Pennsylvania: Favorable Decision in Underground Storage Tank Case, PA Supreme Court

03/04/14

Young’s Sales and Service v. Underground Storage Tank Indemnification Board et al, case number 6 MAP 2011, Supreme Court of Pennsylvania

Rawle & Henderson LLP recently obtained a favorable decision from the Pennsylvania Supreme Court in the case of Young’s Sales & Service v. The Underground Storage Tank Indemnification Fund, et al. Carl D. Buchholz, III, Chair of Rawle & Henderson’s Appellate Section, represented the Commonwealth’s Underground Storage Tank Indemnification Fund (“Fund”) in the appeal.

The case involved a claim for coverage submitted by Young’s Sales & Services to the Fund pursuant to the Storage Tank Spill Prevention Act, 35 P.S. § 6021.101 et. seq., for certain remediation fees incurred by Young’s stemming from underground leaks consisting of both gasoline and kerosene discovered in the year 2000 during removal of four underground storage tanks on Young’s property. The Fund determined that Young’s was ineligible for Fund coverage because mandatory tank fees had not been paid on at least one of the four tanks at the time the contamination was discovered, and Young’s had otherwise failed to meet its burden of proving eligibility for Fund coverage.

A panel of the Commonwealth Court of Pennsylvania vacated the Fund’s decision, agreeing with Young’s contention that eligibility for reimbursement for leak-related remediation expenses is on a “per tank” basis, such that if all current fees are paid with respect to any one particular tank at a multi-tank site prior to the discovery of contamination, then the owner should be entitled to recover for the remediation costs associated with that one tank. The Commonwealth Court then remanded the matter back to the Fund for more specific findings on which fees were owed at the time the contamination was discovered and from which tanks the leaks had occurred.

The Pennsylvania Supreme Court granted allowance of appeal to determine whether the Commonwealth Court’s holding that eligibility for recovery from the Fund is on a “per tank” basis misinterprets the purpose of, and misapplies, both federal and state laws requiring mandatory financial responsibility for underground storage tanks and threatens the overall financial sustainability of the Fund itself.

At oral argument before the Supreme Court, Carl Buchholz made three arguments as to why the Commonwealth Court had erred in deciding that eligibility for reimbursement in a multi-tank site is on a “per tank” basis. The first argument was that an “underground storage tank” is defined in the Act as “any one or combination of tanks,” such that the eligibility for reimbursement requirement applies to all the tanks in a multi-tank site.

The second argument was that if there was any ambiguity regarding the requirement for payment of fees on all the tanks in a multi-tank site, the Commonwealth Court failed to give “due deference” to the interpretation of the Underground Storage Tank Indemnification Fund which administers the Act.

The third argument was that the Commonwealth Court’s “per tank” interpretation of the fee requirement under the Act threatened the financial stability of the Fund since tank owners would only be able to pay the tank fees on older underground storage tanks, which are more likely to leak, and not pay fees on newer tanks, so that the amount of fees that would be collected by the Fund to pay remediation expenses would be dramatically reduced.

Each of these three arguments was accepted by at least one of the Justices. The majority of the Court, consisting of Justices Todd, Baer, and McCaffery, agreed with the argument that the Commonwealth Court had failed to give due deference to the Fund’s interpretation of the Act. These Justices held that although the language of the Act regarding payment of fees on all tanks in a multi-tank site was ambiguous, the Commonwealth Court failed to give due deference to the Fund’s interpretation of the Act, as the Fund was the entity the legislature had entrusted with administering the Act. Further, these Justices also agreed with the argument that the tank fee payment requirement had to be applied to all tanks in a multi-tank site or the financial stability of the Fund would be severely threatened.

Justice Saylor on the other hand, joined by Chief Justice Castille, also agreed with the argument that the Fund had acted within its discretion in denying eligibility for Young’s claim. However, these two Justices did not agree that the Fund had correctly determined that the fees on all the tanks in a multi-tank site had to be current in order to obtain reimbursement. Rather, they felt the Fund had acted within its discretion in determining that Young’s did not carry its burden of proving that all fees were current as to the tanks involved in the contamination. Justice Saylor noted that if Young’s had been able to establish that the contamination emanated from tanks on which the fees were current, there might have been coverage.

Lastly, Justice Eakin issued his own opinion, agreeing with the argument that the definition of “tank” in the Act is “one tank or a combination of tanks”, so that the eligibility requirement that the tank fee be current at the time the contamination is discovered applies to all the tanks in a multi-tank site.

Although there was not a clear consensus on the reason to reverse the Commonwealth Court’s holding, the holding of the majority and Justices Saylor and Chief Justice Castille that “due deference” must be given the Fund’s eligibility decisions, should prove extremely helpful to the Fund in future eligibility claims.

Young’s Sales and Service v. Underground Storage Tank Indemnification Board et al, case number 6 MAP 2011, Supreme Court of Pennsylvania

Carl D. Buchholz, III, is Chair of the Maritime, Insurance Coverage and Appellate Sections. His federal appellate practice includes an argument before the United States Supreme Court, as well as numerous arguments before the U.S. Court of Appeals for the Third Circuit. His state appellate practice includes seven arguments before the Pennsylvania Supreme Court, as well as numerous arguments before the Pennsylvania Superior Court and Commonwealth Court. In 2006, the Pennsylvania Supreme Court appointed Carl to the Disciplinary Board of the Supreme Court of Pennsylvania. In 2010, the Pennsylvania Supreme Court designated Carl as Chair of the Disciplinary Board. He graduated from Muhlenberg College in 1967 and Villanova Law School in 1970 where he was a member of the Villanova Law Review and graduated with honors.