U.S. District Court in Dayton Issues Ohio's First Decision Applying the Supreme Court's May 2009 Ruling in Burlington Northern

September 4, 2009

CERCLA practitioners in Ohio who were expecting the U.S. Supreme Court's decision in Burlington Northern1 to effect a sea change in how our federal courts apply "arranger liability" to the sale of a used but useful product were dealt a blow Tuesday when Judge Walter Rice ruled in the long-running United Scrap Lead litigation that Burlington Northern merely affirmed existing precedent from the Sixth Circuit that dates back to 1996.2

In Burlington Northern, the Supreme Court clarified, and most agree restricted, the criteria used to find companies liable as "arranging" for the disposal of hazardous substances, holding that (1) the sale of a useful product must include evidence showing specific intent to dispose before liability attaches, and (2) knowledge that the product may be leaked, spilled or discarded, in whole or in part, by the buyer is not enough evidence, standing alone, to prove there was intent to dispose. The Supreme Court also held that the imposition of joint and several liability, so often the government's biggest weapon in its CERCLA "arsenal," does not apply if there are sufficient facts in the record to reasonably apportion liability among the defendants, even when margins of error must be employed in the absence of scientific certainty. In doing so, the Supreme Court rejected a long line of federal decisions wherein the courts strictly construed the requirements to demonstrate divisibility.

At a time when liberal application of CERCLA's liability scheme and strict application of the divisibility defense have become the norm, the Burlington Northern decision is seen as breathing new life into a somewhat "dormant" practice of aggressively defending CERCLA liability claims.

One of the first opportunities to apply Burlington Northern is in pending CERCLA cases. Thus, the remaining defendants in the United Scrap Lead litigation in Dayton filed motions in June, asking the court to (1) vacate its earlier summary judgment ruling, holding them jointly and severally liable as arrangers under CERCLA for their sales of used batteries, and (2) give them their day in court under Burlington Northern's standard for arranger liability.

Although Burlington Northern has been widely reported as changing the landscape of CERCLA liability, unfortunately the district court in Dayton did not see it that way. Instead, the court denied the motion, holding that the Supreme Court's decision simply confirmed the validity of the Sixth Circuit's 1996 decision in Cello-Foil Products on the criteria necessary to find arranger liability.

While the Supreme Court cited Cello-Foil because it correctly held that intent to dispose must be demonstrated, Burlington Northern picks up where Cello-Foil left off in a critically important aspect. Until Burlington Northern, no federal court applying CERCLA's liability scheme to the sale of a useful product had ever held that arranger liability doesn't exist when a company knows that the downstream buyer or handler of its material has a history of leaking, spilling or otherwise disposing of the product.

At a minimum, Burlington Northern mandates that inferences and supposition, coupled by a liberal construction of CERCLA's liability scheme, are no longer sufficient, standing alone, to prove that a company's sale of a useful product constitutes an arrangement for disposal - a mandate that the district court overlooked. Its earlier ruling granting summary judgment against sellers of used batteries was based on a previous ruling that the sale of used batteries is not the recycling of a useful product,3 plus the court's finding that (1) the sellers admitted selling used batteries, not just used lead plates, (2) United Scrap Lead Company admitted that it dumped the casings and battery acid and recycled only the lead plates, and (3) it was reasonable to infer that the sellers intended for the casings and acid to be disposed, even though all evidence in the record showed that the sellers did not intend for disposal to occur, nor knew that such was in fact occurring. It is difficult to reconcile the district court's decision with the holding in Burlington Northern.

If you would like a copy of the district court's decision, contact Frost Brown Todd's Environmental Practice Group. Our attorneys can assist you in evaluating the impact on your business transactions of the Burlington Northern decision and other recent U.S. Supreme Court decisions interpreting CERCLA's liability scheme.

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1 Burlington Northern and Santa Fe Railway Company v. United States, 556 U.S. ___, 129 S. Ct. 1879 (2009)
2 United States v. Cello-Foil Product, Inc., 100 F.3d 1227 (6th Cir. 1996).
3 At the time of the court's earlier ruling that used batteries are junk and thus cannot legitimately be sold as a useful product, Congress had not yet amended CERCLA to add an exemption from liability for bona fide recycling arrangements for spent batteries, which exemption was added in 1999, but did not apply to pending actions brought by the government.

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