Peter Voggenthaler v. Maryland Square LLC

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETER J. VOGGENTHALER; WILLIAM No. 10-17520

MONTERO; BARBARA MONTERO;

CLIFFORD ROGERS; SHARON D.C. No.

ROGERS; HERMANN ROSNER; 2:08-cv-01618-

MARCUS ROTHKRANZ; DANIEL RCJ-GWF

SOLDINI; CHARLES WALKER; VERNA

WALKER; JACK YENCHECK; OFELIA

YENCHECK; RICHARD MALM; ROGER

ELLSWORTH; JO ANN ELLSWORTH;

MARGARET RUDELICH-HOPPE;

PATRICIA MAHONEY; RICHARD

FALEN; PETER LEARNED; KRISTIAN

MEIER; ELIZA ACOSTA; MIRHA

ELIAS; AIKO BERGE; VICTOR

BECERRA; ARTHUR BODENDORFER;

BRENDA C. CHAFFIN; MICHAEL J.

SOLMI; JASON COWLES; JANE

GAUTHIER; HONORE GAUTHIER;

NIKOLAS KONSTANTINOU; DRAGAN

KURAJICA; KENNETH LOWTHER;

JAMES LUEHMANN; JACQUELINE

LUEHMANN; RUTH MANNHEIMER;

STATE OF NEVADA, on behalf of

Department of Conservation &

Natural Resources, Division of

Environmental Protection,

Plaintiffs-Appellees,

v.

2 VOGGENTHALER V. MARYLAND SQUARE

Maryland Square LLC,

Defendant-Appellant,

and

MARYLAND SQUARE SHOPPING

CENTER LLC; HERMAN KISHNER

TRUST, DBA Maryland Square

Shopping Center; IRWIN KISHNER;

JERRY ENGEL; BANK OF AMERICA,

NA, Trustee on behalf of Herman

Kishner Trust; CLARK COUNTY

SCHOOL DISTRICT; MELVIN

SHAPIRO; SHAPIRO BROTHERS

INVESTMENT COMPANY,

Defendants.

PETER J. VOGGENTHALER; WILLIAM No. 11-15174

MONTERO; BARBARA MONTERO;

CLIFFORD ROGERS; SHARON D.C. Nos.

ROGERS; HERMANN ROSNER; 2:08-cv-01618-

MARCUS ROTHKRANZ; DANIEL RCJ-GWF

SOLDINI; CHARLES WALKER; VERNA 3:09-cv-00231-

WALKER; JACK YENCHECK; OFELIA RCJ-GWF

YENCHECK; RICHARD MALM; ROGER

ELLSWORTH; JO ANN ELLSWORTH;

MARGARET RUDELICH-HOPPE;

PATRICIA MAHONEY; RICHARD

FALEN; PETER LEARNED; KRISTIAN

MEIER; ELIZA ACOSTA; MIRHA

ELIAS; AIKO BERGE; VICTOR

BECERRA; ARTHUR BODENDORFER;

VOGGENTHALER V. MARYLAND SQUARE 3

BRENDA C. CHAFFIN; MICHAEL J.

SOLMI; JASON COWLES; JANE

GAUTHIER; HONORE GAUTHIER;

NIKOLAS KONSTANTINOU; DRAGAN

KURAJICA; KENNETH LOWTHER;

JAMES LUEHMANN; JACQUELINE

LUEHMANN; RUTH MANNHEIMER,

Plaintiffs-Appellees,

MARYLAND SQUARE SHOPPING

CENTER LLC, Trustee on behalf of

Herman Kishner Trust,

Defendant-Intervenor,

STATE OF NEVADA, on behalf of

Department of Conservation &

Natural Resources, Division of

Environmental Protection,

Plaintiff-Intervenor,

BANK OF AMERICA, NA, Trustee on

behalf of Herman Kishner Trust;

JERRY ENGEL, Trustee on behalf of

Herman Kishner Trust; HERMAN

KISHNER TRUST, Trustee on behalf

of Herman Kishner Trust, DBA

Maryland Square Shopping Center;

IRWIN KISHNER, Trustee on behalf of

Herman Kishner Trust,

Defendants-Intervenors,

v.

4 VOGGENTHALER V. MARYLAND SQUARE

SHAPIRO BROTHERS INVESTMENT

COMPANY,

Defendant-Appellant,

and

CLARK COUNTY SCHOOL DISTRICT;

MELVIN SHAPIRO; MARYLAND

SQUARE LLC, Trustee on behalf of

Herman Kishner Trust,

Defendants.

PETER J. VOGGENTHALER; WILLIAM No. 11-15176

MONTERO; BARBARA MONTERO;

CLIFFORD ROGERS; SHARON D.C. Nos.

ROGERS; HERMANN ROSNER; 2:08-cv-01618-

MARCUS ROTHKRANZ; DANIEL RCJ-GWF

SOLDINI; CHARLES WALKER; VERNA 3:09-cv-00231-

WALKER; JACK YENCHECK; OFELIA RCJ-GWF

YENCHECK; RICHARD MALM; ROGER

ELLSWORTH; JO ANN ELLSWORTH;

MARGARET RUDELICH-HOPPE;

PATRICIA MAHONEY; RICHARD

FALEN; PETER LEARNED; KRISTIAN

MEIER; ELIZA ACOSTA; MIRHA

ELIAS; AIKO BERGE; VICTOR

BECERRA; ARTHUR BODENDORFER;

BRENDA C. CHAFFIN; MICHAEL J.

SOLMI; JASON COWLES; JANE

GAUTHIER; HONORE GAUTHIER;

NIKOLAS KONSTANTINOU; DRAGAN

KURAJICA; KENNETH LOWTHER;

VOGGENTHALER V. MARYLAND SQUARE 5

JAMES LUEHMANN; JACQUELINE

LUEHMANN; RUTH MANNHEIMER;

STATE OF NEVADA, on behalf of

Department of Conservation &

Natural Resources, Division of

Environmental Protection,

Plaintiffs,

v.

MARYLAND SQUARE SHOPPING

CENTER LLC; HERMAN KISHNER

TRUST, DBA Maryland Square

Shopping Center; IRWIN KISHNER;

JERRY ENGEL; BANK OF AMERICA,

Trustee on behalf of Herman

Kishner Trust,

Defendants-Appellees,

v.

MELVIN SHAPIRO; SHAPIRO

BROTHERS INVESTMENT COMPANY,

Defendants-Appellants,

and

MARYLAND SQUARE LLC; CLARK

COUNTY SCHOOL DISTRICT,

Defendants.

6 VOGGENTHALER V. MARYLAND SQUARE

PETER J. VOGGENTHALER; WILLIAM No. 12-16409

MONTERO; BARBARA MONTERO;

CLIFFORD ROGERS; SHARON D.C. Nos.

ROGERS; HERMANN ROSNER; 2:08-cv-01618-

MARCUS ROTHKRANZ; DANIEL RCJ-GWF

SOLDINI; CHARLES WALKER; VERNA 3:09-cv-00231-

WALKER; JACK YENCHECK; OFELIA RCJ-GWF

YENCHECK; RICHARD MALM; ROGER

ELLSWORTH; JO ANN ELLSWORTH;

MARGARET RUDELICH-HOPPE;

PATRICIA MAHONEY; RICHARD

FALEN; PETER LEARNED; KRISTIAN

MEIER; ELIZA ACOSTA; MIRHA

ELIAS; AIKO BERGE; VICTOR

BECERRA; ARTHUR BODENDORFER;

BRENDA C. CHAFFIN; MICHAEL J.

SOLMI; JASON COWLES; JANE

GAUTHIER; HONORE GAUTHIER;

NIKOLAS KONSTANTINOU; DRAGAN

KURAJICA; KENNETH LOWTHER;

JAMES LUEHMANN; JACQUELINE

LUEHMANN; RUTH MANNHEIMER,

Plaintiffs,

and

STATE OF NEVADA, on behalf of

Department of Conservation &

Natural Resources, Division of

Environmental Protection,

Plaintiff-Appellee,

v.

VOGGENTHALER V. MARYLAND SQUARE 7

MARYLAND SQUARE LLC;

MARYLAND SQUARE SHOPPING

CENTER LLC; HERMAN KISHNER

TRUST, DBA Maryland Square

Shopping Center; IRWIN KISHNER;

JERRY ENGEL; BANK OF AMERICA,

NA, Trustee on behalf of Herman

Kishner Trust; CLARK COUNTY

SCHOOL DISTRICT; MELVIN

SHAPIRO,

Defendants,

and

SHAPIRO BROTHERS INVESTMENT

COMPANY,

Defendant-Appellant.

PETER J. VOGGENTHALER; WILLIAM No. 12-16412

MONTERO; BARBARA MONTERO;

CLIFFORD ROGERS; SHARON D.C. No.

ROGERS; HERMANN ROSNER; 2:08-cv-01618-

MARCUS ROTHKRANZ; DANIEL RCJ-GWF

SOLDINI; CHARLES WALKER; VERNA

WALKER; JACK YENCHECK; OFELIA

YENCHECK; RICHARD MALM; ROGER OPINION

ELLSWORTH; JO ANN ELLSWORTH;

MARGARET RUDELICH-HOPPE;

PATRICIA MAHONEY; RICHARD

FALEN; PETER LEARNED; KRISTIAN

MEIER; ELIZA ACOSTA; MIRHA

ELIAS; AIKO BERGE; VICTOR

8 VOGGENTHALER V. MARYLAND SQUARE

BECERRA; ARTHUR BODENDORFER;

BRENDA C. CHAFFIN; MICHAEL J.

SOLMI; JASON COWLES; JANE

GAUTHIER; HONORE GAUTHIER;

NIKOLAS KONSTANTINOU; DRAGAN

KURAJICA; KENNETH LOWTHER;

JAMES LUEHMANN; JACQUELINE

LUEHMANN; RUTH MANNHEIMER,

Plaintiffs,

and

STATE OF NEVADA, on behalf of

Department of Conservation &

Natural Resources, Division of

Environmental Protection,

Plaintiff-Appellee,

v.

MARYLAND SQUARE LLC,

Defendant-Appellant,

and

MARYLAND SQUARE SHOPPING

CENTER LLC; HERMAN KISHNER

TRUST, DBA Maryland Square

Shopping Center; IRWIN KISHNER;

JERRY ENGEL; BANK OF AMERICA,

NA, Trustee on behalf of Herman

Kishner Trust; CLARK COUNTY

SCHOOL DISTRICT; MELVIN

VOGGENTHALER V. MARYLAND SQUARE 9

SHAPIRO; SHAPIRO BROTHERS

INVESTMENT COMPANY,

Defendants.

Appeal from the United States District Court

for the District of Nevada

Robert Clive Jones, Chief District Judge, Presiding

Argued and Submitted

April 17, 2013—San Francisco, California

Filed July 26, 2013

Before: Mary M. Schroeder, Sidney R. Thomas,

and Barry G. Silverman, Circuit Judges.

Opinion by Judge Schroeder

SUMMARY*

Environmental Law

The panel affirmed in part and reversed in part the district

court’s judgments in litigation under the Comprehensive

Environmental Response, Compensation, and Liability Act

and the Resource Conservation and Recovery Act concerning

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

10 VOGGENTHALER V. MARYLAND SQUARE

seepage of a toxic dry cleaning chemical into the ground

under a Las Vegas shopping center.

The district court granted summary judgment in favor of

neighboring homeowners who sought injunctive relief against

the property owners of the shopping center and operators of

the dry cleaning facility. The district court also granted

summary judgment in favor of the Nevada Division of

Environmental Protection, which sought to recover its

cleanup costs. The panel largely affirmed the district court’s

judgments. It affirmed the district court’s rejection of the

contention that application of CERCLA to soil and

groundwater contamination that occurred solely in Nevada

violated the Commerce Clause.

The panel vacated the grant of summary judgment under

CERCLA against the current owner and remanded so that the

owner might have an opportunity to make the additional

showing that would be necessary to establish that it met an

exception to CERCLA liability for bona fide prospective

purchasers. The panel reversed on procedural grounds the

grant of summary judgment under RCRA against the current

owner and the operators because those defendants did not

have an adequate opportunity to respond to plaintiffs’ claims.

The panel reversed the grant of summary judgment against a

guarantor because there was no evidence of spills during the

term of his guaranty.

VOGGENTHALER V. MARYLAND SQUARE 11

COUNSEL

Alexander Robertson, IV and Jennifer L. Taylor, Robertson

& Associates, LLP, Las Vegas, Nevada; Jan Adam Greben,

Greben & Associates, Santa Barbara, California, for

Plaintiffs-Appellees Peter J. Voggenthaler, et al.

Catherine Cortez Masto, Attorney General, Carolyn E.

Tanner (argued), Senior Deputy Attorney General, and

Jasmine K. Mehta (argued), Deputy Attorney General, Carson

City, Nevada, for Plaintiff-Intervenor-Appellee Nevada

Division of Environmental Protection.

Thomas Vandenburg, Joshua Levine, Christopher Smith and

John A. Lawrence (argued), Dongell Lawrence Finney, LLP,

Los Angeles, California, for Defendants-Iintervenors-

Appellees Maryland Square Shopping Center, LLC, et al.

Jeremy Gilman and Gregory J. Lucht (argued), Benesch,

Friedlander, Coplan & Aronoff, LLP, Cleveland, Ohio;

Jeffrey T. Oberman, Levin & Oberman, Beverly Hills,

California, for Defendants-Appellants Melvin Shapiro and

Shapiro Brothers Investment Co.

Franklin H. Levy and Joshua M.D. Segal (argued), Lawson &

Weitzen, LLP, Boston, Massachusetts; Shan Davis, Shan

Davis & Associates, Las Vegas, Nevada, for Defendant-

Appellant Maryland Square, LLC.

12 VOGGENTHALER V. MARYLAND SQUARE

OPINION

SCHROEDER, Circuit Judge:

Two environmental statutes everyone loves to hate are the

Comprehensive Environmental Response, Compensation, and

Liability Act (“CERCLA”) and the Resource Conservation

and Recovery Act (“RCRA”). In combination, they make

owners of contaminated property and contributors to

contamination responsible for cleaning up toxic waste, and,

if someone else cleans up the waste, liable for the costs of

that clean up. This litigation illustrates the point. It involves

seepage over several decades of a toxic dry cleaning chemical

into the ground under a Las Vegas shopping center. There

have been two district court actions leading to multiple

appeals.

Neighboring homeowners brought the first action, seeking

injunctive relief against the property owners of the shopping

center and operators of the dry cleaning facility. The Nevada

Division of Environmental Protection (“NDEP”) brought the

other action to recover its clean up costs. The district court

granted summary judgment for both sets of plaintiffs on all

claims. The current owner and the former operators of the

dry cleaning facility appeal. There are numerous procedural

issues, but the principal legal contention is that application of

CERCLA to this conduct that occurred solely in Nevada

violates the Commerce Clause.

We largely affirm the district court, including its rejection

of that constitutional challenge. We vacate the grant of

summary judgment under CERCLA against the current owner

and remand so the owner may have an opportunity to make

the additional showing that would be necessary to establish

VOGGENTHALER V. MARYLAND SQUARE 13

that it meets an exception to CERCLA liability. We reverse

on procedural grounds the grant of summary judgment under

RCRA against the current owner and the operators because

those defendants did not have an adequate opportunity to

respond to plaintiffs’ claims. We also reverse the grant of

summary judgment against one guarantor, because there is no

evidence of spills during the term of his guaranty.

THE STATUTES

CERCLA and RCRA, passed by Congress within a few

years of each other, both address the problem of

environmental contamination from hazardous waste disposal,

but they employ different means. Congress passed CERCLA

in 1980, motivated by several environmental catastrophes,

especially the infamous Love Canal disaster in Niagra Falls,

New York. S. Rep. No. 96-848, at 8–10 (1980). The statute

authorizes governments or private parties to clean up polluted

sites and seek compensation from the polluters. 42 U.S.C.

§ 9607. It is designed to ensure that the cost of clean up is

“borne by those responsible for the contamination.”

Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S.

599, 602 (2009). In this case, NDEP began a clean up of the

contaminated site due to the inaction of the owners and

operators, and then sued for the funds it had expended and

those that it would need to expend in the future.

RCRA, passed in 1976, focuses on limiting waste

production and ensuring that when waste is produced, it is

treated and disposed of properly. It plugged a then-existing

loophole in environmental law. Before its passage, disposing

pollutants into the water and air was regulated, but the land

disposal of hazardous substances was not. H.R. Rep. No. 94-

1491, at 4 (1976). RCRA’s primary purpose was “to reduce

14 VOGGENTHALER V. MARYLAND SQUARE

the generation of hazardous waste and to ensure the proper

treatment, storage, and disposal of that waste which is

nonetheless generated, ‘so as to minimize the present and

future threat to human health and the environment.’”

Meghrig v. KFC W., Inc., 516 U.S. 479, 483 (1996) (quoting

42 U.S.C. § 6902(b)). RCRA, in 42 U.S.C. § 6972,

authorizes citizen suits for two types of injunctive relief—an

injunction ordering the responsible parties to clean up the

contamination and an injunction ordering them to stop any

further violations. See Meghrig, 516 U.S. at 484. At the time

of the homeowners’ suit, the toxic spills had already occurred

and the dry cleaning operations had ceased. The homeowners

therefore sought an injunction ordering the owners and

operators to clean up, test, and monitor the contaminated site.

FACTS AND PROCEDURAL BACKGROUND

I. History of the Site and Its Contamination

Maryland Square Shopping Center (“the Site”), a Las

Vegas shopping center, was from 1969 to 2000 home to a dry

cleaning facility responsible for environmental

contamination. Maryland Square LLC (“Maryland Square”),

the current owner of the Site, has owned it since 2005. The

Site has had many prior owners, but only the Herman Kishner

Trust, a non-appealing defendant, owned the Site during the

contamination period. During that period two companies

leased the Site and operated the dry cleaning facility. Shapiro

Bros. Investment Co. (“SBIC”) operated it from 1969 until

1984. Johnson Group, Inc., the predecessor of DCI USA,

Inc., (collectively “DCI”) purchased the dry cleaning business

in 1984 and operated it until 2000.

VOGGENTHALER V. MARYLAND SQUARE 15

The history is summarized in the following chart showing

the owners, operators, and known or alleged chemical spills:

Year Owners Operators Known/Alleged Incidents

1968 Herman Kishner N/A N/A

1969– Herman Kishner Shapiro Bros. Spill of ~100 gallons of

1984 Trust (w/ Maryland Investment Co. PCE in 1982. Occasional

Square Shopping spills from a clogged

Center LLC as button trap between

successor-in- 1969–1984.

interest)

1984– Herman Kishner DCI Alleged to have used PCE

2000 Trust (w/ Maryland in its operations. No

Square Shopping confirmed spills.

Center LLC as

successor-in-

interest)

2000– Herman Kishner N/A N/A

2002 Trust (w/ Maryland

Square Shopping

Center LLC as

successor-in-

interest)

2002– Clark County School N/A N/A

2005 District

2005– Maryland Square N/A Demolition of Site in 2006

Present LLC allegedly spread PCE.

Herman Kishner constructed the Site in 1968 and

transferred ownership to the Herman Kishner Trust the

following year. Beginning in 1969, the Trust leased the dry

cleaning facility to SBIC, and SBIC agreed in the lease to

indemnify the Trust for all claims arising from SBIC’s

16 VOGGENTHALER V. MARYLAND SQUARE

actions, omissions, or negligence. SBIC signed a

replacement lease in 1982 in which it agreed to indemnify the

Trust for violations of law. SBIC sold the dry cleaning

business to DCI in 1984. As part of the sale, Melvin Shapiro,

who formed and controlled SBIC with his brother Philip

Shapiro, personally guaranteed DCI’s performance of the

lease obligations, including the obligation to indemnify the

Site’s owner for any future violations of law.

The contamination at the Site was produced by a chemical

commonly used in the dry cleaning industry and called

tetrachloroethylene (“PCE”). PCE is a hazardous substance

as defined by CERCLA and the Nevada Administrative Code.

42 U.S.C. § 9601(14); Nev. Admin. Code § 445A.3454.

During its operation of the dry cleaning facility, SBIC used,

and spilled, PCE. According to former SBIC employees,

from time to time “a button trap would clog and amounts of

PCE would spill onto the concrete floor.” SBIC also

admitted that a spill of roughly 100 gallons of PCE occurred

during a filter change in 1982. When PCE spilled, it fell onto

a concrete floor equipped with a “trench style floor drain.”

The PCE then went down the drain through the pipes beneath

the floor and into the ground and groundwater.

II. Entry of the State of Nevada and Its Clean Up Efforts

The PCE discharge was first reported to NDEP on

November 29, 2000, during a pre-purchase investigation by

Clark County School District. When Maryland Square

purchased the property from the School District in 2005,

Maryland Square was aware of the contamination. Maryland

Square demolished the building in 2006, including the

contaminated floor, but made no efforts to remove any

contaminant beneath it.

VOGGENTHALER V. MARYLAND SQUARE 17

After the initial discovery, NDEP, on July 21, 2001,

received a report from the environmental consultant

performing Clark County’s pre-purchase investigation.

NDEP oversaw further investigation of the Site that revealed

the presence of PCE in the soil and groundwater. The highest

PCE concentrations were found in and around the floor drain

and drain pipes beneath the former dry cleaning facility. The

investigation also revealed a plume of PCE-contaminated

groundwater emanating from the Site and extending eastward

into a nearby residential Las Vegas neighborhood. NDEP

then began its lengthy clean up of the soil.

The contaminated plume was a cause for concern. On the

basis of a soil gas report submitted to NDEP in 2007, NDEP

determined that there was a potential for PCE vapor intrusion

into the neighborhood homes at concentrations that could

materially increase the probability of cancer in exposed

individuals. To address the risks posed by PCE evaporating

into the air, NDEP offered to install subslab depressurization

systems in the homes. NDEP recognized, however, that it

also needed to reduce the PCE concentrations in the

groundwater in order to prevent potential future exposures,

because the plume was moving away from the Site. NDEP

informed residents, property owners, and government

officials of the PCE contamination in the groundwater and the

possible health effects.

NDEP also notified the current and former owners and

operators of the Site that NDEP considered them to be

potentially responsible parties under CERCLA for clean up

costs. NDEP stated in those notices in 2008 that it already

had expended approximately $160,000, that it intended to

spend more funds to address human exposure to PCE, and

that it planned to seek recovery of its expenses. NDEP has

18 VOGGENTHALER V. MARYLAND SQUARE

continued its clean up efforts over the following years, and

removed the contaminated soil in 2011.

III. History of the Litigation

In late 2008 and early 2009 two suits were filed in the

United States District Court for the District of Nevada against

the owners and operators of the Site. NDEP sued them under

both CERCLA and Nevada state law. Peter Voggenthaler,

with other neighborhood homeowners, sued under RCRA. In

the homeowners’ RCRA suit, the owners filed cross-claims

against the operators for indemnity.

NDEP’s action under CERCLA sought to recover the

costs of cleaning up the Site and a declaratory judgment

entitling NDEP to future clean up costs. NDEP contended

that all of the defendants, as owners or operators of a facility

that had released toxic chemicals, were liable under

CERCLA. Each of the defendants offered a separate reason

for why it was not liable, and several of the defendants

contended that the application of CERCLA to conduct solely

within Nevada violates the Commerce Clause. NDEP, under

Nevada state law, also sought recovery of clean up costs and

injunctive relief to prevent further violations. The district

court eventually granted summary judgment for NDEP on all

of its claims on May 17, 2012.

The homeowners filed their complaint under RCRA

seeking an injunction forcing all of the Site’s owners to clean

up the contamination, and contending that the owners were

contributors under RCRA. The homeowners did not seek

relief under state law. The Site’s owners all took the position

that they were not responsible for the actual spills, even

though they knowingly leased the Site to a dry cleaning

VOGGENTHALER V. MARYLAND SQUARE 19

business and profited from the operation of that business.

The district court granted summary judgment for the

plaintiffs and against all of the owners on July 22, 2010.

The current owner, Maryland Square, however, moved for

rehearing after the entry of summary judgment on its RCRA

liability, contending that it was in a different position from

the other owners because its ownership of the property did

not begin until after the dry cleaning facility had closed

down. The homeowners responded to the motion for

rehearing, contending that Maryland Square nevertheless

should be considered a contributor under RCRA because its

demolition of the building in 2006 had exacerbated the

situation by exposing and disseminating the contamination.

The homeowners relied on the expert report that had been

attached to their summary judgment reply.

The district court, however, did not resolve the issue of

Maryland Square’s liability raised in the reconsideration

motion. Instead, the court concluded in an October 20, 2010

order that it lacked jurisdiction because the motion involved

the merits of the owners’ RCRA liability, and the other

owners had already filed a notice of appeal from the summary

judgment order on RCRA liability. (That premature appeal

was later consolidated by our court with the owners’ appeal

of the RCRA permanent injunction after the district court

proceedings became final.)

The district court then did enter a permanent injunction

under RCRA on December 27, 2010, ordering a clean up of

the Site. Although the plaintiffs had moved for summary

judgment on RCRA liability against only the owners, the

district court not only granted that motion, but, sua sponte,

also entered judgment and ordered injunctive relief against

20 VOGGENTHALER V. MARYLAND SQUARE

operator SBIC as well, even though plaintiffs had not moved

for such relief.

The owners’ leases to the operators contained

indemnification provisions. The owners therefore moved for

judgment in the RCRA litigation on their cross-claims for

indemnity against SBIC and Melvin Shapiro as operators.

The district court granted the motion as to both on October

20, 2010. Although only SBIC actually operated the

business, the court held Melvin Shapiro liable on the basis of

the guaranty he signed on the 1984 transfer of the business

from SBIC to DCI. The court rejected his position that the

guaranty acted only prospectively and did not take effect until

after the spills occurred.

We consider multiple appeals in each action.

DISCUSSION

I. Application of CERCLA to Soil and Groundwater

Contamination in Nevada Does Not Offend the

Commerce Clause

Maryland Square’s appeal challenges the application of

CERCLA to the contamination of the Site as violating the

Commerce Clause, because the PCE disposal physically

affected the Site and a nearby neighborhood within the state

of Nevada. The district court summarily rejected this claim.

Maryland Square relies primarily on the Supreme Court’s

opinions in United States v. Lopez, 514 U.S. 549 (1995), and

United States v. Morrison, 529 U.S. 598 (2000), the two

Commerce Clause decisions of the last twenty years

invalidating Congressional enactments. Neither involved

environmental issues. Lopez concerned regulation of conduct

VOGGENTHALER V. MARYLAND SQUARE 21

near a school and Morrison involved violence against an

individual.

The Constitution states that “The Congress shall have

Power . . . To regulate Commerce with foreign Nations, and

among the several States, and with the Indian Tribes.” U.S.

Const. Art. I, § 8, cl. 3. This grant of authority has been

separated into three broad categories. Perez v. United States,

402 U.S. 146, 150 (1971). Under its commerce power,

Congress may regulate (1) “the use of the channels of

interstate or foreign commerce,” (2) “the instrumentalities of

interstate commerce . . . or persons or things in commerce,”

and (3) “those activities affecting commerce.” Id. These

categories were recognized in both Lopez and Morrison.

Maryland Square contends that none of the three categories

apply, but two of them do.

The application of CERCLA to contaminated soil and

groundwater is proper under the second and third categories

as regulation of articles in commerce and activities affecting

commerce. Groundwater may be regulated as an article of

commerce, because any item that may be bought or sold,

indeed all objects of trade, are articles of commerce. See Fort

Gratiot Sanitary Landfill, Inc. v. Michigan Dep’t of Natural

Res., 504 U.S. 353, 359 (1992). The Supreme Court has

expressly held that groundwater is an article of commerce,

because it can be traded. Sporhase v. Nebraska, ex rel.

Douglas, 458 U.S. 941, 953–54 (1982). There, the state of

Nebraska, in defending a state law limiting the interstate sale

of Nebraska groundwater, tried to contend that groundwater

was not an article of commerce. Id. at 951–52. According to

Nebraska, groundwater was not an article of commerce

because Nebraska’s residents did not enjoy an unlimited

ownership interest in the groundwater they withdrew and

22 VOGGENTHALER V. MARYLAND SQUARE

because groundwater was essential to its citizens’ survival.

Id. at 951–53. The Supreme Court rejected this argument,

citing Nebraska’s efforts to limit the sale of groundwater

within the state as proof that groundwater is an object of

trade. Id. at 953–54 (“[The] claim that Nebraska ground

water is not an article of commerce goes too far: it would not

only exempt Nebraska ground water regulation from burden-

on-commerce analysis, it would also curtail the affirmative

power of Congress to implement its own policies concerning

such regulation [of groundwater].”).

Maryland Square’s position in this case, that groundwater

found within a state cannot be an article of interstate

commerce, is the same as the position the Court rejected in

Sporhase. Indeed, the Supreme Court emphasized that the

federal government has a significant interest in groundwater

because groundwater is found in multistate aquifers and

facilitates irrigated farming that supplies markets worldwide.

Id. at 953. Congress, by making the protection of

groundwater and surface water a main priority of CERCLA,

acted on that federal interest. See 42 U.S.C. §§ 9605(c)(2),

9618.

In addition, we deal with a dry cleaning establishment that

created the contamination as part of its commercial operation,

and resulted in clean up costs that burdened commerce. The

clean up, as well as the business itself, substantially affect

interstate commerce. Application of CERCLA is supported

for those reasons as well. The Eleventh Circuit in United

States v. Olin Corporation, 107 F.3d 1506 (11th Cir. 1997),

recognized the economic burden of clean up costs in rejecting

a challenge to CERCLA very similar to the one in this case.

The chemical manufacturer in Olin contended that its on-site

disposal of hazardous substances did not affect interstate

VOGGENTHALER V. MARYLAND SQUARE 23

commerce because the substances never left the site. Id. at

1511. The court rejected that contention, stating that

Congress, in passing CERCLA, recognized the growing

economic costs of handling and disposing hazardous

substances and that these costs were associated with both off-

site and on-site disposal. Id. Also recognizing that hazardous

substance clean up affects interstate commerce, the Second

Circuit in Freier v. Westinghouse Electric Corporation,

303 F.3d 176 (2d Cir. 2002), rejected a Commerce Clause

challenge to an amendment to CERCLA affecting the statute

of limitations for claims resulting from exposure to hazardous

substances. In upholding this amendment as an integral part

of CERCLA’s regulatory scheme, the court stated that the

generation and disposal of waste in connection with the

operation of a business are economic activities properly

regulated under the Commerce Clause. Id. at 202.

The Supreme Court’s decisions in Lopez and Morrison

concerning non-economic activity are not relevant here, for

the Court’s holding in both depended upon the conclusion

that the activities sought to be regulated were not commercial

activities. See Lopez, 514 U.S. at 561 (the criminal statute

prohibiting the knowing possession of a firearm in a school

zone had “nothing do with ‘commerce’ or any sort of

economic enterprise”); Morrison, 529 U.S. at 613 (gender-

motivated violent crimes “are not . . . economic activity”).

The Supreme Court has consistently held that Congress,

under the Commerce Clause, can regulate commercial

activities, even where the economic impact of the individual

defendant’s actions were far smaller than in this case, as with

home cultivation of medical marijuana. Gonzales v. Raich,

545 U.S. 1, 26–27 (2005). The Court has made no de

minimus exception. Courts will not “excise, as trivial,

24 VOGGENTHALER V. MARYLAND SQUARE

individual instances” of a class of activities that is within the

federal power. Id. (internal quotations and citations omitted).

II. Maryland Square Has Not Shown That It Qualifies for

an Exception to CERCLA Liability, and It Is Clearly

Responsible for Reimbursement Under Nevada State

Law

Maryland Square contends that even if CERCLA may be

constitutionally applied, Maryland Square nevertheless

should not be liable because it qualifies as a bona fide

prospective purchaser under CERCLA. It also challenges its

liability under the Nevada state law requiring the owners of

a contaminated site and those responsible for the hazardous

spill to reimburse the State after it cleans up the

contamination. We deal with each contention in turn.

A. Maryland Square Did Not Establish That It

Qualifies as a Bona Fide Prospective Purchaser

Under CERCLA

CERCLA is a strict liability statute in that it does not

require a party to act culpably in order to be liable for clean

up. Cal. Dept. of Toxic Substances Control v. Hearthside

Residential Corp., 613 F.3d 910, 912 (9th Cir. 2010). Our

court has described the four elements that create liability.

3550 Stevens Creek Associates v. Barclays Bank of Cal.,

915 F.2d 1355, 1358 (9th Cir. 1990). A plaintiff must

establish: (1) the site containing the hazardous substances is

a facility under CERCLA; (2) a release or threatened release

of a hazardous substance has occurred from that facility; (3)

the plaintiff incurred response costs as a result of that release

or threatened release and those costs were necessary and

consistent with the national contingency plan; and (4) the

VOGGENTHALER V. MARYLAND SQUARE 25

defendant is in one of the categories of entities subject to the

liability provisions of CERCLA § 107(a). Id.

Maryland Square does not contest the first three elements.

The Site is a facility under CERCLA because hazardous

substances were disposed there. 42 U.S.C. § 9601(9). A

hazardous substance was released when the operators spilled

PCE down the drain, through the pipes and into the

environment. 42 U.S.C. § 9601(22). NDEP’s response was

necessary because no party had taken responsibility for the

clean up. 42 U.S.C. § 9607(a).

Maryland Square contends it falls within 42 U.S.C.

§ 9607(r)(1), the bona fide prospective purchaser exception

to liability. This provision exempts from liability those who

in good faith purchased a property they did not contaminate,

but only provided they meet certain conditions. It states that:

a bona fide prospective purchaser whose

potential liability for a release or threatened

release is based solely on the purchaser’s

being considered to be an owner or operator

of a facility shall not be liable as long as the

bona fide prospective purchaser does not

impede the performance of a response action

or natural resource restoration.

Id.

The statute further provides, however, that a defendant

must meet eight separate criteria to qualify as a bona fide

prospective purchaser. 42 U.S.C. § 9601(40)(A)–(H). An

owner seeking to qualify as a bona fide prospective purchaser

must establish, among other things, that it purchased the

26 VOGGENTHALER V. MARYLAND SQUARE

property after the hazardous substances were spilled,

42 U.S.C. § 9601(40)(A), made all appropriate inquiries

before it purchased the property, 42 U.S.C. § 9601(40)(B),

provided all legally required notices about the hazardous

substances, 42 U.S.C. § 9601(40)(C), and took steps to stop

any ongoing spill, prevent future spills, and limit the exposure

from past spills, 42 U.S.C. § 9601(40)(D).

Regulations further spell out the steps an owner must take

to qualify. An owner seeking to establish that it made “all

appropriate inquiries,” for example, must show that the

examination was performed by an environmental

professional, as defined in 40 C.F.R. § 312.10, that particular

kinds of information about the property, its history and its

value were collected, 40 C.F.R. § 312.22, and that various

sources were consulted, 40 C.F.R. § 312.30. All of these

steps must be taken prior to the purchase, but no more than a

year before the purchase date. 40 C.F.R. § 312.20. The

owner, furthermore, must interview past owners and

operators, search for environmental cleanup liens, review

government records, inspect the property, and obtain a

declaration by the environmental professional no more than

180 days before the purchase date. Id.

Maryland Square attempted to establish it satisfied these

requirements by submitting the “Supplemental Affidavit” of

Paul G. Roberts, Maryland Square’s manager. The district

court did not consider this submission because it was not

notarized, and for that reason concluded that Maryland

Square had failed to meet its burden.

The “affidavit” should have been notarized, but the

district court did not give Maryland Square an opportunity to

correct that deficiency. Nor did the court consider the

VOGGENTHALER V. MARYLAND SQUARE 27

contents of the submission to determine whether they would

have been sufficient if notarized. The parties on appeal

assume the truth of the statements and address the merits of

Maryland Square’s contention that the facts stated would

show it qualifies as a bona fide prospective purchaser.

Roberts’s submission stated that the seller, Clark County

School District, disclosed the PCE contamination during the

sale negotiations and that Maryland Square then retained

counsel and hired Entrix, Inc., an environmental consulting

firm, to review and report on the NDEP files concerning the

Site. After purchasing the Site, Maryland Square hired an

environmental contractor to demolish the building. The

submission does not indicate that Maryland Square took any

remedial steps, such as removing the soil after demolishing

the building, but says only that Maryland Square followed the

progress of the previous owners in drafting and submitting

plans to clean up the Site, and that Maryland Square had

some (mainly undescribed) correspondence with NDEP.

The statements in the submission are insufficient to

establish Maryland Square satisfied the requirements for bona

fide prospective purchaser status. They do not establish

Maryland Square met requirements of 42 U.S.C.

§ 9601(40)(D) to prevent further harm, because Maryland

Square failed to limit human and environmental exposure to

a contamination already present. The submission

acknowledges Maryland Square purchased the Site with

knowledge of the contamination, and subsequently

demolished the building, an action that exposed the

contaminated soil to the elements, but identifies no steps that

it took to remove the contaminated soil or limit the spread of

PCE. NDEP was then forced to remove the contaminated soil

six years after the building was destroyed, thereby creating a

28 VOGGENTHALER V. MARYLAND SQUARE

situation contemplated by Congress when enacting

CERCLA—reimbursement of a government entity forced to

clean up a site because the owner refused to take action. See

42 U.S.C. § 9607(a)(4)(A).

In addition, Maryland Square’s submission does not

discuss the numerous regulatory requirements for making

appropriate inquiries. See 42 U.S.C. § 9601(40)(B); 40

C.F.R. §§ 312.10, 312.20 et seq. The submission, without

providing necessary supporting information, merely states

that Maryland Square retained Entrix, Inc. to review files and

prepare a report. It does not indicate if Entrix employed a

qualified environmental professional, the substance of the

report, or any description of the assessment conducted. See

40 C.F.R. §§ 312.10, 312.20 et seq. Maryland Square’s

submission was woefully insufficient to establish it was a

bona fide prospective purchaser within the meaning of

CERCLA.

The district court, however, rejected the submission on

the basis of its form rather than its substance, and did not give

Maryland Square a chance to make any additional showing.

We therefore vacate the district court’s grant of summary

judgment against Maryland Square so that it may have an

opportunity to cure the formal and substantive deficiencies of

its prior submission and establish that it has met the statutory

and regulatory requirements to qualify as a bona fide

prospective purchaser.

VOGGENTHALER V. MARYLAND SQUARE 29

B. Maryland Square is Liable to the State under

Nevada Law Because It Owned the Property and

Failed to Remove the Contaminated Soil

Pursuant to Nevada law, Nevada has established an

account from which it may spend money to respond to a

hazardous spill, manage the clean up of a contaminated site,

and remove the hazardous substance. Nev. Rev. Stat.

§ 459.537. Under the statute, money from the “Account for

the Management of Hazardous Waste” may be spent to pay

the costs of responding to a leak or spill if the person

responsible did not promptly clean it up. Id. Once this

money has been spent, the statute instructs NDEP to demand

reimbursement from various people, including “any person

. . . who owns or controls . . . the area used for the disposal of

the waste, material or substance.” Id. This must include the

current owner.

Maryland Square, as the current owner, tries to maintain

it is not responsible under the statute because it did not own

the Site at the time of the PCE disposal. However, the state

statute contains no exceptions, nor does it limit the

reimbursement obligation to those responsible for the spill.

Maryland Square also challenges the grant of injunctive

relief under Nevada Revised Statutes § 445A.695, on the

ground that it was not responsible for any discharges of PCE.

Under this statute, NDEP may seek an injunction “to prevent

the continuance or occurrence of any act or practice which

violates any provision of NRS 445A.300 to 445A.730 . . . .”

Id. NDEP contends that Maryland Square violated Nev. Rev.

Stat. § 445A.465, a state statute that encompasses not only

discharges, but also the failure to clean up a spilled

contaminant that may enter the State’s waters. The statute

30 VOGGENTHALER V. MARYLAND SQUARE

makes it unlawful to “[a]llow a pollutant discharged from a

point source or fluids injected through a well to remain in a

place where the pollutant or fluids could be carried into the

waters of the State by any means.” Nev. Rev. Stat.

§ 445A.465(1)(d). Maryland Square allowed PCE to remain

in the soil for six years, and the PCE did enter the waters of

the State. The district court, therefore, correctly granted

summary judgment on NDEP’s claim for injunctive relief as

well.

III. NDEP Was Entitled to Summary Judgment

Against the Operator, SBIC, on the CERCLA and

State Law Claims

NDEP sued SBIC under CERCLA because SBIC

operated the dry cleaning facility and disposed of the PCE.

Among the categories of entities that CERCLA holds liable

are operators of a facility where there was a “disposal” of

hazardous substances. CERCLA liability may be assessed

against “any person who at the time of disposal of any

hazardous substance owned or operated any facility at which

such hazardous substances were disposed of.” 42 U.S.C.

§ 9607(a)(2). “Disposal” means the “discharge, . . . spilling,

leaking, or placing of any solid waste or hazardous waste into

or on any land or water so that such solid waste or hazardous

waste or any constituent thereof may enter the environment

or be emitted into the air or discharged into any waters,

including ground waters.” 42 U.S.C. § 6903(3). SBIC’s

principal challenge to its CERCLA liability is that it did not

operate the facility “at the time of disposal” because it leaked

the contaminant onto the floor, not into the natural

environment.

VOGGENTHALER V. MARYLAND SQUARE 31

SBIC does not dispute the facts. It operated the dry

cleaning facility at the Site between 1969 and August 31,

1984. SBIC’s lease agreement for the facility called for it to

be built with a trench style “sewage drain adequate for

[SBIC’s] business.” SBIC admits that it used PCE in its

operations and that it regularly spilled PCE on the concrete

floor, and once spilled roughly 100 gallons of PCE during a

filter change in 1982.

SBIC argues that spilling PCE onto the floor, rather than

directly onto the land or water, does not count as a “disposal.”

SBIC’s argument, therefore, is that the statute must be

interpreted to require a disposal directly into the groundwater

or onto the land. This interpretation is contrary to the

language of the statute. A “disposal” under the statute

includes any discharge or spill of waste “into or on any land

or water so that [the waste] may enter the environment . . . .”

42 U.S.C. § 6903(3) (emphasis added). Because the phrase

“enter the environment” is qualified by the word “may” in the

definition of “disposal,” the statute cannot be interpreted to

cover only spills that go directly and immediately into the

groundwater. The statute contemplates that some spills may

never enter the environment. The definition covers more than

direct spills. SBIC’s interpretation conflicts with our practice

of construing CERCLA liberally to achieve the goals of

cleaning up hazardous waste sites promptly and ensuring that

the responsible parties pay the costs of the clean up. Carson

Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d 863, 881 (9th

Cir. 2001).

The only other courts to consider an interpretation like

SBIC’s requiring “disposal” to be directly onto the land or

into the water have rejected it. See Amland Props. Corp. v.

Aluminum Co. of Am., 711 F. Supp. 784, 791–92 (D.N.J.

32 VOGGENTHALER V. MARYLAND SQUARE

1989) (concluding that a disposal inside a plant was a

disposal “on any land”); Lincoln Properties, Ltd. v. Higgins,

No. S-91-760DFL/GGH, 1993 WL 217429, at *19–20 (E.D.

Cal. Jan. 21, 1993) (stating that a release into the environment

need not be direct). Their reasoning is sound. SBIC cites no

contrary authority on point.

Because we conclude that NDEP has established SBIC’s

liability for past costs under CERCLA, NDEP is also entitled

to a declaratory judgment for future costs. City of Colton v.

Am. Promotional Events, Inc.–W., 614 F.3d 998, 1007 (9th

Cir. 2010). In City of Colton, we held that a plaintiff who

establishes liability for past response costs under CERCLA is

entitled to a declaratory judgment on liability for future costs.

Id. (citing 42 U.S.C. § 9613(g)(2)).

SBIC also, and on a similar basis, challenges the district

court’s grant of summary judgment on NDEP’s state law

claim under Nev. Rev. Stat. § 445A.695, which authorizes

injunctive relief to prevent the continuation or reoccurrence

of other statutory violations. SBIC contends that it did not

operate the facility at the time the PCE actually touched the

soil or groundwater. This fact is not relevant. NDEP has

charged that SBIC violated Nev. Rev. Stat. § 445A.465,

which makes it unlawful to “[d]ischarge from any point

source any pollutant into any waters of the State . . . .” Nev.

Rev. Stat. § 445A.465(a), (d). A drain pipe is a point source.

Nev. Rev. Stat. § 445A.395. SBIC spilled PCE into the drain

of the facility. The PCE was thus discharged through the

drains as the point sources. SBIC is therefore liable for the

resulting contamination of the groundwater.

VOGGENTHALER V. MARYLAND SQUARE 33

IV. The District Court Did Not Decide the Issue

Raised By Maryland Square’s Motion for

Reconsideration, So Remand is Required to

Determine Whether Maryland Square Has RCRA

Liability for Exposing the Contamination to the

Elements

The homeowners sought an injunction under RCRA to

require all of the owners of the Site, including Maryland

Square, to clean up the contamination. An entity may be held

liable under RCRA if it is an active contributor to the

contamination on the site. Liability may be assessed against:

any person . . . who has contributed or who is

contributing to the past or present handling,

storage, treatment, transportation, or disposal

of any solid or hazardous waste which may

present an imminent and substantial

endangerment to health or the environment.

42 U.S.C. § 6972(a)(1)(B). Maryland Square’s original

position was the same as the other owners of the Site:

ownership of the Site was insufficient to establish liability.

The district court rejected the Site owners’ contention and

granted summary judgment for the homeowners.

Maryland Square then moved for rehearing and advanced

a new theory. It contended that it was in a different position

from the other owners because it acquired the property after

the dry cleaning facility had closed down. The homeowners

opposed the motion for rehearing on the ground that even if

Maryland Square did not own the Site when the spills

happened, Maryland Square’s demolition of the building in

2006 exposed the contaminated soil, exacerbating the

34 VOGGENTHALER V. MARYLAND SQUARE

problem and making Maryland Square a contributor. The

homeowners relied on the expert report that they had attached

to their summary judgment reply and that explained the

effects of the demolition.

The district court did not resolve this issue, however.

Instead, the district court ruled that it was divested of

jurisdiction to decide the motion for reconsideration when the

other Site owners appealed the earlier order granting

summary judgment on the merits of the owners’ RCRA

liability. The court was incorrect because the earlier order

determined only liability, not relief, and was not a final

judgment. Thus, the appeal was taken prematurely from an

interlocutory order. See State of Cal., on Behalf of California

Dep’t of Toxic Substances Control v. Campbell, 138 F.3d

772, 776–77 (9th Cir. 1998). Because the district court

effectively denied the motion on jurisdictional grounds,

Maryland Square never had the opportunity to respond to the

merits of the homeowners’ alternative theory of liability. We

therefore reverse the district court’s denial of Maryland

Square’s motion for reconsideration, and remand so the issue

of Maryland Square’s RCRA liability may be fully

considered.

V. The District Court Erred in Entering an Injunction

Against SBIC for Clean Up Responsibilities Under

RCRA in the Absence of Any Request for Judgment

on the Underlying Claim

The district court granted summary judgment against the

operator, SBIC, sua sponte, followed by a RCRA permanent

injunction. This was error, because the homeowner plaintiffs

in the RCRA suit never moved for summary judgment against

SBIC.

VOGGENTHALER V. MARYLAND SQUARE 35

There are only two general situations where a district

court may sua sponte enter summary judgment; neither

applies to this case. A district court may enter summary

judgment against a party that has moved for summary

judgment when the court determines the moving party cannot

prove its case at trial. See Gospel Missions of Am. v. City of

Los Angeles, 328 F.3d 548, 553 (9th Cir. 2003); Cool Fuel,

Inc. v. Connett, 685 F.2d 309, 311 (9th Cir. 1982). Here,

SBIC did not ask for summary judgment in the homeowners’

RCRA case. The second situation is when a Fed. R. Civ. P.

12(b)(6) motion is converted into a motion for summary

judgment under Rule 56 by consideration of materials outside

the pleadings. Fed. R. Civ. P. 12(d). That did not occur here

either.

The homeowner plaintiffs in the action have not tried to

defend the district court’s sua sponte order that SBIC now

appeals. The defendant owners argue the result is fair since

they are happy to have SBIC share their liability. Such

determinations of liability and injunctive remedy are

appropriate only after a court has considered the positions of

all the parties. Portsmouth Square Inc. v. S’holders

Protective Comm., 770 F.2d 866, 869 (9th Cir. 1985). Here,

the district court’s sua sponte orders were entered without

such consideration and must be vacated.

VI. SBIC is Liable to the Previous Owners Under the

Indemnification Provisions of the 1968 and 1982

Leases

Both of the lease agreements that SBIC reached with the

Site owners contained indemnification provisions. Under

Nevada law, indemnification provisions are interpreted like

any other contract provision, according to normal contract

36 VOGGENTHALER V. MARYLAND SQUARE

rules. George L. Brown Ins. v. Star Ins. Co., 237 P.3d 92,

96–97 (Nev. 2010). The 1968 indemnification provision

covered all claims arising from SBIC’s actions as operator of

the business. It stated as follows:

Lessee agrees to indemnify and save harmless

lessor from and against all claims arising from

any act, omission or negligence of lessee . . .

or employees or arising from any accident,

injury or damage whatsoever caused to any

person, or to the property of any person

during the demised term, in or about the

demised premises . . . and will indemnify and

hold harmless Lessor from and against all

costs, expenses and liabilities incurred in or in

connection with any such claim or proceeding

brought thereon.

The provision covers the homeowners’ claims for SBIC’s

spills. SBIC admitted that from time to time during its

operation of the dry cleaning facility “a button trap would

clog and amounts of PCE would spill onto the concrete

floor.” SBIC also stated that a spill of roughly 100 gallons of

PCE occurred in 1982 during a filter change. The RCRA

claims from the homeowners arose from these spills, and the

Site’s previous owners claim they are entitled to indemnity

from SBIC pursuant to the lease.

SBIC contends it is not liable because the previous

owners have not proved that the contamination of the soil and

groundwater happened “during the demised term” of its lease.

The basis for liability under the guaranty, however, is the

RCRA claim that arose from conduct of SBIC’s employees

VOGGENTHALER V. MARYLAND SQUARE 37

during the lease. Their PCE spills occurred during the lease

term.

SBIC also contends that the 1982 lease terminated any

liability it might have had from the 1968 lease. The provision

it points to in the 1982 lease stated in relevant part as follows:

TRANSITION AND TERMINATION OF

PRIOR LEASE – As has been aforestated

herein, LANDLORD and TENANT have

heretofore held and been in a Landlord-Tenant

relationship, the same being under a lease

dated April 29, 1968 and addendum thereto

dated February 27, 1969. With respect

thereto, upon the commencement of the lease

term hereunder, said prior lease, addendum,

and any rights and obligations of the

respective parties arising out of the same shall

be deemed terminated as if said lease as

amended had expired by its term, i.e., lapse of

time . . . .

The 1982 lease terminated the provisions of the prior lease,

but did not extinguish the obligations SBIC incurred during

its term.

SBIC also challenges its liability under the 1982 lease.

The indemnification provision in that lease covered all

obligations that were the result of SBIC violating a law. The

provision read as follows:

INDEMNIFICATION – TENANT hereby

covenants to indemnify, save and hold

LANDLORD and the leased property free,

38 VOGGENTHALER V. MARYLAND SQUARE

clear and harmless from each liability, loss,

cost, charge, penalty, obligation, expense,

attorney’s fee, litigation, judgment, damage,

claim or demand of any kind whatsoever in

connection with, arising out of, or by reason

of any violation of law, ordinance or

regulation by TENANT or of any independent

contractor, agent, or employee of TENANT

while in, upon, about or in any way connected

with the leased property or any portion thereof

during the term of this Lease.

SBIC contends that a claim for relief under RCRA does not

arise out of a “violation of law” within the meaning of the

provision. RCRA, however, imposes liability for failure to

clean up contamination, and one who has not paid has

violated the law. SBIC thus must indemnify the owners for

the obligations they incurred as a result of SBIC’s RCRA

violations.

VII. The District Court Erred in Holding Melvin

Shapiro Liable on His Personal Guaranty Because

the Guaranty Operated Only Prospectively and

There Was No Evidence of Spills Occurring After

He Signed the Guaranty

Melvin Shapiro, a co-founder and officer of SBIC, signed

a guaranty when SBIC transferred the dry cleaning business

to DCI. Under Nevada law, guaranty agreements are

interpreted according to general contract interpretation

principles. Dobron v. Bunch, 215 P.3d 35, 37 (Nev. 2009).

By signing the guaranty at issue in this case, Melvin Shapiro

personally guaranteed that DCI would perform all of SBIC’s

VOGGENTHALER V. MARYLAND SQUARE 39

obligations, including the obligation to indemnify. The

personal guaranty at issue here read as follows:

The undersigned, jointly and severally,

unconditionally guarantees performance by

Assignee of each and every one of the

obligations of tenant under the lease herein

assigned . . .

The date of the Assignment was August 31, 1984. A

guaranty agreement is prospective unless it expressly states

otherwise. 38A C.J.S. Guaranty § 59; Bank of Am. Nat. Trust

& Sav. Ass’n v. Kelsey, 44 P.2d 617, 619 (Cal. Ct. App. 1935)

(“It is a rule of very general application that all guaranties are

prospective and not retrospective in operation, unless the

contrary appears by express words or by necessary

implication.”). Because this principle has not been addressed

by the Nevada Supreme Court, we must predict how the

Nevada Supreme Court would rule. Arizona Elec. Power Co-

op., Inc. v. Berkeley, 59 F.3d 988, 991 (9th Cir. 1995).

Counsel for the previous owners commendably conceded at

oral argument that such guarantees are generally only

prospective. There is no reason to believe that Nevada would

deviate from this widely-recognized rule for interpreting a

guaranty.

The previous owners did not identify any violation of the

1982 lease that occurred after the effective date of the

Assignment. The only spills the previous owners referenced

were those that occurred during SBIC’s operation of the

facility. Because the violations occurred before Melvin

Shapiro signed the guaranty, and it did not apply

retroactively, the judgment against him must be reversed.

40 VOGGENTHALER V. MARYLAND SQUARE

CONCLUSION

The district court properly rejected Maryland Square’s

constitutional challenge to the application of CERCLA in this

case, and correctly granted judgment against Maryland

Square and in favor of NDEP on its state law claims.

The district court’s judgment in favor of NDEP and

against SBIC on both the CERCLA and the state law claims

must be affirmed. The judgment against SBIC on the claims

of the prior Site owners for indemnity was in accordance with

the provisions of the leases and must be affirmed.

The district court erred, however, in entering judgment

against Maryland Square on NDEP’s CERCLA claim without

giving Maryland Square an opportunity to correct the

deficiencies in its “bona fide prospective purchaser”

submission. The district court also erred in denying for lack

of jurisdiction Maryland Square’s motion for reconsideration

of the RCRA judgment, and we remand for consideration on

the merits.

In the homeowners’ RCRA action, the district court erred

in entering judgment against SBIC sua sponte and the

judgment, as well as the ensuing injunction, must be vacated.

Although the district court properly held that the prior

Site owners were entitled to indemnification from SBIC, the

court erred in holding Melvin Shapiro was individually liable

for indemnification on the basis of his personal guaranty that

operated only prospectively.

Our decision may be summarized with reference to each

of the five appeals before us as follows:

VOGGENTHALER V. MARYLAND SQUARE 41

The district court’s judgment in favor of NDEP on the

CERCLA and Nevada state law claims against SBIC is

AFFIRMED (12-16409).

The district court’s judgment against Maryland Square on

the CERCLA claim is REVERSED and REMANDED. The

judgment against Maryland Square on the Nevada state law

claims is AFFIRMED (12-16412).

The RCRA judgment against Maryland Square is

REVERSED and REMANDED with instructions to consider

Maryland Square’s motion for reconsideration (10-17520).

The sua sponte entry of summary judgment against SBIC

under RCRA is VACATED and REMANDED, and the

permanent injunction entered under RCRA is VACATED as

to SBIC (11-15174).

The judgment for indemnity against SBIC is

AFFIRMED, and the judgment for indemnity against Melvin

Shapiro is REVERSED and REMANDED with instructions

to enter judgment in favor of Melvin Shapiro (11-15176).

AFFIRMED in part, REVERSED in part, VACATED

in part, and REMANDED in part.

Costs are awarded to NDEP in No. 12-16409 and No. 12-

16412, and to Melvin Shapiro in No. 11-15176. In Nos. 11-

15174 and 10-17520, each party is to bear its own costs.