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Ninth Circuit Denies En Banc Review of Burlington Northern, Creating an Intra and Inter-Circuit Split Re: CERCLA “Arranger” Liability

Beveridge & Diamond, P.C., April 22, 2008

On March 25, 2008, the Ninth Circuit, for the second time, amended its opinion in United States v. Burlington Northern & Santa Fe Railway, but denied petitions for rehearing en banc regarding a panel decision which both expanded arranger liability for hazardous product manufacturers and limited the ability of PRPs to apportion liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675. 

The original panel decision was issued on March 16, 2007, amended for the first time on September 4, 2007, and amended for the second time as part of the en banc denial.  On the issue of arranger liability, the panel found that because unintentional practices like “leaking” are included within the definition of “disposal” under CERCLA, “disposal” need not be purposeful.  Slip Op. at 2963.  Therefore, the panel concluded that a company “can be an arranger even if it did not intend to dispose of the product” and consequently found the seller of a chemical that contaminated the site jointly and severally liable.  Slip Op. at 2963, 2966-67.  With regards to apportionment, the panel found that whether a particular harm is theoretically capable of apportionment under CERCLA is a question of law.  Slip Op. at 2949-50.  The issue of whether a defendant has submitted sufficient evidence to establish a reasonable basis for apportionment, however, is a question of fact.  Id.  Here, the panel found that the district court erred in finding a reasonable basis for apportioning the costs of remediation at the site, holding that the percentage of land area ownership and the length of time of property ownership were insufficient evidence.  Slip Op. at 2952-57. 

In a rare occurrence, Judge Bea issued a written dissent to the denial of en banc review, which was joined by seven other Ninth Circuit judges, including the Chief Judge.  The dissent opened by stating that the panel’s “novel and unprecedented” application of CERCLA arranger liability creates “impossible-to-satisfy burdens” on defendants and specifically creates “intra- and inter-circuit conflicts in an area of law where uniformity among the circuits is of paramount importance.”  Slip Op. at 2903.  The dissent protested the panel’s decision to impose arranger liability on a company that relinquished control over its product to the buyer upon delivery and before spillage that resulted in contamination occurred.  Slip Op. at 2906.  The dissent noted that the panel decision conflicts with previous Ninth, Sixth and Eleventh Circuit decisions requiring affirmative steps or actual control over a hazardous product for arranger liability to attach.  Slip Op. at 2906, 2919.

With regards to apportionment of damages, the dissent noted that the “panel’s unreasonable application of CERCLA apportionment law imposes joint and several liability on [] defendants where Congress did not so intend.”  Slip Op. at 2903.  While the dissent acknowledged that the most recent amendments to the panel’s decision to align Ninth Circuit law with the Restatement (Second) of Torts in apportioning harm between defendants held strictly liable under CERCLA are “a step in the right direction,” it noted that the panel did not actually follow the Restatement test.  Slip Op. at 2904.  The dissent objected to the reversal of the district court’s apportionment of liability based on time of ownership, location of contamination, and percentage of contamination because the panel failed to find clear error.  In fact, the dissent noted that “[i]f this evidence does not provide a ‘reasonable estimate’ for apportionment liability, I do not see how -- short of ‘perfect information’ sufficient to trace every molecule to the landlord’s parcel -- apportionment could ever be possible.”  Slip Op. at 2905. 

The scope of arranger liability under CERCLA is of tremendous importance to all members of the industrial community, whether as potential plaintiffs or potential defendants.  While contribution plaintiffs may applaud any expansion of CERCLA arranger liability, such expansions threaten to make the CERCLA liability scheme even more unfair than it is today, and the additional uncertainty created may ultimately impose significant transaction costs on everyone.  Similarly, while geographic divisibility may come into play at relatively few sites, creating a very high evidentiary burden for defendants will further increase the unfairness of the CERCLA liability scheme.

For a printable PDF of this article, please click here.

For more information, please contact Steve M. Jawetz at (202) 789-6045 or sjawetz@bdlaw.com, Lily N. Chinn at (202) 789-6044 or lchinn@bdlaw.com, or Kristine L. Sendek-Smith at (202) 789-6063 or ksendeksmith@bdlaw.com.

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