Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

The PCB contamination in the Lower Fox River in Wisconsin continues to spawn novel Superfund decisions.  The latest is US v. NCR, in which Judge Greisbach of the Eastern District of Wisconsin reversed his initial ruling, made less than six months ago, that the United States could not establish successor liability under CERCLA against  Appleton Papers, which had bought assets from the alleged  polluting party – NCR Corp – and assumed NCR’s liabilities.  As Judge Greisbach explained in his earlier ruling, there can be no successor liability where the  seller of assets remains a viable CERCLA defendant, since the purpose of successor liability is to prevent “paper transactions” that deny the public access to a solvent party to respond to claims.  Whatever contract rights NCR might have against Appleton, the court initally held that they did not extend to the United States.

While the earlier decision seemed eminently reasonable, it posed a practical problem for the parties, since the PCB remedial work was essentially in the control of Appleton, which the Court ruled was not liable.  That practical problem then unleashed a flurry of creative advocacy by the United States – specifically an argument that the Court could issue orders requiring Appleton as a non-liable party to take steps to facilitate the remedial work.  The Court ultimately declined that invitation to be creative.  However, illustrating once again that hard cases make bad law, the Court did accept the government’s alternative invitation to reverse its earlier holding on successor liability.  To justify this reversal, the court could point to no supporting case law or policies in the doctrine of successor liability; the best the court could come up with was the weak argument that none of the successor liability cases expressly held that it was necessary that the seller of assets be insolvent or dissolved, even though all those cases involved circumstances in which the seller was in fact insolvent or no longer in existence.  To compound the confusion, the court went on to note that, in a private arbitration between Appleton and NCR to resolve their contract dispute, Appleton would be assigned 60% of all liability for the site.  According to the court, the fact that the arbitration assigned a majority of the liability to Appleton somehow justified allowing the government to pursue joint and several CERCLA liability against Appleton. 

Environmental law often pushes courts to put practicality ahead of sound legal principle, which begs the question whether the short-term result justifies the jurisprudential confusion.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

More than 20 years ago, in the Tanglewood East decision, the 5^th Circuit Court of Appeals held that a developers could potentially be liable under CERCLA for conducting site development activities that moved contamination on the site, exacerbated conditions, and required additional cleanup. There have not been many reported cases on this issue since then, so the decision earlier this week in Saline River Properties v. Johnson Controls seemed noteworthy. 

The factual discussion was pretty sparse, but it seems undisputed that Johnson Controls had previously owned the property, the property was contaminated, and Johnson Controls was remediating it under a state administrative order. Saline became the operator of the property and at some point “destroy[ed] the building slab.” Johnson Controls alleged that this resulted in migration of contamination that would not otherwise have occurred. 

For the court, these allegations were sufficient for Johnson Controls’ claim to survive Saline’s summary judgment motion.  The court distinguished cases holding that “passive migration” does not constitute disposal:

Here, more is alleged than just passive migration. [Johnson Controls] alleges that Saline took the affirmative action of breaking up the concrete slab, which caused hazardous substances beneath the barrier to migrate into additional soils and groundwater. The Court concludes that [Johnson Controls] has created a genuine issue of material fact as to whether Saline caused a release or disposal at the facility.

I don’t regard the decision as a surprise, but it is a useful lesson (if costly to Saline) for developers.  Perform your due diligence before purchasing contaminated property and make certain that your redevelopment plans are appropriate given site conditions.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Recently, I expressed concern that District Courts, which traditionally have never seen a CERCLA plaintiff they didn’t like, would ignore the Supreme Court’s Burlington Northern decision – at least until there is another Supreme Court decision affirming that Supremes really meant the two-part holding in Burlington Northern: (1) divisibility isn’t that hard and (2) parties aren’t liable as arrangers unless they actually intended to dispose of hazardous material. 

Although it shouldn’t be earthshaking, I was therefore encouraged to see last week’s decision in Schiavone v. Northeast Utilities Service Company. In Schiavone, the defendants sold used transformers to a scrap yard. Their policy was to drain the transformers before sale. The Court concluded that there remained a material dispute whether the defendants sent PCB-containing transformers to the site. Nonetheless, the Court granted the defendants’ motion for summary judgment on the ground that there was no evidence that the defendants intended to dispose of PCBs. Citing to Burlington Northern, the Court stated that:

The defendants’ specific intent to dispose of the transformers themselves is not enough to make them “arrangers” under § 9607(a), even if the defendants had knowledge that oil was in the used transformers when they sold them…. The plaintiffs have produced no evidence that could support a conclusion that the defendants had as a purpose in their dealings with [the scrap yard] disposing of transformer oil containing PCBs.  Consequently, the plaintiffs have not created a genuine issue of material fact as to whether the defendants arranged for the disposal of a hazardous substance.

Sometimes, justice does triumph. I am hopeful that arranger cases where the defendant wasn’t actually intending to dispose of hazardous substances will start to fade away. I remain less optimistic about the divisibility side of Burlington Northern, but one can always hope.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In an interesting decision issued earlier this month, Judge Lewis Babcock of the District of Colorado ruled, in County of La Plata v. Brown Group Retail, that detection of contamination at levels exceeding state cleanup standards does not, by itself constitute an imminent and substantial endangerment under RCRA. I think that Judge Babcock is correct, but I can’t help but feel that the decision might be different in the blue state of Massachusetts. I was particularly taken by Judge Babcock’s description of the nature and purpose of state regulatory standards:

Regulatory screening levels, action levels, and standards do not identify real or actual risks to human health. Rather, these regulations are designed to protect the public health by identifying the level of chemical exposure at which there is no threat of harm with a large margin of error. Exceedance of regulatory screening levels, action levels, or standards therefore does not demonstrate a real or actual risk to human health.

Tell it to MassDEP.

I think it’s wonderful that a federal judge has said that “regulatory … standards do not identify real or actual risks to human health.” He’s right, of course, and we often forget that when conservative assumption is piled on top of conservative assumption in the establishment of a standard, the standard may end up having only the most tenuous connection to any actual concern about human health.

I wish I could make equally kind statements about Judge Babcock’s handling of the CERCLA claims in the same case. Like many judges implementing the Supreme Court’s decision in Burlington Northern, Judge Babcock shrugged off the defendant’s divisibility arguments, notwithstanding that the arguments the defendant made were well within the ambit of the types of considerations the Supreme Court said were relevant in Burlington Northern. I feel we are destined to continue the cycle of lower court decisions which simple-mindedly whack the defendant, followed every few years by a Supreme Court decision that says fairly simply: No, that’s not the way it’s supposed to be.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In late 2009, Judge Griesbach ruled, in Appleton Papers v. George A. Whiting Paper, that parties who were significantly more “blameworthy” than others were not entitled to contribution from the less blameworthy parties. Last week, Judge Griesbach ruled on the cross-contribution motions from the defendants. 

The defendants took a simple view. If the plaintiffs are not entitled to contribution from the defendants, because the plaintiffs were almost entirely at fault, then the defendants should be able to receive 100% of their own response costs in contribution from the plaintiffs. Plaintiffs, not surprisingly, took a contrary view. Plaintiffs' position was that the court still needed to assess the defendants’ contribution claims in light of the full panoply of equitable factors and that, because the plaintiffs had cooperated with the government and the defendants had caused some releases themselves, the plaintiffs should not have to pay 100% of defendants’ costs.

Judge Griesbach was having nothing of the plaintiffs’ arguments. To him, it remains really a simple analysis:

[C]ases reject the idea that a district court has to follow some sort of mechanical laundry-list approach to assessing contribution liability, and I am satisfied that basing contribution on fault, under the totality of the circumstances of this case, is a sound approach to resolving the liability for the river cleanup.

I remain of the view that, while the outcome of the case is permissible, it is a surprise that the judge was so willing to make these decisions on summary judgment; they seem more the stuff of trial to me. However, the judge’s willingness to decide this case on summary judgment only emphasizes the important lessons of this case. Fault matters, and the parties who succeed in tarring other parties with the label of “fault” are going to be the big winners in contribution cases – Gore Factors be damned.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Two recent decision illustrate that PRPs do hold some cards in hazardous waste litigation, particularly if they are willing to be aggressive in investigating the contamination. Both cases demonstrate that “victims” or bystanders can face serious consequences if they do not cooperate with the investigation.

In Carlson v. Ameren Corporation, the plaintiffs had purchased a former manufactured gas plant from Ameren Corporation. They brought suit under RCRA, seeking an injunction requiring that Ameren remediate the property. Ameren filed counterclaims against the Carlsons, alleging that they had refused to cooperate with the cleanup. The question was whether such a lack of cooperation could constitute proof that the owner was “contributing to or has contributed to the handling” of the solid or hazardous waste at issue in the case. The 7^th Circuit rule requires “active involvement in handling or storing of materials.” Denying the plaintiffs' motion to dismiss the counterclaim, the court concluded that “obstruction may be construed as active storage of materials.” 

The Carlsons prevented Ameren from accessing and repairing the land. Furthermore, as a result of their affirmative action in obstructing the repair of the land, the Carlsons are allegedly permitting the continued leaching of hazardous material into the land. As a result, the Carlson’s [sic] may be said to be actively contributing to the condition of the Property.

Voggenthaler v. Maryland Square presents a different situation, but reinforces the lesson that even those probably not otherwise liable need to cooperate. In this case, downgradient property owners had sued a mall owner and a dry cleaner located at the mall, alleging contamination from a PCE release at the dry cleaner. The defendants were clearly liable, but were seeking other deep pockets to contribute to the cleanup. Another mall, the Boulevard Mall, was located across the highway from Maryland Square. That mall contained a Sears store and other automotive uses that could have used, and released, PCE. The original defendants filed a third-party complaint against the Boulevard Mall. They also filed a request for inspection under Rule 34 in order to implement environmental testing on the Boulevard Mall property, intended to provide evidence that there was a separate source of contamination affecting the plaintiffs. When Boulevard Mall refused, Maryland Square filed a motion to compel.

I’ll spare you all of the procedural details; the bottom line is that Magistrate Judge Foley, while acknowledging that the third party claims against Boulevard Mall were weak, allowed the motion to compel. The decision is worth reading and provides an interesting discussion of “fishing expeditions” versus “discovery of relevant and potentially admissible evidence.” In short, the Court refereed what might be called a preliminary battle of the experts and concluded that the Maryland Square expert had made - barely - enough of a case that the Boulevard Mall property might be a source of contamination to justify the testing. Interestingly, Magistrate Judge Foley said that, if he were deciding a summary judgment motion, he would have ruled that Maryland Square’s claims would not survive. However, under “a more lenient discovery standard,” he concluded that Maryland Square had “made a sufficient threshold factual showing to support the proposed testing. 

The lesson for known PRPs? Aggressive efforts to investigate contamination can be a useful sword in litigation. The lesson for others? If the PRPs are acting responsibly, you had better cooperate.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Sometimes, good lawyering does matter. When DVL found PCBs on its property in Fort Edward, New York, and when it looked up and realized that GE had operated a manufacturing facility which utilized PCBs “almost adjacent” to DVL’s property, DVL and its attorneys may have thought that they had a slam dunk case on liability. Not so fast. Last week, in DVL v. General Electric, Judge Lawrence Kahn awarded GE summary judgment on liability, because DVL had failed to provide even enough evidence of GE’s liability to survive summary judgment. 

DVL did have more than just GE’s proximity on its side. The types of PCB Aroclors used by GE at its facility were the same as were found at the DVL property. There was contamination on GE’s property. However, GE denied disposing of its contamination on DVL’s property, DVL never saw any GE capacitors on its property, and groundwater wells installed by GE on DVL property to determine if contaminated groundwater had migrated off of GE’s property were non-detect for PCBs. 

Unfortunately for DVL, that was the limit of its evidence. It did obtain a declaration from James Ludlam, an employee of the New York Department of Environmental Conservation, who clearly is no fan of GE, and who stated that GE wastes were at the DVL property. However, DVL did not identify Mr. Ludlam as an expert and Mr. Ludlam had no personal knowledge that GE disposed of anything at the Site. Judge Kahn ruled that DVL was improperly trying to parlay a lay witness into an undisclosed expert witness and struck Mr. Ludlam’s declarations. 

Judge Kahn agreed that liability under CERCLA can be based solely on circumstantial evidence, “especially where the passage of time has made direct evidence difficult or impossible to obtain.” Nonetheless, he concluded that the circumstantial evidence proffered by DVL was not enough to establish its prima facie case. DVL’s case was basically that GE manufactured the types of PCBs found at the DVL property and that its historical disposal practices were, shall we say, messy. Judge Kahn concluded that this was not enough to establish that GE’s wastes had been disposed of at the DVL property. 

Evidence that merely “presents probabilities rather than proof,” “relies upon a collection of facts that could be summarized as ’if it is there, it must be theirs,’” or is “vague and imprecise, of questionable reliability, and therefore not sufficiently probative to create an issue for trial” is insufficient to hold a party liable under CERCLA. 

I think that the decision in DVL v. GE is probably correct. However, it’s hard not to be left with a nagging feeling that the PCBs probably were from the GE facility and that DVL was not well-served by its lawyers. DVL clearly did some looking, because they had a declaration from someone who used to play in the area.  However, were there really no former employees of GE or employees of any waste handlers of GE who could have testified? How about more sophisticated analytical work that would have not merely confirmed that the PCBs were the same Aroclors as used by GE, but were somehow fingerprinted as being the same as the PCBs found in the soil at the GE site? 

If this case stands for anything, it’s that the details matter; the actual evidence matters.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As the holiday approaches, I am particularly thankful that I am not counsel to the Washington State DOT in United States v. Washington State DOT, a case that continues to make me want to take EPA, DOJ, and United States District Judge Robert Bryan by the neck and ask them what the heck are they thinking. 

In July, I posted about Judge Bryan’s decision holding that the Washington DOT “arranged” for the disposal of hazardous substances by designing and operating a highway drainage system that deposited highway runoff containing hazardous substances into what became the Commencement Bay Superfund Site. As I noted then, the logic of that decision is that every Clean Water Act stormwater problem is now potentially a Superfund claim and every highway department – and every private developer with a parking lot – potentially faces not just stormwater enforcement, but a Superfund cost recovery suit. 

Last week, Judge Bryan issued another decision regarding the DOT’s potential arranger liability. Although his earlier decision held that Washington DOT had arranged for the disposal of hazardous substances through the design of its highway drainage systems, the court had not actually found the DOT liable under § 107(a)(3) of CERCLA. The DOT argued that, even if it arranged for the disposal of hazardous substances, the United States hasn’t “established a connection between the hazardous substances found at the [DOT] Property and the response costs incurred at the [Superfund site].” 

Judge Bryan wasn’t buying it. Instead, Judge Bryan concluded that, where plaintiff can establish contamination at defendant’s property that is at least similar to contamination at the Superfund site, and can establish a “plausible migration pathway by which the contaminant could have traveled from the defendant’s facility to the plaintiff’s site,” plaintiff has met its burden. The burden then shifts to the defendant to create a genuine issue of fact regarding causation.

Judge Bryan further concluded that it is up to the trial court to determine when to consider divisibility and apportionment defenses, and noted that “it would be consistent with the purposes of CERCLA to first fix liability and then determine any divisibility/apportionment defense based on causation.”

In other words, design a stormwater drainage system that directs contamination towards an area that needs a cleanup, and you are in Superfund litigation up to your neck until the final verdict is rendered.

Thanks, but no thanks.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As Superfund practitioners know, federal NPL sites are generally settled on the basis that the PRPs will first attain interim cleanup levels, though final cleanup levels are not determined until EPA is actually ready to issue its certification of completion of the remedy. Moreover, EPA insists that, should any ARARs change during the course of the cleanup, whatever standards are in effect at the time of site closure will be applied.

We saw the impact of this on the ground in 2001, when EPA revised the Safe Drinking Water Act maximum contaminant level, or MCL, for arsenic from 50 ppb to 10 ppb. The new MCL became an ARAR for Superfund, and the expected date to attain cleanup standards suddenly got pushed back at a number of Superfund sites.

Even at the time, it was not clear that 10 ppb was the last word. EPA’s proposed rule had provided for a 5 ppb standard, but EPA eased off in response to public comment; small water suppliers can have great difficulty in attaining a 5 ppb standard. 

Earlier this year, EPA announced the availability of a new toxicological review of arsenic. That review suggested greater cancer risks from arsenic. Yesterday, EPA’s Science Advisory Board issued a report generally supportive of the new toxicological review. If the result is a further tightening of the MCL, more stringent cleanups, through the ARARs process, will follow ineluctably. 

I don’t normally post about developments this far from concrete regulatory changes. However, given the way the Superfund cleanup process works, PRPs negotiating cleanups of sites with arsenic groundwater contamination have to begin to factor this issue into their strategy now, because it’s not too early to starting thinking about cleanup cost estimates for alternative - meaning lower - arsenic MCLs.

Having put you on notice, I now have to tell one war story; if you don’t feel the need for a war story, you can stop reading here. In 1991, I was involved in negotiating the settlement for the cleanup of the Coakley Landfill Site, in southern New Hampshire. The federal government was a PRP. In Coakley, the government made a substantial (seven figure) contribution to the settlement. However, because the private PRPs had argued in negotiations with EPA that there was no need to treat groundwater – notwithstanding that the ROD remedy selected by EPA required groundwater treatment – the federal government as PRP insisted on getting a refund of the share of its payment attributable to the groundwater remedy, should EPA finally certify completion of the remedy without there ever having been an active groundwater treatment system in operation.

A few years later, the PRPs indeed persuaded EPA to eliminate active groundwater treatment. At the time, the expected date for certification of completion was 2007. In 2001, EPA changed the arsenic MCL from 50 ppb to 10 ppb. I don’t need to tell you that there is an arsenic issue at the Coakley Site. Now, the expected date for certification of completion is 2021. If, before then, EPA were to further lower the arsenic MCL, who knows what will happen to the expected date for certification of completion? The private PRPs may never have to reimburse the federal government!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

One of the first lessons I learned as a summer associate, more years ago than I care to remember, is that the probability of a successful estoppel claim against the government is approximately the same as the probability that there is a Santa Claus. After the recent decision from the District of New Jersey in FMC Corporation v. American Cyanamid, the probability of a successful estoppel claim may still be low, but it isn’t zero. 

FMC involves claims concerning the Higgins Farm Superfund Site, in Franklin, New Jersey. According to the decision, FMC contacted the State of New Jersey in 2001 in order to obtain information concerning the scope of its potential liability. One of the questions involved natural resource damages. New Jersey determined that it would not assess NRD for the site and that conclusion was communicated by telephone to FMC in late 2002. As settlement negotiations continued, in 2003, New Jersey actually provided to FMC a copy of the memorandum that had been prepared documenting that no NRD would be assessed. 

The reason for the determination apparently was a NJDEP policy that, where no off-site groundwater contamination existed, no NRD would be assessed. However, that policy changed later in 2003, after a change in administration at NJDEP. Ultimately, in 2006, NJDEP filed suit against FMC seeking natural resource damages. In responding to FMC’s motion to dismiss, NJDEP made the argument most of us would expect:

the doctrine of waiver should not be applied under these circumstances [because] a government agency may change policies for the benefit for the public without creating rights in parties who claim to have relied on the old policy.

The Court wasn’t buying it. While acknowledging that “the application of waiver or estoppel principles to government actions is to be most strictly limited,” the Court concluded that New Jersey had expressly waived its right to recover NRD. It was significant to the Court that NJDEP did not qualify the waiver in any way. Given the absence of qualifying language, the Court concluded that to allow NJDEP to bring NRD claims after such an unqualified waiver “would serve to completely alter the calculus of the litigation and undermine settlement negotiations that parties engage in with the State.”

The biggest lesson of FMC will probably be for government attorneys – make sure you qualify your waivers. Nonetheless, it does suggest that, at least in the right case, the government will be held to its promises. 

Merry Christmas, FMC.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

My partner Robby Sanoff blogged last week about the “Illusion of Finality in CERCLA.” His post addressed City of Emeryville v. Sherwin-Williams, in which the 9^th Circuit Court of Appeals held that a person who was not a party to a prior settlement could bring a contribution claim against such a settling party, at least where the new claim involved contamination at a downgradient property, rather than the property that was the subject of the first settlement.

City of Emeryville seems to have been rightly decided. The only real lesson it teaches is that a PRP who wants to settle and achieve finality must do everything possible to ensure that all potentially liable parties are brought to the table and that the site is properly defined.

However, a case from earlier this summer just came to my attention. Its lesson is different. Its lesson is that CERCLA is just plain nuts, and judges’ efforts to harmonize its decisions can do more harm than good. Ashland v. Gar Electroplating teaches that there is no finality under CERCLA and that parties who step up to the plate to settle with the government and perform cleanups can be subject to joint and several cost recovery claims brought by recalcitrants. Alice in Wonderland, here we come.

Although Ashland seems wrong, Judge Lisi’s decision is a not surprising consequence of the simplistic CERCLA jurisprudence announced by Justice Thomas in Aviall and Atlantic Research. In holding that contribution claims are limited to those who have been the subject of litigation or certain kinds of settlements with the United States or a state, and that PRPs not subject to suits or administrative orders can bring cost recovery actions under § 107 of CERCLA, the Supreme Court has opened a Pandora’s Box.

What evil genie was loosed in Ashland? The facts are too complicated for a complete recital, but some history is required. Here goes:

1.                   The government sued a number of parties, including United Technologies, under CERCLA. The claims related to the Davis Liquid Waste Site, in Smithfield, Rhode Island.

2.                   The defendants brought third-party claims against a number of other PRPs, including Ashland.

3.                   Some original defendants (including this firm’s client, Ciba-Geigy) settled.

4.                   The United States went to trial against UT and obtained a finding of liability. UTC then settled with the government and agreed to perform a portion of the remedy. It also agreed to allocate sums recovered from the third-party defendants with the government.

5.                   A number of third-party defendants, not including Ashland, settled with UTC – and the government. 

6.                   The case against Ashland (and some other non-settlors) went to trial. Ashland was found liable. The judge allocated liability and imposed a percentage share on Ashland. 

7.                   At some point, EPA directly notified Ashland that it was a PRP and sent Ashland an administrative order on consent, requiring it to perform certain groundwater cleanup.

8.                   It is not clear if Ashland signed the AOC, but, according to an EPA affidavit, Ashland agreed to perform certain cleanup work.

9.                   Ashland spent approximately $2 million performing the work.

10.               It then brought claims under § 107 of CERCLA.  It had no contribution claim, because nothing had happened to bring Ashland under the ambit of § 113.

11.               The United States and the State of Rhode Island both filed amicus briefs on behalf of those sued by Ashland, arguing that their respective settlements with UTC barred Ashland’s claims.

Faced with these facts, what did Judge Lisi do? First, she found that Ashland does have a right to bring claims under § 107. Because it was not sued by the United States or Rhode Island, Ashland was not limited to contribution claims.

Second, Judge Lisi found that the allocation previously reached in the private action was not applicable to this case, precisely because the private case was for contribution and this case is a claim under § 107, which is assumedly one for joint and several liability. While Judge Lisi noted that the defendants in this action can bring counterclaims for contribution, the burden is on them to prove that the harm is divisible. 

As someone might say, OMG. Here’s what Justice Thomas has done to us. The recalcitrant party has a joint and several claim against those who settled with the government, and the burden is on the good guys to prove that liability should not be joint and several. 

If I may be permitted to gloat, I raised this specter following Aviall and Atlantic Research, and was generally told not to worry; the district courts would find ways to reach practical results. Plan B would seem to be the 1^st Circuit Court of Appeals. Plan C? I can’t wait to see what Justice Thomas would make of this fine mess.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

In City of Emeryville v. The Sherwin-Williams Company, the Ninth Circuit recently underscored that CERCLA settlements can be a risky business that don’t always produce finality, particularly when neither the United States nor a state is a party. 

The Ninth Circuit decision grew out of a federal court action by the City of Emeryville involving contamination at a manufacturing facility that had been operated by Sherwin-Williams. Sherwin-Williams settled that suit and obtained what it thought was broad protection against contribution claims based on contamination “at, on, under, and emanating from” the facility.

After Sherwin-Williams had performed its obligations under the settlement, the Emeryville Redevelopment Agency filed a lawsuit in state court involving contamination at a property adjacent to the former Sherwin-Williams facility. Sherwin-Williams was a defendant in that new action, as were the City of Emeryville and other parties who had not been involved in the federal court action. When the City of Emeryville and those other parties cross-claimed against Sherwin-Williams, Sherwin-Williams went back to federal court to enforce its settlement and its contribution protection. The District Court agreed with Sherwin-Williams and ruled that the settlement barred any claims in the state court action by the City of Emeryville and the other parties to the extent those claims were based on contamination migrating from the former Sherwin-Williams facility. 

On appeal, the Ninth Circuit agreed that claims by the City of Emeryville were barred but ruled that claims by the other parties who had not been included in the original federal action or who had not received notice of the settlement could not be precluded.   According to the Ninth Circuit, the broad contribution protection authorized by Section 113(f)(2) of CERCLA is triggered only when the settlement involves either the United States or a state and the City of Emeryville was not a state no matter how hard Sherwin-Williams claimed it was. The Ninth Circuit went on to hold that a federal court in approving a CERCLA settlement has authority to provide contribution protection but only with respect to parties who are PRPs with respect to the site that is the subject of the settlement.

Although it may seem like a harsh result for Sherwin-Williams, it’s hard to disagree with the reasoning of the Ninth Circuit.   While it is fair to hold the City of Emeryville to the deal it made and bar its contribution claims against Sherwin-Williams, it would be palpably unfair to bar claims by parties that did not participate in the original settlement, did not know of the settlement, and had no reason to know of it because they were not PRPs with respect to the former Sherwin-Williams facility. Whether or not the state court ultimately limits Sherwin-Williams’ liability for the adjacent property based on its undertakings in its settlement with the City of Emeryville, the lesson seems clear. Finality in Superfund settlements can be illusory, particularly where the settlement does not involve the federal or state government. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable.  Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court. 

For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.

What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.

Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong? 

Just askin’.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There are only two permissible answers to this question:

1.                   Yes

2.                   I don’t know.

I was reminded of this reality in reading the decision issued earlier this month in Solutia v. McWane, in which Chief Magistrate Judge Greene of the Northern District of Alabama held that a party which incurs response costs pursuant to a consent decree or administrative order may not bring an action for cost recovery under § 107 of CERCLA and is instead limited to a contribution action under § 113 of CERCLA. 

For those of our readers who are either masochists or do Superfund law for a living and thus have to keep up with this stuff, the decision is worth reading; it’s a useful summary of the post-Atlantic Research, post-Aviall case law. At bottom, the decision is a reasonable, practical result. Why should the nature of a private party’s right of action depend on whether the party did the cleanup itself or instead reimbursed the government for costs incurred pursuant to a government-led cleanup?

I will say that it’s not obvious to me that the Supreme Court would agree, were it to hear the case, simply because the Supreme Court has appeared to be so fixated on the traditional common law understanding of the nature of contribution as the right of a contribution plaintiff to receive a payment from a third party defendant when the contribution plaintiff has paid to the original plaintiff more than its fair share of a common liability.  Direct response costs don’t fit neatly into that traditional contribution model. However, it's probably a moot point, because it is hard to picture this issue getting to the Supreme Court. I expect the justices to conclude that they’ve heard enough of these cases by now.

We’re still left with my original question. Why is it that 30 years after CERCLA was passed and 24 years after the SARA amendments, the nature of third party claims still isn’t clear? Because CERCLA is incomprehensible, that’s why.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Sometimes, the practice of environmental law just takes my breath away. A decision issued earlier last month in United States v. Washington DOT was about as stunning as it gets. Ruling on cross-motions for summary judgment, Judge Robert Bryan held that the Washington State Department of Transportation had “arranged” for the disposal of hazardous substances within the meaning of CERCLA by designing state highways with stormwater collection and drainage structures, where those drainage structures ultimately deposited stormwater containing hazardous substances into Commencement Bay -- now, a Superfund site -- in Tacoma, Washington.  

I’m sorry, but if that doesn’t make you sit up and take notice, then you’re just too jaded. Under this logic, isn’t everyone who constructs a parking lot potentially liable for the hazardous substances that run off in stormwater sheet flow? 

For those who aren’t aware, phosphorus, the stormwater contaminant du jour, is a listed hazardous substance under Superfund. Maybe EPA doesn’t need to bother with new stormwater regulatory programs. Instead, it can just issue notices of responsibility to everyone whose discharge of phosphorus has contributed to contamination of a river or lake.

The Court denied both parties’ motions for summary judgment regarding whether the discharges of contaminated stormwater were federally permitted releases. Since the Washington DOT had an NPDES permit, it argued that it was not liable under § 107(j) of CERCLA. However, as the Court noted, even if the DOT might otherwise have a defense, if any of the releases occurred before the permit issued – almost certain, except in the case of newer roads – or if any discharges violated the permit, then the Washington DOT would still be liable and would have the burden of establishing a divisibility defense. 

If one were a conspiracy theorist, one might wonder if EPA were using this case to gently encourage the regulated community to support its recent efforts to expand its stormwater regulatory program. Certainly, few members of the regulated community would rather defend Superfund litigation than comply with a stormwater permit.

You can’t make this stuff up. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last year, I analogized PRP efforts to have CERCLA’s unilateral administrative order provisions declared unconstitutional to Chevy Chase’s repeated announcements during the first year of Saturday Night Live that Francisco Franco was still dead. Eventually, that joke wore out. With yesterday’s decision by the D. C. Circuit Court of Appeals, in General Electric v. Jackson, upholding EPA’s UAO authority, these legal challenges may be similarly about to wear out. 

The analysis in GE v. Jackson is pretty straightforward. EPA may not obtain fines or treble damages if a PRP defies a UAO unless the agency goes to court and the court concludes that the PRP is in fact liable under CERCLA and that none of the statutory defenses apply. Because PRPs thus have a “pre-deprivation” remedy, there is no due process violation. At a formal level, that’s hard to dispute. The formal pre-deprivation remedy and the absence of a circuit split make it unlikely that the Supreme Court will have any interest in hearing this case.

GE’s most cogent argument, to me, is that, as a practical matter, the deck is so heavily stacked in EPA’s favor that it really is very difficult for PRPs to take advantage of the due process rights that CERCLA provides. The Court gave this argument short shrift, noting that, out of 1,638 recent UAOs, PRPs had refused to comply with 75, or 4.6%. However, we do not know the details underlying these data. Many of these 75 non-complying PRPs could simply be deadbeats, rather than viable PRPs who considered themselves not liable or had reason to believe that EPA’s remedy was arbitrary and capricious. 

There are limits to the use of anecdotal evidence, but does anyone who has a lot of CERCLA experience really deny that the coercion faced by PRPs is extreme? This is why liberal friends of mine who consider themselves environmentalists, but who aren’t lawyers and don’t know how CERCLA works, are often shocked when I describe some of these cases – in an unbiased way, of course – and ask how CERCLA can be constitutional.

My own sense is that the D.C. Circuit decision is probably right as a matter of constitutional law. Not every law that is unfair is unconstitutional. I certainly think that CERCLA’s UAO provisions are unfair. I also think that they are bad law, masquerading as “polluter pays” provisions. However, to the extent one can really even speak about Congressional intent given the haphazard way CERCLA was drafted, Section 106, as interpreted in GE v. Jackson, is pretty clearly what Congress intended and, for now, it’s the law. 

Francisco Franco is still dead, and so are constitutional challenges to EPA's UAO authority under CERCLA.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

When the Burlington Northern decision was first announced, I concluded that “never has the Supreme Court done so much by doing so little.” On May 5, Judge John Mendez, of he Eastern District of California, proved me at least half right. In United States v. Iron Mountain Mines, joint and several liability was imposed on the defendants in 2002. The 2002 decision stated that “given the nature of pollution at the site, it would be difficult to identify distinct harms.” The court did not analyze whether there was a reasonable basis for apportionment of liability. 

Following the Burlington Northern decision, the defendants moved for reconsideration, arguing that Burlington Northern constituted an intervening change in the law. Defendants argued that “the Supreme Court clearly meant to send a signal to other courts that they must begin evaluating apportionment in a different way.” I think that the defendants in Iron Mountain were right.  Unfortunately, that’s not the standard for a motion for reconsideration.   If Iron Mountain were being decided for the first time today, the defendants might get a better result, but that doesn't mean that they win their motion for reconsideration.

What the Supreme Court really said in Burlington Northern isn’t that the law was wrong; it is that District Courts weren’t applying the law correctly. District court judges had their collective judicial thumbs firmly on the side of the government. The Supreme Court simply told the lower courts to take those thumbs off the scales. I hope that this decision will not encourage lower courts to keep the thumbs on the scales.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

One of the outstanding questions following the Supreme Court decisions in Aviall and Atlantic Research was whether a party which had entered into a consent decree with the United States and incurred direct response costs as a result could bring an action for cost recovery under § 107 of CERCLA or whether such a settling party would instead have a contribution action under § 113. The problem facing practitioners and the courts following Atlantic Research was that the Supreme Court seemed to have backed itself into a corner. By focusing its analysis of § 113 so narrowly on the traditional common law understanding of contribution, it at least suggested that contribution claims under § 113 might be limited to situations in which the plaintiff had paid “reimbursement” to satisfy a “common liability.”

Unfortunately, if a party which settled with the government and paid direct response costs could instead bring an action under § 107, then the defendant in the private action would face the specter of joint and several liability, notwithstanding that the private plaintiff was also liable. The Supreme Court thought it addressed this issue in Atlantic Research by noting that the defendant in a private action under § 107 could bring a contribution counterclaim, thus forcing an equitable allocation. However, as the Third Circuit noted in Agere Systems v. Advanced Environmental Technology, decided earlier this week, the Supreme Court’s solution doesn’t work when the private plaintiff has entered into a consent decree with the government pursuant to which it has protection against claims for contribution under § 113. Can Justice Thomas say “oops”?

What was the Third Circuit’s solution? Like Justice Thomas, it chose the straightforward approach. It simply barred private claims under § 107 where the private plaintiff would otherwise be liable under CERCLA, but, by virtue of contribution protection, would be immune from a counterclaim under § 113. While the holding is certainly right as a matter of policy, as a matter of law it seems largely a case of what we lawyers might call ipse dixit – basically, it’s so because I say so. Because it would be unfair to allow a private liable party to obtain a joint and several verdict against another private party, the court simply forbid it.

Interestingly, the Third Circuit did not address the question whether the plaintiffs had a right to bring a contribution action under § 113; it appeared to assume that they had such a right, without discussing the Supreme Court’s indication that contribution claims might be limited to reimbursement. If forced to face the issue directly, the Third Circuit would presumably have said that, just as we have to be fair to private defendants and not impose joint and several liability on them, we have to be fair to private plaintiffs and give them some kind of remedy. If they don’t have claims under § 107, they simply must have claims under § 113.

Given the practicality of the result, it seems likely that other courts of appeal will follow the Third Circuit’s lead. However, if the issue does somehow make it up to the Supreme Court, I still wouldn’t bet on the outcome there. They have surprised us before with their Superfund jurisprudence.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last week, Judge William Griesbach, of the Federal District Court for the Eastern District of Wisconsin, issued an important Superfund contribution decision, which shows just how much equitable discretion judges have in resolving contribution claims. In Appleton Papers v. George Whiting Paper, Judge Griesbach ruled, on summary judgment, that one equitable factor, knowledge of the potential environmental harm caused by PCBs, trumped all others, and that the plaintiffs, who had manufactured carbonless copy paper, or CCP, had no right to contribution from paper companies which used CCP and as a result discharged substantial amounts of PCBs into the Fox River.

The basis for Judge Griesbach’s holding was that “between parties who produced the product and those who merely processed it and recycled it along with all other paper products or water sources, these latter parties are significantly less blameworthy.” (The Judge’s italics, not mine.) This is not necessarily an unreasonable conclusion and probably within the Judge’s discretion to make, but does it follow that that is a sufficient basis to determine, without a trial, that the defendants were – literally – infinitely less blameworthy?

Interestingly, the plaintiffs had produced evidence that the defendants’ discharges had polluted the Fox River, even aside from PCBs. The Judge held that, because such other pollution did not cause response costs, it was irrelevant to the equitable judgment regarding who should pay to clean up PCBs.

The Judge also acknowledged that much of the contamination occurred before the plaintiffs themselves knew of the environmental risks posed by PCBs. Notably, however, the Judge did not discuss whether response costs would have been any different had discharges ceased as soon as the plaintiffs gained knowledge of the risks.

I’m not surprised that the plaintiffs in this contribution action are being held to bear the lion’s share of response costs. I am surprised that, on summary judgment, the court was able to conclude that the defendants’ share, notwithstanding their knowing pollution of the Fox River, and notwithstanding that much of the harm was caused before anyone had knowledge of the risks posed by PCBs, was a big, fat, zero.

What’s the real lesson here? The real lesson is that, while Judge Griesbach both noted that his equitable power is “broad and loose,” and acknowledged that it is “not unfettered,” the emphasis is greatly on the side of "broad and loose," and less so on the side of “not unfettered.” 

I’ve made this point in the past, but lesson one of Superfund contribution actions remains – Get The Judge On Your Side.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In an interesting decision issued a few weeks ago, a District Court in Georgia held that a property manager at a strip mall could not be held liable as an owner of a facility under CERCLA. However, the court held that the property manager could be liable as an operator of the facility. I don't think that the decision is correct, but if it is the law, then property managers would be wise to consider carefully what responsibilities they are willing to assume and what sort of indemnification agreements may be required with the actual property owners.

The case, Scarlett & Associates v. Briarcliff Center Partners, involved a strip mall which had as one of its tenants – surprise, surprise – a dry cleaning operation. The owner had almost no connection to the property. It had leased the entire strip mall. When the lessee ran into financial problems, its lender took over the property and engaged Faison & Associates to manage the property for it. Faison managed the property for approximately two years, until the bank sold the lease.

It seems obvious that Faison was not an owner of the property, since it neither owned nor leased the property, and the court agreed.

However, the court denied Faison’s motion for summary judgment on operator liability. Looking to the Bestfoods decision, the court concluded that there was sufficient evidence that Faison "manage[d], direct[ed], or conduct[ed] operations specifically related to pollution….” The evidence cited by the court, however, is troubling, to say the least. In ruling against Faison, the court noted that Faison had informed the dry cleaner of certain EPA requirements and requested documentation that the dry cleaner was in compliance. There was also evidence that Faison “generally was responsible for managing and maintaining the shopping Center and performing all acts necessary to effect [the bank’s] compliance with all laws….”

I don’t think that that’s enough. In fact, the reverse seems to be the case. Don’t we want property managers to be taking steps to ensure that operating lessees comply with applicable regulations? If that can be evidence that the manager is an operator, the only result will be to cause property managers to be more hands off, which means less oversight, which means less compliance. The law has to be that property managers can take steps to ensure that lessees are in compliance without such steps being interpreted as “operation” of the facility by the manager.

Nonetheless, with this decision out there, if I were a property manager, I’d be very carefully reviewing my contracts both to ensure that I have minimized the likelihood that I will be considered an operator and to ensure that I have received proper indemnifications from the property owner.

Good luck.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Justice Potter Stewart famously said, with respect to obscenity, that “I know it when I see it.” I fear that the test for what constitutes an imminent and substantial endangerment under RCRA is no clearer than Justice Stewart’s subjective test regarding obscenity.

This week, in a decision that is good news for RCRA defendants, Judge Illlston, of the Northern District of California, ruled, in West Coast Home Builders v. Aventis Cropscience USA,  that risks posed by potential future vapor intrusion into buildings from a groundwater plume could not be “imminent and substantial” where no development has yet occurred on the property that is the subject of the litigation. The court was interpreting the Supreme Court’s statement in Meghrig v. KFC Western, to the effect that RCRA “implies that there must be a threat which is present now, although the impact of the threat may not be felt until later.”

Although Judge Illston’s interpretation of Meghrig seems right, other RCRA cases have been allowed to proceed, even though the relationship between the contamination and the exposure have often been equally attenuated. It seems that the court liked the simplicity of a black-letter rule that risks associated with conditions not yet in place can never be imminent.  I am not confident this case will provide much clarity, but even if it only establishes a bright line rule in one narrow corner of the "imminent and substantial endangerment" landscape, that's better than the prior morass.

A developer might reasonably respond to this decision by arguing that such a ruling means that the development will never happen, because no one will finance such a project without knowing that the potential vapor intrusion risk will be addressed. (And a court might respond by saying that that is a problem for Congress to solve, not the courts.)

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For those of you who cannot get enough of Superfund, I spoke at a Boston Bar Association panel on this subject yesterday about the implications of the Supreme Court’s Burlington Northern decision. Thanks to EPA Region I and Joanna Jerison, head of the Region I Superfund Legal Office, for being willing to speak on so obviously sore a subject. And thanks to Craig Campbell for participating on the panel as well.

As you can see from her presentation and mine, it appears that EPA and the private bar do not yet have a common understanding of the implications of the case. Isn’t that a surprise?

I still think, as I said at the meeting, that never has the Supreme Court done so much by doing so little. With respect to the divisibility issue, which is of the greatest long-run significance, the Court explicitly did not change the law at all. And yet …. We all know that they did. Now, instead of divisibility being an insuperable hurdle, it should become something like routine.

Or so I hope.  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

One more note on the Burlington Northern decision.  A client of mine has already noted that one impact of the decision will be to result in more litigation over divisibility, which will be good for private lawyers (ouch!).  She’s right, as my clients always are, but she shouldn’t be.

Litigation should only increase if EPA does not adjust its settlement demands. If EPA responds appropriately, and makes demands which reflect a fair resolution of a divisible liability, then there shouldn’t necessarily be more litigation than there is today.  However, if EPA continues to negotiate with PRPs as though liability is always joint and several, then there will certainly be more litigation – and EPA will start to lose some more cases.  

Anyone care to bet which response by EPA is more likely?

If EPA adjusts its settlement demands downward in response to the decision – or if we start to see litigation in which courts find liability to be divisible – then EPA’s ability to fund Superfund cleanups will be under even more pressure.  This could provide some additional momentum behind the current Congressional effort to reinstitute the Superfund tax.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Those of us who have practiced in the Superfund arena for some time know that the government, in those rare cases where it has been forced to litigate, has used the same oral argument in every case: “Good morning, your honor. My name is ______. I represent the government in this action and we win.” Today, the Supreme Court made clear that that the government now needs a new oral argument template.

In Burlington Northern v. United States, the Supreme Court issued two important decisions in one. First, the Court held that a defendant must actually intend its waste to be disposed of before it can be found liable as an arranger under § 107(a)(3) of CERCLA. The facts were these. Shell Oil sold pesticides to Brown & Bryant, Inc., which operated a chemical distribution business. As part of the transfer of pesticides from Shell to B&B, some pesticides were released on the property. There was evidence that Shell knew that releases were a regular part of the transfer process. Both the District Court and Appeals Court concluded that Shell’s knowledge that releases occurred was enough to establish arranger liability.

Noting that CERCLA does not define the term “arrange[e] for”, the Court looked the phrase’s ordinary meaning. Doing so, the Court concluded that liability may attach only where the defendant “takes intentional steps to dispose of a hazardous substance.” The government argued that, because the defendant knew that disposal was the inevitable result of its sale of product to the site owner, the defendant had “intended” disposal to occur. The Court rejected this argument. The Court was very clear: The defendant “must have entered into the sale of [the product] with the intention that at least a portion of the product be disposed during the transfer process.”

The direct holding with respect to Shell will be important in a number of cases and is helpful in setting a fairly bright line on arranger liability. Even beyond the immediate holding, however, I wonder what, if anything, this case means for what is known as transshipment liability. Under section 107(a)(3), a person is liable as an arranger if they

arranged for disposal or treatment … of hazardous substance owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party…

It has always seemed to me that the plain reading of § 107(a)(3) is that the defendant must have “arranged” for the disposal of the hazardous substances at the site where disposal occurred. In those not uncommon situations where the site operator transshipped the waste – without the generator’s knowledge or consent – the generator should not be liable under CERCLA at the transshipment site, because it did not intend for any disposal at the transshipment site. Given the Supreme Court’s emphasis on what the generator intended, I think that, in the right case, a transshipment generator defendant would stand a pretty good chance of winning, if he or she were willing to litigate the case all the way up to the Supreme Court. 

I hope someone will and I hope I’m right. 

The second holding in Burlington Northern may be of even more practical significance. In it, the Court reversed the Court of Appeals and upheld the District Court’s original divisibility finding with respect to the Burlington Northern Railroad. The District Court used a simple formula based on percentage of the site owned by Burlington Northern and the percentage of time that Burlington Northern leased the land as compared to the total duration of site operations. What’s most significant is that the Court did not even require any significant analysis to uphold the District Court; Justice Stevens’ opinion merely stated that there was evidence that contribution from the railroad parcel to the overall contribution was limited, so that, “[w]ith these background facts in mind, we are persuaded that it was reasonable for the court to use the size of the leased parcel and the duration of the lease as the starting point for its analysis.”

This seems obvious, but is probably a game changer in government Superfund litigation. The overwhelming tenor of lower court opinions has been that the defendant’s burden in a divisibility argument is almost overwhelming and that the burden will be satisfied in the rarest of cases and only upon almost perfect evidence of divisibility. The Supreme Court has made clear that that is simply not the case. Superfund cases are no different than other cases and there is no unstated higher burden of proof. 

Thus, while a district court judge might still be affirmed if he or she concludes that the defendant did not meet its burden of proving divisibility, the real import of the decision is that now district court judges need not fear that they will be automatically reversed if they do conclude that the harm is divisible. Given the standard stated in Burlington Northern, it might go too far to say that most cases will be divisible, but divisibility findings should not be at all rare – and that’s definitely news.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo. 

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For those following developments in Superfund cost recovery and contribution case law after the Atlantic Research decision, it seemed worth noting that the Second Circuit Court of Appeals recently held, in W.R. Grace & Co. – Conn. v. Zotos International, Inc., that a party who incurs response costs pursuant to a state consent order has a right to bring an action to recover those response costs under § 107 of CERCLA.

Thus, the 2^nd Circuit has answered the question left open by note 6 in Atlantic Research, and come down on the side of actions under § 107, rather than § 113. Although it is only dicta in Zotos, the 2^nd Circuit also seemed to support the view the claims under § 113 will be narrowly limited to those that really are traditional contribution claims, i.e., actions in which the contribution plaintiff seeks to recover from one party payments that it made to another party – usually the United States or a State – to address the contribution plaintiff’s potential liability under CERCLA.

I’m tempted to say that this result is unsurprising and perhaps even obvious – except that nothing is unsurprising or obvious under CERCLA. As I have previously noted, only the Supreme Court seems to think that interpreting CERCLA is a straightforward exercise, so there is no assurance that the Zotos interpretation will sweep the land.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In Key Tronic Corp. v. United States, the Supreme Court held that costs which are “closely tied to the actual cleanup may constitute a necessary cost of response in and of itself….” Such costs include “work performed in identifying other PRPs.”   According to the Supreme Court, “tracking down other responsible solvent polluters increases the probability that a cleanup will be effective and get paid.”

On the other hand, the Supreme Court noted that attorneys’ fees incurred in the course of negotiations with the government or for the purpose of defending a party against expected litigation are not recoverable. 

The problem in this approach is that distinguishing between these two motives will almost always be impossible. This difficulty was brought home by a recent case from the Eastern District of California. In BNSF Railway v. California, the court denied a contribution plaintiff’s effort to recover its attorneys fees incurred in identifying additional PRPs, because the court could “not distinguish [plaintiff’s] efforts expended in searching for PRPs from their own litigation expenses.”

Well, duh.

When a PRP attempts to identify other PRPs, is there ever a situation in which the PRP is acting solely out of the goodness of his heart? It seems more likely that the PRP is looking for others to share the pain. Indeed, for PRPs with large pocketbooks, the Supreme Court’s premise that identifying other PRPs will increase the likelihood that the cleanup will be effective and get paid for seems questionable, at best. Even if no other PRPs are identified, the well-heeled PRP is likely to perform the cleanup itself. The identification of additional PRPs, while possibly decreasing the share to be paid by the original PRP, is, if anything, likely to lead to more private cost recovery litigation.

On the other hand, is it reasonable to allow recovery of attorneys’ fees to small PRPs, because their identification of additional PRPs does increase the likelihood that the cleanup will be completed, but not to the GEs of this world? That hardly seems fair and certainly has no basis in the statutory language.

It seems to me that the Supreme Court’s language in Key Tronic is simply unworkable in the real world. The better approach would be to allow recovery of attorneys’ fees incurred in the identification of additional PRPs, regardless of whether the motivation for the PRP search might have been to protect the PRP’s own financial interests in defending an action brought by the government.   Such a rule might actually facilitate private settlements, but it would in any case be much easier for courts to administer and, on that basis alone, would be preferable to the current free-for-all, in which the outcome seems most likely to be decided by the judge’s respective level of sympathy for the plaintiff and the defendant.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For those of you who haven’t been keeping up with the law on private cost recovery and contribution claims under CERCLA, following the decision in Atlantic Research, I recently participated in a panel discussion on the issue. A copy of my presentation can be found here.

The most contentious issue during the discussion was whether private parties who have settled with the government and performed direct cleanups – as opposed to reimbursing the government – as a result of such settlements have an action for cost recovery under § 107 of CERCLA or an action for contribution under § 113 of CERCLA. 

My own view is that the Supreme Court has backed itself into a corner by so narrowly associating claims under § 113 with traditional contribution claims. It seems to me that the Court has limited contribution claims to situations where one liable party has reimbursed the original plaintiff for more than the contribution plaintiff’s fair share of the common liability. Thus, in a situation where the private plaintiff has directly incurred response costs – even if following a consent decree – no contribution claim lies. This is also consistent with a plain reading of § 107 – and we know that the Supreme Court loves plain language interpretations of CERCLA – which provides for claims for response costs, without any distinction being drawn between whether those costs were incurred voluntarily or not.

As I said at the panel, I just wish that the language of CERCLA was as clear to me and all of the practitioners with whom I work as it apparently is to Justice Thomas and the rest of the Supreme Court.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

In a recent decision, the 7^th Circuit Court of Appeals confirmed that neither CERCLA nor RCRA provide convenient ways for the buyer of a building containing asbestos to finance the abatement of that asbestos. In Sycamore Industrial Park Associates v. Ericsson, the seller of the building replaced the old heating equipment shortly prior to sale, but left the old system, including piping, in place. The buyer sought to make the seller pay for the asbestos abatement on the ground that the seller has disposed of the old equipment by abandoning it in place when it installed the new system. The 7^th Circuit didn’t buy it.

The Court acknowledged that there might be a close question as to whether the asbestos constituted a solid or hazardous waste or RCRA and CERCLA. However, the Court concluded that it need not answer the question, because the seller had not “disposed” of the material. The Court concluded that, where all of the asbestos was either inside the building or inside a pipe chase, there “is no real threat that asbestos ‘or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters….” 

The Court did indicate that the intent of the seller may be relevant; it gave the example that a person looking to avoid liability for a toxic retaining pond, could not sell the entire property, including the pond, as a means of avoiding such liability. It described this situation as the “malicious motive case.” Absent such a malicious motive, however, sale of property including toxic or hazardous material does not put a person into the category of potentially responsible parties.

Similar to its analysis of the “disposal” question, the Court also concluded that there was no release or threat of release that would subject a person to CERCLA liability. “We reaffirm that when there is no emission into the outside environment,… there is no release or threatened release, and thus there can be no liability under CERCLA. 

The Court reached the same conclusion under RCRA. First, utilizing the same analysis as under CERCLA, it found that there had been no disposal by the seller. It also rejected the allegation that the seller had handled or stored the asbestos, concluding that “RCRA requires active involvement in handling or storing of materials for liability.”

In short, if the asbestos isn’t walking out the door, it may be a problem inside a building, but CERCLA and RCRA won’t help the building owner pay to fix that problem.

• Email This
• Print
• Comments
• Trackbacks
• Share Link