Unstated Rule on Superfund Liability for Sale of a Usable Product — One Year Later

Exactly a year ago, I posted a blog that argued that the decisions on Superfund liability for the sale of usable product could be distilled down to an “unstated rule” — a party will be held liable as having intended to arrange for the disposal of a hazardous substance if it sells a waste that cannot be used or won’t be used as delivered without first causing the release of a hazardous substance.  One year later, that rule still seems to be correct and still is unstated (except here).

The most recent court to wrestle with this issue was Carolina Power and Light Company v. Alcan Aluminum Corporation.  There,  CERCLA contribution claims had been asserted against a number of companies that allegedly arranged for the disposal of PCBs at a transformer recycling facility in North Carolina where significant volumes of PCBs had been released.  Georgia Power was one of the contribution defendants because it had sold to the recycling faclity a large number of transformers for ultimate resale.  None of those transformers were leaking when they arrived at the recycling facility although some of them contained PCB oils which needed to be drained before they could be rebuilt and resold.

Like the cases before it, the Carolina Power court started by rehearsing the general standard whether Georgia Power “intended” to arrange for the disposal of a hazardous substance and then turned to a laundry list of factors, including: (1) whether the transformers had “marketable value”; (2) the “usefulness” of the transformers when sold to the recycling facility; (3) the state of the product at the time of the sale to the recycling facility; and (4) Georgia Power’s knowledge that hazardous waste would be leaked or spilled as a result of the sale to the recycling facility.  After discussing these factors, the court concluded that Georgia Pacific did not intend to arrange for the disposal of PCBs.  Exactly how the court weighed these different factors is unclear.  However, the court’s conclusion squares easily with the unstated rule for determining when a party intended to arrange for the disposal of a hazardous substance.   Georgia Power could not be held liable as an arranger because the transformers it sold could be used  and indeed were used as transformers when resold; while the transformers needed to be rebuilt before being resold, that rebuilding process did not necessitate the release of hazardous substances since the transformers were not leaking and any PCB oil in the transformers could in the exercise of ordinary care be drained without releasing it to the environment.