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March 1, 2000

Consultants' and Lawyers' Duties to Report Contamination

New York Law Journal

A recent decision by the New York State Department of Environmental Conservation (DEC) expands the duty of environmental consultants to report contamination on their clients' land. The rationale of the decision might also apply to lawyers and to states beyond New York.
Many federal, state and municipal laws require spills of pollutants to be reported to the government. People have received criminal penalties, including jail time, as well as heavy civil fines, for violating some of these requirements. Almost all of these rules apply only to persons who own, operate, or are otherwise in charge of the polluting facility, or who played a direct role in the spill.
A notable exception is found in a portion of DEC's regulations, Part 613, concerning petroleum storage tanks. Section 613.8 provides, "Any person with knowledge of a spill, leak or discharge of petroleum must report the incident to [DEC] within two hours of discovery."
Notwithstanding the broad language of this sentence, most environmental professionals assumed that it implicitly applied only to site owners and operators. That seems to have been the assumption used by a consulting firm, Middleton, Kontokosta Associates, Ltd. (MKA) and its vice president, Donald J. Middleton, Jr., when they agreed to observe the testing of an underground storage tank for a bank that held a mortgage on the property. As another consulting firm drilled holes around the tank, Mr. Middleton viewed dirt from the borings and noticed that their color and odor suggested that they were probably contaminated with petroleum. He did not report this observation to DEC at the time.
The DEC staff started an administrative proceeding against MKA and Mr. Middleton, alleging that they had violated Section 613.8 by not reporting this observation, and sought a $25,000 penalty. The respondents moved to dismiss, and DEC Administrative Law Judge (ALJ) Kevin Casutto granted this motion. He found that "[t]he term 'all persons', as it occurs in 6 NYCRR § 613.8, must be interpreted in the context of the entire regulatory section," and that the statute upon which this section was based -- N.Y. Environmental Conservation Law (ECL) § 17-1743 -- addressed only "owners or operators". Therefore, ALJ Casutto concluded, "The phrase 'any person' must be limited to any regulated person under the regulatory framework; that is, any 'owner or operator'." Since all agreed that MKA and Mr. Middleton were not owners or operators of the site, he dismissed the complaint. In the Matter of Middleton, Kontokosta Associates, Ltd. and Donald J. Middleton, Jr., DEC Case No. R1-6039 (October 14, 1998),
DEC staff appealed to DEC Commissioner John P. Cahill, who reversed ALJ Casutto's decision. DEC, Ruling of the Commissioner (December 31, 1998), 1998 WL 939495. Commissioner Cahill concluded that "[t]he term 'any person' is intended to apply, not only to persons who are 'owners' and 'operators', but also to all other persons with knowledge of a spill, leak or discharge in order to implement the remedial and preventive purposes of the Petroleum Bulk Storage Code, of which § 613.8 is a part." The rationale for requiring "any person" to report a spill to DEC within two hours "is obviously to enable stoppage of ongoing contamination as quickly as possible after detection of a spill," Commissioner Cahill found.
Commissioner Cahill found that § 613.8 is authorized by portions of the ECL beyond § 17-1743. Other statutory sections broaden DEC's rulemaking powers, he concluded, and allow the expansive interpretation of § 613.8 advanced by the DEC staff. Thus the Commissioner remanded the case to the ALJ for further proceedings. He stated that

"there has not yet been an opportunity for clear development of the facts on the record. Staff's claim of entitlement to the relief sought will need to be fully justified. Granting the relief staff seeks in whole or even in part would arguably tend to chill relationships between environmental consultants and their clients. On the other hand, the importance of the Department obtaining prompt reports on spills, leaks and discharges of petroleum cannot be disparaged. These competing factors need to be taken into account in this proceeding."

Professional Responsibility
Respondents had asserted that the engineers' code of professional responsibility requires that engineers shall not reveal facts, data or information obtained in their professional capacity without prior consent of the client or employer, except as authorized or required by law. Mr. Middleton is not an engineer, so ALJ Casutto found that this provision did not apply to him. Commissioner Cahill agreed, and further noted that Mr. Middleton is not an attorney, "and therefore the attorney-client privilege could not be asserted as a basis for his non-disclosure."
Thus Commissioner Cahill seems to be suggesting that a professional may be excused from some reporting obligations if the code of conduct applicable to his field prohibits such a report. This is somewhat confusing, because many of the applicable codes provide, by their own terms, that a duty of confidentiality to clients may be trumped by a law that requires reporting or by supervening considerations of public interest.
For example, the New York Code of Professional Responsibility, DR 4-101(C)(2), provides that "[a] lawyer may reveal ... [c]onfidences or secrets when ... required by law or court order." The rules on this point vary considerably from state to state; the codes of lawyers' ethics in some states say that a lawyer may not breach confidentiality even if a failure to report would violate a statute or would endanger the public, while other states say that under these circumstances a lawyer may (or even must) reveal this information. Rule 1.6 of the American Bar Association's Model Rules of Professional Conduct allows (but does not require) a lawyer to reveal confidential information "to prevent the client from committing a criminal act that the lawyer believes is likely to result in imminent death or substantial bodily harm." This condition of permissive disclosure was not met in the circumstances of the Middleton case.
Moreover, even if Mr. Middleton were an attorney, it would seem unlikely that his observation of a spill would be protected as an attorney-client communication or even as attorney work product. Many states, but not New York, have adopted an evidentiary privilege for information discovered in the course of environmental audits. In few if any states do the environmental audit privilege laws provide that spills that must otherwise be reported are exempt from reporting if they are discovered in the course of an audit.
As to engineers, the codes of conduct of the various engineering societies have not been incorporated into law in the same way as the lawyers' code. The engineering codes also tend to have broad exceptions to their confidentiality rules and allow disclosures when necessary to protect public health, safety or welfare.
Section 613.8 is highly unusual in requiring spill reports by any person "with knowledge". The closest provision in New York environmental law appears to be in DEC's Part 595 regulations, which concern certain releases from chemical storage facilities, and applies to "any employee, agent or representative" of facility owners and operators "who has knowledge of a release."
There have been no reported proceedings against consultants who failed to file reports under Part 595, and the Middleton case is the only such reported proceeding under Part 613. (Why Mr. Middleton and his firm were singled out for prosecution is not apparent from the decisions.) Nor have any cases explored the interrelationship between these regulations and the decisions finding that passive migration of historical underground contaminants does not constitute a "discharge" or "release" of contaminants (a conclusion that raises the question of why discovery of this migration would be reportable).
Several other states have statutes or regulations that seem to require reporting of spills by "any person" or similarly broad categories, regardless of whether the person has any relationship to the entity or facility responsible for the spill: Louisiana, Maine, Massachusetts, New Hampshire, New Jersey, Vermont and the District of Columbia. In some of these states, the rule concerns only spills at underground storage tanks; in others, it is more broadly applicable. So far as I have been able to determine, in none of these states have there been prosecutions of uninvolved persons such as occurred in New York with the Middleton case.
If the Middleton case signals a new policy to pursue professionals who fail to report within two hours the spills (and evidence of spills, such as contaminated drill cuttings) that they observe, then lawyers, engineers and other consultants will have to be extremely cautious; should advise clients in advance of field work that they may have to file immediate reports; and should carry with them at all times the phone number of the National Response Center and the state's spill reporting number. It is hoped that subsequent decisions in this area do not have the effect of discouraging clients from seeking, or professionals from providing, expert help in the conduct of site investigations.


Michael B. Gerrard is a partner with the New York office of Arnold & Porter and a member of the Section's Council. The ABA has recently published his latest book, The Law of Environmental Justice: Theories and Procedures to Address Disproportionate Risk. An earlier version of this article appeared in the New York Law Journal; it is reprinted here with permission.