2020 Environmental Real Estate IssuesThe recent US Supreme Court case of Atlantic Richfield v. Christian addressed the extent the federal Comprehensive Environmental Response, Compensation, and Liability Act (the Superfund statute, commonly called “CERCLA”) either preempts or restricts state law.  The Court held that owners of residential property subject to the CERCLA remediation process must get EPA approval if they request under state common law restoration that goes beyond the remedy selected by EPA pursuant to CERCLA.

Montana Allows Recovery for Restoration in Excess of Market Value
The dispute arose, in part, because Montana common law allows residential property owners to recover restoration damages even if restoration costs exceed the property’s diminution in value due to the contamination.  The residential property owners requested additional restoration that would increase the remediation costs by $50 million beyond EPA’s selected remedy.  The Court said that CERCLA’s insistence that EPA choose CERCLA remedies meant that the residential owners would need to prevail under Montana common law and receive EPA approval before Atlantic Richfield would be required to perform the additional restoration.

Approach Varies by State
The measure of damages for restoration of contaminated property is a matter of the law of the state where the contaminated property is located and can vary considerably.  Montana allows recovery for restoration of residential property for “reasons personal” when the owner can demonstrate the award will actually be used for restoration.

Other states take different and apparently more moderate approaches.  In Texas, restoration damages are not available if the costs exceed the diminution in value “by a disproportionately high degree.”  West Virginia allows recovery of restoration costs beyond the diminution in value if the restoration costs are not “unreasonably” greater.  California allows recovery of “reasonable” restoration costs in excess of diminution in market value for personal reasons, with the jury determining the reasonable costs, subject to court reversal if “grossly disproportionate.”  Georgia allows for recovery of restoration costs in excess of diminution of market value as long as the result is not “absurd.”

These cases demonstrate the competing pressures from the often emotional relationship people have to real property and the desire to avoid over compensation.

For a copy of the US Supreme Court opinion https://www.supremecourt.gov/opinions/19pdf/17-1498_8mjp.pdf