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Media Alerts - Price Trucking Corp. v. Norampac Industries, Inc. - Second Circuit
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March 18, 2014
  Price Trucking Corp. v. Norampac Industries, Inc. - Second Circuit
Headline: Second Circuit Reverses, Holding CERCLA Does Not Give Subcontractor Right to Sue Landowner Directly For Unpaid Fees Owed to Subcontractor by General Contractor

Issue(s) Presented: Does CERCLA create direct liability between a land owner and a subcontractor for cleanup performed by the subcontractor on a CERCLA remediation site when the owner has paid the general contractor in full for the subcontractor's work?

Brief Summary: The defendant landowner, Norampac Industries, appealed a grant of a summary judgment by the United States District Court for the Western District of New York to plaintiff, Price Trucking. Price Trucking was a subcontractor to the general contractor, AAA Environmental Inc., in a Brownfield remediation cleanup of Norampac's Erie County property. Norampac paid AAA Environmental in full for work, but AAA failed to pay monies owed to subcontractor Price Trucking for the work performed. Price Trucking brought this action asserting liability under the Comprehensive Environmental Response, Compensation, and Liability Act's ("CERCLA") liability provision, codified at 42 U.S.C. § 9607.

The Second Circuit reversed the grant of summary judgment motion and remanded the case. The court held that to make the landowner owner essentially a surety for contractors, subcontractors, employees, or suppliers is beyond the scope of Congress's intent in enacting CERCLA. The court found that CERCLA's purpose is to ensure that landowners accept responsibility and pay for these actions, and Norampac had done so upon completing the cleanup and ensuring that the contracted party was paid. The Second Circuit also reasoned that Congress did not intend to upend state law by providing a separate remedy to the normal method in which subcontractors and contractors seek to be paid.

To read the full opinion, please visit:
http://www.ca2.uscourts.gov/de...c470529bbb1/1/hilite/

Extended Summary: Norampac Industries, Inc. ("Norampac") owned land in Erie County, New York which contained levels of lead and other contaminants exceeding the maximums set by the New York State Department of Environmental Conservation ("DEC"). The company entered into a Brownfield Site Cleanup agreement with the DEC and contracted with AAA Environmental, Inc. to perform the remedial work. AAA Environmental subsequently subcontracted with Price Trucking, the plaintiff, to transport and dispose of the contaminated soil from the site.

Initially, AAA Environmental paid Price Trucking for all services rendered, but on October 6, 2008 the payments stopped. AAA Environmental refused to pay any outstanding invoices, and Price Trucking in turn refused to keep working unless Norampac paid them directly. Norampac agreed to this agreement and Price Trucking continued working until completion. After work was completed, Price Trucking was unable to recover the payments due from AAA Environmental. Price Trucking instituted this suit in the United States District Court for the Western District of New York against Norampac for its unpaid bills premised on the Comprehensive Environmental Response, Compensation, and Liability Act's ("CERCLA") liability provision, codified at 42 U.S.C. § 9607.

In March 2010, Price Trucking moved for partial summary judgment on the issue of liability, and District Court adopted the findings of the Magistrate Judge and found in favor of Price Trucking. There were several concurrent state court cases which affected the damages in this case, but the appeal in front of the Second Circuit dealt solely with the issue of liability.

The Second Circuit initially outlined the primary purposes of CERCLA as "encourage[ing] the timely cleanup of hazardous waste sites; and [placing] the cost of that cleanup on those responsible for creating or maintaining the hazardous condition." The parties stipulated that the defendant met the elements required to impose strict liability under CERCLA and, thus, the court concluded that the issue in the case was whether the landowner had discharged his liability under CERCLA by making payments to the general contractor which included the amounts due for work done by the subcontractor. Norampac argued that its CERCLA liability was satisfied when the response was complete and once it had made all payments pursuant to the applicable contracts entered into to effect the cleanup. Price Trucking argued that liability remained until all parties who contributed to cleanup were made whole for all costs of their work.

The Second Circuit disagreed with the District Court and held that CERCLA does not require the landowner to ensure that all subcontractors are made whole for the work they perform. The court first notes that nothing under 42 U.S.C. § 9607(a), CERCLA's liability provision, on its face provides assistance in determining the extent of a party's liability. The court instead looked to the purpose of CERCLA's liability provision in making its determination, stating that it was enacted "with the expansive, remedial purpose of ensuring that those responsible for any damage, environmental harm, or injury from chemical poisons bear the costs of their actions" and accomplishes these purposes by imposing a "strict liability regime . . . without regard to fault or negligence." The court continued by stating that "CERCLA's purposes are served when landowners and others who profit from hazardous activities are made to bear the costs of accidents on their land."

In this case, the Second Circuit reasoned that through Norampac's actions and payments, it had accepted responsibility and paid for its actions, and Price Trucking's attempt to treat Norampac "as though it were a surety to its subcontract with AAA Environmental . . . pushes the terms of CERCLA beyond their intended assignment of responsibilities." The Second Circuit ultimately held that "CERCLA is not designed to hold the responsible party perpetually liable as a surety in any dispute relating to the clean up between or among contractors, subcontractors, employees, or suppliers."

The Second Circuit went on to address the role of state law in providing resolution for disputes such as this. Common law in New York addresses a subcontractor's right to remedy for nonpayment by a general contractor by providing that subcontractor's cannot assert a cause of action against one who they are not in privity with, and cannot place a mechanic's lien on property unless the owner has not yet paid a general contractor for the work done. The court reasoned that Congress did not intend for CERCLA to upend these longstanding principles. Furthermore, the court stated that neither CERCLA's terms or legislative history suggest that "the statute is meant to provide a substitution for the usual manner in which contractors and subcontractors are paid." The Second Circuit offered a disclaimer, noting that its holding does not suggest that private contractors and subcontractors cannot bring recovery actions, but rather reminds that this can only be done under certain circumstances that did not exist in this case.

To read the full opinion, please visit:
http://www.ca2.uscourts.gov/de...c470529bbb1/1/hilite/

Panel: Chief Circuit Judge Katzmann, Circuit Judges Straub and Sack

Argument: 9/24/2012

Date of Issued Opinion: 3/18/2014

Docket Number: 11-2917-cv

Decided: Reversed and Remanded

Case Alert Author: David Restrepo

Counsel: John Gilbert Horn (Craig A. Slater, of counsel), Harter Secrest & Emery LLP, Buffalo, N.Y., for Appellant. Kevin M. Hogan, Phillips Lytle LLP (Patricia A. Manabelli, of counsel), Buffalo, N.Y., for Appellee.

Author of Opinion: Circuit Judge Sack

Case Alert Supervisor: Elyse Diamond Moskowitz

    Posted By: Elyse Diamond @ 03/18/2014 03:13 PM     2nd Circuit  

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