Washington Supreme Court Holds Investigation Costs Qualify As Remedial Costs Even When No Cleanup Is Required, But Prevailing Party Status Determination Was Premature

Posted by in Cost Recovery, Environmental Litigation, Remediation on January 22, 2018

In Douglass v. Shamrock Paving, Inc., 2017 Wash. LEXIS 1149 (December 21, 2017), the Washington Supreme Court held that soil testing conducted by a landowner qualified as a “remedial action” under the state’s Model Toxics Control Act (“MTCA”) (Wash. Rev. Code § 70.105D.020(33)), giving rise to a contribution claim.  However, the Supreme Court affirmed the appellate court’s ruling that landowner was not entitled to recover his soil removal costs because the contaminant concentrations did not exceed State cleanup standards.  The Supreme Court also reversed the appellate court’s ruling that defendant was the prevailing party, entitled to attorney fees, because it was premature to make that determination until after the trial court, on remand, applies equitable factors to determine the underlying award to which plaintiff was entitled for his investigation costs, as compared with his non-compensable remedial costs.

In Douglass, defendant Shamrock Paving Inc. spilled unknown amounts of lube oil on the Douglass property.  Douglass hired an environmental consulting firm to perform an investigation, which showed lube oil, a hazardous substance under the MTCA, present at levels ranging from 400 mg/kg to 2,000 mg/kg.  The Washington Department of Ecology (“Ecology”) cleanup level for lube oil is 2,000 mg/kg.  Ecology defines “cleanup level” as the “concentration of a hazardous substance … that is determined to be protective of human health and the environment.”  (Emphasis added.)  Nonetheless, Douglass subsequently directed the consulting firm to remove 68 tons of soil from the property and filed suit for trespass, nuisance and a contribution action under the MTCA.

The trial court denied the MTCA claim, including Douglass’ claims for both investigation and remediation costs, finding Douglass failed to prove that the lube oil was a threat to human health or the environment since the lube oil concentration detected did not exceed the DOE cleanup level which was protective of human health and the environment.  The judge designated Shamrock as the prevailing party pursuant to the MTCA’s attorney fee provision and awarded it attorney fees.  On appeal, the Court of Appeals concluded that the soil testing performed at Douglass’s request was a remedial action under the MTCA, but ruled the soil removal was not because the soil did not pose a threat or potential threat to human health or the environment based on the trial judge’s ruling.  However, because Douglass established the elements of his MTCA claim for investigative costs, the Court of Appeals designated him the prevailing party and therefore entitled to recover his attorney fees.  The Court of Appeals remanded the case to the trial court to complete the assessment of equitable factors to determine the exact recovery amount.

The Washington Supreme Court affirmed the Court of Appeals in part and reversed in part.  First, like the Court of Appeals, the Washington Supreme Court held that investigation activities fall within the MTCA’s definition of “remedial action” which constitutes “any action . . . including any investigative and monitoring activities.”  That the investigation results revealed no cleanup activity was required was not relevant: “investigations of hazardous substances are remedial actions because their purpose is to ‘discern whether such a threat exists.'” Second, the Washington Supreme Court affirmed the Court of Appeals’ remand to the trial court to apply appropriate equitable factors to determine the amount of investigation costs Douglass was entitled to recover, noting that if Shamrock had only spilled a drop of oil, but Douglass investigated the entire property, the recovery may be little to none.  Third, the Washington Supreme Court upheld the Court of Appeals’ affirmation of the trial court’s determination that no cleanup of the lube oil was required because the concentrations detected did not exceed Ecology’s soil cleanup level of 2,000 mg/kg.  While the Washington Supreme Court acknowledged that Ecology could require a more stringent cleanup level based on a site-specific evaluation, Ecology never performed such an evaluation at the Douglass property.  Finally, the Washington Supreme Court reversed the Court of Appeals’ designation of Douglass as the prevailing party.  The Washington Supreme Court held that while the statute does not define “prevailing party,” its meaning is clear.  “[T]he ‘prevailing party’ is the party that either recovers remedial action costs or successfully defends against a claim for such costs.”  The appellate court improperly based its decision solely on whether plaintiff satisfied the elements of a contribution claim, rather than waiting for the trial court’s assessment of whether monetary relief for plaintiff was warranted based on the application of equitable factors.  Thus, the equitable assessment of any recovery must occur prior to the designation of the prevailing party.  Only if the trial court awards remedial action costs for at least some of Douglass’ costs would Douglass be the prevailing party, entitled to attorney fees.

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