Amicus Curiae Brief — Shell Oil Co. v. United States (Nos. 07-1607, 07-1601)
Supreme Court brief2009
Ask Donna
What actually matters in this document.
Text
Nw, 4) © ‘pious.
Nos. 07-1607, 07- ; HOV 24 2008
LERK
IN THE
Supreme Court of the Ginited States
SHELL OIL COMPANY,
Petitioner,
Vv
UNITED STATES OF AMERICA; DEPARTMENT OF TOXIC
SUBSTANCES CONTROL, STATE OF CALIFORNIA,
Respondents.
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY
COMPANY, AND UNION PACIFIC RAILROAD COMPANY,
Petitioners,
Vv.
UNITED STATES OF AMERICA AND DEPARTMENT OF TOXIC
SUBSTANCES CONTROL, STATE OF CALIFORNIA,
Respondents.
On Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
BRIEF OF AMICI CURIAE CHAMBER OF COMMERCE
OF THE UNITED STATES, AMERICAN CHEMISTRY
COUNCIL, AMERICAN PETROLEUM INSTITUTE,
CROPLIFE AMERICA, NATIONAL ASSOCIATION OF
MANUFACTURERS, AND NATIONAL
PETROCHEMICAL AND REFINERS ASSOCIATION IN
SUPPORT OF PETITIONERS
ROBIN S. CONRAD DANIEL M. STEINWAY
AMAR D. SARWAL THOMAS C, JACKSON
NATIONAL CHAMBER Counsel of Record
LITIGATION CENTER, INC. MICHAEL MCGOVERN
1615 H Street, N.W. BAKER BOTTs L.L.P.
Washington, D.C. 20062 1299 Pennsylvania Ave., NW
(202) 463-5337 Washington, D.C. 20004-2400
(202) 639-7700
Counsel for Amicus Curiae
(Additional Counsel Listed on Inside Cover)
WILSON-EPES PRINTING CO. INC. - (202) 789-0096 -— WaSHINGTON, D.C. 20002
/
Horm 41 DR AN —
Nos. 07-1607, 07-1601
(list of counsel, continued from front cover)
DONALD D. EVANS HARRY M. NG
T.FSLIE HULSE ERIK G. MT..ITO
AMERICAN CHEMISTRY AMERICAN PETROLEUM
COUNCIL INSLiruts
1300 Wilson Blvd. 1790 L Street, NW
Arlington, VA 22909 Washington, D.C. 20005
(703) 741-5000 (202) 682-8953
DOUGLAS T. NELSON JAN S. AMUNDSON
JOSHUA B. SALTZMAN QUENTIN RIEGEL
CROPLU'& AMFRICA NATIONAL ASSOCIATION OF
1156 15th Su eet, NW MANUFACTURERS
Suite 400 1331 Pennsylvania Ave., NW
Washington, D.C. 20005 Washington, D.C. 20004
(202) 872-3882 (202) 637-3000
GREGORY M. SCoTT
NATIONAL PETROCHEMICAL
& REFINERS ASSOCIATION
1667 K Street, NW
Suite 700
Wash D.C. 20006
(202) 457-0480
WILSON-EPES PRINTING Co., INC. — (202) 789-0086 — WASHINGTON, D.C. 20002
TABLE OF CONTENTS
Page
INTEREST OF AMICI CURIABE............ccccssssseessnseseees 2
SUMMARY OF ARGUMENT
I.
II.
The Ninth Circuit’s Decision Erroneously
Expands The Scope Of CERCLA
“Arranger” Liability To Ensnare Innocent
Sellers Of Useful Products
A.
The Ninth Circuit’s Ruling Subjects a
Mere Seller of Useful Products to
CERCLA Liability Absent Any
Showing That the Seller Intended to
Arrange for the Disposal of Hazard-
rE RE ree ae
Properly Construed, the CERCLA
“Arranger” Liability Provision Pre-
cludes The Imposition of Liability on
Shell Because Of Shell’s Underlying
Intent With Respect to the Sales
Decisions from Other Circuits Prop-
erly Applying the “Intent” Factor in
the “Sale of Useful Product” Context
Underscore the Ninth Circuit’s Error...
The Ninth Circuit’s Ruling Threatens
to Undermine the Well-Recognized
“Sale of Useful Product” Defense
That Suppliers Have Come to Rely
Si acneoitientenssedeedaitiidenintaincbiseiiinaiahibiemmnees
The Ninth Circuit’s Standards For Appor-
tionment Of Harm Are Overly Restrictive
And Produce Highly Inequitable Results
(i)
i
TABLE OF CONTENTS Continued
Page
A. The Ninth Circuit’s Approach to Ap-
portionment Is Inconsistent With the
Restatement and Precedent ...............css0+e0 21
B. Apportionment in This Case Would
Be Consistent With the Policies
Underlying CERCLA............scssessssesessesseeeees 23
III. The Ninth Circuit’s Ruling Increases Sup-
pliers’ Risk Of Potentially Substantial
Future CERCLA Liability ..0...........scscesceseeseeees 28
IIIT atiesiciionsihsnectibabsainindnnesunsitieeasteniaioincesionineaia 32
ill
TABLE OF AUTHORITIES
CASES
3550 Stevens Creek Assocs. v. Barclays
Bank of Cal., 915 F.2d 1355 (9th Cir.
SSE RARER ne 13
AM International, Inc. v. International
Forging Equipment Corp., 982 F.3d
Be I I SII scitcccssntcrstcnscrcesensoccocsssoscesesee 9, 16
Amcast Indus. Corp. v. Detrex Corp.,
2 F.3d 746 (7th Cir. 1998) ............ccsceseeeeee Passim
Board of Governors of Fed. Reserve
System v. Dimension Fin. Corp., 474
i csssemnesnens 23
Carson Harbor Village Ltd. v. '/nocal
Corp., 270 F.3d 863 (9th Cir. 2001) .................00. 8
Coeur d’Alene Tribe v. ASARCO, Inc.,
280 F. Supp. 2d 1094 (D. Idaho 2008)................ 22
Exxon Corp. v. Hunt, 475 U.S. 355 (1986) ............ 23
Federal Savings & Loan Ins. Corp. v.
Reeves, 816 F.2d 130 (4th Cir. 1987).................. 21
Fidelity Savings & Loan Ass'n v. Aetna
Life & Casualty Corp., 440 F. Supp.
862 (N.D. Cal. 1977), affd, 647 F.2d 933
as csrneremecneat 21
Florida Power & Light Co. v. Allis
Chalmers Corp., 893 F.2d 1313
Sf ne 9, 12, 16, 18
Freeman v. Glaxo Wellcome, Inc., 189
F.3d 160 (2d Cir. 1999) .....................cccccssscsereee 9,15
GenCorp, Inc. v. Olin Corp., 390 F.3d
ID I iccrinscttinnrnieinieiniaiianentesemnasnmtatnies 12
iv
McDermott, Inc. v. AmClyde and River
Don Castings, Lid., 511 U.S. 202 (1994)........... 25
Norfolk & Western Ry. Co. v. Ayers,
OE 21
Pneumo Abex Corp. v. High Point,
Thomasville & Denton R.R. Co.,
142 F.3d 769 (4th Cir. 1998)................ 9, 13, 16, 17
Ragsdale v. Wolverine World Wide,
Tnc., 535 U.S. 81 (2002)...........cecceccecsecssserscceeeeeess 23
Rodriguez v. United States, 480 US.
EES 23
Sauer v. Burlington Northern R. Co.,
106 F.3d 1490 (10th Cir. 1996).............ccseeceeeeeee 22
United States v. A&F Materials Co.,
Inc., 578 F. Supp. 1249 (S.D. Ml. 1984).............. 24
United States v. Aceto Agric. Chem.
Corp., 872 F.2d 1373 (8th Cir. 1989)............ 12,13
United States v. Alcan Aluminum
Corp., 964 F.2d 262 (3d Cir. 1992)... 24
United States v. CDMG Realty Co., 96
F.3d 706 (Srd Cir. 1996) .......coccsscceccessssverecescevensese 8
United States v. Celio-Foil Products,
Inc., 100 F.3d 1227 (6th Cir. 1996? ................ 9,10
United States v. Chem-Dyne Corp., 572
F. Supp. 802 (S.D. Ohio 1983).............cccccceseeseees 26
United States v. Hardage, 761 F. Supp.
RES COU is SIRI, BOD cececereecetccveseccnssececceczseowtees 25
United States v. Lyon, No. CV F 07-0491
LJO GSA, 2007 WL 4374167 (E.D. Cal.
United States v. Township of Brighton,
153 F.3d 307 (6th Cir. 1998)..............cccccrecsececseee 22
Vv
United States v. Wade, 577 F. Supp.
1326 (ED. Pa. 1983)........ccseseresesserseseees
U.S. Environmental Protection
Agency v. Sequa Corp. (In re Bell
Petroleum Serv., Inc., 3 F.3d 889
SEE IIIT ciiscenevenscsveneconsseesensncnesosscsncee
LEGISLATIVE
126 Cong. Rec. at S15004 (Nov. 24,
ait eianibvtsitindcstseinbuninecesaccenecerscososassepcossece
STATUTES
42 U.S.C. $§ 9601-9675...........cccceccserseseseseeees
42 U.S.C. § 9607 (a)(B) ......cerererserersrrerereseneesens
42 U.S.C. § 9601(29).........cereresersrsssssssesseerssees
MISCELLANEOUS
Restatement (Second) of Torts, § 433A.....
Restatement (Second) of Torts § 433A,
EE
' Restatement (Second) of Torts § 433A,
es
Restatement (Second) of Torts, § 433B,
A eR
W. Page Keaton, et al., Prosser and
Keaton on the Law of Torts 345 (5th
Resources for the Future, Superfund’s
Future: What Will It Cost? (RFF
) | ee
IN THE
Fupreme Court of the Anited States
Nos. 07-1607, 07-1601
SHELL OIL COMPANY, 7
Petitioner,
Vv.
UNITED STATES OF AMERICA; DEPARTMENT OF TOXIC
SUBSTANCES CONTROL, STATE OF CALIFORNIA,
Respondents.
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY
COMPANY, AND UNION PACIFIC RAILROAD COMPANY,
Petitioners,
Vv.
UNITED STATES OF AMERICA AND DEPARTMENT OF
Toxic SUBSTANCES CONTROL, STATE OF CALIFORNIA,
Respondents.
On Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
BRIEF OF AMICI CURIAE CHAMBER OF
COMMERCE OF THE UNITED STATES OF
AMERICA, AMERICAN CHEMISTRY COUNCIL,
AMERICAN PETROLEUM INSTITUTE, CROPLIFE
AMERICA, NATIONAL ASSOCIATION OF
MANUFACTURERS, AND NATIONAL
PETROCHEMICAL & REFINERS ASSOCIATION
IN SUPPORT OF PETITIONERS
2
INTEREST OF AMICI CURIAE
The Chamber of Commerce of the United States of
America (the “Chamber”) is the world’s largest business
federation, representing an underlying membership of
more than 3,000,000 businesses and organizations of all”
sizes. Chamber members operate in every sector of the
economy and transact business throughout the United
States, as well as in a large number of countries around
the world. A central function of the Chamber is to
represent the interests of its members in important
matters before the state and federal courts, legislatures
and executive branches. To that end, the Chamber files
amicus briefs in cases that raise issues of vital concern to
the nation’s business community.
The American Chemistry Council (“ACC”) represents
the leading companies engaged in the business of chem-
istry. The business of chemistry is a $664 billion enter-
prise and accounts for ten cents of every dollar in U.S.
exports.
The American Petroleum Institute (“API”) is a nation-
wide, non-profit, trade association headquartered in
Washington, D.C., that represents over 400 members
engaged in all aspects of the petroleum and natural gas
industry, including exploration, production, transporta-
tion, refining and marketing.
CropLife America (“CLA”), which was organized in
1933, is the nationwide not-for-profit trade organization
representing the major manufacturers, formulators and
distributors of crop protection and pest control products.
CLA is headquartered in Washington, D.C. Its member
companies produce, sell ane distribute most of the active
compounds used in crop protection products registered
for use in the United States. CLA represents its mem-
bers’ interests by, inter alia, monitoring federal agency
3
regulations and agency actions and related litigation to
identify issues of concern to the crop protection and pest
control industry, and participating in such actions when
appropriate.
The National Association of Manufacturers (“NAM”)
is the nation’s largest industrial trade association, rep-
resenting small and large manufacturers in every indus-
trial sector and in all 50 states. NAM’s mission is to en-
hance the competitiveness of manufacturers by shaping a
legislative and regulatory environment conducive to U.S.
economic growth and to increase understanding among
policymakers, the media and the general public about the
vital role of manufacturing to America’s economic future
and living standards.
The National Petrochemical & Refiners Association
(“NPRA”) is a national trade association that represents
more than 450 companies who own or operate most U.S.
refining capacity, as well as petrochemical manufacturers
with processes similar to refiners. NPRA members
supply consumers with a wide variety of products and
services used daily in their homes and businesses. These
products include gasoline, diesel fuel, home heating oil,
jet fuel, lubricants and the chemicals that serve as
“building blocks” in making everything from plastics to
clothing to medicine to computers.
‘Certain members of the Chamber, ACC, API, CLA,
NAM, and/or NPRA have been identified as potentially
responsible parties at contaminated sites across the
country pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C.
§§ 9601-9675 (“CERCLA”), and have participated in
cleaning up many such sites. Moreover, many members
of these associations are engaged in the manufacture and
sale of chemicals and other products containing hazar-
4
dous substances and utilize common carriers to transport
and deliver such products to their customers’ facilities.
Therefore, these amici and their respective members
have a substantial interest in the federal courts’ proper
interpretation and application of the CERCLA “arran-
ger” liability provision set forth in section 107(a)(3) of
CERCLA, 42 U.S.C. § 9607(a)(3), as it relates to situ-
ations involving the sale of useful products. These amici
are also significantly affected by and concerned about the
standards adopted by the court below for determining
when a defendant in a CERCLA cost recovery action
may avoid the imposition of joint and several liability by
demonstrating that there is a reasonable basis for
apportioning the harm at a contaminated site.’
SUMMARY OF ARGUMENT
The Ninth Circuit’s decision should be reversed for
several reasons. First, the Ninth Circuit’s decision
widens the already broad net of CERCLA liability to
encompass those who sell chemicals or other products in
the ordinary course of business based on the assertion
that such companies have somehow “arranged for the
disposal” of their products at the same time they are
delivering them to customers for use. Given the
magnitude of the costs typically associated with cleaning
up contaminated sites, the imposition of such costs on
chemical manufacturers and suppliers places a significant
burden on these manufacturers and suppliers. When
coupled with the imposition of joint and several liability,
' Pursuant to this Court’s Rule 37.6, amici affirm that no counsel for
any party has authored this brief in whole or in part, that no such
counsel or party made a monetary contribution to fund the
preparation or submission of this brief, and that no person other
than amici and their counsel made such a monetary contribution.
The parties’ letters consenting to the filing of this brief have been
filed with the Clerk’s office.
5
the result can be that a mere seller of a product could be
forced to pay the entire cost of cleaning up a site
which in many cases would amount to tens of millions of
dollars to which its product was delivered if any of that
product was spilled, even if the spiliage was caused by
the buyer. Such a result can hardly be said to be in
accord with the “polluter pays” principle.
Congress’s intent is evident from the plain language of
the statute and the Ninth Circuit’s decision cannot be
reconciled with that language. The statute provides for
liability under section 107(a)(3) of CERCLA, 42 U.S.C.
- §9607(a)(3), where a party has “arranged for the
disposal” of a hazardous substance. The Ninth Circuit
focused on the breadth of the term “disposal” under
CERCLA, id. § 9601(29), but treated the term as if it
were untethered from the remainder of the statutory
provision. It thus failed to recognize that in order to be
liable under section 107(a)(3) a party must arrange for
disposal. As other circuits have recognized, determining
whether a party has arranged for disposal requires an
analysis of the purpose of the transaction and the intent
of the seller. Simply put, a party that arranges to sell or
transport its products does not “arrange for disposal” of
its products. It arranges for disposal of its products only
if it intends or desires the products to be disposed of.
The Ninth Circuit’s decision also is inconsistent with
numerous CERCLA cases involving sales of useful
products. The courts have generally held that where the
purpose of the transaction was the sale of a useful
product, the seller of the product is not liable as an
“arranger.” The Ninth Circuit suggested that these
cases are distinguishable but its opinion in fact
represents a significant departure from prior case law
holding a seller of new, ready-to-use pesticides liable for
6
the cleanup of spills of such pesticides even if the spill
occurred at the buyer’s facility on the buyer’s watch.
The Ninth Circuit’s decision in this respect will impose
substantial and unwarranted burdens on manufacturers
and suppliers of pesticides and a wide variety of other
products. The decision will increase the cost of doing
business for such suppliers and threatens to disrupt
longstanding relationships between suppliers and their
customers as they struggle to address and allocate the
sizable risks the Ninth Circuit has imposed on ordinary
commercial conduct involving sales of products. The
Ninth Circuit’s decision will also upset relationships
between suppliers and the common carriers that deliver
their goods. As a result, the Ninth Circuit’s decision has
the potential to adversely affect the flow of useful
products across the U.S., particularly products that are
transported by common carrier.
The Court also should reverse the Ninth Circuit’s
ruling regarding the standard for apportionment of harm
under section 107 of CERCLA. The heightened
evidentiary standards established by the Ninth Circuit
for demonstrating that there is a basis for apportioning
harm are inconsistent with the standards set forth in the
Restatement (Second) of Torts, which the Ninth Circuit
purported to use as a basis for its approach. The Ninth
Circuit’s evidentiary requirements also are inconsistent
with the approach adopted by other circuits, which
accords more closely with the Restatement.
The Ninth Circuit’s stand>+ds wil! eke it more likely
that parties with minimal _responsibility for the
contamination at a site will nevertheless be required to
pay the entire cost of a cleanup of a site. That result is in
no respect mandated by the statute and ignores the
concerns expressed by Congress in developing the
7
CERCLA liability scheme. Such a result is also
fundamentally unfair, particularly in light of the
substantial costs of cleaning up many contaminated sites.
The Ninth Circuit approach will unfairly penalize
companies that are careful to minimize the extent to
which they are involved in any activities that may result
in pollution, imposing joint and several liability on those
parties with even a minimal connection to site
contamination. This approach should be rejected by the
Court.
I. THE NINTH CIRCUIT’S DECISION ERRO-
NEOUSLY EXPANDS THE SCOPE OF CERCLA
“ARRANGER” LIABILITY TO ENSNARE INNO-
CENT SELLERS OF USEFUL PRODUCTS
A. The Ninth Circuit’s Ruling Subjects a Mere
Seller of Useful Products to CERCLA Liability
Absent Any Showing That the Seller Intended
to Arrange for the Disposal of Hazardous
Substances
The decision below erroneously expands. the scope of
CERCLA “arranger” liability by failing to properly con-
sider Shell’s underlying intent in entering into the
relevant sales transactions with Brown & Bryant
(“B&B”). The Ninth Circuit essentially ruled that a
seller of useful products Shell was subject to
CERCLA “arranger” liability for the inadvertent and
unintended leakage of some of the product (a pesticide)
during its transfer from the common carrier's tank
trucks to the buyer’s storage tanks at the buyer’s facility.
In doing so, the Ninth Circuit misconstrued the language
of the statute.
CERCLA provides, in relevant part, that an
“arranger” is a “person who by contract, agreement, or
otherwise arranged 5 for disposal or treatment, or
8
arranged with a transporter for transport for disposal or
treatment, of hazardous substances....” 42 U.S.C.
§ 9607(a)(3). The Ninth Circuit rationalized that it was
not necessary to consider Shell’s underlying intent in
selling its products to B&B because CERCLA defines
the term “disposal” to include “such unintentional
processes as ‘leaking.”” Pet. App. 44a. Without
considering the meaning and effect of the related
statutory phrase “arranged for,” the Ninth Circuit
concluded that the “disposal’ need not be purposeful”
for purposes of imposing CERCLA “arranger” liability
upon a seller for its sale of a useful product. Jd.* Asa
result, the Ninth Circuit summarily concluded that “an
entity [such as Shell] can be an arranger even if it did not
intend to dispose of the product.” Jd.
That analysis is incorrect. As the nine judges who dis-
sented from the denial of a rehearing en banc explained,
the term “disposal” cannot be considered in isolation but
must be read in the context of the entire statutory
provision. “[E}ven though the definition of ‘disposal’ may
include unintentional practices, mere ‘disposal’ does not
constitute arranger liability.” Pet. App. 70a. Rather,
under the express terins of section 107(a)(3) of CERCLA
“arranger liability requires the defendant to have
‘arranged for’ such disposal (not just arranged for the
sale)” and “[tjJhis connotes an intentional action toward
achieving the purpose: disposal.” Jd. (citing Webster's
Third New International Dictionary 120 (1993) (defining
* “Pet. App.” refers to the appendix filed by petitioner Shell Oil
Company in No. 07-1607.
* Neither of the two court decisions cited by the Ninth Circuit in
support of its conclusion — Carson Harbor Village Ltd. v. Unocal
Corp., 270 F.3d 863 (9th Cir. 2001), and United States v. COMG
Pealty Co., 96 F.3d 706 (3rd Cir. 1996) — concerned an
interpretation of section 107(a)(3) of CERCLA.
9
“arrange” as “to make preparations for”)) (emphasis in
original). Thus, absent any intent on the part of the
seller to dispose of hazardous substances, the mere
possibility that leakage of some of the product may occur
during the transfer to B&B’s storage tanks “cannot mean
that Shell, as a seller, arranged for such leakage.” Pet.
App. 71a.
Numerous circuits have applied the well-established
“intent” factor to determine whether a seller of a
“product” should be subject to CERCLA “arranger”
liability under section 107(a)(3). See, eg., Freeman v.
Glaxo Wellcome, Inc., 189 F.3d 160 (2d Cir. 1999)
(“Freeman”); Pneuwmo Abex Corp. v. High Point,
Thomasville & Denton R.R. Co., 142 F.3d 769 (4th Cir.
1998) (“Pneumo Abex”’); United States v. Cello-Foil
Products, Inc., 100 F.3d 1227 (6th Cir. 1996) (“Cello-
Foil”); Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746
(7th Cir. 1993) (“Amcast”); AM International, Inc. v.
International Forging Equipment Corp., 982 F.3d 989
(6th Cir. 1993) (“AM IntT”’); Florida Power & Light Co.
v. Allis Chalmers Corp., 893 F.2d 1313 (11th Cir. 1990)
(“Florida P & L”). These cases make clear that the
purpose of the transaction plays an essential role in
CERCLA “arranger” liability determinations.
For example, in Cello-Foil the Sixth Circuit stated
that “[njotwithstanding the strict liability nature of
CERCLA, it would be error for us not to recognize the
indispensable role that state of mind must play in
determining whether a party has ‘otherwise arranged for
disposal .. . of hazardous substances.’” 100 F.3d at 1231.
The court observed that the phrase “otherwise arranged
for disposal” “embrace[s] a concept similar to those of
‘contract’ or ‘agreement.’” Jd. Therefore, it is essential
for the court to inquire into “what the parties had in mind
with regard to the disposition of the hazardous sub-
10
stance” because “including an intent requirement into the
‘otherwise arranged’ concept logically follows the struc-
ture of the arranger liability provision.” Jd. The inquiry
regarding “what the parties had in mind” necessarily
must focus on the purpose of the transaction, i.e., was it a
sale of a useful product or the disposal of waste or other
unwanted material. The Ninth Circuit erred in departing
from that analysis here.
B. Properly Construed, the CERCLA “Arranger”
Liability Provision Precludes the Imposition of
Liability on Shell Because of Shell’s Under-
lying Intent With Respect to the Sales Trans-
actions
If the Ninth Circuit had properly considered Shell’s
underlying intent in its sales of pesticide to B&B, Shell
would not be subject to CERCLA liability. Simply put,
the record is devoid of evidence that Shell intended to
arrange for disposal of hazardous subsiamces. The
record amply establishes that Shell entered into the
transactions with B&B to sell a product that it had pur-
posely manufactured for sale as a useful product because
it had value and a marketplace of customers, such as
B&B. The pesticide purposely manufactured and sold by
Shell to B&B was one of Shell’s principal business
products, not a waste or byproduct which had no value
and had to be disposed of. There is no evidence in the
record that Shell had any intent to dispose of this product
at B&B’s facility or anywhere else.
Moreover, the substantial safety precautions that
Shell undertook in order to ensure that its product was
properly delivered to B&B’s facility and transferred to
B&B's storage tanks belie even an inference that Shell
had any “intent” to arrange for the disposal of hazardous
substances at B&B’s facility. The record evidence shows
that: (1) Shell contracted with a common carrier utilizing
11
suitable tanker trucks to transport and deliver the
product to B&B’s facility; (2) Shell provided B&B with a
rebate for improvements in B&B’s bulk handling and
safety facilities and required an inspection of such
facilities by a qualified engineer; and (3) Shell distributed
a manual and created a checklist of the manual’s
requirements to ensure that the product tanks at B&B’s
facility were being operated in accordance with
appropriate safety requirements. Pet. App. 47a. These
actions underscore the lack of any mtent on Shell’s part
to arrange for the disposal of its products at the very
time it was delivering those products to B&B for
productive use.‘
Despite the dearth of evidence that Shell had any
intent to arrange for the disposal of hazardous sub-
stances at B&B’s facility, the Ninth Circuit imposed
CERCLA “arranger” liability on Shell. The Ninth
Circuit acknowledged that intent is a _ relevant
consideration in what it termed “direct arranger liability”
cases but argued that there is a separate category of
cases which it labeled “broader arranger cases” _ in
which intent is not controlling and is not even a
particularly useful concept. In these cases, according to
the Ninth Circuit, arranger liability is imposed where
disposal of hazardous wastes is a foreseeable byproduct
of, but not the purpose of, the transaction giving rise to
liability. Pet. App. 42a.
However, to the extent such “broader arranger”
liability has been recognized by other circuits, see, e.g.,
* Indeed, the record shows that the total amount of Shell product
that leaked or spilled during transfer operations at the B&B facility
was less than one-tenth of one percent (ie., 81 gallons spilled per
year of a total amount of 122,930 gallons delivered per year, or 0.07
percent). Pet. App. 257a
12
United States v. Aceto Agric. Chem. Corp., 872 F.2d 1373
(8th Cir. 1989) (“Aceto”); GenCorp, Inc. v. Olin Corp., 390
F.3d 433 (6th Cir. 2004), no court of appeals had ever
extended it to cases involving the sale of useful products
such as occurred here. Rather these cases have involved
situations such as manufacturing not sales of
_ products. For example, ii Aceto the Eighth Circuit
upheld a district court’s denial of a motion to dismiss
claims against a pesticide manufacturer for costs
incurred by the U.S. Environmental Protection Agency
(“EPA”) in cleaning up contamination at a facility
operated by a company that was formulating pesticide
products for the manufacturer. The court found that the
U.S. had stated a claim for “arranger” liability where the
manufacturer supplied the formulator with the materials
to be used in the formulation process, retained title to the
materials throughout that process, and was aware that
disposal of hazardous substances was an inherent part of
the formulation process. 872 F.2d at 1379-82.
In contrast, in cases involving sales of useful products,
disposal is the antithesis of the seller’s goal, which is to
get all of its product into the buyer’s hands for beneficial
use. For that reason, the courts have generally required
at least some evidence that a party intended to dispose of
hazardous substances found in the material being sold
before imposing liability on the seller. See, e.g., Amcast,
2 F.3d at 51 (the words “arrange for” imply intentional
® The cases cited by the Ninth Circuit as examples of this broader
arranger liability do not involve the imposition of CERCLA liability
on sellers of useful products such as Shell. For example, in Florida
P&L, the court acknowledged the possibility that a manufacturer
could be liable for contamination caused by its products but refused
to impose liability on a manufacturer of transformers where there
was no evidence that the transactions in question involved anything
more than a sale of goods. 893 F.2d at 1318-19.
13
action); Pneumo Abex, 142 F.3d at 775-76 (refusing to
hold railroads liable as “arrangers” where they did not
intend their sales of used bearings to be an arrangement
for disposal of hazardous substances). The Ninth Circuit
acknowledged that Shell manufactured and sold B&B “a
useful product,” and that in accordance with the “useful
product doctrine” the Ninth Circuit previously “had
refused to hold manufacturers liable as arrangers for
selling a useful product containing or generating
hazardous substances that later were disposed of.” Pet.
App. 45a (citing 3550 Stevens Creek Assocs. v. Barclays
Bank of Cal., 915 F.2d 1355, 1362-65 (9th Cir. 1990)). The
Ninth Circuit nevertheless attempted to distinguish
these other “useful product cases” as inapplicable
“where, as here, the sale of a useful product necessarily
and immediately results in the leakage of hazardous
substances.” Pet. App. 45a. The Ninth Circuit therefore
held that the “useful product doctrine” was not applicable
to the leaked product “that never made it to the fields for
its intended use but was disposed of prior to use.” Pet.
App. 46a-47a.
That purported distinction finds no basis in the “useful
product” defense as interpreted by the other circuits.
The applicability of that defense has turned on a variety
of factors such as whether the material sold was usable in
its existing form or required further processing to
remove hazardous substances. See, e.g., Pneumo Abezx,
142 F.3d at 775. However, the courts outside the Ninth
Circuit have never looked to the timing of the disposal of
hazardous substances associated with a product as being
® There is no question in this case that, unlike materials such as
spent batteries, the chemicals that Shell sold to B&B were intended
to be used in the form in which they were sold and did not require
further processing prior to use.
14
relevant to the application of the “useful product” de-
fense. Indeed, such considerations have been effectively
rejected. See Amcast, 2 F.3d at 751. The Ninth Circuit’s
opinion therefore undermines the “useful product”
defense and further expands the already broad net of
CERCLA liability to ensnare innocent sellers of
pesticides and other goods that have no intent to dispose
of any hazardous substances but are merely selling their
goods in the ordinary course of business.
C. Decisions from Other Circuits Properly
Applying the “Intent” Factor in the “Sale of
Useful Product” Context Underscore the Ninth
Circuit’s Error
The Ninth Circuit’s decision to disregard Shell’s
underlying intent with respect to its sales of useful
product to B&B in determining whether Shell was
subject to CERCLA “arranger” liability is facially
inconsistent with numerous decisions from other circuits,
which uniformly deemed the underlying “intent” of the
parties with respect to the relevant transactions an
essential factor to consider. In Amcast, for example, the
Seventh Circuit refused to impose arranger liability in
circumstances nearly identical to the circumstances here.
In that case, the seller employed a common carrier to
deliver its liquid chemical product to a customer’s facility.
On occasion, the common carrier would spill some of the
product during transfer to the customer's storage tanks,
resulting in contamination of the groundwater at the
facility. 2 F.3d at 747-48. However, in contrast to the
Ninth Circuit’s decision, in Amcast the Seventh Circuit
properly applied the traditional “intent” test in the
context of the “sale of useful product” defense and held
that the seller was not subject to CERCLA “arranger”
liability:
15
{Seller} hired a transporter, all right, but it did not
hire it to spill [product] on [the Buyer’s] premises.
Although the statute defines disposal to include
spilling, the critical words for present purposes are
“arranged for.” The words imply intentional action.
The only thing that [Seller] arranged for [the com-
mon carrier] to do was deliver [product] to [Buy-
er’s] storage tanks. It did not arrange for spilling
the stuff on the ground.
Amcast, 2 F.3d at 751. The Seventh Circuit thus con-
cluded that “when the shipper is not trying to arrange for
the disposal of hazardous wastes, but is arranging for the
delivery of a useful product, he is not a responsible per-
son within the meaning of the [CERCLA] statute.” /d.
Decisions of the Second, Fourth, Sixth and Eleventh
Circuits properly considering the “intent” factor in cases
involving the sale of useful products further highlight the
nature of the Ninth Circuit’s error. For example, in
Freeman the Second Circuit addressed the liability of a
pharmaceutical company that sold chemical reagents to a
buyer of chemical intermediates. The buyer later stored
the reagents at its facility. EPA eventually concluded
that there had been a release or threatened release of
hazardous substances from the buyer’s facility that
required a CERCLA cleanup. 189 F.3d at 162. The
Second Circuit ruled that the pharmaceutical company
that had sold the chemical reagents was not subject to
CERCLA “arranger” liability because the underlying
intent of the transaction was a mere sale of a useful
product. “(I]t is uncontroverted,” the Second Circuit
stated, “that [the pharmaceutical company] merely sold
unused chemicals that it would ordinarily use in its
laboratories to [the buyer] so that [the buyer] could use
or resell them... .” Jd. at 164.
16
Pneumo Abezx is similar. That case involved a railroad
which had sold used journal bearings to a foundry for
processing into new bearings. The Fourth Circuit ruled
that the railroad was not subject to CERCLA “arranger”
liability because the intent of the railroad was to sell a
valuable product, not to dispose of unwanted material or
waste. Pneumo Abex, 142 F.3d at 775-76. In so ruling,
the Fourth Circuit noted that “[tJhe Foundry paid the
railroad] for the bearings; the [railroad] did not pay the
Foundry to dispose of unwanted metal.” Jd. at 775. See
also AM Int'l, 982 F.2d at 992 ( “(lliability 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”); Florida P & L, 893 F.2d
at 1315 (no evidence “that the manufacturers intended to
otherwise dispose of hazardous waste when they sold the
transformers”).
Thus every circuit to have considered this issue other
than the Ninth Circuit has required an intent to dispose
as a precondition to “arranger” liability under section
107(a)(3) of CERCLA where the defendant merely en-
gaged in the sale of a useful product, a precondition
rejected by the Ninth Circuit. The Ninth Circuit thus did
not merely depart from the statute’s text. It departed
from the settled understanding of every other court of
appeals.’
7 In its brief in opposition to the petitions for certiorari, the United
States essentially ignored this “intent” requirement, choosing to
focus instead solely on the involvement of Shell in the process of
delivering pesticides to the B&B facility. See Brief For the United
States in Opposition at 15-17. This myopic approach to “arranger”
liability cannot be squared with the language of the statute.
17
D. The Ninth Circuit’s Ruling Threatens to
Undermine the Well-Recognized “Sale of
Useful Product” Defense That Suppliers Have
Come to Rely Upon
The Ninth Circuit’s decision threatens to undermine
the well-recognized “sale of useful product” defense that
suppliers of useful products have come to rely upon.
Over the past two decades the circuits have established
some level of uniformity with respect to the proper
interpretation and application of the CERCLA
“arranger” liability provision in the “sale of useful
product” context. This uniformity is in no small measure
due to the circuits’ consistent acknowledgement of the
essential nature of the “intent” inquiry and the
concomitant premise that a supplier which merely in-
tended to sell a product and not dispose of hazardous
substances should not be subject to CERCLA “arranger”
liability. The consistency among the circuits resulted in a
“sale of useful product” defense that has provided
suppliers of pesticides and other products containing
hazardous substances with some assurance that they
would not be subject to CERCLA “arranger” liability if
the intent of their transactions was the mere sale of a
useful product.
However, the Ninth Circuit’s wholesale disregard of
this well-established “intent” inquiry threatens to
undermine the “sale of useful product” defense, eroding
the degree of certainty and protection that it has
provided suppliers of chemicals and other products.
With the Ninth Circuit’s decision, the gray area of the
CERCLA “arranger” liability provision has now
enveloped mere sales of useful products; under that
decision the sale of useful products may qualify as an
arrangement for disposal of hazardous substances if, for
example, unintentional and inadvertent leakage of some
18
of the product occurs while the common carrier and the
buyer transfer the product to the buyer’s tanks. As a
result of the Ninth Circuit’s decision, every sale and
delivery of a useful product could potentially subject the
supplier to crippling CERCLA liability if any leakage
occurs. While the web of CERCLA liability is neces-
sarily far-reaching to effectuate the purposes of the
statute, it is quite evident that CERCLA was never
intended to ensnare innocent suppliers who harbored no
intent to dispose of hazardous substances in conducting
their sales of useful products.
A recent federal district court case applying the Ninth
Circuit’s ruling demonstrates its far-reaching effects. In
United States v. Lyon, No. CV F 07-0491 LJO GSA, 2007
WL 4374167 (E.D. Cal. Dec. 14, 2007), EPA sued the
owners of a dry cleaning establishment to recover costs
incurred and to be incurred in cleaning up
perchlorethylene (“PCE”) contamination resulting from
the dry cleaning operations. The owners filed a claim for
contribution under CERCLA against a number of PCE
manufacturers. Those manufacturers were not alleged to
have had any direct contact with the owners of the dry
cleaning shop or any authority or control over the
disposal of PCE by the owners. Nevertheless, the
district court citing the Ninth Circuit’s decision
declined to dismiss the claims against the PCE
manufacturers based simply on an allegation that
leakage of PCE was somehow inherent in the process of
- transferring PCE to the dry cleaning establishment and
that the manufacturers somehow had knowledge of and
control over the transfer process. /d at *5. Thus,
chemical manufacturers that had no contact with the
ultimate purchasers of their products have now been
enmeshed in what will undoubtedly be expensive
CERCLA litigation based on the Ninth Circuit’s opinion.
19
Il. THE NINTH CIRCUIT’S STANDARDS FOR
_ APPORTIONMENT OF HARM ARE OVERLY
RESTRICTIVE AND PRODUCE HIGHLY
INEQUITABLE RESULTS
The Ninth Circuit’s decision also must be reversed
because the barriers it erected to demonstrating
apportionment of harm are inconsistent with the
Restatement standards the court purported to follow and
create the kind of harsh results and unfairness that
Congress intended to avoid. The Ninth Circuit
acknowledged that the imposition of joint and several
liability is not mandatory and that apportionment is
available in appropriate circumstances. Pet. App. 12a-
13a. Moreover, the Ninth Circuit agreed with other
courts that (i) the standards for determining when harm
may be apportioned in CERCLA cases are drawn from
Section 433A of the Restatement (Second) of Torts and
that (ii) harm may be apportioned where there is a
reasonable basis for divisibility of a single harm or where
there are distinct harms. /d. at 16a.
However, the Ninth Circuit’s application of these
principles puts it at odds with the Restatement and other
courts of appeals that have applied the Restatement
approach in the CERCLA context.* In particular, the
Ninth Circuit imposed standards of proof that are not
required to establish a reasonable basis for
apportionment and that will be impossible to meet in
most instances. For example, the Ninth Circuit held that
in order for the Railroads to establish that the harm
attributable to them as owner of a parcel that B&B
® As the dissent to the denial of petition for rehearing en banc noted,
“although the panel’s amended opinion pays lip service to the
Restatement test, the panel then proceeds effectively to disregard
it.” Pet. App. 53a.
20
leased for a portion of its operations, the Railroads would
have had to keep records that would allow a comparison
of the amount of chemicals stored on the Railroad parcel
and the amount stored on B&B’s own property, the
amounts of chemicals transferred between containers
and the amounts of chemicals actually spilled on each
parcel. Jd. at 34a. The Ninth Circuit imposed these
requirements even though it recognized that the kind of
records it demanded “would have had little utility to B&B
...and none to the Railroads....” Jd Moreover, the
Ninth Circuit required a particular kind of evidence to
justify apportionment records of chemical storage,
transfer and release even though the Restatement
simply requires evidence without limiting the nature of
the evidence that could support divisibility.
At the same time, the Ninth Circuit rejected various
factors that were used by the trial court in establishing a
reasonable basis for divisibility of the harm at the site,
such as the period during which the Railroad parcel was
leased for use in B&B’s operations as compared to the
total period of B&B’s operations and the proportion of
the parcel owned by the Railroads to the total area of the
site. The Ninth Circuit concluded that these factors were
inadequate to support apportionment because they were
“simple” and allegedly did not take into account the
“dynamic nature” of B&B’s operations, Pet. App. 3la-
34a, even though the district court concluded after a
detailed and careful review of the evidence that the use of
these factors was warranted and in fact conservative
because if anything they tended to overstate the amount
* These factors are no more simple than the factors endorsed in the
comments to the Restatement, such as the relative number of cows
owned by a defendant. Restatement (Second) Torts, § 433A,
comment d.
21
of contamination that could be attributed to the use of the
Railroad parcel, id. 254a-255a.
A. The Ninth Circuit’s Approach to Appor-
tionment Is Inconsistent with the Restatement
and Precedent
The Ninth Circuit’s approach to apportionment is
inconsistent with the Restatement. Section 433A of the
Restatement provides that damages fur harm can be
apportioned among two or more causes where there is a
reasonable basis for determining the contribution of
each. The comments to Section 433A indicate that
apportionment of distinct harms may be made based on a
“rough estimate” that will “fairly apportion” the
damages, that a single harm may be divisible if there is a
“reasonable and rational basis” which results in a fair
apportionment and that “reasonable assumptions may be
used.” Restatement (Second) of Torts, § 483A, comments
(b), (d) (1965). Likewise, Dean Prosser (who served as
the Reporter for the Second Restatement) states that
where there is a basis for a “rough practical
apportionment,” it is likely that such apportionment will
be made. W. Page Keaton, et al., Prosser and Keaton on
the Law of Torts 345 (5th ed. 1984). Thus, the thrust of
the common law approach around the time of CERCLA’s
enactment in 1980 was to apportion damages if there was
a rough but rational way of doing so which achieved a
result that was generally fair."° The courts applied the
Restatement approach accordingly. See, e.g., Federal
Savings & Loan Ins. Corp. v. Reeves, 816 F.2d 130, 135-
36 (4th Cir. 1987); Fidelity Savings & Loan Ass'n v.
'© The Court has noted that the state of the law at the time a statute
was enacted is the most important consideration in determining what
common law liability concepts are incorporated in a statute. Norfolk
& Western Ry. Co. v. Ayers, 538 U.S. 135, 164 (2003).
22
Aetna Life & Casualty Corp., 440 F. Supp. 862, 875-76
(N.D. Cal. 1977), affd, 647 F.2d 933 (9th Cir. 1981). See
also Sauer v. Burlington Northern R. Co., 106 F.3d 1490,
1494 (10th Cir. 1996) (rejecting the argument that
apportionment of injury had to be precise and holding
that apportionment need not be proven with
mathematical precision or great exactitude but requires
only evidence sufficient to “permit a rough practical
apportionment”).
A number of circuits have adopted this approach in the
CERCLA context. For example, the Fifth Circuit in U.S.
Environmental Protection Agency v. Sequa Corp. (In re
Bell Petroleum Serv., Inc.), 3 F.3d 889 (5th Cir. 1993),
held that joint and several liability should not be imposed
under section 107 of CERCLA if the evidence establishes
a factual basis for making a reasonable estimate that will
fairly apportion liability. The court stated that the “fact
that apportionment may be difficult, because each
defendant’s exact contribution to the harm cannot be
proved to an absolute certainty, or the fact that it will
require weighing the evidence and risking credibility
determinations, are inadequate grounds upon which to
impose joint and several liability.” Jd. at 903. In fact, the
court concluded that “evidence sufficient to permit a
rough approximation is all that is required under the
Restatement.” Jd. at 904 n.19. The court held that
liability should be apportioned in the case before it
because there was “sufficient evidence from which a
reasonable and rational approximation of each
defendant’s individual contribution to the contamination
can be made.” Jd. See also United States v. Township of
Brighton, 153 F.3d 307, 320 (6th Cir. 1998) (district court
should be receptive to any argument for divisibility that
provides a reasonable basis for distinguishing between
the harm caused by the Township and the harm caused
23
by others); Coeur d'Alene Tribe v. ASARCO, Inc., 280 F.
Supp. 2d 1094 (D. Idaho 2003) (Restatement does not
require “fingerprinting” of each defendant’s hazardous
wastes; apportionment of harm at mining site based on
estimate of volume of mine tailings produced by each
defendant was not perfect but was reasonable based on
the facts of the case).
B. Apportionment in This Case Would Be Con-
sistent With the Policies Underlying CERCLA
It is evident that the Ninth Circuit adopted its
parsimonious approach to apportionment because of
policy considerations, 7.e., to ensure that “the taxpayers
are not left holding the tab.” Pet. App. 35a. While the
“polluter pays” principle is by now a familiar one and it is
one of the goals that CERCLA is designed to achieve,
this Court has acknowledged that no statute pursues its
goals at all costs. Rodriguez v. United States, 480 US.
522, 525-26 (1987) (per curiam) (it frustrates rather than
effectuates congressional intent to assume that whatever
furthers the statute’s primary objective must be the iaw).
Acts of Congress are usually the result of compromise
among competing goals and “[clourts and agencies must
respect and give effect to these sorts of compromises.”
Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81, 94
(2002). See also Board of Governors of Fed. Reserve
System v. Dimension Fin. Corp., 474 U.S. 361, 374 (1986)
(invocation of purposes of legislation which takes no
account of process of legislative compromise prevents the
effectuation of congressional intent). This is certainly
true of CERCLA; in fact, this Court has previously
recognized that CERCLA reflects an accommodation of
several competing policy concerns, including concerns
about the potential impacts of the statute on the
petrochemical industry. See Exxon Corp. v. Hunt, 475
U.S. 355, 371-72 (1986).
24
One of the concerns of Congress was the potentially
harsh impacts of joint and several liability in some cases,
which ultimately led Congress to delete any specific
reference to joint and several liability in the statute.
During the floor debates on the statute, Senator Helms
noted that the potential inclusion of joint and several
liability in the Act “received intense and well-deserved
criticism from a number of sources, since it could impose
financial responsibility on persons who contributed only
minimally (if at all) to a release or injury.” 126 Cong.
Rec. at S15004 (Nov. 24, 1980). See also United States v.
Alcan Aluminum Corp., 964 F.2d 262, 268 (3d Cir. 1992)
(Congress intended to avoid application of joint and
several liability in situations where it might produce
inequitable results); United States v. A&F Materials Co.,
Inc., 578 F. Supp. 1249, 1255 (S.D. Til. 1984) (“both
Houses of Congress were concerned about issues of
fairness, and joint and several liability is extremely harsh
only a small amount of waste to a site”). The
Restatement itself recognizes the potential unfairness of
such an outcome and even contemplates that the burden
of establishing a defendant’s appropriate share of liability
in such a case could be shifted to the plaintiff.
Restatement (Second) Torts § 433B, comment (e).
Such concerns take on particular force in the
CERCLA context. In the typical case of two joint
tortfeasors, the parties may be held jointly and severally
liable under circumstances where both are culpable to
some degree. It is that culpability — as compared to a
plaintiff that is often blameless - which supports the
notion of joint and several liability, ~e., it is better to
impose the entire liability on a defendant who is culpable
rather than leave an innocent plaintiff with only a partial
remedy if one or more of the defendants is unavailable.
25
See, e.g., McDermott, Inc. v. AmClyde and River Don
Castings, Ltd., 511 U.S. 202, 221 (1994) (when the
limitations on the plaintiffs’ recovery arise from outside
forces, joint and several liability makes the other
defendants, rather than an innocent plaintiff, responsible
for the shortfall).
In contrast, under CERCLA a party may be held
strictly liable for the cost of a cleanup regardless of fault.
See, e.g., United States v. Hardage, 761 F. Supp. 1501
(W.D. Okla. 1990) (strict liability imposed without regard
to fault or state of mind). Thus, in a CERCLA case the
equities cannot be said to lie with an innocent plaintiff as
compared to a culpable defendant because the CERCLA
defendant may well be blameless.’’ As the Fifth Circuit
noted:
Often, liability is imposed upon entities for conduct
predating the enactment of CERCLA, and even for
conduct that was not illegal, unethical, or immoral
at the time it occurred.... We also recognize,
however, that CERCLA, as a strict liability statute
that will not listen to pleas of “no fault,” can be
terribly unfair in certain instances in which parties
may be required to pay huge amounts for damages
to which their acts did not contribute. Congress
recognized such possibilities and left it to the couris
" Some might argue that even if a defendant company in a
CERCLA cost recovery case is not culpable in the traditional sense,
the equities still weigh in favor of requiring the defendant to pay the
costs of the cleanup because the defendant profited from the waste-
generating activity. In this case, the Railroads charged B&B $410
per year in rent for a period of approximately 15 years, see Brief For
Petitioners the Burlington Northern and Santa Fe Railway Co. and
Union Pacific Railroad Co. at 9, resulting in total revenue for the
Railroads of approximately $6,150. This represents a mere pittance
when compared to the more than $11 million in cleanup costs for
which the Railroads could be liable under the Ninth Circuit decision.
26
to fashion some rules that will, in appropriate
instances, ameliorate this harsnuess.
Bell Petroleum, 3 F.3d at 897. See also United States v.
Chem-Dyne Corp., 572 F. Supp. 802, 810 (S.D. Ohio 1983)
(the term joint and several liability was deleted from the
express language of the statute in order to avoid its
universal application to inappropriate circumstances);
United States v. Wade, 577 F. Supp. 1326, 1337 (E.D. Pa.
1983) (deletion of reference to joint and several liability
was intended to avoid mandatory application of the
standard to a situation where it would produce
inequitable results).
Thus, in CERCLA cases the rationale for appor-
tionment as a means of ameliorating the harsh effects of
joint and several liability is even stronger than in the
joint tortfeasor case, particularly where the alternative is
to impose substantial liability on a party with limited
responsibility of any kind for the contamination at a site.
This is just such a case in which it would be quite unfair
to require the Petitioners to pay millions in cleanup coSts
when their contribution to the contamination at the site is
quite limited. The district court found that Shell was
liable for 6% of the harm at the site and that the
Railroads were liable for 9%. Pet. App. 255a, 260a.
Nevertheless, under the Ninth Circuit’s ruling these
parties — collectively responsible for less than 1/6 of the
harm — will be required to pay the entire bill of over $11
million to clean up the site.
Contrary to the assertion of the Ninth Circuit, neither
the language of the statute, the policies underlying
CERCLA nor the equities involved dictate such a result.
The Ninth Circuit made clear its preference for having
“some entity with connection to the contamination”
rather than the taxpayers pick up the tab for
27
contamination attributable to parties — such as B&B -
that are insolvent. Pet. App. 36a-37a. However, applying
the Restatement approach in an appropriate manner the
district court found that the Railroads and Shell were not
responsible for the remaining 85% of the contamination.
Stated differently, the district court found that the
Railroads and Shell did not have a “connection” to the
vast majority of the contamination at the site. Therefore,
under the Ninth Circuit's own reasoning, the Railroads
and Shell should not be required to “pick up the tab” for
contamination for which they are not responsible.
Throwing up roadblocks to achieve the opposite result
does not comport with basic notions of fairness and yields
exactly the type of harsh results about which Congress
was concerned.
Moreover, Congress created a mechanism to address
precisely this type of situation. The Hazardous
Substances Superfund was created in part because
Congress recognized that EPA and State environmental
agencies would face situations where contamination
needed to be addressed but the responsible party was not
available to pay for it. See S. Rep. No. 96-848 at 13 (1980)
(identifying “providing a fund to finance response action
where a liable party does not clean up, cannot be found or
cannot pay the costs of cleanup” as one of the “basic
elements” of the statute). Congress also recognized that
requiring companies such as Shell to pay to establish the
Superfund while at the same time imposing joint and
several liability on such companies to pay massive costs
to clean up particular sites with which they had only a
minimal connection would be “grossly unfair.” 126 Cong.
Rec. at S15004 (Nov. 24, 1980) (statement of Senator
Helms). The use of the fund to pay for some of a cleanup
where the owner/operator who was responsible for the
vast majority of the contamination is not available to pay
28
would be entirely consistent with the purposes for which
the Superfund was established.
In fact, such uses of the Superfund -— even though
implicating some taxpayer dollars - would result in a
more equitable sharing of the risk among all segments of
society that benefit from the activities leading to the
contamination. Accordingly, the Court should overturn
the Ninth Circuit’s attempt to discourage the use of
apportionment in an overzealous and inappropriate effort
to protect the public fisc.
Il. THE NINTH CIRCUIT'S RULING IN-
CREASES SUPPLIERS’ RISK OF POTENT-
IAIL.LLY SUBSTANTIAI. FUTURE CERCLA
LIABILITY
The decision below increases the risk of future
CERCLA liability that could be substantial, even
crippling for suppliers of pesticides, chemicals and other
products shipped by common carrier such as ethanol,
water treatment products, antiseptics and other cleaning
products, paints and primers, printing ink, etc. The
Ninth Circuit’s ruling creates the risk that a blameless
supplier may become liable for the costs to clean up an
industrial facility merely because of inadvertent and
unintentional leakage of some of the supplier’s product at
the facility. Given the Ninth Circuit’s decision, it is
reasonable to predict that CERCLA plaintiffs may target
such suppliers and creatively use the Ninth Circuit’s
decision to seek to impose CERCLA “arranger” liability
on an ever-increasing number of suppliers whose sole
“crime” was the innocent sale of useful products. In fact,
the Ninth Circuit’s decision may prompt EPA and state
environmental agencies to begin to routinely identify any
suppliers that sold or delivered products to the
contaminated site at issue as potentially responsible
29
parties (“PRPs”), thereby subjecting otherwise innocent
suppliers to the Pandora’s box of potential CERCLA
liability, transactional costs and other problems that
often befall a person or company formally designated as a
PRP at a particular site.
The resulting liability and costs can be onerous. First,
at sites (such as the B&B site) where the owner/operator
of the facility is no longer viable, the Ninth Circuit's
ruling creates the possibility that EPA or the relevant
state agency may not only designate any former supplier
of products to the facility as a PRP at the site, but pursue
the former supplier as the primary PRP and seek to hold
the supplier jointly and severally liable for all the cleanup
costs at the site.
Moreover, in view of the heightened evidentiary
standards imposed by the Ninth Circuit with respect to
divisibility of harm, any CERCLA liability imposed on
such a supplier is likely to be joint and several. The
Ninth Circuit’s decision creates standards for
demonstrating divisibility of harm that may be
impossible to meet and that go well beyond the
reasonable basis for apportionment required by other
circuits. Given these strict standards parties that have a
limited nexus to a site may be forced to pay huge
amounts for damages to which their acts did not
contribute.
Thus, a company that did no more than supply a useful
product could end up bearing the entire cost to clean up a
contaminated site. The magnitude of these costs cannot
be understated; studies have indicated that the average
cost of cleaning up the largest sites on EPA’s National
Priorities List was approximately $140 million, while the
average cost of cleaning up other sites on the NPL was
$12 million in 2001. See Resources for the Future,
30
Superfund’s Future: What Will It Cost? (RFF Press
2001), at xxv, available at http/Awww.ifl.org/rff/RFF_Press-
/CustomBookPages/Superfunds-Future.cfm. The finan-
cial implications of the Ninth Circuit’s decisions for a
wide range of businesses are therefore quite serious.
Moreover, the Ninth Circuit’s decision may upset the
mutually beneficial business relationship between
suppliers and the common carriers that deliver their
products. A key aspect to the continued health of this
relationship is that suppliers must be able to rely on
common carriers to deliver the products without concern
that the supplier may incur CERCLA liability for the
carrier’s actions during delivery of the products. See
Amcast, 2 F.3d at 751 (“It would be an extraordinary
thing to make shippers strictly liable under the
Superfund statute for the consequences of accidents to
common carriers or other reputable transportation
companies that the shippers have held in good faith to
ship their products.”). For ordinary risks, the supplier
and common carrier may simply allocate the risk of this
potential liability between themselves or assume
additional insurance requirements in their contractual
arrangement. However, where the potential liability at
issue is CERCLA liability that may easily rise to the
millions of dollars rather than merely the cost of lost
product, mutual satisfactory contractual arrangements
may not be quite as easy to achieve and will undoubtedly
increase the parties’ costs of doing business.
In addition, many suppliers ship their products
nationwide by common carrier to various customers.
These suppliers may have to tailor their contractual
arrangements with common carriers by means of special
liability provisions and insurance protections with
respect to the shipments that will involve the delivery of
products to customers located in states within the
31
jurisdiction of the Ninth Circuit. Some of these suppliers
may simply cease shipment of goods to these states if the
special liability provisions and insurance protections be-
come cost prohibitive. Such artificial constraints on
interstate commerce are anathema to our integrated na-
tional economy and are a powerful reason for this Court
to overturn the Ninth Circuit decision and restore
uniformity in this important area of federal law.
Likewise, the Ninth Circuit’s approach to appor-
tionment of harm may have a substantial impact on a
wide variety of businesses. The Ninth Circuit approach
clearly disfavors apportionment and sends a strong
signal to trial courts to err heavily on the side of
imposing joint and several liability on defendants in all
CERCLA cost recovery cases, even where a company
with a minimal connection to the contamination at a site
may end up footing the bill for the cleanup of the entire
site because the parties that are responsible for the
contamination are insolvent or otherwise unavailable.
The attitude that a business should always be made to
pay for a cleanup rather than the public at large cannot
justify such inequitable results, particularly given the
high costs of site cleanups.
Indeed, the “make the polluter pay at all costs”
approach embodied in the Ninth Circuit decision will only
serve to further disrupt relationships between suppliers
of products and their customers and between lessors and
lessees of commercial and industrial property. The
specter of joint and several liability being imposed for the
cleanup of amy site to which a company’s products are
shipped or on the lessor of any property used even
minimally for a business operation substantially raises
the stakes for allwcation of risk in any such business
relationship. Moreover, the imposition of joint and
several liability in such circwmstances may unfairly
32
penalize companies that devote significant resources to
environmental compliance but may nevertheless be
forced to shoulder the entire burden of a multi-million
dollar cleanup because of a minimal connection to a site
and a failure to keep records that it would never occur to
any business to maintain in the normal course of its
operations.
Under the Ninth Circuit approach, liability becomes a
form of roulette, making losers of |= and even bank-
rupting companies based simply on a limited or even
tangential connection to a contaminated site. As other
courts have recognized, Congress intended for
apportionment to ameliorate these harsh effects of a joint
and several liability regime. The Ninth Circuit has
effectively declared that it prefers a different balance.
This Court should reverse the Ninth Circuit and restore
the balance intended by Congress.
CONCLUSION
For the foregoing reasons the decision below should
be reversed.
Respectfully submitted.
ROBIN S. CONRAD DANIEL M. STEINWAY
AMAR D. SARWAL THOMAS JACKSON
NATIONAL CHAMBER Counsel of Record
LITIGATION CENTER, MICHAEL MCGOVERN
INC. BAKER Borys L.L.P.
1615 H STREET, N.W. 1299 Pennsylvania Ave., NW
WASHINGTON, D.C. Washington, D.C. 20004-2400
20062 (202) 639-7700
(202) 463-5337
DONALD D. EVANS
LESLIE HULSE
AMERICAN CHEMISTRY
COUNCIL
1300 WILSON BLVD.
ARLINGTON, VA 22209
(703) 741-5000
DOUGLAS T. NELSON
JOSHUA B. SALTZMAN
CROPLIFE AMERICA
1156 15TH STREET, NW
SUITE 400
WASHINGTON, D.C.
20005
(202) 872-3882
GREGORY M. Scorr
NATIONAL
PETROCHEMICAL
& REFINERS
ASSOCIATION
1667 K STREET, NW
SUITE 700
WASHINGTON, D.C.
20006
(202) 457-0480
33
HARRY M. NG
ERIK G. MILITO
AMERICAN PETROLEUM
INSTITUTE
1220 LSTREET, NW
WASHINGTON, D.C. 20005
(202) 682-8253
JAN S. AMUNDSON
QUENTIN RIEGEL
NATIONAL ASSOCIATION OF
MANUFACTURERS
1331 PENNSYLVANIA AVE.,
NW
WASHINGTON, D.C. 20004
(202) 637-3000
Counsel for Amici Curiae
November 24, 2008
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.