update on liability under cercla: emerging principles and...

Update on Liability Under CERCLA: Emerging

Principles and Trends in PRP Liability

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WEDNESDAY JANUARY 23, 2019

Presenting a live 90-minute webinar with interactive Q&A

Denise G. Fellers, Attorney, Morgan Lewis & Bockius, Los Angeles

Jillian C. Kirn, Attorney, Greenberg Traurig, Philadelphia

Shoshana (Suzanne Ilene) Schiller, Partner, Manko Gold Katcher & Fox, Bala Cynwyd, Pa.

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Update on Liability Under CERCLA

Emerging Principles and Trends in PRP Liability

Shoshana (Suzanne Ilene) SchillerManko, Gold, Katcher & Fox, [email protected]

Jillian C. KirnGreenberg [email protected]

Denise G. FellersMorgan, Lewis & Bockius [email protected]

Topics to be Covered

1. CERCLA Liability: An Overview

2. Burlington Northern, Fox River, and the “Fact Intensive” Inquiry

3. Recent Case Law on Potentially Responsible Parties

4. Divisibility and Allocation Methodology

5. Best Practices and Questions

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CERCLA Liability: An Overview

Burlington Northern, Fox River, and the “Fact-Intensive” Inquiry

Jillian C. Kirn | [email protected] | 215.988.7880

© 2019 Greenberg Traurig, LLP

Overview

• Where does arranger liability come from?

• The evolution of arranger liability, pre-Burlington Northern

• Burlington Northern and the fact-intensive inquiry

• Post-Burlington Northern – how did arranger liability initially change?

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CERCLA Liability, Generally

• Release or substantial threat of a release

• Of a hazardous substance

• From a facility

• Released by one of four categories of PRPs

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Four Categories of PRPs

• Present owners and operators

• Owners or operators at the time of disposal

• Generators – generated hazardous substances that came to be located at the site or who “otherwise arranged” for their disposal or treatment

• Transporters or anyone who arranged with transporter for transport for disposal or treatment

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Arrangers Under CERCLA §107(A)(3)

• 42 U.S.C. §9607(a)(3)

• Clear: any person who affirmatively provides for the disposal or treatment of hazardous substances will be liable for subsequent release of such hazardous substances.

• Less clear: Under what circumstances is a person deemed to have implicitly arranged for “disposal” or “treatment” at the facility.

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Pre-Burlington Northern


The Useful Product Doctrine

• Distinction between virgin and secondary products

• Focus on original utility

• Low threshold for knowledge and intent

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Distinction between virgin and secondary materials• 3550 Stevens Creek Associates v.

Barclays Bank of California, 915 F.2d 1355, 1356 (9th Cir. 1990)

• California Department of Toxic Substances Control v. Alco Pacific, Inc., 508 F.3d 930, 934 (9th Cir. 2007)

• State of New York v. General Electric Co., 592 F. Supp. 291, 297 (N.D.N.Y. 1984)

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Utility: Original use

• The mere sale of a product which is, or contains, a hazardous substance cannot support a finding of arranger liability under CERCLA "without additional evidence that the transaction includes an 'arrangement' for the ultimate disposal" or treatment of the hazardous substance.

• Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313, 1317 (11th Cir. 1990)

• Cadillac Fairview/California Inc. v. United States, 41 F.3d 562, 564 (9th Cir. 1994)

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Sale as Intent

• Chatham Steel Corp. v. Brown, 858 F. Supp. 1130, 1140-41 (N.D. Fla. 1994)

• United States v. Pesses, 794 F.Supp.151 (W.D. Pa. 1992)

• Catellus Dev. Corp. v. United States, 34 F.3d 748 (9th Cir. 1994)

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Intent, Knowledge, and Control

• “Whatever else ‘otherwise arranged for disposal’ means…it does not apply to situations where there was no intent to dispose of a hazardous substance.”

• United States v. Cello-Foil Products, Inc., 848 F. Supp. 1352, 1357 (W.D. Mich. 1994)

• Morton International Inc., v. A.E. Staley Manufacturing Co., 343 F.3d 669, 678 (3d Cir. 2003)

• United States v. Aceto Agricultural Chemicals Corp., 872 F.2d 1373, 1380-82 (8th Cir. 1989)

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Burlington Northern


• Burlington Northern & Santa Fe Railway Co. v. United States, 555 U.S. 599 (2009)

• Raised the threshold of proving arranger liability

• Simple evidence of a party’s knowledge of potential environmental contamination no longer sufficient to infer intent

• Rather, a fact-intensive inquiry is required

A Shift in Arranger Liability and CERCLA Jurisprudence

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Post-Burlington Northern, Shift in Arranger Liability


Secondary Products

• NCR Corp v. George A. Whiting Paper Co., 768 F.3d 682, 705-07 (7th Cir. 2014)

• Consolidation Coal Co. v. Ga. Power Co., 781 F.3d 129, 153-54 (4th Cir. 2015)

• United States v. Dico, Inc., 808 F.3d 342, 350-51 (8th Cir. 2015)

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Elevated Intent

Standard

• Team Enterprises, LLC v. Western Investment Real Estate Trust, 647 F.3d 901, 910-11 (9th Cir. 2011)

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Useful Product

Exemption –Circumstantial

Evidence

United States v. Gen. Elec. Co., 670 F. 3d 377, 385-86

(1st Cir. 2012)

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Questions?

Jillian C. [email protected]

mailto:[email protected]

RECENT CASE LAW:POTENTIALLY RESPONSIBLE

PARTIES

Shoshana (Suzanne Ilene) Schiller

Manko, Gold, Katcher & Fox, LLP

Overview

▪ Owners and Operators

▪ Arrangers/Generators

▪ Transporters

▪ Defenses

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Owners and Operators

▪ Pa. Dep’t of Envtl. Prot. v. Trainer Custom Chem., LLC., 906 F.3d 85 (3d Cir. 2018)

▪ PPG Indus., Inc. v. United States, No. 12-3526, 2018 WL 6168623 (D.N.J. Nov. 26, 2018)

▪ New Mexico v. USEPA, 310 F. Supp.3d 1230 (D. New Mexico 2018)

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Owners and Operators

▪ Chevron Mining Inc. v. United States, 863 F.3d 1261 (10th Cir. 2017)

▪ Next Millenium Realty, LLC v. Adchem Corp., 690 Fed.Appx. 710 (2d Cir. 2017)

▪ El Paso Natural Gas Co. LLC v. U.S, 2017 WL 3492993 (D. Ariz. Aug. 15, 2017)

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Transporters

▪ 105 Mt. Kisco Assocs. LLC v. Carozza, No. 15 CIV. 5346 (NSR), 2017 WL 1194700 (S.D.N.Y. Mar. 30, 2017)

▪ United States Oil Recovery Site Potentially Responsible Parties Grp USOR Site v. Bealine Serv. Co., 262 F. Supp. 3d 467, 468 (S.D. Tex. 2017)

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Arrangers/Generators

▪ United States v. Dico, Inc., 265 F.Supp.3d 902 (S.D. Iowa 2017)

▪ Islip v. Datre, 245 F.Supp.3d 397 (E.D.N.Y. 2017)

▪ LCCS Grp. v. A.N. Webber Logistics, Inc., No. 16 C 5827, 2018 WL 4489587 (N.D. Ill. Sept. 19, 2018)

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Defenses

▪ Innocent Landowner/Third Party (107(b)(3) & 101(35)(A))▪ Cal. Dep’t of Toxic Substances Control v. Westside

Delivery, 888 F.3d 1085 (9th Cir. 2018)

▪ Lenders/Security Interest Holders (101(20)(A))▪ United States v. Puerto Rico Indus. Dev. Co., 287 F.

Supp. 3d 133 (D.P.R. 2017)

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Defenses

▪ Sovereign Immunity▪ U.S. Oil Recovery Site Potentially Responsible

Parties Grp v. RR Comm’n of Texas, et al., 898 F.3d 497 (5th Cir. 2018)

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UPDATE ON LIABILITY UNDER CERCLA:

EMERGING PRINCIPLES AND TRENDS IN PRP LIABILITY

Presented by: Denise Fellers

Divisibility and Allocation Methodology

Topics to be Covered

• Divisibility (or Apportionment) vs. Allocation

• Burlington Northern & Santa Fe Railway v. U.S.

• Post-Burlington Northern Cases

• Equitable Allocation

• Update on Recent Allocation Cases

• Best Practices and Questions

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Divisibility vs. Allocation

• Divisibility only applies to joint and several liability under CERCLA § 107“[I]nsofar as the District Court made reference to equitable considerations favoring apportionment, it erred. Equitable considerations play no role in the apportionment analysis; rather, apportionment is proper only when the evidence supports the divisibility of the damages jointly causes by PRPs.

. . . As the Court of Appeals explained, apportionment looks to whether defendants may avoid joint and several liability by establishing a fixed amount of damage for which they are liable, while contribution actions allow jointly and severally liable PRPs to recover from each other on the basis of equitable considerations.”

Burlington Northern, 556 U.S. at 615, FN 9 (2009)

• Equitable allocation is an allocation of liability by the court between liable partiesA court “may allocate response costs among liable parties using such equitable factors as the court determines are appropriate”

42 U.S.C. § 9613(f)(1)

“[T]he law does not command mathematical preciseness from the evidence in finding damages. Instead, all that is required is that sufficient facts . . . Be introduced so that a court can arrive at an intelligent estimate without speculation or conjecture.”

Trinity Industries, Inc. v. Greenlease Holding Company, No. 16-1994, 2018 WL 4324261 (3d Cir. Sept. 11, 2018)

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Background on Burlington Northern

• Burlington Northern & Santa Fe Railway v. U.S., 556 U.S. 599 (2009)

– Arranger Liability – Court looked at the dictionary definition of “arranged for disposal” to resolve a split in the Circuits regarding arranger liability

– Divisibility – Court reinstated divisibility defense to a CERCLA § 107(a) claim relying upon § 433A of the Restatement (Second) of Torts

• Apportionment Facts

– Railroad owned 19% of the surface area of the Site (0.9 acres/4.7 acres)

– Railroad leases their parcel to B&B for 45% of the time of operation (13 years/29 years)

– Only spills of DBCP and Dinoseb substantially contributed to contamination originating on the Railroad parcel and those two chemicals contributed two thirds of the total site contamination requiring remediation

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Burlington Northern and the Divisibility Defense

• The Supreme Court recognized that “congress intended the scope of [CERCLA] liability to be ‘determined from traditional and evolving principles of common law.” As such, “the universal starting point for divisibility of harm analyses in CERCLA cases is § 433A of the Restatement (Second) of Torts.”

• Section 433A contains two steps (1) whether the harm at issue is theoretically capable of apportionment – this is a question of law and (2) if the harm is capable of apportionment, the fact-finder must determine how to apportion the damages – this is a question of fact

• Burlington Northern has not brought the sea change initially anticipated

– As of January 15, 2018, Burlington Northern has been cited in approximately 320 opinions, the majority of these cases involved “arranger” liability, not divisibility defenses

– Successfully obtaining a divisibility ruling post-Burlington Northern has proven extremely difficult

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Post-Burlington Northern Cases

• Pakootas v. Teck Cominco Metals, Ltd., 905 F.3d 565 (9th Cir. 2018)

• Emhart Industries, Inc. v. New England Container Co., Inc., 130 F. Supp. 3d 534 (D. R.I. 2015)

• New York v. Next Millennium Realty, LLC, 160 F. Supp. 3d 485 (E.D.N.Y. 2016)

• The saga of the Fox River cases

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Take Away Points in the Post-Burlington Northern World

• Courts continue to develop what a PRP must establish to prevail on a divisibility defense

• PRP bears the burden of proof and if the burden is not met, then the default is joint and several liability

• In order for a PRP to meet this burden of proof, the divisibility defense requires rigorous fact and expert discovery

– The divisibility defense is a very fact-intensive determination requiring almost un-rebuttable proof, ideally from fact witnesses and experts

• Absent clear geographic or temporal separation, it is very difficult to prove divisibility at traditional CERCLA sites (such as a landfill)

• If a divisibility defense is not available, don’t forget to present an equitable allocation argument

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Equitable Allocation

• For a defendant at a multiple PRP site, the next best alternative to a divisibility defense is to seek a reasonable allocation of liability

• The court may allocated response costs among liable parties using such equitable factors as the court determines are appropriate

• The District Court is authorized to make the final equitable allocation of costs and to choose which equitable factors will inform its decision

• A court may consider several factors, a few factors, or only one determining factors, depending on the totality of the circumstances presented to the Court. See NCR Corp. v. George A. Whiting Paper Co., 768 F.3d 682, 695-696 (7th Cir. 2014)

• The Court must “balance the equities in light of the totality of the circumstances.” FMC Corp. v. Aero Industries, Inc., 998 F.2d 842, 847 (10th

Cir. 1993)

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Equitable Allocation – Factors Considered

• Gore Factors

– Ability of the parties to demonstrate their contribution to a discharge, release, or disposal of hazardous waste can be distinguished

– Amount of the hazardous waste involved

– Degree of toxicity of the hazardous waste involved

– Degree of involvement by the parties in the generation, transportation, treatment, storage, or disposal of hazardous waste

– Degree of care exercised by the parties with respect to the hazardous waste concerned, taking into account the characteristics of such hazardous waste

– Degree of cooperation by the parties with Federal, State or local officials to prevent any harm to the public health or the environment

• Other Equitable Factors (“Torres Factors”)

– Extent to which cleanup costs are attributable to wastes for which a party is responsible

– Party’s level of culpability

– Degree to which the party benefitted from disposal of the waste

– Party’s ability to pay its share of the cost

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Equitable Allocation – Factors Considered

• Additional Factors that some courts have found relevant:

– Relative Fault

– State of mind of the parties

– Economic benefit

– The circumstances and conditions involved in the property’s conveyance

– The migratory potential of the hazardous substances

– The benefit to the party, the party’s knowledge of the operation, and its acquiescence to those dangers, degree of fault, and relative equality

– The value of the contamination causing activities to furthering the government’s national defense efforts

– The existence of an indemnification agreement

– The financial benefit that a party may gain from remediation of a site

– The potential windfall “double recoveries” by plaintiff

– The potential that a plaintiff might “make a profit on the contamination” at the expense of another PRP

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Update on Recent Allocation Cases

• TDY Holdings, LLC v. U.S., No. 15-56483, 2017 U.S. App. Lexis 19371 (9th Cir. 2017)

• Trinity Industries, Inc. v. Greenlease Holding Company, No. 16-1994, 2018 WL 4324261 (W.D. Pa. 2018)

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Best Practices & Questions

• Early fact gathering is essential

• Many PRPs fall within more than one category, don’t box yourself into just one

• Review all possible defenses, even those that are rarely used

• EPA has many guidance documents online; use them

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