Quote of the Day - Chuck brings a lot to the band. He has a history with us and he's a terrific arranger and keyboardist.
Supreme Court Agrees To Tell All
It's difficult to parse a 191-page District Court ruling and a 78-page Ninth Circuit ruling down to something easy to understand, but here's my attempt. Note in the last link that the the actual opinion starts on the 37th page - the first part is the dissent. Shell and several railroads, the Burlington, Northern & Santa Fe Railroad, the Atchison, Topeka & Santa Fe Railroad and the Union Pacific Railroad were involved in a toxic contamination site. It's located in Arvin, California just southeast of Bakersfield in an agricultural area, and the United States Environmental Protection Agency and the California DTSC (Department of Toxic Substances Control) have attempted to clean it up. The Arvin site isn't completely clean yet, and both agencies may have to spend more money to clean it up. The chemicals stored on the site were nematocides, which are designed to kill nematodes, microscopic worms that attack the roots of crops.
After their initial cleanup, the two agencies sued Shell and the railroads for the cost under CERCLA (the Comprehensive Environmental Response, Compensation, and Liability Act, the federal statute more commonly known as Superfund) that imposes strict and joint and several liability on the potentially responsible parties. Based on various factors such as time, ownership, size of the parcels and fractions of the hazardous chemicals found on the parcels, the District Court apportioned the cleanup costs, but the manner of apportionment didn't allow the agencies full recovery of the money they spent on the cleanup. The District Court held the railroads only nine percent liable and Shell only six percent liable.
The agencies appealed, and the Ninth Circuit determined that the District Court did not apportion the cost properly, instead assessing the entire cost of cleanup to both Shell and the railroads under CERCLA's strict and joint and several liability scheme. The companies appealed, and the Supreme Court has now agreed to hear the case, which will most likely occur next term in 2009 since their docket is full for the 2008 term. So we probably won't know the outcome until sometime in 2010.
But let's get back to the case. First, the Ninth Circuit majority opinion held Shell liable with the following language: "Shell arranged for the sale and transfer of chemicals under circumstances in which a known, inherent part of that transfer was the leakage, and so the disposal, of those chemicals." Under CERCLA, an entity that "arrange[s] for disposal or treatment . . . of hazardous substances" is strictly liable for the clean-up costs. 42 U.S.C. § 9607(a)(3). The Free Dictionary defines strict liability as: "absolute legal responsibility for an injury that can be imposed on the wrongdoer without proof of carelessness or fault." Shell argues it was not an arranger. Shell's potential liability arises from its delivery of the chemicals to the site, but it contends it has no liability for the cleanup.
Not everyone on the Ninth Circuit agrees that Shell is liable, however, which makes the matter into a horse race. The dissent argued with the majority's finding of liability for Shell, saying: "the panel [improperly] imposes ‘arranger' liability on Shell Oil for agricultural fertilizers that were spilled on the site by the buyer of Shell's product, shipped by a common carrier in non-defective truck tankers, F.O.B. [Free on Board at the] delivery point. The [majority] panel's imposition of arranger liability on a mere seller, which relinquished control over its products upon delivery and before spillage occurred, goes far beyond the statutory language and creates inter- and intra-circuit splits." The Court notes that FOB means "when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them." U.C.C. § 2-319(1)(b). Even so, CERCLA has provisions for transporter liability, which is not yet an issue in this case.
Part of the problem the court faces is the absence of a major player at the Arvin site. The site's operator, Bryant & Bryant is now defunct, but "owned and operated an agricultural chemical distribution facility" for 29 years, and about 15 years into its operations, leased just less than an acre of land from the railroads. That 0.9 acre lease for 14 years drew the railroads into the lawsuit and made them a potentially responsible party liable for the cleanup costs under the statute. The railroads are owners of the site, which makes them liable for the cleanup, a point universally agreed to in the opinion. The question for the railroads revolves around the amount of their liability.
Here's how CERCLA lays out liability according to the Court: "Under its provisions, parties can be liable for cleaning up toxic chemicals if they fit into one or more of the four PRP categories set out in § 9607(a):
(1) the owner and operator of . . . a facility,
(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,
(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person . . . , and
(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities . . . . "
The next question, then, becomes how does the court apportion the liability of those liable? Apportionment is a common law tort remedy, however, not a statutory remedy. Part of the problem in developing the apportionment lies in the statutory remedy afforded by CERCLA - the round hole of common law divisions normally used in typical tort cases don't easily handle the square peg of CERCLA. For example, the causation issue is particularly troublesome. There's nothing that an owner of the property does to "cause" the contamination. Likewise, the delivery of the chemicals didn't cause the contamination. It was the poor handling of the chemicals - spills during transfer and leaking tanks that actually caused the contamination. Nevertheless, CERCLA holds both parties equally responsible. The rub here then is the missing operator who is, under common law, "more liable."
Likewise, the concept of harm has the same round-hole, square-peg problem. The harm to be divided is not the actual contamination, as you would first think, but rather the payment for someone else's remedy of the harm. Then there's the question of equity - how to divide and according to what factors - time, amount of contribution to the contamination or other reasonably applicable measures. Not an easy thing to do between an owner and an arranger. Finally, there's the question of strict liability - the responsibility for the whole amount of the cleanup - something difficult to achieve when the remaining defendants have so far been held to be 15% responsible, especially when the Court says Congress originally intended to collect the cost of cleanup from those who are more responsible than the government, who so far is the only one who paid to clean the site.It's obviously a mess that will take the Supreme Court a few hundred pages to sort out. MIPTC will keep its ear to the ground and you informed of the outcome in a few years, but in the meantime, I'll go out on a limb and predict that Shell will be kept in and the amount of liability paid by Shell and the railroads will be a lot closer to 100%.