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

Heading: Georgia Power Transformers

Text: Consol and PCS fail to establish a material issue of fact in dispute as to Georgia Power’s intent to arrange for the disposal of PCBs in the 101 transformers it sold to Ward. There is no direct evidence that Georgia Power intended, even in part, to arrange for the disposal of PCBs through these transactions. Nor is there circumstantial evidence from which a reasonable juror could infer that Georgia Power so intended. 33
Consol and PCS have pointed to no direct evidence that Georgia Power auctioned its transformers to Ward intending to dispose of the contained PCBs. What direct evidence does exist of Georgia Power’s subjective intent reflects only that it wished to sell its used transformers “to the best advantage of the company” –- to recover revenue. (J.A. 1331.) Although Georgia Power’s procedures for offloading transformers refer to “scrapping,” and even to “disposal,” it is equally clear that, where permitted by the TSCA, Georgia Power meant those terms to reflect that the transformers were “actually sold.” (Id.) Georgia Power may have called these sales “disposals” in its 1974 procedures bulletin, but that has limited bearing on its intent to “dispose” of transformers as the word is construed in CERCLA, let alone the PCBs within those transformers. Consol and PCS argue that Georgia Power’s PCB testing procedure for used transformers –- first testing the PCB concentrations and then processing the transformers differently based on the result -- proves that one overall goal was to dispose of PCBs. The procedure, however, merely demonstrates Georgia Power’s intent to comply with the TSCA, the federal waste statute that compels a differential process based on products with PCB levels above or below 50 ppm. Georgia Power legitimately sought to sell used transformers to its greatest 34 commercial advantage, and the TSCA circumscribed how Georgia Power went about accomplishing that goal. Compliance with the TSCA does not create a backdoor arranger liability factor under CERCLA. In Burlington, the Supreme Court noted “the indispensable role that state of mind must play in determining whether a party has otherwise arranged for disposal . . . of hazardous substances.” 556 U.S. at 611 (internal quotation marks omitted) (quoting with approval United States v. Cello-Foil Prods., Inc., 100 F.3d 1227, 1231 (6th Cir. 1996)). The record before us does not contain any direct evidence that Georgia Power’s “state of mind” in selling the transformers was to “dispose” of PCBs.
The circumstantial evidence surrounding Georgia Power’s transformers sales also fails to create a material issue of fact as to Georgia Power’s intent in selling the transformers. Consol and PCS argue that intent to dispose of the PCBs is evident from the nature of the sales. For example, they contend that some transformers were drained of oil and non-functional, exposed to damaging moisture, or sold in lots at low prices. However, the circumstances of the sales, viewed through the lens of Burlington and supported by the Pneumo Abex factors, do not support arranger liability in this case. The record reflects 35 the position of Consol and PCS rests on speculation, not a dispute over a genuine issue of material fact. a) Intent for Reuse The first Pneumo Abex factor asks whether the parties intended for “the materials . . . to be reused entirely or reclaimed and then reused.” 142 F.3d at 775. Consol and PCS argue that the PCB-contaminated oil and parts were “worthless accouterments” to the transformer shells that Ward really wanted. (Appellant’s Br. 39.) Georgia Power, focusing on the overall product, responds that Ward commercially reused all of the transformers, selling them to third-party buyers and usually for a profit. Much of the parties’ disagreement as to this and the remaining Pneumo Abex factors turns on whether the court should apply the factors with respect to the overall product (the transformers) or only the hazardous material contained within, ignoring all other circumstances of the transaction. Where, as here, the hazardous materials are part of the overall product, a court may consider whether those materials were necessary to the sale, or instead, could and should have been separated. As we noted in Pneumo Abex, if the hazardous materials are an “incidental” component of a legitimate sale, then their inclusion in the transaction may well demonstrate nothing more 36 than the seller’s intent to complete the sale of the overall product. Pneumo Abex, 142 F.3d at 775-76 (no arranger liability for returning wheel bearings containing valuable but hazardous metal that was molded into new bearings); see also, e.g., NCR Corp., 768 F.3d at 688, 707 (no arranger liability for a paper company who sold paper scraps containing PCBs to a recycling plant, where the PCBs were released only once the plant processed the valuable scraps into usable fibers). On the other hand, if the hazardous material could practicably have been excluded from the sale, that may suggest the seller entered the transaction with a further intent to arrange for a disposal. See, e.g., Cello-Foil, 100 F.3d at 1230 (recognizing an issue of fact as to arranger liability and reversing a grant of summary judgment where a solvent purchaser returned reusable drums to recover a deposit but in some cases left in the drums “unused solvents of up to fifteen gallons”). For these reasons, the proper focus of the Pneumo Abex analysis -- the overall product or a particular material within –- will likely depend on the product’s construction. If the hazardous materials are easily separable from the overall product, such as a battery in a toy, it may generally be appropriate to direct the Pneumo Abex inquiry toward those materials. But if separation is impractical, like a coat of paint on the toy, it 37 will make more sense to direct the inquiry toward the overall product. At the product level in this case, there is no dispute that Ward, the purchaser, intended to reuse the transformers to the greatest extent possible, including as whole units. Ward was in the repair and resale business; it did not operate a disposal facility. The record does not establish that Ward purchased the transformers to resell for scrap. Nor does the record establish that the parties had any divergent intent for how Ward would handle the PCB-containing oil and oil-soaked parts. The evidence, such as it is, simply does not support an inference that either of the parties entered into the sale of the transformers with the intent that Ward would replace the oil or any oil-soaked parts as a matter of course. Ward’s later decision not to reuse the PCB oil and oilcoated parts in some transformers does not imply that Georgia Power had an intent to dispose of the oil when selling the transformers. Third-party customer specifications, which directed Ward’s profit motive, dictated how Ward chose to process the transformers. While some of the former Georgia Power transformers might be sold “as is, where is” to a thirdparty for a reasonable commercial return, others might be sold for a higher profit to a customer only after repair or retooling 38 depending on that customer’s need. None of that connects to a disposal intent for oil on the part of Georgia Power. Any disposal of PCBs occurred only as a result of Ward’s later business judgments, not any implicit agreement or understanding between Ward and Georgia Power at the time of auction. Nothing in the record reflects to the contrary. See NCR Corp., 768 F.3d at 706 (observing that the purchaser had multiple options for handling the hazardous byproduct it produced; that the seller “neither contracted with them to take that step, nor did it have any control over what the [purchaser] ultimately did”; and that this “lack of control” was “a good reason to find [the seller] was not arranging for disposal”); Pneumo Abex, 142 F.3d at 775 (observing that the “removal of contaminants was not the purpose of the transaction”; the foundry processed the wheel bearing because they were “worn out or broken”). Here, Georgia Power lacked knowledge of or control over what Ward chose to do with the transformers Ward acquired. Even more, Georgia Power did not know whether and to what extent Ward would reuse the PCB-contaminated oil and parts in any transformers it determined to rebuild or retool. Other than speculation on the part of the appellants, there is no record basis to conclude that when Georgia Power sold the transformers to Ward, either party had any intent that the transformers be scrapped or sold for parts as reclaimed 39 materials as opposed to “reused entirely.” Thus, we find no error in the district court’s implicit conclusion that the first Pneumo Abex factor weighs in Georgia Power’s favor based on its “fact-intensive and case-specific” inquiry. 7 b) Value Pneumo Abex also advises courts to consider “the value of the materials sold.” Id. Consol and PCS argue that the transformers had value “despite the tainted residual oil, not because of it.” (Appellant’s Br. 40.) Georgia Power emphasizes, as the district court did, that the transformers had real commercial value, for which Ward paid a “competitive price” and later sold them all for profit. See CP&L, 921 F. Supp. 2d at 500. The record confirms that Georgia Power recovered revenue in excess of scrap value from the sales, and that Ward profited from the resale of the transformers. Ward purchased the transformers at competitive auctions, sometimes losing units to 7 Consol and PCS argue that the district court’s failure to expressly state its resolution of the first Pneumo Abex factor is a fatal error that requires vacation of the judgment. We find the district court’s resolution of this factor to be sufficiently clear from its remaining analysis, and in any event, Pneumo Abex merely highlights some factors that courts “focus on” in carrying out the arranger liability inquiry. 142 F.3d at 775. The result of the inquiry is not contingent on any single factor. 40 higher bids. Cf. Pneumo Abex, 142 F.3d at 775-76 (“The parties contemplated that the bearings were a valuable product for which the Foundry paid a competitive price.”). This is not a case where the parties entered an “idiosyncratic” transaction for a substance for which there was no “general demand.” United States v. Gen. Elec. Co., 670 F.3d 377, 386 (1st Cir. 2012) (“[T]he lack of a viable market for scrap Pyranol during the relevant period supplies further proof that GE did not view scrap Pyranol as a legitimate and serviceable product.”). In the district court’ words, “Ward was able to resell most or all of the transformers that it purchased from Georgia Power, after reconditioning and/or reconfiguration, making thousands of dollars more than what Ward paid Georgia Power, on resale.” CP&L, 921 F. Supp. 2d at 498. That Ward repaired or rebuilt some of the transformers was simply its business model and the used transformers were, in essence, its raw materials. “Clearly, the transformers that Georgia Power sold to Ward had marketable value.” Id. The record does not support the conclusion that the presence of PCB-contaminated oil and parts depressed the transformers’ value. Consol and PCS present no evidence that Ward paid less for transformers based on PCBs, which could have suggested Georgia Power’s intent to “contract[] away [its] responsibility” to dispose. Fla. Power & Light Co., 893 F.2d at 41 1318 (internal quotation marks omitted); see also Pneumo Abex, 142 F.3d at 775 (“The Foundry paid the appellants for the bearings; the appellants did not pay the Foundry to dispose of unwanted metal.”). The undrained transformers would not have been functional without the oil and oil-coated parts, and a functional transformer is intuitively more valuable than a nonfunctional transformer. Georgia Power’s decision to not render these transformers inoperable can hardly be evidence that Georgia Power intended to dispose of PCBs. For the drained transformers, the evidence does not show that a residual PCB oil sheen created increased costs for Ward during the repair and rebuilding processes or, as noted above, affected the auction price. In short, there is no basis in the record to isolate a negative value for the PCB-contaminated oil and parts from the unquestionably positive commercial value of the transformers. Consol and PCS argue that certain factors relating to the sales -- that Georgia Power sold the transformers in lots, allowed some of the coils to be exposed to moisture, and provided no warranties except as to title -- reflect an intent to simply scrap the transformers to get rid of the PCBs in the oil. But Consol and PCS adduced no evidence that such sale factors had any relationship to a decision to dispose of PCBs and were not ordinary commercial terms of sale. The value of the transformers was in their ability to be resold to meet 42 third-party customers’ orders. Cf. NCR Corp., 768 F.3d at 704 (“Purchasing this product was essential to the recycling mills’ business operations, and they must take the bitter with the sweet of operating in that market.”). There simply is not evidence in the record supporting the argument by Consol and PCS that the auctions were, even in part, an intended PCB disposal arrangement. Accordingly, the district court’s determination as to the Pneumo Abex “value” factor is well supported. c) Usefulness The third Pneumo Abex factor considers “the usefulness of the materials in the condition in which they were sold.” 142 F.3d at 775. Consol and PCS argue that the residual oil “could not by itself cool a transformer” and was “undesirable to use in rebuilt transformers.” (Appellant’s Br. 43.) Georgia Power, again, focuses on the transformers and highlights the district court’s conclusion that “all or most continued to be used as transformers after their sale because they had not reached the end of their useful lives.” CP&L, 921 F. Supp. 2d at 489. The PCB content thus does not appear to have factored into the continued usefulness of the auctioned transformers. Consol and PCS say that some materials in some transformers were discarded, but not that they had to be. Georgia Power did not auction all of the used transformers that regulations permitted 43 it to sell; some it reconditioned and retained itself. That decision was based not on PCB content, but on age, obsolescence, the need for additional stock of the particular transformer type, and the nature and extent of any needed repairs. (J.A. 2201.) Once Ward acquired the transformers, the record does not show that Ward was required or necessarily had to remove residual oil or oil sheen containing the PCBs. Customer specifications dictated how Ward processed the transformers, and it was able to process all of them for sale. Again, we find no error in the district court’s application of this Pneumo Abex factor. d) State at the Time of Transfer Finally, the fourth Pneumo Abex factor addresses “the state of the product at the time of transferral,” and particularly whether the “hazardous material [was] contained or leaking/ loose.” 142 F.3d at 775. Consol and PCS acknowledge that the transformers were not leaking, but conjecture that the condition of some of the transformers at the time of transfer was equivalent to a leaking transformer. The record, however, shows that, as in Pneumo Abex, this is a case “in which a party sells to another a material which becomes hazardous in its use, but is contained when sold.” Id. 44 There is no evidence that any form of “disposal” under CERCLA occurred during the transformers’ transfer from Georgia Power to Ward. None of the undrained transformers were leaking oil at the time of sale because they were capped. CP&L, 921 F. Supp. 2d at 498. Nor is there any record evidence that the drained transformers leaked or spilled in conjunction with the sale transfer. As the district court found, allegations relating to the condition of the transformers do not “amount to leaking at the time of sale.” Id. at 498-99. Absent leaks or some similar disposal of hazardous substances during the transfer, this factor does not indicate Georgia Power’s intent to arrange for a disposal. See Pneumo Abex, 142 F.3d at 775 (noting that the hazardous metals “were in a contained form when delivered for sale”). The district court did not err in concluding that the fourth Pneumo Abex factor weighed in favor of Georgia Power. e) Knowledge Finally, relying on Burlington, Consol and PCS argue that Georgia Power’s intent to dispose can be inferred from its knowledge that Ward could spill PCBs while rebuilding the transformers. The district court observed that knowledge alone was insufficient for liability “where all other factors counsel toward a finding that Georgia Power lacked the requisite intent 45 for arranger liability.” CP&L, 921 F. Supp. 2d at 499 (citing Burlington, 556 U.S. at 612 (“[K]nowledge alone is insufficient to prove that an entity ‘planned for’ the disposal[.]”)). The district court noted that, at any rate, the “knowledge” Consol and PCS allege was “merely about Georgia Power’s general expertise in dealing with transformers and PCB-laden oils, and not any knowledge as to spills at Ward.” Id. at 499. Nothing in the record contradicts that determination or the view that Ward “unbeknownst to the seller, disposed of the product in a way that led to contamination.” Burlington, 556 U.S. at 610. In some respects, Georgia Power appears even less culpable than Shell Oil in Burlington, which apparently had some knowledge “that some disposal may occur as a collateral consequence of the sale itself.” Id. at 612. Shell Oil was nonetheless found not to have sufficient intent for arranger liability. In contrast, the record here shows no knowledge by Georgia Power of the disposition of the transformers (and any PCBs) once acquired by Ward. Given Georgia Power’s clear intent to sell a valuable product on a competitive market, and its lack of specific knowledge regarding how Ward would process the transformers, the “knowledge” factor is of no aid to Consol and PCS. In sum, Consol and PCS fail under Burlington to adduce record evidence creating any genuine issue of material fact as 46 to whether Georgia Power sold the transformers “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. 556 U.S. at 612. The Pneumo Abex factors, whether examined individually or holistically, also favor Georgia Power. Given the district court’s “fact-intensive and case-specific” analysis, we find no error in its award of summary judgment in favor of Georgia Power on this issue.