## Facts

- Westwood Pharmaceuticals, Inc. bought industrial property in Buffalo, New York, from National Fuel’s predecessor, a former owner associated with gas manufacturing and storage at the site.
- After acquiring the property, Westwood discovered soil and subsurface contamination and incurred investigation and cleanup (response) costs.
- Westwood sued National Fuel under CERCLA, seeking to recover response costs from National Fuel as a former owner/operator.
- National Fuel asserted CERCLA’s § 107(b)(3) third-party defense, alleging Westwood’s post-acquisition construction activities were the sole cause of any release or threatened release.
- Westwood argued National Fuel was legally barred from the third-party defense because contractual relationships existed in the property’s chain of title (including the sale contract).

## Issues

1. Whether the existence of a contractual relationship between the parties automatically precludes a defendant from asserting CERCLA’s § 107(b)(3) third-party defense.
2. Whether CERCLA § 101(35)(C) categorically bars a prior owner/seller from invoking the § 107(b)(3) third-party defense due to contractual relationships in the chain of title.
3. Whether factual disputes about causation and the § 107(b)(3) “due care” and “precautions” elements precluded partial summary judgment on liability.

## Decision

- The Second Circuit affirmed the district court’s denial of Westwood’s motion for reconsideration, leaving in place the denial of Westwood’s motion for partial summary judgment on CERCLA liability.
- The court held that a mere contractual relationship does not automatically bar the § 107(b)(3) third-party defense.
- The court held that § 101(35)(C) does not per se preclude a prior owner from asserting § 107(b)(3); disqualification depends on whether the third party’s causal acts or omissions occurred “in connection with” the relevant contractual relationship.
- The court agreed that triable factual issues existed as to whether Westwood’s actions solely caused any release and whether National Fuel satisfied § 107(b)(3)’s additional requirements.

## Legal Principles

- CERCLA § 107(b)(3) requires more than the existence of a contract to defeat the third-party defense; the third party’s causative conduct must have a substantive connection to the contractual relationship at issue.
- The “in connection with a contractual relationship” limitation in § 107(b)(3) is not satisfied by a contract’s mere presence in the chain of title; the statute requires a nexus between the contract and the third party’s acts or omissions that caused the release.
- CERCLA § 101(35)(C) (addressing “innocent landowner” concepts) does not override § 107(b)(3) by categorically eliminating the third-party defense for defendants connected by property-transfer contracts.
- Summary judgment on CERCLA liability is improper where there are genuine disputes about whether a third party was the sole cause of the release and whether the defendant exercised “due care” and took “precautions against foreseeable acts or omissions” as required by § 107(b)(3).

## Conclusion

The Second Circuit held that CERCLA’s third-party defense is not automatically unavailable simply because the parties are linked by a property-transfer contract; the defense turns on whether the third party’s causative conduct occurred “in connection with” the contractual relationship and on unresolved factual questions about sole causation and statutory care and precaution requirements.


Westwood Pharmaceuticals, Inc. v. National Fuel Gas Distribution Corp., 964 F.2d 85 (2d Cir. 1992)