Tuesday, May 5, 2009

Arranger Liability Under CERCLA

Happy Cinco de Mayo from The Water Law. Yesterday, the U.S. Supreme Court issued its opinion in the case Burlington Northern & Santa Fe Railway Co. v. United States, 566 U.S. ___ (2009). In that opinion, among other things, the Court clarifies the scope of “arranger” liability under the Comprehensive Environmental Response, Compensation, and Liability Act (more commonly known as “CERCLA”).

For those who are not familiar with how CERCLA works, CERCLA is the statute under which the federal government may compel four broad categories of so-called Potentially Responsible Parties (”PRP’s”) to clean up a contaminated area or compensate the government for costs it has or will incur to clean up the contamination. Those categories cast a wide net and CERCLA imposes strict liability (i.e. it doesn’t require negligence or intentional conduct to impose liability) on those who fall within it. The issue in Burlington was whether Shell, who sold chemicals to the property owner for the owner’s use, was a person who “arranged for disposal or treatment…of hazardous substances [owned by Shell]…by [the property owner].” 42 U.S.C. §9607(a)(3).

The District Court and Ninth Circuit Court of Appeals took a broad view and held that Shell was a PRP under §9607(a)(3). While Shell was not “arranging” the “disposal” of hazardous chemicals in the traditional sense, CERCLA’s definition of “disposal” includes “discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water.” 42 U.S.C. §6903(3); see also §9601(29). Because Shell was apparently aware that its product was being “spilled” and/or “leaked” into the environment, the lower courts held Shell was an “arranger” and thus a PRP. The Supreme Court disagreed.

The Supreme Court held, “In common parlance, the word “arrange” implies action directed to a specific purpose. Consequently, under the plain language of the statute, an entity may qualify as an arranger under §9607(a)(3) when it takes intentional steps to dispose of a hazardous substance.” Burlington at *10-11(citations omitted). The Court further stated:

While it is true that in some instances an entity’s knowledge that its product will be leaked, spilled, dumped, or otherwise discarded may provide evidence of the entity’s intent to dispose of its hazardous wastes, knowledge alone is insufficient to prove that an entity “planned for” the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product. In order to qualify as an arranger, Shell must have 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 by one or more of the methods described in §6903(3). Here, the facts found by the District Court do not support such a conclusion.

Id. at *12. This greatly raises the bar of proof needed to assess liability to non-traditional “arrangers” and further insulates those who sell hazardous materials from liability associated with the unintentional “disposal” of those materials. The irony of the decision is that while CERCLA is well known for its almost draconian imposition of strict liability, the Supreme Court has now read an intentionality requirement into it, “[T]he evidence does not support an inference that Shell intended such spills to occur.” Id. (emphasis added). The practical effect of the decision will be to limit the sources of funding for environmental remediation. In the words of Justice Ginsberg’s dissent:

Relieving Shell of any obligation to pay for the cleanup undertaken by the United States and California is hardly commanded by CERCLA’s text, and is surely at odds with CERCLA’s objective—to place the cost of remediation on persons whose activities contributed to the contamination rather than on the taxpaying public.
Burlington dissent at *3 (Ginsberg, J. dissenting).

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