Opinion ID: 2788105
Heading Depth: 2
Heading Rank: 1

Heading: CERCLA Arranger Liability

Text: What qualifies as “arranging for disposal” under CERCLA “is clear at the margins but murky in the middle.” NCR Corp., 768 F.3d at 704. At one extreme, liability plainly attaches if an 27 entity enters a transaction “for the sole purpose of discarding a used and no longer useful hazardous substance.” Burlington, 556 U.S. at 610. On the other extreme, there is no liability “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. “[B]etween these two extremes” are arrangements where “the seller has some knowledge of the buyers’ planned disposal or whose motives for the ‘sale’ of hazardous substances are less than clear.” Id. In those cases, the court must undertake a “fact-intensive inquiry that looks beyond the parties’ characterization of the transaction as a ‘disposal’ or a ‘sale.’” Id. In Burlington, the Supreme Court considered whether Shell Oil had arranged for disposal of pesticides and other chemical products by shipping them to a wholesale distributor “under conditions it knew would result in the spilling of a portion of the hazardous substance by the purchaser or common carrier.” Id. at 612. The government contended that the phrase “arranged for disposal” should be interpreted broadly, based on the definition of the statutory term “disposal.” 6 Id. at 611. In 6 CERCLA defines “disposal” as “the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water so that (Continued) 28 the government’s view, Congress had included “unintentional acts such as ‘spilling’ and ‘leaking’ in the definition of disposal” because it intended to impose liability when entities “engage in legitimate sales of hazardous substances knowing that some disposal may occur as a collateral consequence of the sale itself.” Id. at 611-12 (footnote omitted). The Supreme Court rejected the government’s position. To be sure, the Court acknowledged, “in some instances an entity’s knowledge that its product will be leaked, spilled, dumped, or otherwise discarded may provide evidence of the entity’s intent to dispose of its hazardous wastes.” Id. at 612. But the Court further concluded that “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.” Id. at 612. To qualify as an arranger, Shell would have had to sell the chemicals “with the intention that at least a portion of the product be disposed of during the transfer process by one or more of the methods” within the statutory definition of disposal. Id. at 612. Far from intending for the spills to occur, Shell “took numerous such solid waste or hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.” 42 U.S.C. § 6903(3). 29 steps to encourage its distributors to reduce the likelihood of such spills.” Id. at 613. Given those circumstances, Shell’s “mere knowledge that spills and leaks continued to occur” provided “insufficient grounds” to find that Shell had arranged for a disposal within the meaning of § 9607(a)(3). Id. Thus, for arranger liability to be found, something more is required than mere knowledge “that some disposal may occur as a collateral consequence of the sale itself.” Id. at 612. Prior to Burlington, we identified four factors in Pneumo Abex Corp. v. High Point, Thomasville and Denton Railroad Co. that could be useful in “determining whether a transaction was for the discard of hazardous substances or for the sale of valuable materials”: [1] the intent of the parties to the contract as to whether the materials were to be reused entirely or reclaimed and then reused, [2] the value of the materials sold, [3] the usefulness of the materials in the condition in which they were sold, and [4] the state of the product at the time of transferral (was the hazardous material contained or leaking/ loose). 142 F.3d 769, 775 (4th Cir. 1998). We also recognized that there was “no bright line” and that “[a] party’s responsibility . . . must by necessity turn on a fact-specific inquiry into the nature of the transaction.” Id. (internal quotation marks omitted). In Pneumo Abex, a parts foundry sought contribution for cleanup costs from railroads that shipped used wheel bearings to 30 the foundry and received credit for their weight against the purchase of new bearings. Id. at 773. The foundry removed dirt, grease, and impurities from the used bearings and melted the bearings to mold new bearings. In this process dust and slag was produced, which was dumped in an area that the EPA found to be contaminated. Id. at 775. We concluded that the railroads did not arrange for disposal of the wheel bearings, for CERCLA purposes, by sending them to the foundry. “The intent of both parties to the transaction was that the wheel bearings would be reused in their entirety in the creation of new wheel bearings,” not simply disposed of as hazardous metals. Id. We likened the case to one “in which a party sells to another a material which becomes hazardous in its use, but is contained when sold.” Id. Several factors led to that conclusion. The slag and dust would have been produced “even if virgin materials were used to make the new bearings.” Id. The dirt and grease were removed “incidental to remolding new bearings,” and “were not the hazardous materials, the metals themselves were.” Id. Also, the foundry paid for the bearings; the railroads did not pay for disposal of unwanted metal. Id. In sum, “[t]he parties contemplated that the bearings were a valuable product for which the Foundry paid a competitive price.” Id. at 775-76. 31 Consol and PCS do not contend that the sole or even primary purpose of the sale of the transformers was to dispose of PCBs. On this record, Burlington would foreclose that claim. Instead, Consol and PCS contend Georgia Power and Savannah Electric had a secondary motive for the transformer sale -- to dispose of PCBs –- and that this secondary motive is sufficient to create arranger liability under CERCLA. In that regard, neither Burlington nor Pneumo Abex foreclose arranger liability as a matter of law based on a secondary intent, at least when there is a sufficient factual basis for such a finding from the necessary “fact intensive and case specific” inquiry. Burlington, 556 U.S. at 610. Nonetheless, a party does not “intend to dispose” of a hazardous substance solely by selling a product to a buyer who at some point down the line disposes of a hazardous substance that was within the product. The Supreme Court made that point quite clear in Burlington. Anytime an entity sells a product that contains a hazardous substance, it also “intends” to rid itself of that hazardous substance in some metaphysical sense. But intent to sell a product that happens to contain a hazardous substance is not equivalent to intent to dispose of a hazardous substance under CERCLA. For arranger liability to attach, there must be something more. 32 The something more could be the seller’s “intentional steps,” beyond what is inherent to the sale, to dispose of the hazardous waste. Id. at 611. Or other evidence might demonstrate that the seller “entered into the sale . . . with the intention that at least a portion of the [hazardous] product be disposed of” as defined in the act -– by discharge, deposit, injection, dumping, spilling, leaking, or placing it into or on any land or water. Id. at 612. This is the “fact-intensive inquiry that looks beyond the parties’ characterization,” id. at 610, and “into the nature of the transaction,” Pneumo Abex, 142 F.3d at 775 (internal quotation marks omitted). With that framework in mind, we turn to the circumstances of transformer sales by Georgia Power and Savannah Electric.