• Supreme Court Limits "Joint and Several" Liability in CERCLA Cases
  • May 29, 2009 | Authors: Cyndy Day-Wilson; Beth S. Dorris
  • Law Firms: Best Best & Krieger LLP - San Diego Office; Best Best & Krieger LLP - Los Angeles Office
  • On May 4, 2009, the United States Supreme Court issued an 8-1 decision limiting private entity responsibility for environmental clean-up costs under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”).  The decision limits the kinds of companies subject to liability and may reduce “joint and several liability,” a theory in which each potentially responsible party (“PRP”) is liable for all damages.   

    BACKGROUND

    Burlington Northern and Santa Fe Railway Company v. United States, No. 07-1601, and Shell Oil Company v. United States, No. 07-1607 (consolidated), concern the contamination of a site owned by Brown & Bryant, Inc. (“B&B”) on which hazardous chemicals were stored and distributed.  A small portion of the property was leased from Burlington Northern and Santa Fe Railway Company and Union Pacific Railroad Company (collectively, the “Railroads”) and some of the chemicals were purchased from, and shipped by, Shell Oil Company (“Shell”).  Shell was aware that some leaks of their chemicals had occurred and took steps to reduce and prevent spills. 

    In 1983, the California Department of Toxic Substances Control (“DTSC”) and the United States Environmental Protection Agency (“EPA”) began investigating the site for contamination and named the Railroads and Shell PRPs under CERCLA.  The Railroads sued B&B seeking to recover their costs.  The EPA and DTSC also filed a cost recovery action against the Railroads and Shell.

    LOWER COURT DECISIONS

    The District Court held that the Railroads and Shell were PRPs and were responsible for a portion of the governments’ clean-up costs.  Accordingly, the District Court apportioned the Railroads’ liability at 9% of the governments’ total response cost and Shell’s liability at 6%. 

    Shell appealed, reasoning that it should not have been identified as a PRP because it did not intend to dispose of a hazardous substance.  DTSC and EPA appealed the District Court’s apportionment of liability.  

    The Ninth Circuit Court of Appeals determined that Shell was a PRP, regardless of intent, because Shell had “arranged” for delivery and knew that leaks had occurred.  The Appellate Court acknowledged that apportionment was possible, but held that the basis of apportionment was unreasonable.  It reversed the District Court and found the Railroads and Shell jointly and severely liable for the governments’ costs.

    SUPREME COURT REVIEW 

    On review, the Supreme Court held that an entity qualifies as an “arranger” when “it takes intentional steps to dispose of a hazardous substance.”  In this case, the Supreme Court found that Shell lacked the necessary intent and was not properly a PRP.

    The Supreme Court also determined that the Railroads were improperly held jointly and severely liable and instead found that the facts supported the apportionment of the Railroads’ share at 9%. 

    IMPLICATIONS

    This case may have far-reaching implications.  The potential pool of PRP’s in future cases may be reduced if the requisite intent cannot be demonstrated.  There may be increased litigation regarding whether or not an entity “intended” to dispose of hazardous substances as entities previously identified as “arrangers” seek to avoid, or reduce, their liability.  

    Additionally, there may be increased litigation regarding what constitutes a reasonable basis for apportionment as identified PRPs seek to avoid joint and several liability.  This holding could also result in governments bearing a larger financial responsibility for hazardous waste clean-ups if joint and several liability is not imposed.  New federal and/or state legislation may be necessary to reduce this liability.