Ever since the Supreme Court issued its landmark 2008 decision in Burlington Northern & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 129 S. Ct. 1870, 173 L. Ed. 2d 812 (2009), significantly limiting the application of CERCLA “arranger” liability, federal courts have been re-examining the application of “arranger liability” with renewed purpose.  The upshot is that it is much harder for a plaintiff to prevail on an “arranger” theory of liability today than it was  ten years ago.  The recent Tenth Circuit decision in Chevron Mining Inc. v. United States,  No. 15-2209, 2017 U.S. App. LEXIS 12959 (10th Cir. July 19, 2017) only serves to strengthen that view.

The issue in Chevron Mining  was whether the United States would contribute to the staggering environmental cleanup costs Chevron has incurred, and  is likely to continue to incur, cleaning up the Questa Mine Site in New Mexico.   Molycorp, a Chevron predecessor, operated Questa Mine, a molybdenum open pit mine, and allegedly disposed of 324 million tons of  hazardous rock waste and 100 million tons of mine tailings.  The Tenth Circuit overturned the district court and held that the United States, because it held title to the public land on which the mine was located, was an “owner” for the purpose of establishing CERCLA liability.  In holding that the United States was an “owner,” the court observed that the government had sold some of its land to Molycorp, including 2,885 acres for waste disposal.  The court found that it was indisputable that the government was aware that Chevron’s predecessor was disposing of hazardous substances on U.S.-owned land.  Despite losing the case, the U.S. did obtain one small victory in the litigation–the court determined that the United States was not an “arranger” because Chevron failed to prove an important element of the “arranger” test, i.e. that the United States owned  or possessed the hazardous substances dumped at the site.  However, this victory may have come at a high cost to the United States in the long run because the court’s logic in finding that there was no “arranger liability” will almost certainly be used against the government in cases in which the DOJ as the plaintiff seeks to keep marginal  “arranger” PRPs in the government’s cases.  It is this part of the court’s ruling that this article addresses.

What was Congress’ purpose in creating an “arranger” provision in the CERCLA statute to begin with?  As the First Circuit explained in U.S. v. General Elec. Co., 670 F.3d 377, 382 (1st Cir. 2012), the provision was “intended to deter and, if necessary, to sanction parties seeking to evade liability by ‘contracting away’ responsibility”.  In other words, the provision was intended to close a loophole by which polluters could seek to evade statutory responsibility.  Any analysis of “arranger liability” should start with the text of the statute, 42 U.S.C. 9607 (a)(3), which states in pertinent part that “any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances….”

The consequences of Burlington Northern are:  (1) there must be some indicia of intent to dispose of at least some hazardous substances.  (Although the defendant in Burlington Northern was alleged to have “arranged” for the disposal of an unused, useful product, one important take-away from the case is that the trial judge must conduct a “fact-intensive inquiry that looks beyond the parties’ characterization of the transaction” at issue. )  Thus, demonstrating defendant’s knowledge that hazardous substances  were present is an important element of the government’s case.  In a recent CERCLA decision handed down in New York, the court held in Town of Islip v. Thomas Datre, Jr., et al, Case 2:16-cv-02156 (EDNY 3/28/17) that the “arranger defendant must have known or should have known that the material in question was hazardous”; (2) mere knowledge of facts leading to disposal alone is insufficient to impose liability; and (3) the plaintiff must demonstrate that the arranger defendant took “intentional steps to dispose of a hazardous substance.”  It is in those “in between” cases, where the facts are not clear cut, where written and oral advocacy can make a difference in how the court determines the result.

The Tenth Circuit’s decision in Chevron Mining reinforces what may be a further hurdle for the government in establishing its case.  The court’s ruling makes clear that for liability to be imposed, the arranger defendant must be shown to have owned or possessed the hazardous substances at issue.  This requirement suggests that although the plaintiff may be able to demonstrate that a site owner or operator “owned or possessed” the hazardous substances, the same may not be true for other parties on a work site engaged by the owner to perform certain work.  Interestingly, the Burlington Northern court did not address the issue of ownership or control.