24 ELR 10665 | Environmental Law Reporter | copyright © 1994 | All rights reserved
When Is a Transporter an Arranger Under CERCLA?
Gerard M. Giordano
Gerard M. Giordano represented Nicholas Enterprises, Inc., in the litigation of New York v. SCA Services, Inc. Mr. Giordano is associated with the firm of Cole, Schotz, Meisel, Forman & Leonard in Hackensack, New Jersey. He specializes in representing clients in legal aspects of environmental, health and safety matters, including CERCLA matters, permit programs, enforcement matters, and real estate, and commercial transactions involving environmental issues.
[24 ELR 10665]
In New York v. SCA Services, Inc.,1 the U.S. District Court for the Southern District of New York rejected the notion that a transporter cannot be an arranger under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).2 This Dialogue reviews the parties' arguments and the court's opinion. It then analyzes the impact this case will have on transporters.
Background
Under CERCLA, four classes of persons may be liable for hazardous waste cleanup costs: Current owners and operators,3 owners and operators at the time of disposal,4 generators and arrangers,5 and transporters.6 Under § 107(a)(3), a person could be held liable for cleanup costs as a result of merely arranging for the disposal of waste that it owned or possessed.7 Under § 107(a)(4), a transporter could be held liable for releases or threats of release that occur from a site to which the transporter takes the waste.8 Typically, a transporter will not be held liable for cleanup costs at a site if it did not select the site at which the waste is disposed of.9
In SCA Services, a garbage collection company argued that it could only be held liable as a transporter, not as an arranger.10 This would have absolved the company of liability for the cleanup costs at issue because the site where the costs were incurred was not the facility selected by the company when it disposed of the waste; the site where the cleanup costs were incurred was a landfill where the intermediary company had subsequently disposed of the waste.11 The court determined, however, that the garbage collection company could be held liable as an arranger under CERCLA § 107(a)(3).12
New York v. SCA Services, Inc.
In SCA Services, the state of New York and the town of Tusten sued SCA Services, Inc. (SCA) and other defendants for damages arising out of the alleged disposal and release of hazardous substances at the Cortese landfill in Narrowsburg, New York. SCA brought a third-party action against Nicholas Enterprises, Inc. (Nicholas) and other third parties. SCA alleged, among other causes of action, that Nicholas was jointly and severally liable as an arranger for all costs incurred or to be incurred in connection with the cleanup of the Cortese landfill.13
Nicholas is a garbage collection company and engages in the collection and transportation of solid waste.14 Its customers are commercial and industrial establishments. Typically, Nicholas collects waste from customers for transportation to a disposal site.15 In this case, Nicholas picked up drummed waste from Jersey Dyeing, Inc. for transportation to a disposal site, but found that its disposal sites were unavailable for drummed waste. Nicholas reached an agreement with Gaess Environmental Services Corporation (Gaess) -- predecessor to SCA -- to deliver the drummed wastes to Gaess' Passaic facility.16 Gaess then disposed of the waste at the Cortese landfill site.17 Nicholas played no role in Gaess' selection of the Cortese landfill site.18
[24 ELR 10666]
The Argument Against Holding Transporters Liable as Arrangers
Relying on the opinion of the U.S. District Court for the Western District of Washington in United States v. Western Processing Co.,19 Nicholas argued in a motion for summary judgment that transporters cannot be held liable as arrangers under CERCLA § 107(a)(3). Nicholas also contended that congressional intent behind CERCLA dictates that transporters should incur liability only under § 107(a)(4)20 and generators under § 107(a)(3).21
Nicholas attempted to expand the Western Processing case by arguing that because it was involved in the transportation of waste it could not be held liable as an arranger under CERCLA § 107(a)(3).22 The Western Processing court had noted that there was no basis for interpreting § 107(a)(3) as applying to transporters.23 According to the court, it made more sense to read § 107(a)(3) and (a)(4) as addressing separately the liability of (i) generators and arrangers, and (ii) transporters, respectively. The court concluded that § 107(a)(3) "is not a CERCLA provision under which transporters may be liable."24 Nicholas argued that this statement should be read broadly to protect all transporters from § 107(a)(3) liability.
The Argument for Holding Transporters Liable as Arrangers
SCA successfully distinguished the facts of Western Processing from the facts of SCA Services.25 In Western Processing, the transporters disposed of the material received from generators directly at the facility that was subject to cleanup under CERCLA.26 In SCA Services, Jersey Dyeing, Inc., the generator, arranged to have Nicholas dispose of the hazardous substances, but played no role in Nicholas' arrangements with Gaess to dispose of the drummed wastes at Gaess' Passaic facility. Gaess then disposed of the material at the Cortese site.27 The facts in SCA Services are more amenable to imposing arranger liability on the transporter than the facts in Western Processing because Nicholas acted more like an arranger than did the transporter in Western Processing.
SCA also noted that the Second Circuit broadly defined arranger liability under § 107(a)(3) in General Electric Co. v. AAMCO Transmissions, Inc.28 In General Electric, the Second Circuit held that parties who merely had the opportunity to control a third party's disposal of hazardous substances, but had no obligation to do so, could not be held liable as arrangers.29 The court stated that CERCLA liability arises out of the "obligation to exercise control over hazardous waste disposal.…"30 Thus, a party is liable as an arranger if it had some obligation to arrange for or direct the disposal of hazardous waste.31 SCA argued that Nicholas was not only involved in, but controlled the decision to dispose of the waste by arranging to take the hazardous waste to Gaess' Passaic facility for disposal when it was unable to use its own direct disposal outlet.32
The Court's Opinion
The court decided that because Nicholas possessed a hazardous substance, it can be liable as an arranger even though it transported the waste to a third party who ultimately disposed of it at the site that became subject to cleanup.33 It noted that liability should accrue to Nicholas because Nicholas "assumed an obligation to exercise control over the disposal of the hazardous substances it received from its customer, and then arranged with Gaess to dispose of the waste."34 Accordingly, the court held that Nicholas can be held liable under the "arranger" provisions of CERCLA.35
The court also agreed with SCA that the facts in Western Processing are distinguishable from the facts in SCA Services. However, the court distinguished the Western Processing case from a different perspective. The court focused on the fact that Nicholas did not "act as a transporter who transported hazardous waste from a customer's site to a disposal site selected by the customer.…"36 The court noted that Nicholas instead picked up the waste from Jersey Dyeing, Inc. and delivered it to Gaess "under an arrangement which it made with Gaess to dispose of the drummed waste."37 The court determined that "[u]nder the facts presented in this case, Nicholas is liable as an arranger but not as a transporter."38
Finally, the court rejected Nicholas' statutory intent argument by noting that holding Nicholas liable as an arranger is consistent with congressional goals in enacting CERCLA. In General Electric, the Second Circuit observed that "[i]t was Congress' intent that CERCLA be construed liberally.…"39 Nicholas acted in a manner consistent with the statutory description of an arranger, therefore liability under CERCLA § 107(a)(3) is warranted.40 Accordingly, the court denied Nicholas' motion for summary judgment.41
[24 ELR 10667]
Implications
The court more clearly defined the parameters of the holding in Western Processing with this decision. Thus, a waste hauler who acts as a mere conduit for the disposal of hazardous substances opens itself up to liability under CERCLA § 107(a)(3). This will be the case even if the hauler does not know where the disposal company to whom it delivers the waste will dispose of it. The liability is strict; it does not matter whether the hauler knew that the waste would be disposed of improperly.42
This case imposes a substantial obligation on companies engaged in hauling waste. A hauling company must now insure that material it disposes of at one site is not disposed of by other parties at a site that is or could be subject to liability under CERCLA. If the disposal facility disposes of this waste at another site subject to a CERCLA cleanup, as was done in SCA Services, the hauler could be liable as an arranger.
By obtaining indemnification from the disposal facility the hauler could avoid cleanup costs. Another option to minimize the hauler's liability exposure is to perform an audit of the site where the waste is disposed of. The audit should ascertain the procedures used by the disposal company in disposing of the waste if the waste is disposed of on-site. If the waste is disposed of off-site, the hauler should evaluate off-site locations to assess the possibility of those sites becoming subject to a CERCLA cleanup. By performing these actions, the hauler at least demonstrates a good-faith effort to comply with the law. Although such efforts are irrelevant for liability purposes under CERCLA, they do play an important part in the allocation process when a court must decide the percentage of liability attributed to responsible parties.43 By performing such activities, the hauler may minimize its potential damages.
Conclusion
As a result of the SCA Services opinion, waste haulers will no doubt take costly protective actions. They will pass this cost on to their customers. As with many environmental precautions imposed by the law, these costs will probably result in increased rates.
1. 844 F. Supp. 926, 24 ELR 21461 (S.D.N.Y. 1994).
2. 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA §§ 101-405.
3. Id. § 9607(a)(1), ELR STAT. CERCLA § 107(a)(1).
4. Id. § 9607(a)(2), ELR STAT. CERCLA § 107(a)(2).
5. Id. § 9607(a)(3), ELR STAT. CERCLA § 107(a)(3).
6. Id. § 9607(a)(4), ELR STAT. CERCLA § 107(a)(4).
7. Id. § 9607(a)(3), ELR STAT. CERCLA § 107(a)(3).
8. Id. § 9607(a)(4), ELR STAT. CERCLA § 107(a)(4).
9. See Alcatel Information Systems, Inc. v. Arizona, 778 F. Supp. 1092, 1096 (D. Ariz. 1991); United States v. Western Processing Co., 756 F. Supp. 1416, 1420, 21 ELR 20855, 20856 (W.D. Wash. 1991).
10. 844 F. Supp. 926, 927, 24 ELR 21461, 21461 (S.D.N.Y. 1994).
11. Memorandum of Law of Third-Party Defendant, Nicholas Enterprises, Inc., in Support of Its Motion for Summary Judgment at 1, SCA Services (No. 83 Civ. 6402 (RPP)) (on file with author) [hereinafter Nicholas Memorandum].
12. 844 F. Supp. at 928-29, 24 ELR at 21462.
13. Id. at 927, 24 ELR at 21461.
14. Id.
15. Nicholas Memorandum, supra note 11, at 4.
16. 844 F. Supp. at 927, 24 ELR at 21461.
17. Id.
18. Id. at 927, 24 ELR at 21461-62.
19. 756 F. Supp. 1416, 21 ELR 20855 (W.D. Wash. 1991).
20. 42 U.S.C. § 9207(a)(4), ELR STAT. CERCLA § 107(a)(4), provides that "any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or threatened release … of hazardous substances.…"
21. Nicholas Memorandum, supra note 11, at 13-15.
22. Id. at 12.
23. 756 F. Supp. at 1420-21, 21 ELR at 20856.
24. Id. at 1421, 21 ELR at 20856.
25. Answering Memorandum of Law of Defendant/Third-Party Plaintiff, SCA Services, Inc., to Third-Party Defendant, Nicholas Enterprises, Inc.'s Motion for Summary Judgment at 11, SCA Services (No. 83 Civ. 6402 (RPP)) (on file with author) [hereinafter SCA Memorandum].
26. See 756 F. Supp. at 1418, 21 ELR at 20855.
27. 844 F. Supp. 926, 927, 24 ELR 21461, 21461 (S.D.N.Y. 1994).
28. See SCA Memorandum, supra note 25, at 8; 962 F.2d 281, 22 ELR 20930 (2d Cir. 1992).
29. 962 F.2d at 286, 22 ELR at 20933.
30. Id.
31. Id. at 286-87, 22 ELR at 20933.
32. SCA Memorandum, supra note 25, at 9.
33. 844 F. Supp. 926, 928, 24 ELR 21461, 21461 (S.D.N.Y. 1994).
34. Id.
35. Id. at 929, 24 ELR at 21462.
39. 962 F.2d 281, 285, 22 ELR 20930, 20932 (2d Cir. 1992) (citing B.F. Goodrich Co. v. Murtha, 958 F.2d 1192, 1198, 22 ELR 20683, 20684 (2d Cir. 1992)).
40. 844 F. Supp. at 929, 24 ELR at 21462.
41. Id.
42. See id. at 928, 24 ELR at 21462.
43. See United States v. A&F Materials Co., 578 F. Supp. 1249, 1256, 14 ELR 20105, 20108 (S.D. Ill. 1984) (Gore factors listed).
24 ELR 10665 | Environmental Law Reporter | copyright © 1994 | All rights reserved
|