In this case, Charles Bruner purchased an undeveloped parcel known as Ray Vista in 1978. The Ray Vista Site was located adjacent to the Mesa de Oro mound of mine tailings that had been generated by the Central Eureka Mine. At the time that Bruner purchased the site, the adjacent tailing mounds were covered with vegetation. However, aerial photos showed that the tailings had been subject to extensive erosion prior to 1977 that had allowed contaminated soils to migrate onto the development site.
Following his purchase of the property, Bruner retained contractors to excavate and grade the site to facilitate construction of streets and the installation of the underground utilities. He also contracted with the City of Sutter Creek for the construction of the streets, street lighting, sanitary sewers, water distribution pipes, and other utility distribution facilities. Thereafter, he built four homes on two streets in the subdivision.
In 1995, EPA discovered that contamination from the historical mining operations at the Site had migrated to the Vista Ray residential subdivision (“Vista Ray”). EPA implemented a response action which involved excavation of the contaminated soils from all of the residential lots, placement of clean soils as well as landscaping. The federal government then commenced a cost recovery suit against Honeywell International and other responsible parties. Honeywell and the defendants ultimately agreed to pay EPA $600K along with an additional $120K in funds collected from contribution actions that had been filed against other responsible parties. The only third-party defendant that refused to settle was Bruner, and the settling parties sought $160K in response costs.
Bruner argued that he was entitled to assert the innocent purchaser defense because he did not know or have reason to know of the presence of the contamination but the court did not reach that issue because he could not the first element of the third party defense.
The innocent purchaser defense is technically part of the CERCLA third-party defense which provides that a person will not be liable if the defendant can show that the release was (1) solely caused by an act or omission of a third party (2) whom the defendant did not have any direct or indirect contractual relationship (3) that the defendant exercise due care with respect to the hazardous substances and (4) took precautions against the foreseeable acts or omissions of third. The innocent purchaser's defense is used to satisfy the second prong of the third party defense. If the defendant can show that it did not know or had no reason to know of contamination, it would be deemed to not be in a 'contractual relationship' with a person who caused the contamination.
Bruner argued that the contamination was solely due to mine operations. However, the court said the contaminated soil was spread either by Bruner's actions or those of his contractors. Distinguishing other cases were parties had been able to assert a defense based on the passive migration of the contaminants, the court said that Bruner took affirmative steps in developing his land. The court noted that he actively graded and excavated the property, that it was reasonable to expect that any contaminants in the soil would have been agitated and that it is eminently foreseeable that development of such land would result in a release of whatever hazardous substances were in the soil.
Because Bruner could not show that a third party was the 'sole' cause of the release of from the Vista Ray subdivision, the court ruled there was no need to discuss whether he exercised due care or took the proper precautions to prevent such a release. Likewise, because the court found that Bruner had actively contributed to the 'release' of the hazardous substance at the time he undertook development, the issue of whether he had 'reason to know' of the presence of a hazardous substance was irrelevant. While the court held that Bruner was liable, it determined that there were genuine issues of material fact on the amount of Bruner's equitable share of the response costs and that further discovery was required before the Bruner share of the costs could be established.
This is one of those harsh cases that have given CERCLA a bad name and perhaps of the situations that Congress had hoped to ameliorate when it enacted the Innocent Landowners (ILO) Defense in 1986. Had the defendant been able to get past the 'solely caused by' prong, it might have been able to demonstrate that in 1978 it would not have had any reason to know of the contamination, especially since the mine tailings had been covered with vegetation. Since the decision was at the summary judgment stage, it is unlikely that sufficient discovery had been conducted to determine if Bruner had exercised due care.
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