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May 5, 2009 |
Supreme Court Limits Scope of "Arranger" Liability and Joint and Several Liability Under Superfund In an 8-1 decision, the Supreme Court issued an opinion on Monday which places limits on the scope of "arranger" liability and joint and several liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Burlington Northern & Santa Fe Railway Co. v. United States (No. 07-1601, May 4, 2009). This case involved Brown & Bryant (B&B), a now-defunct agricultural chemical distributor. B&B leased a portion of the land on which it operated from the Burlington Northern & Santa Fe Railway Company and the Union Pacific Railway Company (the railroads). B&B purchased and stored various hazardous chemicals in connection with its operations, including D-D, a pesticide it purchased from Shell Oil Company (Shell). Those chemicals were discharged onto B&B's property in the course of its operations, including frequent spills of small amounts of D-D during transfers and deliveries, causing significant contamination. The California Department of Toxic Substances Control and the United States Environmental Protection Agency (the government) undertook a cleanup action of the property under CERCLA and sought to hold Shell and the railroads jointly and severally liable for the cleanup costs. The government argued that Shell should be held jointly and severally liable for the cleanup costs because, when it sold the D-D pesticide to B&B, Shell knew that some of that chemical likely would be spilled on the ground during the transfer and delivery of the chemical to B&B and that Shell should be liable for having arranged for the disposal of a hazardous substance. The government argued that the railroads, as owners of a portion of the contaminated property, should also be jointly and severally liable for the entire cleanup cost. Justice Stevens, writing for the majority, disagreed with both arguments. The Court held that a party's "mere knowledge" that spills and leaks of a hazardous substance had occurred and were continuing to occur during a particular activity is not a sufficient basis to conclude that the party "arranged for" the disposal of that hazardous substance under CERCLA. The Court premised its decision on the meaning of the word "arrange" in common parlance, which the Court explained "implies action directed to a specific purpose." Thus, unless a party actually "takes intentional steps to dispose of a hazardous substance," the party cannot be liable as an arranger under CERCLA. In the present case, Shell had intended only to sell D-D, a useful product, to B&B. The fact that Shell knew that the product was likely to, and often did, spill and leak on the ground at the time it was transferred to B&B did not mean that Shell intended for the product to do so. To the contrary, as the Court noted, Shell had taken steps to reduce the likelihood of the spills and leaks. In this case, the Court notes that Shell would qualify as an arranger under CERCLA only if it had "entered into the sale of D-D with the intention that at least a portion of the product be disposed of during the transfer process." Because that was not Shell's intent, the Court held that Shell cannot be held liable under CERCLA for having arranged for the disposal of D-D. With respect to the railroads, the Court embraced a line of cases holding that apportionment is proper, rather than joint and several liability, when "there is a reasonable basis for determining the contribution of each cause to a single harm." In this case, the Court held that the district court had a reasonable basis for concluding that the railroad contributed to nine percent of the total site contamination; therefore, the railroad was not jointly and severally liable for the total site contamination. The district court based its calculation on three factors — the percentage of the B&B facility that was owned by the railroads, the duration of B&B's activities compared with the duration of B&B's lease of the railroad's property, and the fact that only certain hazardous substances requiring remediation at the site were present on the railroad's property — and then increased the number 50 percent to account for possible errors in its assumptions. The Court held that it was reasonable for the district court to use these factors. The Court expressed some reservation for the factual basis supporting one of the factors, but concluded that the district court's increase of its calculation by 50 percent offset any error. Thus, the Court concluded that the railroads should not be held jointly and severally liable for the total site contamination. This decision will likely be a boon to defendants in future CERCLA cases as it limits the scope of "arranger" liability and provides additional precedent for a potentially responsible party to avoid joint and several liability. RECENT ENVIRONMENTAL PUBLICATIONS
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