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On May 4, 2009, the United States Supreme Court issued its first "apportionment" opinion under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). In reversing the Ninth Circuit, the Supreme Court, in an 8-to-1 decision, held in Burlington Northern & Santa Fe Railway Co. v. United States that a potentially responsible party will not be jointly and severally liable under CERCLA if there is a reasonable basis upon which a court can apportion its share of liability. That is so even if apportionment results in the creation of a significant "orphan share." The court further added an element of intent to arranger liability, holding that a party can not be an "arranger" for the disposal of waste under CERCLA unless it intends that its waste be disposed. These rulings are sure to change the focus of Superfund litigation for years to come.

In 1960, Brown and Bryant, Inc. (B&B) started an agricultural chemical distribution business on a 3.8-acre parcel in Arvin, California. As part of its business, B&B purchased pesticides and other chemicals from suppliers, including Shell Oil Company. In 1975, B&B expanded its operations, leasing a 0.9-acre parcel of land from predecessors of the Burlington Northern and Santa Fe Railway Company and Union Pacific Railroad Company. Shell delivered its product to B&B by common carrier in tanker trucks. When B&B transferred the product from the tanker trucks to its bulk storage tanks, leaks and spills were commonplace. Shell knew that the leaks and spills occurred, however, it took steps to encourage B&B's safe handling of its product.  

In 1988, California's Department of Toxic Substances Control (DTSC) ordered B&B to perform certain remedial activities at the facility, including soil cleanup and groundwater remediation. Shortly thereafter, B&B became insolvent and ceased operations. In 1989, the United States Environmental Protection Agency (EPA) placed the facility on the National Priority List, and EPA and DTSC undertook clean-up efforts at the site. Both the railroads (as owners of a portion of the site) and Shell (based upon the spills of its product) were named potentially responsible parties (PRPs). In 1991, EPA issued an administrative order requiring the railroads to perform certain remedial tasks. Thereafter, the railroads filed a cost recovery action against B&B that was subsequently consolidated with two other cost recovery actions that DTSC and EPA had brought against Shell and the railroads.

The district court concluded that the railroads were responsible for only 9 percent of the site remediation costs. It did this based upon three factors: the percentage of the total area of the site owned by the railroads and leased to B&B; the duration of the business conducted at the site by B&B divided by the term of the lease; and the volume of B&B's hazardous-substance-releasing activities on the site as compared to the releases that occurred (or did not occur) on the railroads' leased parcel. The district court further concluded that Shell was an "arranger" under CERCLA responsible for 6 percent of the cleanup costs based upon its volume estimate of the spills that occurred during product delivery. The court attributed the remaining 85 percent of liability to the defunct B&B.

On appeal, the Ninth Circuit agreed that apportionment was theoretically possible when there was a "reasonable basis" for determining the relative contributions of several defendants to a single harm. The Ninth Circuit reversed, however, because it believed that the facts did not adequately support apportionment of liability among the parties to the case. The circuit court agreed with the district court, however, on the issue of arranger liability. According to the Ninth Circuit, even if Shell did not intend to "dispose" of its products at the facility, the spillage of the product constituted a disposal under CERCLA that was foreseeable.

Apportionment of Liability
In Burlington Northern, the Supreme Court rejected the notion, held by the Ninth Circuit, that evidence in support of divisibility must establish "the precise portions of contamination" attributable to each party or that the district court's reliance on estimates, rather than specific and detailed records as a basis for its conclusion, was fatally defective. To the contrary, the Supreme Court held that the record relied upon by the district court "reasonably supported the apportionment of liability."

The Supreme Court focused on the fact that the primary pollution at the site was located in the portion of the facility most distant from the railroad parcel and that the spills occurring on the railroad parcel contributed no more than 10 percent of the total site contamination. With those facts, the court found it reasonable to use the size of the leased parcel and the duration of the lease as the starting point for an apportionment analysis. Further, the court noted that fewer spills occurred on the railroad parcel and that not all of those spills were carried to the B&B sump and pond. According to the court, the fact that one of three hazardous substances spilled on the railroad parcel did not require remediation strengthened the district court's apportionment analysis.  

'Arranger' Liability

With respect to "arranger" liability, the Supreme Court initially noted that whether such liability attaches is a fact-sensitive and case-specific inquiry, and, because CERCLA does not define what it means to "arrange for" the disposal of a hazardous substance, gave the phrase its "ordinary" meaning — i.e., implying action directed to a specific purpose. In analyzing Shell's conduct in the context of that definition, the court noted that Shell's knowledge of leaks and spills of its product at the B&B site was insufficient to prove that it "planned for" the disposal, especially since the "disposal occurred as a peripheral result of a legitimate sale of a unused, useful product." As such, the court concluded that Shell had not entered into the sale of its product with the intention that a portion thereof would be disposed during delivery. Indeed, the evidence of record, while establishing Shell's knowledge of the spills and releases, did not support an inference that Shell intended such spills and releases to occur. To the contrary, Shell took steps to encourage its distributors to reduce the likelihood of spills, providing them with detailed safety manuals, requiring them to maintain adequate storage facilities and providing discounts to those who took safety precautions. The court thus reversed both the circuit and district courts, and held that Shell was not liable as an "arranger" under CERCLA.

Practical Ramifications of Burlington Northern

As a practical matter, the Supreme Court's opinion in Burlington Northern has breathed new life into the concept of divisibility. While the moving party will still have the burden of proof on this issue, the evidential threshold necessary to prevail has been lowered to a more reasonable, and thus achievable level. As a consequence, the concept of divisibility likely will play a significant role both in the context of litigation and voluntary settlements. For example, PRPs that have a viable divisibility argument, especially those whose liability is at best de minimus, will have a disincentive to participate in settlements that are typically joint and several. Strict adherence to the Burlington Northern decision also will lead to the creation of more (and larger) orphan shares that the government — and thus the public — will be forced to fund.

In addition, litigation over the subjective issue of whether an "arranger" actually intended to dispose of its waste at any given site will undoubtedly increase. Where a seller delivered a product for purposes other than disposal, arranger liability may not attach, even if the seller knew there would be releases. If such sellers cannot be held liable, more responsibility may fall on site owners and transporters.

One thing is certain — the future of Superfund litigation has changed significantly.