Apportionment of CERCLA Liability Post-Burlington

Pre-Burlington Apportionment

Apportionment of liability was rare prior to Burlington. See, e.g., United States v. Monsanto Co., 858 F.2d 160, 173 (4th Cir. 1988) (holding harm was not divisible); United States v. 175 Inwood Assocs. LLP, 330 F. Supp. 2d 213, 233 (E.D.N.Y. 2004) (same); United States v. Northernaire Plating Co., 670 F. Supp. 742, 748 (W.D. Mich. 1987), aff’d sub nom. United States v. R.W. Mayer, Inc., 889 F.2d 1497, 1507 (6th Cir. 1989) (same). Courts tended to allow apportionment only in relatively simplistic cases, where apportionment could be determined on a single-factor basis. See, e.g., In re Bell Petroleum Servs., Inc., 3 F.3d 889, 903–4 (5th Cir. 1993) (allowing apportionment where one contaminant was at issue and the three PRPs had operated at the site at mutually exclusive times); United States v. Spaulding Composites Co., 202 F. Supp. 2d 336, 337 (D.N.J. 2002) (acknowledging that a single harm may be divisible where remedial activities largely addressed volatile organic compound (VOC) contamination, but defendant did not contribute waste that contained VOCs to the site); Memphis Zane May Assocs. v. IBC Mfg. Co., 952 F. Supp. 541, 548 (W.D. Tenn. 1996) (finding that a single harm is divisible because evidence showed that there are “distinct pollutants that are geographically separated”); Akzo Coatings, Inc. v. Aigner Corp., 881 F. Supp. 1202, 1211 (N.D. Ind. 1994) (finding that a single harm was divisible based on geographic location because “each area of contamination is separate and more importantly, non-contiguous”); United States v. Broderick Inv. Co., 862 F. Supp. 272, 277 (D. Colo. 1994) (holding apportionment was proper where the site consisted of two lots with distinct contamination).

The test for determining when apportionment is appropriate in a CERCLA case was first established in United States v. Chem-Dyne Corp., 572 F. Supp. 802 (S.D. Ohio 1983). This case applied the Second Restatement of Torts’ treatment of apportionment in the CERCLA context. In Chem-Dyne, the government sought to recover CERCLA cleanup costs from 24 defendants. The defendants moved for partial summary judgment on the scope of liability, arguing that joint and several liability should not be imposed. The Chem-Dyne court noted that under the Restatement “when two or more persons acting independently caus[e] a distinct or single harm for which there is a reasonable basis for division according to the contribution of each, each is subject to liability only for the portion of the total harm that he has himself caused.” Id. at 810 (citing Restatement (Second) of Torts §§ 433A, 881 (1976); W. Prosser, Law of Torts 313–14 (4th ed. 1971)). However, “where two or more persons cause a single and indivisible harm, each is subject to liability for the entire harm.” Id. (citingRestatement (Second) of Torts § 875; Prosser at 315–16). The Chem-Dyne court ultimately concluded that there were too many factual questions to reasonably determine that the harm was divisible at the summary-judgment stage.

Id. at 811.

While the Chem-Dyne court held that apportionment was not proper in that case, it did establish the standard two-step analysis that is used for determining whether apportionment is appropriate in a CERCLA case: (1) whether contamination at the site is capable of being divided, and (2) whether there is a reasonable basis for divisibility. See, e.g., Spaulding, 202 F. Supp. 2d at 343. Burlington was the first time these principles were successfully applied in a more complex fact pattern involving multiple divisibility factors.

The Supreme Court’s Decision in Burlington

Burlington involved two adjoining parcels of land, one of which was owned by two railroad companies, Burlington Northern and Santa Fe Railway Company, and Union Pacific Railroad Company. A third company, Brown & Bryant (B&B), operated an agricultural-chemical-distribution business on the parcels. B&B had spilled hazardous substances onto the parcels during the course of its operations. In addition, Shell Oil sold fumigant to B&B, which had been spilled during and after delivery. B&B ultimately went bankrupt. The government sought to hold Shell Oil and the railroads jointly and severally liable under CERCLA section 107 under the theories of arranger and owner liability, respectively, for the response costs to clean up the land.

However, rather than impose joint and several liability on the defendants, the district court concluded that the contamination, while constituting a single harm, was divisible and capable of apportionment. Divisibility was allowed based on geography, time, and volume. The district court found that the railroads owned about 19 percent of the geographic surface area of the entire site and that the time period that the railroad parcel was used by B&B was about 45 percent of the time of B&B’s total site operations. The district court further found that the two chemicals that had spilled on the railroads’ parcel had contributed to 66 percent of the overall site contamination requiring remediation. The district court multiplied 0.19 x 0.45 x 0.66 to reach an apportionment of approximately 6 percent for the railroads. The district court then allowed for a 50 percent margin of error, resulting in a decision that the railroads could be held responsible for 9 percent of the response costs.

The Supreme Court held that Shell Oil was not responsible for any of the response costs as an “arranger” because “knowledge alone is insufficient to prove that an entity ‘planned for’ the disposal . . .” With respect to the railroads, the Court upheld the district court’s apportionment analysis as reasonable. The Court endorsed the Restatement approach to joint and several liability, which allows for the apportionment of costs when a “reasonable basis” for such apportionment exists. Id. at 614 (quoting Restatement (Second) of Torts § 433A(1)(v)). The Court noted that defendants have the burden of proving that a reasonable basis exists for the divisibility of harm. Additionally, the Court explained that equitable factors do not play a role in apportionment analysis; rather, they play a role only in contribution analysis for CERCLA actions brought under section 113.

While the Court did not adopt any specific test for determining apportionment, its decision could be interpreted as approving the three factors used by the district court to determine apportionment as reasonable: (1) geographic distribution of the hazardous substances, (2) the length of time of the defendants’ involvement/operations at the site, and (3) the volume of hazardous substances contributed by the defendants. These three factors have become the basis for many subsequent apportionment decisions.

Post-Burlington Apportionment

Despite the hopes many had that Burlington would lead to more widespread application of divisibility principles in CERCLA actions, in the roughly 40 cases that have discussed apportionment after Burlington, courts have continued the pre-Burlington trend of limiting apportionment.

The two-step apportionment analysis used in Chem-Dyne and Burlington continues to serve as the standard for determining whether apportionment should be imposed. See, e.g.,United States v. NCR Corp., 688 F.3d 833, 838 (7th Cir. 2012). Thus, courts first determine whether the harm is “capable of apportionment.” While this is a question of law, “there will be underlying findings of fact on which the court’s decision will rest.” For example, “the district court will need to decide what type of pollution is at issue, who contributed to that pollution, how the pollutant presents itself in the environment after discharge, and similar questions.” Second, the courts “determine how actually to apportion the damages.” “By its nature, apportionment necessarily requires a fact-intensive, site-specific analysis.” PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161, 182 (4th Cir. 2013). Further, to be divisible, there must be true proportionality of the harm between the defendants. See, e.g., Pakootas v. Teck Cominco Metals, Ltd., 868 F. Supp. 2d 1106, 1121 (E.D. Wash. 2012)(holding there must be “sufficient evidence to reasonably establish each of the PRP’s proportionate contribution to, and share of, the single harm”).

After Burlington, some courts have interpreted the burden of proving a reasonable basis for apportionment to be diminished. See, e.g., Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431, 483 (D.S.C. 2011) (“Some legal commentary and case law have interpreted Burlington Northern to lessen the burden on defendants seeking to avoid joint and several liability by demonstrating a reasonable basis for apportionment.”). Other courts, however, have held that Burlington only affirmed the court’s holding in Chem-Dyne. See, e.g., United States v. Iron Mountain Mines, Inc., No. 91-0768, 2010 WL 1854118, at *3 (E.D. Cal. May 6, 2010) (“Plaintiffs are correct that Burlington Northern does not constitute a change in law as required for reconsideration. Burlington Northern simply reiterated the law as established in 1983 by Chem-Dyne, and then examined the record to resolve a factual question of whether the record supported apportionment. Burlington Northern did not add a new mandate that [courts] must apportion harm in CERCLA cost recovery cases.”).

Courts have split regarding whether harm is divisible when either cause alone would have been sufficient to cause the resulting need for cleanup. The Seventh Circuit has held that a harm is not divisible where“multiple entities independently contribute amounts of pollutants sufficient to require remediation” because “[a]pportionment is improper where either cause would have been sufficient in itself to bring about the result, as in the case of merging fires which burn a building.” NCR, 688 F.3d at 839, 842. NCR involved the cleanup of polychlorinated biphenyls (PCBs) that were allegedly discharged into the Lower Fox River by various companies. One of those companies, NCR, argued that it would no longer comply with an Environmental Protection Agency (EPA) order to perform remediation work in the Fox River because it had performed more than its share of that work. The EPA moved for a preliminary injunction, requesting that the court order NCR to finish the remediation. NCR tried to argue that the harm to the Fox River was divisible based on the volume of PCBs discharged and that remediation costs should be apportioned between all potentially responsible parties. The Seventh Circuit affirmed the district court’s holding that even though NCR contributed only about 6–8 percent of the volume of PCBs found in the contaminated river, NCR was still jointly and severally liable for all of the remediation costs because “the need for cleanup triggered by the presence of a harmful level of PCBs in the River is not linearly correlated to the amount of PCBs that each paper mill discharged.” The government argued that even with only NCR’s contributions, the cost of cleanup (i.e., harm) would be the same. “Even if all that were present in the river were NCR’s contributions, the Lower Fox River would still need to be dredged and capped, because EPA has set a maximum safety threshold of 1.0 ppm of PCB. Anything above that amount . . . requires remediation.” Id.When NCR conducted significant modeling to demonstrate the portion of the PCBs in the river for which it was responsible at the permanent-injunction phase, the district court pointed to flaws in NCR’s analysis and again rejected NCR’s divisibility argument, noting the relationship between the PCBs discharged and the resulting contamination was “quite loose.” United States v. NCR Corp., 960 F. Supp. 2d 793 (E.D. Wis. 2013).

In a contrasting decision, Reichhold, Inc. v. United States Metals Refinery Co., the plaintiff sought reimbursement for the cost of installing a cap as part of a remediation. 655 F. Supp. 2d 400, 448 (D.N.J. 2009). Both the defendant and a third party had caused the contamination necessitating the cap. The court found that because “[e]ach contamination alone would have caused [the agency] to require the . . . cap[,] [t]ogether they constituted a single harm.” That said, the court found that this single harm was divisible between the two parties:

Id. at 448–49.

Consequently, the court did not impose joint and several liability and instead split the damages: The plaintiff was able to recover only half of the costs related to the cap from the defendant; the plaintiff would have to recover the other half of the costs from the third party.

Courts have rejected apportionment theories that do not address the entirety of the harm or the entirety of factors contributing to the harm at a site. See, e.g., Pakootas, 868 F. Supp. 2d at 1117 (rejecting defendant’s apportionment theories because they failed to account for all harm at the site); Bd. of Cnty. Comm’rs of the Cnty. of La Plata, Colo. v. Brown Grp. Retail, Inc., 768 F. Supp. 2d 1092, 1118 (D. Colo. 2011) (holding that apportionment by ownership was not reasonable because it failed to account for the other factors involved in producing the harm, such as the productivity of the facility during each period of ownership).

For example, in PCS Nitrogen, PCS offered several bases for apportionment to the district court, including the amount of fill material each PRP added to the site, the volume of contaminants introduced at the site by different entities, the period of time different entities operated at the site, the percentage of soil disturbed by each PRP on the site, and the number of contaminated soil samples attributable to each PRP. 714 F.3d at 182. While the district court recognized that harm at the site was theoretically divisible based on how much contamination each party contributed to the site and how much soil each party caused to be included in the remediation area, the court rejected the proposed bases for apportionment because they did not properly account for volume from secondary disposals of contaminated soil, did not properly account for all time periods during which contamination took place, and did not “compensate appropriately for changes in the type and intensity of uses and construction on the site over time.” Accordingly, the district court held that the defendants had not shown that there was a reasonable basis for apportionment.

The Fourth Circuit upheld the district court’s decision, explaining that while Burlingtonallowed for apportionment based on the “simplest of considerations” such as “time and land area,” Burlington “neither mandates these ‘simplest of considerations,’ nor establishes their presumptive propriety in every case.” Id. at 183 (citing NCR, 688 F.3d at 842). PCS sought review of the Fourth Circuit’s decision by the Supreme Court. In its petition for a writ of certiorari, PCS argued that by denying apportionment and upholding the district court’s application of joint and several liability, the Fourth Circuit essentially ignored Burlington. The Supreme Court denied PCS’s petition, leaving in place the Fourth Circuit’s decision. PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161 (4th Cir. 2013), cert. denied, 82 U.S.L.W. 3083, 3256, 3277 (U.S. Nov. 4, 2013) (No. 13-139).

Conclusion

On the whole, then, Burlington does not appear to have had much impact on apportionment in CERCLA matters. Courts have interpreted the decision narrowly and have set a high standard for “reasonableness” when it comes to apportionment. With the Supreme Court’s denial of certiorari to PCS and a more recent loss on divisibility arguments in the Seventh Circuit (see above), that narrow interpretation is likely to continue.

Keywords: environmental litigation, CERCLA, potentially responsible party, PRP, Burlington Northern, joint and several liability

_{Bina Joshi is an associate at Schiff Hardin in Chicago, Illinois. She extends her thanks to William Jackson, Vanessa Dittman, and Justin Smith, who provided helpful suggestions during the drafting of this written material.}

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