Property Owners: Don't pay for the same work twice. A discharge from liability to subcontractors under CERCLA
On March 18, 2014, the United States Court of Appeals for the Second Circuit decided that under the federal environmental cleanup law known as the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") (42 U.S.C. §9607), a subcontractor cannot recover the value of unpaid work directly from a landowner if the landowner has already paid the general contractor for the subcontractor's work and the general contractor had failed to make the required payments to the subcontractor.
In this case, Price Trucking Corp. v. Norampac Industries Inc., the defendant landowner hired a general contractor to perform environmental remediation work, including excavation and the removal of contaminated soil, on its property in Erie County, New York. The general contractor hired the plaintiff subcontractor to remove contaminated soil from the site and transport it to a licensed disposal facility. The subcontractor performed and completed all of the required work at the site, but was not paid in full by the general contractor for its services. The landowner paid the general contractor for all costs associated with the cleanup of the site, but the general contractor failed to remit the portion of the payment due to the subcontractor. As a result, the subcontractor sought payment of its unpaid balance directly from the landowner, claiming that such recovery from the landowner was permitted under CERCLA’s contribution provisions.
CERCLA's purpose is to encourage the timely cleanup of hazardous waste sites and to place the cost of such cleanup on those responsible for creating or maintaining such hazardous condition. CERCLA imposes strict liability on owners and operators- regardless of whether they caused such release of hazardous substances. The subcontractor argued that under CERCLA any party who incurs “response costs” is entitled to recover those costs from any responsible party in a contribution action.
Since the landowner was a “responsible party”, and since the subcontractor had incurred “response costs” in connection with the removal of the contaminated soil, the subcontractor reasoned that it was entitled to sue the landowner to recover those costs. However, the Second Circuit found that CERCLA did not intend to hold a landowner perpetually liable in any dispute relating to the cleanup among general contractors, subcontractors, employees and suppliers.
Once the landowner has paid the total costs for the cleanup of its property, its liability for payments under CERCLA is discharged. As such, under CERCLA, a landowner does not have to pay twice for the same work performed on its land.
The court also said that a subcontractor can seek recourse under the N.Y. Lien Law, which provides that a subcontractor can place a mechanic's lien on the landowner's property to hold such landowner responsible for any unpaid work, but only to the extent that such landowner has not paid the general contractor for such work in question.