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Thursday, May 21, 2009 High Court Limits CERCLA Liability: Clarifies "Arranger" Status And Approves Divisibility Analysis By: Kirsten M. McNelly |
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The Comprehensive Environmental Response, Compensation, and Liability Act, as amended, ("CERCLA") places the burden of environmental cleanup costs on certain groups generally regardless of fault. Liable parties may include past and current property owners, operators of facilities situated on contaminated property, those who arranged for disposal/treatment of hazardous substances ("arrangers"), and those who accept the contaminants for disposal. This month, the United States Supreme Court better defined the circumstances under which "arranger" liability may be imposed. In the same ruling, the High Court approved a divisibility argument based upon such factors as percentages of land area, time of ownership, and types of hazardous products, providing guidance to practitioners seeking to apportion response costs based upon actual harm caused. Arranger Liability Under CERCLA, "arranger" liability applies to those who "arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances…." For many years, courts have struggled with what constitutes such an "arrangement," and potentially responsible parties have debated the circumstances which give rise to arranger liability. In Burlington Northern Santa Fe Railroad Company v. United States, the United States Supreme Court lent a helping hand by clarifying one circumstance which may not result in arranger liability under 42 USC § 9607(a). In Burlington, a landowner was compelled by various government organizations to remediate its contaminated property. Ultimately, contribution toward cleanup costs was sought, under an arranger theory, from the manufacturer/distributor of a product believed to have contributed to contamination there. What makes the case interesting is that the manufacturer sold a new product (and thus did not technically arrange for its disposal), but knew that, at times, the product spilled (so it was argued that releases of the product were a foreseeable byproduct of the product's sale). In analyzing potential arranger liability, the United States Supreme Court noted: It is plain from the language of the statute that [arranger] liability would attach…if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance. It is similarly clear that an entity could not be held liable as an arranger merely for selling 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. Less clear is the liability attaching to the many permutations of “arrangements” that fall between these two extremes-cases in which the seller has some knowledge of the buyers' planned disposal or whose motives for the “sale” of a hazardous substance are less than clear. In such cases, courts have concluded that the determination whether an entity is an arranger requires a fact-intensive inquiry that looks beyond the parties' characterization of the transaction as a “disposal” or a “sale” and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLA's strict-liability provisions. In Burlington, the High Court concluded that the inquiry turned on intent; i.e., arranger liability will not attach absent intentional steps to dispose. This decision is important as it may limit liability for those who did not intend to dispose of a product which ultimately contaminates a site. Apportionment of Liability Also importantly, the Burlington decision addressed the possible division of responsibility for harm. Because CERCLA liability is joint and several, a small polluter may find itself responsible for a lion's share of response activity costs for which it does not feel responsible. CERCLA does provide limited grounds for division of responsibility when there is a reasonable basis for apportionment. In Burlington, the following factors were deemed relevant to an apportionment analysis: percentages of land area, time of ownership, and types of hazardous products. Equitable considerations were specifically disallowed. Relevant to Both Federal and State Environmental Litigation The Burlington ruling is relevant both to federal litigation and litigation in Michigan. Michigan courts look to federal cases interpreting CERCLA for guidance when analyzing suits brought pursuant to Part 201 of Michigan's Natural Resources and Environmental Protection Act, MCL 324.20101 et seq., which mirrors CERCLA in many ways. If you have any questions about how the Burlington decision may affect you, please call any member of Foster Swift's Energy and Sustainability Team. |
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