IMPLICATIONS FOR CONTRACTORS

New Environmental Case has Significant Implications for Contractors

The Washington Court of Appeals, Division I, recently decided several new issues under Washington’s Model Toxics Control Act (MTCA). The MTCA, modeled on the federal Superfund statute, imposes liability without fault on persons that cause the release of contaminants (defined broadly as hazardous substances in the statute) into the environment or persons who own, or control operations on, property that has a contaminant release. Contractors may encounter contaminated soil or groundwater during a construction project. For example, contractors may expose contamination when excavating a foundation or placing underground utilities at the site. Because it may be difficult to quickly identify the party that caused the contamination, many contractors may decide to quickly investigate and remediate the contamination and seek reimbursement later to avoid delay costs.

MTCA Cost Recovery is Now Easier for Contractors

In Taliesen Corp. v. Razore Land Co. el al. (Taliesen) the Court of Appeals allowed a condo developer who encountered contaminated soil on its property to get reimbursed for its cleanup costs without having to strictly comply with the Washington State Department of Ecology (Ecology)’s cleanup requirements. The developer, Taliesen, quickly excavated the contaminated soil, without comprehensively assessing the scope of the contamination, or considering cleanup alternatives, or giving public notice of the cleanup – all steps required by the Ecology regulations. The Court held that Ecology viewed the requirements as guidance only, and not a checklist; rather, said the Court, the “overall effectiveness” of the cleanup should determine whether it satisfies MTCA. On this basis the Court awarded Taliesen a portion of its cleanup costs.

Notably, the Court only reimbursed Taliesen for the costs at a reasonable rate to remove and dispose of soil that exceeded MTCA cleanup levels. In other words, Taliesen could only recover for soils that legally had to be removed because of the MTCA. Taliesen, to avoid any delay in completing the project, had not sampled and analyzed soil at a laboratory but had excavated the general area of contamination. In doing so, it had removed a large quantity of soil that was not legally contaminated.

Operator Liability is Clarified for Contractors

The Court also clarified the relationship between subcontractors and contractors in the context of “operator” liability under MTCA. Under MTCA a contractor can be liable as an “operator” if the contractor has any control at a project site and it causes the release of a hazardous substance. As you can imagine, the type and degree of control are always at issue in determining operator liability. In Taliesen a contractor drilling soil nails for shoring accidentally punctured an underground storage tank and petroleum was released to the soil. However, the design contractor had directed the drilling contractor to drill in the area of the tank, even after encountering leaking petroleum. The Court reasoned that the drilling contractor had no authority to reposition the soil nails to avoid the tank and it was directed by the design contractor to drill in a specific area. On this basis, the drilling contractor was held not liable as an operator under MTCA, while the design contractor was held liable.

MTCA Trumps the Construction Statute of Repose

Finally, the Court ruled that the contractor statute of repose does not eliminate MTCA liability. The statute of repose bars any claim arising from construction on real property that has not arisen within six years of construction project completion. RCW 4.16.310. The statute is intended to protect contractors from having to defend against stale claims and bring finality to construction projects. By contrast, a person can bring a claim for costs under MTCA within three years of the completion of the cleanup, regardless of when the contamination occurs. RCW 105D.080. The Court resolved this inherent conflict by ruling that the MTCA and its statute of limitation prevails. Thus, the construction industry statute of repose does not provide a defense to a MTCA claim for cost recovery.

Summary

Taliesen is an important decision because it provides a sword to contractors to quickly clean up newly discovered contamination without delaying the project schedule and, most importantly, without jeopardizing recovery of cleanup costs under MTCA. The decision also gives contractors a shield by providing some guidance concerning operator liability under MTCA. Contractors can use this guidance to avoid MTCA liability by drafting clear contract language and on-site work practices for its employees. And because MTCA claims can be very costly and survive the construction statute of repose, contractors would be wise to address and attempt to resolve contamination issues as soon as they arise during a project.