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Supreme Court issues important CERCLA decision

On May 4, 2009, the U.S. Supreme Court issued its decision in Burlington Northern and Santa Fe Railway Co. v. United States, dramatically narrowing the scope of CERCLA liability by limiting the application of both arranger liability and joint and several liability. Shell Oil Company sold and delivered agricultural chemicals to B&B, an agricultural chemical distribution business, where the chemicals spilled and leaked in the course of B&B’s operations. The Ninth Circuit found Shell liable because (a) spills occurred every time Shell delivered the product; (b) Shell arranged for the delivery by common carrier; (c) Shell changed its delivery process to require the use of large storage tanks that were more likely to leak; (d) Shell provided incentives for B&B to improve the handling of the product; (e) Shell reduced the purchase price by an amount related to product losses from leakage; and (f) Shell distributed a manual for safe operation of the tanks B&B used to hold the product.

By an 8-1 vote, the Court reversed the Ninth Circuit. First, it held that Shell could not be held liable as a CERCLA arranger even though it know that its product may be leaked, stating “knowledge alone is insufficient to prove that an entity ‘planned for’ the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.” Second, the Court found a reasonable basis for apportioning liability with respect to railroads that owned a portion of the property where B&B had operated. The district court had apportioned liability based on percentages of land ownership, periods of ownership, and rough estimates of the volume of releases, and assigned the railroads a 9% share. The Ninth
Circuit rejected that apportionment and imposed joint and several liability on the railroads, finding that apportionment had to be based on “adequate records” detailing the amount of
leakage attributable to activities on certain parcels, how that leakage traveled to and contaminated the soil and groundwater, and the costs of cleanup. Because such detailed information had not been presented at trial, the Ninth Circuit had found the railroads and Shell jointly and severally liable. The Supreme Court found that the district court’s ultimate allocation of liability was supported by the evidence and comported with traditional tort law apportionment principles.

Comments (1)

Alan J. Knauf:

It will be interesting to see how the courts construe the arranger issue. Some will argue that it means only intentional disposal is covered, but at least spills of waste should be covered. Seldom do you see an intentional spill. The holding may just be limited to accidental spills of products.

Perhaps the severability issue is more important, since it opens the door to this being the rule not the exception.

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