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New York v. Shore Realty Corp. - 759 F.2d 1032 (2d Cir. 1985)

Rule:

Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C.S. § 9601(20)(A), "owner or operator" is defined to mean any person owning or operating an onshore facility, and "person" includes individuals as well as corporations. More important, the definition of "owner or operator" excludes a person, who, without participating in the management of a facility, holds indicia of ownership primarily to protect his security interest in the facility. The use of this exception implies that an owning stockholder who manages the corporation is liable under CERCLA as an "owner or operator." That conclusion is consistent with that of other courts that have addressed the issue.

Facts:

In 1984, the State brought suit against Shore Realty Corp. (Shore) and Donald LeoGrande, Shore's officer and stockholder, to clean up a hazardous waste disposal site at One Shore Road, Glenwood Landing, New York, which Shore had acquired for land development purposes. At the time of the acquisition, LeoGrande knew that hazardous waste was stored on the site and that cleanup would be expensive, though neither Shore nor LeoGrande had participated in the generation or transportation of the nearly 700,000 gallons of hazardous waste that were currently on the premises. The State's suit under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), for an injunction and damages was brought in the United States District Court for the Eastern District of New York. The complaint also contained pendent state law nuisance claims, based on both common law and N.Y. Real Prop. Acts. Law § 841. About eight months later, the district court granted the State's motion for partial summary judgment. Apparently relying at least in part on CERCLA, the district court's permanent injunction directed Shore and LeoGrande to remove the hazardous waste stored on the property, subject to monitoring by the State, and held them liable for the State's "response costs." In the alternative, the court based the injunction on a finding that the Shore Road site was a public nuisance. Following a remand by the Court of Appeals for the Second Circuit, the district court on January 11, 1985, stated with more particularity the undisputed material facts underlying its decision finding defendants liable for the State's response costs and clarifying its earlier decision by basing the injunction solely on state public nuisance law. The district court also modified its earlier decision by suggesting that CERCLA did not authorize injunctive relief in this case. Both Shore and LeoGrande sought further review.

Issue:

Did the district court err in granting partial summary judgment in favor of the State of New York?

Answer:

No

Conclusion:

The Second Circuit affirmed the lower court's grant of partial summary judgment, finding Shore liable for response costs even though they did not own the site at the time of disposal and did not cause the release of the hazardous waste, as a covered person under 42 U.S.C. § 9607(a). It noted that the nonlisting by the Environmental Protection Agency of the site on the National Priorities List was irrelevant to Shore's liability. After noting that injunctive relief under CERCLA was not available to the State, the Second Circuit further held that the district court, exercising its pendent jurisdiction, properly granted the permanent injunction based on New York public nuisance law. Lastly, the Second Circuit found LeoGrande jointly and severally liable under both CERCLA and New York law.

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