The Supreme Court's recent ruling in Burlington Northern & Santa Fe Railway Co v United States(1) received much attention for its holding that Shell Oil Company was not liable as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (commonly known as 'Superfund'). The court held that Shell had not "arranged for the disposal... of hazardous substances" within the meaning of Section 107(a)(3) of Superfund, because Shell's mere knowledge of continuing spills and leaks from a useful product that it sold and transported to a customer's facility were insufficient grounds to conclude that the company had arranged for disposal of the product. The eight-to-one holding was helpful, but not surprising, given that Shell had been shipping a useful product in commerce without intending for that product to be disposed of by its customer.
The more interesting part of the court's opinion, and the part that has greater potential to affect Superfund litigation, is contained in the section on apportionment of liability based on a variety of factors. This ruling has the potential to limit the severity of Superfund joint and several liability to defendants which are not principal contributors to the contamination at hazardous waste sites. This sends an unsubtle message to trial courts that apportionment of liability in direct Superfund Section 107 actions is to be encouraged where the evidence provides some rationale for divisibility. The key for defendants will be to develop the facts that will give trial courts the basis to apportion liability.
The apportionment part of the court's decision in Burlington reviewed the appeal court's decision holding that certain 'railroad' defendants, which merely owned portions of the contaminated property and leased them to the facility operator, were jointly and severally liable for the full cost of the government's response efforts, reversing the district court's decision to apportion only 9% of the liability to the railroad defendants. The district court had based its apportionment on:
the size of the parcel owned by the railroad that was part of the overall contaminated property;
the duration of the lease to the party undertaking the activities leading to the release of hazardous substances; and
the volume of hazardous substance-releasing activities on the railroad-owned parcel.
The district court also apportioned liability because only spills of two chemicals:
"substantially contributed to the contamination that had originated on the railroad parcel and... those two chemicals had contributed two-thirds of the overall site contamination requiring remediation."
The Supreme Court reversed the appeal court's decision and upheld the district court's apportionment ruling. In so doing, the Supreme Court tacitly acknowledged that environmental harm can be rationally apportioned in Superfund cases when the facts and common sense support such a result. While the court stated that it was merely affirming long-established rules on apportionment in direct Superfund Section 107 actions, citing with approval the seminal decision of Chief Judge Carl Rubin of the US District Court for the Southern District of Ohio in United States v Chem-Dyne Corp,(2) it signalled that courts should engage in a pragmatic application of these principles. Chem-Dyne, which has been cited and followed by federal appeals courts, held that although Superfund imposes strict liability, it does not mandate joint and several liability when there is a reasonable basis for determining the contribution of each cause to a single harm. However, Chem-Dyne and the cases following it also made clear that the burden of proving a reasonable basis for apportionment lies with the Superfund defendant seeking to avoid joint and several liability, and defendants have found this a difficult burden to meet in the 25 years since Chem-Dyne.
The Supreme Court did not change the rule relating to the burden for establishing a basis for apportionment, but affirmed an apportionment by the district court that was pragmatic and based on a general sense of fairness. The district court rejected the 'scorched earth', all-or-nothing approach to liability proffered by the litigants and applied common sense to the facts before it. Although the factual record was not fully developed on some of the points on which the district court relied, the Supreme Court upheld the apportionment because it found that it "was properly rooted in evidence that provided a reasonable basis for identifying the portion of harm attributable to the railroads", and that notwithstanding the criticisms of the appeal court, "the facts contained in the record reasonably supported the apportionment of liability".
Thus, while purportedly not enunciating a new rule or a stated change in the applicable approach, in practice the Supreme Court upheld and applied a pragmatic basis for the apportionment of Superfund liability based on a reasonable, commonsense application of the facts. The court upheld the district court's central finding that the principal contamination that led to the response costs did not occur on the railroad parcel, which "contributed to no more than 10% of the total site contamination". The Supreme Court's decision should empower trial courts to engage in reasonable apportionment of Superfund costs when a party can establish that it has a minor or tenuous link to the site contamination that would make it unreasonable to impose joint and several liability for the entire cost of cleaning up a contaminated site. The key to achieving that result will be in developing evidence during pre-trial discovery and through expert proof that any contamination attributable to that party was not the primary cause of the response costs incurred at the site.
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