Falling under the Environmental Protection Agency’s (EPA) hammer of “joint and several liability” in contaminated site cleanup cases is a costly proposition. Recently, the Supreme Court has thrown open the door to dividing these costs, and courts are now considering how to do it.
Joint and several liability is based on the legal concept that one entity can be solely responsible for the entire cost of cleanup regardless of whether other companies may have contributed to the problem. The EPA often threatens to seek full liability against companies that decline to settle. Contractors and site development professionals have potential liability if they work on or use sites that are contaminated. Site developers may be liable if they own or lease them.
In 2009, the Supreme Court endorsed “divisibility”—the notion that apportionment, not joint liability, is proper in some cases. This endorsement was widely viewed to open the possibility of settlements with the EPA based on fair shares for liability. But how can divisibility be proven?
Courts Attempt to Develop a Standard
In Burlington Northern & Santa Fe Railway Co. v. United States, the Supreme Court reviewed the EPA’s claim that a group of railroads owning a portion of a site should be liable for millions of dollars in cleanup costs for the entire site. At the trial court level, the railroads had been held liable for 9 percent of the costs. The trial court’s decision was the first time a court had divided cleanup liability.
On appeal, the 9th Circuit Court of Appeals sided with the EPA’s argument that joint and several liability must be imposed. The court placed a huge burden of proof on the railroads to prove divisibility and did not find support for it in the trial court record.
In turn, the Supreme Court reversed the decision and returned the case to the trial court. The Supreme Court pointed to a number of facts showing divisibility, including the railroads’ ownership of only 19 percent of the surface area of the site, the main polluter’s lease of that property for only 45 percent of the time that it operated in the area, the volume of contaminants on other portions of the site that were much greater than the volume present on the railroads’ property, and the fact that only two chemicals of concern were used on the railroads’ property.
Courts Attempt to Apply a Standard
In the last seven years, only one other court has adopted divisibility; then it backed off. The case, United States v. NCR Corp., involved the remediation of—and disposal of polychlorinated biphenyls (PCBs) into—portions of the Fox River in Wisconsin.
In May 2015, after two trials, NCR was held liable for 43 percent of one area and 23 percent of another. In October, after the EPA asked for reconsideration, the trial court reversed itself, stating NCR’s divisibility evidence was unreliable.
How to Present the Claim
The Supreme Court in Burlington Northern provides guidance by quoting the District Court’s finding that the case was a “classic ‘divisible in terms of degree’ case.” Time periods, ownership interest and each party’s contributions are a starting point for asserting divisibility.
In a recent matter, site contamination from several sources that entered, traveled through and mixed with groundwater required cleanups and infrastructure improvements at an estimated cost of $50 million to $100 million. To establish divisibility, the following engineering and legal factors relatable to the contamination and costs were systematically compiled, checked and evaluated.
- Area. Property deeds, parcel maps, site facility and operation maps, and aerial photographs were used to determine the contamination source areas.
- Time. Property sale closing records, aerial photographs, and site facility and operations maps helped determine the percentage of the total time period that operations likely contributed to contamination.
- Role of the responsible party. A business’s status as owner, lessor, lessee, tenant, operator, contractor, transporter or disposal facility may provide a qualitative weighting factor.
- Contaminant type. Multiple contaminants may contribute to the remediation costs, such as an additional treatment technology.
- Contaminant volume. The volume can be quantified as a relative concentration that must be treated, or volume of groundwater such as gallons per minute that must be processed.
After considering all of these factors, a project team must employ strategic and sound engineering, environmental and legal analysis to best advance the prospects of court acceptance of divisibility.