Has BNSF Changed Superfund and MTCA Practice? Allocation, Divisibility and Joint and Several Liability

1. Has BNSF Changed Superfund and MTCA Practice?Allocation, Divisibility and Joint and Several Liability Steven G. Jones Environmental Law Education Center Advanced Sediment Conference: Seattle, WA April 22, 2010

2. Three Landmark Supreme Court Decisions Under CERCLA BNSF (2009) Atlantic Research (2007) Aviall Services (2004) 1980 1990 2000 CERCLA enacted (1980)

3. Common Theme in All Three Cases: No Deference to EPA’s Interpretation of CERCLA

4. Aviall, Atlantic Research and BNSF • Aviall and Atlantic Research: addressed who can be sued for contribution and cost recovery • BNSF has the most potential to impact the pursuit of cost recovery and contribution • BNSF addresses two of the fundamental legal principles affecting CERCLA and MTCA practice • Joint and several Liability • Allocation of orphan shares

5. Bedrock principles you thought you knew about CERCLA/MTCA • Strict, joint and several liability • Statute is designed to make polluter pay

6. Joint and Several Liability • Allows EPA/States/Tribes to name fewer than all PRP/PLPs • Forces PRPs/PLPs to cover any orphan shares • Minimizes governmental exposure (for cleanup) • Forces quick settlements based on expansive litigation risk • Encourages insurers to defend based on that same risk

7. Burlington NorthernBackground Facts • Brown & Bryant, Inc. (B&B), owned and operated a facility that repackaged agricultural chemicals. • 4.7-acre parcel, • 0.9-acres leased from predecessors of BNSF and UP • Railroads played no role in B&B’s operations • Only basis for liability was status as “owner”

8. Background Facts (cont’d) • 1988: California’s DTSC ordered B&B to take remedial action • B&B goes out of business • 1989: EPA lists site on NPL • Railroads and Shell are named PRPs and ordered to clean up site • 1996 – EPA and California file cost recovery action for $8 million in response costs

9. District Court Opinion • Lengthy bench trial results in 185-page opinion • Railroads and Shell held liable as owners/arranger • While burden to demonstrate apportionment is “heavy,” defendants met the burden • District court held there was reasonable basis to apportion liability and did so – 9% to Railroads, 6% to Shell

10. District Court Opinion (cont’d) • 85% of cleanup costs (orphan share) allocated to governments – EPA and California are forced to pay • Court acknowledges that Sec. 113(f) allows for reallocation of orphan share to PRPs, • “[T]o do so to do so would be manifestly inequitable.”

11. Apportionment Formula Used by the District Court • Railroads: • % property leased x % of time leased x % of chemicals spilled on leased land • Shell: • Gallons of chemicals spilled by Shell vs. total gallons of chemicals spilled

12. The big question - who covers the orphan share?

13. Ninth Circuit Opinion • Ninth Circuit reversesDistrict Court • Holds Railroads and Shell jointly and severally liable • Holds it cannot reasonably apportion liability as between PRPs; too complex • Calls District Court’s formula a “meat axe approach” • Awards EPA/California 100% of their costs

14. Supreme Court Decision (8-1)May 4, 2009 Joint and Several Liability • Joint and several unless “reasonable basis for apportionment” exists • Burden is on PRPs to show a reasonable basis for apportionment • Court accepted fairly simplistic formula for apportioning liability in this case -- i.e., the “meat axe” approach was good enough for eight of the justices

15. Take Aways

16. Liability Before and After Supreme Court’s Ruling in BNSF

17. Liability as Applied After BNSF Ruling

18. What Next? Federal • Fewer “voluntary” cleanups – no voluntary settlements? • Fewer EPA enforcement orders? • Focus only on priority sites? Will states fill the gap? • MTCA contains joint and several language • But program funding is being curtailed • The State faces the same enforcement dilemmas as EPA

19. Possible implications of the Supreme Court’s ruling • Increased use of apportionment could change the dynamic in cleanup cases • Provides incentive to force both the federal and state governments to prove their case first • Use of insurance may be affected by modified liability standard • Largest implication may be on responsibility for “orphan shares”

20. Decisions following BNSF – Arranger Liability • Subsequent decisions have tended to follow BNSF’s analysis • Appleton Papers, Inc. v. George A. Whiting Paper Co., • No arranger liability without evidence of intent to dispose • U.S. v. WSDOT, • Determination of arranger liability requires facts showing control over disposal • Frontier Communication Corp. v. Barrett Paving Materials • Rejection of arranger liability based on limited record

21. Decisions following BNSF - Apportionment • Evansville Greenway and Remediation Trust v. Southern IN Gas and Elec. Co. • BNSF came down during motion practice – court reserved the apportionment question for trial • Appleton Papers, Inc. v. George A. Whiting Paper Co., • “Nothing in Burlington Northern . . . Requires courts to make some sort of threshold determination regarding joint and several liability or allow plaintiffs in a contribution action to make an apportionment argument.”

22. Deficits and reduced funding may mean tough choices – at least for governments

23. Thank you Steven G. Jones Marten Law 1191 Second Ave., Suite 2200 Seattle, WA 98101 206-292-2629 (direct); 206-356-3360 (cell) sjones@martenlaw.com www.martenlaw.com