1 BURLINGTON NORTHERN DID IT CHANGE ANYTHING? Richard A. Schwartz Schwartz Junell Greenberg & Oathout 909 Fannin, Suite 2700 Houston, Texas [email protected].

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BURLINGTON BURLINGTON NORTHERN NORTHERN

DID IT CHANGE DID IT CHANGE ANYTHING?ANYTHING?

Richard A. SchwartzRichard A. SchwartzSchwartz Junell Greenberg & OathoutSchwartz Junell Greenberg & Oathout

909 Fannin, Suite 2700909 Fannin, Suite 2700Houston, TexasHouston, Texas713-752-0017713-752-0017

[email protected]@schwartz-junell.com

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Superfund ExperienceSuperfund Experience

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WHERE WE WERE BEFORE WHERE WE WERE BEFORE BURLINGTON NORTHERN?BURLINGTON NORTHERN?

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CERCLA’s PURPOSECERCLA’s PURPOSE

CERCLA’s “broad remedial purpose is CERCLA’s “broad remedial purpose is to facilitate the prompt clean up of to facilitate the prompt clean up of hazardous waste sites and to shift hazardous waste sites and to shift the cost of environmental response the cost of environmental response from the taxpayers to the parties from the taxpayers to the parties who benefited from the wastes that who benefited from the wastes that caused the harm.”caused the harm.”

Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613.100 Stat. 1613.

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WHAT MUST BE WHAT MUST BE PROVED?PROVED?

1.1. Defendant falls within at least one of the Defendant falls within at least one of the four categories of responsible persons;four categories of responsible persons;

2.2. Hazardous substances are disposed at a Hazardous substances are disposed at a facility;facility;

3.3. There has been a release or threatened There has been a release or threatened release of hazardous substances from release of hazardous substances from the facility; andthe facility; and

4.4. The plaintiff incurred response costs.The plaintiff incurred response costs.

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WHO IS LIABLE?WHO IS LIABLE?

1.1. Owners and operators Owners and operators

2.2. Past owners and operatorsPast owners and operators

3.3. Persons who arranged for disposal Persons who arranged for disposal or treatment of hazardous or treatment of hazardous substances, andsubstances, and

4.4. Transporters of hazardous Transporters of hazardous substances.substances.

42 U.S.C. 9607(a)(1)-(4)42 U.S.C. 9607(a)(1)-(4)

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The definition of The definition of “arranger”“arranger”

An “arranger” is a “person who by An “arranger” is a “person who by contract, agreement, or otherwise contract, agreement, or otherwise arranged for disposal or . . . arranged for disposal or . . . treatment, or arranged with a treatment, or arranged with a transporter for disposal or transporter for disposal or treatment, of hazardous substances treatment, of hazardous substances owned or possessed by such person.owned or possessed by such person.

42 U.S.C. 9607(a)(3)42 U.S.C. 9607(a)(3)

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““Treatment” or Treatment” or “Disposal”“Disposal”

Defined by Solid Waste Disposal Act (42 Defined by Solid Waste Disposal Act (42 U.S.C. 6903)U.S.C. 6903)

TreatmentTreatment is any method, technique, or is any method, technique, or process, including neutralization designed to process, including neutralization designed to change the physical, chemical, or biological change the physical, chemical, or biological character or composition of any hazardous character or composition of any hazardous waste, so as to neutralize such waste or so as waste, so as to neutralize such waste or so as to render such waste nonhazardous, safer for to render such waste nonhazardous, safer for transport, amenable for recovery, amenable transport, amenable for recovery, amenable for storage, or reduced in volume. for storage, or reduced in volume.

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““Treatment” or Treatment” or “Disposal”“Disposal”

““DisposalDisposal” is discharge, injection, ” is discharge, injection, dumping, spilling, leaking or placing, dumping, spilling, leaking or placing, of any solid waste or hazardous of any solid waste or hazardous waste into or on land or water so waste into or on land or water so that such solid waste or hazardous that such solid waste or hazardous waste or any constituent thereof may waste or any constituent thereof may enter the environment or be emitted enter the environment or be emitted into the air or discharged into any into the air or discharged into any waters, including ground waters.waters, including ground waters.

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Scope of LiabilityScope of Liability

Unless a statutory defense or exclusion, Unless a statutory defense or exclusion, covered persons are liable for “all costs of covered persons are liable for “all costs of removal or remedial action incurred by the removal or remedial action incurred by the Unites States Government or a State or an Unites States Government or a State or an Indian tribe not inconsistent with the national Indian tribe not inconsistent with the national contingency plan” and “any other necessary contingency plan” and “any other necessary costs of response incurred by any other person costs of response incurred by any other person consistent with the national contingency plan.”consistent with the national contingency plan.”

42 U.S.C. 9607(a)42 U.S.C. 9607(a)

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WHAT DID ALL THIS WHAT DID ALL THIS MEAN?MEAN?

Devil’s Dictionary, The World Devil’s Dictionary, The World Publishing Company (1911) said it Publishing Company (1911) said it best. It defined:best. It defined:

““LawfulLawful, adj. Compatible with the will , adj. Compatible with the will of a judge having jurisdiction.”of a judge having jurisdiction.”

PROVIDED THAT YOU HAVE A GOOD PROVIDED THAT YOU HAVE A GOOD LAWYER.LAWYER.

““LawyerLawyer, n. One skilled in , n. One skilled in circumvention of the law.”circumvention of the law.”

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WHAT DID ALL THIS WHAT DID ALL THIS MEAN?MEAN?

WHICH, OF COURSE, MEANT YOU WHICH, OF COURSE, MEANT YOU HAD TO BE PATIENT.HAD TO BE PATIENT.

““PatiencePatience, n. A minor form of despair, , n. A minor form of despair, disguised as a virtue.”disguised as a virtue.”

AND DEAL WITH POSITIONS WHICH AND DEAL WITH POSITIONS WHICH WERE ABSURD.WERE ABSURD.

““AbsurdityAbsurdity, n. A statement or belief , n. A statement or belief manifestly inconsistent with one’s manifestly inconsistent with one’s own opinion.”own opinion.”

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BURLINGTON NORTHERNBURLINGTON NORTHERN

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ISSUES ADDRESSEDISSUES ADDRESSED

1.1. Whether a seller of a “useful Whether a seller of a “useful product” was an arranger by product” was an arranger by virtue of foreseeable spills at a virtue of foreseeable spills at a distributor’s facility?distributor’s facility?

2.2. The nature of evidence The nature of evidence sufficient to establish a basis for sufficient to establish a basis for apportioning liability for clean apportioning liability for clean up costs.up costs.

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BURLINGTON’S FACTSBURLINGTON’S FACTS

1960 Brown & Bryant, Inc. (B&B) began 1960 Brown & Bryant, Inc. (B&B) began operating an agricultural chemical operating an agricultural chemical distribution business on a 3.8 acre distribution business on a 3.8 acre parcel.parcel.

1975 1975 B&B leased another .9 acres from B&B leased another .9 acres from Burlington Burlington and Union Pacific.and Union Pacific.

B&B stored and distributed B&B stored and distributed pesticides on the pesticides on the site.site.

- Dinoseb sold by Dow- Dinoseb sold by Dow- D-D and Nemagon sold by Shell- D-D and Nemagon sold by Shell

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Burlington’s FactsBurlington’s Facts

Over 28 years, spills, equipment failures, Over 28 years, spills, equipment failures, and rinsing of tanks and trucks and rinsing of tanks and trucks contaminated soils and groundwater.contaminated soils and groundwater.

D-D leaked during unloading from trucks D-D leaked during unloading from trucks to bulk storage tanks.to bulk storage tanks.

B&B accepted delivery on arrival.B&B accepted delivery on arrival.

Shell did not directly control or supervise Shell did not directly control or supervise the activities that resulted in the leaks.the activities that resulted in the leaks.

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Burlington’s FactsBurlington’s Facts

Shell was aware of the leaks and would Shell was aware of the leaks and would reduce the purchase price by an amount reduce the purchase price by an amount related to the loss due to leakage and related to the loss due to leakage and spills and offered discounts to spills and offered discounts to incentivize distributors to make facility incentivize distributors to make facility improvements and eventually required improvements and eventually required tanks to be inspected. tanks to be inspected.

Even though improved, leaks still Even though improved, leaks still occurred.occurred.

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Burlington FactsBurlington Facts

California Dept. of Toxic Substances Control California Dept. of Toxic Substances Control and and later EPA investigated the Site in 1983.later EPA investigated the Site in 1983.Investigations showed significant soil and Investigations showed significant soil and groundwater contamination at the Site.groundwater contamination at the Site.B&B ceased operations and became B&B ceased operations and became insolvent in insolvent in 1989.1989.State and EPA undertook cleanup and spent State and EPA undertook cleanup and spent 8 8 million by 1989.million by 1989.State and EPA sued Shell and railroads for State and EPA sued Shell and railroads for cost cost recovery under section 107.recovery under section 107.

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Trial Court OpinionTrial Court Opinion

Over 500 findings of fact.Over 500 findings of fact.

Railroads liable as ownersRailroads liable as owners

Shell liable as “arranger” because of Shell liable as “arranger” because of delivery of hazardous substances delivery of hazardous substances knowing that accidental releases knowing that accidental releases routinely occurred incident to routinely occurred incident to delivery; thus, delivery; thus, generation of waste generation of waste was a known and inherent part of was a known and inherent part of the sales transactionthe sales transaction..

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Trial Court OpinionTrial Court Opinion

Liability was divisible.Liability was divisible.Railroads (“RR”): Court multiplied the Railroads (“RR”): Court multiplied the

percentage of facility owned by RR percentage of facility owned by RR (.9/4.7=19.1%); duration B&B’s activities on (.9/4.7=19.1%); duration B&B’s activities on RR parcel compared to duration overall RR parcel compared to duration overall (13/29=45%), fraction of contaminants on RR (13/29=45%), fraction of contaminants on RR parcel (66% less D-D) times 50% fudge factor parcel (66% less D-D) times 50% fudge factor = 9% of total response costs.= 9% of total response costs.

Shell: Volume from leaks divided by total Shell: Volume from leaks divided by total chemicals spilled = 6% of total response costs.chemicals spilled = 6% of total response costs.

U.S. and State: responsible for orphan share of U.S. and State: responsible for orphan share of B&B.B&B.

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99thth Circuit Circuit

Reversed on apportionment Reversed on apportionment

Apportionment lacked a reasonable Apportionment lacked a reasonable basis and evidence was not specific basis and evidence was not specific and concrete enough of divisible and concrete enough of divisible harmharm

Affirmed on arranger liabilityAffirmed on arranger liability

Leaks were a necessary part of the Leaks were a necessary part of the delivery processdelivery process..

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SUPREME COURT’S SUPREME COURT’S HOLDINGHOLDING

REVERSED.REVERSED.

The Court of Appeals erred in holding The Court of Appeals erred in holding Shell liable as an arranger under Shell liable as an arranger under CERCLA for the costs of remediating CERCLA for the costs of remediating environmental contamination at the environmental contamination at the Arvin California Facility, andArvin California Facility, and

The Court of Appeals erred in setting The Court of Appeals erred in setting aside the Trial Court’s judgment on aside the Trial Court’s judgment on apportionment.apportionment.

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ARRANGER LIABILITYARRANGER LIABILITY

FOR THE SALE OF USEFUL FOR THE SALE OF USEFUL PRODUCTSPRODUCTS

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BURLINGTON’S BURLINGTON’S REASONINGREASONING

The Court described the two existing extremes The Court described the two existing extremes - cases of absolute liability and no liability:- cases of absolute liability and no liability:

Liability under section 9607(a)(3) Liability under section 9607(a)(3) if an entity if an entity were to enter into a transaction for the sole were to enter into a transaction for the sole purpose of discarding a used and no longer purpose of discarding a used and no longer useful hazardous substance. useful hazardous substance.

No liability if No liability if merely sell a new and useful merely sell a new and useful product if the purchaser of that product later, product if the purchaser of that product later, and unbeknownst to the seller, disposed of the and unbeknownst to the seller, disposed of the product in a way that led to contamination.product in a way that led to contamination.

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BURLINGTON’S BURLINGTON’S REASONINGREASONING

The Court recognized the existing The Court recognized the existing murky middle:murky middle:

"Less clear is the liability attaching to "Less clear is the liability attaching to the many permutations of the many permutations of "arrangements" that fall between these "arrangements" that fall between these two extremes - cases in which the seller two extremes - cases in which the seller has some knowledge of the buyers has some knowledge of the buyers planned disposal or whose motives for planned disposal or whose motives for the ‘sale’ of a hazardous substance are the ‘sale’ of a hazardous substance are less than clear."less than clear."

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BURLINGTON’S BURLINGTON’S REASONINGREASONING

Conclusion: Intent to dispose is required.Conclusion: Intent to dispose is required.

Arrange implies action directed at a specific Arrange implies action directed at a specific purpose. Consequently, under the plain purpose. Consequently, under the plain language of the statute, an entity may language of the statute, an entity may qualify as an arranger under 9607(a)(3) qualify as an arranger under 9607(a)(3) when it takes intentional steps to dispose of when it takes intentional steps to dispose of a hazardous substance. a hazardous substance.

An entity must have entered the sale with An entity must have entered the sale with the intention that at least a portion of the the intention that at least a portion of the product be disposed of by leaking, spilling, product be disposed of by leaking, spilling, dumping, or otherwise.dumping, or otherwise.

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BURLINGTON’S BURLINGTON’S REASONINGREASONING

Did Shell intend to dispose?Did Shell intend to dispose?

Although Shell was aware that minor, Although Shell was aware that minor, accidental spills occurred during the accidental spills occurred during the transfer of product from common transfer of product from common carriers to storage tanks after the carriers to storage tanks after the product arrived at the facility, the product arrived at the facility, the evidence did not support an inference evidence did not support an inference that Shell intended such spills to occur. that Shell intended such spills to occur. Why?Why?

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Burlington’s ReasoningBurlington’s Reasoning

1.1. Shell took numerous steps to encourage Shell took numerous steps to encourage its its distributors to reduce the likelihood of distributors to reduce the likelihood of such spillssuch spills by providing them with by providing them with detailed safety manuals, detailed safety manuals, requiring them to requiring them to maintain adequate storage maintain adequate storage facilities, and facilities, and providing discounts for those that providing discounts for those that took took safety precautions.safety precautions.

2.2. Although unsuccessful, mere knowledge Although unsuccessful, mere knowledge that spills that spills and leaks continued to occur and leaks continued to occur is insufficient for is insufficient for concluding that Shell concluding that Shell “arranged for” disposal. “arranged for” disposal.

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THE NEW EXTREMESTHE NEW EXTREMES

NO LIABILITY IFNO LIABILITY IF::

(1) an entity has (1) an entity has knowledge aloneknowledge alone that a product that a product will be leaked, spilled, dumped or otherwise will be leaked, spilled, dumped or otherwise discarded, particularly when the discarded, particularly when the disposal occurs as disposal occurs as a peripheral result of a legitimate sale of an a peripheral result of a legitimate sale of an unused, useful productunused, useful product..

(2) an entity (2) an entity sells a sells a new and useful productnew and useful product and the and the purchaser, purchaser, unbeknownst to the seller, disposed ofunbeknownst to the seller, disposed of the product in a way that led to contamination. the product in a way that led to contamination. (same as before)(same as before)

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THE NEW EXTREMESTHE NEW EXTREMES

LIABILITY IFLIABILITY IF::

An entity enters into a transaction An entity enters into a transaction with the with the sole purpose of discardingsole purpose of discarding a a used and no longer useful hazardous used and no longer useful hazardous substancesubstance. (same as before). (same as before)

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The MiddleThe Middle

The many permutations of The many permutations of "arrangements" that fall between these "arrangements" that fall between these two extremes. Cases in which two extremes. Cases in which

- the seller has some knowledge of - the seller has some knowledge of the the buyers planned disposal, buyers planned disposal,

- the seller fails to take corrective - the seller fails to take corrective actions, actions, and and

- the seller’s motives for the ‘sale’ of - the seller’s motives for the ‘sale’ of a a hazardous substance are less hazardous substance are less than clear.than clear.

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Did Anything Change?Did Anything Change?

ActuallyActually, adv. “Perhaps, possibly.”, adv. “Perhaps, possibly.”

Ask you have “faith” in what I am Ask you have “faith” in what I am about to tell you.about to tell you.

““FaithFaith, n. Belief without evidence in , n. Belief without evidence in what is told by one who speaks what is told by one who speaks without knowledge, of things without knowledge, of things without parallel.”without parallel.”

The Devil’s Dictionary (1911)The Devil’s Dictionary (1911)

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Did Anything Change?Did Anything Change?

1.1. If just have knowledge that leaks If just have knowledge that leaks are necessary part of the sale, no are necessary part of the sale, no liability. liability.

2.2. Arranger must have intent to Arranger must have intent to dispose.dispose.

3.3. The standard for showing divisible The standard for showing divisible harm is not exacting.harm is not exacting.

4.4. Taking corrective action is evidence Taking corrective action is evidence of intent not to dispose and does of intent not to dispose and does not equate to control over disposal.not equate to control over disposal.

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INTENT TO DISPOSEINTENT TO DISPOSE

PRIOR LAWPRIOR LAW: The useful product defense : The useful product defense does not apply when does not apply when the purpose of a salethe purpose of a sale is to is to get rid or treat a waste or byproduct. get rid or treat a waste or byproduct. State of State of California v Summer Del Caribe, Inc.California v Summer Del Caribe, Inc., 821 , 821 F.Supp. 574, 581 (N.D. Cal. 1993)(solder dross)F.Supp. 574, 581 (N.D. Cal. 1993)(solder dross)

BURLINGTONBURLINGTON: “It is plain from the language : “It is plain from the language of the statute that CERCLA liability would of the statute that CERCLA liability would attach under section 9607(a)(3)if an entity attach under section 9607(a)(3)if an entity were to enter into a transaction for were to enter into a transaction for the the solesole purposepurpose of discarding a used and no longer of discarding a used and no longer useful hazardous substance.” (Substantially useful hazardous substance.” (Substantially same as before)same as before)

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Intent is RequiredIntent is Required

PRIOR LAWPRIOR LAW: An entity’s knowledge that its : An entity’s knowledge that its product would be leaked, spilled, dumped or product would be leaked, spilled, dumped or otherwise discarded otherwise discarded is an arrangement for is an arrangement for disposaldisposal..

BURLINGTONBURLINGTON::

In some instances an entity’s knowledge that In some instances an entity’s knowledge that its product will be leaked, spilled, dumped or its product will be leaked, spilled, dumped or otherwise discarded otherwise discarded may providemay provide evidence of evidence of the entity’s intent to disposethe entity’s intent to dispose of its hazardous of its hazardous wastes. wastes.

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MERE SALEMERE SALE

PRIOR LAWPRIOR LAW: A manufacturer who does : A manufacturer who does nothing more than sell a useful product, nothing more than sell a useful product, albeit hazardous product to an end user, has albeit hazardous product to an end user, has neither generated, transported, nor arranged neither generated, transported, nor arranged for the disposal of hazardous waste. for the disposal of hazardous waste. City of City of Merced v. FieldsMerced v. Fields, 997 F.Supp. 1326, 1332 , 997 F.Supp. 1326, 1332 (E.D.Cal. 1998) citing cases as, (E.D.Cal. 1998) citing cases as, Dayton Indep. Dayton Indep. School Dist. V. U.S. Mineral Products Co., School Dist. V. U.S. Mineral Products Co., 906 F.2d 1059, 1065 (5906 F.2d 1059, 1065 (5thth Cir. 1990)(fact Cir. 1990)(fact question on whether mere sale of PCE).question on whether mere sale of PCE).

NOWNOW: same as before.: same as before.

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MERE SALEMERE SALE

PRIOR LAWPRIOR LAW: Manufacturer that sold : Manufacturer that sold product containing small amounts of product containing small amounts of hazardous substance is not liable as hazardous substance is not liable as arranger because it was unaware of how arranger because it was unaware of how substances would be disposed of decades substances would be disposed of decades later. later. Florida Power & Light Co. v. Allis Florida Power & Light Co. v. Allis Chalmers Corp.Chalmers Corp., 893 F.2d 1313 (11th Cir. , 893 F.2d 1313 (11th Cir. 1990)(Manufacturer sold transformers with 1990)(Manufacturer sold transformers with PCB and purchaser sold after useful life to PCB and purchaser sold after useful life to metal recovery company)metal recovery company)

NOWNOW: Same as before.: Same as before.

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BYPRODUCTSBYPRODUCTS

PRIOR LAWPRIOR LAW: The useful product defense : The useful product defense does not apply when a product’s only does not apply when a product’s only remaining purpose is to reclaim material, remaining purpose is to reclaim material, Chesapeake and Potomac Telephone Co. of Chesapeake and Potomac Telephone Co. of Virginia v. Peck Iron & Metal Co., Inc.Virginia v. Peck Iron & Metal Co., Inc., 814 , 814 F.Supp. 1269, 1275 (E.D. Va. 1992)(lead F.Supp. 1269, 1275 (E.D. Va. 1992)(lead from batteries), or when the material could from batteries), or when the material could not be used without processing. not be used without processing. State of State of Cal. on Behalf of State Dept. of Toxic Cal. on Behalf of State Dept. of Toxic Substances v. Summer Del Caribe, IncSubstances v. Summer Del Caribe, Inc.., 821 , 821 F.Supp. 574, 581 (N.D. Cal. 1993)(solder F.Supp. 574, 581 (N.D. Cal. 1993)(solder dross).dross).

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BYPRODUCT?BYPRODUCT?

NOWNOW: :

LIABILITY if an entity were to enter into a LIABILITY if an entity were to enter into a transaction for the sole purpose of transaction for the sole purpose of discarding a discarding a used and no longer useful used and no longer useful hazardous substance. hazardous substance.

If motives for the "sale" of a hazardous If motives for the "sale" of a hazardous substance are less than clear and Seller has substance are less than clear and Seller has some knowledge that product may be leaked, some knowledge that product may be leaked, dumped, spilled or otherwise discarded.dumped, spilled or otherwise discarded.

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BYPRODUCTSBYPRODUCTS

THIS WILL BE A CASE BY CASE THIS WILL BE A CASE BY CASE FACT SPECIFIC INQUIRY.FACT SPECIFIC INQUIRY.

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DOJ POSITION ON DOJ POSITION ON BYPRODUCTSBYPRODUCTS

BURLINGTON directly relevant to sale BURLINGTON directly relevant to sale of an unused and 100% useful product.of an unused and 100% useful product.

In the traditional case involving In the traditional case involving getting rid of wastes and byproducts, getting rid of wastes and byproducts, unlikely to have much impact.unlikely to have much impact.

Does not prevent liability for the Does not prevent liability for the disposal of a partially useful product. disposal of a partially useful product. To be liable a party need only to have To be liable a party need only to have intended that a portion of the product intended that a portion of the product be disposed of.be disposed of.

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DOJ STATEMENTS RE DOJ STATEMENTS RE CASECASE

See presentation by Joanna Jerison, See presentation by Joanna Jerison, Chief, Superfund Legal Office, EPA Chief, Superfund Legal Office, EPA Region 1 Head at http://Region 1 Head at http://www.FoleyHoag.comwww.FoleyHoag.com

See speech by John C. Cruden, Acting See speech by John C. Cruden, Acting Assistant Attorney General Assistant Attorney General

http://http://www.usdoj.gov/enrdwww.usdoj.gov/enrd//

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DIRECTING PRODUCT DIRECTING PRODUCT HANDLINGHANDLING

PRIOR LAWPRIOR LAW: Dry cleaning machine : Dry cleaning machine manufacturer liable as arranger for manufacturer liable as arranger for chemicals contaminating property used for chemicals contaminating property used for dry cleaning, when:dry cleaning, when:

Manufacturer’s manuals advised machine Manufacturer’s manuals advised machine operators to dispose of chemicals in the public operators to dispose of chemicals in the public sewer.sewer.Manufacturer knew its machines would discharge Manufacturer knew its machines would discharge dry cleaning materials.dry cleaning materials.Manufacturer initially supplied and filled the Manufacturer initially supplied and filled the machines with dry cleaning chemicals.machines with dry cleaning chemicals.

Vine Street LLC v. Keeling ex rel. Estate of Keeling, Vine Street LLC v. Keeling ex rel. Estate of Keeling, 460 F.Supp.2d 728 (E.D. Tex. 2006)460 F.Supp.2d 728 (E.D. Tex. 2006)

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DIRECTING PRODUCT DIRECTING PRODUCT HANDLINGHANDLING

NOWNOW: :

Taking reasonable corrective Taking reasonable corrective actions is evidence of lack of actions is evidence of lack of intent to dispose.intent to dispose.

Taking unreasonable actions Taking unreasonable actions could likewise be evidence of could likewise be evidence of intent to dispose.intent to dispose.

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SPENT MATERIALSSPENT MATERIALS

PRIOR LAWPRIOR LAW: :

Removal and release of hazardous substances Removal and release of hazardous substances was not only the inevitable consequence, but was not only the inevitable consequence, but the very purpose of the transaction. the very purpose of the transaction. Cadillac Cadillac Fairview/California, Inc. v. United StatesFairview/California, Inc. v. United States, 41 , 41 F.3d 562, 565 (9F.3d 562, 565 (9thth Cir. 1994)(rubber Cir. 1994)(rubber companies sent contaminated styrene to Dow companies sent contaminated styrene to Dow for redistillation when the styrene became for redistillation when the styrene became too contaminated).too contaminated).

NOWNOW:: Same as beforeSame as before

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Spent MaterialsSpent Materials

PRIOR LAWPRIOR LAW::United States v. A & F Materials Co.United States v. A & F Materials Co., 582 , 582 F.Supp. 842 (S.D. Ill. 1984)(spent aluminum F.Supp. 842 (S.D. Ill. 1984)(spent aluminum caustic)caustic)

Chesapeake and Potomac Telephone Co. of Chesapeake and Potomac Telephone Co. of Virginia v. Peck Iron & Metal Co., Inc.Virginia v. Peck Iron & Metal Co., Inc., 814 , 814 F.Supp. 1269, 1275 (E.D. Va. 1992) (spent lead F.Supp. 1269, 1275 (E.D. Va. 1992) (spent lead batteries)batteries)

NOWNOW: Same as before. Used and no longer : Same as before. Used and no longer useful products.useful products.

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PRICE AS A FACTORPRICE AS A FACTOR

PRIOR LAWPRIOR LAW: : Price is one factor to consider in determining Price is one factor to consider in determining arrangement for disposal or the sale of a useful arrangement for disposal or the sale of a useful product.product.De-linking of the price of a substance from the De-linking of the price of a substance from the market value may support a conclusion that a price market value may support a conclusion that a price is nominal and the sale only a disguised disposal. is nominal and the sale only a disguised disposal. California Dept. of Toxic Substances Control v. Alco California Dept. of Toxic Substances Control v. Alco Pacific, Inc.Pacific, Inc., 508 F.3d 930, 938 (9, 508 F.3d 930, 938 (9thth Cir. 2007)(dross Cir. 2007)(dross and slag purchased for lead value).and slag purchased for lead value).

NOWNOW: Not addressed by Supreme Court, but : Not addressed by Supreme Court, but should be same as before under fact specific inquiry should be same as before under fact specific inquiry on case by case basis.on case by case basis.

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CONTINUING OWNERSHIP CONTINUING OWNERSHIP AND CONTROLAND CONTROL

PRIOR LAWPRIOR LAW::

Although continuing ownership and control of Although continuing ownership and control of a hazardous substance is evidence of a hazardous substance is evidence of arranging for disposal, it is not necessary for arranging for disposal, it is not necessary for arranger liability. Requiring continuous arranger liability. Requiring continuous ownership or control of hazardous substances ownership or control of hazardous substances would make it easy for parties who wanted to would make it easy for parties who wanted to dispose of hazardous substances to escape dispose of hazardous substances to escape responsibility by going through a sale. responsibility by going through a sale. Catellus Development Corp. v. U.S.,Catellus Development Corp. v. U.S., 34 F.3d 34 F.3d 748, 752 (9748, 752 (9thth Cir. 1994)(used batteries). Cir. 1994)(used batteries).

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Continuing Ownership and Continuing Ownership and ControlControl

NOWNOW: :

Reasonable corrective actions Reasonable corrective actions (control) is evidence of lack of intent (control) is evidence of lack of intent to dispose.to dispose.

Significantly, the Supreme Court did Significantly, the Supreme Court did not state that continuing ownership not state that continuing ownership is necessary for arranger liability. is necessary for arranger liability.

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TOLLING/CONTROLTOLLING/CONTROLPRIOR LAWPRIOR LAW::

Customer supplied raw material to Customer supplied raw material to chemical processing plant at no charge. chemical processing plant at no charge. Plant used materials to make chemicals, Plant used materials to make chemicals, which it would sell to the customer for a which it would sell to the customer for a fee. Customer refused delivery. The fee. Customer refused delivery. The chemicals caused contamination. chemicals caused contamination.

Refusal was evidence of authority to Refusal was evidence of authority to control disposal and of intent to dispose.control disposal and of intent to dispose.

Sea Lion, Inc. v. Wall Chemical Corp.Sea Lion, Inc. v. Wall Chemical Corp., 974 , 974 F.Supp. 589, 595 (S.D. Tex. 1996).F.Supp. 589, 595 (S.D. Tex. 1996).

..

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TOLLING/CONTROLTOLLING/CONTROL

A case specific inquiry, same as A case specific inquiry, same as before.before.

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CHARACTERIZATION AS A CHARACTERIZATION AS A SALESALE

PRIOR LAWPRIOR LAW: When a defendant : When a defendant characterizes a transaction as a “sale,” a characterizes a transaction as a “sale,” a court must examine the transaction to court must examine the transaction to determine whether a statutorily defined determine whether a statutorily defined disposal or treatment has occurred. disposal or treatment has occurred. U.S. U.S. v. Aceto Agr. Chemicals Corp.v. Aceto Agr. Chemicals Corp., 872 F.2d , 872 F.2d 1373, 1381 (81373, 1381 (8thth Cir. 1989)(Manufacturers Cir. 1989)(Manufacturers hired company to reformulate pesticide hired company to reformulate pesticide from technical grade to commercial from technical grade to commercial grade and return to manufacturer).grade and return to manufacturer).

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Characterization As A Characterization As A SaleSale

NOWNOW::Courts have concluded that the determination Courts have concluded that the determination whether an entity is an arranger requires a whether an entity is an arranger requires a fact intensive inquiry that looks beyond the fact intensive inquiry that looks beyond the parties’ characterization of the transaction as parties’ characterization of the transaction as a “disposal” or “sale” and seeks to discern a “disposal” or “sale” and seeks to discern whether the arrangement was one Congress whether the arrangement was one Congress intended to fall within the scope of CERCLA’s intended to fall within the scope of CERCLA’s strict liability provisions…strict liability provisions…Although we agree that the question whether Although we agree that the question whether 9607(a)(3) liability attaches is fact intensive 9607(a)(3) liability attaches is fact intensive and case specific, such liability may not and case specific, such liability may not extend beyond the limits of the statute itself.extend beyond the limits of the statute itself.

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A FACT SPECIFIC A FACT SPECIFIC INQUIRYINQUIRY

PRIOR LAWPRIOR LAW: Courts determine arranger : Courts determine arranger liability taking into account the totality of the liability taking into account the totality of the circumstances, circumstances, Geraghty and Miller, Inc. v. Geraghty and Miller, Inc. v. Conoco, Inc.Conoco, Inc., 234 F.3d 917 at 929 (5, 234 F.3d 917 at 929 (5thth Cir. Cir. 2000)(fact issue re control at site).2000)(fact issue re control at site).

Whether an arrangement for disposal exists Whether an arrangement for disposal exists depends on the facts of each case. depends on the facts of each case. Sea Lion, Sea Lion, Inc. v. Wall Chemical Corp.Inc. v. Wall Chemical Corp., 974 F.Supp. 589, , 974 F.Supp. 589, 595 (S.D. Tex. 1996).595 (S.D. Tex. 1996).

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A FACT SPECIFIC A FACT SPECIFIC INQUIRYINQUIRY

NOWNOW::

We agree that the question whether We agree that the question whether 907(a)(3) liability attaches is fact 907(a)(3) liability attaches is fact intensive and case specific.intensive and case specific.

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APPORTIONMENTAPPORTIONMENT

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S.Ct. REAFFIRMED LEGAL S.Ct. REAFFIRMED LEGAL STANDARDS FOR JOINT AND STANDARDS FOR JOINT AND

SEVERAL LIABILITYSEVERAL LIABILITY- Apportionment is proper when there is a Apportionment is proper when there is a

reasonable basis for determining the reasonable basis for determining the contribution of each cause to a single harm.contribution of each cause to a single harm.

- Not all harms are capable of apportionment – Not all harms are capable of apportionment – defendants bear the burden of proving a defendants bear the burden of proving a reasonable basis for apportionment.reasonable basis for apportionment.

- When two or more causes produce a single, When two or more causes produce a single, indivisible harm, each of the causes is indivisible harm, each of the causes is responsible for the entire harm.responsible for the entire harm.

- Equitable considerations play no role in Equitable considerations play no role in apportionment. Apportionment is proper only apportionment. Apportionment is proper only when the evidence supports divisibility of the when the evidence supports divisibility of the damages.damages.

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SO WHAT CHANGED?SO WHAT CHANGED?ARGUABLY THE LEVEL OF PROOF ARGUABLY THE LEVEL OF PROOF REQUIRED.REQUIRED.

BEFOREBEFORE: PROOF OF PRECISE : PROOF OF PRECISE PORTION ATTRIBUTABLE TO A PRP.PORTION ATTRIBUTABLE TO A PRP.

NOWNOW: APPROXIMATIONS AND : APPROXIMATIONS AND INFORMAL ESTIMATES MAY BE INFORMAL ESTIMATES MAY BE SUFFICIENT IF SOME BASIS IN SUFFICIENT IF SOME BASIS IN FACT.FACT.

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So What Changed?So What Changed?

NOTENOTE: BURLINGTON INVOLVED:: BURLINGTON INVOLVED:SMALL NUMBER OF DEFENDANTS AND SMALL NUMBER OF DEFENDANTS AND PRODUCTS, PRODUCTS, A SMALL SITE, ANDA SMALL SITE, ANDA SINGLE OPERATOR. A SINGLE OPERATOR.

TIME WILL TELL IF STANDARD IS RELAXEDTIME WILL TELL IF STANDARD IS RELAXEDIN MATTERS WITH MULTIPARTY SITESIN MATTERS WITH MULTIPARTY SITESWITH NUMEROUS CONTAMINANTS OF WITH NUMEROUS CONTAMINANTS OF VARYING VARYING TOXICITY AND MOBILITY TOXICITY AND MOBILITY FROM VARYING POLLUTANTS AND VARYING FROM VARYING POLLUTANTS AND VARYING

CONTAMINATION LEVELS IN SOIL AND CONTAMINATION LEVELS IN SOIL AND GROUDWATER.GROUDWATER.

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POSSIBLE POSSIBLE IMPLICATIONSIMPLICATIONS

1.1. More PRPs have a higher likelihood More PRPs have a higher likelihood of showing divisibility, such that EPA of showing divisibility, such that EPA leverage in asserting joint and leverage in asserting joint and several liability is diminished, several liability is diminished,

2.2. EPA must cover orphan shares, EPA must cover orphan shares, 3.3. State and federal budgets may be State and federal budgets may be

affected, andaffected, and4.4. If government must assume more If government must assume more

cost, lawmakers may reinstate some cost, lawmakers may reinstate some form of Superfund Tax.form of Superfund Tax.

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USEFUL USEFUL PRODUCT/DIVISIBLE PRODUCT/DIVISIBLE

HARM TODAY?HARM TODAY?

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QUESTIONS?QUESTIONS?