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Owners of Automobile Repair Shop Found Strictly Liable for Petroleum Discharge under NY Oil Spill Act

If you're familiar with the harsh reality of property owner liability under the New York State Navigation Law's Oil Spill Act, this headline shouldn't raise any eyebrows. However, the holding of State of New York v. C.J. Burth Services, Inc., 79 A.D.3d 1298, 915 N.Y.S.2d 174 (N.Y. App. 3rd Dep't 2010), once again confirms the Draconian nature of strict liability for property owners in Spill Act cases. 

In the Burth case, the New York State Department of Environmental Conservation ("DEC") sued the owners of an upstate automobile repair shop ("Owners") to recover costs associated with the removal and cleanup associated with a petroleum spill from an underground storage tank ("UST") on the property. See generally NYS Nav. Law Art. 12. The Owners argued that they cannot be held liable for the cleanup costs because they (1) did not cause the contamination, (2) did not control the site when the contamination occurred, and (3) had no knowledge of the existence of storage tanks or contamination on the property when they purchased it.

The trial court agreed, holding that: "Unlike the circumstances in [US Underwriters Ins. Co. v. City Club Hotel, LLC, (3 NY3d 592)(2004)], there is nothing in this record indicating that defendants had knowledge of the underground tanks or any contamination resulting from the leakage of the tanks at the time they purchased the premises in 1986. As such, defendants were not in a position of control over the site." State of New York v. CJ Burth Services, Inc., 2009 NY Slip Op 50374 (N.Y. Sup. Ct. Feb. 18, 2009).

On appeal, however, the court did not agree. The appellate court reversed, holding that even so-called "faultless owners" are strictly liable as dischargers under the New York Oil Spill Act for any petroleum contamination on their property. Thus, the appellate court held fast to the harsh doctrine of strict liability for property owners under the New York Oil Spill Act, upholding the standard laid out in Matter of White v Regan, 171 AD2d 197, 199 (1991).

The Oil Spill Act imposes strict liability for cleanup and remediation costs upon "any person who has discharged petroleum." NYS Nav. Law. §181(1). Under the Act, liability does not depend on fault or knowledge, but "[i]nstead, the liability of an otherwise faultless owner [(i.e. one who has neither caused nor contributed to a discharge)] of contaminated property or a system from which petroleum has spilled 'turns on the owner's capacity to take action to prevent an oil spill or to clean up contamination resulting from a spill.'" Burth, 79 A.D.3d at 1300 (quoting State of New York v B & P Auto Serv. Ctr., Inc., 29 AD3d 1045, 1047 (2006)) (emphasis in original).

Thus, owners of petroleum systems from which petroleum has spilled or leaked are "dischargers" within the purview of Nav. Law § 172(8) even where the discharge occurred before their ownership began and the owners did not contribute to the discharges or did not know that a spill had occurred. See Matter of White v Regan, 171 AD2d 197, 199 (1991). Burth takes it a step further, imposing strict liability upon owners who didn't even know that there was a petroleum UST on their property! The holding in Burth is just as strict as the line of cases that include State v. Green, 96 N.Y.2d 403 (N.Y. 2001), which hold that landlords are in effect always capable of regulating the behavior of their tenants, and should therefore be strictly liable for any releases caused by tenants. In Green, for example, the court held that the mobile home park owner was in a position to control the site and source of the discharge, and, therefore, the owner's knowledge that its tenant had heat was sufficient to impose liability on the owner under the Oil Spill Act for a leak caused by a tenant's tank. State v. Green, 96 N.Y.2d 407 (liability under the NY Oil Spill Act is based on "failure, unintentional or otherwise, to take any action in controlling the events that led to the spill or to effect an immediate cleanup" (emphasis added)).

As you may remember, the troubling part about Green is that the tank in question was an above-ground kerosene tank outside of a mobile home, so the court's generalization from this kind of case - where, arguably, the landlord or his agent could see any leakage, and so would be in a position to "regulate the behavior of their tenants" - to the far more typical case in which the tanks are underground fuel oil or gasoline tanks that cannot be seen, seems grossly unfair. How is the landlord to know what's going on underground?

Owners Beware!

In New York, owners of property at which there has been petroleum contamination are strictly liable for the cleanup costs under the State's Oil Spill Act regardless of their knowledge of a spill or potential spill, the time when the spill occurred, or that there was even a petroleum storage system on site. If there is a petroleum spill on your property and you don't clean it up, forcing DEC to undertake the remedial actions, the Attorney General, representing DEC, can - and will - come after you for all costs.

Therefore, it is always important to undertake the appropriate environmental due diligence anytime you purchase an industrial or commercial property. That way, at least, you know what you're dealing with . . . before you're stuck with the bill!

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