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

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