Environmental Law Alert
U.S. Supreme Court Speaks on CERCLA “Arranger” Status, Apportionment of Liability
Environmental Law Alert May 2009 - Printable PDF
On May 4, 2009, the Supreme Court released its opinion in Burlington Northern & Santa Fe Railway Co., et al. v. United States, et al.
, Case No. 07-1601, 556 U.S. ___. One of the petitioners, Shell Oil Company, sold pesticides and other hazardous chemicals to a now-defunct chemical distributor. Over time, a significant amount of chemicals spilled during deliveries and transfers, and eventually leached into groundwater. Portions of the spills occurred on leased property owned by two railroads — the Santa Fe Railway Company and Union Pacific Railroad Company. Under these facts, the Court addressed two issues: 1) Is Shell liable as an “arranger” under CERCLA? 2) Did the district court appropriately apportion liability among the various parties?
The Court took a limited view of the scope of arranger liability, holding that an entity is an “arranger” only when it takes “intentional steps to dispose of a hazardous substance.” The Court held close to the plain language of the statute (42 U.S.C. § 9607(a)(3)), noting that the dictionary definition of the word “arrange” implies action directed to a specific purpose. Shell’s mere knowledge that spills occurred during delivery and transfer did not rise to the level of “intentional steps to dispose,” and therefore it had no arranger liability. To the contrary, Shell had encouraged its distributors to more safely handle the product, a point in its favor.
In so holding, the Court rejected the expansive view of the statute advanced by the Ninth Circuit, which had recognized a “broader category of arranger liability” if the “disposal of hazardous wastes is a foreseeable byproduct of, but not the purpose of, the transaction giving rise to” liability.
The Court recognized that future “arranger” cases will likely require a fact-intensive inquiry because of the wide scope of possibilities between two extremes: obvious liability stemming from a transaction for the sole purpose of discarding a “used and no longer useful hazardous substance,” and non-liability stemming from the sale of “a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination.”
The portion of the opinion dealing with apportionment reinforces well-settled law but in time may prove equally important. As the Court put it, “Neither the parties nor the lower courts dispute the principles that govern apportionment in CERCLA cases . . . .” First, the Court recognized the lower courts’ consensus that the starting point for a divisibility analysis is § 433A of the Second Restatement of Torts, which provides that apportionment is proper when “there is a reasonable basis for determining the contribution of each cause to a single harm,” because a person “is subject to liability only for the portion of the total harm that he has himself caused.” The Court did not disturb this precedent. It also affirmed the well-established principle that CERCLA defendants seeking to avoid joint and several liability bear the burden of proving that a reasonable basis for apportionment exists. In a footnote, the Court delivered a reminder that equitable considerations have no role to play in the apportionment analysis; rather, the evidence in the record must support the divisibility of the jointly-caused damages.
As such, the Court’s discussion on apportionment largely came down to an application of those principles to the record in the case. It favorably viewed the district court’s detailed consideration of the evidence in the record, which included analysis of the total area in the facility leased by each party, the various time periods of ownership and other activity, the chemicals requiring remediation, and the estimated maximum contribution of each party’s release of hazardous substances. Ultimately, the Court found that the presence of this detailed information in the record (and the district court’s consideration of it) provided a valid basis for apportionment.
The Court’s remarks on apportionment provide an avenue for those with minor connections to a site to avoid being held liable for a major part of the damages. Going forward, such parties will be wise to tailor their arguments to the Court’s opinion. Specifically, those seeking divisibility must show a reasonable basis for it, and such a showing must include detailed evidence supporting the proffered basis for apportionment.
The full text of the decision is available here.
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For more information, contact your local Quarles & Brady attorney.