Posted on February 5, 2010 by Bradley Marten
It has been nearly nine months since the U.S. Supreme Court decided Burlington Northern and Santa Fe Railway Company v. United States(BNSF),[1] a case some called a landmark decision that would change the Superfund practice.[2] In some respects that has turned out to be the case, in others it has not. There have been several reported cases citing BNSF, and all of them confirm that the decision requires both the EPA and potentially responsible parties (“PRPs”) to engage in a more fact-intensive inquiry into “arranger” liability. Less clear, however, is how the apportionment of liability among liable parties in private contribution cases will be affected, given the relatively small number of reported decisions.
Readers will recall that the BNSF decision had two elements: (1) it addressed the scope of arranger liability under CERCLA, and (2) it affirmed the view of several circuit courts that PRPs can avoid joint and several liability if a “reasonable basis” to apportion liability exists. This article reviews how lower court decisions issued subsequent to BNSF have applied those two components.
A Review of the BNSF Facts
BNSF was issued on May 4, 2009. The 8-1 decision written by Justice Stevens arose out of a fairly common fact pattern for CERCLA cases: a small chemical distributor Brown & Bryant, Inc. (“B&B”) owned and operated a facility that repackaged agricultural chemicals. B&B’s operation was on a 3.8-acre parcel, a portion of which was leased from predecessors to BNSF and the Union Pacific Railroad. Neither railroad played any part in B&B’s operations. The other PRP, Shell Oil, sold a soil fumigant to B&B which was shipped via commercial carrier FOB destination, meaning that the buyer was responsible for the product once it arrived at the facility.
After the State of California ordered B&B to clean up soil and groundwater contamination, B&B went out of business and then EPA listed the site on the National Priorities List. Both railroads and Shell were named as PRPs. The railroads were ordered to clean up the entire site, even though the portion of the site that they owned did not require remediation. Shell was named a PRP for having delivered chemicals to the site which it knew or should have foreseen would be spilled by B&B. In 1996, the United States and the State of California filed a cost recovery action against the railroads and Shell, seeking to recover over $8 million in response costs.
The Supreme Court’s Opinion
1. Arranger Liability
In affirming that “arranger liability” under CERCLA must be determined on a case-by-case basis, the Court set up a continuum. At one end are cases where an entity entered into a transaction “for the sole purpose of discarding a used and no longer useful hazardous substance.”[3] In such cases, there is a clear intent to discard the product, and therefore liability under section 107(a)(3). On the other end are situations where a company sells a useful product and “the purchaser of that product later, and unbeknownst the seller, disposed of the product in a way that led to contamination.”[4] The Court acknowledged that there were “many permutations of ‘arrangements’ that fall between these two extremes.” In these cases, based on a “plain reading” of the CERCLA statute, the Court held that “an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance.”[5] Applying this statement of the law to the facts, the Court held that Shell’s mere knowledge of the spills did not amount to an “intent” that they be spilled or otherwise disposed of and that Shell was therefore not liable as an arranger.
2. Apportionment
BNSF highlighted that the CERCLA statute does not contain joint and several liability language. Instead, the notion that PRPs should be held jointly and severally liable is a judicial doctrine grounded in Section 433A of the Restatement (Second) of Torts. Applying the Restatement, the Court held – as had several circuit courts previously– that “apportionment is proper when there is a reasonable basis for determining the contribution of each cause to a single harm.”[6]
Where multiple parties cause a single harm, “CERCLA defendants seeking to avoid joint and several liability bear the burden of proving that a reasonable basis for apportionment exists.”[7] In BNSF, while both the district court and the Ninth Circuit had found that apportionment of the harm was possible, they disagreed on how to allocate responsibility. The district court came up with a nine percent allocation to the railroads. The Ninth Circuit criticized the evidence on which the district court had relied, finding that it was insufficient to establish the “precise proportion” of the Railroads’ responsibility. The Supreme Court affirmed the district court’s approach, holding that the evidence supporting apportionment need not be precise. There must simply be “facts contained in the record reasonably support[ing] the apportionment of liability.”[8]
Lower Court Decisions Applying BNSF
Cases Applying the Court’s Arranger Liability Ruling
Of the four published cases that have substantively applied BNSF in the context of arranger liability, all suggest that lower courts are taking seriously the Supreme Court’s instruction to conduct a factually-intensive review of the parties’ intent. Prior to BNSF, the view prevalent among at least some government attorneys, and even some private party attorneys, was that every party who somehow came into contact with a hazardous substance was liable as having “arranged for disposal.” That view has been shattered.
Two cases, in particular, illustrate this point. The first is Appleton Papers Inc. v. George A. Whiting Paper Co.[9] Plaintiffs in that case were companies who had manufactured and sold carbonless paper. The emulsion used in the paper contained microscopic capsules that burst when pressure was applied, releasing a dye, and allowing the words on a page to be transferred from one sheet to another. The microcapsules were dissolved in a solvent which contained PCBs. The PCBs were released into the Fox River from manufacturing plants which produced the paper. An even greater proportion of PCBs were released by companies that recycled carbonless paper and by municipal wastewater utilities that discharged PCB-contaminated wastewater.
Plaintiff manufacturers filed a contribution action under CERCLA §113 against the recyclers and municipalities (their §107 claim was previously dismissed by the court). The court bifurcated the case into a liability and apportionment phase. In the liability phase, on cross-motions for summary judgment, the court considered whether the defendants knew they were disposing of hazardous chemicals, and concluded that they did not. The analysis – while not explicitly using the word “intent” – focused on what the defendants knew when they recycled the carbonless paper or discharged wastewater from the plants that did. After reviewing a record that included roughly 900 exhibits – including expert reports, government reports, corporate records, laboratory records and deposition transcripts – the court sided with the defendants, finding that they had little or no knowledge that they were disposing of PCBs into the river.[10]
Defendants are recyclers of paper and municipal sewerage entities who simply processed paper and water, and they would have had little reason or ability to inspect or investigate the chemical makeup of anything that came in the door…[t]he recyclers were the ‘innocent victims’ of the circumstances [citation to record omitted]. This is even more true for Defendants who merely received and released wastewater containing invisible PCBs in it.[11]
Similarly, in a case in Washington state, the district court made clear that the issue of arranger liability after BNSF turns squarely on the facts. United States v. Wash. State Department of Transp.[12] In that case, EPA sued the Washington State Department of Transportation (“WSDOT”) to recover cleanup costs at a contaminated site that the state had acquired to build a bridge. During construction of the bridge, a contractor discovered three open-bottom tanks containing tar, which appeared to have been placed there by a coal gasification plant. The State counterclaimed, arguing that the United States was also liable, because the US Army Corps of Engineers (“USACE”) had dredged a portion of the waterway that the coal gassification plant was located on, thereby moving hazardous substances released by others and causing additional releases to the environment. The United States moved for summary judgment. Judge Bryan denied the motion, holding that the United States’ liability, if any, turned on a fact-intensive inquiry that the parties had yet to conduct.
At this point, the facts are insufficiently developed to determine what level of control USACE exerted over the dredging process and what responsibility it may have had regarding disposal of the dredged materials.… As the Supreme Court stated in Burlington Northern, “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 CERCLA’s strict-liability provisions.” 129 S. Ct. at 1879. Considering the USACE’s involvement with dredging the contaminated waterways in light of CERCLA’s strict liability standard, the court cannot say as a matter of law that upon further discovery, the facts will fail to show that the USACE “qualif[ies] as an arranger under [§107(a)(3) when taking] intentional steps to dispose of a hazardous substance” through the granting of permits to dredge the waterway.[13]
Meanwhile, across the country in Maine, a district court applied BNSF in the context of a cleanup of the Penobscot River.See Frontier Communications Corp. v. Barrett Paving Materials.[14] We previously reported on this case. See District Court in Maine Applies Supreme Court’s BNSF Decision on “Arranger” Liability, Marten Law Environmental News (July 22, 2009). The court in the Maine case reiterated that the question of arranger liability is “fact-intensive,” but it found that the record contained sufficient facts to conclude that the defendant had intended to dispose of wastes through a sewer into the river.[15]
Finally, in New Hampshire, General Electric asked a judge to reverse a prior ruling holding GE liable as having “arranged for disposal” of PCB-containing “scrap Pyranol” when it sold the material to a paint manufacturing company. GE relied on BNSF to argue that the phrase “arranged for disposal” required “an intentional action toward achieving the purpose: disposal.”[16] The court did not dispute GE’s reading of the law, but held that there was sufficient evidence of intent to hold GE liable as an arranger.
Cases Applying BNSF’s Apportionment Ruling
We have located two reported decisions expressly dealing with the “apportionment” arm of the BNSF decision. In the first case, the court essentially punted, holding that the best way to apportion liability was to let the case go to trial. See Evansville Greenway and Remediation Trust v. Southern IN Gas and Elec. Co., Inc.[17]
In Evansville, the BNSF decision was handed down while cross-motions for summary judgment were being briefed. The defendants claimed that BNSF “effected a dramatic change that will make it easier for PRPs to avoid the burden of joint and several liability,” while the plaintiffs argued that “BNSF amounts to nothing new.”[18] Noting that “the Supreme Court’s new decision has presented what might be called genuine questions of material law,”[19] the court declined to commit to a particular interpretation of the BNSF decision, based on the fact that the timing of the decision meant that the record before the court was sparse. Instead, the court granted the motion as to liability under 107(a), but reserved the question of apportionment for trial, so that “each side [can] present evidence relevant to its own and its opponents’ different interpretations of BNSF.”[20]
More interesting is the court’s decision in Appleton Papers, discussed above. In that case, the court engaged in an extended discussion of whether BNSF was applicable to a §113 contribution action (having previously dismissed the plaintiff’s §107 claims). The court concluded that, while “Burlington Northern changed the applicable standards for ‘arranger liability’ … there is nothing within Burlington Northern that requires courts to make some sort of threshold determination regarding joint and several liability or allow plaintiffs in a contribution action to make an apportionment argument.”[21]
One question not answered by BNSF is the quantum of proof necessary to establish a reasonable basis for apportionment. Judge Shira A. Scheindlin addressed that question in a non-CERCLA case involving environmental torts, holding that: (1) a fact finder may rely on the “available evidence” in apportioning liability among joint tortfeasors; and (2) the burden of production necessary to support a showing of divisibility is “low.” In re MTBE, S.D.N.Y. Case No. 00 MDL 1898, Docket No. 352 (July 14, 2009). See Applying BNSF, District Court in New York Finds “Best Available Evidence” Is Sufficient to Apportion Liability, Marten Law Environmental News (July 22, 2009). It remains to be seen whether this approach will be extended in a CERCLA context.
Conclusion
It is still too early to get a good sense of whether BNSF will be the watershed case some had predicted. The first few cases have reinforced the Supreme Court’s holding that the inquiry into arranger liability is “fact-intensive.” Only two reported cases have addressed the apportionment arm of the decision, and neither reached the question of how apportionment is to be conducted.
[1] 129 S. Ct. 1870 (2009).
[2] See, e.g., J. Barkett, The Burlington Northern Decision, American College of Environmental Lawyers Blog (May 19, 2009).
[3] 129 S. Ct. at 1878.
[4] Id.
[5] Id. at 1879.
[6] Id. at 1881.
[7] Id.
[8] Id. at 1882.
[9] Slip Op., 2009 WL 5064049 (E.D. Wis., December 16, 2009).
[10] Id. at *15.
[11] Id. at *17.
[12] , ___ F. Supp.2d ___, 2009 WL 2985474 (W.D. Wa., September 15, 2009).
[13] Id. at *8.
[14] District of Maine, Case No. 07-00133.
[15] 2009 WL 1941920, *3
[16] General Electric Company’s Supplemental Memorandum on the Evidence of Intent or Knowledge Required to Prove that a CERCLA Defendant has “Arranged for” Disposal or Treatment of Hazardous Waste at 2, United States v. General Electric Co., 06-354, Doc. No. 89 (D.N.H. Nov. 5, 2008).
[17] ___ F.Supp.2d ___, 2009 WL 3163180 (S.D. Ind., September 29, 2009),
[18] Id. at * 21.
[19] Id.
[20] Id.
[21] Appleton Papers, Inc. v. George A. Whiting Paper Co., Slip Op., 2009 WL 3921036 (E.D. Wis. 2009), **4, 5.
Tags: Superfund