The United States Supreme Court issued a significant decision recently that clarifies two important issues in favor of defendants at CERCLA sites. The case was Burlington N. & S. F. R. Co. v. United States, 556 U.S. __ (May 4, 2009), an 8-1 majority opinion written by Justice Stevens. See link to U.S. Supreme Court Opinions.
To understand the issues, it is helpful to have some factual background in the underlying case. Shell sold pesticides to a small agricultural chemical distributor in California starting in 1960 and continuing into the 1980s. The evidence showed that Shell knew that the distributor had a sloppy operation and knew that spills and leaks occurred on transfer of the product and in other ways. The distributor went out of business, leaving a large mess, including soil and groundwater contamination. The contamination had to be remediated by EPA, which sought to recover costs from Shell, claiming that continued sales to the site with knowledge of ongoing spills constituted an ``arrangement for disposal`` sufficient to trigger CERCLA liability.
EPA also sued a railroad that had owned adjacent property and had leased a small parcel to the chemical distributor when it expanded its operations. The evidence showed that this parcel was only a small portion of the site, and most of the contamination was concentrated on the original site. The railroad argued that it should not be jointly and severally liable because the harm was capable of being apportioned (the so-called ``divisibility defense``). The District Court had agreed that the harm was capable of apportionment and used an analysis that included the relative geographic area, time of operations and types of chemicals found on the respective portions of the site. It concluded that the railroad was only responsible for 9 percent of the costs. However, the Ninth Circuit reversed, finding that none of these factors were sufficiently correlated to the costs of cleanup. For years, courts have recognized this divisibility defense, but have set the standard of proof so high that defendants were rarely successful when they invoked it.
The U.S. Supreme Court reversed the Ninth Circuit on both issues. First, it concluded that Shell had not ``arranged for disposal of hazardous substances`` and therefore was not liable for cleanup costs. The Court concluded that the plain language of CERCLA precluded liability under the circumstances of this case:
``Arrange`` implies action directed to a specific purpose. See Merriam-Webster`s Collegiate Dictionary 64 (10th ed. 1993) (defining `arrange` as `to make preparations for; plan; . . . to bring about an agreement or understanding concerning`); see also Amcast Indus. Corp. 2 F3d, at 751 (words `arranged for` . . . imply intentional action). Consequently, under the plain language of the statute, an entity may qualify as an arranger under Section 9607(a)(3) when it takes intentional steps to dispose of a hazardous substance.
Here, Shell`s purpose was to sell product. The Supreme Court noted that Shell had taken steps in the late 1970s to instruct purchasers on proper ways to handle the pesticides and to ensure that purchasers took steps to comply, further negating any intent to dispose of the hazardous substances.
On the other issue, the Court held that the District Court`s allocation was supported by sufficient evidence to support the divisibility determination. Even where there is a single harm (such as through co-mingled waste), parties can avoid joint and several liability if there is a reasonable basis for apportionment. The defendant has the burden of proof, but the evidence does not have to be perfect. It is enough that there is a reasonable basis for apportionment. The Court also clarified that equitable considerations do not play a role in this determination. They come into play only at the stage where liability is allocated among those parties who are jointly and severally liable. The Ninth Circuit standard for divisibility had made this defense almost impossible.
The Supreme Court`s decision injects more fairness into CERCLA jurisprudence, and expands the defenses available. The Supreme Court did note, however, that each issue is fact-intensive, and will require a case-specific analysis.