may 2009

U.S. Supreme Court Decision in Superfund Case Reins in Liability For Certain Property Owners and Manufacturers

Background

On May 4, 2009, the U.S. Supreme Court issued an important decision narrowing the presumed scope of liability under CERCLA – the federal Superfund law. In Burlington Northern & Santa Fe Railway Co. v United States, the court ruled on:

  • Factors to be considered in allocating liability among responsible parties; and

  • Whether a manufacturer of hazardous agricultural chemicals can be held liable under CERCLA merely because it knew that its product was being improperly handled and disposed of by one of its customers.

    Apportionment of Property Owner’s Liability

    A party liable for cleanup costs at a contaminated site can be held jointly and severally liable under CERCLA, which could result in liability for an entire cleanup even if that party is only one of many who owned, operated or caused contamination at a particular site. However, a number of federal courts have found that a party can limit the extent of its liability if it can establish that its contribution to the contamination problem is divisible and that its particular share of responsibility can be separated out from the rest.

    In Burlington Northern, the Court approved the use of several factors that substantially limited a particular property holder’s share of liability. The Court held that it was proper to limit the owner’s share of liability based upon the following factors: (1) it only owned 19% of the total Superfund site; (2) the discharger was the owner’s tenant for only 45% of the total time the discharger was operating there; and (3) the chemicals handled by the tenant only comprised two-thirds of the total contamination at the property.

    Based on these facts, the property owner’s liability was held to be divisible and its liability for cleanup costs was limited to 9% of the total.

    Scope of Manufacturer Liability

    Among the parties liable for cleanup costs under CERCLA are those who “arranged for disposal” of hazardous substances. A number of federal cases have addressed the question of whether and when manufacturers of useful chemicals can be deemed liable for arranging for their disposal.

    In Burlington Northern, one of the defendants was a manufacturer of agricultural chemicals. The operator at the site was a distributor of these products and frequently spilled and otherwise handled the products sloppily, and the manufacturer was aware of continuing spills. The Court held that the manufacturer was not an “arranger” for disposal merely by knowing of the spillage and the sloppy handling of its products by the distributor. The Court found that to be deemed an “arranger” under CERCLA, the manufacturer would have to have intended that its product be disposed of in this manner. Knowledge of the distributor’s poor habits alone did not rise to the level of intention.

    Impact of the Decision

    If you are a potentially responsible party at a contaminated site, you may be able to make use of historical facts about the site and the operations there so as to limit your exposure and avoid joint and several liability. You should determine whether this ruling improves your position and the scope of your potential liability.

    If you are a manufacturer whose alleged liability is based on activities of a customer or other user of your product, “arranger” liability under CERCLA cannot be adjudged against you simply by your knowledge that a customer or user may be causing spills or discharges of your product. If you have been brought into a CERCLA case as an alleged “arranger,” you should reevaluate whether there are facts sufficient to hold you liable.

    If you have any questions concerning these issues please contact David B. Farer or Daniel L. Schmutter.