June 01, 2015 Articles

Federal Court Rules in Favor of Volumetric Approach to Divisibility

The Eastern District of Wisconsin ruled in favor of a volumetric approach to CERCLA divisibility in the Fox River sediment cleanup case.

By Shawn M. LaTourette and Irvin M. Freilich

In the latest development in the litigation over the environmental cleanup of the Fox River in northeastern Wisconsin, in United States v. NCR Corp., the U.S. District Court for the Eastern District of Wisconsin has found that NCR Corporation’s liability for the remediation of a section of the river is divisible—not joint and several under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Fox River is a Superfund site contaminated primarily with polychlorinated biphenyls (PCBs) from historic paper manufacturing and recycling facilities along the river. The ruling in favor of divisibility is believed to be the first such judicial decision that has ruled in favor of a divisibility defense since the Supreme Court’s 2009 decision in Burlington Northern & Santa Fe Railway Co. v United States, 556 U.S. 599 (2009). Whether it is an indication of how courts may address divisibility and apportionment of cleanup costs at complex sediment sites and other sites in the future remains to be seen.

At Trial, Denial of the Divisibility Defense
The district court’s May 15, 2015, ruling follows a trial and subsequent appeal in which NCR’s potential liability for the remediation of a section of the river known as Operable Unit 4 (OU4) was a primary focus. Following a December 2012 bench trial, the district court determined that the harm caused to OU4 was not “theoretically capable of divisibility.” United States v. NCR Corp., 960 F. Supp. 2d 793 (E.D. Wis. 2013). That determination rested, in part, on the way harm was defined. The court explained that “during the trial, it was made clear that the amount of PCBs a given party had discharged bore little relation to the harm that existed in OU4.” Id. at 810. Rather, harm was defined by reference to the 1 part per million (ppm) remedial action level, whereby an area of sediment was deemed harmful “regardless of whether it has 1.1 ppm or 35 ppm of PCBs.” Id. The district court concluded that “even a very large increase in PCB contamination does not move the needle in making that area any more harmful. Put another way, once an area qualified as contaminated, additional PCB loads do not make that area any more contaminated, at least from a remedial perspective.” Id. The district court did not find persuasive NCR’s testimony concerning the extent to which its releases alone affected the overall remedial cost. Thus, the district court found that the harm was not theoretically capable of divisibility and did not reach the second prong of the analysis, i.e., whether there was a reasonable way of apportioning damages.

The Seventh Circuit Steps In
On appeal, the Seventh Circuit found error in the district court’s treatment of the harm as binary because the “1.0 ppm remedial action level is not quite the line of demarcation it appeared to be,” noting the Environmental Protection Agency’s remedial goal of a surface-weighted average concentration of 0.25 ppm, which “drives the ultimate harm with which EPA is concerned, i.e., the harm to human health and the environment.” United States v. P.H. Glatfelter Co., 768 F.3d 662 (7th Cir. 2014). Therefore, the Seventh Circuit explained, the harm is better understood as continuous and not binary because PCB concentrations below 1.0 (and even 0.25) ppm still pose a threat to human health and the environment, and that risk of harm increases with concentrations at higher levels. Id. at 677. The Seventh Circuit concluded that “the harm would be theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations.” Id. at 678. If NCR could make this showing, the court anticipated that “a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.” Id.

On Remand, Divisibility Is Revived
On remand, the district court explained that at trial, the parties, their experts, and the court all reviewed the evidence through the binary lens subsequently rejected on appeal. Now, the district court reasoned, “the harm is more properly defined as a release’s toxicity or danger to health and the environment, as opposed to the release’s propensity to trigger a costly remedy.” United States v. NCR Corp., No. 10-C-910 (E.D. Wis. May 15, 2015). “Simply put, the more PCBs, the more harm.” Working from the premise that “harm is essentially toxicity,” the district court concerned itself with the extent to which NCR’s releases contributed to the contamination in OU4. To answer that question, the district court looked no further than evidence presented at the trial by one of NCR’s experts who adopted, for argument’s sake, the high-end estimate of the volume of NCR’s discharge initially developed by one of NCR’s adversaries. Slip op. at 6. Critical to the district court’s new analysis was that no party had argued that NCR’s releases were materially more than these high-end estimates, which accounted for 27–43 percent of the PCB contamination (i.e., the harm) in OU4. Id. at 12–15. Given the “more abstract definition of harm,” the district court found that apportionment was theoretically possible if “a party can demonstrate a reasonable correlation between the volume of PCBs it is responsible for and the concentration in the river.” Id. at 11. In the district court’s opinion, NCR carried this burden by incorporating the high-end discharge estimates into its model of NCR’s impacts on OU4.

Following the Seventh Circuit’s edict, the district court reasoned that “cleaning up a given portion of the river becomes more expensive the more toxic that portion is.” Id. at 14–15. By correlating cost to harm, the district court concluded that it would be reasonable to apportion costs by reference to the amount of contamination contributed by a party. Id. at 15. Thus, if NCR contributed 27–43 percent of the contamination (i.e., the harm), “it also contributed roughly the same amount to the cleanup cost.” Id. The court acknowledged that this method of apportionment was not scientifically precise but found it reasonable, noting that if NCR is responsible for 27–43 percent of the PCBs remaining in OU4, “[i]t requires no stretch of science or logic to conclude that NCR would also be responsible for a similar amount of cleanup costs.” When incorporating that high-end estimate into its own model, NCR reached a 28 percent share of cleanup costs throughout OU4. Although this unit-wide share would inevitably underestimate NCR’s impact in some areas of OU4, it would overestimate its impact in others, leading the court to find it “reasonably accurate.” Id. at 17–18.

Divisibility: Where Is the Bar?
The district court’s latest decision suggests that a divisibility analysis should not be driven by the extent to which a potentially responsible party’s release increased concentrations of a hazardous substance above a remedial action level. Rather, it suggests a “simple volumetric approach” to divisibility, id. at 6, which “demands much less from an expert.” Id. at 8. It essentially equates volumetric apportionment with divisibility of harm, and divisibility of harm with reasonable apportionment of remedial costs. In short, it makes the determination of the volume of a party’s release the primary consideration in avoiding joint and several liability under CERCLA. This argument has been rejected by other courts that have considered this issue. See, e.g.Pakootas v. Teck Cominco Metals, Ltd., No. CV-04-256-LRS (E.D. Wash. Apr. 4, 2012); Ashley II of Charleston, LLC v. PCS Nitrogen Inc., No. 2:05-cv-2782-MBS (D.S.C. May 27, 2011). However, the decision, if it stands, will undoubtedly lower the bar for divisibility, perhaps to a greater degree than envisioned by the Supreme Court in Burlington Northern. Particularly in light of the Fox River parties’ repeated visits to and remands from the Seventh Circuit, the degree of reliance that potentially responsible parties at other sites place on this decision should be critically evaluated.

Keywords: environmental litigation, Fox River, NCR Corp., divisibility

Shawn M. LaTourette is an associate and Irvin M. Freilich is a director with Gibbons P.C. in Newark, New Jersey.

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