Burlington Northern & Santa Fe Railway Co. v. United States (2009), 129 S. Ct. 1870, 68 ERC 1161, 173 L.Ed.2d 812 ("Burlington").
On May 4, 2009, the U.S. Supreme Court (the "Court") issued an opinion resulting in impacts to the determination of liability against potentially responsible parties ("PRPs") under CERCLA. In Burlington, the Court set forth two important holdings, which are discussed in greater detail below.
In addition to other forms of liability, CERCLA imposes strict liability for environmental contamination upon those parties "who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other entity, at any facility or incineration vessel owned or operated by another part or entity and containing such hazardous substances." See 42 U.S.C. § 9607(a). (referred to herein as "arranger liability").
In 1960, Brown & Bryant, Inc. ("B&B"), an agricultural chemical distributor, began operating on a parcel of land located in Arvin, California. B&B later expanded onto an adjacent parcel owned by Burlington Northern and Santa Fe Railway Company and Union Pacific Railroad Company ("Railroads"). As part of its business, B&B purchased and stored various hazardous chemicals, including the pesticide D-D, which it bought from Shell Oil Company ("Shell"). Over time, many of these chemicals spilled during transfers and deliveries, and as a result of equipment failures.
Investigations of B&B by the California Department of Toxic Substances Control and the U.S. Environmental Protection Agency (the "Governments") revealed significant soil and ground water contamination. In 1989, the Governments exercised their CERCLA authority to clean up the Arvin site, spending over $8 million by 1998. Seeking to recover their costs, the Governments initiated legal action against Shell and the Railroads.
At issue in Burlington was whether Shell was liable under CERCLA's arranger liability provision. Notably, the Supreme Court held that Shell was not liable as an arranger for the contamination at the Arvin site. The Court stated, in pertinent part:
Because CERCLA does not specifically define what it means to "arrang[e] for" disposal of a hazardous substance, the phrase should be given its ordinary meaning. In common parlance, "arrange" implies action directed to a specific purpose. Thus, under § 9607(a)(3)'s plain language, an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance. To qualify as an arranger, Shell must have entered into D-D sales with the intent that at least a portion of the product be disposed of during the transfer process by one or more of § 6903(3)'s methods. (emphasis added).1
The Court then found that while Shell was aware that minor, accidental spills occurred during D-D's transfer from the common carrier to B&B's storage tanks after the product had come under B&B's stewardship, the record also revealed that Shell took numerous steps to encourage its distributors to reduce the likelihood of spills. Thus, the Court found that Shell's mere knowledge of continuing spills and leaks was insufficient grounds for concluding that it "arranged for" D-D's disposal.2
In light of the Court's ruling on this matter, it is not clear exactly what actions qualify as "intentional steps to dispose." However, it is clear that there will probably be additional litigation regarding the meaning and application of the Court's holding in Burlington to other sites.
Secondly, the Court issued an important holding that may impact the process for apportioning liability between the liable parties in a CERCLA action. Courts have previously held that liable parties may seek to avoid joint and several liability only by demonstrating evidence that supports the divisibility of damages jointly caused by PRPs. In prior CERCLA case law, this demonstration has required complicated and precise analysis.
In Burlington, the Court reversed the Court of Appeals and upheld the District Court's original divisibility finding with respect to the Railroads. The District Court determined liability is calculated based on three figures:
- The percentage of the total area of the facility that was owned by the Railroads;
- The duration of B&B's business divided by the term of the Railroads' lease; and
- The Court's determination that only two chemicals spills originating from the Railroads' parcel contributed to the contamination requiring remediation, and that those chemical spills were responsible for roughly two-thirds of the overall site contamination.
The Court upheld the District Court's determination that the above factors supported the Railroad's responsibility for 9% of the CERCLA response costs at the site. This is important because it demonstrates that apportionment of the harm may no longer require a complicated and precise analysis, as has been the custom in prior CERCLA cases. Instead, the Court determined that the evidence of the Railroads' contribution of contamination to the overall parcel was limited, so the Court believed that it was reasonable to use the size of the leased parcel and the duration of the lease as starting points in the apportionment analysis.