Liability of Hazardous-Waste Brokers for Negligent Selection of Treatment and Disposal Facilities

John J. Zodrow

Mr. Zodrow is an environmental litigator for the Denver law firm of Zodrow et al. P.C. and writes frequently on negligence and standards of care for environmental professionals. He recently represented Power Engineering Company in Quicksilver Prods., Inc. v. Power Eng'g Co., No. C-93-1739 (N.D. Cal. Feb. 2, 1996) (negligent disposal facility) and Power Eng'g Co. v. EnviroChem Servs. L.C., No. 95-CV-1941 (D. Colo. filed May 4, 1995) (negligent transporter/broker). The author thanks Lynnae Flora of the firm for her research assistance.

[26 ELR 10424]

About a decade ago, disposal facilities began infiltrating the market for transportation of hazardous waste, to guarantee that they would be shipped an adequate supply of waste. To regain the transportation business, transportation companies increased the scope of the services they provided, to include recommending and selecting treatment and disposal facilities. This intense competition for the transportation and disposal markets created a new intermediary called a hazardous-waste "broker."

Generally, the services that hazardous-waste brokers offer vary according to the particular needs of the client-generator. Brokers often assist with the completion of labeling and manifest requirements, package materials for shipping, and load materials onto the transportation vehicles. Brokers also make arrangements for transportation of the waste (either by subcontracting or using broker-owned vehicles), for treatment of the waste (if necessary), for additional transportation to the disposal facility, and for disposal of the hazardous materials.

Despite the crucial role that hazardous-waste brokers play in managing toxic wastes and hazardous substances, their profession is completely unregulated. Unlike transporters, treatment facilities, and disposal sites, hazardous-waste brokers are not required to carry a U.S. Environmental Protection Agency permit¹ or identification number. There are currently no federal or state² requirements for the licensing or certification of hazardous-waste brokers. Quite literally, individuals can hold themselves out as hazardous-waste brokers in the garages of their homes with as little as a telephone line, an optional personal computer, and no training or expertise.

Currently, there are no statutory definitions for "hazardous-waste broker" or "environmental broker," despite a plethora of environmental laws and definitions. Furthermore, no case law exists on the duties owed by or standards applied to hazardous-waste brokers. Because brokers evolved from the hazardous-waste transportation industry, however, much of the case law on a transporter's duty of care is also applicable to brokers. For liability purposes, however, it is important to distinguish between brokers and transporters.

Distinctions Between Brokers and Transporters

Traditionally, transportation companies provided only for the movement of hazardous wastes between generators and disposal facilities.³ As transporters increasingly engage in activities beyond the mere hauling of waste, it becomes more difficult to distinguish between hazardous-waste brokers [26 ELR 10425] and transporters. One tell-tale sign of a hazardous-waste broker, however, is its practice of offering a complete hazardous-waste disposal "package," of which transportation is only one element. It is common for hazardous-waste brokers to subcontract the transportation aspect of the "package deal" to a transportation company. True transporters rarely subcontract transportation. It is also common for hazardous-waste brokers to use transportation subcontractors that routinely transport both hazardous and nonhazardous cargo. Generally, hazardous-waste transporters do not handle nonhazardous cargo.

Moreover, transporters directly invoice the generator only for their charges for hauling, which are usually priced by the container, mile, or ton. Treatment and/or disposal facilities, however, bill the broker, who then passes the costs (including a profit margin) and an additional markup on to the generator as a package price. A broker ordinarily receives a discount from certain treatment and disposal facilities with whom it does regular business. Generally, the broker profits both from its markup for brokering the transaction, plus the discount amount when the broker passes the nondiscounted costs on to the hazardous-waste generator.

The distinction between transporter and broker is blurred whenever the entity performs any services, whether compensated or uncompensated, that transcend providing a vehicle and driver to transport the materials from one site to another. In assessing liability for hazardous-waste releases at disposal sites, courts have noted the limited role of transporters. In Ravan v. Greenville County, a South Carolina court explained that the role of a transporter "extends only to the safe transport of the waste while it is in the hauler's possession and control."⁴ Similarly, in Commonwealth v. Pace, a district court held that a transporter was not liable for the release of chemicals at a site because the release "was not a natural consequence of the mere transportation of waste."⁵

Case law under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), although not directly on point, offers some helpful analysis regarding the distinction between a transporter and broker. Under CERCLA, the term "arranger" is analogous to the term "broker."⁶ Two of the classes of persons that may be liable for hazardous substance cleanup costs under CERCLA are persons who arrange for disposal⁷ and persons who transport hazardous substances.⁸ Typically, a transporter will not be held liable for CERCLA cleanup costs at a site if it did not select the waste disposal site.⁹

In New-York v. SCA Services, Inc.,¹⁰ a waste-collection company argued that as a transporter, it could not also be liable as an arranger. The court, in rejecting the company's defense, offered an analysis that assists in distinguishing between companies that perform mere transportation and others that act as arrangers or brokers. In SCA Services, the generator arranged to have the waste-collection company dispose of the hazardous substances, but played no role in the company's arrangements with a disposal site to dispose of the material. The court opined that liability should accrue to the waste-collection company because it "assumed an obligation to exercise control over the disposal of the hazardous substances it received from its customer, and then arranged with [the disposal facility] to dispose of the waste."¹¹ In so doing, the waste-collection company went beyond merely transporting the "hazardous waste from a customer's site to a disposal facility selected by the customer" and assumed the duties of an arranger.¹² Thus, the extent of a company's control over the waste and whether it arranged for the disposal of the waste are helpful factors to consider in determining whether the company is acting as a transporter or a broker.

Broker Liability at Common Law

The more complicated and involved the role of the hazardous-waste broker becomes, the more likely it is that the broker may incur liability for its acts or omissions. Currently, no case law specifically addresses the standard of care for an environmental broker. At common law, however, brokers may be held liable for recommending or selecting a treatment or disposal facility that cannot or fails to perform proper treatment and/or disposal of the generator's hazardous waste. Brokers may also be liable for misrepresenting the facility's capabilities.

Essential to a claim of negligence for broker misrepresentation or negligent selection of a treatment and/or disposal facility are the issues of (1) who made the decision to place the substances at a particular facility; and (2) who had the authority to control disposal of the hazardous waste.

Negligent Misrepresentation

Brokers are subject to the common-law obligation to be nonnegligent in imparting information on which they know another will rely. The Restatement (Second) of Torts describes when liability for negligent misrepresentation attaches:

One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to [26 ELR 10426] exercise reasonable care or competence in obtaining or communicating the information.¹³

A misrepresentation is negligent when a professional has not discovered or communicated information that a reasonably prudent professional in a similar position would have discovered or communicated. "It is no longer in dispute that one who renders services to another is under aduty to exercise reasonable care in doing so, and that he is liable for any negligence to anyone who may foreseeably be expected to be injured as a result."¹⁴

For a cause of action to lie against an environmental broker for negligent misrepresentation, the generator must prove that the broker either supplied faulty information on which the generator reasonably and justifiably relied, or otherwise did not act in a reasonably prudent manner where others would not have made a similar mistake. For example, a hazardous-waste broker who arranges for disposal of waste at a site for which it fails to perform elementary due diligence may be liable in negligence if the site is unqualified or does not have a permit to accept such wastes. When the broker supplies faulty information, however, it is not necessary to prove that the broker knew that its statements were false.¹⁵

Negligent Selection

To prove that a broker negligently selected a disposal site, a generator should establish (1) that the broker selected or recommended the site; and (2) that the broker breached its duty of care to the generator in selecting or recommending the site.

While no court has interpreted a broker's "selection" of a disposal site, the Third Circuit, in Tippins Inc. v. USX Corp.,¹⁶ offered an interesting analysis of the acts of a transporter that constitute "selection" of a disposal facility under CERCLA § 107.¹⁷ In this case, Tippins agreed to furnish and install a baghouse for a steel manufacturer. Tippins contracted with Petroclean, a transporter licensed to haul hazardous waste and specializing in the transport and disposal of hazardous substances, to pick up and transport the baghouse dust for disposal. Petroclean gathered information on potential disposal sites and submitted a proposal to Tippins. After Tippins rejected the first proposed site, Petroclean researched two additional facilities, presented financial information regarding disposal costs, and offered Tippins both sites as possible disposal locations. Tippins subsequently picked the site where Petroclean disposed of the baghouse dust.¹⁸

Although Tippins argued that Petroclean selected the site because it was actively involved in the selection process, Petroclean asserted that a transporter is liable only when it makes the final decision to select the disposal facility, regardless of whether the transporter contributed to the selection of the facility. Because CERCLA does not define what constitutes the selection of a disposal facility, the court looked to case law on the subject. In United States v. Hardage,¹⁹ the government asserted that CERCLA liability attaches when a transporter actively participates or assists in the site selection, while the transporter argued that it could be liable only if it acted alone in selecting the disposal site. The Hardage court, however, declined the invitation to "define the outer limits of transporter liability," and instead held that given the case circumstances, the transporter had clearly selected the disposal site.²⁰

Following Hardage, the Tippins court found Petroclean liable as a transporter that selected the disposal facility under CERCLA § 107(a)(4), holding that a transporter is liable not only when it ultimately selects the disposal facility, but also when it actively participates in the disposal decision by having substantial input into which facility is ultimately chosen.²¹

The Tippins court further conditioned its holding regarding the meaning of site selection on whether the decisionmaker relied on the transporter's special expertise in reaching its final decision:

When a transporter with a knowledge and understanding of the industry superior to its customer's investigates a number of potential disposal sites and suggests several to the customer from which it may pick, and the customer relies upon the transporter's knowledge and experience by choosing one of the winnowed sites, the transporter has performed a selection. Although the transporter has not made the ultimate decision, it has made the penultimate one; for all intents and purposes, the transporter has selected the facility by presenting it as one of the few disposal alternatives.²²

The Tippins court, in holding that a transporter "selects" a site if it "actively participates in the disposal decision" as measured by "substantial input" and if the decisionmaker relies on the transporter's "special expertise," recognizes the reality that transporters often play an influential role in the decision to dispose of waste at a given facility. [26 ELR 10427] The court further noted that "generators undoubtedly regularly rely upon a transporter's expertise in hazardous waste management when considering disposal alternatives. A sophisticated transporter specializing in the transportation of hazardous material is accordingly frequently in the best position to ensure safe and proper disposal of the waste."²³

In assessing a transporter's liability, courts distinguish transporters who merely provide a truck for hire from those that actively participate in the disposal decision. The facts of the case at hand proved that Petroclean did more than merely pick up the dust and transport it to the disposal facility:

Although Petroclean did not make the financial decision to dispose of the dust at [the ultimate disposal site], it substantially contributed to and shared in that decision by locating and submitting a limited number of potential disposal sites from which Tippins could select. Moreover, it is evident from the record that Tippins at all times relied upon Petroclean's expertise in the field of hazardous waste management when deciding the appropriate means and location to dispose of the … dust. On these facts, Petroclean was far more than a mere conduit of the hazardous waste; rather, it actively participated in the site selection decision….²⁴

The court held Petroclean liable under CERCLA § 107(a)(4) as a transporter that selected the disposal facility because it had considerable input into the selection process and because Tippins relied on Petroclean's expertise in hazardous-waste management when making its disposal decision. Although the Tippins court did not find Petroclean liable as an "arranger" under CERCLA, the court's analysis is helpful in determining what acts constitute selection of a disposal site.

Thus, to prove that a broker selected a disposal site, a generator should establish that the broker had substantial input in the site selection process and that it relied on the broker's expertise. Even if the broker was not actually involved in selecting the site, it may nevertheless be liable if the generator establishes that a special confidence or trust existed between it and the broker.

In Lippy v. Society National Bank,²⁵ an Ohio appeals court, in a split decision, acknowledged a professional's and a client's relationship of trust, which turns an ordinary business suggestion into the endorsement of an environmental consultant. Although this case dealt with an inept environmental consulting firm, the criteria that impute liability for the negligent selection of an environmental company are helpful in determining an environmental broker's potential exposure in recommending a disposal site.

Lippy, an individual, wanted to purchase an abandoned service station and contacted Society National Bank to secure financing. The bank's loan officer conditioned financing on a satisfactory environmental site assessment and recommended that Lippy hire United Asbestos Management, Inc. Lippy hired United, which assessed the property without noting any concerns. Based on United's assessment, Society financed the purchase of the property.

Unknown to Lippy, United's experience was limited to asbestos abatement, and it had no experience in the type of site assessment Lippy needed. When Lippy discovered that the property had soil, surface, and groundwater contamination and required extensive cleanup, he sued both the consultant and the lender, claiming that Society National Bank negligently recommended an incompetent environmental consultant.

According to Lippy, when Society recommended an asbestos consultant to perform an environmental site assessment, it misrepresented the consultant's qualifications to perform such work. Moreover, he alleged, the lender failed to exercise reasonable care in determining whether the consultant was experienced or qualified before undertaking to make such a recommendation. Society advised Lippy knowing that Lippy was both likely to rely on its advice and was justified in doing so. Lippy argued that Society went beyond offering mere business advice when it offered and identified United after stating that an assessment was necessary.

Ordinarily, the mere rendering of advice does not transform a business relationship into a fiduciary relationship sufficient to form the basis of a cause of action. But the Ohio court held that a "special relationship" arose because Lippy, as the borrower, placed "special trust" in Society by relying on the bank for advice. Because both parties understood a special confidence or trust to exist, Society owed a duty of care to Lippy to recommend a competent environmental consultant, and breached that duty in failing to use reasonable care in endorsing United, causing Lippy to rely on an unqualified environmental consultant's opinion and evaluation.

Thus, even if a broker only recommends and does not actually select the generator's disposal site, the broker may still owe a duty of care to the generator if a special relationship of trust exists between the broker and the generator. This duty of care may be breached, and the broker held liable for negligence, if the broker chooses or recommends a disposal site it knows or reasonably should know is unsafe.

Although there is no case law directly addressing a broker's duty of care in selecting or recommending a treatment or disposal facility, a few cases in the environmental context apply by analogy to demonstrate such a cause of action. In Ravan,²⁶ the court found evidence that the transporter's role consisted of more than the mere hauling of waste to the disposal site. The transporter's supervisor testified that the transporter was in the business of disposing of industrial-plant waste, and the record indicated that the transporter's customers did not simply employ it to transport the waste. The court concluded that these acts support the conclusion that the transporter was under a duty to carefully select a disposal site.²⁷

In Kenney v. Scientific, Inc.,²⁸ the court held that a generator could be liable for the negligent choice of an independent contractor and that a cause of action existed against a hazardous-waste hauler for negligently choosing a disposal facility. The Kenney court found that a hauler may be liable for negligence if it chooses a disposal site that it knows or reasonably should know to be hazardous. The hauler may be negligent even if it does not make the site [26 ELR 10428] decision, but delivers waste to a site that it knows to be dangerous.²⁹

In Russell-Stanley Corp. v. Plant Industries, Inc.,³⁰ the court reiterated the Kenney court's holding that haulers of waste can be found liable for negligence in choosing a dangerous disposal facility and in delivering the waste.³¹ These cases establish that a transporter owes a duty of care to its client when selecting a disposal site. Likewise, if a broker selects or recommends a disposal site that it knows, or should know, to be unsafe, a court may find that it has breached its duty of care and is liable for negligence.

Conclusion

In light of these recent environmental cases, those who recommend or suggest treatment or disposal facilities to their clients face a dilemma as to whether they may continue to offer suggestions without incurring unnecessary exposure or disclaiming every statement made to their clients. The duties incumbent on a broker in suggesting an environmental facility include the requirement that it accurately state the entity's capabilities. In order to make reliable representations, the broker should have actual and specific experience with the facility or perform adequate due diligence inquiries. The measure of accuracy required in investigating and representing the facility's qualifications to perform work increases as the client's circumstances indicate that it is likely to rely on the broker's representations.

1. The Resource Conservation and Recovery Act (RCRA) requires treatment, storage, and disposal facilities to be permitted. 42 U.S.C. § 6925, ELR STAT. RCRA § 3005.

2. While the state of Nevada does require some environmental consultants to be certified, its program does not specifically apply to hazardous-waste brokers. The Nevada Department of Conservation and Natural Resources, Division of Environmental Protection, offers the Certified Environmental Manager endorsement, which is required for a company to perform environmental services in Nevada. Additionally, there are a few private, noncompulsory certification programs for environmental professionals, although none of these programs are oriented to environmental brokers. The Institute of Hazardous Materials Management in Rockville, Maryland, offers a Certified Hazardous Materials Manager credential in three levels: Master Level, Senior Level, and Associate. The National Environmental Health Association in Denver, Colorado, offers three certifications: Registered Hazardous Substance Specialist, Registered Hazardous Substance Professional, and Registered Hazardous Substance Professional-In-Training. The National Association of Environmental Professionals offers a certification called Certified Environmental Professional. The American Society of Testing Materials (ASTM) has prepared draft standards to accredit environmental professional credentialling organizations. The objective of the draft accreditation criteria, according to ASTM, is to allow certification programs to meet the highest standards of quality and integrity. None of these certifications or registrations are directed specifically at hazardous-waste brokers, nor are any such endorsements required of waste brokers in any state.

3. According to EPA, "transporters of hazardous waste are the critical link between the generator and the ultimate off-site hazardous waste, treatment, storage or disposal facility." U.S. EPA, RCRA ORIENTATION MANUAL III-27 (1990) (available from the ELR Document Service, ELR Order No. AD-578). A transporter must comply with the regulations under 49 C.F.R. Parts 171-179 (1995) (the Hazardous Materials Transportation Act) as well as those under 40 C.F.R. Part 263 (1995) (Subtitle C of RCRA). A transporter under Subtitle C of RCRA is defined as any person engaged in the off-site transportation of hazardous waste within the United States by air, rail, highway, or water. 40 C.F.R. § 260.10 (1995).

4. 434 S.E.2d 296, 309 (S.C. Ct. App. 1993); see also Kenney v. Scientific, Inc., 497 A.2d 1310, 1328 (N.J. Super. Ct. 1985) (holding that truckers who merely transported waste to the landfill could not be held liable under nuisance or strict liability theories).

5. 616 F. Supp. 815, 821, 16 ELR 20036, 20039 (D. Mass. 1985).

6. See United States v. Bliss, 667 F. Supp. 1298, 18 ELR 20055 (E.D. Mo. 1987) (holding a broker liable as an arranger under CERCLA § 107(a)(3) based on its authority to control the place and manner of waste disposal).

7. "Any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with the transporter for transport for disposal or treatment" may be liable under CERCLA. 42 U.S.C. § 9607(a)(3), ELR STAT. CERCLA § 107(a)(3).

8. "Any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities" may be liable under CERCLA. Id. § 9607(a)(4), ELR STAT. CERCLA § 107(a)(4).

9. See, e.g., Alcatel Info. Sys., 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, 24 ELR 21461 (S.D.N.Y. 1994).

11. Id. at 928, 24 ELR at 21462.

12. Id. at 928-29, 24 ELR at 21462. SCA Services clarified the separation of liability of arrangers and transporters as previously opined in Western Processing, 756 F. Supp. at 1416, 21 ELR at 20855 and General Electric Co. v. AAMCO Transmissions, Inc., 962 F.2d 281, 22 ELR 20930 (2d Cir. 1992). For an excellent discussion of SCA Services, see Gerald M. Giordano, When Is a Transporter an Arranger Under CERCLA?, 24 ELR 10665 (Nov. 1994).

13. RESTATEMENT (SECOND) OF TORTS § 552(1) (1981).

14. W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS 719 n.41 (5th ed. 1984) and numerous cases therein, including Central & S. Trucklines v. Westfall GMC Truck, 317 S.W.2d 841 (Mo. App. 1958); Zierer v. Daniels, 122 A.2d 377 (N.J. Super. Ct. 1956); Kalinowski v. Truck Equip. Co., 261 N.Y.S. 657 (1933).

15. Hartwell Corp. v. Bumb, 345 F.2d 453, 455 (9th Cir. 1965), cert. denied, 382 U.S. 891 (1965).

16. 37 F.3d 87, 24 ELR 21486 (3d Cir. 1994).

17. A transporter may be liable if it accepts or accepted any hazardous waste for transport to disposal or treatment facilities or sites "selected by such person." 42 U.S.C. § 9607(a)(4), ELR STAT. CERCLA § 107(a)(4).

18. Tippins, 37 F.3d at 90, 24 ELR at 21487. The court noted that Petroclean subcontracted with another transporter to transport at least a portion of the dust to the disposal facility. "This contractual arrangement might have rendered Petroclean liable as an arranger under CERCLA Section 107(a)(2)." Id. at 90 n.3, 24 ELR at 21487 n.3. See also New York v. SCA Servs., Inc., 844 F. Supp. 926, 928-29, 24 ELR 21461, 21462 (S.D.N.Y. 1994). As previously discussed, subcontracting transporter services is one way to distinguish a broker from a true transporter.

19. 750 F. Supp. 1444, 21 ELR 20714 (W.D. Okla. 1990).

20. Id. at 1459, 21 ELR at 20721.

21. Tippins, 37 F.3d at 94, 24 ELR at 21489. The court cited two district courts that appeared to have adopted this standard but found that neither court provided any rationale for its construction. In United States v. Western Processing Co., a district court stated that "as one who actively selected a disposal site, the transporter may more equitably be subject to liability." 756 F. Supp. 1416, 1420, 21 ELR 20855, 20856 (W.D. Wash. 1991). In United States v. South Carolina Recycling & Disposal, Inc., a court held a company liable as a transporter under CERCLA because it "participated in the selection of" the facility. 653 F. Supp. 984, 1006, 17 ELR 20843, 20843 (D.S.C. 1984), modified on other grounds sub nom. United States v. Monsanto Co., 858 F.2d 160, 19 ELR 20085 (4th Cir. 1988), cert. denied, 490 U.S. 1106, 19 ELR 10232 (1989).

22. Tippins, 37 F.3d at 95, 24 ELR at 21489.

23. Id.

24. Id. at 96, 24 ELR at 21490.

25. 651 N.E.2d 1364 (Ohio Ct. App. 1995).

26. Ravan v. Greenville County, 434 S.E.2d 296 (S.C. Ct. App. 1993).

27. Id. at 309.

28. 497 A.2d 1310 (N.J. Super. Ct. 1985).

29. Id. at 1328.

30. 595 A.2d 534 (N.J. Super. Ct. 1991).

31. Id. at 540-42.