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Legal alert
LegalAlert by John H. Phillips
Landlord Liability Under RCRA
S
everal years ago your company, Pennsylvania Six Five Thousand Inc., built a warehouse in Philadelphia for storing finished goods prior to distribution. You wanted to be able to have room in the warehouse for your business to grow, so you built the warehouse larger than needed. To keep cash flow up and overhead down you rent the portion of the warehouse that you do not need to a company known as Innovative Disposal Co. (“Innovative”). Innovative operates a business across town. Your relationship with the tenant appears to be fine. You collect a rent check every month. You mind your business, and Innovative appears to mind its business. Last week, U.S. EPA showed up at your warehouse. You advised that your company generated no hazardous wastes but that the inspectors could look around if they desired. Surprising to you, U.S. EPA inspectors found two 27%gal above-ground storage tanks in the space that you had leased to Innovative. On the basis of an analysis of samples taken from the 275gal tanks during the inspection, U.S. EPA determined that the tanks contained a spent halogenated solvent, 1, 1,l -trichloroethane, which is defined as a hazardous waste under the Resource Conservation and Recovery Act (RCRA). Apparently, Innovative had been depositing machine oils and a solvent that contains 1,l, l-trichloroethane into the tanks. You are surprised to learn that Innovative was storing hazardous wastes at your warehouse. When you attempt to contact Innovative, you find out that they went out of business the previous week. You are very cooperative with U.S. EPA during its investigation of Innovative, and ultimately, you agree to pay for the disposal of the hazardous wastes to get it off of your property. The material is shipped out of the warehouse, and you believe that the matter is closed, at least as to your company. Six months have passed, and you have practically forgotten about your relationship with Innovative and the inspection by U.S. EPA. Today, you were rudely reminded of the whole event when you received a complaint from U.S. EPA against your company, alleging violations of RCRA. The complaint contains four counts based on the presence of the hazardous wastes at your warehouse. The complaint alleges that your warehouse was a hazardous-waste storage facility because the building at that address had been used to store hazardous wastes in two 275gal storage tanks. The complaint further alleges that your company is the owner of the warehouse and that it had failed to perform certain duties imposed by RCRA and its implementing regulations on owners of hazardous-waste storage facilities. Count I of the complaint alleges that your METAL
FINISHING
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SEPTEMBER
1997
company violated 25 Pa. Code Section 270.1 in that it “owned and/or operated” a hazardous-waste storage facility without having first obtained a permit from the Pennsylvania Department of Environmental Protection. Count II of the complaint alleges that your company violated 2.5 Pa. Code Section 265.195(a) in that it failed to conduct required inspections of two storage tanks containing stored hazardous wastes. Count III of the complaint alleges that your company violated 25 Pa. Code Section 264.11 in that it accepted hazardous waste for treatment, storage, or disposal at its facility without having received an identification number. For Count IV your company is alleged to have violated federal RCRA regulations. Specifically, Count IV alleges that your company violated 40 C.F.R. Section 268.50(a)(2): [B]y storing hazardous waste restricted from land disposal for purposes other than to accumulate such quantities of hazardous waste as necessary to facilitate proper recovery, treatment, or disposal and by failing to mark the two hazardous waste storage tanks with the information specified by 40
C.F.R. Section 26%50(a)(2)(i) and (ii). U.S. EPA is proposing in the complaint a total penalty of $160.000. U.S. EPA calculated the penalty amounts in accordance with the 1990 Revised RCRA Civil Penalty Policy. You are astounded. How in the world could you be guilty of violating a RCRA statute when you only leased warehouse space to someone else? You call your environmental attorney and ask for an explanation of what U.S. EPA is trying to do to you. Your environmental attorney obtains a copy of the complaint, does some research on the applicable law, and calls you back to explain. Your attorney explains that the two storage tanks contained a spent halogenated solvent, 1, 1,l -trichloroethane, which bears the hazardous-waste identification number “Fool.” Your company is the “owner” of the warehouse. An “owner” is defined by regulation as “the person or municipality who is the owner of record of all or part of a facility.” 25 Pa. Code Section 260.2. Your company’s warehouse is a “facility” under that definition in that it contains a structure that was used to store “hazardous wastes” in two 275-gal storage tanks. Your company must concede that it is the owner of the warehouse; therefore, your company is the owner of a facility that was used to store hazardous waste under the Pennsylvania regulations. The result would be the same under the federal regulations, explains your attorney. You explain to your attorney that you should not be held liable given that the hazardous waste was stored on the property by the tenant to whom the space was leased and
0 Copyright Elsevier Science Inc.
73
without your company’s knowledge or consent. Your attorney explains that nothing either in the applicable Pennsylvania statute or in the federal regulatory language at issue will support such an argument. The applicable federal and Pennsylvania regulations are clear and unambiguous. On its face, 25 Pa. Code Section 270.1 expressly provides: A person or municipality may not own or operate a hazardouswaste storage, treatmentor disposal facility unless the person or municipality has first obtained a permit for the facility from the department.. . . (Emphasis added.) No person or municipality shall own or operate a hazardous waste storage, treatment or disposal facility. (Emphasis added.)
On the basis of a review of the applicable regulation and statute, your attorney can find no grounds for upholding your company’s argument that because your company did not know, it should not be held liable. To the contrary, by their terms, the laws apply to owners as well as to operators. Your attorney explains that applying the Pennsylvania regulations to owners of facilities that store hazardous waste is supported by a Legal Statement from Pennsylvania’s Deputy General Counsel, with a concurrence letter from the First Deputy Attorney General, which accompanied Pennsylvania’s request to EPA that it be authorized to carry out the RCRA Subtitle C program in that state. The Pennsylva-
nia Legal Statement, a required component of the state’s request for authorization to administer the federal RCRA program, states that the Pennsylvania program “like RCRA, requires that owners and operators of treatment, storage, and disposal facilities obtain permits and operate in compliance with them.” Furthermore, your attorney explains that other owners who were unaware of the operation of their tenants have failed on the argument that an owner was not liable under RCRA. The Court of Appeals for the Ninth Circuit upheld the interpretation of RCRA that absentee landlords are “owners” of hazardous-waste facilities under RCRA and “must have permits.” 55 E3d at 1469. In In re Arrcom, Inc., DrexZer Enterprises, Inc., 2 E.A.D. 203 (CJO 1986), an owner/lessor of commercial property, which was leased to a tenant storing used oil and solvent on the leased premises, argued unsuccessfully that it was not the owner of a facility that was used to store hazardous waste under the federal regulations that implement RCRA. The definition of “facility” in the federal regulations at 40 C.F.R. Section 260.10 is identical to the definition in the Pennsylvania regulations at 25 Pa. Code Section 260.2. The owner and its tenant were both assessed civil penalties for failure to obtain a RCRA permit. On appeal, the Agency’s Chief Judicial Officer upheld the penalty assessment against the owner of the
Burnoff is only l/2 the answer Washdown is the other half. You can get your hooks, hangers, and rework as clean as you want (assumingyou have a good burnoft) with a Washdown Separator from C-M-P Systems,No ash, no white powder, and good rust protection.
.
BASKETS
For All Centrifugal Dryers
Now you can have the cost-savingof burnoff stripping without the problems.C-M-PWashdown Separators take off the ash, collect the ash, and send water to the drain, Quick, efficient, and cost effective. Non-toxic, non-hazardous,neutral pH. With 24 years experience in the field, we understand both the chemistryAND the physicsijf cleaning, Our post-bumoffWashdownSeparatorshave been doing good ash control since1992.Justask our customers.
Outside Dimensions 6”x6”
12”~ 18”
18”x24”
24”x22”
12”x12”
18”x18”
23”xi 8”
3O”x24”
Half Drop Bottoms Available Steel, SS304, Polypropylene
508 Grand Avenue
??
P.O. Box 15488
loves Park, Illinois 611324488 1-815-636-2122 Circle 121 on reader information card
74
COOLEY WIRE PRODUCTS MFG. CO.
5025 N. River Road Schiller Park,IL60176 (708)678-8585 F#(708)678-8612 “Keep Us In Mind For Dlpplna Baskets” Circle 028 on reader information card METAL
FINISHING
.
SEPTEMBER
1997
property, holding that “the owner of a facility at which hazardous waste is stored is subject to RCRA and may be held accountable for its violation.” 2 E.A.D. at 208. The Chief Judicial Officer noted that the statute “expressly directs EPA to hold property owners responsible for hazardous waste activities conducted on their property,” id. at 2 11, and he further stated that “RCRA does not link the duty to obtain a RCRA permit to the extent of the owner’s knowledge or control of the facility.” Id. at 207. In Systech Environmental Corp. v. U.S. EPA, 55 E3d 1466 (9th Cir. 1995) it was held that Owners of facilities are required to have permits. This is true even for “absentee owners” who have nothing to do with the operation of the facility. Also, In re Waste Technologies Industries, East Liverpool, Ohio, 4 E.A.D. 106, 109 (EAB 1992), held that
“Landowners as well as tenant-operators are each required to have a permit.” In In re Hawaiian Western Steel, Ltd., and James Campbell Estate, 2 E.A.D. 675,680 (Adm’r 1988), it was held “Notice is not a prerequisite to liability for failure to obtain a permit under RCRA.” Furthermore, “RCRA is a remedial strict liability statute which is construed liberally,” as held by the court in U.S. v. Production Plated Plastics, Inc., 742 F. Supp. 956, 960 (W.D. Mich. 1990), aff’d, 955 E2d 45 (6th Cir. 1992). See also In re Humko Products, An Operation of Krajt, Inc., 2 E.A.D. 697, 70 3 (CJO 1988) (“RCRA is a strict liability statute, however, and authorizes the imposition of a penalty even if the violation is unintended”).
Your attorney explains that the alleged violations are based on your company’s ownership of the property and not on any affirmative misconduct; therefore, as revealed by the case law, your company’s lack of knowledge of the existence of the storage tanks is not a defense to the allegations of the complaint. For the same reason, your company’s efforts to bring its warehouse into compliance upon notification of the existence of the tanks, although commendable, does not constitute a defense to the allegations in the complaint. In short, your attorney explains that the best that he can do is attempt to negotiate a more favorable penalty; beyond that, you would probably be wasting your money to try and change the law. I always advise clients to make it their business to know the business of their tenants. Inspect the tenant’s premises once per month, ask questions, and be extremely concerned if drums or tanks start appearing on your rental property. Ignorance on the part of the landlord is not bliss in the eyes of U.S. EPA and the strict liability provisions of RCRA. As with any legal matter you should always consult with your attorney. The above information, while deemed accurate by the author should not be relied upon. Each set of facts and circumstances will be different and may lead to a different legal conclusion.
John H. Phillips is owner and general manager of Phillips Law Firm, Cincinnati. MF
Have you met the ESMAfamilv? Our versatile cleaners stand out from the crocd with unique electronics generating optimum power and long life. Housed in stainless steel cabinetry, our cleaners display quality inside and out. With units that range in capacity from 1 to 18 gallons, and in function from single tank to multi-tank to single automated cleaner-rinser-dryers, we provide superior cleaning, reliable service and knowledgeable technical support. To solve your cleaning problems, call 1-800-276-2466.
Over 2.5 Years of Service Circle 040 on reader information card METAL
FINISHING
.
SEPTEMBER
1997
75
Landlord Liability Under RCRA
S
everal years ago your company, Pennsylvania Six Five Thousand Inc., built a warehouse in Philadelphia for storing finished goods prior to distribution. You wanted to be able to have room in the warehouse for your business to grow, so you built the warehouse larger than needed. To keep cash flow up and overhead down you rent the portion of the warehouse that you do not need to a company known as Innovative Disposal Co. (“Innovative”). Innovative operates a business across town. Your relationship with the tenant appears to be fine. You collect a rent check every month. You mind your business, and Innovative appears to mind its business. Last week, U.S. EPA showed up at your warehouse. You advised that your company generated no hazardous wastes but that the inspectors could look around if they desired. Surprising to you, U.S. EPA inspectors found two 27%gal above-ground storage tanks in the space that you had leased to Innovative. On the basis of an analysis of samples taken from the 275gal tanks during the inspection, U.S. EPA determined that the tanks contained a spent halogenated solvent, 1, 1,l -trichloroethane, which is defined as a hazardous waste under the Resource Conservation and Recovery Act (RCRA). Apparently, Innovative had been depositing machine oils and a solvent that contains 1,l, l-trichloroethane into the tanks. You are surprised to learn that Innovative was storing hazardous wastes at your warehouse. When you attempt to contact Innovative, you find out that they went out of business the previous week. You are very cooperative with U.S. EPA during its investigation of Innovative, and ultimately, you agree to pay for the disposal of the hazardous wastes to get it off of your property. The material is shipped out of the warehouse, and you believe that the matter is closed, at least as to your company. Six months have passed, and you have practically forgotten about your relationship with Innovative and the inspection by U.S. EPA. Today, you were rudely reminded of the whole event when you received a complaint from U.S. EPA against your company, alleging violations of RCRA. The complaint contains four counts based on the presence of the hazardous wastes at your warehouse. The complaint alleges that your warehouse was a hazardous-waste storage facility because the building at that address had been used to store hazardous wastes in two 275gal storage tanks. The complaint further alleges that your company is the owner of the warehouse and that it had failed to perform certain duties imposed by RCRA and its implementing regulations on owners of hazardous-waste storage facilities. Count I of the complaint alleges that your METAL
FINISHING
??
SEPTEMBER
1997
company violated 25 Pa. Code Section 270.1 in that it “owned and/or operated” a hazardous-waste storage facility without having first obtained a permit from the Pennsylvania Department of Environmental Protection. Count II of the complaint alleges that your company violated 2.5 Pa. Code Section 265.195(a) in that it failed to conduct required inspections of two storage tanks containing stored hazardous wastes. Count III of the complaint alleges that your company violated 25 Pa. Code Section 264.11 in that it accepted hazardous waste for treatment, storage, or disposal at its facility without having received an identification number. For Count IV your company is alleged to have violated federal RCRA regulations. Specifically, Count IV alleges that your company violated 40 C.F.R. Section 268.50(a)(2): [B]y storing hazardous waste restricted from land disposal for purposes other than to accumulate such quantities of hazardous waste as necessary to facilitate proper recovery, treatment, or disposal and by failing to mark the two hazardous waste storage tanks with the information specified by 40
C.F.R. Section 26%50(a)(2)(i) and (ii). U.S. EPA is proposing in the complaint a total penalty of $160.000. U.S. EPA calculated the penalty amounts in accordance with the 1990 Revised RCRA Civil Penalty Policy. You are astounded. How in the world could you be guilty of violating a RCRA statute when you only leased warehouse space to someone else? You call your environmental attorney and ask for an explanation of what U.S. EPA is trying to do to you. Your environmental attorney obtains a copy of the complaint, does some research on the applicable law, and calls you back to explain. Your attorney explains that the two storage tanks contained a spent halogenated solvent, 1, 1,l -trichloroethane, which bears the hazardous-waste identification number “Fool.” Your company is the “owner” of the warehouse. An “owner” is defined by regulation as “the person or municipality who is the owner of record of all or part of a facility.” 25 Pa. Code Section 260.2. Your company’s warehouse is a “facility” under that definition in that it contains a structure that was used to store “hazardous wastes” in two 275-gal storage tanks. Your company must concede that it is the owner of the warehouse; therefore, your company is the owner of a facility that was used to store hazardous waste under the Pennsylvania regulations. The result would be the same under the federal regulations, explains your attorney. You explain to your attorney that you should not be held liable given that the hazardous waste was stored on the property by the tenant to whom the space was leased and
0 Copyright Elsevier Science Inc.
73
without your company’s knowledge or consent. Your attorney explains that nothing either in the applicable Pennsylvania statute or in the federal regulatory language at issue will support such an argument. The applicable federal and Pennsylvania regulations are clear and unambiguous. On its face, 25 Pa. Code Section 270.1 expressly provides: A person or municipality may not own or operate a hazardouswaste storage, treatmentor disposal facility unless the person or municipality has first obtained a permit for the facility from the department.. . . (Emphasis added.) No person or municipality shall own or operate a hazardous waste storage, treatment or disposal facility. (Emphasis added.)
On the basis of a review of the applicable regulation and statute, your attorney can find no grounds for upholding your company’s argument that because your company did not know, it should not be held liable. To the contrary, by their terms, the laws apply to owners as well as to operators. Your attorney explains that applying the Pennsylvania regulations to owners of facilities that store hazardous waste is supported by a Legal Statement from Pennsylvania’s Deputy General Counsel, with a concurrence letter from the First Deputy Attorney General, which accompanied Pennsylvania’s request to EPA that it be authorized to carry out the RCRA Subtitle C program in that state. The Pennsylva-
nia Legal Statement, a required component of the state’s request for authorization to administer the federal RCRA program, states that the Pennsylvania program “like RCRA, requires that owners and operators of treatment, storage, and disposal facilities obtain permits and operate in compliance with them.” Furthermore, your attorney explains that other owners who were unaware of the operation of their tenants have failed on the argument that an owner was not liable under RCRA. The Court of Appeals for the Ninth Circuit upheld the interpretation of RCRA that absentee landlords are “owners” of hazardous-waste facilities under RCRA and “must have permits.” 55 E3d at 1469. In In re Arrcom, Inc., DrexZer Enterprises, Inc., 2 E.A.D. 203 (CJO 1986), an owner/lessor of commercial property, which was leased to a tenant storing used oil and solvent on the leased premises, argued unsuccessfully that it was not the owner of a facility that was used to store hazardous waste under the federal regulations that implement RCRA. The definition of “facility” in the federal regulations at 40 C.F.R. Section 260.10 is identical to the definition in the Pennsylvania regulations at 25 Pa. Code Section 260.2. The owner and its tenant were both assessed civil penalties for failure to obtain a RCRA permit. On appeal, the Agency’s Chief Judicial Officer upheld the penalty assessment against the owner of the
Burnoff is only l/2 the answer Washdown is the other half. You can get your hooks, hangers, and rework as clean as you want (assumingyou have a good burnoft) with a Washdown Separator from C-M-P Systems,No ash, no white powder, and good rust protection.
.
BASKETS
For All Centrifugal Dryers
Now you can have the cost-savingof burnoff stripping without the problems.C-M-PWashdown Separators take off the ash, collect the ash, and send water to the drain, Quick, efficient, and cost effective. Non-toxic, non-hazardous,neutral pH. With 24 years experience in the field, we understand both the chemistryAND the physicsijf cleaning, Our post-bumoffWashdownSeparatorshave been doing good ash control since1992.Justask our customers.
Outside Dimensions 6”x6”
12”~ 18”
18”x24”
24”x22”
12”x12”
18”x18”
23”xi 8”
3O”x24”
Half Drop Bottoms Available Steel, SS304, Polypropylene
508 Grand Avenue
??
P.O. Box 15488
loves Park, Illinois 611324488 1-815-636-2122 Circle 121 on reader information card
74
COOLEY WIRE PRODUCTS MFG. CO.
5025 N. River Road Schiller Park,IL60176 (708)678-8585 F#(708)678-8612 “Keep Us In Mind For Dlpplna Baskets” Circle 028 on reader information card METAL
FINISHING
.
SEPTEMBER
1997
property, holding that “the owner of a facility at which hazardous waste is stored is subject to RCRA and may be held accountable for its violation.” 2 E.A.D. at 208. The Chief Judicial Officer noted that the statute “expressly directs EPA to hold property owners responsible for hazardous waste activities conducted on their property,” id. at 2 11, and he further stated that “RCRA does not link the duty to obtain a RCRA permit to the extent of the owner’s knowledge or control of the facility.” Id. at 207. In Systech Environmental Corp. v. U.S. EPA, 55 E3d 1466 (9th Cir. 1995) it was held that Owners of facilities are required to have permits. This is true even for “absentee owners” who have nothing to do with the operation of the facility. Also, In re Waste Technologies Industries, East Liverpool, Ohio, 4 E.A.D. 106, 109 (EAB 1992), held that
“Landowners as well as tenant-operators are each required to have a permit.” In In re Hawaiian Western Steel, Ltd., and James Campbell Estate, 2 E.A.D. 675,680 (Adm’r 1988), it was held “Notice is not a prerequisite to liability for failure to obtain a permit under RCRA.” Furthermore, “RCRA is a remedial strict liability statute which is construed liberally,” as held by the court in U.S. v. Production Plated Plastics, Inc., 742 F. Supp. 956, 960 (W.D. Mich. 1990), aff’d, 955 E2d 45 (6th Cir. 1992). See also In re Humko Products, An Operation of Krajt, Inc., 2 E.A.D. 697, 70 3 (CJO 1988) (“RCRA is a strict liability statute, however, and authorizes the imposition of a penalty even if the violation is unintended”).
Your attorney explains that the alleged violations are based on your company’s ownership of the property and not on any affirmative misconduct; therefore, as revealed by the case law, your company’s lack of knowledge of the existence of the storage tanks is not a defense to the allegations of the complaint. For the same reason, your company’s efforts to bring its warehouse into compliance upon notification of the existence of the tanks, although commendable, does not constitute a defense to the allegations in the complaint. In short, your attorney explains that the best that he can do is attempt to negotiate a more favorable penalty; beyond that, you would probably be wasting your money to try and change the law. I always advise clients to make it their business to know the business of their tenants. Inspect the tenant’s premises once per month, ask questions, and be extremely concerned if drums or tanks start appearing on your rental property. Ignorance on the part of the landlord is not bliss in the eyes of U.S. EPA and the strict liability provisions of RCRA. As with any legal matter you should always consult with your attorney. The above information, while deemed accurate by the author should not be relied upon. Each set of facts and circumstances will be different and may lead to a different legal conclusion.
John H. Phillips is owner and general manager of Phillips Law Firm, Cincinnati. MF
Have you met the ESMAfamilv? Our versatile cleaners stand out from the crocd with unique electronics generating optimum power and long life. Housed in stainless steel cabinetry, our cleaners display quality inside and out. With units that range in capacity from 1 to 18 gallons, and in function from single tank to multi-tank to single automated cleaner-rinser-dryers, we provide superior cleaning, reliable service and knowledgeable technical support. To solve your cleaning problems, call 1-800-276-2466.
Over 2.5 Years of Service Circle 040 on reader information card METAL
FINISHING
.
SEPTEMBER
1997
75