Presenting a live 90-minute webinar with interactive Q&A Arranger Liability Under CERCLA: Leveraging Recent Court Decisions Reducing Liability Amid Uncertainty and Absent Clear Guidance WEDNESDAY, JANUARY 21, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Michael K. Murphy, Partner, Gibson Dunn & Crutcher , Washington, D.C. Suzanne Ilene (Shoshana) Schiller, Partner, Manko Gold Katcher & Fox , Bala Cynwyd, Pa. 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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Arranger Liability January 21, 2015 Under CERCLA Michael K. Murphy Gibson Dunn & Crutcher LLP Suzanne Ilene Schiller Manko, Gold, Katcher & Fox, LLP
6 Topics • The text of Section 107 of CERCLA, 42 U.S.C § 9607 • The Supreme Court’s decision in Burlington Northern & Santa Fe Railway Company v. United States , 556 U.S. 599 (2009) • Recent cases applying Burlington Northern
Section 107 of CERCLA Michael K. Murphy
8 Liability for Response Costs Under CERCLA • CERCLA § 107, 42 U.S.C § 9607, permits recovery of response costs from potentially responsible parties (PRPs) for cleanup of hazardous substances ▫ Four categories of PRPs: Current owner/operator Past owner/operator Arranger Transporter
9 Defining “Arranger:” Starting with the Text • 42 U.S.C. § 9607(a)(3): “[A]ny person 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 party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances . . . . ”
10 Taking a Closer Look at Arranger Liability • Purpose: close a loophole ▫ Prevent entity from avoiding CERCLA liability by contracting with another party to arrange for the disposal of the entity’s hazardous waste • “Arranged for” not defined in statute • Courts previously implemented varying standards of liability: ▫ Specific intent that waste will be disposed of ▫ Mere knowledge that waste will be disposed of Inferring intent where PRP knew or should have known about hazardous material releases ▫ Strict liability
The Decision in Burlington Northern Michael K. Murphy
12 “Arranger” Interpreted: Burlington Northern • Burlington Northern & Santa Fe Railway Company v. United States , 556 U.S. 599 (2009) ▫ Issue: Is intent to dispose of hazardous materials required for arranger liability or is knowledge sufficient? • Facts: ▫ Shell Oil Company sold the pesticide D-D to B&B, a chemical distributor ▫ During transfer from tanker trucks to B&B’s bulk storage containers, spills of D-D occurred Shell had actual knowledge of some degree of spillage ▫ Shell identified as PRP under arranger liability theory
13 Burlington Northern : Procedural History • Ninth Circuit, 520 F.3d 918 (2008): ▫ Shell not “traditional” arranger – had not directly contracted to dispose of hazardous material ▫ Shell still liable under “broader category of arranger liability” because disposal of D -D was foreseeable byproduct of transaction with B&B • Supreme Court, 556 U.S. 599 (2009): ▫ Reversed Ninth Circuit decision ▫ Shell not liable as arranger because it had no intent to dispose of D-D
14 A Textual Analysis • The Court began with the language of the statute: ▫ “It is plain from the language of the statute that CERCLA liability would attach under § 9607(a)(3) 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 .” • But what about those cases in between?
15 Crafting a Rule for the Cases In Between • Giving “arrange” its ordinary meaning: ▫ “In common parlance, the word ‘arrange’ implies action directed to a specific purpose.” ▫ “Consequently, under the plain language of the statute, an entity may qualify as an arranger . . . when it takes intentional steps to dispose of a hazardous substance.” • And limiting the inference of intent: ▫ “While it is true that in some instances an entity’s knowledge that its product will be leaked, spilled, dumped, or otherwise discarded may provide evidence of the entity’s intent to dispose of its hazardous wastes, knowledge alone is insufficient to prove that an entity ‘planned for’ the disposal.”
16 The Court’s Holding: Shell Not an Arranger ▫ “In order to qualify as an arranger, Shell must have entered into the sale of D-D with the intention that at least a portion of the product be disposed of during the transfer process . . . .” ▫ “Shell’s mere knowledge that spills and leaks continued to occur is insufficient grounds for concluding that Shell ‘arranged for’ the disposal of D-D within the meaning of § 9607(a)(3).”
17 The Upshot of Burlington Northern • Some indicia of intent to dispose of at least a portion of a hazardous substance is required ▫ Especially for unused, useful products • Mere knowledge of facts leading to disposal is insufficient • Courts left to examine facts of each case to determine intent of the parties to the transaction
18 Inconsistent Decisions • Compare American Int’l Specialty Lines Ins. Co. v. United States , 2010 WL 2635768 (C.D. Ca. 2010) (finding arranger) with Lockheed Martin v. United States , 2014 WL 1647147 (D.D.C.), 79 ERC 1311 (no arranger liability). ▫ Both cases addressed solid rocket manufacturers working for the United States and the disposal of government-owned materials in burn pits under government contracts in accordance with government manuals
19 Degree of “Control” under BNSF • ASLIC : United States knew that hazardous substances would be removed from motors and discarded; mandated the use of certain materials; knew the manufacturing process would generate waste; and had the right to supervise disposal • Lockheed Martin : Those facts are not sufficient: “Instead, arranger liability attaches only if the government exercised direction and control over waste disposal activities related to its contracts with LPC.”
Recent Cases Suzanne Ilene Schiller
21 Key Issues • Waste vs. Useful Product ▫ Is the product the hazardous substance, or is the hazardous substance merely contained on/within the product? ▫ Is there an established market for the product? ▫ What is the value of the product to the purchaser? ▫ What is the value of the product to the seller? ▫ Has the seller taken steps to minimize potential disposal of the hazardous substance by the buyer?
22 Key Issues (cont.) • Knowledge and Intent ▫ Is there knowledge of the hazardous nature of product? ▫ Is there an intent to dispose of the product? Is there an intent to dispose of the hazardous substance? • Ownership and Control ▫ Who owns the product at the time of the disposal of the hazardous substance? ▫ Who controls the method and manner of disposal?
23 Common Subjects
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