Club Quarters World Center Hotel at 140 Washington St. in Manhattan
Club Quarters World Center Hotel at 140 Washington St. in Manhattan (NYLJ/Rick Kopstein)

The owner of a building contaminated with toxic dust after the destruction of the World Trade Center cannot recover money spent on the cleanup because the attacks were an act of war, the U.S. Court of Appeals for the Second Circuit held Friday.

Affirming Southern District Judge Alvin Hellerstein (See Profile), the Second Circuit said that real estate developer Cedar & Washington Associates’ bid for indemnification under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) must fail.

Cedar & Washington had sued the owners of the World Trade Center, their lessees and the airlines whose planes were hijacked by terrorists and flown into the Twin Towers on 9/11, claiming they should be held responsible for the cost of ridding a Washington Street building of contaminated dust.

The circuit had dealt with In Re September 11 Litigation: Cedar & Washington Associates v. The Port Authority of New York and New Jersey, 10-4197, once before, when it directed Hellerstein to determine if an act-of-war defense applied to the company’s claim under CERCLA, 42 U.S.C. §§9601-9675. Hellerstein last year found the defense applied (NYLJ, Mar. 22, 2013).

“We agree,” said Judges Dennis Jacobs (See Profile), Jose Cabranes (See Profile) and Debra Ann Livingston (See Profile) in an opinion Friday. “Although CERCLA’s strict liability scheme casts a wide net, an ‘act of war’ defense avoids ensnarement of persons who bear no responsibility for the release of harmful substances.”

After 9/11, Cedar & Washington began renovating a 12-story office building at 140 Washington St. into the 19-story Club Quarters World Center Hotel.

But in 2004, the company was notified by the New York State Department of Environmental Conservation and the U.S. Environmental Protection Agency that the building might contain finely-ground “WTC Dust” made up of concrete, asbestos, silicon, fiberglass, benzene, lead and mercury. The environmental agencies insisted on a clean up as the price for allowing the renovation to continue, and began remediation work that ended up costing the company $50 million.

Cedar & Washington sought to recover those costs, but Hellerstein held in 2010 that its claim was barred by the statute of limitations, and in any event, the company had failed to establish that there had been a “release” or “disposal” of hazardous substances within the meaning of CERCLA.

After Hellerstein affirmed the act-of-war defense, the company returned to the circuit, where oral argument was held on July 12, 2013.

Writing for the panel Friday, Jacobs said “CERCLA was not intended to create liability for the dispersal of debris and wreckage from a catastrophe that was indistinguishable from military attack in purpose, scale, means and effect.”

Jacobs said the labeling of the 9/11 attacks as acts of war by both the Congress and President George W. Bush is a classification that “warrants notice, and perhaps some deference, in the CERCLA context.”

“The decisive point is that the attacks directly and immediately caused the release, and were the ‘sole cause’ of the release because the attacks ‘overwhelm[ed] and swamp[ed] the contributions of the defendant[s],” he said.

There are three exceptions to strict liability under CERCLA in §107(b): an act of God, an act of war, and an act or omission of an unrelated third party and both Hellerstein and the Second Circuit said those exceptions are read narrowly.

Jacobs said CERCLA was intended to make people who are responsible for damage, environmental harm or injury caused by chemical poisons pay for it, but he said this “purpose, however broad, is not advanced by imposing CERCLA liability on the airlines and the owners (and lessors) of real estate.”

On 9/11, he said, “The attacks wrested from the defendants all control over the planes and the buildings, obviated any precautions or prudent measures defendants might have taken to prevent contamination, and located sole responsibility for the event and the environmental consequences on fanatics whose acts the defendants were not bound by CERCLA to anticipate or prevent.”

The judge drew a parallel between the “act of war” and the “act of God” defense, which he said are similar on causation. He refuted Cedar & Washington’s argument that the WTC dust was made worse by the actions or negligence of the airlines or the property owners.

“It would be absurd to impose CERCLA liability on the owners of property that is demolished and dispersed by a tornado,” he said. “A tornado, which scatters dust and all else, is the ‘sole cause’ of the environmental damage left in its wake notwithstanding that the owners of flying buildings did not abate asbestos, or that farmers may have added chemicals to the soil that was picked up and scattered.”

Sari Kolatch, partner, at Cohen Tauber Spievack & Wagner argued for Cedar & Washington.

Leah Warden Sears, a partner at Schiff Harden argued for the Port Authority.

“We are very, very pleased with the result, and I think the Second Circuit got it just right in this particular set of circumstances,” Sears said. “There are very few act-of-war cases. The court is pretty clear that this is a narrow ruling that only applies in the context of CERCLA.”

Richard Williamson and Thomas Egan, partners at Fleming Zulack Williamson Zauderer argued for Silverstein Properties.

Christopher Walsh, partner at Gibbons, P.C. in Newark represents Host Hotels and Resorts.

Peter Winik, partner at Latham & Watkins, represents Westfield WTC and Westfield Corp.

Charles Rysavy partner at K&L Gates in Newark represented Con Edison.

Maura Monaghan, a partner at Debevoise & Plimpton represents American Airlines.

Jeffrey Ellis, a partner at Quirk and Bakalor represents United Airlines.