Amicus Curiae Brief — Shell Oil Co. v. United States (Nos. 07-1607, 07-1601)

104 a

JUL 2 5 2008

OFFICE OF THE CLERK |

No. 07-1607

In The

Supreme Court of the Gnited States

e

SHELL OIL COMPANY,

Petitioner,

Vs.

UNITED STATES OF AMERICA, et al.,

Respondents.

°

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

+

BRIEF OF INTERNATIONAL ASSOCIATION

OF DEFENSE COUNSEL AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

+

HoRVITZ & LEVY LLP

MARY-CHRISTINE SUNGAILA

JEREMY B. ROSEN

BRADLEY S. PAULEY*

*Counsel of Record

15760 Ventura Boulevard, 18th Floor

Encino, California 91436-3000

(818) 995-0800

Attorneys for Amicus Curiae

International Association of Defense Counsel

——— EE EEE EEESEEEEESEEIoOoyaIIa™i|===—=x

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................ccccccssseeseseeee il

INTEREST OF AMICUS CURIAE...............0.2.0006+ 1

SUMMARY OF ARGUMENT ..................:cceeeeeeeeeee 1

STATEMENT OF THE CASE..............:ccccceesseseesees 4

RT iiiihinctiniatitabidanlidpidteniaiccinnnmnviscinieriennncesn 4

I. ARRANGER LIABILITY UNDER CERCLA

REQUIRES INTENTIONAL CONDUCT

DiRECTED AT DISPOSAL ...............ccccceeeees 4

II. ARRANGER LIABILITY UNDER CERCLA

REQUIRES THE DISPOSAL OF [:AZ-

ARDOUS WASTE, NOT MERELY THE

SHIPMENT OF USEFUL PRODUCTS...... 12

III. THE PETITION SHOULD BE GRANTED

TO CLARIFY THAT OWNERSHIP OF

WASTE AT THE TIME OF DISPOSAL,

AND CONTROL OF THE DISPOSAL

PROCESS, ARE NECESSARY FOR AR-

B® 5 en ere 17

IV. WITHOUT REVIEW BY THIS COURT,

THE NINTH CIRCUIT'S DECISION WILL

HAVE SEVERE AND FAR-REACHING

ECONOMIC RAMIFICATIONS...................- 21

SITE cialattnidienbihesinedainsnbinieenesotecpaguoipeonein 23

al

ii

TABLE OF AUTHORITIES

Page

CASES

3550 Stevens Creek Associates v. Barclays Bank

of California, 915 F.2d 1355 (9th Cir. 1990)...passim

AM Int'l, Inc. v. Intl Forging Equip. Corp., 982

Me EN SAE: BGI) aiccccvsscevccsescersscesanssceseoress 7,15

Amcast Industrial Corp. v. Detrex Corp., 2 F.3d

POE ED BID sctivvccccececcectscescanenpeetstns 5, 11, 14, 21

Cadillac Fairview/Cal., Inc. v. United States,

41 F.3d 562 (9th Cir. 1994) ............................... 14, 19

Cal. Dept. of Toxic Substances Control v. Pay-

less Cleaners, 368 F. Supp. 2d 1069 (E.D. Cal.

ee icaedi cetacean tieiicahechinhiiiadeineadinicinh iedieghiliaibpaiideniideniatniwesiiaaren 15

Caminetti v. United States, 242 U.S. 470 (1917)......... 5

Carson Harbor Village, Ltd. v. Unocal Corp.,

ee ee ES GIO sc sctcnesesecsctntisseiccicenencsscess 5

Catellus Dev. Corp. v. United States, 34 F.3d

I cine iarsiecnteabsianinpiicheninaiiiniies 13

Chatham Steel Corp. v. Brown, 858 F. Supp.

BIBS GUD. Fim. 29D6)..........cc.ccocecsecescoregecercencorcoreves 11

Courtaulds Aerospace, Inc. v. Huffman, 826

F. Supp. 345 (E.D. Cal. 1993) ..................... 13, 15, 16

First United Methodist Church of Hyattsville v.

U.S. Gypsum Co., 882 F.2d 862 (4th Cir.

ST diitstetcsitdichepilaalecabteisnchaiibaedecipiiieibba didi stitilainvnndiciciiateainindl 22

ill

TABLE OF AUTHORITIES — Continued

Page

Fla. Power & Light Co. v. Allis Chalmers Corp.,

893 F.2d 13138 (ilth Cir. 1990).........................2.. 7,15

Freeman v. Glaxo Wellcome, Inc., 189 F.3d 160

a 12, 13, 14

General Electric Co. v. Aamco Transmissions,

Inc. , 962 F.2d 281 (2d Cir. 1992)....................... 18, 19

Jones-Hamilton Co. v. Beazer Materials &

Serv., Inc., 973 F.2d 688 (9th Cir. 1992)................... 8

Mathews v. Dow Chem. Co., 947 F. Supp. 1517

RCE Re we ae ACR Oe 11

Negonsott v. Samuels, 507 U.S. 99 (1993) ................... 5

Pakootas v. Teck Cominco Metals, Ltd., 452

Is a scesenensenven 4

Pneumo Abex Corp. v. High Point, Thomasville

& Denton R.R. Co., 142 F.3d 769 (4th Cir.

RE RE aE ELS AE RP Ie Races LS AOE Stk a 14

RSR Corp. v. Avanti Dev., Inc., 69 F. Supp. 2d

RETIREE eM Pe eS SO Ee 14

South Fla. Water Mgmt. Dist. v. Montalvo, 84

i aclidbatsemnnnbehs 7

United States v. Aceto Agric. Chem. Corp., 872

F.2d 1373 (Gth Cir. 1068) ...........0cccccccccccceseess 8, 11,18

United States v. CDMG Realty Co., 96 F.3d 706

TRESS SE ATR arene ee Oo a NR a a 5,8

United States v. Cello-Foil Products, Inc., 100

F.3d 1227 (6th Cir. 1996) ...................... 6, 7, 8, 15,19

iv

TABLE OF AUTHORITIES -— Continued

Page

United States v. Davis, 261 F.3d 1 (1st Cir

a etniil i)

United States v. Northeastern Pharmaceutical

& Chemical Co., 810 F.2d 726 (8th Cir.

AR ee ey ae ORCA ROP SRN Me eee ee 18, 20

United States v. Ron Pair Enter., Inc., 489 U. Ss.

a eed i)

United States v. Shell Oil Co., 294 F.3d 1045

SELES UNY ne 6s Roe ea OS ne

In re Voluntary Purchasing Groups, Inc., 2002

WL, 31166635 (N.D. Tlex. BOOB) .......cscrcccccccscoccesscese. 11

Zands v. Nelson, 779 F. Supp. 1254 (S.D. Cal.

SSS Sey aber SES IO ARR Ra eo EE 16, 17

STATUTES

i as saeedniniieieisainianell 10

I i aeenenesmndibennueiaiian 11

II Sevnccccscccnnccsssocceésnesnnsnes 12, 13,14

a ria teeaaescabebiinmicainmai 13

I ia iinnsucdndicsccineniedpaniiinenienensiinn passim

i cceniestibdbinnmmeemnenneelal 10

ee i I bs vcnicasccninscnicsnincansvincatonsiis passim

RULES

I UIT UII UTI shah sidadlliaisnelaindniteinnesbnmpelstepeadibinlaphaiian 1

Vv

TABLE OF AUTHORITIES — Continued

MISCELLANEOUS

Blake A. Watson, Liberal Construction of CERCLA

Under the Remedial Purpose Canon: Have

the Lower Courts Taken a Good Thing Too

Far?, 20 Harv. Envtl. L. Rev. 199 (1996)...........

Ian Erickson, Comment, Reconciling the CERCLA

Useful Product and Recycling Defenses, 80

BOs Ti: SA ID vevewnsncesesstietedeosiinnpeosepeees

David Brose, Ending the Arranger Debate: Inte-

grating Conflicting Interpretations in Search of

a Uniform Approach, 10 Mo. Envtl. L. &

2 | RISERS Es Bertone ae ona tone

Jason C. Kuhlman, Pneumo Abex Corp. v. High

Point, Thomasville & Denton R.R. Co., and

CERCLA “Arranger Liability,” 16 J. Nat.

Resources & Envtl. L. 151 (2002)............00........

1

INTEREST OF AMICUS CURIAE'

Amicus curiae International Association of De-

fense Counsel (IADC) is an association of corporate

and insurance attorneys whose practice is concen-

trated on the defense of civil lawsuits. The LADC is

dedicated to the just and efficient administration of

civil justice and continual improvement of the civil

justice system. The LADC supports a justice system in

which plaintiffs are fairly compensated for genuine

injuries, responsible defendants are held liable only

for appropriate damages, and non-responsible defen-

dants are exonerated without unreasonable cost.

°

SUMMARY OF ARGUMENT

As the petition demonstrates, the Ninth Circuit

has sanctioned an improper expansion of liability

under the Comprehensive Environmental Response,

Compensation, and Liability Act (CERCLA), 42

U.S.C. sections 9601-9675, by broadly defining

those who have “arranged for disposal” of hazardous

* This brief was authored by amicus and its counsel listed

on the front cover, and was not authored in whole or in part by

counsel for a party. No one other than amicus or its counsel has

made any monetary contribution to the preparation or submis-

sion of this brief. Pursuant to rule 37 of the Rules of the Su-

preme Court of the United States, all parties have consented to

the filing of this brief. Letters indicating their consent are being

submitted with this brief. The parties were notified ten days

prior to the due date of this brief of the intention to file.

2

waste under 42 U.S.C. section 9607(a)(3) to include

a manufacturer like Shell who shipped a useful

product that later leaked after it left the manufac-

turer’s ownership and control. This potentially far-

reaching and ill-defined form of CERCLA liability is

contrary to CERCLA’s plain language and structure

and both deepens existing circuit splits and creates

new ones with regard to three different aspects of

“arranger” liability.

First, contrary to the Sixth and Seventh Circuits’

interpretation, the Ninth Circuit panel held that

arranger liability does not require an intent to dis-

pose of hazardous substances. Rather, because CER-

CLA’s definition of “disposal” includes “leaking” and

“spilling,” the panel concluded a defendant may be

liable as an arranger in the absence of “purposeful”

conduct. Pet. App. 44a. In so ruling, the panel failed

to acknowledge that the statute’s plain language — in

particular, its use of the phrase “arranged for dis-

posal” — requires intentional conduct directed at

carrying out disposal of hazardous material.

Second, parting ways with other circuits that

have considered the question, the Ninth Circuit panel

expanded arranger liability through its related, but

distinct, ruling that “disposal” under CERCLA can

encompass a manufacturer’s shipment of new, useful

products to its customers. Pet. App. 45a. In reaching

this result, the panel failed to take into account that

CERCLA’s definition of “disposal” is expressly limited

to waste, and that the term “disposal” itself connotes

the act of discarding useless matter. By so holding,

9

ry

the panel effectively eviscerated the “useful product”

doctrine in the Ninth Circuit, which until now has

ordinarily prevented shippers of useful products from

being held liable for the cost of cleaning up their

customers’ hazardous waste sites.

Finally, the panel concluded that whether Shell

owned the substance in question at the time of the

asserted disposal “is not an informative considera-

tion,” and that control of the disposal process “is

informative only in light of additional considera-

tions.” Pet. App. 49a. The panel thereby added to a

jumble of conflicting decisions by the Ninth Circuit

and other circuits concerning the relevance of owner-

ship and control to “arranger” liability.

If the Ninth Circuit’s opinion is left undisturbed,

its secondary and tertiary impacts will be widely felt

throughout our economy. The transfer of billions of

dollars in clean-up costs to those who do no more

than manufacture and ship new products in the chain

of commerce is certain to adversely impact prices, job

creation, and insurance premiums. While Congress

could have chosen to impose such liability, there is no

indication in the language of CERCLA that it did so.

Therefore, this Court should grant certiorari to

resolve the circuit splits created and perpetuated by

the Ninth Circuit’s decision. In so doing, it will pro-

vide critically needed guidance to the lower courts

and bring nationwide uniformity to this important

aspect of CERCLA liability.

+

4

STATEMENT OF THE CASE

Amicus hereby adopts and incorporates by refer-

ence the Statement of the Case set forth in Peti-

tioner’s Brief.

¢

ARGUMENT

I. ARRANGER LIABILITY UNDER CERCLA

REQUIRES INTENTIONAL CONDUCT

DIRECTED AT DISPOSAL.

CERCLA “was designed to deal with the problem

of inactive and abandoned hazardous waste disposal

sites.” 3550 Stevens Creek Assoc. v. Barclays Bank of

Cal., 915 F.2d 1355, 1363 (9th Cir. 1990). It “sets

forth a comprehensive scheme for the cleanup of

hazardous waste sites, and imposes liability for

cleanup costs on the parties responsible for the re-

lease or potential release of hazardous substances

into the environment.” Pakootas v. Teck Cominco

Metals, Lid., 452 F.3d 1066, 1972 (9th Cir. 2006).

One of four types of potentially responsible

parties (“PRPs”) liable for clean-up costs under CER-

CLA is an “arranger” — one who arranges for the

disposal of hazardous substances. An “arranger” is

defined as:

|AJny person who by contract, agreement, or

otherwise arranged for disposal or treat-

ment, or arranged with a transporter for

transport for disposal or treatment, of haz-

ardous substances owned or possessed by

5

such person, by anv other party or entity, at

any facility or incineration vessel owned or

operated by another party or entity and con-

taining such hazardous substances. .. .

42 U.S.C. § 9607(a)(3) (2006).

The circuit courts are deeply divided about what

the plain language’ of section 9607(a)(3) means. Two

circuits, the Sixth and Seventh, have concluded that

Congress’s decision to impose CERCLA liability on

those who “arrange[ ] for disposal or treatment .. . of

hazardous substances” implies a requirement of

intentional conduct directed toward such disposal or

treatment. For example, in Amcast Industrial Corp. v.

* “It is elementary that the meaning of a statute must, in

the first instance, be sought in the language in which the act is

framed, and if that is plain, . . . the sole function of the courts is

to enforce it according to its terms.” Caminetti v. United States,

242 U.S. 470, 485 (1917); accord Negonsott v. Samuels, 507 U.S.

99, 104-05 (1993). The plain language of CERCLA is particularly

critical to its interpretation because its legislative history is

widely considered to be of little value in determining Congress’s

intent. See Carson Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d

863, 885 (9th Cir. 2001) (“Any inquiry into CERCLA’s legislative

history is somewhat of a snark hunt. Like other courts that have

examined the legislative history, we have found few truly

relevant documents.”); United States v. CDMG Realty Co., 96

F.3d 706, 713 n.2 (3d Cir. 1996) (finding CERCLA’s legislative

history “unhelpful ... sparse and often inconsistent”); David

Brose, Ending the Arranger Debate: Integrating Conflicting

Interpretations in Search of a Uniform Approach, 10 Mo. Envtl.

L. & Pol'y Rev. 76 (2003) (“[Als a consequence of the unusually

rapid passage of this legislation, there is little legislative history

to guide the courts in interpreting the statute.”).

6

Detrex Corp., 2 F.3d 746, 751 (7th Cir. 1993), a case

factually analogous to this one, the Seventh Circuit

held that, under the plain language of section

9607(a)\(3), a chemical manufacturer, Detrex, was not

liable as an arranger merely because its product

spilled onto its customer’s premises from a common

carrier’s trucks:

Detrex hired a transporter, all right, but it

did not hire it to spill TCE on [the cus-

tomer’s] premises. Although the statute de-

fines disposal to include spilling, the critical

words for present purposes are ‘arranged for.’

The words imply intentional action. The only

thing Detrex arranged for [the common car-

rier] to do was to deliver TCE to [the cus-

tomer’s} storage tanks. It did not arrange for

spilling the stuff on the ground. No one ar-

ranges for an accident. .. .

Similarly, in United States v. Cello-Foil Products,

Inc., 100 F.3d 1227, 1231 (6th Cir. 1996), the Sixth

Circuit held that the existence of an intent require-

ment is dictated by the application of the canons of

statutory construction to section 9607(a)(3):

We derive the intent element from the can-

ons of statutory construction. ‘Otherwise ar-

ranged’ is a general term following in a series

two specific terms and embraces the concepts

similar to those of ‘contract’ and ‘agreement.’

All of these terms indicate that the court

must inquire into what transpired between

the parties and what the parties had in mind

with regard to disposition of the hazardous

7

substance. Therefore, including an intent re-

quirement into the ‘otherwise arranged’ con-

cept logically follows the structure of the

arranger liability provision.

(Citations omitted); accord AM Int'l, Inc. v. Int’

Forging Equip. Corp., 982 F.2d 989, 999 (6th Cir.

1993) (“Liability only attaches to parties that have

‘taken an affirmative act to dispose of a hazardous

subsiance’”).°

As the Sixth Circuit explained in Cello-Foil,

interpreting section 9607(a)(3) to require a showing of

intent is consistent with CERCLA’s scheme of strict

liability for PRPs:

[E]xamining state of mind or ascertaining in-

tent at the contract, agreement, or other type

of arrangement stage does not undermine

the strict liability nature of CERCLA. The

intent inquiry is geared only towards deter-

mining whether the party in question is a

* The Eleventh Circuit has adopted a different approach.

Under its test, the court must examine all of the evidence

presented, keeping in mind the “broad remedial nature of

CERCLA” and that the transaction in question has to be some-

thing more than a “mere sale” to show that the “manufacturers

arranged for the disposal of hazardous waste by selling the

{product).” Fla. Power & Light Co. v. Allis Chalmers Corp., 893

F.2d 1313, 1318-19 (11th Cir. 1990); aecord South Fla. Water

Mgmt. Dist. v. Montalvo, 84 F.3d 402, 406 (11th Cir. 1996). In

contrast to the Sixth and Seventh Circuits, the Eleventh Circuit,

therefore, has “reject{ed] any attempt to establish a per se rule

in determining a manufacturer’s liability under CERCLA.” Fila.

Power, 893 F.2d at 1318.

8

potentially liable party. Once a party is de-

termined to have the requisite intent to be

an arranger, then strict liability takes effect.

Cello-Foil, 100 F.3d at 1232.

In stark contrast to the Sixth and Seventh Cir-

cuits, and in violation of CERCLA’s plain language,

the Ninth Circuit here adhered to the view that

arranger liability does not require intentional con-

duct. In reaching that conclusion, the panel ne-

glected the statute’s use of the term “arranged for”

and focused exclusively on CERCLA’s definition of

“disposal,” reasoning that because “‘d.sposal’ includes

such unintentional processes as ‘leaking’ . . . ‘disposal’

need not be purposeful.” Pet. App. 44a; accord Jones-

Hamilton Co. v. Beazer Materials & Serv., Inc., 973

* The same approach has been adopted by the Eighth

Circuit. United States v. Aceto Agric. Chem. Corp., 872 F.2d

1373, 1380 (8th Cir. 1989) (“Citing dictionary definitions of the

word ‘arrange,’ defendants argue they can be liable under

section 9607(a)(3) only if they intended to dispose of a waste... .

We reject defendants’ narrow reading of ... the statute.”)

(citation omitted).

* The Third Circuit, on the other hand, has observed that

the terms “leaking” and “spilling” are not mutually exclusive of

an intentional conduct requirement:

We think there is a strong argument ... that in the

context of this definition, “leaking” and “spilling”

should be read to require affirmative human action.

Both “leaking” and “spilling” also have meanings that

require some active human conduct... . In the context

of these words, then, Congress may have intended ac-

tive meanings of “leaking” and “spilling.”

CDMG Realty Co., 96 F.3d at 714.

9

F.2d 688, 695 (9th Cir. 1992) (holding company that

supplied chemicals to formulator under agreement

that “contemplated 2% spillage of materials” had

“arranged for disposal” of hazardous substances).

The Ninth Circuit panel reasoned that CERCLA’s

broad remedial purpose supported such a_ broad

definition of “arranger” liability because otherwise

government agencies and eventually the taxpayers

would be “left holding the bag for a great deal of

money” to clean up environmental sites. See Pet. App.

3a, 26a, 45a. The panel explained, “[wle have avoided

giving the term ‘arranger’ too narrow an interpreta-

tion to avoid frustrating CERCLA’s goal of requiring

that companies responsible for the introduction of

hazardous waste into the environment pay for the

remediation.” Pet. App. 42a.

But it is not the role of the courts to second-guess

the framework Congress has established for funding

cleanups, or to expand the scope of CERCLA beyond

the statute’s plain language and structure. United

States v. Ron Pair Enter. Inc., 489 U.S. 235, 242

(1989) (The task of statutory interpretation “begins

where all such inquiries must begin: with the lan-

guage of the statute itself. In this case it is also where

the inquiry should end, for where, as here, the stat-

ute’s language is plain, ‘the sole function of the courts

is to enforce it according to its terms.’”) (citation

omitted); United States v. Davis, 261 F.3d 1, 53 (lst

Cir. 2001) (CERCLA’s “‘broad remedial purpose’”

cannot be construed inconsistently with the statute’s

plain language); see also Stevens Creek, 915 F.2d

at 1363 (notwithstanding the remedial purpose of

10

CERCLA, “we must reject a construction that the

statute on its face does not permit, and the legislative

history does not support.”).

As one commentator on CERCLA statutory

construction has observed:

It is well-accepted that the remedial purpose

canon has little utility when an expansive in-

terpretation would contradict the plain

meaning of the statute. Even those who dis-

agree with a textualist approach to statutory

construction acknowledge that there is a hi-

erarchy among interpretive principles, and

that the prevailing view is ‘that the statutory

text is the most authoritative interpretive

criterion.” Thus, when deciding whether to

apply the remedial purpose canon, the courts

have made it clear that a judge charged with

interpreting a statute must respect the pri-

macy of the text.

Blake A. Watson, Liberal Construction of CERCLA

Under the Remedial Purpose Canon: Have the Lower

Courts Taken a Good Thing Too Far?, 20 Harv. Envitl.

L. Rev. 199, 243-44 (1996) (footnotes omitted).

Moreover, the Ninth Circuit’s concern that ordi-

nary taxpayers will unfairly bear the burden of clean-

up costs is misplaced. See Pet. App. 26a. It is not

the taxpayers per se who fund clean-ups when

solvent PRPs cannot be located. Rather, Congress’s

1986 amendments to CERCLA create a Superfund

that funds clean-up activities. See 26 U.S.C. § 9507

(2006); 42 U.S.C. §§ 9604-05 (2006). The Superfund

11

is financed by a combination of appropriations, indus-

try taxes and judgments obtained in legal actions to

recover response costs. See 26 U.S.C. § 9507(b) (2006).

Accordingly, rather than doing violence to the statu-

tory text by stretching the limits of arranger liability

beyond their appropriate bounds, the proper ap-

proach is to presume that if a party is not a PRP

under CERCLA’s plain language, Congress intended

for the Superfund — including industry taxes — to

fund the clean-up.

As district courts around the country have previ-

ously observed, there is an irreconcilable and widening

circuit split concerning whether intentional conduct is

required for arranger liability under CERCLA. See Jn

re Voluntary Purchasing Groups, Inc., 2002 WL

31156535 at *6 (N.D. Tex. 2002) (unreported) (“The

Eighth Circuit in Aceto differs from the Seventh [in

Amcast] in holding that an arranger need not have an

intent to dispose of hazardous materials”); Mathews

v. Dow Chem. Co., 947 F. Supp. 1517, 1523 (D. Colo.

1996) (“As to the term ‘arranged for,’ ... several

courts in other circuits have grappled with this

important issue. Three leading cases regarding this

issue have each taken different approaches in inter-

preting ‘arranged for.’”) (citations omitted); Chatham

Steel Corp. v. Brown, 858 F.Supp. 1130, 1138-39

(N.D. Fla. 1994) (noting conflict between intent

requirement of the Seventh Circuit and the looser

Eleventh Circuit approach); see also Brose, supra, at

77 (“Modern courts have adopted three approaches

in applying arranger liability: (1) a strict liability

12

approach; (2) a specific intent approach; and (3) a

‘totality of the circumstances,’ case-by-case ap-

proach.”). The Ninth Circuit has only added to this

divergence of authority, placing it squarely at odds

with the Sixth and Seventh Circuits on this impor-

tant issue. This Court should grant the petition and

provide needed guidance to the lower courts by re-

solving this conflict.

II. ARRANGER LIABILITY UNDER CERCLA

REQUIRES THE DISPOSAL OF HAZ-

ARDOUS WASTE, NOT MERELY THE

SHIPMENT OF USEFUL PRODUCTS.

Before the Ninth Circuit’s holding below (Pet.

App. 45a-46a), no federal appeals court had ever held

that the mere shipment of a useful product to a

customer can give rise to arranger liability for the

shipper when that product leaks on the customer’s

property after delivery. By so holding, the Ninth

Circuit has contravened CERCLA’s definition of

“disposal,” and placed itself in conflict with several

other circuits that have held arranger liability does

not attach to the sale of a useful product.

CERCLA borrows its definition of disposal from

the Solid Waste Disposal Act (SWDA), 42 U.S.C.

§ 6901, et seq. (2006).° Freeman v. Glaxo Wellcome,

* The Resource Conservation and Recovery Act of 1976 (RCRA),

42 U.S.C. § 6901 et seq. (2006), amended the SWDA in 1976 and

the terms RCRA and SWDA may be used interchangeably.

(Continued on following page)

13

Inc., 189 F.3d 160, 164 (2d Cir. 1999) (“Congress

expressly incorporated into CERCLA the definition of

‘disposal’ from the Solid Waste Disposal Act.”). The

SWDA defines “disposal” exclusively in terms of the

disposal of waste. 42 U.S.C. § 6903(3) (defining “dis-

posal” as “the discharge, deposit, injection, dumping,

spilling, leaking, or placing of any solid waste or

hazardous waste into or on any land ... so that [it]

may enter the environment or be emitted into the air

or discharged into any waters, including ground

waters.”) (emphases added); Ian Erickson, Comment,

Reconciling the CERCLA Useful Product and Recy-

cling Defenses, 80 N.C. L. Rev. 605, 612 (2002) (“The

RCRA definition requires the disposal of a ‘waste,’ not

a ‘substance.’”).

As a result, numerous courts, including the Ninth

Circuit in the past, have held that CERCLA applies

only to the disposal of material that may be charac-

terized as “waste.” Freeman, 189 F.3d at 164 (“Be-

cause the definition of ‘disposal’ refers to ‘waste,’ only

transactions that involve ‘waste’ constitute arrange-

ments for disposal within the meaning of CERCLA.”);

Catellus Dev. Corp. v. United States, 34 F.3d 748, 750

(9th Cir. 1994) (“In Stevens Creek, we agreed with

other circuits that ‘disposal’ refers ‘only to an affirma-

tive act of discarding a substance as waste, and not to

the productive use of the substance.’”) (quoting

Courtaulds Aerospace, Inc. v. Huffman, 826 F. Supp. 345, 349 &

n.4 (E.D. Cal. 1993).

14

Stevens Creek, 915 F.2d at 1362); accord Cadillac

Fairview/Cal., Inc. v. United States, 41 F.3d 562, 565

(9th Cir. 1994).

Courts have also found the scope of arranger

liability is limited to the disposal of waste because the

words “disposal” and “treatment,” as used in the

SWDA, connote the act of discarding a substance.

Pneumo Abex Corp. v. High Point, Thomasville &

Denton R.R. Co., 142 F.3d 769, 774 (4th Cir. 1998)

(the SWDA’s “definition of ‘treatment’ presupposes

discard.... Therefore, ‘treatment ... of hazardous

substances’ as used in CERCLA refers to a party

arranging for the processing of discarded hazardous

substance or processing resulting in the discard of

hazardous substances.”) (emphasis added); Amcast, 2

F.3d at 751 (“The words ‘arranged with a transporter

for disposal or treatment’ appear to contemplate a

case in which a person or institution that wants to get

rid of its hazardous wastes hires a transportation

company to carry them to a disposal site.”) (emphasis

added); accord RSR Corp. v. Avanti Dev., Inc., 69

F. Supp. 2d 1119, 1126 (S.D. Ind. 1999).

Conversely, federal appeals courts have until now

consistently held that one who merely sells a useful

product does not arrange to discard waste and cannot

be liable as an arranger for “disposal” under section

9607(aX3). Freeman, 189 F.3d at 164 (“‘ilf a party

merely sells a product, without additional evidence

that the transaction includes an “arrangement” for

the ultimate disposal of a hazardous substance,

CERCLA liability [will] not be imposed.’”) (quoting

15

Fla. Power, 893 F.2d at 1317); Cello-Foil, 100 F.3d at

1232 (“‘Liability only attaches to parties that have

“taken an affirmative act to dispose of a hazardous

substance... as opposed to convey a useful substance

for a useful purpose”’”), quoting AM Int'l, 982 F.2d at

999; Jason C. Kuhlman, Pneumo Abex Corp. v. High

Point, Thomasville & Denton R.R. Co., and CERCLA

“Arranger Liability,” 16 J. Nat. Resources & Envtl. L.

151, 159 (2002) (“the distinction between a sale of

valuable property and an arrangement for treatment

or disposal takes on great significance; a sale of a

valuable commodity by definition cannot be a discard-

ing of material.”).

Indeed, the Ninth Circuit has previously recog-

nized and applied this “useful product doctrine.”

Stevens Creek, 915 F.2d at 1362 (“[C]Jourts in other

circuits have construed ‘disposal’ for purposes of

section 107(a)(3) as referring only to an affirmative

act of discarding a substance as waste, and not to the

productive use of the substance. [W]e see no reason to

adopt a different definition in this case.”) (citations

omitted); see also Cal. Dept. of Toxic Substances

Control v. Payless Cleaners, 368 F.Supp. 2d 1069,

1077 (E.D. Cal. 2005) (a manufacturer cannot “be

held liable as a CERCLA arranger where it has done

nothing more than sell a useful chemical”) (citations

omitted); Courtaulds Aerospace, 826 F. Supp. at 354

(“the ‘sale of a useful product’ defense applies when

the sale is of a new product, manufactured specifi-

cally for the purpose of sale, or of a product that

16

remains useful for its normal purpose in its existing

state.”).

By its present holding, however, the Ninth Cir-

cuit has effectively broken with its own precedent and

with the holdings of the Second, Fourth, Sixth, and

Eleventh Circuits cited above. The Ninth Circuit

panel here held that the useful product doctrine only

applies when a substance is first used as intended.

Pet. App. 45a. Based on this assumption, the panel

concluded that the “useful product” doctrine has no

application where “the sale of a useful product neces-

sarily and immediately results in the leakage of

hazardous substances.” Jd.

The Ninth Circuit’s exceedingly narrow interpre-

tation of the useful product doctrine turns CERCLA

on its head. By imposing arranger liability on one

who merely manufactures and ships new, useful

products, the panel opinion exceeds CERCLA’s ex-

press limitation of liability under section 9607(a)(3) to

those who arrange to dispose of — i.e., to discard —

waste. To be sure, a product is not useful after a leak

has occurred but if, by such faulty logic, a useful

product can be so readily transformed into “waste,”

there are no useful products for CERCLA’s purposes

and the doctrine has no meaning.’ Arranger liability

’ The panel acknowledged as much by citing Zands uv.

Nelson, 779 F. Supp. 1254, 1262 (S.D. Cal. 1991) as support for

its interpretation. Pet. App. 45a-46a. The district court in Zands

addressed whether the leakage of gasoline from underground

storage tanks constituted the disposal of waste. The court found

(Continued on following page)

17

only arises after substances have been released,

thereby terminating their usefulness.

The Ninth Circuit’s narrow reading of section

9607(aX(3) vitiates the useful product doctrine and

imposes a sweeping expansion of CERCLA liability

that cannot be squared with the statute’s language

and structure. Therefore, this Court should grant the

petition to resolve the circuit split created by the

Ninth Circuit and to provide needed guidance con-

cerning the applicability of arranger liability under

CERCLA to shippers of useful products.

lil. THE PETITION SHOULD BE GRANTED

TO CLARIFY THAT OWNERSHIP OF

WASTE AT THE TIME OF DISPOSAL, AND

CONTROL OF THE DISPOSAL PROCESS,

ARE NECESSARY FOR ARRANGER LI-

ABILITY.

The Court should also grant the petition to

resolve inter- and intra-circuit conflicts concerning

the relevance of ownership and control to arranger

liability under section 9607(a)(3). As deeply divided

as the circuits are concerning all questions pertinent

to arranger status, nowhere is there more confusion

and less uniformity than on the issue of whether an

alleged arranger must own the hazardous substance

that it did, reasoning in circular fashion that “‘gasoline is no

longer a useful product after it leaks into, and contaminates, the

soil.’” Id.

18

at the time of disposal, and whether it must control

the disposal process.

Outside of the Ninth Circuit, the federal courts

are divided on this issue. In Aceto, the Eighth Circuit

held the defendant chemical manufacturers who

contracted with a pesticide formulator could be liable

as arrangers for the costs of cleaning up the formula-

tor’s property in part because the manufacturers

“actually owned the hazardous substances, as well as

the work in process.” (Aceto, 872 F.2d at 1382.) In so

holding, the Eighth Circuit cited its earlier holding in

United States v. Northeastern Pharmaceutical &

Chemical Co., 810 F.2d 726, 743-44 (8th Cir. 1986)

(NEPACCO), that liability may be imposed “on those

who had the authority to control the disposal, even

without ownership or possession.” Aceto, 872 F.2d at

1382.

By contrast, the Second Circuit in General Elec-

tric Co. v. Aamco Transmissions, Inc., 962 F.2d 281,

286 (2d Cir. 1992), rejected the notion that authority

to control the disposal process is sufficient, holding

“that it is the obligation to exercise control over

hazardous waste disposal, and not the mere ability or

opportunity to control the disposal of hazardous

substances that makes an entity an arranger under

CERCLA’s liability provision.” (Second emphasis

added.) There, the court held that oil companies had

not arranged for disposal of their service station

tenants’ waste motor oil because any control they

exercised over their tenants’ businesses was not

19

“directed toward either the generation of or the

disposal of waste oil.” Id. at 287-88.

The Sixth Circuit has taken yet another ap-

proach to the issue, rejecting control over the disposal

process as a relevant consideration in deciding who is

an arranger under CERCLA. In Cello-Foil, it ob-

served that “a party can be responsible for ‘arranging

for’ disposal, even when it has no control over the

process leading to the release of substances.” Cello-

Foil, 100 F.3d at 1232. Instead, as discussed above,

the Sixth Circuit found the key inquiry to be whether

“a party possessed the requisite intent to be an ar-

ranger.” Id. Thus, the federal appeals courts have

taken divergent approaches to the relevance of waste

ownership and control of the disposal process to

arranger liability under section 9607(a)(3).

The same lack of consistency prevails within the

Ninth Circuit. In Cadillac Fairview, the Ninth Circuit

held that rubber companies who returned contami-

nated styrene to the producer for redistillation coula

be liable as arrangers notwithstanding the fact they

did not own the styrene or control the redistillation

process. Cadillac Fairview, 41 F.3d at 565 (“[WJe have

extended liability under section 107(a\(3) to persons

who have sold and therefore no longer own the haz-

ardous substances, and to persons who have no

control over the process leading to release of the

substances.”) (citations omitted).

Eight years later, the Ninth Circuit executed an

apparent about-face in United States v. Shell Oil Co.,

20

294 F.3d 1045 (9th Cir. 2002). There, in the course of

ruling on counter-claims by oil companies that the

United States was partly liable as an arranger for the

costs of cleaning up the sites of World War II-era

aviation fuel refineries, the court stated: “We agree

. that control is a crucial element of the determina-

tion of whether a party is an arranger under

§ 9607(a\(3).” Id. at 1055 (emphasis added). Citing

the Eighth Circuit’s decision in NEPACCO, the Ninth

Circuit then concluded the United States lacked the

ownership and control necessary for imposing ar-

ranger liability. Jd. at 1057 (“In this case, the United

States neither exercised actual control, nor had the

direct ability to control, in the sense intended in

NEPACCO. In this case, the waste never belonged to

the United States... .”).

Notwithstanding its holding in Shell, the Ninth

Cireuit again reversed course in its panel decision

below. Responding to Shell’s argument that it neither

owned the product at the time of transfer to the

buyer’s storage tanks nor controlled the transfer

process that resulted in spills, the panel determined

that “ownership at the time of disposal is not an

informative consideration, and control is informative

only in light of additional considerations.” Pet. App.

49a.

Accordingly, the relevance of ownership and

control to the question of arranger liability is unset-

tled. The different federal circuits disagree and the

Ninth Circuit’s decisions are themselves difficult, if

not impossible, to reeoncile. Therefore, this Court

21

should grant the petition to decide whether owner-

ship of the substance and control of the disposal

process are necessary to the imposition of arranger

liability under CERCLA.

IV. WITHOUT REVIEW BY THIS COURT, THE

NINTH CIRCUIT’S DECISION WILL HAVE

SEVERE AND FAR-REACHING ECONOMIC

RAMIFICATIONS.

The negative economic consequences of the Ninth

Circuit’s holding are far-reaching. If everyone who

ships a useful, potentially hazardous substance can

be deemed a responsible party under CERCLA when

that substance later spills or leaks, the reach of

CERCLA liability will be nearly infinite. Suddenly,

every shipper will be rendered the de jure insurer of

the environmental purity of all of its customers’ far-

flang properties. The impact of such broad-based

liability will reverberate through our economy, in-

creasing the cost of doing business and directly or

indirectly affecting consumers, workers, manufactur-

ers, shippers and insurers alike.*

* As explained above, CERCLA’s language does not require

such an ill-advised result. See, eg., Ameast, 2 F.3d at 751 (“It

would be an extraordinary thing to make shuppers strictly liable

wnder the Superfund statute for the consequences of accidents to

common carners or other reputabie transportateon companies

that the shippers had hired in good faith to ship their prod-

ucts.”).

22

The Ninth Circuit, in rejecting the notion that

CERCLA creates a cause of action for the voluntary

removal of asbestos from commercial buildings, has

itself acknowledged such far-reaching adverse effects

from expanding CERCLA liability. Stevens Creek, 915

F.2d at 1365. In recognizing the “substantial and far-

reaching legal, financial and practical consequences”

of expanding the reach of CERCLA, the court favora-

bly cited the Fourth Circuit’s decision in First United

Methodist Church of Hyattsville v. U.S. Gypsum Co.,

882 F.2d 862, 869 (4th Cir. 1989), in which that court

observed of the same question:

To extend CERCLA’s strict liability scheme

to all past and present owners of buildings

containing asbestos as well as to all persons

who manufactured, transported, and in-

stalled asbestos products into buildings,

would be to shift literally billions of dollars of

removal cost liability based on nothing more

than an improvident interpretation of a stat-

ute that Congress never intended to apply in

this context. Certainly, if Congress had in-

tended for CERCLA to address the monu-

mental asbestos problem, it would have said

so more directly when it passed [the 1986

“Superfund” amendments to CERCLA|.

The same reasoning applies equally to the Ninth

Circuit’s ill-advised holding that shippers of useful

products can now be liable as “arrangers” for paying

the vast sums needed to clean up others’ hazardous

waste sites. The decision to shift potentially billions

of dollars in clean-up liability in this fashion rests on

23

nothing more than an “improvident interpretation” of

section 9607(a)(3).

If Congress had wished to extend CERCLA

“arranger” liability to the shipment of useful prod-

ucts, it certainly could have selected the appropriate

language to effectuate that result. It is not the func-

tion of the Ninth Circuit to make that policy determi-

nation. Therefore, this Court should uphold the

primacy of CERCLA’s text and forestall the negative

ramifications of the Ninth Circuit’s decision by de-

termining the appropriate scope of arranger liability

under CERCLA.

+

CONCLUSION

For the foregoing reasons, the petition for certio-

rari should be granted.

Respectfully submitted,

Horvitz & LEVY LLP

MAry-CHRISTINE SUNGAILA

JEREMY B. ROSEN

BRADLEY S. PAULEY*

*Counsel of Record

15760 Ventura Boulevard,

18th Floor

Encino, California 91436-3000

(818) 995-0800

July 25, 2008 Attorneys for Amicus Curiae

International Association

of Defense Counsel