Posted on November 19, 2014 by William Hyatt
DEFENSE TO JOINT AND SEVERAL LIABILITY
On September 25, 2014, the Seventh Circuit added two more opinions to the long list of decisions arising out of the Lower Fox River and Green Bay Superfund Site (Fox River Site) in northeastern Wisconsin.
In NCR Corp. v. George A. Whiting Paper Co., a contribution suit, the court reversed and remanded a decision by the Eastern District of Wisconsin, which had held that NCR was not entitled to any contribution from the other defendants.
In U.S. v. P.H. Glatfelter Co. (Glatfelter), an enforcement action, the court ruled on a number of important CERCLA issues, such as whether a permanent injunction can be issued to enforce a Section 106 unilateral administrative order. In affirming in part and reversing in part the same District Court decision, the Seventh Circuit provided the latest appellate guidance on the divisibility of harm defense to joint and several liability.
The District Court had rejected divisibility of harm defenses raised by defendants NCR and Glatfelter, ruling, as a matter of law, that the “harm” in one of the operable units of the Fox River Site (OU-4) was not “theoretically” capable of being divided. The District Court ruling thereby avoided the second step of the divisibility of harm analysis, the factual question of how a divisible harm might be apportioned. That was the question resolved by the Supreme Court in Burlington N. & Santa Fe R.R. Co. v. United States (Burlington Northern), a decision which gave Superfund practitioners great hope because the apportionment approved by the Court was so imprecise. Litigation in the lower courts following Burlington Northern quickly turned to the question of what makes a harm “theoretically” capable of being divided. The question is whether it is possible to approximate the contamination caused by each party.
In the District Court, defendants NCR and Glatfelter argued for divisibility of harm on different theories. NCR admitted that it had contributed to the contamination in OU-4, but argued that the harm was capable of apportionment and that it should be liable only for its apportioned share of the costs. Glatfelter argued that it did not cause any of the contamination in OU-4 and therefore was not liable for the costs of cleaning up OU-4.
As to NCR, the Seventh Circuit first addressed the question of what the appropriate metric should be for measuring the contamination caused by each party. The District Court, after a lengthy trial, had viewed the harm as “binary,” in the sense that contamination in concentrations above EPA’s maximum safety threshold of 1.0 ppm of PCBs was harmful; whereas, concentrations below that level were not. The Seventh Circuit rejected that “on-off switch” approach on the ground that the evidence at trial had shown that the dividing line between “harmfulness and geniality” was much more subtle. The Seventh Circuit reviewed the various metrics used by EPA to measure harm and settled on “surface weighted average concentrations” (SWAC) of 0.25 ppm throughout OU-4 as the appropriate value. Even that value, however, could not be viewed as “binary,” according to the Seventh Circuit , because lesser concentrations still could pose risks of harm.
This analysis led the Seventh Circuit to reconsider whether remediation costs can be a useful approximation of the contamination caused by each party. The District Court had concluded that, like contamination levels, remediation costs were “binary” in the sense that “sediment with PCB concentrations below 1.0 ppm would impose no remediation costs, while sediment with PCB concentrations above 1.0 ppm would always impose about the same remediation costs.” The Seventh Circuit said “[w]e think the district court got this wrong as well.” Instead, “remediation costs increase with the degree of contamination above 1.0 ppm. As a result, remediation costs are still a useful approximation of the degree of contamination caused by each party.” As the Seventh Circuit explained, that is so because “the cost of the remedial approach in a particular area is positively correlated with the level of contamination near the surface of that area, which contributes to the operable unit’s SWAC, and consequently, the harm.”
The Seventh Circuit concluded:
As a result, we think the harm would be theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations in OU4. And if NCR cleared that hurdle, we think a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.
The Seventh Circuit then went on to agree with the District Court’s critique of expert opinion offered by NCR to estimate the percentage of mass it contributed to OU-4, but faulted the District Court for failing to explain why it rejected an alternative approach to estimating mass-percentages. The Seventh Circuit did not say whether the estimated mass-percentages, if properly done, would have proven that the harm in OU-4 was “theoretically” capable of apportionment. Instead, the Seventh Circuit reversed the District Court’s rejection of the divisibility defense and remanded for further fact finding.
As to Glatfelter, the Seventh Circuit characterized its divisibility argument as an “all-or-nothing game,” in the sense that Glatfelter argued that none of its PCBs made their way into OU-4, obviating the need, in Glatfelter’s view, to approximate its share of the PCB contamination in OU-4. The Seventh Circuit thoroughly analyzed the testimony of Glatfelter’s expert (to the point of proposing complex algebraic formulas to demonstrate his testimony was unsound), concluding “Glatfelter failed to prove that the PCB discharges for which it is responsible were not a sufficient, or at least a necessary cause of at least some of the contamination in OU-4. Therefore, the district court correctly ruled against Glatfelter on its all-or-nothing divisibility defense.”
So what do Superfund practitioners learn from Glatfelter? Some things we already understood are confirmed. Divisibility analysis is a two step process; the initial and far more challenging step is to prove that the harm is “theoretically” capable of apportionment. The burden of proof on that issue rests with a defendant advancing a divisibility of harm defense. Glatfelter now instructs that the test to determine whether a harm is theoretically capable of apportionment depends upon the extent to which the defendant contributed to concentrations of contaminants at the site, an obvious subject for expert testimony. The battle on that issue can be expected to resume in the District Court. To the extent the first step is cleared, a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.
More than theoretical is the fact the Fox River Site will produce more opinions for guidance to Superfund practitioners in this confusing and difficult area of the law.
Tags: Divisibility of Harm