Amoco Oil Company v. Borden, Inc.

889 F.2d 664 (5th Cir. 1989)

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Nature of the Case

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Facts

The property at issue is a 114-acre tract of land. For many years, D operated a phosphate fertilizer plant on the site. As a by-product of the fertilizer manufacturing process, large quantities of phosphogypsum were produced. The site now contains a large inactive pile of phosphogypsum covering approximately 35 acres. Phosphogypsum contains low levels of radioactivity. More highly radioactive sludges and scales from processing equipment were dumped into the phosphogypsum pile, creating 'hot' areas within the pile. Additionally, during processing, radioactive materials became concentrated in manufacturing equipment, pipe, and filter cloths used in production. These materials constitute 'off-pile' wastes and were left primarily near a junkyard on the property and near the abandoned manufacturing buildings. Some of the off-pile sites contain over 500 times the background level of radiation. In 1977, P became interested in purchasing the property. The parties discussed two prices: $1.8 million for the site 'as is,' or $2.2 million if D would remove the phosphogypsum. P accepted the 'as is' option claiming it was unaware of the radiation problems. P was informed of the issue by the Texas Department of Water Resources in 1978. P investigated and the reports revealed the various elevated radiation levels throughout the site. The site is currently unused and is secured with fences and guards to prevent access. P claims that permanent remedial action will cost between $11 million and $17 million. In 1982, P brought this action alleging fraud and breach of contract. It later added the CERCLA claim to recover response costs incurred as a result of the radioactive contamination. The state law claims were tried by a jury. The jury found that D did not fraudulently misrepresent the condition of the property, but did find that D did not deliver the building, equipment, and machinery in a 'clean and healthful' condition, as it had expressly warranted. The jury also found that P should have known about the radioactivity prior to April 16, 1978, and thus that claim was barred by the statute of limitations. As to the CERCLA claim D's primary defenses against liability were: (1) that it had sold the property on an 'as is' basis, and that this fact and the doctrine of caveat emptor should preclude a finding of liability; and (2) that the levels of radiation emanating from the site are not high enough to be considered a release of a hazardous substance within the meaning of CERCLA. The district court denied P's motion for entry of judgment on the CERCLA claim. The court rejected D's caveat emptor argument, holding that common-law defenses do not apply to CERCLA claims and that there can be no implied transfer of CERCLA liability. The court held that P must prove that some threshold level of radioactivity exists at the site in order to establish CERCLA liability and select the standards for remedial actions at inactive uranium processing sites under the Uranium Mill Tailings Radiation Control Act, 42 U.S.C.A. §§ 7901-7942 (1983 & Supp. 1989), to determine hazardous radionuclide levels. The court concluded that the property's radiation levels did not exceed the Inactive Tailings Standards. It then entered judgment for D. P appealed.