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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Arranger Liability Under CERCLA
Air & Waste Management AssociationSouthern SectionAnnual Meeting & Technical ConferenceCallaway GardensAugust 20, 2015
Steven Burns
ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Question: •Why does this matter?
Answer:•$ $ $
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Presentation outline
•Arranger liability basics
•Ward Transformer recap
•Roundup of other recent cases
•Takeaways and guiding principles3
ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
What is an “arranger”?
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Arranger liability basicsScenario:
• Contamination at a site
• Associated with products or materials brought from elsewhere
•What is the liability of the party who sold or shipped that material?
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Arranger liability basics
“Arranger”:
•One of several categories of liable parties under CERCLA, the federal contamination statute.
(Comprehensive Environmental Response, Compensation and Liability Act of 1980)
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Arranger liability basics
Liable parties under CERCLA: 1. Current owner / operator2. Past owner / operator3. “Any person who by contract,
agreement or otherwise arranged for disposal or treatment . . .”
4. TransporterPer CERCLA § 107(a), 42 U.S.C. § 9607(a)
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Arranger liability basics
When a used part, component, material, etc., is sold or otherwise shipped away, but not to a landfill:
• Is that a sale of a useful product?or,
•Did the seller actually arrange for a “sham” disposal?
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Arranger liability basics
If the transaction is deemed to be an arrangement for disposal:• Seller is liable for response costs in a
similar manner as other liable parties.
If the transaction is deemed to be a sale of a useful product:• Seller has no liability under CERCLA.
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Ward Transformer recap
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Ward Transformer recap
•Consolidation Coal Co. v. Georgia Power Company, 781 F.3d 129 (4th Cir. 2015)
•Spoiler alert:Georgia Power won!
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Ward Transformer recap
Scenario:
•Utilities sold used transformers to Ward Transformers in Raleigh, NC
•Massive contamination at the site (PCBs)
• Court reviewed several sale transactions from 1980 to 1984
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Ward Transformer recap
Relevant facts:
•Age of transformers ranged from 3 to 23 years old
•Most < 15 years old
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Ward Transformer recap
Relevant facts:
•Georgia Power had a two-track process
• Sales group handled valuable transformers
• Disposal group handled items not for resale
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Ward Transformer recap
Relevant facts:
• Sales via competitive bidding process
•Ward inspected and rejected some
•Ward resold the transformers at a profit15
ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Ward Transformer recap
Additional background information available from my presentation at last year’s conference
http://www.ss-awma.org/annual.php
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Ward Transformer recap
Outcome:
• Sale of a useful product
•No arranger liability for Georgia Power
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Ward Transformer recap
Court’s reasoning:
•Applied 4 factors (Pneumo Abex):
1. Intent of the parties as to reuse of the material2. Value of material sold3. Usefulness of materials at the time of sale4. Condition of the product
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Ward Transformer recap
Court’s reasoning:
1. Intent: • No evidence GPC intended to dispose of PCB oil• GPC intended to recover revenue• Efforts to test for PCBs indicated intent to comply
with law (TSCA), not dispose of PCBs
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Ward Transformer recap
Court’s reasoning:
1. Intent: • PCBs were incidental component of a legitimate
sale• Ward, not GPC, made decisions as to dispose or
reuse PCB oil
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Ward Transformer recap
Court’s reasoning:
2: Value of material sold• GPC recovered revenue from the sales• Ward recovered greater revenue from resale
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Ward Transformer recap
Court’s reasoning:
3. Usefulness of the product: • Most transformers used again after resale• Not at the end of their useful lives
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Ward Transformer recap
Court’s reasoning:
4. Condition of the product: • No evidence of transformers leaking at the time
of sale
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Ward Transformer recap
Court’s reasoning:
Knowledge: • No evidence that GPC knew that Ward was
disposing in a manner to cause contamination
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Roundup of other recent cases
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Roundup of other recent cases
Case: •Burlington Northern & Santa Fe Railway
Co. v. United States, 129 S. Ct. 1870 (Supreme Court 2009)
Product at issue: •Pesticides (new product)
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:• Site was an agricultural chemical
distribution business•Operated in part on railroad property• Shell sold pesticides in drums and
containers• Leakage over the years• Shell gave advice as to best practices
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent casesOutcome: •No arranger liability for Shell
Court’s reasoning:• Fact-specific inquiry• Sale of useful product not an arrangement
for disposal• Knowledge of leaks not enough to establish
liability28
ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent casesNote on relative authority of these cases:•Outcome of any case depends on specific
facts and circumstances•Circuit Courts > District Courts•Circuit Court cases are binding on the
District Courts in that circuit• AL & GA – Eleventh Circuit• TN – Sixth Circuit•MS – Fifth Circuit
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Roundup of other recent cases
Case: •American Premier Underwriters, Inc. v.
General Electric Co., 2015 WL 1469095 (S.D. Ohio 2015)
Product at issue:•Rail car transformers
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Roundup of other recent cases
Relevant facts:•Penn Central used GE transformers on
passenger rail cars• Transformers leaked (“burped”) PCB oil• Pressure relief valves, working more or less as
intended• Leaks around welds and bushings
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Roundup of other recent cases
Outcome:•No arranger liability for GE
Court’s reasoning:• Intent of valves was to relieve pressure
to prevent rupture (not disposal)• Leaks an “undesirable consequence” but not a
specific purpose
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Roundup of other recent cases
Court’s reasoning (continued):• Emphasis on “knowledge not intent”
from Burlington case•After the sales transactions, GE did not
own the transformers•GE knew of environmental issues with
PCBs, but the PCB oil was a useful product at time of transformer sales
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Case: •City of Merced Redevelopment Agency
v. Exxon Mobil Corp., 2015 WL 471672 (E.D. Cal. 2015)
Product at issue:•Gasoline containing methyl tertiary
butyl ether (MBTE)
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:•Agency came to acquire two service
stations with MBTE contamination•Defendants supplied gasoline with
MBTE•Plaintiffs alleged that suppliers provided
inadequate warnings and instructions as to proper handling of gasoline
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Outcome:•No arranger liability for gasoline suppliers
Court’s reasoning:• Sale of gasoline not intent to dispose•No other evidence of intent to dispose•Knowledge of leaks does not establish
arranger liability (Burlington)
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Roundup of other recent cases
Case: •Vine Street LLC v. Borg Warner Corp.,
776 F.3d 312 (5th Cir. 2015)
Product at issue:•Dry cleaning equipment
(perchloroethylene (PERC))
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Roundup of other recent cases
Relevant facts:•Borg Warner subsidiary provided dry
cleaning equipment, design assistance, and PERC the dry cleaner•Water separators supposed to allow
recycling of PERC• Actively attempted to recycle (expensive)
•PERC contamination nevertheless resulted
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Outcome:•No arranger liability for Borg Warner
Court’s reasoning:•Neither party intended to dispose PERC • Intent was to recapture
•Knowledge of leaks does not establish arranger liability (Burlington)
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Case: •NCR Corp. v. George A. Whiting Paper
Co., 768 F.3d 682 (7th Cir. 2014)
Product at issue:•Carbonless paper (with PCBs) and paper
scraps (with PCBs) sold to recycling mills
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:•NCR made “carbonless” paper with PCBs•Recycling mills made paper from
primary mill byproducts•NCR sold carbonless paper scraps to
mills, which made paper•Mills extracted and dumped PCBs into
the Lower Fox River (WI)
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Outcome:
•No arranger liability for NCR
• Note: This was a complex case. NCR was involved in the response, and NCR had liability for other reasons.
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Roundup of other recent cases
Court’s reasoning:•District court made a factual finding that
intent of NCR was to “place it on a competitive market and recoup some of its costs of production”• Deferred to trial court’s fact-finding
•Knowledge of leaks does not establish arranger liability (Burlington)
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Roundup of other recent cases
Case: •W.R. Grace & Co. v. Zotos International,
Inc., 2013 WL 5488939 (W.D. N.Y. 2013)
Product at issue:•Hair care products
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Roundup of other recent cases
Relevant facts:
• Zotos sold hair care products
• ECI manufactured the products and managed distribution (Waterloo plant)• Grace later acquired ECI assets• Grace = ECI for purposes of this case
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Roundup of other recent cases
Relevant facts:
• Zotos customers returned some products that met quality specifications• Zotos decided whether product could be
reconditioned (by ECI) or disposed of•Other products sold slow & became
obsolete• ECI sought Zotos approval to dispose
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:
• In all cases, disposals occurred at Brewer Road property
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Roundup of other recent cases
Outcome:• Zotos arranged for disposal for purposes
of CERCLA
Court’s reasoning:•Court rejected Zotos claims:• Zotos merely abandoned inventory• ECI made all arrangements as to disposals
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Court’s reasoning:•Rather, according to the court:• True that Zotos sold useful products• But here, the products were unsold, unwanted, or
obsolete• Zotos made key decisions of which
products to sell & which to throw away• This was more than knowledge of leaks as
discussed in Burlington Northern:• “intentional steps to dispose of a hazardous substance”
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Case: •Wilson Road Development Corp. v.
Fronabarger Concreters, Inc., 971 F. Supp. 2d 896 (E.D. Mo. 2013)
Product at issue:•Utility transformers
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:
•Plaintiffs owned property downgradient from Missouri Electric Works (MEW)
•Defendant utilities sold transformers to MEW
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:
•Many were sold and subsequently resold• Some sent for repair, but utilities still
owned them• Some sent in poor condition• “Junkers” for a “nominal” price
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent casesOutcome:•Motion for summary judgment denied
Court’s reasoning:•Defendants’ intent – “whether to dispose
of hazardous waste or to engage in legitimate sale and repair of used transformers” – was “a disputed issue of fact”
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Case: •United States v. Dico, Inc., 892 F. Supp.
2d 1138 (S.D. Iowa 2012)
Product at issue:•Metal building with insulation that had
PCBs
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:•Dico sold SIM various metal buildings• Disputed factual history indicates Dico may have
had reason to believe there could be PCB issues• SIM mainly wanted the steel beams• SIM extracted the steel beams and left
them in a lay-down area• Steel beams had been in contact with
PCBs; PCBs entered the ground55
ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Outcome:•Dico arranged for disposal of the PCBs
Court’s reasoning:• Fact-specific inquiry indicates intent to
dispose
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Roundup of other recent cases
Court’s reasoning:•No real market for the metal buildings•Not in great shape•Could not be moved without demolition•Only the steel beams were valuable• Everything else, including the PCB-laden
insulation, had to be disposed of• Facts disputed, but Dico knew there was
a good probability of PCBs57
ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Case: •United States v. General Electric Co., 670
F.3d 377 (1st Cir. 2012)
Product at issue:• Scrap insulating material
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Roundup of other recent cases
Relevant facts:•GE manufactured electric capacitators at
two plants in New York•Required use of PCBs (Pyranol)•GE developed a “glut” of Pyranol and
accumulated drums of “scrap” Pyranol• Sold scrap Pyranol to Fletcher• Local businessman who added it to paint
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ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC
Roundup of other recent cases
Relevant facts:•Arrangement worked for 10+ years
beginning in 1953•Over time, Fletcher began missing
payments•GE continued to send shipments • Some dispute as to quality•No more shipments after 1967
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Roundup of other recent cases
Relevant facts:•Problems at the Fletcher site discovered
in 1987
Outcome:•GE arranged for disposal
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Roundup of other recent cases
Court’s reasoning:•GE considered Pyranol to be a waste
product• Typically labeled “scrap,” “waste,” etc.• Got rid of it various ways, including dust
suppressant and dumping into Hudson River• Much of the scrap Pyranol was poor quality• No effort to sell it as a useful product to anyone
other than Fletcher
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Roundup of other recent cases
Court’s reasoning:•GE controlled quality and volume of
material sent •After learning Fletcher could not use all
the quantities sent, GE tested some of the material• Found it was poor quality and forgave debt• But made no effort to retrieve off-spec material
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Roundup of other recent cases
Other transformer cases finding no arranger liability for the utility:
•Carolina Power & Light Co. v. Alcan Aluminum Corp., 921 F. Supp. 2d 488 (E.D. N.C. 2013)
• Schiavone v. Northeast Utilities Service Co., 2011 WL 1106228 (D. Conn. 2011)
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Takeaways
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Takeaways
•When selling surplus items, intent of the seller matters• Intent to dispose or sale of useful
product?
•Sale (and resale) price
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Takeaways
•Disposal costs and practices
• Separate internal process from sales?• Separate, specialized vendors?•Who makes the decision of what
material to dispose of?
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Takeaways
•Current and potential utility of product• Competitive market for the item?• Potentially subject to resale?
•Condition of the product• Risk of spill or release• Condition as affecting usefulness
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Takeaways
•Due diligence to avoid counterparties with bad practices•No releases = no CERCLA liability
•But if diligence uncovers concerns, be prepared to take action in response
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Takeaways
•Use only high quality vendors – top tier of those reviewed
•More vendors of lower quality = more opportunities for releases
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Takeaways
•Where the intent truly is for a sale, limit contractual obligations as to buyer’s disposal practices
• Sharing best practices is fine, but…
•Don’t create a contract that looks like the seller dictates manner of disposal
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Thank you!Steven Burns
(205) [email protected]