(May 18, 2009) On May 4, 2009, the United States Supreme Court held that companies could not be held liable under the Superfund hazardous waste cleanup statute solely on the ground that they sold hazardous chemicals to other companies that they knew spilled the chemicals into the environment. The Court also ruled that where sufficient evidence is available, liability should be apportioned among responsible parties, rather than holding responsible parties jointly and severally liable.
The litigation concerned the cleanup of a property formerly owned by an agricultural chemical distributor, Brown and Bryant, Inc. (B&B). Shell Oil Company sold pesticides in bulk to B&B, knowing that B&B's operations sometimes resulted in spills into the environment. The governments of the United States and California cleaned up the site, and then sought to recover their costs pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund. The governments sought cost recovery from Shell as a CERCLA “arranger” of hazardous waste disposal, based on its sale of chemicals to B&B knowing that B&B would spill them into the environment. They also sought recovery from Burlington Northern & Santa Fe Railway Co. and Union Pacific Railroad Co., as owners of part of the property on which B&B operated. Following a trial, the U.S. District Court held that Shell could be liable as an “arranger.” Rather than holding these responsible parties jointly and severally liable for all of the governments' cleanup costs, the District Court performed a calculation based on available evidence apportioning liability of 9% to the two railroad companies, and 6% to Shell. On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed the ruling that Shell could be held as an “arranger” of disposal based on the finding that B&B's spills were the foreseeable outcome of Shell's sales. On the apportionment issue, the Ninth Circuit found that the evidence in the record was insufficient to permit a reliable determination of an appropriate apportionment, and because the burden of proof on apportionment rests with the responsible parties, it ruled that they should be held jointly and severally liable for all of the governments' cleanup costs. The Supreme Court accepted the case for review.
The Supreme Court concluded that Shell could not be held liable as a CERCLA “arranger” of hazardous waste disposal. It ruled that “arranger” liability depends on a company's intent that disposal of the chemicals would take place, and mere knowledge that spills occurred is insufficient to establish such liability. The Court noted evidence that, rather than intending for B&B to spill the chemicals into the environment, Shell undertook active efforts to encourage B&B to reduce the likelihood of spills, and the Court concluded that Shell had no intent to arrange for disposal.
The Court also reversed the Ninth Circuit with respect to apportionment of liability, ruling that apportionment is appropriate where the evidence in the record reasonably supports a finding that a party's contribution to environmental harm is divisible from that of other parties. The Court found that the evidence relied on by the District Court in this case was adequate to support such apportionment. (Burlington Northern & Santa Fe Railway Co. v. United States, No. 07-1601 (May 4, 2009), available at http://www.supremecourtus.gov/opinions/08pdf/07-1601.pdf.)