Consolidation Coal Co. v. Georgia Power Co., 781 F.3d 129 (4th Cir. 2015).Georgia Power Company, an electric utility, used electrical transformers to generate electricity. 781 F.3d at 144. When it stopped using transformers, Georgia Power inspected them, tested them for PCBs, and discarded transformers that were unusable or contained PCBs at levels exceeding 50 parts per million pursuant to the Toxic Substances Control Act requirements. Id. at 144–45. Georgia Power sold at auction those transformers that could be repaired and reused after it drained and removed the oil from the transformers. Id. at 145. During the 1980s, Ward Transformer Company—which was in the business of purchasing used transformers, repairing and reconditioning them, and then reselling them—purchased 101 used transformers from Georgia Power at four auctions. Id. at 145, 151. Some of the transformers that Ward acquired included oil that had not been drained or residual oil containing PCBs. Id. at 145. After reconditioning and rebuilding some transformers in accordance with its customers’ specifications, Ward resold all 101 transformers in working condition to third parties for a profit. Id.at 145–46. None were sold for scrap. Id. at 146. PCB-laden oil was discharged at the Ward site during the time that Ward stored and worked on the transformers.
In addition, in 1980, Savannah Electric and Power Company, which later merged with Georgia Power, replaced all its transformers that contained PCBs. Id.Savannah Electric sold 20 such transformers at auction to Electric Equipment Company of New York (EECNY), none of which had been drained of oil containing PCBs. The transformers were in good shape, lacked problems, and required no remanufacturing other than alteration of outdated voltage configurations in some instances. EECNY shipped the transformers to the Ward site, and after Ward updated the voltage configurations of certain transformers, Ward sold all 20 transformers for a profit. PCBs were released at the Ward site at that time.
Consolidation Coal Company and Duke Energy Progress, Inc., initiated cleanup at the Ward site pursuant to an administrative settlement with the United States Environmental Protection Agency, and PCS Phosphate Company, Inc., subsequently joined the remediation efforts pursuant to a trust agreement with Consol and Progress. Consol and Progress then sued Georgia Power, PCS, and others, seeking contribution for cleanup costs under section 107(a)(3) of CERCLA. PCS counterclaimed and asserted a cross-claim against Georgia Power and others for contribution. Id. at 146–47. Consol, Progress, and PCS sought to recover the cleanup costs from Georgia Power and others who sold transformers to Ward or sent transformers to the Ward site, alleging that they “arranged for disposal” of PCBs under section 107(a)(3) of CERCLA.
The United States Court of Appeals for the Fourth Circuit in Georgia Power affirmed the district’s court grant of summary judgment in favor of Georgia Power because Georgia Power lacked the requisite intent for disposal for purposes of CERCLA arranger liability. The Fourth Circuit concluded that no direct evidence existed that Georgia Power intended to arrange for the disposal of PCBs when it sold used transformers. Id. at 150. Rather, the evidence showed that Georgia Power sold transformers at auction to generate revenue. The mere fact that Georgia Power called the sales of used transformers “scrapping” and “disposals” in its internal documents did not demonstrate that Georgia Power possessed the necessary intent to dispose for purposes of arranger liability because it was clear Georgia Power used those terms to reflect transformers that were “actually sold” to others.
The Fourth Circuit also did not find any circumstantial evidence of Georgia Power’s intent to dispose of PCBs. To reach this conclusion, the Fourth Circuit applied four factors enumerated in Pneumo Abex Corp. v. High Point, Thomasville & Denton Railroad Co., 142 F.3d 769, 775 (4th Cir. 1998), for determining whether a party arranged for the disposal of a hazardous substance or merely sold a valuable product: (1) “the intent of the parties to the contract as to whether the materials were to be reused entirely or reclaimed and then reused”; (2) “the value of the materials sold”; (3) “the usefulness of the materials in the condition in which they were sold”; and (4) “the state of the product at the time of transferral (was the hazardous material contained or leaking/loose).” Id. at 148–49. The Fourth Circuit concluded that these factors, taken individually or together, counseled against a finding that Georgia Power intended to dispose of PCBs. Id. at 155.
First, the Fourth Circuit concluded that the evidence showed Georgia Power sold the used transformers entirely for reuse and Ward intended to reuse the transformers to the fullest extent. Id. at 151. There was no evidence that Georgia Power or Ward intended for the transformers to be scrapped or sold for parts as reclaimed materials. Id. at 151–52. Moreover, at the time of sale, Georgia Power and Ward did not have any agreement on how Ward would handle the PCB-containing oil or parts. Second, the Fourth Circuit found that the used transformers sold by Georgia Power had marketable commercial value. Id. at 152–53. Georgia Power sold the used transformers at competitive auctions for amounts “in excess of scrap value” so that they could be resold to third parties. Id. at 152. Ward, for its part, profited from the resale of the transformers, reselling most, if not all, of the transformers to third parties for “thousands of dollars more than what Ward paid Georgia Power” after rebuilding and reconditioning them. Id. at 152–53. In addition, there was no evidence that Ward paid less for transformers based on the presence or absence of PCBs—a fact that would have suggested Georgia Power intended to get rid of waste when it sold the used transformers. Id. at 153. Third, the Fourth Circuit concluded that the concentration of PCBs did not factor into the usefulness of the transformers sold by Georgia Power. Fourth, the Fourth Circuit stated that the evidence showed the transformers including PCB-containing oil were not leaking and were capped when Georgia Power sold them to Ward. Id. at 154. No evidence existed that any transformers leaked during the sale transfer. Lastly, in addition to the Pneumo Abex factors, the Fourth Circuit analyzed whether Georgia Power had knowledge of any spills of oil containing PCBs by Ward and concluded that Georgia Power did not have even knowledge of the disposition and processing of the transformers after Ward purchased them, much less knowledge of spills. Id. at 154–55.
Furthermore, in circumstances “fall[ing] squarely on the side of a legitimate sale and against arranger liability,” the Fourth Circuit in Georgia Power concluded that Savannah Electric (which merged into Georgia Power) did not intend to dispose of PCBs when it sold 20 used, but useable and working, transformers at auction because Savannah Electric intended for the transformers to be reused entirely; the transformers retained significant value; the transformers were in useful condition; and the transformers did not leak at the time of sale. Id. at 155. For these reasons, the Fourth Circuit affirmed the district court’s ruling that Georgia Power lacked the requisite intent for arranger liability under section 107(a)(3) of CERCLA.