Burlington Northern Continues to PERColate

Posted on January 26, 2015 by Robert M Olian

The Fifth Circuit has just weighed in with a significant interpretation of the Supreme Court’s landmark decision in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). In a case involving “arranger” liability under CERCLA (the Comprehensive Environmental Response, Compensation and Liability Act), the Fifth Circuit on January 14 overturned a district court judgment that had held BorgWarner liable for leaks of perchloroethylene (PERC) from equipment sold by an affiliate of BorgWarner’s corporate predecessor. Vine Street LLC v. Borg Warner Corp., No. 07-40440 (Jan. 14, 2015)

The Fifth Circuit held there was no “intent” to dispose of PERC even though the dry cleaning equipment was designed with the knowledge that some PERC would inevitably be mixed in with the water that the system was designed to discharge. Because PERC was a useful product and the intent was to reclaim it rather than dispose of it, the Fifth Circuit strictly applied Burlington Northern’s holding that arranger liability requires an intent to dispose and remanded the case to the district court with instructions to enter judgment in favor of BorgWarner.

Vine Street usurps the Fifth Circuit’s earlier “nexus” test (the test in effect when the District Court issued its ruling), which was based on a totality of the circumstances, and gives further ammunition to those defending against CERCLA liability for releases incidental to the sale of a useful product.