Posted on January 29, 2010 by William Hyatt
To many Superfund practitioners, United States v. Burlington Northern & Sante Fe Railway Company, __ U.S. __, 129, S. Ct. 1870 (2009) represents the latest in a series of surprises from the Supreme Court. The decision follows Cooper Industries, Inc. v. Aviall Services, Inc, 543 U.S. 157 (2004), from which we learned that the statutory words “during or following” really mean just what they say and contribution claims under the Comprehensive Response Compensation and Liability Act (also referred to as CERCLA or the Superfund statute) are only available in those limited circumstances. A few years later, in United States v. Atlantic Research Corp., 551 U.S. 128 (2007), we learned that “covered persons” (also referred to as potentially responsible parties or PRPs) under the statute may, in certain procedural circumstances, have cost recovery claims in the event they do not meet the criteria for contribution claims. In Burlington Northern, we learned that “arranger” liability may not be as broad as we had thought it was, and that joint and several liability may not be the automatic we thought it was. It is probably fair to say that the outcome in Burlington Northern, like the outcomes in Aviall and Atlantic Research, was not intuitive to Superfund practitioners.
A Superfund practitioner might have expected the Supreme Court decision in Burlington Northern to look more like the Ninth Circuit opinion it reversed (found at 502 F.3d 781), endorsing a broad reading of “arranger” liability under the statute and applying joint and several liability to all the defendants, the latter being the norm for more than 25 years since the seminal decision in United States v. ChemDyne, 572 F. Supp. 802 (S.D. Ohio 1983).
As with Aviall and Atlantic Research, it will probably take many years, and many decisions by the lower courts, before we fully appreciate the implications of Burlington Northern, but one thing is already clear. Defendants in multi-party Superfund sites will be contending for apportionment as the alternative to joint and several liability, if for no other reason than to avoid funding the orphan share represented by “covered persons” who can’t be found, no longer exist, or, as is more recently the case, are bankrupt. On the other hand, governments asserting cost recovery claims can be expected to continue to advocate aggressively for joint and several liability, so as to avoid having to absorb the orphan share themselves. The question is what practical impacts this battleground will have on Superfund practice at multi-party sites.
Burlington Northern raises several practical questions which will have to resolved as the law and practice develop. Here are some of them.
Whether a defendant is entitled to apportioned liability is a fact-intensive inquiry, resolved in Burlington Northern only after a six week bench trial, and only after the district judge took four years to render a decision. Will governments be able to obtain liability judgments at the beginning of cost recovery actions, as they have typically tried to do in the past? Will Burlington Northern force more cases to go to trial?
Whether liability is subject to apportionment is not likely to be decided until the end of a case, as it was in Burlington Northern. How will cost recovery defendants evaluate their chances of success in the early stages of a case? Will they feel compelled to develop a detailed record to support arguments that liability for a single harm is subject to apportionment, unlike the defendants in Burlington Northern, who limited their arguments to general denials of liability?
Governmental plaintiffs can be expected to insist that liability at multi-party sites is still joint and several, even after Burlington Northern. Will those governmental plaintiffs be willing to consider the litigation risk that liability may be subject to apportionment in negotiating settlements? If so, how will that litigation risk be taken into consideration?
If liability is apportioned, how will any resulting orphan shares be funded? Will EPA’s historic limitations on orphan share funding be adequate? If not, where will the funding come from? Is the Superfund tax more likely to be reinstated because of Burlington Northern?
Will the organization of multiple “covered persons” into PRP groups be more difficult if the defendants believe they can escape liability through apportionment? How will defendants balance that possibility against the potential benefit in the form of reduced costs that might be gained by performing cleanup work themselves?
Will ADR emerge as the norm for dividing responsibility among defendants who believe their liability is subject to apportionment, as it has in allocating joint and several liability? What evidence will be used to apportion liability? Burlington Northern endorsed many of the same causation-related considerations as the equitable factors historically used to allocate joint and several liability; will some or all of the Gore factors still be relevant? Burlington Northern also endorsed estimations and compromises, considerations not normally found in legal determinations; how will the lower courts react to imprecise calculations of apportioned liability?
How will defendants argue for an orphan share? Will they seek to establish an orphan share from the bottom up (by quantifying the share of missing PRPs), or from the top down (by quantifying their own individual shares)? Whichever way defendants decide to approach the issue, they can be expected to develop the record the district judge found lacking in Burlington Northern.
Finally, in states whose statutes make joint and several liability explicit (e.g, the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11g(c)(1)), how will apportionment decisions be made? Will the scope of liability be different to EPA and to such states? Under such statutes, is there no instance in which liability will be subject to apportionment, even for distinct harms?
Like Aviall and Atlantic Research before it, Burlington Northern promises to be a fertile source of future litigation.