Ninth Circuit Finds No CERCLA Arranger Liability for Manufacturer of PCE Recycling Equipment

On July 26, 2011, the Ninth Circuit held that the manufacturer of equipment designed to filter and recycle perchlorethylene ("PCE") could not be found liable as an "arranger" under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601-9675. 

Plaintiff generated PCE-laden wastewater in its dry cleaning operation.  It used the manufacturer's filtering equipment to recycle and capture the valuable PCE for re-use, and then disposed of the filtered wastewater by pouring it down a sewer drain.  The filtered wastewater contained dissolved and invisible PCE that contaminated the surrounding soil, which plaintiff was required to remediate at its own expense.

Plaintiff sought contribution under CERCLA from the manufacturer of the filtering equipment under a theory of arranger liability.  Plaintiff's contribution claimed rested on two contentions: first, that the design of the equipment contemplated and even necessitated the disposal of wastewater contaminated with PCE, such that the manufacturer had taken "intentional steps" and "planned a disposal" of PCE; and second, that the manufacturer had authority to control and actually exercised control over the disposal process.

The Ninth Circuit rejected both contentions.  With respect to the first contention, the court cited Burlington N. & Santa Fe Ry. Co. v. United States, 129 S. Ct. 1870, 1880 (2009), for the proposition that:

[w]hile it is true that in some instances an entity's knowledge that its product will be . . . discarded may provide evidence of the entity's intent to dispose of its hazardous wastes, knowledge alone is insufficient to prove that an entity "planned for" the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.

Noting that the filtering equipment itself was a useful product, the court declined to find that the manufacturer intended its product's use to result in the unlawful disposal of PCE.  It further declined to infer intent based on the claimed inevitability of the disposal of PCE or the manufacturer's failure to warn about the risk of contamination that would result from improper disposal. 

In rejecting plaintiff's second contention, the court noted that the manufacturer had no legal authority to direct the conduct of plaintiff's employees and then dispensed with plaintiff's several factual contentions, finding "a dearth of evidence" indicating that the manufacturer exercised actual control over the disposal process.  The court also rejected plaintiff's state law theories of nuisance and trespass, finding that neither theory was supported by evidence sufficient to give rise to a genuine dispute.

The Ninth Circuit's opinion may be found here.

If you have any questions concerning this topic, please contact K. Eric Adair from our office, or the KMTG attorney with whom you normally consult.