May 13, 2009
In an important refinement of key defenses to liability under the Comprehensive Response, Compensation and Liability Act ("CERCLA," or the "Superfund" law), the United States Supreme Court recently narrowed the definition of parties liable for "arranging" disposal of hazardous wastes, and relaxed the procedure for allocating costs among potentially-responsible parties.
Background
The May 4, 2009 decision, in the consolidated cases of Burlington Northern et al v. United States and Shell Oil v. United States, arose from environmental contamination of an agricultural chemical distribution facility operated by the Brown & Bryant company in Arvin, California (the "Site"). Most of the Site had been owned and operated by Brown & Bryant, although the company at one point expanded its operations to include a smaller portion of the Site, owned by petitioners Burlington Northern Santa Fe Railway and Union Pacific Railroad. Shell Oil Company had sold and delivered to the Site various pesticides and other chemical products, which Brown & Bryant then distributed to its customers.
The federal government had sought to hold Shell responsible for the contamination at the Site, on the theory that Shell's history of selling pesticides to the Site, with knowledge that chemical leaks and spills were common and even likely there, qualified Shell as a party "arranging" for the disposal of wastes at the Site. The District Court agreed, finding Shell liable as an "arranger" for waste disposal at the Site.
Considering the fact that the railroads had owned a fraction of the property upon which the Site was operated, the District Court also undertook its own liability analysis and allocated a portion of the loss to the railroads, rather than finding them jointly and severally liable for 100% of the remedial costs.
The Holding
Arranger Liability
On appeal, the U.S. Supreme Court found that Shell was not subject to "arranger" liability, in the process clarifying the circumstances under which "arranger" liability may be imposed. The facts of the case fell on a line between transactions whose sole purpose was to discard used and no longer useful hazardous substances (clearly subject to "arranger" liability under existing decisions), and sales of an unused and useful product, where the seller has no knowledge as to the ultimate disposition of the product (clearly, not subject to "arranger" liability under existing holdings). Noting that the term "arrange" is not defined in CERCLA, the Court looked to the term's dictionary definition, and concluded that "an entity may qualify as an arranger under [CRCLA] when it takes intentional steps to dispose of a hazardous waste." Applying this standard, the Court concluded that, although Shell may have known that releases and spills would likely occur after its products were delivered to the Site, there was insufficient evidence to conclude that Shell intended to dispose of waste (in the form of leaks and spills) at the Site.
Apportionment of Liability
The Supreme Court ruling also relaxed the procedure for apportioning liability for harm or damages that are "divisible" (for example, based upon the relative toxicity of the substances at issue, their migratory potential, their geographic location on a site, or their volume). Prior caselaw had placed a "heavy burden" upon potentially responsible parties to demonstrate divisibility of the harm or damages resulting from releases attributed to those parties. In contrast, the District Court undertook to allocate the parties' respective liability for the Site's clean-up costs, without proof from the parties on that point. The Supreme Court approved the District Court's apportionment of liability, in the process relieving the railroads of the burden to prove that damages were "divisible."
Conclusion
Burlington Northern et al. v. United States further expands two significant defenses to CERCLA liability. The fact that this expansion is advanced by the highest federal court will likely encourage future rulings by lower federal courts mitigating the impacts of CERCLA's strict joint and several liability scheme.
If you would like a copy of the Burlington Northern decision, or for further information regarding our environmental litigation and compliance capabilities, please feel free to contact Michael Case at (212) 634-5030 or mcase@brhr.com.
