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Burlington Northern & Santa Fe Railway Co. v. United States: The Supreme Court Clarifies the Requirements for "Arranger" Liability and Allocation of Liability in CERCLA Cases - Part II.

Burlington Northern & Santa Fe Railway Co. v. United States: The Supreme Court Clarifies the Requirements for "Arranger" Liability and Allocation of Liability in CERCLA Cases - Part II.

As discussed in our prior posting, the Supreme Court recently clarified the requirements for "arranger" liability and allocation of liability in CERCLA cases in Burlington Northern & Santa Fe Railway Co. v. United States, No. 07-1601, -U.S.- (U.S. May 4, 2009). That post set forth the facts and procedural history of the case; this post discusses the Supreme Court's holding.

The two issues facing the Supreme Court were: (1) whether Shell was properly liable as an arranger under CERCLA § 107(a)(3); and (2) whether the Railroads and Shell were properly held liable for all the Governments' response costs.

Arranger Liability

The Court began its discussion noting the sometimes-blurry line between a party that sells a hazardous substance (as useable product) and a party that arranges for disposal of that substance. The Court agreed with lower courts that whether a party is an "arranger" is a fact-intensive inquiry, but noted that liability must not extend beyond the statute itself.

Because CERCLA does not define the term "arranges for", the Court held that the phrase should be assigned its ordinary meaning. That is, "an entity may qualify as an arranger under [CERCLA § 107(a)(3)] when it takes intentional steps to dispose of a hazardous substance. Id., at 11.

The Governments' argument emphasized the word "disposal" in the phrase "arranges for disposal" and its broad definition under the statute that includes acts such as "spilling" or "leaking". They asserted that Shell arranges for disposal of its pesticides by selling them to B&B under conditions that Shell knew would result in the spilling of those substances by B&B.

Reversing the lower courts, the Supreme Court stated, "knowledge alone is insufficient to prove that an entity 'planned for' the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product." Id., at 12. The Court went on to state that Shell must have intended that at least a portion of the product be disposed of when it sold the pesticides to B&B. Although evidence at trial revealed that Shell knew B&B's operations caused leaks of its pesticides, the evidence also showed that Shell coached B&B on proper handling techniques and, therefore, did not intend for these leaks to occur. Therefore, the Court held that Shell is not liable as an arranger.

Apportionment

Citing to prior CERCLA cases and the Restatement of Torts, the Court noted that apportionment is proper when 'there is a reasonable basis for determining the contribution of each cause to a single harm.' Id., at 14 (quoting Restatement (Second) of Torts § 433A(1)(b), p. 434 (1963-1964)). There was no dispute that the harm cause was a single harm capable of apportionment. The question was whether the record provided a reasonable basis for the District Court's determination that the Railroads were only liable for 9% of the harm caused.

The Court held that it was reasonable for the District Court to use the size of the leased parcel and the duration of the lease as the starting point for its analysis because the evidence showed that the primary pollution was contained in the unlined sump and unlined pond on the original parcel, furthest away from the Railroads' parcel, and that the spills that occurred on the Railroads' parcel contributed to no more than 10% of the total site contamination.

The Supreme Court seemingly chided the Ninth Circuit for rejecting the District Court's apportionment analysis when it had earlier in its opinion acknowledged that divisibility may be established by volumetric, chronological or other types of evidence when adequate information is available.

The Court reversed the Court of Appeals because "the District Court's ultimate allocation of liability is supported by the evidence and comports with the apportionment principles outlined above."

The Court did not need to address whether the District Court's allocation of Shell's liability was reasonable because it determined that Shell was not liable.

Our next post will discuss the impact this decision will have on future CERCLA litigation.

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