Reducing Environmental Risk

The Supreme Court Clarifies the Requirements for “Arranger” Liability and Allocation of Liability in CERCLA Cases – Part III.

Following our recent posts on the Supreme Court’s decision in Burlington Northern & Santa Fe Railway Co. v. United States, No. 07-1601, -U.S.- (U.S. May 4, 2009) (“BNSF“), this post will discuss the implications of this decision on arranger liability.

Courts have historically held that imposing “arranger” liability is a fact specific inquiry. The seemingly most important fact in the BNSF case is that Shell did not retain ownership of the chemicals once sent to B&B. (See the two prior posts for a discussion of the facts of this case.) The 1989 Aceto case, which imposed liability on a PRP in a similar situation to Shell and is one of the leading cases on arranger liability, is however distinguishable because the parties found to be arrangers in that case had maintained ownership of the chemicals after they were sent to the third party to be processed into smaller packaging. U.S. v. Aceto Agr. Chemicals Corp., 872 F.2d 1373 (8th Cir. 1989). Arguably, because of this distinction, Aceto is still good law.

Additionally, in the 1990 Florida Power & Light case, the Eighth Circuit held that a manufacturer that sells a useful product to an end user, who then disposes of it, is not liable as an arranger. Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313 (8th Cir. 1990) Under the facts in that case, the party providing the chemical had not retained ownership. The BNSF Court cites to Florida Power & Light for this proposition in support of its decision.

Accordingly, the BNSF case does not appear to overturn any of the leading cases on “arranger” liability. The BNSF Court is saying, however, that there is an intent requirement for arranger liability and then goes a step further to say that knowledge of a disposal can impute intent. One commenter suggests, though, that this pronouncement does not necessarily change the standard of liability because in most cases the facts will not be as clear as they were in this case. That is, in BNSF, Shell did not intend to dispose of its product in selling it to B&B, and it affirmatively tried to prevent the disposal. Most fact patterns are not going to be so clear cut.

This commenter also suggested that the BNSF case will actually only change the landscape of litigating these claims. First, most “arranger” PRPs will be more likely to challenge their liability, leading to an increase in litigation, generally. Second, discovery during litigation will necessarily be much more fact intensive, focusing on the PRPs’ level of knowledge of the site’s practices and the goal of the transaction.

Whether the BNSF case actually does change the landscape of Superfund litigation depends on the facts of each case. If the waste was generated on-site, the BNSF decision will not apply. If, however, a case involves more complicated facts concerning generation of and arrangement for disposal of hazardous waste, then the BNSF decision may have a bearing on the intensity of litigating that particular case.

Our next post will discuss implications of this decision on apportionment in Superfund cases.



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