The Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") imposes strict liability on potentially responsible parties ("PRP") for the cleanup costs of an environmental hazard. Plaintiffs-Appellants TDY Holdings, LLC, TDY Industries, LLC, and its predecessor, the Ryan Aeronautical Company (collectively, "TDY"), operated a forty-four acre aeronautical manufacturing facility in San Diego, California, from 1939 to 1999. During operations, TDY's business for this location was 90-99 percent from military contracts with the United States Government. During the six decades of manufacturing operations, certain chemical substances were released. This contaminated both the soil and the groundwater in and around the plant. Under CERCLA, TDY was facing substantial remediation expenses. TDY turned to the U.S. Government to pay for a large portion of the cost. The US Government denied the claims. This lead TDY to sue the U.S. Government.
In 2007, TDY filed a complaint under CERCLA seeking the U.S. Government pay its equitable share of the cleanup costs. After a twelve-day bench trial, the district court granted judgment favoring the U.S. Government. The district court allocated 100% of the costs to TDY and zero percent to the U.S. Government. Since this court decision left TDY still holding the total bill for remediation, TDY appealed the decision.
In 1939, the Ryan Aeronautical Company, which later became known as TDY, opened the manufacturing facility near the San Diego Airport. During World War II, the facility manufactured aircraft and aircraft parts to support the war effort. In more recent times, the facility was tasked with manufacturing aeronautical products including drones, Apache helicopter components, and avionics systems for the U.S. military. The facility was closed in 1999 after Northrop Grumman purchased the facility. The assets and operations were moved to a different location and the factory was shut down.
During the 60 years of operations, three hazardous substances were found to be released, contaminating the soil and groundwater (1. chromium compounds, 2. chlorinated solvents, and 3. polychlorinated biphenyls (PCBs)). Some of the military contracts required the use of the chromium compounds and/or the chlorinated solvents, but not the PCBs. The substances were not listed as "hazardous substances", until declared as such by the Clean Water Act and other environmental laws passed during the 1970s. All of these elements lead to arguments from TDY that the U.S. Government is liable to pay a major portion of the remediation costs, which had already exceeded $11 million in response costs for TDY.
Another factor is that the U.S. Government had paid nearly all the remediation costs for cleaning up other substances released at the facility. This had laid a foundation that the U.S. Government would work with TDY to clean up all hazardous materials used at the facility over the years. The fact that the U.S. Government completely denied this claim was a change in recent dealings between TDY and the U.S. Government.
The Appellant Court reversed the Trial Court's decision that TDY is responsible for 100% of the costs. Initially, this would seem like a big win for TDY. However, the Appellant Court remanded the case back to the Trial Court for them to determine what the U.S. Government should pay. The U.S. Government did not operate any equipment nor store any hazardous materials. So TDY is responsible for the lack of care in properly maintaining and storing the hazardous materials. The U.S. Government did not require TDY to use PCBs, so again, the U.S. Government is not responsible for any contamination from lack of care in handling the PCBs. Since the U.S. Government did contractually require TDY to use chromium and chlorinated solvents, the Trial Court has to allocate some portion of the clean-up costs to the U.S. Government. This doesn't need to be a 50% allocation; the Trial Court only needs to arrive at an equitable cost allocation.