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Washington Supreme Court Rules that Investigation Costs Alone may be Recoverable MTCA Costs

In a case of first impression, the Washington Supreme Court held in Douglas v. Shamrock Paving, Inc. No. 94807-8 (December 21, 2017) that a party can recover investigative costs under MTCA even if it cannot recover cleanup costs for the same release of hazardous substances. In Shamrock Paving, a paving company trespassed on the Douglas’ property and release some amount of lube oil, a MTCA hazardous substance, while servicing its equipment for a WSDOT paving project. Douglas hired a consultant to investigate the release, and soil test results showed the lube oil either met or were less than the applicable cleanup level of 2,000 ppm for unrestricted land use. Despite these soil sample results, Douglas removed 68 tons of soil, and then sued Shamrock Paving for its investigative and cleanup costs under the MTCA.

The Washington Supreme Court reviewed trial and lower appellate court decisions in the case, and ruled for the first time that investigative activities are within the MTCA definition of “Remedial Action,” and thus a party may recover its investigative costs under MTCA (assuming such costs satisfy the “substantial equivalence” test), even when the court denies it any cleanup costs for the same release. The Court based its holding on the MTCA definition of “Remedial Action, which includes an investigation to determine whether any threat or potential threat to human health or the environment exists, regardless whether a cleanup is needed. By contrast, the Court denied Douglas its cleanup costs for the removal and disposal of 68 tons of soil because the soil did not exceed the applicable published MTCA cleanup level of 2,000 ppm, and thus there was no threat or potential threat to human health or the environment. Douglas did this cleanup independently, without getting an Ecology opinion as to whether a cleanup was necessary, so the Court felt bound to apply the published cleanup level as a bright line for a potential threat to human health or the environment, a necessary element for cleanup cost recovery under MTCA.

Notably, the Court provided a good primer on the steps in a MTCA cost recovery lawsuit:

(1) the plaintiff mush show that the defendant has contributed to a release of a MTCA hazardous substance that poses a threat or potential threat to human health or the environment;

(2) the plaintiff must show that it’s claimed remedial action costs (RAC) meet “substantial equivalence”, which defines the eligible RAC for recovery;

(3) the trial court must apply its equitable assessment or determination using equitable factors to the eligible RAC and award the plaintiff all, some or none of its eligible RAC; and

(4) after applying its equitable assessment to the eligible RAC and setting a final award, if the trial court awards at least some RAC to the plaintiff, then the plaintiff is a “prevailing party” who may recover all its attorneys’ fees and costs related to the investigation, cleanup and litigation arising from the contamination, which the trial court awards within its discretion based on the same equitable factors.

Given these steps, the Court remanded the Douglas case back to the trial court for that court to apply its equitable assessment to the eligible RAC for the Douglas investigation, and then make a prevailing party finding based on its award of RAC, if any, to Douglas.

Practical Implications

The decision breathes life into the NTCA definition of “remedial action” by holding that a person can recover its investigation costs even when the investigation shows that a cleanup is not necessary because there is no potential threat to human health or the environment. However, there are logical limits to cost recovery for investigation costs. The Court implied in dicta that an extensive investigation of one drop of oil would not result in recoverable costs under MTCA because there is no potential threat. Further, the decision underscored the importance of enrolling in the Ecology Voluntary Cleanup Program (VCP) if you intend to recover investigation or cleanup costs under MTCA. As the Court noted had Douglas been in the VCP, Ecology would have reviewed the soil sampling results and may have decided that the lube oil contamination posed a potential threat and Required soil removal. Since Ecology was not consulted, the Court stated that it was constrained to apply the published cleanup level as the bright-line determinant of a potential threat. Since that level was not exceeded, there was no threat and thus no cleanup cost recovery.

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