Burlington Northern & Santa Fe Railway Co. v. United States

1. Burlington Northern & Santa Fe Railway Co. v. United States 129 S.Ct. 1870 (May 4, 2009) Joanna Jerison Chief, Superfund Legal Office, EPA Region 1

2. Issues Before the Court • Did a seller of agricultural chemicals (Shell) “arrange for disposal” of chemicals spilled on its customer’s property, so as to be liable under CERCLA 107(a)(3)? • Were owners (the Railroads) of part of the site jointly and severally liable for the cost of cleaning up the whole site, or was there a “reasonable basis” to apportion their liability?

3. The Parties • Brown & Bryant operated an agricultural distribution business, purchasing chemicals from suppliers such as Shell Oil Company. • B&B began operating on its original parcel in 1960. It later expanded to a smaller, adjacent parcel. The smaller parcel was jointly owned by two railroads, who leased it to B&B.

4. Shell’s Role • B&B purchased two chemicals from Shell, one of which was distributed in bulk. • Shell arranged for delivery of the bulk chemical by common carrier. When product arrived at the facility it was transferred from tanker trucks to a bulk storage tank. • Through delivery spills, equipment failures, and the rinsing of tanks and trucks, the two chemicals contaminated the site.

5. The Contamination and Remediation • Spills occurred throughout the site from various activities. • Hazardous substances entered the subsurface of the facility, creating a single plume of contaminated groundwater. • B&B made efforts to remediate, but by 1989 it had ceased operations and was insolvent. • EPA and California spent $8M responding to contamination and the Railroads spent $3M.

6. The Litigation • In 1992, the Railroads sued B&B to recover some of their costs. • EPA and California sued Shell and the Railroads in a cost recovery action. • In 1996, the cases were consolidated, and there was a six-week bench trial. • The District Court (E.D. Cal.) held both Shell and the Railroads liable. The District Court apportioned 9% of total site costs to the Railroads, and a little less than 6% of total site costs to Shell. The court made hundreds of factual findings in a 191-page written opinion. • The parties did not make arguments on apportionment. The Court made the findings sua sponte. • The Ninth Circuit affirmed the liability findings. It reversed on apportionment, holding Shell and the Railroads jointly and severally liable.

7. Supreme Court Decision • Justice Stevens wrote the majority opinion, joined by seven other justices: • Shell was not liable as an arranger • The district court had a reasonable basis for apportioning the Railroads’ liability at 9%. • Justice Ginsburg filed a dissenting opinion on both issues.

8. Supreme Court Ruling on Arranger Liability • The Court said that because CERCLA does not specifically define what it means to “arrange for” disposal, the Court would give the phrase its ordinary meaning. • Common usage of the word “arrange” implies “action directed to a specific purpose.” Under the plain language of the statute, “an entity may qualify as an arranger … when it takes intentional steps to dispose of a hazardous substance.”

9. Supreme Court Ruling onArranger Liability (cont.) • The Court held that, while knowledge may in some instances provide evidence of an intent to dispose, “knowledge alone is insufficient to prove that an entity ‘planned for’ disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.” • The Court noted that while Shell was aware of minor, accidental spills, this did not support an inference that Shell intended such spills to occur. To the contrary, Shell took numerous steps to encourage its distributors to reduce the likelihood of spills. • Shell was not liable for any costs at the site.

10. Supreme Court on Apportionment of Costs to the Railroads • Following Chem-Dyne and the Restatement (2d) of Torts § 433A, the Court held that an apportionment of CERCLA liability is proper if a reasonable basis exists for determining the contribution of each PRP to a single harm. • “Not all harms are capable of apportionment, however, and CERCLA defendants seeking to avoid joint and several liability bear the burden of proving that a reasonable basis for apportionment exists.” • “Equitable considerations play no role in the apportionment analysis.” • The Court held that the District Court had a reasonable basis to apportion the Railroads’ liability at 9%.

11. The Basis of the District Court’s Apportionment • The District Court calculated the Railroads’ liability based on: • Land area: the parcel the Railroads leased to B&B was 19% of the site acreage. • Duration of lease: the Railroads leased the parcel to B&B for 45% of the period in which the site was operated. • Types of chemicals spilled: the District Court found that two chemicals (which were also spilled on the main parcel) were responsible for two-thirds, or 67%, of the overall site contamination requiring remediation. • The District Court multiplied 19% x 45% x 67% to get 5.7%. It rounded this number up to 6%, and then boosted it to a final number of 9% to allow “for calculation errors up to 50%.”

12. Supreme Court Holding on Apportionment • The Supreme Court held that the record reasonably supported the apportionment of liability. • “[W]e conclude that the facts in the record reasonably supported the apportionment of liability. The district court’s detailed findings make it abundantly clear that the primary pollution [occurred] … in the southeastern portion of the facility most distant from the Railroads’ parcel and that the spills of hazardous chemicals that occurred on the Railroad parcel contributed to no more than 10% of the total site contamination. With those background facts in mind, we are persuaded that it was reasonable for the court to use the size of the leased parcel and the duration of the lease as the starting point for its analysis.” • There was “less support” in the record for the finding that dinoseb and Nemagon contributed to 2/3 of overall site contamination, but any error based on this finding was “harmless,” because it was cancelled out by the 50% margin for error. (That is: 19% x 45% x 66% x 150% equals 9%, but 19% x 45% also equals 9%.)

13. What does the case mean?

14. Arranger Liability • Holding pertains to a narrow set of facts. • Facts are unusual: • Pure, unused product; 100% “useful” • Spills were unintended by Shell • Shell took steps to reduce likelihood of spills

15. Arranger Liability, cont’d • In cases where purpose is to get rid of used and no longer useful materials, intent is usually clear • In other cases, determination of party’s “intent” is fact-intensive • Intent to dispose of a portion of waste is sufficient. • While Shell’s knowledge of spills alone was insufficient, knowledge can be probative of intent • US v. GE at Fletcher’s Paint Site: Court reaffirmed finding of arranger liability after Burlington Northern

16. Joint & Several Liability Reaffirmed basic principles of J&S liability: • Apportionment is defendant’s burden • Apportionment requires a reasonable basis for determining the contribution of each cause to a single harm • If the harm is indivisible, each of the causes is charged with responsibility for the entire harm

17. Joint and Several, cont’d • Facts of case were atypical; most cases will be harder: • Small number of defendants • Single plume with small no. of contaminants in the gw • No synergistic effects from multiple contaminants of varying toxicity • Procedural posture of case was atypical: • U.S. never had opportunity to offer expert proof on j&s liability • Supreme Court deferred to District Court’s “detailed findings.” • S.Ct. did not criticize standing circuit caselaw. Cited the main cases. “Burden on defendants is substantial.” Alcan.

18. Conclusion “The rumors of CERCLA’s demise are greatly exaggerated.” John Cruden, Acting AAG, with a bow to Mark Twain. “Since B.N. was decided, I have approved several multi-million dollar CERCLA settlements which were absolutely consistent with settlements we achieved before this decision.” Cruden http://www.usdoj.gov/enrd/1306.htm