Presenting a live 90-minute webinar with interactive Q&A CERCLA Liability Distribution: Emerging Trends Establishing Arranger Liability and Apportionment of Liability Since Burlington Northern WEDNESDAY, NOVEMBER 12, 2014 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Dan Chorost, Principal, Sive Paget & Riesel , New York Marc A. Zeppetello, Partner, Barg Coffin Lewis & Trapp , San Francisco The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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CERCLA Liability Distribution: Emerging Trends November 12, 2014 Marc Zeppetello Dan Chorost SIVE, PAGET & RIESEL P.C. OVER FIFTY YEARS OF ENVIRONMENTAL LAW
OVERVIEW OF BURLINGTON NORTHERN Marc Zeppetello 6
General Principles – Apportionment – CERCLA is silent on the scope of liability – U.S. v. Chem-Dyne Corp. , 572 F.Supp. 802 (S.D. Ohio 1983), was first reported case to address scope of CERCLA liability – After examining the statute and legislative history, Chem-Dyne concluded Congress intended courts to determine scope of CERCLA liability under common law principles, particularly the Restatement (Second) of Torts 7
General Principles – Apportionment Restatement (Second) of Torts §433A provides: – Damages for causes are to be apportioned among two or more harms where • there are distinct harms, or • there is a reasonable basis for determining the contribution of each cause to a single harm – Damages for any other harm cannot be apportioned among two or more causes 8
General Principles – Apportionment – The defendant bears the burden of proving that there is a reasonable basis for apportionment. Restatement (Second) of Torts §433B – Apportionment proper only when evidence supports divisibility of damages caused by defendants – Equitable considerations play no role in apportionment analysis – Not all harms are capable of apportionment; courts will not make an arbitrary apportionment for its own sake 9
General Principles – Arranger Liability CERCLA Section 107(a)(3) establishes liability for: – any person who by contract, agreement, or otherwise arranged for disposal or treatment – or arranged with a transporter for disposal or treatment – of hazardous substances owned or possessed by such person – by any other party or entity – at any facility owned or operated by another party or entity and containing such hazardous substances 10
Divisibility Pre- Burlington Northern – Courts consistently found harm not divisible or defendant had not met burden to establish a reasonable basis for apportionment – In the matter of Bell Petroleum Services, Inc. v. Sequa Corp. , 3 F.3d 889 (5 th Cir. 1993) • Reversed imposition of joint and several liability because sufficient evidence to make “a reasonable and rational approximation” of each defendant’s contribution to the contamination • Reasonable to assume respective harm done by each defendant proportionate to volume of chromium- contaminated water each discharged 11
Burlington Northern and Santa Fe Railway Company v. United States, 556 U.S. 599, 129 S. Ct. 1870 (2009) 520 F.3d 918 (9th Cir. 2008) U.S. v. Atchison Topeka & Santa Fe Ry. Co., 2003 WL 25518047 (E.D. Cal. July 15, 2003) 12
Site Plan 13
Brown & Bryant Arvin Plant 14
District Court held Shell Liable as an Arranger – Spills inherent in delivery and unloading constituted disposal – Shell arranged for means and method of delivery – Shell knew spills inherent in delivery and unloading process – Useful product doctrine not applicable to spilled D-D 15
District Court used three factors to calculate the Railroads’ divisible share of the harm – Length of time B&B leased Railroad parcel compared to its period of operations (45%) – Size of Railroad parcel relative to total site area (19%) – Court’s assessment that releases of dinoseb and Nemagon (but not DCP) on the Railroad parcel had contributed to the site contamination (2/3) 16
District Court used three factors to calculate the Railroads’ divisible share of the harm – Multiplying the relative percentage of each factor (0.45 x 0.19 x 2/3), court calculated Railroads’ divisible share to be 6% – Then, court increased the Railroads’ share by 50% (to 9%) to account for possible calculation errors 17
To calculate Shell’s divisible share of harm – Court cited evidence of estimated quantities of various types of D-D spills – Court compared volume of spills during bulk deliveries to total volume of D-D spillage from combined activities of delivery, storage, transfer, and equipment rinsing – Court also found dinoseb hot spot removal action was a separate harm and capable of apportionment 18
Ninth Circuit Decision – Reversed the District Court’s apportionment rulings – Affirmed Shell’s liability as an arranger – Let stand District Court finding Shell was not liable for dinoseb hot spot 19
Ninth Circuit Divisibility: Two areas where Restatement approach requires slight modification to ensure it comports with CERCLA’s liability and remediation scheme – First, important distinctions between causation as conceived in Restatement and causation in context of CERCLA • CERCLA liability based upon party’s statutorily -based nexus to contaminated site • PRP status premised on ownership does not require any involvement in disposal of hazardous substances • Where PRP status is as a landowner, can establish divisibility by demonstrating reasonable basis for concluding certain proportion of contamination did not originate on portion of facility that landowner owned at time of disposal 20
Ninth Circuit • Second, CERCLA cost recovery does not focus on “harm,” but rather on “costs of removal or remedial action.” When applying Restatement in CERCLA context, what is the “harm” to be apportioned? – Three possible kinds of harm • initial disposal • resulting contamination • costs of remediation contamination – Most useful for purposes of determining divisibility to view the “harm” under CERCLA as the contamination traceable to each defendant • Disposal not the focus of statute unless it results in contamination • Cost of cleaning up contamination most analogous to damages recovered in a tort suit, not to the injury (harm) on which liability based • Cost of cleanup of different substances or in different areas will often be a useful measure of the proportion of the pertinent contamination allocable to each defendant 21
Ninth Circuit Arranger Liability – Useful product cases have no applicability here, where sale of useful product necessarily and immediately results in leakage of hazardous substances. Leaked portions are never used for their intended purpose. – Parties dispute whether Shell owned pesticide during transfer (to B&B) and controlled transfer process, but we do not enter this controversy. 22
Ninth Circuit Arranger Liability – Shell owned chemicals at time sale entered into. Statute requires nothing more in terms of ownership – District court’s findings demonstrate Shell had sufficient control over, and knowledge of, transfer process to be considered an “arranger” for disposal of chemicals that leaked 23
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