Introduction to Arranger Liability:
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) §107(a)(3) imposes strict liability on “any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by an other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances.” 42 U.S.C. §9607(a)(3). However, CERCLA does not provide a definition for “arrange for” thus the courts have been left to delve into a fact specific inquiry to determine whether or not a party should be held liable as an “arranger.”
Burlington Northern decision:
The U.S. Supreme Court’s 2009 decision in the consolidated cases of Burlington Northern & Santa Fe Ry Co v. United States (Case No. 07-1601) and Shell Oil Co. v. United States (Case No. 07-1607) hereinafter “Burlington Northern” changed the fact specific inquiry for determining whether or not a potentially responsible party (PRP) is an “arranger” by including an “intent to dispose” element. Burlington Northern & Santa Fe Ry Co v. US, 129 S.Ct. 1870, 1879 (2009).
Under Burlington Northern the Supreme Court explained the two situations in which determination of whether or not a PRP would be held responsible as an “arranger” is a simple one. First, “CERCLA liability would attach under §9607(a)(3) if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance.” Id. Second, “an entity could not be held liable as an arranger merely for selling a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination.” Id.
The Supreme Court goes on to explain the fact specific inquiry required to determine whether an entity is an arranger for those situations, which fall somewhere in the middle. This involves the following:
· “[U]nder the plain language of the statute, an entity may quality as an arranger under §9607(a)(3) when it takes intentional steps to dispose of a hazardous substance.” Id.
· “[k]nowledge 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. In order to qualify as an arranger, Shell must have entered into the sale of D-D with the intention that a least a portion of the product be disposed of during the transfer process by one or more of the methods described in §6903(3)…Shell’s mere knowledge that spills and leaks continued to occur is insufficient grounds for concluding that Shell ‘arranged for’ the disposal of D-D within the meaning of §9607(a)(3).” Id. at 1880.
Following the U.S. Supreme Court’s decision in Burlington Northern in those situations where there is a question as to whether or not a PRP should be held strictly liable as an “arranger” under CERLCA, many courts have conducted a fact specific inquiry into the circumstances surrounding the transfer and disposal of the hazardous substance and will include an “intent-to-dispose” requirement. See Hinds Inv. v. Team Enter., No. CV F 07-0703, 2010 WL 922416 (E.D. Cal. 2010); Appleton Papers Inc. v. George A. Whiting Paper Co., Slip Op., 2009 WL 5064049 (E.D. Wis., Dec. 16, 2009) (summary judgment); Frontier Communications Corp. v. Barrett Paving Materials, Inc., 631 F. Supp. 2d 110 (D. Me. 2009) (denying motion to dismiss due to fact-intensive inquiry).
Post Burlington Northern the District Court in Washington seems to have expanded the scope of Arranger Liability:
On June 7, 2010, the United States District Court, W.D. Washington at Tacoma, issued an unusual decision finding the Washington State Department of Transportation (WSDOT) liable as an arranger for disposal of hazardous substances for its role in the management of storm water runoff. In the brief discussion that follows the court explained its reasoning:
The U.S. counters by arguing that WSDOT arranged for disposal by designing, constructing, and operating drainage systems whose sole function was to collect highway runoff and dispose of it into nearby water-bodies. Dkt. 62, at 27. The U.S. states that WSDOT had actual knowledge that the runoff that it was discharging contained hazardous substances. Id. The U.S. further states that WSDOT has the ability to redirect, contain, and treat its contaminated runoff. Id. at 28.
An arranger is defined as “any person who by con-tract, agreement, or otherwise arranged for disposal or treatment ... of hazardous substances owned or possessed by such person, by any party or entity, at any facility ... owned or operated by another party or entity and containing such hazardous substances.” 42 U.S.C. §9607(a)(3). “A party that ‘arranged for disposal’ of a hazardous substance under §9607(a)(3) does not become liable under CERCLA until there is an actual or threatened release of that substance into the environment.” Pakootas v. Teck Cominco Met-als, Ltd., 452 F.3d 1066, 1077-78 (9th Cir.2006). “[D]isposal activities that were legal when conducted can nevertheless give rise to liability under §9607(a)(3) if there is an actual or threatened release of such hazardous substances into the environment.” Id. at 1078. “[A]n entity may qualify as an arranger under §9607(a)(3) when it takes intentional steps to dispose of a hazardous substance.” Burlington Northern and Santa Fe Railway Co. v. United States, ---U.S. ----, ----, 129 S.Ct. 1870, 1879, 173 L.Ed.2d 812 (2009). “[T]he word ‘arrange’ implies action directed to a specific purpose.” Id.
*6 The court is persuaded by the U.S.'s arguments. WSDOT arranged for disposal of hazardous sub-stances. It is undisputed that WSDOT designed the drainage systems at issue. Designing is an action directed to a specific purpose. The purpose was to dis-charge the highway runoff into the environment. WSDOT had knowledge that the runoff contained hazardous substances and there was an actual release of the hazardous substances into the environment. WSDOT argues that it did not have control of the hazardous substances. However, it did have control over how the collected runoff was disposed of. WSDOT did design the drainage system and, as noted by the U.S., WSDOT has the ability to redirect, contain, or treat its contaminated runoff. For the foregoing reasons, WSDOT is an arranger under 42 U.S.C. §9607(a)(3). United States v. Washington State Department of Transportation, 2010 WL 2302502 (W.D. Wash. 2010).
As evidenced by the district court’s discussion, the district court does not appear to have made the fact specific inquiry suggested by Burlington Northern decision. Time will tell if other courts will continue to expand the scope of arranger liability that recently appeared to have narrowed as a result of the Burlington Northern decision.
This article was authored by Laura G. Swingle, Jackson Kelly PLLC. For more information on the author see here.
