Amicus Curiae Brief — Meghrig v. KFC Western, Inc.

No. 95-83

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CLERK

Supreme Court of the United States

OCTOBER TERM, 1995

ALAN MEGHRIG and MARGARET MEGHRIG,

Petitioners,

Vv.

KFC WESTERN, INC.,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

BRIEF AMICUS CURIAE OF THE

PETROLEUM MARKETERS ASSOCIATION OF AMERICA

ALPHONSE M. ALFANO

(Counsel of Record)

Rosert S. BASSMAN

BASSMAN, MITCHELL &

ALFANO, CHTD.

1201 New York Avenue, N.W.

Of Counse/ Washington, D.C. 20005

John J. Huber, Counsel 202-466-6502

Petroleum Marketers

Association of America Counsel for Amicus Curiae

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CASILLAS PRESS, INC. WASHINGTON, D.C. 202-223-1220

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TABLE OF AUTHORITIES

Cases:

Boris v. Hill, 375 S.E.2d 716 (Va. 1989)........ 11

California v. Sierra Club,

451 U.S. 287 (1981) (White J.) .............. 5

Cannon v. University of Chicago,

Re 12, 14

Director, UWCP v. Perini North

River Assoc., 459 U.S. 297°(1983) ........... 12

Feldman v. Rucker, 109 S.E.2d 379 (Va. 1959)... 11

Furrer v. Brown, 62 F.3d 1092 (8th Cir. 1995) . 6, 13

Hydro-Manufacturing, Inc. v. Kayser-

Roth Corp., 640 A.2d 950 (R.I. 1994) ....... 8,11

KFC v. Meghrig, 49 F.3d 518, 519

"Saleen aia 3, 6,9, 11, 14

Philadelphia Electric Co. v. Hercules, Inc.,

762 F.2d 303 (3rd Cir. 1985),

cert. denied, 474 U.S. 980 (1985)............ 11

Porter v. Warner Holding Co., 328 U.S. 395 (1946) . 7

Smith Land & Improvement Corp. v.

Rapid-American Corp.,

18 Envtl. L. Rep 20, 769 (M.D. Pa. 1987) ...... 11

Touche Ross & Co. v. Reddington,

ED oda bae deus te eeenes 5,14

TransAmerica Mortgage Advisors, Inc. v.

lewis, 444 U.S. 11 (1979)... .......2 2c eee 5

Westwood Pharmaceuticals, Inc. v.

37 F. Supp. 1272 (W.D.N.Y. 1990),

affd, 964 F.2d 857 (2d Cir. 1992) ........... 11

Wilson Auto Enterprises, Inc. v. Mobil Oil

Corp., 778 F. Supp. 101 (DRI. 1991) ....... 8,11

Comprehensive Environmental Response,

(CERCLA) 42 U.S.C. §§ 9601-9675 .......... 13

Resource Conservation and Recovery Act

(RCRA), 42 US.C. § 6972, et seq. ....... 4,9, 10

Other Authorities:

Friedman, Contracts and

of Real Property (4th ed. 1984) § 1.2(n) ....... 11

H.R. Rep. No. 98-198, 98th Cong.,

2d Sess., at 48 (1984), reprinted in

1984 US.CCA.N. 5576 ............. 6, 10, 13

Little, Brown & Ca (1965)... .......00 cee eees 7

John F. O'Connell, Remedies, West (1985) ....... 7

IN THE

Supreme Court of the United States

OcToBER TERM, 1995

ALAN MEGHRIG and MARGARET MEGHRIG, —

Petitioners,

. KFC WESTERN, INC.,

t% Respondent.

3

* On Writ of Certiorari to the

| United States Court of Appeals for the Ninth Circuit

ye

“4

” BrigF AMICUS CURIAE OF THE

ar PETROLEUM MARKETERS ASSOCIATION OF AMERICA

a The Petroleum Marketers Association of America

(PMAA) respectfully submits this brief amicus curiae in

<3 support of Alan and Margaret Meghrig in this case

| Written consent to the filing of this brief has been obtained

| from all parties. The original letters authorizing consent

By have been filed concurrently herewith.

r

INTEREST OF AMICUS CURIAE

The PMAA is a federation of 42 state and regional

trade associations representing more than ten thousand

small business petroleum marketers:’ Together, PMAA

members market approximately 46 percent of the gasoline

and 75 percent of the home heating oil sold in America.

In addition, they supply more than one-half of the Nation’s

retail motor fuel facilities?’ approximately three-quarters of

which are operated by independent retailers. PMAA

members are primarily composed of jobbers and other

wholesale distributors of refined petroleum products, as

well as chain retailers that market motor fuels through

service station outlets.

In connection with their businesses, PMAA members

have purchased and sold tens of thousands of parcels of

real property at which petroleum products were stored,

distributed, or sold. Because they served as both the

vendor and vendee of petroleum-contaminated properties,

petroleum marketers have a unique perspective as to the

balance of interests that is reflected in the parties’

determinations of fair market value They also have a

great deal at stake At issue is a decision of the Ninth

A list of the constituent state and regional trade associations

that compose the PMAA is set forth in the Appendix hereto.

2\Independent marketers own or lease more than 50,000 retail

facilities nationwide and store fuel at more than 10,000 addi-

tional “bulk plants.” PMAA’s 1994 member survey discloses

that its members supplied 71,279 of America’s approximately

150,000 retail motor fuel distribution outlets (e.g., gasoline

stations, truck stops, convenience stores). Their 240,000 full-

time employees service this network with roughly 100,000

vehicles.

3

Circuit Court of Appeals® that exposes petroleum

marketers to unlimited liability for the costs of remediating

petroleum contamination at properties in which they had

an ownership interest at one time or another over a period

of decades.

Although PMAA members stand to benefit from the

decision below, to the extent they were vendees of

petroleum-contaminated property, or to be affected

adversely by the decision, to the extent they were vendors,

their collective interest is aligned with that of the Meghrigs.

For the reasons that follow, the Ninth Circuit's decision in

this case, if allowed to stand, would serve to retroactively

reallocate the rights and obligations of parties to settled

real estate transactions. It would place a cloud over the

transactions and jeopardize the viability of many petroleum

marketers who may now be called upon to suffer the costs

of remediating sites they parted with years ago. The

uncertainties created by these contingent liabilities would

stifle the business plans of all but the most ambitious

marketer; it would unsettle real estate markets for

petroleum-related properties, and it would lead to

dislocations in an industry in which market stability and

predictability are essential to plans for growth.

Over the decades, petroleum marketers purchased and

sold tens of thousands of properties at which petroleum

storage, distribution, or dispensing operations were

conducted. An important component in establishing the

fair market value of these properties was a set of common

i as to the risk of exposure of the vendor

and vendee to claims arising out of petroleum

contamination. These understandings were grounded in

The opinion of the Court of Appeals is reported at 49 F.3d 518

(9th Cir. 1995).

4

certain well-defined rules regarding the liability of property

owners to state regulatory agencies, to adjacent property

owners, and to successor land owners. The rules emanate

from the common law and from the various state statutes

that govern petroleum leaks and spills.

The understandings of the vendor and vendee as to the

risks and liabilities of property ownership were reflected in

the purchase price for the property. Properties sold "as is"

or in their “present condition" were conveyed without any

warranty as to condition, thus reflecting the intent of the

vendor and vendee to allocate the risks of property owner-

ship in the context of determining fair market value If a

vendor sold a contaminated property at an appropriately

discounted price, the rules governing real property trans-

actions, including the doctrine of caveat emptor, precluded

any unbargained-for liability to remote vendees. In this

way, the market allocated resources and risks in an orderlv

climate of well-defined rights and responsibilities.

The decision of the Ninth Circuit in this case imputes to

Congress an intent to retroactively reallocate the rights and

obligations of parties to real property transactions without

regard to the understandings on which the transactions

were based. By interpreting the citizen suit provision of

the Resource Conservation and Recovery Act (RCRAF’ to

authorize a private right of action for money damages,

albeit in the form of “equitable restitution,” the court

created a remedy so broad in scope as to effectively pre-

empt the more limited state remedies and defenses which

had heretofore governed the parties’ actions. The ultimate

consequence of the ruling is enormous. It calls into

question the understandings on which thousands of

bargained-for transactions were grounded and subjects

them to scrutiny on the basis of ruies that were never

imagined when the parties set out to define their respective

obligations.

#42 U.S.C. § 6972(a)(1)(B). ‘

5

The decision of the Ninth Circuit rests on the notion

that Congress intended these consequences notwith-

standing the absence of any explicit reference in RCRA’s

citizen suit provision to a private right of action for money

damages. It construed the language “to take such other

action as may be necessary” to include the full range of

equitable remedies, including "restitution," to be targeted,

in the absence of a statute of limitations, to each vendor

in the chain of title

For the reasons that follow, the presumption that

Congress had the will to effect such enormous change

cannot be based on so little in the way of evidence of

congressional intent. Indeed, it is clear that the decision of

the court below rested not on evidence of congressional

intent, but on a conclusion that “public policy concerns"

favor a restitutionary remedy. It is not the role of the

federal courts, however, to "engraft a remedy on a statute,

no matter how salutary, that Congress did not provide”

California v. Sierra Club, 451 U.S. 287, 298 (1981)

(White, J.).

A. The Ninth Circuit Erred in Failing to Apply

the Precedents of this Court that Establish

Standards for Implied Rights of Action

In Cort v. Ash, 422 U.S. 66 (1975), this Court set out

four standards for determining whether a private right of

action exists in a statute. They are: (i) whether the plaintiff

is in the class for whose benefit the statute was enacted,

(ii) whether the legislative history evidences an intent to

create a cause of action, (iii) whether the proposed remedy

is consistent with the statutory scheme, and (iv) whether

the cause of action is one traditionally a matter of state

law. In later decisions, the Court restructured the inquiry,

stating that congressional intent is the determinative factor,

and that the other three are indicative of its presence or

absence Jouche Ross & Ca v. Reddington, 422 U.S.

560, 575-576 (1979); TansAmerica Mortgage Advisors,

Inc. v. Lewis, 444 U.S. 11, 18 (1979). The central focus

of the inquiry, therefore, is whether Congress intended to

create a remedy.

The focus of the decision below is not on congressional

intent. On the contrary, it assumes that congressional

intent is evident in an explicit authorization for courts “to

take such other action as may be necessary," which the

court construed as including equitable remedies such as

restitution. In effect, the Ninth Circuit concluded that it

was not recognizing an implied right of action; rather, it

was giving effect to an express right of action for

restitutionary relief2’

In order to accomplish this result, the court indulged in

two assumptions, neither of which was subjected to even

a cursory analysis. First, the court agreed with KFC that

“its damages claim was actually a claim for ‘equitable

restitution.’" KFC v. Meghrig, 49 F.3d 518, 519 (9th Cir.

1995). Second, it concluded that an equitable remedy,

such as restitution, is merely an adjunct to the type of

injunctive relief that is indisputably authorized by the

statute and encompassed in the language “such other

action as may be necessary... ." This assumption was

necessary to conform the remedy to what Congress clearly

intended as the “equitable authority of Section 7003.”

H.R. Rep. No. 98-198, 98th Cong., 2d Sess., 48 (1984),

reprinted in 1984 U.S.C.C.A.N. 5576, 5607. As will be

developed more fully below, however, neither of these

assumptions is valid.

*/The approach taken by the court below stands in stark contrast

to the one applied by the Eighth Circuit Court of Appeals in

Furrer v. Brown, 62 F.3d 1092 (8th Cir. 1995), which examined

the identical issue. The Eighth Circuit applied the factors set

out in Cort v. Ash and concluded that RCRA does not authorize

a private right of action for monetary remedies.

Private Right of Action for Money Damages

Restitution is an equitable remedy that attempts to

restore a plaintiff to the position it would have been in had

there been no wrongful act committed by the defendant.

See, eg., Porter v. Warner Holding Co, 328 U.S. 395,

402 (1946). The remedy is restorative in nature; on the

basis of equitable principles, it attempts to reimburse the

plaintiff for what was unlawfully acquired from him. The

most distinctive feature of restitution is that liability is

based on, and recovery is usually measured by, benefit to

the defendant rather than harm to the plaintiff In short,

restitution is based upon the gains to the defendant which

would be unjust for him to retain2’

The remedy imposed by the court below is more

mechanical in its approach than anything that can be

characterized as restitutionary. It requires any party who

contributed in the past to a current endangerment to

reimburse the plaintiff for the costs of cleaning up a site

Damages are measured by the amount of the plaintiff's

costs of remediation; there is no attempt to determine

whether the defendant was unjustly enriched or whether

a reimbursement in the amount of the remediation costs

would restore the status quo ante.

Assuming that the wrongful act of the defendant is its

contribution to the endangerment, the aggregate of the

plaintiff's clean-up costs may be greater than necessary to

restore the plaintiff to the position it would have been in

had the wrongful act not occurred. Were the property not

contaminated, the plaintiff may never have been in a

*Douglas Laycock, Modern American Remedies, 462.

John F. O'Connell, Remedies, 72.

position to purchase it. Clearly, the range of options

available to a vendor of clean property is significantly

greater than would be the case if the property were

polluted with petroleum hydrocarbons. More than likely,

the price at which the plaintiff purchased the property

would have been greater in the event the property were

clean at the time of sale. Assuming for the moment that

the purchase price for the property was discounted by the

estimated amount of clean-up costs, reimbursement in the

manner prescribed by the court below would unjustly

enrich the plaintiff, KFC.

Moreover, "[b]uyers of contaminated land, unlike the

victims of negligent acts, are in a position to protect

themselves through contract or by refusing to conclude a

transaction." Hydro-Manufacturing, Inc. v. Kayser-Roth

Corp., 640 A.2d 950, 956 (Rl. 1994). A prospective

buyer, for example, "can bargain with the seller for security

or indemnity against unknown defects." Wilson Auto

Enterprises, Inc. v. Mobil Oil Corp., 778 F. Supp. 101, 105

(D.R.1. 1991). Even where no security is obtained by the

buyer, and there is no reduction in the purchase price, the

property may have a value to the buyer that is far in

excess of its fair market value. Whether reimbursement is

equitable, therefore, and whether the vendor has been

unjustly enriched as a result of remediation by the vendee,

it is subject to numerous market-based and other policy

considerations, among which is whether a vendee who

purchases property after a satisfactory inspection assumes

all risk of liability from petroleum contamination.

The Ninth Circuit did not, however, appear concerned

with the intricacies of —— a truly restitutionary

remedy. its conception of the remedy envisioned by

Congress is one in the nature of indemnity. See KFC,

supra, at 524. ("[T]he innocent private party, like KFC,

who purchases already-contaminated property, often must

clean the property immediately and recover secondarily

from the actual polluter"). Its aim is narrow; that is, to

compensate the vendee for the costs of remediation on the

9

assumption that a “right to reimbursement" would

encourage prompt cleanups” As such, it is functionally

no different from compensatory damages.

2. The Citizen Suit Provision of RCRA

Was not Intended by Congress as a

Private Right of Action for Damages

The RCRA citizen suit provision provides in pertinent

part that:

The district court shall have juris-

diction .. . to restrain 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 referred to

in [8 6972(a)(1)(B) (the endangerment

provision)] [and] to order such person to

take such other action as may be

necessary, or both... .

42 U.S.C. § 6972(a).

In construing the “such other action as may be necessary,"

language to include a private right of action for damages,

the court below crafted a broad-based remedy that

effectively abrogates the various defenses available to the

defendant under the common law. Thus, the court has

created a “super remedy" that supersedes and renders

meaningless the traditional common law remedies available

to a vendee against the vendor of real property. Congress

could not have intended to create such a remedy and, at

"See 49 F.3d at 524. ("The right to reimbursement becomes

important to the Administrator only when contamination requires

prompt attention, which is always the case for private citizens

who are ordered to remedy contamination.").

10

the same time, to preserve state law remedies as an

adjunct to the equitable remedies available under RCRA.

In RCRA, Congress inserted a savings clause which

preserves a person's rights “under any statute or common

law... to seek any other relief." 42 USC. § 6972(f).

The legislative history of the 1984 amendment to § 6972

reflects the awareness of Congress that these state law

claims would be instituted in conjunction with a citizen's

suit under RCRA to abate an imminent hazard?’ In fact,

the legislative history of the 1984 amendment suggests a

congressional awareness that the state and federal actions

would be instituted in tandem, the federal action for

injunctive relief to abate the endangerment and the state

causes of action to seek reimbursement for the losses

associated with petroleum contamination22 In any

event, the congressional assumptions evident in the legis-

lative history would make no sense if the citizen’s suit

provision were interpreted to include the private damage

remedy envisioned by the Ninth Circuit. For the reasons

set forth below, the state remedies would be useless sur-

plusage in relation to the more potent federal cause of

action.

Where, as here, a vendee sues the vendor of real

property, common law defenses are often available to bar

the claim. In jurisdictions that adhere to the doctrine of

caveat emptor, a seller cannot be held responsible for

defects, such as petroleum contamination, existing in the

2H.R. Rep. No. 98-198, 98th Cong., 2d Sess., 48 (1984),

reprinted in 1984 U.S.C.C.A.N. 5576, 5612.

1°/See id. ("Although the Committee has not prohibited a citizen

from raising claims under state law in a Section 7002 action,

the Committee expects courts to exercise their discretion

concerning pendent jurisdiction in a way that will not frustrate

or delay the primary goal of this provision, namely the prompt

abatement of imminent and substantial endangerments.").

11

property at the time of sale’ Nor would such defects

afford the purchaser a basis to resist an action for specific

performance of the sales contract, Feldman v. Rucker,

109 S.E.2d 379 (Va. 1959) or, absent an attempt by the

seller to prevent discovery of the defects, to seek recision.

Boris v. Hill, 375 S.E.2d 716 (Va. 1989). The same result

would obtain where the buyer attempts indirectly to

circumvent the rule, such as by claiming that the defects

were the result of the seller’s negligence, Hydro-

Manufacturing, supra; Wilson Auto Enterprises, supra, or

where the purchaser claims that the defects have resulted

in a private nuisance. Westwood Pharmaceuticals, Inc. v.

National Fuel Gas Distribution Corp., 737 F. Supp. 1272,

1282 (W.D.N.Y. 1990), affo, 964 F.2d 85 (2d Cir. 1992).

This is also true where the vendee of real property seeks

compensation for remediation expenses from the vendor on

a theory of common law indemnity. Philadelphia Electric

Ca. v. Hercules, Inc., 762 F.2d 303, 318 (3d Cir. 1985),

cert. denied, 474 U.S. 980 (1985) ("The same policy

considerations that counsel adherence to the rule of caveat

emptor in this situation militate against shifting the loss to

Hercules on an indemnity theory."). See a/so, e.g., Smith

Land & Improvement Corp. v. Rapid-American Corp.,

18 Envtl. L. Rep. 20, 769 (M.D. Pa. 1987). Common law

remedies are also susceptible to being barred by the

applicable statutes of limitations and repose.

The remedy envisioned by the Ninth Circuit is immune

to these defenses. The court below authorized relief in the

form of money damages in a suit by a vendee against the

vendor of real property without regard to caveat emptor

and any statute of limitations” KFC, supra, at 522-

1/Milton Friedman, Contracts and Conveyances of Real Property

§ 1.2(n) (4th ed. 1984) and cases cited therein.

2/The Ninth Circuit does not see the lack of any limitations period

"as a problem.” 49 F.3d at 522-523. In addressing this issue,

(continued...)

12

523. In short, it imputed to Congress an intent to create

a super remedy that imposes strict liability on any party

contributing to an endangerment, irrespective of negligence

or other actionable conduct, and one that is not susceptible

to the traditional common law defenses. Moreover, by

characterizing the remedy as one sounding in restitution,

the court below did not fcreclose the possibility that

restitution could go beyond compensation for clean-up

costs and extend to other areas, such as lost profits or

other business-related damages.

Because the remedy made available to KFC is signifi-

cantly more potent than anything available at common law,

or under state statutes that are subject to a statute of

limitations, it is unlikely that private litigants would rely on

the traditional common law remedies. It is unlikely, there-

fore, that Congress made a point of preserving state law

only to create a remedy that effectively supersedes it!”

It is even more unlikely that Congress could have

intended a remedy that is such a marked departure from

existing law in the absence of some explicit reference in

the statute or in the legislative history. Indeed, the

legislative history indicates a contrary intention. Congress

could not have characterized the citizen's suit provision as

12, continued)

it concluded that “[bly applying equitable defenses such as

laches, courts can alleviate any unfairness that might be created

by the lack of a limitations period for RCRA citizens’ suit.” /d.

In substance, the court below construed congressional intent to

permit the courts unlimited discretion to determine the reach of

the remedy it created on a case-by-case basis.

It is assumed, of course, “that Congress is aware of existing

law when it passes legislation.” Director, VWCP v. Perini North

River Assoc., 459 U.S. 297, 319-320 (1983); Cannon v.

University of Chicago, 441 U.S. 677, 696-697 (1979).

13

conferring “a limited right . . ."** to sue and, at the same

time, to have envisioned a super remedy that broadens the

pihie of eedaniensina waeend endive beating ot

common law.

As the Eighth Circuit concluded in Furrer, referring to

the explicit provision contained in the Comprehensive

Environmental Response, Compensation, and Liability Act

(CERCLA),” Congress would have included an express

provision in RCRA authorizing contribution or indemnity if

such were its intent:

Congress, knowing its CERCLA citizen's

suit provision, did not extend the

available remedies to include a cause of

vision), and wishing to allow such a

remedy in certain cases, enacted

§ 9613/(f)(1) to provide expressly for

62 F.3d at 1096-97. On the basis of the foregoing, there

is No reason to believe that Congress would not have been

equally as clear had it desired to create a CERCLA-type

remedy in RCRA.

1/4.R. Rep. No. 98-198, 98th Cong., 2d Sess., 48 (1984),

reprinted in 1984 U.S.C.C.A.N. 5576, 5612.

1/42 U.S.C. §§ 9601-9675.

15

of hindsight, it attempts to inject into these transactions

contemporary notions of fairness without regard to the

market factors on which the transactions were based. It

exposes thousands of vendors of real property to

unbargained-for liability to remote vendees many years

after the sales of property were concluded, and seriously

threatens the viability of many of them.

The Ninth Circuit's decision was rendered in the

absence of any analysis of these implications and without

Congress has played its part in attempting such a balance

through the enactment of comprehensive statutory

schemes that explicitly define the rights and obligations of

ALFANO, CHTD.

1201 New York Avenue, N.W.

D.C. 20005

202-466-6502

Counsel for Amicus Curiae

Amicus Curiae, Petroleum Marketers Association of

America, is a non-profit trade association comprising the

following associations:

2a

Petroleum Marketers of lowa