release states, as a precautionary measure, women who have lived in the area for 10 or more years should talk to their doctors about the risks and benefits of starting breast cancer screening at the age of 40. This is a precaution until the results of the field epidemiology study are available.

History of the Site

The site itself had been used as a wood preservative plant by Domtar Inc. from 1924 until 1987. The plant manufactured “treated” wood products such as railway ties and telephone poles. The wood products were treated with chemical preservatives, such as creosote, to prolong their lifespan.

Between 1987 and 2008, the plant was decommissioned and Domtar conducted a partial remediation of the property including soil testing. Contamination remains in the subsurface including creosote, polycyclic aromatic hydrocarbons, dioxins and furans.

Cherokee Canada Inc. bought the site from Domtar in 2010 for $1.8 million. The purchase of the property is made with the company fully aware of the contamination at the site and with the acknowledgement by the Alberta Environment Ministry of a remediation plan to clean-up the property prior to redeveloping it for residential use.

Between 2011 and 2016, Cherokee Canada Inc. works on its remediation plan. Part of the plan consists of constructing a berm with contaminated soil from the site and covering it with clean soil. Cherokee Canada Inc. claims the berm structure contains contamination and that natural attention of the organic contaminants in the soil will occur over decades.

A 2013 environmental risk assessment conducted by Cherokee Canada Inc.
concludes that the constructed berm should not lead to any adverse health or environmental outcomes. The Alberta Environment Ministry approves a remediation certificate for a parcel of the site and allows for construction of a residential housing development on the parcel.

By October 2014, the contamination berm is nearly complete. The Alberta Environment Ministry claims that it was the first it had heard of the berm’s construction. The company says the province knew about the project all along and even had representatives on-site from time to time.

In 2016, the Alberta Environment Ministry conducts its own environmental testing at the site and claims that there is evidence of naphthalene in most of the samples, and that the substance is not contained.

Late in 2016, Cherokee sues the Province of Alberta for $126 million, claiming Alberta Environment acted in bad faith by “recklessly” changing its position on the remediation plan after the company had already spent considerable money.

Also in 2016, Alberta Environment issues an Enforcement Order that requires Cherokee to conduct further environmental testing. It also issues an Environmental Enforcement Order against both Cherokee and Domtar requiring further environmental testing in other parcels at the site.

In 2018, the Alberta Environment Ministry said third-party testing at the site found chemicals dangerous to human health. It imposed five enforcement orders on Cherokee, requiring the company to remediate any contamination.

Cherokee appealed the decision, arguing it had already undertaken remediation efforts (as had Domtar), including isolating and protecting contaminated soil from exposure.

The February 26th, 2019 decision by the Alberta Environmental Appeals Board vindicated Cherokee as the Board stated the Orders were inappropriate.

Cherokee Canada Inc.’s Position

In response to the Alberta Environment’s March 7th announcement, Cherokee issued its own press release. In the release, the company claims that Alberta Environment March 7th publication provides unsubstantiated information to community members about potential health risks. It also states that the issue of health risk and the appropriate standards and scientific criteria for remediation for certain chemicals of concern were addressed in by the Environmental Appeals Board in 2018.

The press release also states “We are concerned that the Ministry’s approach is a veiled attempt to influence the Minister’s response to the Board’s independent Report and Recommendations or to attempt to discredit the Board’s findings.”

March 13th Alberta Environment Orders

On March 13, Alberta Environment and Parks Minister Shannon Phillips released her decision on the appeal of the orders issued to Cherokee Canada Inc., 1510837 Alberta Ltd. and Domtar Inc.

In the the newest order, the minister directs the both Cherokee and Domtar to undertake the work on the site within specific periods of time from the issuance of the order. This work includes:

  • Temporary dust control plans (within seven days)
  • Dust control plans (within 60 days)
  • Site delineation (sampling) plan (within 90 days)
  • Site delineation(sampling) (within 150 days)
  • Site modelling identifying all current and historical sampling (within 180 days)
  • Human health risk assessment (within 210 days)
  • Site-specific risk assessments (within 210 days)
  • Reclamation and remediation plans (within 240 days)
  • Long term site monitoring plans (within 240 days)
  • Completion of residential reclamation components (within 280 days)

The minister also issued two environmental protection orders:

  • An order to Cherokee Canada Inc. and 15120837 Alberta Ltd. to conduct sampling and remediation within the neighbouring community and for the berm to the south of the community to address the presence of dioxins and furans.
  • An order to Domtar Inc. to conduct sampling and remediation within the neighbouring community and for the Greenbelt to the south of the community to address the presence of naphthalene, dioxins and furans.

A spokesperson for the Province of Alberta pointed out the AEAB’s recommendations “did not take into consideration the new testing results and health outcomes issued by the chief medical officer of health, as this information was not before the board at the time of the hearings (see below).

When Is It Too Late to Sue for Environmental Contamination? The Alberta Court of Appeal Rules

Written by Laura M. Gill, Stephanie Clark, and Justin Duguay, Bennett Jones LLP

On February 6, 2019, the Alberta Court of Appeal (ABCA) released its first ever decision on section 218 of the Environmental Protection and Enhancement Act (EPEA), which may extend limitation periods applicable to environmental contamination claims.

By a unanimous decision in Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2019 ABCA 35 [Brookfield], the ABCA upheld a lower court decision where the judge refused to exercise his discretion under section 218 of the EPEA to extend the limitation period for an environmental contamination claim. Extending the limitation period would have likely been prejudicial to the defendant’s ability to maintain a defence to the claim, as the alleged cause of the environmental damage occurred over 60 years ago. We previously discussed the 2017 Court of Queen’s Bench decision in an earlier post, When is an Environmental Contamination Claim Too Old to Extend the Limitation Period?

Background

Brookfield Residential (Alberta) LP (Brookfield) brought a negligence claim in the Alberta Court of Queen’s Bench (ABQB) against Imperial Oil Limited (Imperial) for environmental contamination from an oil well. Imperial drilled and operated the well between 1949 and 1950, and disposed of it in either 1950 or 1954. Multiple owners operated the well between 1950 and 1957 and then used it for salt water disposal between 1958 and 1961, at which point the well was decommissioned and abandoned. After several additional transfers of ownership, the site was issued a reclamation certificate in 1968. Contamination requiring remediation was not discovered until 2010, when Brookfield was preparing the site for residential development.

Brookfield brought an application under section 218 of the EPEA to extend the limitation period, and Imperial cross-applied with a summary dismissal application, asserting that the limitation period had expired. Since it was clear that the ten-year ultimate limitation period under the Limitations Act had expired, Brookfield’s negligence claim was entirely dependent on an extension of the limitation period under section 218. The ABQB refused to extend the limitation period and summarily dismissed the action against Imperial. Brookfield appealed.

The appeal was dismissed. In its reasons, the ABCA provided guidance on three important aspects of section 218 applications: (i) procedure and timing; (ii) the impact of the passage of time on prejudice to the defendant; and (iii) policy considerations relevant to the fourth factor in section 218(3).

1. Applications Under Section 218 of the EPEA Should Be Decided Prior to Trial

The ABCA in Brookfield ruled that applications under section 218 of the EPEA should be decided prior to trial, overruling the two-part test in Lakeview Village Professional Centre Corporation v Suncor Energy Inc, 2016 ABQB 288 [Lakeview]. In Lakeview, the ABQB set out a two-part approach to section 218 applications where the court may make a preliminary determination on limitations and allow the action to proceed subject to a final determination on the merits of the limitations issue at trial. Lakeview became the leading case on the procedure for section 218 applications.

In overturning the Lakeview test, the ABCA found two problems with the approach of deferring the decision on extending limitation periods until trial. First, the Lakeview approach “is inconsistent with the wording of section 218, which provides that the limitation period can be extended ‘on application'”. Second, the approach defeats the whole purpose of limitation periods because it forces a defendant to go through the expense and inconvenience of a full trial on the merits for a determination on limitations, notwithstanding that a limitation period is intended to eliminate the distractions, expense, and risks of litigation after the prescribed time has passed.

2. The Passage of Time Increases the Likelihood of Prejudice to the Defendant

The ABCA affirmed the approach of balancing the four factors in section 218(3), which in this case revolved primarily around the third factor (prejudice to the defendant). The ABCA found that it was reasonable for the ABQB to infer prejudice from the passage of time, noting that this is the presumption behind statutes of limitation. The allegations in Brookfield’s claim occurred over 60 years ago, and as such, witnesses and documentary evidence were difficult to identify and were no longer available. The passage of time also made it difficult to establish the proper standard of care. The ABCA agreed that attempting to determine 1949 industry standards and the standard of care at that time would prejudice Imperial.

3. The Competing Policy Objectives of the Limitations Act and the EPEA

The ABCA also provided guidance on the fourth factor listed in section 218(3), which grants judicial discretion to consider “any other criteria the court considers to be relevant”. The ABCA found that policy considerations behind limitations statutes were relevant criteria that should be weighed. In particular, the ABCA noted the policy objectives of statutes of limitations that actions must be commenced within set periods so that defendants are protected from ancient obligations, disputes are resolved while evidence is still available, and claims are adjudicated based on the standards of conduct and liability in place at the time. However, on the other hand, the ABCA highlighted that the EPEA has a “polluter pays” objective where a polluter should not escape responsibility by the mere passage of time.

Implications

The ABCA’s decision in Brookfield changes the procedure for extending limitation periods in environmental contamination claims. Rather than waiting until trial, parties must bring section 218 applications early on. As a result, plaintiffs in contaminated sites claims should also carefully assess the impacts on defendants of the passage of time in making section 218 applications. Brookfield reinforces that a court will likely presume greater prejudice from a longer passage of time, especially if witnesses and evidence may be difficult to identify and the standard of care may be difficult to assess. Going forward, Brookfield suggests that the Court will take a practical approach to assessing prejudice against a defendant when deciding whether to extend limitation periods in contaminated site claims where the ultimate limitation period has passed.


This article has been republished with the permission of the authors. It was first published on the Bennett Jones website.

About the Authors

Laura Gill is called to the bar in Alberta and British Columbia and has a commercial litigation practice specializing in energy and natural resources, First Nations issues, and environmental matters. Laura advises clients on disputes in a wide range of corporate matters, including complex breach of contract claims and joint ventures.

Laura’s experience in the energy industry includes litigating disputes involving leases, right-of-way agreements, ownership stakes, royalties, gas supply contracts, farmout agreements, and CAPL operating agreements. Laura also acts on appeals and judicial review proceedings following decisions of regulatory bodies, in particular with respect to regulatory approvals for energy-related projects in Alberta and British Columbia.

Stephanie Clark has a general commercial litigation practice. Stephanie has assisted with matters before all levels of the Alberta court system. During law school, Stephanie held a student clerkship with the Honourable Mr. Justice Nicholas Kasirer at the Court of Appeal of Quebec, competed in the 2015 Jessup International Law Moot, and was awarded with the Borden Ladner Gervais Professional Excellence Award. Stephanie articled with the firm’s Calgary office prior to becoming an associate. 

Justin Duguay is an articling student at Bennett Jones.

U.S.: Lessons Learned from Citizen Suits for Contamination of Property by Industry

by Seth Jaffe, Foley Hoag LLP

Two recent cases illustrate the potential scope of, and the potential limitations on, injunctive relief in RCRA citizen suits. 

First up, Schmucker v. Johnson Controls. Contamination was detected at the Johnson Controls manufacturing facility in Goshen, Indiana.  In response, Johnson Controls performed substantial remediation under the auspices of the Indiana Department of Environmental Management’s Voluntary Remediation Program.  Nonetheless, significant contamination remains at the site, including a groundwater plume running beneath residences.  In 2011, TCE was detected in indoor air at concentrations exceeding IDEM’s screening level.  Johnson Controls installed vapor mitigation systems at all affected residences, and concentrations were below screening levels in all the residences after installation of the mitigation.

Imminent and substantial endangerment, or not?  In a battle of the experts, the Court denied both sides’ motions for summary judgment.  First, the plaintiff’s expert’s opinion that there was a risk of future exposures, notwithstanding the mitigation, was enough to defeat Johnson Controls’ motion.  The Court did note that:

“Murphy’s law” is not sufficient to establish an endangerment where a party relies only on speculation that mitigation measures might fail.

However, the Court found that the plaintiffs’ expert was not simply speculating.

On the flip side, defendant’s expert said that the mitigation measures were sufficient to eliminate the endangerment.  That was enough to defeat plaintiffs’ motion.

Next up, Lajim v. General Electric.  The facts are somewhat similar to those in Johnson Controls.  There was a long history of industrial use, discovery of a groundwater plume – in this case, impacting municipal water supply wells – and the commencement of significant response actions.  Here, the work was supervised by Illinois EPA, pursuant to a 2010 consent decree.  Here too, nearby plaintiffs were not satisfied with the remedial plan, notwithstanding approval by the state agency overseeing the cleanup.  In another battle of the experts, the District Court denied plaintiffs’ request for injunctive relief.  The 7th Circuit Court of Appeals affirmed.  Here are the highlights:

  • District courts have discretion to deny injunctive relief under RCRA, even where the defendant has been found liable.  “It will usually be the case that injunctive relief is warranted,” but it is not mandatory.
  • RCRA is not a general cleanup statute; injunctive relief is only available where there may be an imminent and substantial endangerment.
  • Where plaintiffs failed, after an evidentiary hearing, to demonstrate that cleanup was necessary beyond that which GE was doing pursuant to the consent decree, no injunction need issue.

I think that there are two lessons from these cases, one substantive and one practical:

  1. RCRA’s citizen suit provision provides plaintiffs with a powerful hammer, but there are limits to the relief that courts will impose, particularly if a defendant is implementing a cleanup under state oversight.
  2. Good lawyering and persuasive experts still really matter.

About the Author

Seth Jaffe is recognized by Chambers USA, The Best Lawyers in America and Massachusetts Super Lawyers as a leading practitioner in environmental compliance and related litigation. He is one of the authors of the Law and the Environment Blog, www.lawandenvironment.com, which provides real-world perspectives on current developments in environmental law and regulation. Seth is a past President of the American College of Environmental Lawyers.

Seth works on a wide range of environmental law issues, representing clients in the permitting/licensing of new facilities and offering ongoing guidance on permitting and enforcement related matters under federal and state Clean Air Acts, Clean Water Acts, RCRA, and TSCA. He also advises on wetlands and waterways regulation. Seth’s clients include electric generating facilities, companies in the printing and chemical industries, and education and health care institutions.

Developer takes Alberta to appeal board over former Edmonton wood treatment plant

As reported by Global News, Cherokee Canada is fighting five enforcement orders imposed by Alberta Environment and Parks (AEP) connected to the former Domtar Wood Treatment Facility located in Edmonton.  AEP has been conducting an investigation on properties associated with the former Wood Treatment Plant. As a result of the investigation, a number of Enforcement Orders were issued to the current owners, Cherokee Canada.

Nearby residents, concerned by off-site migration of wood treatment chemicals, have been kept up-to-date of the results of the AEP investigation and subsequent enforcement actions. Contaminants from a historical wood treatment processing plant continue to exist on property formerly occupied by the Domtar Wood Treatment Plant.  This contamination, which originated prior to 1987, consists of benzene, dioxins and furans, free hydrocarbons, naphthalene, polycylic aromatic hydrocarbons (PAH) mixtures, and pyrene.

AEP stated in a news release that it issued the Enforcement Orders to ensure the responsible parties implement appropriate remedial measures and mitigate the potential risks that have been identified.  The latest Enforcement Orders require that the source of the contamination be controlled and remedial measures be implemented in specific areas of the property.

Off-site testing at lands adjacent to Cherokee Canada development (Photo Credit: CTV Edmonton)

Results of off-site testing for contamination in early 2018 found that contamination had not migrated off-site and that there are no health concerns in the surface soil of people’s properties. The off-site testing program was conducted by an independent third-party consulting firm under the direction of AEP.

Cherokee Canada, the developer has started turning the site of the old Wood Treatment Plant in northeast Edmonton into a new residential community but the current and ongoing legal proceedings have halted the project.  “It’s been very difficult because it’s effectively frozen our activities for three years now,” said John Dill, Cherokee Canada’s managing partner.  “It’s very expensive to go through this process, ” he added.

Houses have already been built in the neighbourhood but recently, the AEP questioned the safety of the soil.  AEP said third party testing at the site found chemicals dangerous to human health. The enforcement orders require Cherokee to remediate any contamination.

“The core aspect of these orders is to basically remove potentially large amounts of soil from these sites,” said Gilbert Van Nes, general counsel for the Environmental Appeals Board. “Domtar and Cherokee disagree that this is necessary.”

Both Cherokee Canada and Domtar have completed remediation efforts but AEP, through the enforcement orders, are claiming that they didn’t go far enough.

“Our approach was to take the contaminated soil, isolate it in a separate soil berm — again, a common practice in other jurisdictions — and ensure the soil was protected from exposure to other receptors, humans, animal,” Dill said.  “The disagreement is over how we can remediate this site so it’s safe for residential standards so that we can complete our residential development and restore the site that was previously contaminated to productive use.”

Three environmental experts are heading up the independent appeal board.  The board will pass its findings on to the environment minister and Shannon Phillips will make the final decision on whether construction can resume. However, a decision is not expected until December.

A map shows the former site of the Domtar creosote plant. (Photo Credit: CBC)

 

Vancouver files claim against owners of vessel that leaked fuel in 2015

As reported by CTV News, the City of Vancouver has filed a federal court claim against the owner of a vessel that spilled fuel into English Bay in 2015, as part of the city’s continuing effort to get compensation for its response efforts.

Vancouver Mayor Gregor Robertson says three years after the MV Marathassa spilled 2,700 litres of bunker fuel into the bay, the city still hasn’t been compensated for about $550,000 it spent on response efforts.

Robertson says Vancouver has sought repayment through the federal government’s Ship-source Oil Pollution Fund, but has only been promised compensation for 27 per cent of its costs — something Robertson called “totally unacceptable.

“It’s ridiculous that it’s taken over three years now fighting for our costs to be covered by an oil spill in our harbour,” Robertson told reporters gathered at Sunset Beach in Vancouver on Sunday.

The city’s claim against the ship owners — filed last month but announced on Sunday — calls for damages, interest and court costs related to the spill.

Robertson said the city’s difficulty in getting paid back for what he described as a “relatively small oil spill” shows there aren’t enough measures in place to protect coastal communities against more major spills.

He said the costs and impacts of a potential diluted bitumen spill from the increased tanker traffic that would come with the Kinder Morgan Trans Mountain pipeline expansion has not been meaningfully addressed by the federal government.

Robertson said the Ship-source Oil Pollution Fund was set up by the federal government to act in the interest of communities like Vancouver, but is failing to do so.

“It clearly does not do that, does not deliver the results. This speaks to the greater concern we have with Kinder Morgan and oil tankers,” he said.

Transport Canada, which oversees spill response, could not immediately be reached for comment.

The claim’s statements have not been proven in court.

Crews on spill response boats work around the bulk carrier cargo ship Marathassa after a bunker fuel spill on Burrard Inlet in Vancouver, B.C., on Thursday April 9, 2015. (Darryl Dyck/THE CANADIAN PRESS)

U.S. Ninth Circuit Rules Military Contractor Liable on CERCLA Clean-up Costs

Written by: By Whitney Jones Roy and Whitney HodgesSheppard Mullin Richter & Hampton LLP

TDY Holdings, LLC brought suit for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) against the U.S. government relating to environmental contamination at TDY’s manufacturing plant. The district court granted judgment in favor of the government after a 12-day bench trial and allocated 100 percent of past and future CERCLA costs to TDY. On appeal, the Ninth Circuit held that the district court sharply deviated from the two most “on point” decisions regarding allocation of cleanup costs between military contractors and the U.S. government when it determined the cases were not comparable, clarified the applicability of those cases, and remanded the case to reconsider the appropriate allocation of cleanup costs between TDY and the U.S. government.

TDY (formerly known as Ryan Aeronautical Company) owned and operated a manufacturing plant near the San Diego airport

From 1939 through 1999, TDY (formerly known as Ryan Aeronautical Company) owned and operated a manufacturing plant near the San Diego airport. TDY’s primary customer was the U.S. government—99 percent of TDY’s work at the plant between 1942 and 1945, and 90 percent of the work thereafter was done pursuant to contracts with the U.S. military. The United States also owned certain equipment at the site from 1939 to 1979. Id. at 1006. Chromium compounds, chlorinated solvents, and polychlorinated biphenyls (PCBs) were released at the site as a result of their use during manufacturing operations. Id. In some cases, the government’s contracts required the use of chromium compounds and chlorinated solvents. Id. After passage of the Clean Water Act and other environmental laws classifying these chemicals as hazardous substances in the 1970s, TDY began environmental remediation and compliance at the site and billed the government for the “indirect costs” of that work, which the government paid. Id. at 1006–07. TDY incurred over $11 million in response costs at the site. Id. at 1007. Until the plant’s closure in 1999, the government reimbursed 90 to 100 percent of TDY’s cleanup costs at the site. Id. at 1007, 1010.

In 2004, the San Diego Unified Port District brought CERCLA claims against TDY. TDY and the Port District entered into a settlement agreement in March 2007 in which TDY agreed to cleanup releases at the site. TDY then brought suit for contribution under 42 U.S.C. § 9613(f)(1) and declaratory relief against the United States. Id. at 1007. The district court granted TDY’s motion for partial summary judgment declaring that the United States was liable as a past owner of the site under CERCLA. Id. After a 12-day bench trial on equitable allocation of costs, the district court held that the contamination caused by the hazardous substances at issue was attributable to TDY’s storage, maintenance, and repair practices, as well as spills and drips that occurred in the manufacturing process, rather than to the government’s directives to use the chemicals. Id. Accordingly, the district court allocated 100 percent of the past and future response costs for remediation of the three hazardous substances to TDY. Id. at 1008.

On appeal, TDY argued that the district court erred (1) when it allocated liability according to “fault”; (2) that the government’s role as owner rather than operator should not have been a dispositive factor in the court’s allocation, and (3) that the government should bear a greater share of response costs because it specifically required use of the chemicals at the site. Id. The court of appeals summarily rejected TDY’s first two arguments, but found that the district court did err in its analysis and application of binding authority on point: United States v. Shell Oil Co., 294 F.3d 1045 (9th Cir. 2002) and Cadillac Fairview/California, Inc. v. Dow Chem. Co., 299 F.3d 1019 (9th Cir. 2002). Id. at 1008–09. Shell Oil and Dow Chemical each produced products to support the U.S. military during World War II and incurred liability for contamination caused by hazardous chemicals that the government required to be used. In both cases, the Ninth Circuit affirmed the district courts’ allocation of 100 percent of cleanup costs to the government because “the contractors’ costs were ‘properly seen as part of the war effort for which the American public as a whole should pay.’” Id. at 1009.

The Ninth Circuit disagreed with the district court’s conclusion that Shell Oil and Cadillac Fairview were not comparable, but agreed that some deviation from their allocations were appropriate. Id. The Ninth Circuit agreed that the government exercised less control over TDY than it did over Shell Oil Co. or Dow Chemical. In support of this determination, the court noted that the government was an operator, rather than an owner, of TDY’s site, that the government-owned equipment was removed from the site 20 years before TDY ceased operations, and that TDY’s own practices at the site caused the contamination. Id. at 1010. Furthermore, the district court properly determined that “industrial operations undertaken for the purpose of national defense, standing alone, did not justify allocating all costs to the government.” Id.

However, the Ninth Circuit held that, in allocating 100 percent of cleanup costs to TDY, the district court failed to consider that the government required TDY to use two of the three chemicals at issue beginning in the 1940s, when the need to take precautions against environmental contamination from these substances was not known. Id. Furthermore, the Ninth Circuit determined that “[t]he court’s acknowledgement of the evolving understanding of environmental contamination caused by these chemicals, and TDY’s prompt adoption of practices to reduce the release of hazardous chemicals into the environment once the hazards became known, further undercuts the decision to allocate 100 percent of the costs to TDY.” Id. The district court also failed to consider the parties’ lengthy course of dealing through 1999, when the government paid between 90 and 100 percent of cleanup costs at the plant. Id. Although “a customer’s willingness to pay disposal costs . . . cannot be equated with a willingness to foot the bill for a company’s unlawful discharge of oil or other pollutants,” the Ninth Circuit nevertheless determined it should have been a relevant factor in the allocation analysis. Id.

This article was originally published on the Sheppard Mullin Real Estate, Land Use & Environment Law Blog

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About the Authors

Whitney Jones Roy is a litigation partner in firm’s Los Angeles office. Ms. Roy was recognized by Law360 as a “Female Powerbroker” and by the Daily Journal as one of the Top 100 Women Lawyers in California in 2014.  Ms. Roy has experience in all aspects of California and federal civil procedure through trial. She also defends her clients on appeal when necessary.  Ms. Roy also specializes in complex environmental litigation and related products liability litigation. Her expertise includes the Clean Air Act, CERCLA, RCRA, design defect, failure to warn, negligence, nuisance, and trespass.

Whitney Hodges is an associate in the Real Estate, Land Use and Natural Resources Practice Group in the firm’s San Diego office. She also serves on the firm’s Diversity and Inclusion Committee, Pro Bono Committee, Recruiting Committee, Energy, Infrastructure and Project Finance Team and Latin Business Team.  Ms. Hodges specializes in the representation of clients involved in real estate development. Her practice focuses on advising and representing major residential, industrial, commercial and mixed-use development projects, as well as Native American Indian tribes and renewable energy developers through all phases of the land use regulatory process and environmental compliance.

 

 

Court Rejects Environmental Consultant’s Third Party Claim Against Prior Owner/Occupants

by Stan Berger, Fogler Rubinoff

On March 22, 2018 the Ontario Superior Court of Justice in MVL Leasing Ltd. v CCI Group Inc. 2018 ONSC 1800 granted Rule 21 motions striking third party claims brought by an environmental consultant who was being sued by a purchaser of property for professional negligence and breach of contract. The lawsuit alleged that the plaintiff was led into closing the sale by the consultant’s Phase 1 and Phase 2 Environmental Site Assessments. The property turned out to be contaminated. The consultant in turn alleged that the contamination was caused by one or more businesses operated by the third parties. The consultant requested contribution indemnity from the third parties on 6 different grounds: nuisance, loss or damage caused by a spill pursuant to s.99 of Ontario’s Environmental Protection Act, the occupier’s duty under the Occupiers’ Liability Act to ensure the safety of persons entering upon the property, negligence, liability under the Negligence Act and unjust enrichment. The consultant argued that if found liable in the main action, it would have incurred pecuniary losses as a direct result of the spill, those damages being the plaintiff’s remediation costs and or the decrease in the property’s value.

Court’s Reasons for Rejecting the Third party Claims

The nuisance claim was rejected on the basis that the consultant did not own, occupy or possess the property, or any adjacent or nearby property impacted by the alleged contamination. The s.99 EPA claim was only available where the damages were directly caused by the spill and that was not the case. The occupier liability claim was rejected because the consultant suffered no damages as a result of entering the property in question. With respect to the negligence claim, the Court refused to impose a new duty of care upon the third parties. There was no proximity in the relationship between the consultant and the third parties. The potential economic harm to the consultant was not a reasonably foreseeable consequence of the alleged acts or omissions of the previous third party owners/occupiers. The Negligence Act claim was rejected on the basis that the consultant and the third parties did not meet the test under the Act of being concurrent tortfeasors for contribution and indemnity to be available. The plaintiff’s actual or potential causes of action against the consultant and the third parties were entirely different in nature. The damages allegedly caused by the third parties were different and discrete from those caused by the consultant. Finally, the unjust enrichment claim was rejected as the consultant had not pleaded any direct conferral of a benefit upon the third parties and the consultant had not suffered a corresponding detriment. If the consultant had incurred a detriment in the future by the plaintiff succeeding with its action, that detriment only related to the breach of contract and/or negligence of the consultant and the third parties were not parties to that relationship.

What can we take away from this Decision?

In order to sustain a third party claim against historic owners or occupiers of contaminated property, environmental consultants who are sued by a purchaser of contaminated property, will have to show that that the historic owners/occupiers were somehow responsible for or at least connected to the contractual breach or negligence which the purchaser alleges against the consultant.

This article was previously published by Fogler, Rubinoff LLP and can be found on the firm’s website.

About the Author

Stanley Berger is certified by the Law Society of Upper Canada as a specialist in Environmental Law.  He was called to the Ontario Bar in 1981.  He joined the law firm of Fogler Rubinoff in 2013.

 

Key Developments in Environmental Law in Canada from 2017

A book on the developments in environmental law in Canada during 2017 was recently published by Thomson Reuters.  Edited by Stanley D. Berger of Fogler Rubinoff LLP, the book includes a number of interesting chapters related to contaminated sites and the issues raised in the Midwest Properties Ltd. v. Thordarson (“Midwest”) court case.  The Midwest case is part of a possible trend in Canada toward awarding damages based on restoration costs rather than diminution in value.  If nothing, else the Midwest Case has introduced uncertainty to the law of damages in contaminated sites cases.

In the chapter written by Natalie Mullins, a litigation partner in the Advocacy and Environmental groups in the Toronto office of Gowling WLG, on the evolution and current state of law on damages in contaminated sites, she states that despite being explicit about awarding compensatory damages only under section 99 of the Alberta Environmental Protection Act (“EPA”) and not at common law, the Alberta Court of Appeal may have implied that restoration costs are the default measure of damages in contaminated sites cases.  She also explores some other critical issues that have arisen post-Midwest, such as:

  • Whether diminution in value is still relevant to the measure of damages;
  • What it means to “restore” a real property;
  • How the court can take a proactive role to ensure that awards made to benefit the environment actually meet that objective; and
  • How defence counsel might prevent similar awards in the future, and how plaintiff’s counsel might use the case to obtain significant damages for their clients.

An interesting point raised by Ms. Mullins in her contaminated sites chapter is that in recent court cases, highlighted with Midwest, court decisions may be paving the way for plaintiffs to recover very significant damage awards for the contaminated of their sites that grossly exceed their actual loss and, in certain circumstances, may be completely unwarranted.

Ms. Mullins questions if the Midwest decision has created the potential for litigants to profit off purchasing contaminated sites and for defendants to face double jeopardy following judgment at trial.

The book is available at online for $144 (Cdn.).

 

Top 10 Questions to Consider If Sued under U.S. RCRA’s Citizen Suit Provisions

by Beveridge & Diamond PC

No longer only a tool of public interest groups, an ever-expanding group of plaintiffs – including commercial plaintiffs – are using the citizen suit provision of the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6972, to address alleged regulatory violations, seek cleanup of wastes alleged to be causing an imminent and substantial endangerment, and pursue fee awards. In addition, RCRA citizen suits have moved beyond traditional allegations of subsurface wastes migrating to soil and groundwater, and may include claims such as vapor intrusion. In light of this diversified landscape of plaintiffs and media, defendants should consider the following key questions when sued under RCRA’s citizen suit provisions.

  1. Do deficiencies in plaintiff’s pre-suit notice provide grounds for dismissal?

RCRA requires 60-day notice for suits brought under § 6972(a)(1)(A) (violation of specific RCRA requirement), and 90-day notice for suits brought under § 6972(a)(1)(B) (imminent and substantial endangerment). RCRA provides an exception for the notice period for citizen suits alleging violations of Subtitle C hazardous waste management provisions, which can be filed immediately after providing notice. The notice requirement reflects the preference for the government to take the lead enforcement role (rather than citizens), and serves to provide the defendant with adequate information to understand basis of the citizen suit. Evaluate whether the notice satisfies the statutory requirements of § 6972(b), and if applicable, the regulatory requirements of 40 C.F.R. § 254.3. If not, consider a motion to dismiss. Courts routinely dismiss RCRA citizen suits for failure to meet these requirements. In addition, check the law in your jurisdiction for other notice-based grounds for a motion to dismiss. For example, the U.S. Court of Appeals for the Second Circuit has affirmed dismissal where plaintiff’s notice only identified waste practices, but did not identify the specific contaminants at issue. Dismissal due to lack of notice typically is without prejudice to refile after proper notice is given, but dismissal may provide strategic or procedural advantages.

  1. Has plaintiff alleged an injury sufficient to satisfy constitutional standing requirements?

A plaintiff must meet the standing requirements of Article III of the U.S. Constitution in order to have standing to sue in federal court. An invasion of a concrete and particularized legally protected interest that is actual or imminent is required to establish standing; the injury may not be conjectural, hypothetical, or too temporally remote. In the RCRA context, standing defenses can be asserted, for example, where there are allegations of an injury to property the plaintiff no longer owns, where the claimed injury is based on future, speculative development plans, or a corporation claims its aesthetic interests have been injured. In such situations, an early motion for summary judgment may expose a plaintiff’s inability to show actual harm, although plaintiffs’ claims of standing are often viewed liberally.

  1. Is plaintiff’s claimed injury redressible by RCRA?

An injury must also be redressible for a plaintiff to have constitutional standing. RCRA provides only forward-looking injunctive relief; not monetary compensation for past costs. Accordingly, suits seeking such compensation are not redressible under RCRA, and thus lack standing. Additionally, where a remediation plan is in place and cleanup is ongoing, the plaintiff may lack an injury needing redress because a court cannot order superfluous relief.

  1. Is there government action that bars the suit?

Certain RCRA citizen suits are barred where the U.S. Environmental Protection Agency (“EPA”) or the state is “diligently prosecuting” a RCRA or Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) action. Plaintiffs have the burden of proving that prosecution is not diligent. This burden is heavy as a presumption of diligence attaches to government prosecution of actions; complaints about the government’s prosecution schedule or strategy generally will not suffice in themselves. Some courts have found that consent decrees and their enforcement amount to diligent prosecution.

  1. Is there an action under CERCLA that bars the suit?

Certain CERCLA removal and remedial actions will bar a RCRA citizen suit. These CERCLA actions include: (i) state or federal government engagement in a CERCLA § 104 removal action; (ii) federal or state government incurrence of costs to initiate a CERCLA § 104 remedial investigation/feasibility study (“RI/FS”) combined with diligent remedial action; and (iii) a court order (including a consent decree) or an administrative order under CERCLA § 106 or RCRA § 7003, pursuant to which a responsible party is “diligently” conducting a removal action, RI/FS, or a remedial action. RCRA suits are also precluded if they “challenge” a removal or remedial action selected under CERCLA § 104. Courts generally find any actions consistent with initial investigations, monitoring, initial clean up, or negotiation or entry of a consent decree will constitute a CERCLA removal action sufficient to preclude a RCRA claim. Remedial actions barring RCRA claims generally consists of those actions consistent with the permanent remedy.

  1. Is the plaintiff alleging entirely past regulatory violations, or violations of superseded federal regulations?

Many RCRA citizen suits concern activities that occurred several decades ago. If a suit alleges regulatory violations based on claims of entirely past conduct (i.e., the violations are not ongoing), such claims should be dismissed. Courts have also ruled that a plaintiff may not bring suit to enforce federal RCRA regulations where they have been superseded by an authorized state program. (However, suits seeking enforcement of state regulations issued pursuant to a state program

authorized under RCRA are typically allowed to proceed in federal court). All claims of regulatory violations should be scrutinized in light of these simple arguments, which can be applied to quickly narrow the claims in a RCRA citizen suit.

  1. Do primary jurisdiction or abstention doctrines provide grounds for a stay, or dismissal?

The doctrines of primary jurisdiction and abstention have seen success as defenses to RCRA citizen suits in some jurisdictions. Abstention doctrines arise out of concern for the proper jurisdictional balance between state and federal courts, and can provide a basis for dismissal of a federal court complaint. Defendants in RCRA citizen suits most frequently invoke the doctrine known as Burford abstention, which applies in situations where a federal suit will interfere with a state administrative agency’s resolution of difficult and consequential questions of state law or policy doctrine. While some courts have rejected the application of Burford abstention to RCRA citizen suits, the argument has seen more consistent success in suits challenging agency permitting, licensing or siting decisions under state law.

Under the doctrine of primary jurisdiction, a federal court may stay proceedings where a claim involves issues within the special competence of an administrative body. Primary jurisdiction has been found applicable where: a consent order with the state completely overlapped with the relief sought by plaintiff’s RCRA claims; where EPA investigation and remediation had been diligent and ongoing for many years, and injunctive relief ordered by court could be conflicting; and where a state agency had extensive involvement in addressing alleged contamination and federal court intervention could result in delay of state agency response or substantial duplication of effort. Courts have been willing to apply primary jurisdiction to stay (or even dismiss) RCRA suits to allow these types of administrative activities to run their course.

  1. If plaintiff has alleged an endangerment to health or the environment, is it imminent?

To prevail on the merits of a RCRA citizen suit, a plaintiff must establish that an endangerment to human health or the environment is “imminent.” The Supreme Court has ruled that “[a]n endangerment can only be ‘imminent’ if it ‘threatens to occur immediately,’ and the reference to waste which ‘may present’ imminent harm quite clearly excludes waste that no longer presents such a danger.” Imminence may be absent where the endangerment is premised on speculative development plans or contingencies, where there is no exposure pathway (e.g., a claim of endangerment to human health based on alleged groundwater contamination, where groundwater is not used for drinking), or remediation has occurred, and to the extent waste remains, it no longer poses a risk. Imminence can be found lacking in these types of fact patterns, notwithstanding the presence of contamination.

will not likely be met. Risk assessments may also be very useful in showing the absence of a substantial risk, and defendants should evaluate the relative risks and benefits of performing such an assessment. For example, in a recent case alleging vapor intrusion, a risk assessment showed that the alleged vapor levels were many magnitudes below risk thresholds, and even below the risk presented by the same contaminants present in ambient (outdoor) air.

  1. If plaintiff has alleged an endangerment, is it substantial?

If a plaintiff cannot show that an alleged endangerment is imminent, it follows that it that RCRA’s substantiality requirement will not likely be met. Risk assessments may also be very useful in showing the absence of a substantial risk, and defendants should evaluate the relative risks and benefits of performing such an assessment. For example, in a recent case alleging vapor intrusion, a risk assessment showed that the alleged vapor levels were many magnitudes below risk thresholds, and even below the risk presented by the same contaminants present in ambient (outdoor) air.

  1. Can you recover your attorneys’ fees?

Although the majority of fee awards under RCRA are for plaintiffs, fee awards have been granted to defendants, especially where the suit was frivolous, unreasonable, or groundless, or where the plaintiff continued to litigate after it clearly became so. Don’t overlook other bases for fees as well. If there is a contractual relationship with the plaintiff (for example, as is common between successive property owners), all contracts should be reviewed for any applicable fee shifting provisions.

In conclusion, if sued under RCRA’s citizen suit provision, consider whether these common defenses or fact patterns apply. Defenses based on notice, standing, or governmental action can provide an early and cost-effective dismissal of the case. Facts showing, for example, speculative alleged endangerment or lack of an exposure pathway should be explored fully in discovery, as they can provide effective defenses on the merits.

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Beveridge & Diamond holds a United States nationwide Tier 1 ranking for Environmental Litigation in U.S. News/Best Lawyers. The Firm’s litigators perform trial and appellate work in enforcement defense (civil and criminal), citizen suit defense, rulemaking challenges and defenses, and private litigation under all major federal and state environmental laws.  For more information about our experience defending RCRA citizen suits, please contact Harold L. Segall (+1.202.789.6038, hsegall@bdlaw.com) or Bina R. Reddy (+1.512.391.8045, breddy@bdlaw.com).

This update is not intended as, nor is it a substitute for, legal advice. You should consult with legal counsel for advice specific to your circumstances. This communication may be considered lawyer advertising.

This article was first published on the Beveridge & Diamond website.