May 5, 2009

 

On May 4, 2009, the U.S. Supreme Court issued its decision in Burlington Northern and Santa Fe Railway Co. v. United States, No. 07-1601 (U.S. May 4, 2009). This ruling, which involves the liability of private parties under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) also known as Superfund, is a significant decision that will have a major impact on cost recovery litigation.  The case raises issues related to parties that are deemed to be “owners” of sites where hazardous substances have been released and also to parties who have “arranged” for the disposal of hazardous substances at such sites.

 

The U.S. Supreme Court decided that a party liable for some of an indivisible problem at a Superfund site can avoid joint and several liability by demonstrating to a trial court that it may reasonably apportion liability based upon certain factors such as, length of time on a site, amount of land under a party’s control, and where the volume of waste disposed.

 

Prior to the Burlington Northern decision under existing precedent, a party facing Superfund liability in a cost recovery action brought by the government would have assumed that it would almost certainly have to bear cleanup liability for the whole site jointly and severally.  Given the complexity of Superfund sites and the potential for significant costs involved in investigating and cleaning up past contamination, such liability can be significant.  A potentially responsible party could hope to get a “fair share” allocation among all the responsible parties at a site that still had assets, but such a party could expect to be responsible to the government for all cleanup costs. In light of the Burlington Northern decision, it may now be possible for a party to avoid Superfund liability for the whole site.  A court may ultimately apportion a separate share of liability.  InBurlington Northern the U.S. Supreme Court also decided that a party does not “arrange for disposal” of a hazardous substance just because the party knows that the delivery of its product will result in spills.

 

Considered together the holdings in Burlington Northern will have widespread implications on pending and future cost recovery actions.

 

In Burlington Northern, the trial court found that the record was sufficient to create a reasonable basis for apportionment of liability.  By way of background, a pesticide distributor had used the site in question and spilled agricultural chemicals that caused groundwater contamination.  The railroads owned only a portion of the site and leased it to the pesticide distributor and only for a portion of the time that the distributor operated at the site.  The trial court considered the railroads limited involvement with the site and apportioned 9% of the total cleanup liability to the railroads.  Because the pesticide distributor was no longer in business and had no assets, the State of California and the U.S. Environmental Protection Agency (EPA) would not recover the lion share of their investigation and cleanup costs.

 

The U.S. Ninth Circuit Court of Appeals reversed the federal district court, finding that the evidence could not support apportionment.  The Ninth Circuit determined that the railroads were jointly and severally liable.  The effect of the Ninth Circuit ruling was to shift the defunct pesticide distributor’s share of liability to the railroads and to Shell Oil, which had supplied pesticides as a product to the distributor and who the district court found liable as an “arranger.”  The Supreme Court reversed the Ninth Circuit and voted to reinstate the district court’s judgment.  The Supreme Court did not remand the case for further trial and consideration of its holdings.  Rather, the Supreme Court simply reversed the Ninth Circuit, adopted the reasoning of the district court and assigned the railroads only 9% of the government’s cleanup costs.

 

In Burlington Northern, the U.S. Supreme Court also addressed the issue of a pesticide manufacturer’s liability as an “arranger” under the federal Superfund law.  Shell Oil delivered by common carrier pesticide products to bulk storage facilities rather than delivering drums of the material.  When the pesticide was delivered to the distributor, the district court found that materials invariably spilled onto the ground.  Shell Oil knew its products would spill and that the substances could not be recovered.  The U.S. Supreme Court relied on references in the record that Shell took steps to minimize spills.

 

Past precedents in Superfund cases have held that a transaction that necessarily involves spills can lead to liability for a manufacturer, such as Shell Oil, as an “arranger” of the spills.  See, e.g.United States v. Aceto Agricultural Chemicals Corp., 872 F.2d 1373 (8th Cir. 1989).  In Burlington Northern, the U.S. Supreme Court overruled past precedent and held that “arranging” requires an actual state of mind or intention to dispose.  The Supreme Court found that knowledge of incidental spills by a common carrier during delivery does not rise to a level that results in the imposition of liability under CERCLA.  The holding makes certain cases involving “arranging” more defensible and may excuse parties who in the past where found to be liable as “arrangers” at Superfund sites.

 

The Supreme Court’s holdings raise the possibility of similar issues at virtually every Superfund site.  More significantly, the Burlington Northern decision makes joint and several liability a subject of litigation in most Superfund cases.  A link to the court’s decision is found below.

 

http://www.supremecourtus.gov/opinions/08pdf/07-1601.pdf

 

Joseph Maternowski and Hessian & McKasy’s Environmental Attorney Law Practice Group have extensive experience in litigating environmental matters including Superfund cost recovery matters.  We defend and prosecute claims on behalf of our clients and handle a full spectrum issues.  Hessian & McKasy also provides businesses and individuals with legal services on a variety of matters.  The information contained within this website does not constitute legal advice. Please see the information contained in the Disclaimer section on the home page of this site. Please feel free to contact any of the following individuals for more information about the issues discussed herein:

 

Joseph Maternowski (612) 746-5754 jmaternowski@hessianmckasy.com

 

The views expressed here are my own and do not reflect the views of my employer, Hessian & McKasy. P.A.

 

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