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Circumstantial Evidence May Not Always Be Enough to Establish "Arranger" Liability under CERCLA.

In DVL Inc. v. General Electric Co., 2010 U.S. Dist. LEXIS 128810 (N.D.N.Y. Dec. 6, 2010), the United States District Court for the Northern District of New York clarified what constitutes proper use of circumstantial evidence to establish "arranger" liability under CERCLA § 107(a)(3). 

GE owned PCB-contaminated property (surface and sub-surface soil contamination) "nearly adjacent" to the plaintiff's property (GE's property was approximately 50 yards north of the DVL site and on the other side of the road). GE manufactured capacitors and other electrical components on the GE property and had used PCBs there at late as 1977. Surface soils, storm water sediments, storm sewer, and groundwater samples at the plaintiff's property taken by the New York State Department of Environmental Conservation ("DEC") indicated below-criteria levels of PCB contamination generally at the DVL site, and concluded that such contamination was "likely not site related" and was of the type of low-level contamination "commonly present in urban/industrial areas." The DEC report could not identify the source of the PCBs at the DVL site.

DVL cleaned up the site, received a "no further concern action" letter from the DEC, and brought this suit seeking, among other things, reimbursement from GE and other nearby property owners (whose liability is not discussed in this summary) for its clean-up costs under CERCLA. DVL moved for partial summary judgment as to the liability of GE under CERCLA for the contamination at the DVL site, asserting that GE intended to dispose of PCB and, consequently, qualified as an "arranger" under CERCLA § 107(a)(3). In turn, GE moved for summary judgment alleging that it had "never generated, stored, disposed of or arranged for disposal of any hazardous substances and/or wastes (including, without limitation, PCBs) on the DVL site," and that there was no evidence in the record to the contrary.

In relevant part, DVL presented the following circumstantial (i.e., non-direct) evidence of GE's liability:

  1. Testimony from a man who, as a boy, saw "the presence of gray objects which he understands to be electrical capacitors" at the site;
  2. Evidence of GE's "historical practices with respect to its disposition of PCBs and PCB wastes" that showed that GE intended to dispose of PCBs which were present at the DVL site; and
  3. Testimony that surface water flowed from GE's property to the DVL property, and evidence that the PCBs on the DVL site matched those previously used at the GE site.

Generally, a plaintiff may rely on circumstantial evidence to prove liability under CERCLA:

Because in certain circumstances "available evidence of who did what at the relevant site is often dependent on inference[, w]hen determining CERCLA liability, "there is nothing objectionable in basing findings solely on circumstantial evidence, especially where the passage of time has made direct evidence difficult or impossible to obtain.'" Thus, "CERCLA liability may be inferred from the totality of the circumstances as opposed to direct evidence."

DVL Inc., 2010 U.S. Dist. LEXIS 128810, at *36 (internal citations omitted).

Moreover, under CERCLA, a plaintiff does not need to show a causal link between that particular waste deposited by the defendant and the response costs the plaintiff incurred, but rather it must demonstrate that a defendant deposited hazardous waste at the cleaned-up site. See US v. Alcan Aluminum Corp., 990 F. 2d 711, 721 (2d Cir. 1993). Yet, it is not enough to simply show that the defendant produced the hazardous waste and that particular waste was cleaned up from the site; the plaintiff must establish the link between the two. See New Jersey Tpk. Auth. v. PPG Indus., 16 F. Supp. 2d 460, 469 (D.N.J. 1998)). Merely presenting a collection of facts and relying on the court to conclude "well, if it is there, it must be theirs," is insufficient to hold a party liable under CERCLA. See New Jersey Tpk. Auth. v. PPG Indus., 197 F. 3d 96, 108-109, 112 (3rd Cir. 1999)).

Yet that is exactly what the plaintiff in DVL tried to do. The court rejected the circumstantial evidence offered by DVL as insufficient to prove arranger liability against GE under CERCLA § 107(a)(3). Specifically, the court found the following faults with DVL's circumstantial evidence:

  1. The testimony from a man who, as a young boy, saw "gray objects" on the DVL site was insufficient because he did not assert that these objects came from GE or that they contained PCBs.
  2. The evidence of GE's historical practices regarding PCBs was insufficient because the practices did not evidence intent of GE to dispose of PCBs at the site property. GE's activities at other sites cannot substitute for evidence of its activities in relation to the DVL property.
  3. Testimony showing that the GE's property upgradient from the DVL property was contaminated was insufficient because it failed to show that the surface water that flowed through the DVL property was PCB contaminated. Additionally, GE presented evidence that its groundwater monitoring wells on its own property have always sampled negative for PCBs.

As well, the court refused to extend the holding of Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112 (2d Cir. 2010), to the "arranger" case before it. In comparison, unlike the facts in Niagara Mohawk, GE was not a former owner of the DVL site. More importantly though, unlike the plaintiff in Niagara Mohawk, DVL had not provided any expert evidence evaluating the circumstantial evidence and thereby linking GE to the on-site contamination.

Accordingly, the court held that DVL's circumstantial evidence, without more, failed to provide any evidence of a "nexus" between any GE waste and the contamination at the DVL site, and therefore failed to establish GE's liability as an arranger under CERCLA § 107(a)(3).

But what are the practical applications of this case?

The implication for our clients will, of course, depend: if they are defendants in a CERCLA suit based largely on circumstantial evidence, we might well counsel more strongly than before the benefits of resisting settlement (whereas in the past the possible futility of fighting, along with transactions costs, might discourage resistance). If our client is a potential CERCLA cost recovery or contribution plaintiff, on the other hand, the holding in DVL might be a sobering suggestion to not jump into such a lawsuit absent persuasive direct evidence of the liability of the prospective defendant. At the very least, a potential cost recovery or contribution plaintiff must be sure to offer competent testimony from an expert witness who will be able to provide the nexus between the on-site contamination and the prospective defendant, or else any circumstantial evidence might be for naught.

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