For most cleaners, the threat of environmental liability is very real, even if they have done nothing technically wrong. In the United States, because of the unique Superfund cleanup law, more than 90% of all dry cleaners bear some degree of responsibility for cleaning up contamination caused by perc or petroleum-solvent leaks. The U.S. Superfund law incorporates the concept of strict liability, which we like to call retroactive liability.
In other words, although most dry-cleaning site contamination occurred before the Superfund law was enacted, dry cleaners can still be held strictly liable for cleanup costs. Property owners—including shopping-center owners—can also be held strictly liable for cleanup costs under Superfund.
This is the dilemma facing today’s dry cleaners and property owners. Considering the legal entanglements that can arise among cleaners, landlords, and third parties responsible for contamination, dry cleaners must have measures in place to prepare for such situations.
How Contamination Cases Arise
Dry-cleaning site contamination usually comes to light during real estate transactions—such as the sale of a shopping center—or during refinancing of a dry cleaner’s loan.
When a cleaner attempts to refinance a loan, the bank typically requires a Phase One audit. A Phase One audit—often followed nowadays by a Phase Two audit—reviews documentation showing how the plant owner handled perc and its waste. A Phase Two audit involves sampling and analysis to determine whether contamination exists on the site.
Environmental cleanup issues can also arise when a landlord transfers ownership. There are thousands of cleaners located in shopping centers or strip malls across the U.S., and ownership changes occur frequently. Institutional investors often buy and sell properties to assemble investment packages that suit their portfolios.
If a prospective buyer learns that a cleaner is located in the shopping center, their consulting firm will almost certainly request soil sampling. “Unfortunately, perc contamination is discovered far too often near these businesses,” says Duane Siler, a partner at the Washington, D.C. law firm Patton Boggs. “When that happens, either the current owner or the new owner will demand that the dry cleaner handle the cleanup.”
Even if perc contamination is discovered on adjacent property, the cleaner may still be held responsible. If contamination is found on a site that has never used perc, the finger naturally points to the cleaner next door. The adjacent property owner may attempt to impose cleanup responsibility on the cleaner, or on the mall owner if the cleaner is located within the mall.
Need for Expert Assistance
Surprisingly, many cleaners do nothing when faced with an environmental contamination issue. This places the cleaner at a disadvantage compared to property owners or third parties who may share liability.
Once a problem arises, the cleaner needs top-tier expert help—specifically, an environmental attorney and an environmental consulting firm. These professionals work together to determine the cleaner’s degree of responsibility.
This is not the time to argue about who is at fault. When retroactive liability applies, no one may be directly at fault. Siler explains, “The task is to allocate responsibility based on involvement.” If multiple cleaners have operated at the same location, factors such as years in operation, amount of perc used, and equipment used are considered. If leaking sewers are also involved, the wastewater authority may share responsibility.
Although litigation is sometimes unavoidable, Siler notes that “environmental cases rarely lead to trial due to poor cost efficiency; most are resolved through negotiation.”
Cleaners should not focus solely on cost when assembling a legal/consulting team. Mark Wagner of Arcadis Environmental Consulting says, “It may be hard to believe, but spending money up front saves you much more later.” Hiring an attorney who truly understands environmental law is critical; relying on a general business attorney could lead to serious regret.
Wagner warns, “If you approach the problem trying to cut costs early, you will always be on the defensive with state regulators and may end up with a more expensive solution.”
Voluntary Cleanup Programs
In some cases, cleaners can use their state’s dry-cleaning cleanup fund or a voluntary remediation program to resolve contamination issues. But when choosing a voluntary program, they must obtain agreement from all involved parties to avoid future third-party liability.
Currently, 12 U.S. states have dry-cleaning cleanup funds, and more states are offering voluntary remediation programs. These programs can be very helpful, as state authorities may apply less stringent cleanup standards if all parties agree.
Under a voluntary program, the cleaner’s consultant notifies state authorities of potential contamination and submits a plan for further investigation. There is also an application procedure the cleaner must follow. Once approved, the consultant begins site investigation.
State authorities generally require answers to three questions:
- How much perc is in the soil?
- Has the perc migrated off-site?
- Is there a potential impact on other people?
Once the extent of contamination is known, the next step is determining cleanup standards. Under Superfund, cleanup requirements—especially groundwater standards—are extremely strict. For example, groundwater with more than 5 ppb of perc is considered contaminated.
However, such strict standards are not always applied. Instead, a risk-based assessment is often used. Wagner explains: “If there is no drinking-water source down-gradient from the contaminated groundwater, a higher cleanup level may be approved. Even if the groundwater exceeds the maximum contaminant level (MCL) of 5 ppb, that does not necessarily mean you must clean it to that level. States are willing to consider site-specific conditions.”
Ultimately, it is important to obtain a certificate of completion from the state. As long as contaminants are not left underground above acceptable levels, such a certificate can be issued—often with conditions attached. These may include deed restrictions or land-use limitations. Wagner notes that voluntary actions typically come with such restrictions.
In states without formal voluntary programs, similar negotiations with regulators are possible, but the process can be much more difficult due to lack of experience.
Long-Term Strategy Required
In summary, when contamination issues arise, the first step is to hire an environmental attorney experienced in dry-cleaner cases. Next, hire an environmental consulting firm with expertise in hazardous substances and remediation technologies. Wagner emphasizes the importance of the human element: “If your consultant has a good relationship with state officials, things move faster and agreements are easier to reach.”
Throughout the process, the cleaner, attorney, and consultant must maintain control. They should guide state authorities with the soundest legal arguments and the most cost-effective, technically appropriate solutions. If regulators take control, unnecessary work—and unnecessary expense—often follows.
Finally, remain calm and take a long-term perspective. Siler says the first thing he tells dry-cleaner clients is “Don’t be afraid,” and the second is “Don’t expect it to end quickly.” Environmental liability cases require a recognition that the process is “a very long road.”
