"Thanks to my colleague Wink Pearson for his contribution and insight to this article"

On May 4, 2009, the U.S. Supreme Court rendered a significant CERCLA decision that will impact the cleanup liability landscape in Arizona and nationally. The decision in Burlington Northern & Santa Fe Railway Co. v. United States ("BNSF") narrowed the category of companies who are liable as "arrangers" under CERCLA and broadened a liable company’s "divisibility" defense to CERCLA’s presumptive "joint and several" liability.

Narrowing of Arranger Liability

The Court held that a company who transports its useful product (e.g., raw chemicals) to a facility is not liable as a party that "arranged" for the disposal of hazardous substances unless the government can prove the company "intended" to dispose of its useful product. The Court rejected the government’s argument that the company’s knowledge that there would be minor spillage in the off-loading process was sufficient to trigger CERCLA liability.

In this case, a chemical supplier delivered its product to the user/facility owner. The supplier knew that minor, accidental spills occurred during transfer of the chemicals from the common carrier to the facility’s storage tanks after the chemicals were under the facility’s stewardship. However, the Court noted that the supplier took steps to encourage the facility to minimize spills during the transfer.  The Court found that the supplier’s knowledge of the spills and leaks was insufficient grounds to conclude that the supplier "arranged for" the disposal of its chemicals at the facility. 

Practical Impact: Fewer companies who sell their useful but potentially contaminating products to contaminated sites will be pursued as an arranger based on incidental spills of the product at the time of delivery. The government and private parties will have a harder time pursuing these cases, as they will have to prove the companies "intended" to dispose of the spilled or leaked product. Companies who sell and transport such products should consider issuing and implementing safety notification procedures to their customers for the prevention of future spills and leaks. Such evidence will be useful in rebutting any inferences urged by plaintiffs that the company had the requisite intent to dispose of their products.

The Court also relaxed the scope and nature of evidence needed by a company at a multi-party CERCLA site to defeat the imposition of joint and several liability (joint and several liability enables the government to pursue any one of the companies at a multi-party site to recover 100% of its cleanup costs despite the fact that the target may have contributed a relatively minor share of the site’s total contamination). Before this decision, it was universally recognized that a company had a "divisibility" defense to joint and several liability, i.e., if a company could establish the existence of distinct harms at the site or a single harm that was reasonably capable of apportionment, the company’s liability for cleanup costs would be limited to the separate harm for which the company was responsible or its apportioned share. However, under a strict interpretation of this defense in the past by the government and some courts, many companies could not defeat joint and several liability because they could not establish distinct harms or a reasonable basis for apportionment at their multi-party site. In the Burlington Northern decision, the Court affirmed the trial court’s "reasonable basis" for apportionment based in part on a relaxed standard of estimates and inferences, rather than specific and detailed records. 

In this case, a company operated a chemical distribution business for many years on two parcels leased from the railroad. The company released contamination across both parcels. The government pursued the railroad for joint and several liability for the entire site. Rejecting the government’s position that the harm was indivisible and not capable of apportionment, the trial court apportioned the railroad a 9% share of liability for cleanup costs. The trial court reasoned that (i) the railroad owned 19% of the site; (ii) the railroad’s ownership period encompassed 45% of the time that the site operated as a waste disposal site; and (iii) 66% of the chemical contamination was associated with the type of chemicals that were disposed of on the railroad parcel. Multiplying these factors together (.19 x .45 x .66), the trial court initially assigned a 6% share to the railroad and then increased its share by 50% (i.e., from 6% to 9%) to account for uncertainty in the analysis. The Supreme Court affirmed the trial court’s apportionment by concluding that the record evidence before the trial court provided a reasonable basis for its 9% decision and thus rejected the government’s claim that the railroad should be liable for all the cleanup costs at the site. In reaching this decision, the Supreme Court focused on whether the contamination at the site could be apportioned, implicitly rejecting the government’s contention that the harm to be subjected to the apportionment analysis was the government’s cleanup costs.

Practical Impact: Liable parties at some multi-party sites will be able to demonstrate apportionment with a more relaxed standard of proof to defeat claims of joint and several liability. Whether a reasonable basis for apportionment exists continues to be determined by the trial court in its discretion on a case-by-case basis.