Opinion ID: 321074
Heading Depth: 2
Heading Rank: 4

Heading: The Vicarious Liability Provisions

Text: 111 The Regulations prohibit retailers from introducing leaded gasoline into converter-equipped cars. 40 C.F.R. 80.22(a). The offense gives rise to a mandatory 'civil penalty' of $10,000 per day. 40 C.F.R. 80.5. If the gasoline illegally introduced was taken from a pump normally used to dispense unleaded gasoline-- i.e. if the gasoline was 'leaded' because of contamination-- liability also runs beyond the retailer. 40 C.F.R. 80.23(a). If the retailer displayed a refiner's trademark, the refiner is vicariously liable for the retailer's offense. 40 C.F.R. 80.23(a)(1). If no refiner's trademark was displayed, vicarious liability attaches to any distributor who sold the retailer gasoline contained in the storage tank from which the contaminated product was taken. 40 C.F.R. 80.23(a)(2). The refiner is vicariously liable 'irrespective of whether any refiner, distributor, or retailer, or the employee or agent of any refiner, distributor, or retailer may have caused or permitted the violation.' No similar language is used in defining the distributor's liability, and it is consequently unclear whether this liability would similarly attach without regard to fault or causation. 112 Petitioners argue that imposition of strict vicarious liability is beyond the Agency's statutory authority, violative of the Constitution, and without support in the Statement or the record. 113 The issue separating petitioners and the Agency is relatively narrow. In their briefs, and particularly at oral argument, petitioners conceded that lead contamination of gasoline sold at retail is typically caused in the pre-retail stages of the distribution chain. Given that it would be extremely difficult for the Agency to locate the source of contamination in each instance, petitioners conceded that a presumption of liability would be reasonable with respect to the retail outlet's immediate supplier, or-- in the case of branded gasoline-- with respect to the refiner of the outlet's product. But, in petitioners' view, the presumption should be a rebuttable one. If a distributor can show it was not the cause of the contamination, liability should fall elsewhere. Likewise, if a refiner can show that it could not have prevented the contamination, it should not be liable. 114 Petitioners acknowledged that, while refiners do not own or directly lease or hire all of the facilities making up the distribution network for their branded gasoline, refiners can exert considerable control over the other facilities through contractual agreements providing for regular inspections and for stiff damages upon contaminatiion of the branded product. To this extent petitioners do not challenge the Statement's finding 'that the contamination of unleaded gasoline associated with transportation of the product can best be prevented by the major refiners who have control or the ability to control their distribution networks.' 71 But petitioners do vigorously assert that a refiner should not be liable if it can show that the contamination of the branded product resulted from an unforeseeable act of vandalism by a third party or from an unpreventable breach of contract by a distributor or jobber. 115 EPA has, in our judgment, failed to explain why the presumption of liability created by 40 C.F.R. 80.23(a)(1) & (2) should not be rebuttable in the circumstances outlined by petitioners. While the literal terms of the regulations do not appear to recognize rebuttability, the Statement seems to read this into the regulations, for it speaks not of strict vicarious liability but only of a 'positive duty on the major brand refiner to prevent any violation of the unleaded gasoline standard at his retail outlets.' 72 At oral argument counsel for the Agency conceded that imposition of strict vicarious liability would be 'unjust' in the circumstances isolated by petitioners. While suggesting that the Agency would 'remit' penalties imposed in such circumstances, counsel was unable to explain why the regulations themselves should not be construed to preclude injustice in the first instance. In our view the record, the Statement, and the concessions of counsel support 40 C.F.R. 80.23(a)(1) & (2) to the extent that these provisions create a rebuttable presumption of liability on, respectively, refiners and distributors. But there is insufficient support from these sources for excluding affirmative defenses to the liability imposed. In enforcement actions the provisions must be construed accordingly. Refiners and distributors must have the opportunity to demonstrate freedom from fault. A distributor which can show that its employees and agents did not cause the contamination at issue may not be held liable under 40 C.F.R. 80.23(a)(2). A refiner which can show that its employees, agents, or lessees did not cause the contamination at issue, and that the contamination could not have been prevented by a reasonable program of contractual oversight, may not be held liable under 40 C.F.R. 80.23(a)(1). 73 116