Company Not Liable for Pre-Ownership Cleanup Costs

A Pennsylvania company is liable only for response costs incurred after it took ownership of a contaminated site, not for those incurred beforehand, a federal trial court ruled Aug. 30 ( Pa. Dep’t of Envtl. Prot. v. Trainer Custom Chem. LLC , 2016 BL 282578, E.D. Pa., No. 15-1232, 8/30/16 ).

Judge Eduardo C. Robreno of the U.S. District Court for the Eastern District of Pennsylvania granted the Pennsylvania Department of Environmental Protection’s motion for summary judgment on liability under the Comprehensive Environmental Response, Compensation, and Liability Act and the state’s Hazardous Sites Cleanup Act regarding the liability of site owner Trainer Custom Chemical LLC (TCC).

The court, however, denied the DEP’s motion on damages in the form of response costs the company owes to the department, finding that it couldn't calculate the relevant personnel charges related to work at the site. It also declined to pierce the corporate veil and hold Jeremy Hunter and James Halkias, who had organized the company, personally liable for the response costs.

Hunter and Halkias formed TCC in October 2012 and a month later purchased the Stoney Creek site, located in Trainer, Pa., for $20,600.

Prior to the purchase, Stoney Creek Technologies LLC owned the site, which contained approximately 17 million pounds of raw materials, chemical products and wastes and other waste materials used to support on-site activities as of 2007. That year, the state agency identified a release or threatened release due to the improper storage or disposal of roughly 3 million pounds of flammable or combustible chemicals.

The U.S. Environmental Protection Agency initiated response actions under CERCLA. When Stoney Creek no longer could pay its electric bills, the state agency began paying the bills to ensure the utility didn’t cut power, which could have resulted in additional releases of chemicals. It claims to have spent about $820,000 on electricity.

The borough of Trainer issued a permit to Halkias to raze structures on the site, and the reclaimed metals were sold for more than $875,000 to JK Myers, a business entity formed by Halkias.

When inspectors from the department visited the site in 2013 and 2014, they found that the demolition of pipes, tanks and buildings had left storage tanks cut open, allowing unknown materials to spill out of the tanks. The department filed a cost recovery action under both state and federal laws against TCC and Hunter and Halkias as individuals.

Primarily at issue was whether liability extends to costs incurred by the department before TCC took ownership of the site.

Prior Response Costs Barred

The court wrote that the necessary CERCLA elements were present—TCC owns and operates the site; the site is a facility; a release occurred there; and the department incurred response costs.

The court said neither it nor the U.S. Court of Appeals for the Third Circuit had ruled on the ownership-response costs issue. Instead, it relied on persuasive authority from the Ninth Circuit, which has held that “current ownership for purposes of liability under 42 U.S.C. §9607(a)(1) is measured from the time the recovery action accrues,” which is “at the point that recovery costs are incurred” ( State Dep’t of Toxic Substance Control v. Hearthside Residential Corp., 613 F.3d 910, 71 ERC 1097, 2010 BL 166595 (9th Cir. 2010)).

The court also applied this reasoning to the state law. The rulings extinguished the department’s claims for costs stemming from its 2007 response. It declined, however, to enter summary judgment on damages because a genuine issue of material fact remains over the amount of response costs.

Lastly, although the court noted that TCC was undercapitalized and had few documents or records, it ruled the department “failed to present evidence that is sufficient to overcome the strong presumption against piercing the corporate veil” and denied the department’s motion for summary judgment on this issue.

Lawyers from the Pennsylvania Department of Environmental Protection represented the agency.

Joseph A. Malley III and Paul, Flandreau & Berger, LLP, both Media, Pa., represented Trainer.

Malley represented Halkias.

Timothy A. Berger of Paul, Flandreau & Berger, LLP represented Hunter.

For More Information

The memorandum and opinion of the U.S. District Court for the Eastern District of Pennsylvania is available at

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