Court Clears Railroad of California Oil Cleanup

6/28/2011 1:41:00 PM, Tim Hull
     (CN) - Two railroad companies do not have to pay to clean up a parcel of petroleum-contaminated land in California, the 9th Circuit ruled Tuesday, finding no evidence that the railroads caused, or even knew of, the spill.

     In so ruling, the three-judge appellate panel rejected a lower court's broad reading of California's nuisance law.
     BNSF Railway and Union Pacific Railroad sold their interest in the land, located in Stockton, to the city's redevelopment agency in 1988. The agency in turn sold a portion to a commercial developer who discovered that the soil and groundwater had long been contaminated. Officials fingered a nearby petroleum facility as the likely source of the pollutants, and determined that several spills in the 1970s had sent petroleum onto the property through an underground drain.
     Per its agreement with the developer, Stockton's redevelopment agency spent nearly $2 million cleaning the site. The agency sued the railroads in 2005 for reimbursement, claiming they were liable for the contamination under common-nuisance law and California's Polanco Redevelopment Act, which governs the rehabilitation of former industrial sites throughout the state.
     U.S. District Judge John Mendez agreed and awarded the agency more than $800,000 in damages and an injunction. Mendez reasoned, in a classic but-for analysis, that the railroads were liable for the contamination since they installed the underground drain through which the contaminants migrated onto the property. Had the railroads not installed the drain, Mendez found, the land would not have been damaged.
     On appeal, a three-judge panel of the 9th Circuit rejected Mendez's logic as an "expansive interpretation of California law."
      "We cannot agree that such passive but-for causation is sufficient for nuisance liability to attach," Judge Richard Tallum wrote for the San Francisco-based panel. "Under California law, conduct cannot be said to 'create' a nuisance unless it more actively or knowingly generates or permits the specific nuisance condition."
     The panel found that there was no precedent allowing but-for causation to establish nuisance liability.
      "We will not adopt such an expansive interpretation of California law here," Tallum wrote. "We decline to hold that an otherwise innocent party who builds or installs a conduit or structure for an unrelated purpose which happens to affect the distribution of contamination released by someone else is nonetheless liable for 'creating or assisting in the creation' of a nuisance. Such a result defies semantics, the law, and common sense."
     The panel remanded the case back to the District Court for entry of summary judgment for the railroads. Attachment