Cercla divisibility and Allocation Issues Gail Wurtzler Davis Graham & Stubbs llp denver, co I. Divisibility

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CERCLA Divisibility and Allocation Issues
Gail Wurtzler

Davis Graham & Stubbs LLP

Denver, CO
I. Divisibility

CERCLA does not mandate joint and several liability. Burlington N. & Santa Fe. Ry. Co. v. United States, 556 U.S. 599, 129 S. Ct. 1870, 1881 (2009). The liability provision of the statute itself contains no reference to joint and several liability for remediation of hazardous substances. 42 U.S.C. § 9607. Instead, Congress purposefully omitted such a statement in order that courts might apply common law principles to determine whether persons who are strictly liable also are jointly and severally liable for CERCLA response costs. See United States v. Chem-Dyne Corp., 572 F. Supp. 802, 808 (S.D. Ohio 1983) (cited with approval in Burlington N., 129 S. Ct. at 1880-881).

The starting point for analyses under CERCLA of whether liability is several or joint and several is Section 433A of the Restatement (Second) of Torts. Burlington N., 129 S. Ct. at 1881. “Damages for harm are to be apportioned among two or more causes where (a) there are distinct harms, or (b) there is a reasonable basis for determining the contribution of each cause to a single harm.” Restatement (Second) of Torts, § 433A(1) (1979); see also Restatement, § 881. See, e.g., Burlington N., 129 S. Ct. at 1881 and cases cited therein. “[I]f some logical, reasonable, or practical basis of apportionment exists, a polluter should properly be held responsible for only that percentage of environmental harm attributable to his specific release.” Cereghino v. Boeing Co., 873 F. Supp. 398, 402-03 (D. Or. 1994). This approach to apportionment or divisibility of harm “has been fully embraced by the Courts of Appeals,” Burlington N., 129 S. Ct. at 1881, and by the United States Supreme Court. Id. at 1880-83.

Commingled contamination at a location is not synonymous with indivisible harm. Cereghino, 873 F. Supp. at 402; United States v. Alcan Aluminum Corp., 990 F.2d 711, 722 (2d Cir. 1993). Even commingled harm may be divisible. Alcan, 990 F.2d at 722.

A number of different factors may distinguish among causes of contamination and therefore show contamination is capable of apportionment. They may include: types of contaminants contributed; levels of those contaminants; ratios of different contaminants to one another; relative toxicity of contaminant contributions; geographic distribution of contamination; time limitations such as period of operations and duration of ownership or occupancy; migratory potential of contaminants; and degree of migration, among others. See, e.g., Burlington N., 129 S. Ct. at 1883-84 (reasonable for district court to consider location of primary pollution, contribution of spills by defendant railroads to overall contamination requiring remediation, size of leased parcel, duration of lease, and types of products); Cereghino, 873 F. Supp. at 402-03 (TCA, when mixed with TCE, did not contribute to harm caused by TCE); United States v. Hercules, Inc., 247 F.3d 706, 717-18 (8th Cir. 2001) (“separate and distinct subterranean ‘plumes’ of groundwater contamination”); United States v. Township of Brighton, 153 F.3d 307, 319-20 (6th Cir. 1998) (geographic, volumetric and time limitations); In re Bell Petroleum Servs., Inc., 3 F.3d 889, 902-04 (5th Cir. 1993) (volumes and operation periods as bases for apportionment); United States v. Broderick Inv. Co., 862 F. Supp. 272, 277 (D. Colo. 1994) (geographic; based on two plumes of pentachlorophenol contamination).

Environmental harm may be divided or apportioned among successive operators by time period as well as by volume of material used or disposed. See, e.g., Township of Brighton, 153 F.3d at 319-20 (geographic, volumetric and time limitations); In re Bell Petroleum Servs., Inc., 3 F.3d 889, 902-04 (5th Cir. 1993) (volumetric basis for apportionment among three operators over a ten-year period of total operations). Apportionment among successive operators on the basis of time each operated is also appropriate regardless of whether one of the operators owned the plant during periods others operated. See, e.g., Bell Petroleum, 3 F.3d at 903-04.

After Burlington Northern, practitioners anticipated that federal district courts would follow the Supreme Court’s lead and that decisions in which liability was found to be divisible would become more common. That has not occurred. Instead, the lower federal courts acknowledge Burlington Northern’s direction that a reasonable basis for apportionment “need not be mathematically precise, and may be based on the ‘simplest of considerations,’ e.g., time and land area,” but often find that the facts of the particular case are more complex than the facts of Burlington Northern and therefore require more stringent proof to divide harm and apportion liability. See, e.g., PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161, 183 (4th Cir. 2013). As a result, of the tens of federal district court CERCLA cases since Burlington Northern in which a defendant raised a divisibility defense, not one has found harm to be divisible. See cases collected in Anthony G. Hopp et al., Four Years Later: How Has BNSF Changed CERCLA Practice?, Lexology (Nov. 20, 2012), available at http://www.toxictortlitgationblog.com/CERCLA.pdf; Steven Ferrey, Reconfiguration of Superfund Liability?: The Disconnection Between Supreme Court Decisions and the Lower Federal Courts, 41 Sw. L. Rev. 589, 610-12 (2012).

II. Allocation

For a defendant at a multiple PRP site, the next best alternative to seeking a divisibility determination is to seek a reasonable allocation of liability. Allocation cannot provide a defendant with a determination that it only has several liability for its contribution to the CERCLA site but it can provide a defendant with an equitable determination that its share of the joint and several liability is a specific percentage. If the other PRPs are financially solvent entities, there are no orphan shares, and the final remedy is not unreasonably expensive and technically straightforward, such a determination may, as a practical matter, provide a defendant with an acceptable and fair outcome even under a joint and several liability structure.

Allocation arises under CERCLA § 113(f)(1) which authorizes a contribution action for PRPs with common liability stemming from an action instituted under § 107. United States v. Atlantic Research Corp., 551 U.S. 128, 139 (2007). A PRP need not itself have incurred response costs to assert a claim for contribution under CERCLA § 113(f)(1). See Atlantic Research Corp., 551 U.S. at 139 (distinguishing between cost recovery action under CERCLA § 107(a) and contribution action under CERCLA § 113(f)(1)). To prevail on a Section 113(f)(1) contribution claim, the party seeking contribution must prove: (1) both it and the others to whom a share would be allocated are liable or potentially liable under CERCLA § 107(a); and (2) the party seeking contribution and an allocation paid or will pay more than its equitable allocable share of response costs and is entitled to contribution for the excess amount. See 42 U.S.C. § 9613(f)(1); Tosco Corp. v. Koch Indus., Inc., 216 F.3d 886, 892, 894-95 (10th Cir. 2000).

“[T]he court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate.” 42 U.S.C. § 9613(f)(1). Under CERCLA, the district court is authorized to make the final equitable allocation of costs and to choose “which equitable factors will inform its decision on a given case.” NCR Corp. v. George A. Whiting Paper Co , 768 F.3d 682, 695-96 (7th Cir. 2014). A court “may consider several factors, a few factors, or only one determining factor depending on the totality of the circumstances presented to the court.” NCR Corp., 768 F.3d at 695-96 (internal quotation omitted); Bancamerica Commercial Corp. v. Mosher Steel of Kan., Inc., 100 F.3d 792, 802, (10th Cir. 1996) (internal quotation omitted). Ultimately, the court “must balance the equities in light of the totality of the circumstances.” FMC Corp. v. Aero Indus., Inc., 998 F.2d 842, 847 (10th Cir. 1993); see Bancamerica, 100 F.3d at 802-03.

Among the factors that may be considered by courts in determining the equitable allocation among liable parties are the so-called Gore Factors:

  • The ability of the parties to demonstrate that their contribution to a discharge, release, or disposal of a hazardous substances can be distinguished;

  • The amount of hazardous substances involved;

  • The degree of toxicity of the hazardous substances involved;

  • The degree of involvement by the parties in the generation, transportation, treatment, storage, or disposal of the hazardous substances;

  • The degree of care exercised by the parties with respect to the hazardous

substances concerned, taking into account the characteristics of such hazardous substances; and

  • The degree of cooperation by the parties with the federal, state, or local officials to prevent any harm to the public health or the environment.

See United States v. Colo. E. R.R. Co., 50 F.3d 1530, 1536 n.5 (10th Cir. 1995); Farmland Indus. v. Colo. & E. R.R. Co., 944 F. Supp. 1492, 1498 (D. Colo. 1996). The first Gore factor appears to overlap in at least part with the divisibility of harm analysis. Therefore, if a party lost its divisibility argument, the same evidence may nonetheless be relevant and admissible for allocation purposes.

Courts are not required to consider each of the Gore factors, nor are they limited to considering only the Gore factors. Litgo New Jersey Inc. v. Commissioner New Jersey Dept. of Envt’l Protection, 725 F.3d 369, 388 (3rd Cir. 2013). There is no definitive list of factors to be considered in every case. See, e.g., Babylon Landfill Joint Defense Group v. 1042 Collision Repairs, Inc. , No. 11-CV-5387 (PKC), 2014 WL 4245947, *2 (E.D. N.Y. Aug. 26, 2014) (the Second Circuit has not set forth a definitive list of factors to consider).

Courts may also consider the so-called “Torres Factors” named after the “critical factors” enumerated by then-Judge Torres, which include:

  • The extent to which cleanup costs are attributable to wastes for which a party is responsible;

  • The party’s level of culpability;

  • The degree to which the party benefitted from disposal of the waste; and

  • The party’s ability to pay its share of the cost.

See, e.g., Lockheed Martin Corp. v. United States, 35 F. Supp.2d 92 (D.D.C. 2014); see also United States v. Davis, 31 F. Supp.2d 45, 63 (D. R. I. 1998); Roberts v. Heating Specialist, Inc., No. 3:12-cv-01820-SI, 2014 WL 3845877, *17 (D. Or. Aug. 5, 2014).

Courts have also considered the following additional factors which may be relevant in light of the facts of a specific case:

  • Relative fault, see, e.g., Farmland, 944 F. Supp. at 1499;

  • The state of mind of the parties, id. at 1498;

  • Economic benefit, id. at 1500-01;

  • The circumstances and conditions involved in the property’s conveyance, including the price paid and discounts granted, Amoco Oil Co. v. Borden, Inc., 889 F.2d 664, 673 (5th Cir. 1989);

  • The migratory potential of the hazardous substance, see United States v. Conservation Chem. Co., 628 F. Supp. 391, 401 (W.D. Mo. 1985);

  • The benefit to the party, the party’s knowledge of the operation, and its acquiescence to those dangers, degree of fault, and relative equality, see Weyerhauser Co. v. Koppers Co., 771 F. Supp. 1420, 1426 (D. Md. 1991);

  • The value of the contamination-causing activities to furthering the government's national defense efforts. Cadillac Fairview/Cal., Inc. v. Dow Chemical Co., 299 F.3d 1019, 1026 (9th Cir.2002); United States v. Shell Oil Co., 294 F.3d 1045, 1060 (9th Cir.2002);

  • The existence of an indemnification agreement demonstrating “the parties' parties' intent to allocate liability among themselves.” Halliburton Energy Servs., Inc. v. NL Indus., 648 F.Supp.2d 840, 863 (S.D.Tex.2009); see also Beazer E., Inc. v. Mead Corp., 412 F.3d 429, 447 (3d Cir.2005).

  • The financial benefit that a party may gain from remediation of a site.” Litgo New Jersey, Inc. v. Martin, 2011 WL 65933, at *9 (D.N.J. Jan. 7, 2011); see also City of Wichita, Kansas v. Trustees of APCO Oil Corp. Liquidating Trust, 306 F.Supp.2d 1040, 1101 (D.Kan.2003);

  • The potential for windfall “double recoveries” by a plaintiff. See, e.g., Litgo N.J. Inc. v. Comm'r N.J. Dep't of Envtl. Prot., 725 F.3d 369, 391 (3d Cir.2013); Friedland v. TIC–The Indus. Co., 566 F.3d 1203, 1207 (10th Cir.2009).

  • The potential that a plaintiff might “make a profit on the contamination” at the expense of another PRP. See Vine St., LLC v. Keeling ex rel. Estate of Keeling, 460 F.Supp.2d 728, 765 (E.D.Tex.2006).

  • CERCLA's intent that “‘responsible parties, rather than taxpayers, bear the costs’” of cleanup. Yankee Gas Servs. Co. v. UGI Utilities, Inc., 852 F.Supp.2d 229, 256 (D.Conn.2012) (quoting Marsh v. Rosenbloom, 499 F.3d 165, 182 (2d Cir.2007)).

In light of the multiple potential factors that a court may consider when exercising its equitable discretion, each case will be unique, and the outcome generally will not be a matter of law or something that can be decided on a summary judgment motion. Instead, the outcome will depend on the particular facts of that case, i.e., the nature, extent and cause of the contamination at issue and the knowledge and conduct of the parties.

In most cases, experts in various disciplines will be a critical part of the litigation team. Scientific and technical experts will be required to address the case-specific facts regarding the contamination and their meaning for allocation. In cases where the events resulting in the contamination occurred decades ago and the percipient witnesses are no longer available to testify, industrial historians may be critical witnesses to describe historic activities and the remaining records of those activities. Depending upon the site, accounting experts may also be needed to summarize and explain ledgers, shipping records and other documents reflecting quantities and type of materials used, transported, treated, processed, or disposed of.


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