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Mississippi College School of Mississippi College School of Law Law Environmental Law CLE Environmental Law CLE Natural Resources, Energy and Environmental Section Natural Resources, Energy and Environmental Section Mississippi Bar Mississippi Bar Burlington Northern – Has CERCLA Burlington Northern – Has CERCLA Liability Changed ? Liability Changed ? Keith Turner Keith Turner Watkins Ludlam Winter & Stennis Watkins Ludlam Winter & Stennis April 2010 April 2010

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Burlington Northern – Has CERCLA Liability Changed ?

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Page 1: Burlington Northern

Mississippi College School of LawMississippi College School of LawEnvironmental Law CLEEnvironmental Law CLE

Natural Resources, Energy and Environmental Section Natural Resources, Energy and Environmental Section Mississippi BarMississippi Bar

Burlington Northern – Has CERCLA Burlington Northern – Has CERCLA Liability Changed ?Liability Changed ?

Keith TurnerKeith TurnerWatkins Ludlam Winter & StennisWatkins Ludlam Winter & Stennis

April 2010April 2010

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Burlington Northern – Has CERCLA Burlington Northern – Has CERCLA Liability Changed ?Liability Changed ?

Short Answer – YesShort Answer – Yes

Long Answer – Yes, but………Long Answer – Yes, but………

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FactsFacts

Brown & Bryant purchased Brown & Bryant purchased agricultural chemicals from several agricultural chemicals from several manufacturers including Shellmanufacturers including Shell

From 1960’s through 1970’s, tanker From 1960’s through 1970’s, tanker trucks and rail cars were offloaded at trucks and rail cars were offloaded at the sitethe site

Chemicals included pesticides – Chemicals included pesticides – Dinoseb, D-D, NemogonDinoseb, D-D, Nemogon

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NUMEROUS SPILLS OCCURRED OVER THE YEARS

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FactsFacts

Aware of the industry spillage problem Aware of the industry spillage problem Shell provided safety manuals, discounts Shell provided safety manuals, discounts for improvements made to offloading for improvements made to offloading facilities, required PE certifications, facilities, required PE certifications, specified types of offloading equipment specified types of offloading equipment

Spills continued at B & BSpills continued at B & B

Sump and drainage pond unlined until Sump and drainage pond unlined until 19791979

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Significant Aspects of the Significant Aspects of the Burlington DecisionBurlington Decision

Narrowing of Arranger LiabilityNarrowing of Arranger Liability

Further development of Further development of apportionment methods ?apportionment methods ?

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Arranger LiabilityArranger Liability

When does the supplier of a useful When does the supplier of a useful product become responsible for product become responsible for resulting wastes ?resulting wastes ?

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Arranger LiabilityArranger Liability

Spills occurred not just at original Spills occurred not just at original offloading but when product was offloading but when product was moved about on the property for moved about on the property for storage and mixing - and when storage and mixing - and when loaded for resaleloaded for resale

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Arranger LiabilityArranger Liability

Government argued “arranger” Government argued “arranger” liability for Shellliability for Shell

Was there “disposal” under Was there “disposal” under § 107 ?§ 107 ?

CERCLA CERCLA § § 9607(a)(3) – “disposal”9607(a)(3) – “disposal” § § 9601(29) - Disposal includes – spilling 9601(29) - Disposal includes – spilling

and leaking (referring to RCRA definition)and leaking (referring to RCRA definition)

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Arranger LiabilityArranger Liability

Was Shell’s knowledge that spills Was Shell’s knowledge that spills were occurring and would likely were occurring and would likely continue to some degree sufficient ?continue to some degree sufficient ?

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Arranger LiabilityArranger Liability

““knowledge alone is insufficient to knowledge alone is insufficient to prove that an entity "planned for" the prove that an entity "planned for" the disposal, particularly when the disposal, particularly when the disposal occurs as a peripheral result disposal occurs as a peripheral result of the legitimate sale of an unused, of the legitimate sale of an unused, useful product”useful product”

Burlington Northern at 1880Burlington Northern at 1880

There may be “some instances” that knowledge is There may be “some instances” that knowledge is evidence of intent to disposeevidence of intent to dispose

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Arranger LiabilityArranger Liability

The defendant “must have entered The defendant “must have entered into the sale of [the product] with the into the sale of [the product] with the intention that at least a portion of the intention that at least a portion of the product be disposed during the product be disposed during the transfer process.” transfer process.”

Burlington Northern at 1880Burlington Northern at 1880

If Shell shipped product other than FOB – factor for If Shell shipped product other than FOB – factor for finding liability ?finding liability ?

(FOB - buyer pays shipping cost, and takes responsibility for (FOB - buyer pays shipping cost, and takes responsibility for the goods when the goods leave the seller's premises) the goods when the goods leave the seller's premises)

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Arranger LiabilityArranger Liability

For new useful products direct For new useful products direct evidence of intent now required ? evidence of intent now required ? LikelyLikely

What about used products -does What about used products -does knowledge become a factor in knowledge become a factor in determining liability ? Possiblydetermining liability ? Possibly

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ApportionmentApportionment

US Government

Corporation A

Corporation B

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ApportionmentApportionment

Which is proper liability for the Which is proper liability for the railroads – joint and several or railroads – joint and several or apportionment ?apportionment ?

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ApportionmentApportionment

Burlington court began with U.S. v. Chem-Burlington court began with U.S. v. Chem-Dyne Corp, 572 F.Supp. 802 (S.D. Ohio Dyne Corp, 572 F.Supp. 802 (S.D. Ohio 1983)1983)

To To §433A §433A Restatement (Second) of TortsRestatement (Second) of Torts ““when two or more persons acting independently when two or more persons acting independently

caus[e] a distinct or single harm for which there is a caus[e] a distinct or single harm for which there is a reasonable basis for division according to the reasonable basis for division according to the contribution of each, each is subject to liability only contribution of each, each is subject to liability only for the portion of the total harm that he has himself for the portion of the total harm that he has himself caused. caused.

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Apportionment Apportionment

““apportionment is proper when apportionment is proper when “there is a reasonable basis for “there is a reasonable basis for determining the contribution of each determining the contribution of each cause to a single harm.” cause to a single harm.” (Restatement)(Restatement)

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Apportionment Apportionment

““Equitable considerations play no Equitable considerations play no role in the apportionment analysis”role in the apportionment analysis”

Burlington Northern FN9Burlington Northern FN9

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Burlington Northern Court Burlington Northern Court FactorsFactors

(District Court’s*)(District Court’s*)

Area OwnershipArea Ownership Percentage of the sitePercentage of the site

TimeTime Percentage of time property controlled compared to Percentage of time property controlled compared to

period of time during operations resulting in spillsperiod of time during operations resulting in spills VolumeVolume

Quantity of waste compared to main portion of siteQuantity of waste compared to main portion of site

Court allowed for 50% margin of errorCourt allowed for 50% margin of error

*District Court was required to create its own approach because the *District Court was required to create its own approach because the parties refused to cooperate parties refused to cooperate

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Burlington Northern District Burlington Northern District Court Apportionment EquationCourt Apportionment Equation

..19 (% surface area) x .45 (% time operation) 19 (% surface area) x .45 (% time operation) x .66 (2/3’s contribution of volume) = % liabilityx .66 (2/3’s contribution of volume) = % liability

6% (+/-) x 50% errors = 9% liability6% (+/-) x 50% errors = 9% liability

Remember – court did this without involvement of the PRP’sRemember – court did this without involvement of the PRP’s

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ApportionmentApportionment

Liability is Joint and Several unless Liability is Joint and Several unless apportionment by: apportionment by:

Distinct harms (physical, chemical, Distinct harms (physical, chemical, geographic or other)geographic or other)

PRP’s argue there is a reasonable basis for PRP’s argue there is a reasonable basis for determining the contribution determining the contribution

How broad this will be has yet to be determinedHow broad this will be has yet to be determined

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ProgenyProgeny Hinds Investments L.P. v. Team Hinds Investments L.P. v. Team

Investments, Inc. 2010 WL 922416 (E.D. Investments, Inc. 2010 WL 922416 (E.D. Cal.)Cal.) PRP claimed dry cleaning machine PRP claimed dry cleaning machine

manufacturer arranged for waste disposal manufacturer arranged for waste disposal from its machine into drains – arranger from its machine into drains – arranger liabilityliability

PRP claimed manufacturer manual directed PRP claimed manufacturer manual directed wastewater flow to open drain – which is wastewater flow to open drain – which is evidence of intentional step to dispose of evidence of intentional step to dispose of PCEPCE

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Hinds Investments L.P. v. Team Hinds Investments L.P. v. Team InvestmentsInvestments

Manufacturer was not an “arranger” –Manufacturer was not an “arranger” – No ownership or possession of wasteNo ownership or possession of waste

Knowledge alone not sufficientKnowledge alone not sufficient

No involvement in installation or direction on disposalNo involvement in installation or direction on disposal

Useful Product Defense the transaction at issue was Useful Product Defense the transaction at issue was the sale of the equipment – which did not create or the sale of the equipment – which did not create or involve hazardous wasteinvolve hazardous waste

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Hinds Investments L.P. v. Team Hinds Investments L.P. v. Team InvestmentsInvestments

Hinds court - “Plaintiffs conveniently ignore Hinds court - “Plaintiffs conveniently ignore the ownership/possession factor of arranger the ownership/possession factor of arranger liability” ----------- following 3liability” ----------- following 3rdrd Circuit which Circuit which states that 107(a)(3) requires such states that 107(a)(3) requires such

The 3The 3rdrd Circuit missed important language Circuit missed important language under 107 - “by any other party or entity”under 107 - “by any other party or entity”

Arranger liability does not require ownership Arranger liability does not require ownership or actual possession of the waste ! or actual possession of the waste !

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ProgenyProgeny

Evansville Greenway and Remediation Trust v. Evansville Greenway and Remediation Trust v. Southern Indiana Gas and Electric, 661 F. Supp. Southern Indiana Gas and Electric, 661 F. Supp. 2d 989, Sept. 29, 2009 (S.D. Ind)2d 989, Sept. 29, 2009 (S.D. Ind)

Scrap yard received batteries from SIGECO and othersScrap yard received batteries from SIGECO and others Is SIGECO jointly and severally liable or can there Is SIGECO jointly and severally liable or can there

apportionment ?apportionment ? Yard records destroyed (contained quantities, types etc)Yard records destroyed (contained quantities, types etc) When “applicable law in flux” the best role the district When “applicable law in flux” the best role the district

court can play is hold a trial to make detailed findingscourt can play is hold a trial to make detailed findings Apportionment would have been impossible prior to Apportionment would have been impossible prior to

Burlington but now court needs more facts to determine Burlington but now court needs more facts to determine is appropriate is appropriate

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ProgenyProgeny U.S. v. Washington State Department U.S. v. Washington State Department

of Transportation, 665 F. Supp. 1233, of Transportation, 665 F. Supp. 1233, Sept. 15, 2009 (W.D. WA)Sept. 15, 2009 (W.D. WA)

Thea Foss Waterway

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U.S. v. Washington State U.S. v. Washington State Department of TransportationDepartment of Transportation

Claim that Corps of Engineers was arranger as Claim that Corps of Engineers was arranger as a result of prior cleanup activities (1902 – a result of prior cleanup activities (1902 – 1949) (1912-1915) (1975-1983) during 1949) (1912-1915) (1975-1983) during dredging projectdredging project

Was Corps just a permitting authority or more ?Was Corps just a permitting authority or more ? Corps claimed only issued permit for 1975-1983 work Corps claimed only issued permit for 1975-1983 work Did the Corps specify disposal locations ?Did the Corps specify disposal locations ?

Because a “fact-intensive inquiry” is necessary Because a “fact-intensive inquiry” is necessary the court could not find for summary judgmentthe court could not find for summary judgment

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ProgenyProgeny

U.S. v. Saporito, 2010 WL 489708 U.S. v. Saporito, 2010 WL 489708 (N.D. Ill.) (N.D. Ill.) PRP owner of metal plating business PRP owner of metal plating business

attempted to apportionment based upon attempted to apportionment based upon period and period and typetype of equipment ownership of equipment ownership (purchased and leased back)(purchased and leased back)

Court held him comparable to joint Court held him comparable to joint venture which would not allow venture which would not allow apportionmentapportionment

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ProgenyProgeny

Halliburton Energy Services, Inc. v. NL Halliburton Energy Services, Inc. v. NL Industries, 648 F. Supp. 2d 840 Aug. Industries, 648 F. Supp. 2d 840 Aug. 18 2009 (S.D. Texas)18 2009 (S.D. Texas) Former barite ore mining and milling siteFormer barite ore mining and milling site An attempt to use Burlington Northern by An attempt to use Burlington Northern by

one PRP against another claiming one PRP against another claiming arranger liabilityarranger liability

Court dismissed discussion as irrelevant Court dismissed discussion as irrelevant because the liability issue was under because the liability issue was under other CERCLA statute (113)other CERCLA statute (113)

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Future effects of Burlington Future effects of Burlington Northern ?Northern ?

Will the courts be willing to embrace Will the courts be willing to embrace efforts to find a basis for apportionment?efforts to find a basis for apportionment?

Loss of Joint and Several Liability early Loss of Joint and Several Liability early settling incentive ?settling incentive ?

Fewer PRP’s ?Fewer PRP’s ?

More liability for owners and operators ?More liability for owners and operators ?

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More ?More ?

Is Intent always a threshold for arranger Is Intent always a threshold for arranger liability?liability?

Litigation over “reasonable basis” ?Litigation over “reasonable basis” ?

More time and costs developing facts ?More time and costs developing facts ?

Shifting of remediation costs to government Shifting of remediation costs to government ? More pressure for Superfund Tax ?? More pressure for Superfund Tax ?