CERCLA Liability Distribution: Emerging Trends Establishing Arranger - - PowerPoint PPT Presentation

CERCLA Liability Distribution: Emerging Trends

Establishing Arranger Liability and Apportionment of Liability Since Burlington Northern

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Presenting a live 90-minute webinar with interactive Q&A Dan Chorost, Principal, Sive Paget & Riesel, New York Marc A. Zeppetello, Partner, Barg Coffin Lewis & Trapp, San Francisco

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Dan Chorost

SIVE, PAGET & RIESEL P.C.

OVER FIFTY YEARS OF ENVIRONMENTAL LAW

CERCLA Liability Distribution: Emerging Trends

November 12, 2014 Marc Zeppetello

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 (5th 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

• wnership

– 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

Supreme Court Decision

– Shell is not liable as an arranger – District Court’s apportionment of liability to Railroads supported by the evidence and consistent with applicable apportionment principles

24

Supreme Court Decision

– To be liable as an arranger, Shell must have sold D- D with intention that at least a portion of product would be disposed of during deliveries – Shell’s mere knowledge that spills occurred was insufficient to establish arranger liability

25

Supreme Court Decision

– Acknowledged Ninth Circuit’s criticisms of the evidence on which District Court relied, but concluded facts in record supported apportionment of liability – Acknowledged Ninth Circuit’s criticism of assumption that

• nly spills of Nemagon and dinoseb had contributed to

contamination from Railroad parcel, but District Court’s conclusion supported by fact that no D-D spills on Railroad parcel required remediation – Found less support for conclusion that Nemagon and dinoseb accounted for two-thirds of contamination, but any miscalculation harmless in light of 50% margin error applied by District Court

26

Implications of the Supreme Court’s Decision for Demonstrating Apportionment

– Standard of review – Burden of proof – Reasonable basis for determining contribution to the harm – Factors that may provide a reasonable basis for apportionment

27

Factors that may provide a reasonable basis for apportionment

– Time – Geography – Relative volume – Relative mass – Nature and extent of operations – Distinct harms

28

ARRANGER LIABILITY SINCE BURLINGTON NORTHERN

29

CERCLA’s Liability Structure

• Section 107 sets out four categories of

“covered persons” (PRPs) that can be liable for response costs incurred by the government or by private parties:

– (a)(1) Current owners and operators of a facility; – (a)(2) Past owners and operators of a facility at the time hazardous substances were disposed of; – (a)(3) Arrangers; and – (a)(4) Transporters

30

What’s an “Arranger” under 107(a)(3)?

• Liability extends to “any 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 …

• wned or operated by another party or entity

and containing such hazardous substances….”

• No definition of “arranged for” or “arranger”

31

Burlington’s Arranger Scenario

• Burlington raised the Arranger standard
• FACTS:

– Several consolidated disputes to recover remedial costs for Brown & Bryant (B&B) site in California – For 28 years, B&B distributed chemicals from site – B&B bought D-D (pesticide) from Shell

• Shell’s delivery of D-D involved numerous transfers
• B&B was “sloppy;” Shell knew transfers resulted in spills
• Shell ultimately took steps to prevent delivery spills

32

Recap of BN “Arranger” Decision

• Trial court/9th Circuit:

– Shell an “arranger” because it arranged for transfers and knew that spills resulted

• SCOTUS:

– §107(a)(3) applies to entity that “arranges for disposal … of hazardous substances,” and “arranges” implies action toward specific purpose – Thus, Shell not “arranger” because it lacked specific intent to dispose of D-D during deliveries

33

The Spectrum of Arranger Liability

Burlington Northern, 556 U.S. at 609-10:

• “It is plain from the language of the statute that CERCLA [arranger]

liability would attach under [Section] 9607(a)(3) if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful 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.”

34

“Easy” case: Arranger liability

• Lockheed Martin Corp. v. U.S., __ F.Supp.2d __, 2014 WL 1647147

(D.C. D.C. Apr. 22, 2014)

• Both parties stipulated to being PRPs; case mostly deals with

equitable allocation of liability.

• Footnote re: the government’s arranger liability: “The evidence of

actual ‘direction’ regarding the disposal of any wastes is limited to a few instances where the government abandoned property and instructed [Lockheed] … to destroy it by burning it in the Portero Canyon burn pits.”

• Holding: Instruction to dispose of waste = arranger liability
• Burlington: arranger liability “if an entity were to enter into a

transaction for the sole purpose of discarding a used and no longer useful substance.”

35

Hobart Corp. v. Dayton Power & Light Co.: The evidence needed for Arranger liability

2014 WL 4627246 (S.D. Ohio Sept. 15, 2014): Landfill case, 30+ PRPs, including DAP

• Witness saw DAP products at the landfill site and knew DAP was a

landfill customer, but didn’t know how DAP materials got to landfill Held: insufficient evidence for arranger liability claim to survive SJ

• “The mere fact that DAP products were transported to the Site

does not necessarily mean that DAP arranged for that to happen. It is possible that some third party purchased the DAP products for their intended purpose, and later arranged for their disposal at the Site.“

• Further discovery allowed "to search for evidence of the missing

link, i.e., that DAP arranged for those hazardous substances to be transported to, or disposed of, at the Site.“

36

Intent to Dispose

• While it is true that in some cases an entity's knowledge that

its product will be … 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, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product. In

• rder to qualify as an arranger, [the party] must have entered

into the sale of [the useful product] with the intention that at least a portion of the product be disposed of…." Burlington, 556 U.S. at 612 (emphasis added)

37

“Easy” case: Knowledge alone = Not Arranger

• U.S. v. Federal Resources Corp., __ F.Supp.2d __, 2014 WL

3400477 (D. Idaho July 14, 2014)

• Arranger liability alleged based on federal agency oversight of

government contractor, who disposed of mine tailings

• Pre-Burlington case, Coeur d’Alene Tribe v. Asarco, Inc., 280

F.Supp.2d 1094 (D. Idaho 2003): arranger liability on similar facts

• “But the Supreme Court has spoken since [Coeur d’Alene],

holding that knowledge of the disposal of hazardous substances is not alone sufficient to establish arranger liability.”

• Held: no arranger liability

38

“Easy” case: No intent = Not Arranger

• Celanese Corp. v. Martin K. Eby Const., 620 F.3d 529 (5th
• Cir. 2010)

– Contractor damaged pipeline, which leaked (years later) – Property owner sued contractor, alleging arranger liability based on failure to investigate and fix damage to pipeline – "Celanese's conscious-disregard allegations do not establish arranger liability under CERCLA." 620 F.3d at 532 – "The district court found, and Celanese does not dispute, that Eby did not intentionally damage the pipeline … Burlington … precludes liability under these circumstances."

39

The “Useful Product” Defense

• Burlington: “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.”

• Selling a useful product does not constitute

“arranging for disposal”

40

Team Enterprises, LLC v. Western Investment Real Estate Trust, 647 F.3d 901 (9th Cir 2011)

– Dry Cleaner pours PCE contaminated wastewater down sewer drain – Dry cleaner remediates contaminated soil – Sues manufacturer of PCE-distilling machinery – "The useful product doctrine serves as a convenient proxy for the intent element [of arranger liability]…"

41

Team Enterprises, LLC v. Western Investment Real Estate Trust, 647 F.3d 901 (9th Cir 2011)

– Dry Cleaner argued:

• Manufacturer knew operation of its machinery required

disposal of PCE, so it is liable as an arranger

– Court Held:

• Manufacturer not liable
• “Absent a showing that [defendant] intended for its sale of the

[product] to result in the disposal of [PCE], we must conclude that [defendant] lacks requisite intent for arranger liability.”

• Actions taken with knowledge of future disposal not enough for

liability

• Affirms district court grant of summary judgment motion by

defendant

42

United States v. General Electric Company, 670 F.3d 377 (1st Cir. 2012) – GE used Pyranol in its capacitors – Impure Pyranol = “Scrap Pyranol” – Stored in 55 gallon drums – Sold to Mr. Fletcher who bought it at “bargain prices” and used for his “industrial needs”

43

United States v. General Electric Company, 670 F.3d 377 (1st Cir. 2012) Court Held: – GE was an arranger – GE viewed scrap Pyranol as a waste material – Profit derived from sale was subordinate and incidental to being rid of it – Only sold to Fletcher; not marketed as viable product to others, additional evidence showed efforts to reduce stockpile of scrap Pyranol without selling it

44

Burlington Northern’s Middle Ground

– “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

• r whose motives for the 'sale' of a hazardous

substance are less than clear.” – Will discuss examples of cases that fall in the middle ground, where resolution is less clear

45

Burlington Northern’s Middle Ground: Disposal of Hazardous Substances into Sewer System – Team Enterprises, 647 F.3d 901 (9th Cir 2011) – Frontier Communications Corp. v. Barrett Paving Materials, Inc., 631 F.Supp.2d 110 (D. Me. 1999) – Gregory Village Partners v. Chevron U.S.A., Inc., 2012 WL 832879 (N.D. Cal. Mar. 12, 2012)

46

Frontier Communications Corp. v. Barrett Paving Materials, Inc. 631 F.Supp. 2d 110 (D. Me. 2009)

– Alleged Railroad operations contaminated a cove – Alleged negligent disposal via spills and via sewer lines located on RR property – Motion to Dismiss – denied – Enough to allege a claim of arranger liability

47

Gregory Village Partners v. Chevron U.S.A., Inc., 2012 WL 832879 (N.D. Cal. Mar. 12, 2012) – Property owner alleged contamination entered a sewer line and reached its property, sued sewer district as arranger – Motion to Dismiss – granted as to arranger liability – No allegation of “intentional steps” by district to dispose of chemicals at issue

48

BN’s Middle Ground: Sale of PCB-containing transformers

• Schiavone v. Northeast Utilities Service Co., 2011 WL

1106228 (D. Conn. Mar. 22, 2011)

• Wilson Road Development Corp. v. Fronabarger

Concreters, Inc., 2013 WL 4375071 (E.D. Mo. Sept. 11, 2013)

49

Schiavone v. N.E. Utilities Serv. Co., 2011 WL 1106228 (D. Conn. Mar. 22, 2011)

• Scrap yard purchased metal scrap from utilities, including

used transformers. Scrap yard contaminated with PCBs.

• "It is undisputed that the defendants had a specific

purpose of disposing of used transformers…by selling them as scrap metal…[and] have produced evidence that…their specific purposes with respect to their dealings with [the scrap yard] did not extend beyond that, i.e., to disposing of any oil that was in the transformers or any PCBs that were in such oil.”

• Held: no arranger liability for utilities

50

Wilson Road Devel. Corp. v. Fronabarger Concreters, Inc., 2013 WL 4375071 (E.D. Mo. Sept. 11, 2013) – Defs sent used transformers for repair, also sold used transformers – Held: fact issues preclude SJ as to arranger liability – No ‘sale of useful product’ if defendants retained title to transformers being repaired – Not clear whether transformers sold as scrap were ‘useful products’ or waste

51

Burlington’s Middle Ground: Sale of carbon paper “broke”

• Recent 7th Circuit decision, NCR Corp. v. George A.

Whiting Paper Co., ___ F.3d ___, 2014 WL 4755491 (7th Cir. Sept. 25, 2014) District court cases:

• Appleton Papers, Inc. v. George A. Whiting Paper

Co., 2012 WL 2704920 (E.D. Wisc. July 3, 2012), aff’d

• n arranger liability
• Georgia-Pacific Consumer Products LP v. NCR Corp.,

980 F.Supp.2d 821 (W.D. Mich. 2013)

52

Appleton Papers, Inc. v. George A. Whiting Paper Co., 2012 WL 2704920 (E.D. Wisc. July 3, 2012)

• No arranger liability for CCP manufacturer due to no intent to dispose of

waste:

– “Indifference is, at most, what occurred here.” – “Even if ignorance about the hazardous nature of a product is not dispositive of arranger liability, I conclude that it is at least strong evidence suggestive of the disposer’s lack of the requisite intent.”

• Affirmed by the 7th Circuit:

– "In order to decide if someone is an arranger, it is also important to look at the party's

• intent. It is more likely to be an arranger if it was simply trying to dispose of the

materials, or if it was compelled to get rid of them …. The simple fact, based on the district court's findings, is that Appleton Coated was not just trying to find a way to dispose of trash when it sold its broke, nor did it need to find a way to bring it to an ultimate destination. It prepared and sold broke because broke was a valuable input for the recycling mills.“ – Supported by lack of control over recyclers’ waste disposal practices

53

Georgia-Pacific Consumer Products LP v. NCR Corp., 980 F.Supp.2d 821 (W.D. Mich. 2013)

– When does a “useful product” become a “waste”? – Arranger liability phrased as "whether and when NCR's sale of CCP broke—a waste in the production of CCP—moved from the sale of a useful product to paper recyclers to an arrangement for disposal of PCB- contaminated waste that no fully informed paper recycler would ever use.“ – Manufacturer’s knowledge of harmful nature of PCBs and release of PCBs in paper recycling meant that this happened “no later than 1969”

54

An outlier: United States v. Washington State Dept. of Transp., 716 F.Supp.2d 1009 (D. Wash. 2010) – U.S. sued State DOT over site where contamination resulted from highway runoff – U.S. alleged that DOT designed, built, & operated drainage system for highway runoff, knew of contamination & could contain/treat – Held: DOT is an arranger

55

Arranger Liability: Practice Points

– Intent is key; knowledge alone insufficient – “Smoking gun” evidence is rare – “Useful product” defense closely related to intent – Minimizing incidental releases is protective – Be careful with contract language when selling useful products

56

APPORTIONMENT AFTER BURLINGTON NORTHERN

57

Marc Zeppetello

Evansville Greenway & Remediation Trust v. Southern Indiana Gas & Elec. Co., Inc., 661 F.Supp. 2d 989 (2009)

• Trust established by PRPs brings §107(a) action to recover costs from
• ther PRPs
• Court grants Trust’s motion for summary judgment that defendant

SIGECO is a PRP but denies the plaintiff’s motion to the extent it seeks a determination that SIGECO would be jointly and severally liable for all response costs

• Burlington Northern decision issued during course of the briefing on

motion

• Trial that will allow each side to present evidence relevant to its and

its opponents’ different interpretations of Burlington Northern

• Trial will allow full development of record and a decision based on the

evidence

• Case subsequently resolved via settlement

58

3000 E. Imperial, LLC v. Robertshaw Controls Co.,

2010 WL 5464296 (C.D. Cal. 2010)

– Former manufacturing site in Lynwood, California – TCE and benzene in soil and groundwater – Defendant owned property from 1955 to 1963, where it manufactured aircraft and missile valves – Plaintiff, current owner, entitled to bona fide prospective purchaser status – Court found:

• USTs leaked during defendant’s operation of property
• Defendant used TCE in its manufacturing operations

59

3000 E. Imperial, LLC v. Robertshaw Controls Co.,

2010 WL 5464296 (C.D. Cal. 2010)

• Geographic Divisibility – rejected

– Defendant proposed using relative sizes of two distinct areas of site, and argued no evidence it contributed to contamination in Area 2 – Court rejected testimony that defendant never used TCE (found in Area 2) – Since court found defendant used TCE, no support for divisibility based on respective sizes of two areas – No evidence of defendant’s relative contribution to contamination in Area 2 as compared to subsequent

• perator

60

3000 E. Imperial, LLC v. Robertshaw Controls Co.,

2010 WL 5464296 (C.D. Cal. 2010)

• Divisibility based on time of ownership –

rejected

– Defendant proposed using number of years of ownership to apportion liability (percentage of time defendant owned property that USTs were in the ground) – Court found apportioning liability in this manner might be reasonable if there was some evidence USTs leaked steadily during entire time they were in the ground – Court found it was possible that most, if not all, of TCE leaked out of USTs during defendant’s ownership – Defendant cited no evidence supporting apportionment based on number of years of ownership

61

3000 E. Imperial, LLC v. Robertshaw Controls Co.,

2010 WL 5464296 (C.D. Cal. 2010)

– Court noted that although similar figures (relative area and time) were used in Burlington Northern, this did not relieve defendant “from supporting its divisibility arguments with evidence that these figures bear a relationship to amount of harm that it caused.”

62

Is Apportionment Available in a Section 113 Contribution Action?

• Redwing Carriers, Inc. v. Saraland Apartments

94 F. 2d 1489 (11th Cir. 1996) – Divisibility is a defense to joint and several liability in a cost recovery action brought under §107(a); it is not a defense to a contribution action under §113(f)

63

Is Apportionment Available in a Section 113 Contribution Action?

– New York v. Solvent Chemical Co., Inc., 2011 WL 6318018 (2d Cir. 2011) (unpublished)

• Apportionment inapplicable to contribution claims

under Section 113(f); it is a common law doctrine that may be used to blunt harshness of joint and several liability under Section 107(a)

64

Is Apportionment Available in a Section 113 Contribution Action?

– PCS Nitrogen Inc. v. Ashley II of Charleston, LLC, 714 F. 3d 161 (2013)

• Because no party raised argument that apportionment

is not available in a §113 action, and because defendant’s apportionment claims fail on merits, we need not decide the issue and assume that the defendant may argue for apportionment to avoid court’s equitable allocation of harm under §113

65

Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431 (D.S.C. 2011)

– 43-acre parcel of land in Charleston, South Carolina, operated as a fertilizer plant – Arsenic and lead contamination across the entire site; also low pH and polyaromatic hydrocarbon (PAH) contamination – Defendant PCS sought divisibility of liability on five methods of apportionment

66

Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431 (D.S.C. 2011)

– Divisibility

• Method 1: Amount of fill material added to site during

each PRP’s period of ownership – rejected

• Method 2: Volume of contaminants introduced to the

site – rejected

• Method 3: Period of time of operation by successive

plant operators – rejected

• Method 4: Analysis of PRPs who first physically

disturbed portions of remediation area – rejected

• Method 5: Calculation based on number of

contaminated soil samples – rejected

67

Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431 (D.S.C. 2011)

– Divisibility (continued)

• Harm at site was theoretically divisible based on:

– How much contamination each party contributed to the site; and – How much soil each party caused to be included in the remediation area by spreading the contamination throughout the site

• PCS failed to provide:

– A reasonable basis for determining approximate volume of contaminants introduced to site by operators; and – A reasonable estimate of additional volume of soil contaminated by earth moving and development activities

68

PCS Nitrogen Inc. v. Ashley II of Charleston LLC.,

714 F.3d 161 (4th Cir. 2013)

– Appeal from trial court decision denying divisibility – Standard of review

• De novo: Trial court’s determination of whether a harm

is capable of apportionment

• Clear error: Trial court’s factual findings underlying that

determination

69

PCS Nitrogen Inc. v. Ashley II of Charleston LLC.,

714 F.3d 161 (4th Cir. 2013)

– General

• “Reasonable basis for apportionment” need not be

mathematically precise and may be based on “simplest

• f considerations” (time and area)
• But Burlington Northern neither mandates these

“simplest of considerations” nor establishes their presumptive propriety in every case

• Apportionment remains a fact-intensive, site-specific

determination

70

PCS Nitrogen Inc. v. Ashley II of Charleston LLC.,

714 F.3d 161 (4th Cir. 2013)

–Divisibility

• PRPs failed to include reliable evidence as to

both initial disposals of hazardous materials and secondary disposals

• Defendant PCS failed to provide a methodology

to apportion either the harm it alone caused or the total harm at the site

71

PCS Nitrogen Inc. v. Ashley II of Charleston LLC.,

714 F.3d 161 (4th Cir. 2013)

–Divisibility

• Defendant RHCE, the current owner and
• perator, argued for a zero-share of the harm

because no disposal occurred during its

• peration of the facility
• Rejected: “The structure and purposes of

CERCLA simply do not permit current owner or

• perator PRPs to use individual share

apportionment to apportion themselves a zero- share harm.”

72

ITT Industries, Inc. v. Borgwarner, Inc., 700 F. Supp. 2d 848 (W.D. Mich. 2010)

– North Bronson Industrial Area Superfund Site, Bronson, Michigan – Plaintiff brought claims for cost recovery and contribution – TCE, metals, and TPH contamination – Various sources of contamination at different times, including operations at:

• Bronson Reel Site (OU 1)
• L.A. Darling Site (OU 2)
• Scott Fetzer Site (OU 3)

73

ITT Industries, Inc. v. Borgwarner, Inc., 700 F. Supp. 2d 848 (W.D. Mich. 2010)

– Divisibility as to Bronson Reel Site (Royal Oaks/BPP)

• Geographic – rejected

– BPP leased and operated entire site – Releases not limited to specific geographic area – Operational activities “not limited to a discrete and measureable section of the property”

• Type of contaminant – rejected

– BPP did not use TCE or PCE, but used TCA, naptha, metals, and TPH – Court found “no reasonable basis for dividing the costs of investigating VOCs from the cost of investigating other VOCs”

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ITT Industries, Inc. v. Borgwarner, Inc., 700 F. Supp. 2d 848 (W.D. Mich. 2010)

– Divisibility as to L.A. Darling and Scott Fetzer

• Type of contamination – rejected

– Defendants contended only responsible for costs related to TCE – Court found Plaintiff was required to investigate the source of all contaminants on the site – Evidence that defendants discharged more than TCE, including metals and TPH – Failed to meet “burden of proving that they did not contribute contaminants other than TCE” to the site

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Board of County Commissioners v. Brown Group Retail, Inc., 768 F. Supp. 2d 1092 (D. Colo. 2011)

– Former rifle lens manufacturing plant, later converted to county detention center – TCE, TCA, and dioxane in soil, soil gas, groundwater, and indoor air – Defendants operated vapor degreasers on property from 1975 to 1982 – Current owner brings 107 and 113 claims against former owners/operators

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Board of County Commissioners v. Brown Group Retail, Inc., 768 F. Supp. 2d 1092 (D. Colo. 2011)

– Divisibility

• Distinct harms – rejected

– Court’s “loose” identification of three general areas of contamination does not mean defendant met burden of showing each area represents a distinct harm – Multiple sources of contamination in each area and a single plume of contaminated groundwater precludes apportionment based on distinct harms

• Court held defendants had not established reasonable

basis for determining their separate contribution to a single harm

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Board of County Commissioners v. Brown Group Retail, Inc., 768 F. Supp. 2d 1092 (D. Colo. 2011)

– Divisibility (continued)

• Geographic – rejected

– Although Court found certain parties caused releases that are primary sources of contamination in distinct areas, defendants’ operations also contributed to contamination in these areas – No reasonable basis to determine separate contribution of defendant, despite evidence of relative measures of solvents and of contribution by non-defendants – Little to no evidence as to how geographic distinctions impacted recoverable response costs

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Board of County Commissioners v. Brown Group Retail, Inc., 768 F. Supp. 2d 1092 (D. Colo. 2011)

– Divisibility (continued)

• Time of operation – rejected

– Roughly equal periods of operation by successive operators of manufacturing plant using similar processes not a reasonable basis on which to divide liability – Incomplete records did not establish relative levels of

• peration or the volume of solvents used and disposed of by

successive operators – Defendants jointly and severally liable for plaintiff’s costs, subject to defendant’s claim for contribution under §113(f)

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Pentair Thermal Mgmt., LLC v. Rowe Indus., 2013 WL 1320422 (N.D. Cal. 2013) – Two-acre industrial property in Redwood City, California – PCB contamination – 107(a) and 113 claims by current owner against successor to prior operator – electrical transformer manufacturer – Divisibility proposed based on square footage of site that four PRPs used at different times

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Pentair Thermal Mgmt., LLC v. Rowe Indus., 2013 WL 1320422 (N.D. Cal. 2013) – Court concluded that apportionment is not appropriate

• No other PRP contributed to the volume of the specific PCBs

attributable to defendant Rowe

• Defendant Rowe failed to prove that divisibility based on square

footage reasonably approximated the harm caused by each PRP

• Divisibility not appropriate where “a chemical is harmful [to

human health] when it surpasses a certain amount” and contamination surpassing that amount is traceable to one defendant

– Court concluded Rowe entitled to some equitable contribution

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Litgo New Jersey, Inc. v. Martin, 2012 WL 32200 (D.N.J. 2012)

• 40-acre parcel of land in the Borough of Somerville,

New Jersey; TCE and other hazardous substances

• Plaintiffs, as current owners of the property, sought to

avoid joint and several liability because they did not generate or contribute to release of contaminants

• Plaintiffs raised divisibility argument after two-day

bench trial to establish amount of their past response costs

• Court had previously ruled on liability and equitably

allocated costs: 70% to Plaintiffs; 27% to Sanzari Defendants; and 3% to United States Defendants

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Litgo New Jersey, Inc. v. Martin, 2012 WL 32200 (D.N.J. 2012)

• Divisibility

– Plaintiffs argued they could not be jointly and severally liable because they did not generate or contribute to releases of contaminants

• Untimely: Plaintiffs raised apportionment argument after liability

phase of trial; court had already equitably allocated response costs; too late to defeat joint and several liability

• Untenable: Plaintiffs were found liable under 107(a)(1) as owners

and operators, not because they generated or contributed to contamination

– Plaintiffs’ proposal “would effectively repeal owner/operator liability ... as no current owner or operator could ever be liable unless it were also a generator or contributor of contaminants”

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City of Gary v. Shafer, 2011 WL 3439239 (N.D. Ind. 2011)

– Former auto salvage facility with lead soil contamination – Court had previously found defendant did de minimis moving of soil at the site, and only operated at the site during a limited time – Court concluded it was appropriate to apportion liability; joint and several liability inappropriate – Court also concluded equitable factors are appropriate in allocation analysis (even though it previously cited Burlington Northern for the proposition that equitable considerations play no role in determining whether liability should be apportioned)

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City of Gary v. Shafer, 2011 WL 3439239 (N.D. Ind. 2011) – Allocation

• Volumetric

– De minimis movement of contaminated soils relative to cross- defendant – Expert testimony established that contaminated soil comprised no more than 0.1% to 0.24% of total

• Chronologic

– Contamination occurred on site over 38 years; defendant’s contamination-causing activities occurred between 1991 and 1993, approximately 3.95% of total time

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City of Gary v. Shafer, 2011 WL 3439239 (N.D. Ind. 2011) – Allocation (continued)

• Court found “reasonable, objective, measureable,

concrete, specific basis for allocation of liability ... It is a reasonable basis for determining the contribution of [defendant] to the single harm in this case.”

• Allocated 0.24% of total liability to defendant

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DIVISIBILITY IN WATER CASES

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Dan Chorost

SIVE, PAGET & RIESEL P.C.

OVER FIFTY YEARS OF ENVIRONMENTAL LAW

Divisibility Defense: A PRP’s Evidentiary Burden

• Standard: “Reasonable basis” for divisibility
• Joint and several liability not mandated when

party can show that the harm is divisible (apportionable)

• BN lowers evidentiary threshold, makes burden

achievable

– Allowed divisibility although Defs could not calculate exact % of chemical contribution or harm – Need only show “rough” calculations of divisibility

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Making the Divisibility Argument: Contaminated Water Bodies

• Lakes

– Limited flow, slow sediment transport

• Rivers

– Typically unidirectional flow, entrained sediments move downstream

• Estuaries

– Bi-directional tidal flow – Redistribution/mixing of surface sediments

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Theories Providing a Reasonable Basis for Divisibility

• A) Volumetric divisibility (e.g. Coeur d’Alene)
• B) Chemical divisibility (e.g. BN, Hatco)
• C) Geographic divisibility (e.g. BN, Glatfelter/NCR)

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A) Volumetric Divisibility

Argument: Client discharges X% of total contaminant quantity to river, so only responsible for X% of costs

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• In Coeur D’Alene Tribe v. Asarco, Inc., 280 F.Supp.2d 1094

(D. Idaho 2003), court apportioned liability based on volume of discharges into waterways by defendants

• Must be “apples to apples”

– Harm should correspond to volume – Here, “milling methodologies used in the Basin did not differ significantly from mill to mill,” so discharges were comparable

• “Estimating releases is not an exact science,” but divisibility

based on volume is reasonable given historical facts

Volumetric Divisibility (cont’d)

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Volumetric Divisibility (cont’d)

• How to measure quantity

– Volume of discharge, if composition of discharge is comparable

• Coeur D’Alene

– Contaminant mass, if contaminant is same or comparably harmful

• Court in US v. Glatfelter & NCR (7th Cir. 2014) found that amount of

PCBs in sediment may be a basis for apportionment

• Sources of data on quantity

– Client records – Measurement of amount released (e.g., volume of leaked drums) – Calculation based on Client’s ongoing operations

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B) Chemical Divisibility

Argument: River is contaminated with X, Y, and Z; Client only emitted X and therefore should not have to contribute to purely Y- and Z- related response costs

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Chemical Divisibility (cont’d)

• In Hatco Corp v. W.R. Grace & Co., 836 F. Supp. 1049

(D.N.J. 1993) (landfill case), one PRP was the only source of PCBs on site, other was only source of TCA

• Court apportioned 100% of PCB costs to the PCB party,

and 100% of TCA costs to TCA party

• See also Dent v. Beazer Materials & Servs. (4th Cir.

1995) (pre-BN case permitting equitable allocation based on chemically distinct contaminants)

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Chemical Divisibility (cont’d)

Step 1: Determine content of Client’s discharges

• Direct samples of Client discharges
• Client records
• General industry waste profile
• Technical analysis of sediment

Step 2: Determine whether Client’s discharges are distinguishable from overall water body contamination

• If so, Client may be liable only for its divisible share of costs
• Sources of data/information to support this comparison:

– CERCLA remedial investigation – Chemical fingerprinting

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C) Geographic Divisibility

Argument: Client only contributed contamination to X% of site, so Client should only contribute costs for remediation of X% of site

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• US v. Glatfelter Co. and

NCR (7th Cir. 2014): complex remedial costs can be divisible by “Operating Unit”

• BN apportionment

includes RRs’ portion of total site area (19%)

Geographic Divisibility (cont’d)

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Evidence depends on whether the contamination is chemically distinguishable: When Client’s contaminants CAN be chemically distinguished:

• Use well-distributed sediment samples to identify affected area
• Depict contaminant isolation on map
• Provide proof that contaminants don’t significantly migrate

When Client’s contaminants CANNOT be chemically distinguished:

• Show Client’s contamination is isolated due to physical mechanisms
• Sources of data/information:

– Conceptual Site Model (CSM) – Fate & Transport Modeling (F&T)

Geographic Divisibility (cont’d)

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Dan Chorost

SIVE, PAGET & RIESEL P.C.

OVER FIFTY YEARS OF ENVIRONMENTAL LAW

Marc Zeppetello

maz@bcltlaw.com Tel: 415-228-5400 Direct: 415-228-5496 dchorost@sprlaw.com Tel: 212-421-2150 Direct: 646-378-7207

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