The Shrinking of Environmental Liability

Environmental liability has always been a dish best served in as many slices as possible. Hence, CERCLA jurisprudence in its first two decades was characterized by a judicial willingness to entertain ever more creative theories to extend environmental liability to new classes of parties, such as a developer who unknowingly moved contaminated soil (Tanglewood East) to a toll manufacturer who merely directed the production of a useful product with knowledge that there would be hazardous waste by-products (Aceto). More recently, however, courts have shown far less appetite for expanding the traditional boundaries of environmental liability beyond owners, operators, arrangers and transporters. Typical of this new trend is Hinds Investment, L.P. v. McLaughlin, decided yesterday. In two short decisions, the Ninth Circuit held that the manufacturer of a dry cleaning machine could not be held liable under either CERCLA or RCRA merely for selling a machine that by design would generate waste PCE.

Similar to the rationale in Aceto, the plaintiff in Hinds Investments claimed that the manufacturer of the dry cleaning equipment used at its shopping centers could be liable on the theory that those dry cleaning machines had been designed with the knowledge that they would generate waste PCE. According to that plaintiff, the manufacturer of the machine was an “arranger” within the meaning of CERCLA and “contributed” to the past handling and disposal of a hazardous waste within the meaning of RCRA’s citizen suit provision. On a motion to dismiss, the trial court rejected these claims. The Ninth Circuit affirmed in its published decision, finding that the machine manufacturer did not have an active enough role in contributing to the use or disposal of the waste PCE to support a RCRA claim. In an unpublished decision, the court ruled that no CERCLA claim would lie given that the machine manufacturer had not sold its equipment for the purpose of disposing waste PCE. In the end, Hinds Investment illustrates just how dramatically the judicial climate has changed after Burlington Northern and Best Foods with courts being far less receptive today to the notion of expanding environmental liability to new classes of PRPs.

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