Albany Supreme Court Dismisses State’s Navigation Law Action

Albany Supreme Court Dismisses State’s Navigation Law Action Against Property Owners Without Knowledge of Leaking Underground Tanks

Earlier this year, in State of New York v. C.J. Burth Service, Inc., et al., 2009 WL 580752 (Alb Cnty, 2009), an unreported decision, the Albany County Supreme Court issued a decision which may – if upheld on appeal-- significantly limit Navigation Law liability for certain purchasers of leaking underground petroleum storage tanks.

The facts of the case are straightforward: In 1986, the defendants, C.J. Burth Services, Inc., Carlton Burth and James Stasaitis, purchased an automotive repaid shop in Utica, New York. Defendants stated that at the time of their purchase of the property, they had no knowledge that the property had been previously used as a gas station. They also stated that when they bought the property there were no gasoline pumps, canopies or other indication of any gasoline storage or sale operations there. In 1992, however, the defendants found out from the prior owner of the property that the site contained several underground gasoline storage tanks (USTs) which had previously been taken out of service. The defendants chose to remove the USTs and when doing so, discovered that petroleum contamination of the soils surrounding the tanks. The USTs were found to be “riddled with holes” and the petroleum apparently leaked from both the lines and USTs.

The Department of Environmental Conservation (DEC) using monies from the State Oil Spill Fund cleaned up the discharge. The Oil Spill Fund referred the matter to the State Attorney General’s Office (AG) to recover the costs. As is very common in cases such as this, the AG commenced suit in Albany County Supreme Court against the defendants, who were the property owners at the time of the discovery of the oil spill.  The State’s cost recovery action is predicated upon the strict liability provisions of Article 12 of the Navigation Law. In a nutshell, Article 12 of the Navigation Law imposes strict liability –without regard to fault – for all cleanup and removal costs upon a party whose “act or omission” caused or contributed to a discharge of petroleum (e.g., gasoline) to the State’s waters, including groundwater, or upon the land where it can migrate into such waters.

Navigation Law Article 12 was enacted in 1978. Since that time, New York courts have attempted to define who is and who is not considered a discharger (or responsible party) under the Navigation Law and thus strictly liable for the cleanup of an oil spill. One of the most complicated issues facing the Courts has involved whether or not the owner of property containing a leaking petroleum storage system should be held liable even where the property owner did not actually operate or own the tank at the time of the discharge.

Two relatively recent Court of Appeals decisions, State v. Green, 96 NY2d 403 (2002) and State v. Speonk Fuels, Inc., 3 NY3d 720 (2004) have addressed this question and were critical to the Albany Supreme Court’s ruling in Burth. In Green, the Court of Appeals had to decide whether the owner of a mobile home park could be held liable for a kerosene spill from a tank owned by one of the mobile home tenants at the park.  Though the mobile home park owner did not own or operate the leaking tank, the Court nonetheless found the park owner to be strictly liable under the Navigation Law because it was in a position to control the activities on its property and had reason to believe that the petroleum products would be stored on the property. Significantly, the Court in Green did not find the mobile home park owner liable under the Navigation simply based on its “status” as owner of property upon which a discharge occurred. Instead, the owner’s ability to control the petroleum storage activities at the property were critical to the decision. (Indeed, the Court noted that the property owner would not be liable if the discharge was caused by a “midnight” dumping or a spill from an “errant oil truck” over which the property owner could not exert any control).

In Speonk, the Court of Appeals held Speonk Fuels, Inc. (Speonk) liable under Article 12 of the Navigation Law even though Speonk did not purchase the gasoline service station and petroleum storage systems until shortly after a leaking underground tank had been removed (by the prior owner), but where the resulting soil and groundwater contamination on the property persisted. Of particular significance to the Court, Speonk was aware of the leaking tank and the contamination prior to its purchase but chose not to cleanup the contamination. The DEC remediated the site using money from Oil Spill Fund and the State sued Speonk to recover the costs. In finding liability, the Court focused on the fact that Speonk had the ability to control the site and predicated its Navigation Law liability on the fact that it had knowledge of the discharge and of the need to cleanup the site prior to the purchase but still chose to do nothing.

In Burth, Albany Supreme Court Justice Lynch, after examining the decisions in both Green and Speonk, addressed the specific question at to “whether the defendants may be held liable [under the Navigation Law] for the discharge by virtue of their ownership of the premises and/or the petroleum storage system…” located there. The Court found that here, unlike Speonk, the defendants had no knowledge of the underground tanks or any of the contamination caused by leaks from the tanks at the time they purchased the property in 1986. Accordingly, the Court found that the “defendants were not in a position of control over the site.” Ruling, as per Green, that the defendants’ status as owners of the property alone does not make them strictly liable under Article 12 of the Navigation Law, the Court dismissed the State’s complaint.

This case may have great significance for environmental lawyers, in general, and defense counsel in oil spill cases, in particular. The question of Navigation Law liability for subsequent purchasers of contaminated property has yet to be fully settled by the Courts. Thus, if upheld on appeal (the State has appealed the ruling), Burth will go a long way towards clarifying the scope of Navigation Law liability of subsequent purchasers of property who had no knowledge of leaking underground tanks or of the resulting petroleum contamination.