4 CERCLAs PURPOSE CERCLAs broad remedial purpose is to facilitate the prompt clean up of hazardous waste sites and to shift the cost of environmental response from the taxpayers to the parties who benefited from the wastes that caused the harm. Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613.
5 WHAT MUST BE PROVED? 1. Defendant falls within at least one of the four categories of responsible persons; 2. Hazardous substances are disposed at a facility; 3. There has been a release or threatened release of hazardous substances from the facility; and 4. The plaintiff incurred response costs.
6 WHO IS LIABLE? 1. Owners and operators 2. Past owners and operators 3. Persons who arranged for disposal or treatment of hazardous substances, and 4. Transporters of hazardous substances. 42 U.S.C. 9607(a)(1)-(4)
7 The definition of arranger An arranger is a person who by contract, agreement, or otherwise arranged for disposal or... treatment, or arranged with a transporter for disposal or treatment, of hazardous substances owned or possessed by such person. 42 U.S.C. 9607(a)(3)
8 Treatment or Disposal Defined by Solid Waste Disposal Act (42 U.S.C. 6903) Treatment is any method, technique, or process, including neutralization designed to change the physical, chemical, or biological character or composition of any hazardous waste, so as to neutralize such waste or so as to render such waste nonhazardous, safer for transport, amenable for recovery, amenable for storage, or reduced in volume.
9 Treatment or Disposal Disposal is discharge, injection, dumping, spilling, leaking or placing, of any solid waste or hazardous waste into or on 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.Disposal is discharge, injection, dumping, spilling, leaking or placing, of any solid waste or hazardous waste into or on 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.
10 Scope of Liability Unless a statutory defense or exclusion, covered persons are liable for all costs of removal or remedial action incurred by the Unites States Government or a State or an Indian tribe not inconsistent with the national contingency plan and any other necessary costs of response incurred by any other person consistent with the national contingency plan. 42 U.S.C. 9607(a)
11 WHAT DID ALL THIS MEAN? Devils Dictionary, The World Publishing Company (1911) said it best. It defined: Lawful, adj. Compatible with the will of a judge having jurisdiction.Lawful, adj. Compatible with the will of a judge having jurisdiction. PROVIDED THAT YOU HAVE A GOOD LAWYER. Lawyer, n. One skilled in circumvention of the law.Lawyer, n. One skilled in circumvention of the law.
12 WHAT DID ALL THIS MEAN? WHICH, OF COURSE, MEANT YOU HAD TO BE PATIENT. Patience, n. A minor form of despair, disguised as a virtue.Patience, n. A minor form of despair, disguised as a virtue. AND DEAL WITH POSITIONS WHICH WERE ABSURD. Absurdity, n. A statement or belief manifestly inconsistent with ones own opinion.Absurdity, n. A statement or belief manifestly inconsistent with ones own opinion.
14 ISSUES ADDRESSED 1. Whether a seller of a useful product was an arranger by virtue of foreseeable spills at a distributors facility? 2. The nature of evidence sufficient to establish a basis for apportioning liability for clean up costs.
15 BURLINGTONS FACTS 1960 Brown & Bryant, Inc. (B&B) began operating an agricultural chemical distribution business on a 3.8 acre parcel. 1975 B&B leased another.9 acres from Burlington and Union Pacific. B&B stored and distributed pesticides on the site. - Dinoseb sold by Dow - D-D and Nemagon sold by Shell
16 Burlingtons Facts Over 28 years, spills, equipment failures, and rinsing of tanks and trucks contaminated soils and groundwater. D-D leaked during unloading from trucks to bulk storage tanks. B&B accepted delivery on arrival. Shell did not directly control or supervise the activities that resulted in the leaks.
17 Burlingtons Facts Shell was aware of the leaks and would reduce the purchase price by an amount related to the loss due to leakage and spills and offered discounts to incentivize distributors to make facility improvements and eventually required tanks to be inspected. Even though improved, leaks still occurred. Even though improved, leaks still occurred.
18 Burlington Facts California Dept. of Toxic Substances Control and later EPA investigated the Site in 1983. Investigations showed significant soil and groundwater contamination at the Site. B&B ceased operations and became insolvent in 1989. State and EPA undertook cleanup and spent 8 million by 1989. State and EPA sued Shell and railroads for cost recovery under section 107.
19 Trial Court Opinion Over 500 findings of fact. Railroads liable as owners Railroads liable as owners Shell liable as arranger because of delivery of hazardous substances knowing that accidental releases routinely occurred incident to delivery; thus, generation of waste was a known and inherent part of the sales transaction.
20 Trial Court Opinion Liability was divisible. Railroads (RR): Court multiplied the percentage of facility owned by RR (.9/4.7=19.1%); duration B&Bs activities on RR parcel compared to duration overall (13/29=45%), fraction of contaminants on RR parcel (66% less D-D) times 50% fudge factor = 9% of total response costs. Shell: Volume from leaks divided by total chemicals spilled = 6% of total response costs. U.S. and State: responsible for orphan share of B&B.
21 9 th Circuit Reversed on apportionment Apportionment lacked a reasonable basis and evidence was not specific and concrete enough of divisible harm Affirmed on arranger liability Leaks were a necessary part of the delivery process.
22 SUPREME COURTS HOLDING REVERSED. The Court of Appeals erred in holding Shell liable as an arranger under CERCLA for the costs of remediating environmental contamination at the Arvin California Facility, and The Court of Appeals erred in setting aside the Trial Courts judgment on apportionment.
23 ARRANGER LIABILITY FOR THE SALE OF USEFUL PRODUCTS
24 BURLINGTONS REASONING The Court described the two existing extremes - cases of absolute liability and no liability: Liability under section 9607(a)(3) if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance. No liability if merely sell a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination.
25 BURLINGTONS REASONING The Court recognized the existing murky middle: "Less clear is the liability attaching to the many permutations of "arrangements" that fall between these two extremes - cases in which the seller has some knowledge of the buyers planned disposal or whose motives for the sale of a hazardous substance are less than clear."
26 BURLINGTONS REASONING Conclusion: Intent to dispose is required. Arrange implies action directed at a specific purpose. Consequently, under the plain language of the statute, an entity may qualify as an arranger under 9607(a)(3) when it takes intentional steps to dispose of a hazardous substance. An entity must have entered the sale with the intention that at least a portion of the product be disposed of by leaking, spilling, dumping, or otherwise.
27 BURLINGTONS REASONING Did Shell intend to dispose? Although Shell was aware that minor, accidental spills occurred during the transfer of product from common carriers to storage tanks after the product arrived at the facility, the evidence did not support an inference that Shell intended such spills to occur. Why?
28 Burlingtons Reasoning 1.Shell took numerous steps to encourage its distributors to reduce the likelihood of such spills by providing them with detailed safety manuals, requiring them to maintain adequate storage facilities, and providing discounts for those that took safety precautions. 2.Although unsuccessful, mere knowledge that spills and leaks continued to occur is insufficient for concluding that Shell arranged for disposal.
29 THE NEW EXTREMES NO LIABILITY IF : (1) an entity has knowledge alone that a product will be leaked, spilled, dumped or otherwise discarded, particularly when the disposal occurs as a peripheral result of a legitimate sale of an unused, useful product. (2) an entity sells a new and useful product and the purchaser, unbeknownst to the seller, disposed of the product in a way that led to contamination. (same as before)
30 THE NEW EXTREMES LIABILITY IF : An entity enters into a transaction with the sole purpose of discarding a used and no longer useful hazardous substance. (same as before)
31 The Middle The many permutations of "arrangements" that fall between these two extremes. Cases in which - the seller has some knowledge of the buyers planned disposal, - the seller fails to take corrective actions, and - the sellers motives for the sale of a hazardous substance are less than clear.
32 Did Anything Change? Actually, adv. Perhaps, possibly. Ask you have faith in what I am about to tell you. Faith, n. Belief without evidence in what is told by one who speaks without knowledge, of things without parallel.Faith, n. Belief without evidence in what is told by one who speaks without knowledge, of things without parallel. The Devils Dictionary (1911)
33 Did Anything Change? 1. If just have knowledge that leaks are necessary part of the sale, no liability. 2. Arranger must have intent to dispose. 3. The standard for showing divisible harm is not exacting. 4. Taking corrective action is evidence of intent not to dispose and does not equate to control over disposal.
34 INTENT TO DISPOSE PRIOR LAW : The useful product defense does not apply when the purpose of a sale is to get rid or treat a waste or byproduct. State of California v Summer Del Caribe, Inc., 821 F.Supp. 574, 581 (N.D. Cal. 1993)(solder dross) BURLINGTON : It is plain from the language of the statute that CERCLA liability would attach under section 9607(a)(3)if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance. (Substantially same as before)
35 Intent is Required PRIOR LAW : An entitys knowledge that its product would be leaked, spilled, dumped or otherwise discarded is an arrangement for disposal. BURLINGTON : In some instances an entitys knowledge that its product will be leaked, spilled, dumped or otherwise discarded may provide evidence of the entitys intent to dispose of its hazardous wastes.
36 MERE SALE PRIOR LAW: A manufacturer who does nothing more than sell a useful product, albeit hazardous product to an end user, has neither generated, transported, nor arranged for the disposal of hazardous waste. City of Merced v. Fields, 997 F.Supp. 1326, 1332 (E.D.Cal. 1998) citing cases as, Dayton Indep. School Dist. V. U.S. Mineral Products Co., 906 F.2d 1059, 1065 (5 th Cir. 1990)(fact question on whether mere sale of PCE). NOW: same as before.
37 MERE SALE PRIOR LAW: Manufacturer that sold product containing small amounts of hazardous substance is not liable as arranger because it was unaware of how substances would be disposed of decades later. Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313 (11th Cir. 1990)(Manufacturer sold transformers with PCB and purchaser sold after useful life to metal recovery company) NOW: Same as before.
38 BYPRODUCTS PRIOR LAW: The useful product defense does not apply when a products only remaining purpose is to reclaim material, Chesapeake and Potomac Telephone Co. of Virginia v. Peck Iron & Metal Co., Inc., 814 F.Supp. 1269, 1275 (E.D. Va. 1992)(lead from batteries), or when the material could not be used without processing. State of Cal. on Behalf of State Dept. of Toxic Substances v. Summer Del Caribe, Inc., 821 F.Supp. 574, 581 (N.D. Cal. 1993)(solder dross).
39 BYPRODUCT? NOW : LIABILITY if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance. If motives for the "sale" of a hazardous substance are less than clear and Seller has some knowledge that product may be leaked, dumped, spilled or otherwise discarded.
40 BYPRODUCTS THIS WILL BE A CASE BY CASE FACT SPECIFIC INQUIRY.
41 DOJ POSITION ON BYPRODUCTS BURLINGTON directly relevant to sale of an unused and 100% useful product. BURLINGTON directly relevant to sale of an unused and 100% useful product. In the traditional case involving getting rid of wastes and byproducts, unlikely to have much impact. In the traditional case involving getting rid of wastes and byproducts, unlikely to have much impact. Does not prevent liability for the disposal of a partially useful product. To be liable a party need only to have intended that a portion of the product be disposed of. Does not prevent liability for the disposal of a partially useful product. To be liable a party need only to have intended that a portion of the product be disposed of.
42 DOJ STATEMENTS RE CASE See presentation by Joanna Jerison, Chief, Superfund Legal Office, EPA Region 1 Head at http://www.FoleyHoag.com www.FoleyHoag.com See speech by John C. Cruden, Acting Assistant Attorney General http://www.usdoj.gov/enrd/
43 DIRECTING PRODUCT HANDLING PRIOR LAW : Dry cleaning machine manufacturer liable as arranger for chemicals contaminating property used for dry cleaning, when: Manufacturers manuals advised machine operators to dispose of chemicals in the public sewer. Manufacturer knew its machines would discharge dry cleaning materials. Manufacturer initially supplied and filled the machines with dry cleaning chemicals. Vine Street LLC v. Keeling ex rel. Estate of Keeling, 460 F.Supp.2d 728 (E.D. Tex. 2006)
44 DIRECTING PRODUCT HANDLING NOW : Taking reasonable corrective actions is evidence of lack of intent to dispose. Taking unreasonable actions could likewise be evidence of intent to dispose.
45 SPENT MATERIALS PRIOR LAW : Removal and release of hazardous substances was not only the inevitable consequence, but the very purpose of the transaction. Cadillac Fairview/California, Inc. v. United States, 41 F.3d 562, 565 (9 th Cir. 1994)(rubber companies sent contaminated styrene to Dow for redistillation when the styrene became too contaminated). NOW :Same as before
46 Spent Materials PRIOR LAW: United States v. A & F Materials Co., 582 F.Supp. 842 (S.D. Ill. 1984)(spent aluminum caustic) Chesapeake and Potomac Telephone Co. of Virginia v. Peck Iron & Metal Co., Inc., 814 F.Supp. 1269, 1275 (E.D. Va. 1992) (spent lead batteries) NOW: Same as before. Used and no longer useful products.
47 PRICE AS A FACTOR PRIOR LAW : Price is one factor to consider in determining arrangement for disposal or the sale of a useful product. De-linking of the price of a substance from the market value may support a conclusion that a price is nominal and the sale only a disguised disposal. California Dept. of Toxic Substances Control v. Alco Pacific, Inc., 508 F.3d 930, 938 (9 th Cir. 2007)(dross and slag purchased for lead value). NOW : Not addressed by Supreme Court, but should be same as before under fact specific inquiry on case by case basis.
48 CONTINUING OWNERSHIP AND CONTROL PRIOR LAW: Although continuing ownership and control of a hazardous substance is evidence of arranging for disposal, it is not necessary for arranger liability. Requiring continuous ownership or control of hazardous substances would make it easy for parties who wanted to dispose of hazardous substances to escape responsibility by going through a sale. Catellus Development Corp. v. U.S., 34 F.3d 748, 752 (9 th Cir. 1994)(used batteries).
49 Continuing Ownership and Control NOW: Reasonable corrective actions (control) is evidence of lack of intent to dispose. Significantly, the Supreme Court did not state that continuing ownership is necessary for arranger liability.
50 TOLLING/CONTROL PRIOR LAW : Customer supplied raw material to chemical processing plant at no charge. Plant used materials to make chemicals, which it would sell to the customer for a fee. Customer refused delivery. The chemicals caused contamination. Refusal was evidence of authority to control disposal and of intent to dispose. Sea Lion, Inc. v. Wall Chemical Corp., 974 F.Supp. 589, 595 (S.D. Tex. 1996)..
51 TOLLING/CONTROL A case specific inquiry, same as before.
52 CHARACTERIZATION AS A SALE PRIOR LAW: When a defendant characterizes a transaction as a sale, a court must examine the transaction to determine whether a statutorily defined disposal or treatment has occurred. U.S. v. Aceto Agr. Chemicals Corp., 872 F.2d 1373, 1381 (8 th Cir. 1989)(Manufacturers hired company to reformulate pesticide from technical grade to commercial grade and return to manufacturer).
53 Characterization As A Sale NOW: Courts have concluded that the determination whether an entity is an arranger requires a fact intensive inquiry that looks beyond the parties characterization of the transaction as a disposal or sale and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLAs strict liability provisions… Although we agree that the question whether 9607(a)(3) liability attaches is fact intensive and case specific, such liability may not extend beyond the limits of the statute itself.
54 A FACT SPECIFIC INQUIRY PRIOR LAW: Courts determine arranger liability taking into account the totality of the circumstances, Geraghty and Miller, Inc. v. Conoco, Inc., 234 F.3d 917 at 929 (5 th Cir. 2000)(fact issue re control at site). Whether an arrangement for disposal exists depends on the facts of each case. Sea Lion, Inc. v. Wall Chemical Corp., 974 F.Supp. 589, 595 (S.D. Tex. 1996).
55 A FACT SPECIFIC INQUIRY NOW: We agree that the question whether 907(a)(3) liability attaches is fact intensive and case specific.
57 S.Ct. REAFFIRMED LEGAL STANDARDS FOR JOINT AND SEVERAL LIABILITY - Apportionment is proper when there is a reasonable basis for determining the contribution of each cause to a single harm. - Not all harms are capable of apportionment – defendants bear the burden of proving a reasonable basis for apportionment. - When two or more causes produce a single, indivisible harm, each of the causes is responsible for the entire harm. - Equitable considerations play no role in apportionment. Apportionment is proper only when the evidence supports divisibility of the damages.
58 SO WHAT CHANGED? ARGUABLY THE LEVEL OF PROOF REQUIRED. BEFORE: PROOF OF PRECISE PORTION ATTRIBUTABLE TO A PRP. NOW: APPROXIMATIONS AND INFORMAL ESTIMATES MAY BE SUFFICIENT IF SOME BASIS IN FACT.
59 So What Changed? NOTE: BURLINGTON INVOLVED: SMALL NUMBER OF DEFENDANTS AND PRODUCTS, A SMALL SITE, AND A SINGLE OPERATOR. TIME WILL TELL IF STANDARD IS RELAXED IN MATTERS WITH MULTIPARTY SITES WITH NUMEROUS CONTAMINANTS OF VARYING TOXICITY AND MOBILITY FROM VARYING POLLUTANTS AND VARYING CONTAMINATION LEVELS IN SOIL AND GROUDWATER.
60 POSSIBLE IMPLICATIONS 1. More PRPs have a higher likelihood of showing divisibility, such that EPA leverage in asserting joint and several liability is diminished, 2. EPA must cover orphan shares, 3. State and federal budgets may be affected, and 4. If government must assume more cost, lawmakers may reinstate some form of Superfund Tax.