## Facts

- A Los Angeles property operated as a solvent-recycling facility from 1949 to 1990, during which hazardous substances were released.
- State regulators ordered the operator to stop hazardous-waste activities, and later investigations documented contamination and identified potentially responsible parties.
- Cleanup planning proceeded through agreements with former customers of the facility.
- The then-owner failed to pay property taxes, and the property was sold at a tax sale to Westside Delivery, LLC.
- Westside did not operate the historic facility and did not cause the legacy contamination.
- The state environmental agency sued Westside to recover response costs under CERCLA and state law based on Westside’s status as current owner.

## Issues

1. Whether acquiring contaminated property at a tax sale creates a “contractual relationship” with the prior owner for purposes of CERCLA’s § 107(b)(3) third-party defense and § 101(35)’s definition.
2. If so, whether the prior owner’s contaminating acts occurred “in connection with” that contractual relationship, defeating the third-party defense.

## Decision

- The Ninth Circuit reversed summary judgment for Westside and remanded.
- The court held that a tax-sale transfer constitutes a “contractual relationship” because title passes via an instrument transferring title within CERCLA’s broad definition.
- The court held the contamination was caused by the prior owner “in connection with” that relationship, so Westside could not invoke the § 107(b)(3) third-party defense.

## Legal Principles

- CERCLA’s “contractual relationship” definition includes deeds and other instruments transferring title or possession and is not limited to privately negotiated contracts.
- A tax sale that results in a deed or comparable title-transfer instrument establishes a “contractual relationship” (directly or indirectly) between the purchaser and the prior owner for § 107(b)(3) purposes.
- The third-party defense is unavailable when the release is attributable to a third party whose acts occurred “in connection with” such a contractual relationship.
- Polluting acts tied to the prior owner’s use and ownership of the transferred parcel can satisfy the “in connection with” requirement, barring the defense for the current owner.

## Conclusion

The Ninth Circuit held that a purchaser at a tax sale has a CERCLA “contractual relationship” with the prior owner through the tax-deed transfer, and where the contamination stems from the prior owner’s operations on the parcel, the § 107(b)(3) third-party defense does not apply.


California Department of Toxic Substances Control v. Westside Delivery, LLC, 888 F.3d 1085 (9th Cir. 2018)