18 ELR 20854 -- United States v. Farber

United States v. Farber

No. 86-3736 (D.N.J. March 16, 1988)

The court rules that the seller of hazardous substances that are not wastes can be held liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but the mere sale of a hazardous substance by the supplier of raw materials to a company that used those ingredients in a manufacturing process does not expose the supplier to CERCLA liability. The court first rules that the phrase "arranged for disposal or treatment . . . of hazardous substances" in CERCLA § 107(a)(3) is not limited to hazardous wastes listed pursuant to the Resource Conservation and Recovery Act (RCRA). Although CERCLA incorporates RCRA's definitions of "disposal" and "treatment," it would ignore CERCLA's broad regulation of hazardous substance releases to interpret that statute as being limited to RCRA's more specific definition of hazardous wastes. Moreover, Congress' explicit use of the word "substance" reflects its desire to preclude manufacturers from disposing of their hazardous substances and then denying liability. The court then rules that the mere sale of a hazardous substance that serves as the raw material in a manufacturing process does not expose the seller to CERCLA liability. The court holds, however, that the seller in this case may have treated the chemicals, within the meaning of CERCLA § 107(a)(3), prior to their use as an ingredient.

Counsel for Plaintiff
Susan Cassell
502 Federal Bldg., 970 Broad St., Newark NJ 07102
(201) 621-2700

Counsel for Defendant-Third Party Plaintiff
David P. Schneider
Bressler, Amery & Ross
44 Whippany Rd., Morristown NJ 07960
(201) 267-7200

[18 ELR 20854]

Wolin, J.:

Opinion

The current motion arises out of a third-party complaint filed March 31, 1987. Defendant/third-party plaintiff, Benjamin Farber, [18 ELR 20855] names several defendants, including the Rambach Chemical Company, Inc. (Rambach), whose alleged liability is the subject of the Twelfth Count. Under that Count, Farber seeks contribution from Rambach pursuant to Section 113(f) of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9613(f), as amended. Rambach moves before the court today for summary judgment dismissing the Twelfth Count pursuant to Fed. R. Civ. P. 56.

Statement of Facts

This case involves the alleged contamination of a parcel of land located at 77-81 Jacobus Avenue in South Kearny, New Jersey. The contaminated parcel is comprised of three lots numbered 12, 13 and 13R of Block 189 on South Kearney's tax map. Defendant/third-party plaintiff, Benjamin Farber, is the owner of lot 12.

Farber acquired lot 12 in 1961. He immediately leased the property to Farnow, Inc., a company which operated a facility for the manufacture of varnishes, alkyds and latexes for paint manufacturers. At the time, Farber was the president and majority stockholder of Farnow.

In 1967, Farnow purchased the adjoining lots, numbered 13 and 13R for its operations. As a result, Farnow's business facility encompassed the street addresses 77 to 81 Jacobus Avenue.

In 1972 Farnow sold all its assets, including lots 13 and 13R to Syncon Resins, Inc., which operated a manufacturing facility on the land. Syncon took over Farnow's lease in connection with lot 12 and Farber became Syncon's landlord as to lot 12. Syncon continued to lease the lot from Farber until 1982.^[1]

In September 1986, the government initiated an action against Farber, alleging inter alia that hazardous materials were disposed of on the land and that the government had incurred and would continue to incur costs in the clean-up of the hazardous substances.^[2] The government seeks reimbursement from Farber as a responsible party for response costs incurred in connection with the clean-up pursuant to § 107 of CERCLA, 42 U.S.C. § 9607.

In March 31, 1987, the Rambach Corporation was named, with several others, as a third-party defendant by Farber on the grounds that Rambach had supplied materials to Syncon which were disposed of on the contaminated land. Rambach now moves for summary judgment on the grounds that it is not a potentially responsible party under CERCLA.

Discussion

Congress passed CERCLA in 1980 in an effort to deal with the increasing problem of disposal sites of hazardous substances which were posing threats to public health and the environment. United States v. Ward, 618 F. Supp. 884 [16 ELR 20127] (D.C.N.C. 1985) (citing S. Rep. No. 848, 96th Cong., 2d Sess. 2 (1980)). The statute enabled the President to provide for governmental action to be taken, consistent with the National Contingency Plan, in response to a release or threatened release of any hazardous substance or pollutant into the environment. Id. at 892; 42 U.S.C. § 9604.

The agency primarily responsible for undertaking the necessary clean-up of hazardous substances pursuant to CERCLA is the Environmental Protection Agency (EPA). 42 U.S.C. § 9604(a)(1); Executive Order No. 12316, § 2, 3 C.F.R. 168 (1982). The EPA is authorized to conduct investigations, determine risks to public health and the environment, plan response action, and enter into arrangements with state agencies as necessary to fulfill the response plan. 42 U.S.C. § 9604.

To help fund the EPA's response efforts, the Hazardous Substance Trust Fund (the Superfund) was created by Congress. 42 U.S.C. § 9631; 42 U.S.C. § 9611(a)(1). The Superfund is financed through a combination of appropriations, industry taxes and judgments received through legal actions to recover response costs from those responsible for the problems. See 42 U.S.C. § 9607; § 9631. Section 107(a) of CERCLA lists those categories of individuals or entities which are liable for reimbursement of monies spent in cleaning-up hazardous sites:

(1) the owner and operator of a vessel . . . or a facility [where hazardous wastes are located],

(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, or hazardous substances owned or possessed by such person, by any other party or entity, at any facility owned or operated by another party or entity and containing such hazardous substances, and

(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance. . . .

42 U.S.C. § 9607(a)

CERCLA also provides a statutory right of contribution against other potentially responsible parties under Section 113, 42 U.S.C. § 9613(f). In order to establish a right of contribution under Section 113, the party seeking contribution must establish that the party from whom contribution is sought falls within one of the classes of persons set forth in Section 107 of CERCLA, 42 U.S.C. § 9607(a).

In the current action, the government has named Farber as a potentially responsible party for response costs incurred in connection with the clean-up of the Jacobus Avenue site pursuant to Section 107(a) of CERCLA, 42 U.S.C. § 9607(a). Farber, in turn, has filed a third-party complaint against Rambach and other third-party defendants seeking contribution pursuant to Section 113 of CERCLA, 42 U.S.C. § 9613(f). Farber alleges that Rambach supplied "materials" to Syncon Resins between 1972 and 1982 and that these materials were ultimately disposed of at the Syncon facility. Accordingly, Farber asserts Rambach is liable for response costs pursuant to Sections 107(a)(3) and (4) of CERCLA, 42 U.S.C. § 9607(a)(3) and (4).

Rambach claims that, as a matter of law, it is not a "responsible party" under Sections 107(a)(3) or (4) of CERCLA and seeks the grant of summary judgment dismissing the claims against it. Specifically, Rambach argues that the "sale of a product is insufficient, as a matter of law, to establish liability under CERCLA." While this court agrees with Rambach's general proposition, its argument has certain laws which must be addressed.

In order to establish Rambach's liability under Section 107(a)(3), Farber must show that (a) Rambach was a person within the meaning of CERCLA; (b) that Rambach owned or possessed a hazardous substance; (c) Rambach, by contract, agreement or otherwise, arranged for the treatment or disposal, or arranged with a transporter for transport for treatment or disposal of the hazardous substances at a facility; (d) there was a release or threatened release of a hazardous substance; and (e) the release or threatened release caused the incurrence of response costs. 42 U.S.C. § 9607(a)(3). Rambach focuses upon the third element of liability and argues that it cannot be shown to have engaged in an "arrangement for the treatment or disposal of a hazardous substance," as "treatment" and "disposal" only contemplate action taken in connection with hazardous "waste." This court disagrees.

Section 107(a)(3) clearly imposes liability upon those parties who "arrange for the treatment or disposal of hazardous substances." 42 U.S.C. § 9607(a)(3) (emphasis added). A "hazardous substance" is defined with CERCLA as:

(A) any substance designated pursuant to section 1321(b)(2)(A) of Title 33 [the Federal Water Pollution Control Act, or Clean Water Act],

(B) any element, compound, mixture, solution, or substance designated pursuant to section 9602 of [CERCLA],

(C) any hazardous waste having the characteristics identified under or listed pursuant to section 3001 of the Solid Waste Disposal Act [42 U.S.C. § 6921] (but not including any waste the regulation of which under the Solid Waste Disposal Act . . . has been suspended by Act of Congress),

(D) any toxic pollutant listed under section 1317(a) of Title 33,

[18 ELR 20856]

(E) any hazardous air pollutant listed under section 112 of the Clean Air Act [42 U.S.C. § 7412], and

(F) any imminently hazardous chemical substance or mixture with respect to which the Administrator has taken action pursuant to section 2606 of Title 15 [the Toxic Substance Control Act]. . . .

42 U.S.C. § 9601(14) (1982).

The terms "treatment" and "disposal," however, are not defined within CERCLA. Instead, Section 101(29) of CERCLA, 42 U.S.C. § 9601(29), incorporates the definitions of "treatment" and "disposal" as set forth in the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. § 6901 et seq. into CERCLA. "Treatment" is defined in RCRA as:

. . . any method, technique, or process, including neutralization, designed to change the physical, chemical, or biological character or composition of any hazardous waste so as to neutralize such waste or so as to render such waste nonhazardous, safer for transport, amenable for recovery, amenable for storage, or reduced in volume. Such term includes any activity or processing designed to change the physical form or chemical composition of hazardous waste so as to render it nonhazardous.

42 U.S.C. § 6903(143).

Similarly, "disposal" is defined in RCRA as:

. . . discharge, deposit, injection, dumping, spilling, leading, or placing of any solid waste or hazardous waste into or on any land or water so that such solid waste or hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.

42 U.S.C. § 6903(3).

Although section 107(a)(3) of CERCLA imposes liability for the disposal or treatment of any hazardous substance, Rambach argues that since the words "treatment" and "disposal" are defined in terms of hazardous waste under RCRA, the crucial factor in determining liability lies in the characterization of the materials supplied as waste. As Rambach did not supply Syncon with "waste," Rambach argues that no liability should attach.

The court questions how well Rambach's interpretation would work in the following hypothetical. Assume there was a Federal Fruit Statute which made it illegal for one to peel a fruit in public. "Fruit" is defined within the statute to include apples, oranges, bananas, plums and peaches. The statute, however, does not define "peel," but, instead, directs the reader to another statute, the Federal Orange Statute. Within the Federal Orange Statute "peel" is defined as:

holding the orange in one hand and pulling back its skin from the center to expose the inner portion of the orange.

Would Rambach then argue that one would only be liable under the Federal Fruit Statute if they peeled an orange? What if someone "peeled" an apple in public? Such a narrow reading completely ignores the plain language of the Fruit Statute. A much more reasonable interpretation of the two statutes would be to conclude that one could peel a fruit by holding the fruit in one hand and pulling back its skin from the center. Likewise, this court concludes that one who arranges for treatment or disposal of a hazardous substance may be liable under CERCLA.^[3]

Moreover, the explicit use of the word "substance" rather than the word "waste" within the statute is presumed to manifest a conscious choice by the legislators. In choosing "substance" over "waste" Congress demonstrated a desire to prevent a manufacturer of hazardous "substances" from one day disposing of its excess inventory and then arguing that since the "substances" had many other uses, they were not "waste," and therefore no liability should attach. In addition, Congress consciously chose the more comprehensive term "substance" over the term "waste" so that the President would be able to respond to a broader range of environmental problems. See, 126 Cong. Rec. 31,964 (December 3, 1980) (Exhibit 3) (discussion of H.R. 7020).

This court is mindful, however, of the numerous cases which have dealt with the phrase "arrange for treatment or disposal of hazardous substances" and routinely interchanged "waste" for "substance." See, i.e., Jersey City Redevelopment Authority v. PPG Industries, 655 F. Supp. 1257 [17 ELR 20763] (D.N.J. 1987); State of N.Y. v. General Electric Co., 592 F. Supp. 281 [14 ELR 20719] (N.D.N.Y. 1984); United States v. A & F Materials Co., Inc., 582 F. Supp. 842 [14 ELR 20432] (S.D. Ill. 1984). In each instance, however, the court was dealing with the narrower issue of a hazardous waste which fit within the definition of hazardous substances. The current action differs in that the chemicals involved are clearly not wastes, but do include certain hazardous substances, as they are defined within other statutes which CERCLA incorporates. Thus, this court concludes that if the transaction between Rambach and Syncon was an arrangement for the treatment or disposal of such chemicals, Rambach would be liable under CERCLA.

The mere fact that Rambach was involved in a transaction with Syncon which involved hazardous substances does not, however, expose it to liability. As Rambach points out, the mere sale of hazardous chemicals does not expose it to liability under CERCLA. See United States v. Westinghouse Electric Corporation, 22 Env't Rep. Case. (BNA) 1230 [14 ELR 20483] (S.D. Ind. 1983). Thus, the crucial question is whether it can be shown that Rambach arranged for the treatment or disposal of such hazardous substances or that it accepted some hazardous substance for transport to a disposal or treatment facility. 42 U.S.C. § 9607(a)(3) and (4). Rambach claims that such cannot be shown as it was merely involved with the "sale" of chemicals to Syncon, and did not accept for transport any other substances.^[4] In support of its contention, Rambach has presented the court with invoices and affidavits which evidence a "sale" between Rambach and Syncon.

In opposition, Farber asserts that Rambach cannot avoid Section 107(a)(3) coverage by characterizing the arrangement for treatment or disposal of its chemicals as a "sale of a finished product." See, e.g., State of New York v. General Electric Company, 592 F. Supp. 291 [14 ELR 20719] (N.D.N.Y.); Accord, United States v. Ward, 618 F. Supp. 884, 895 [16 ELR 20127] (D.C.N.C. 1985) (CERCLA liability not avoided by characterizing transaction for disposal of PCB oil as a sale). Farber claims that in reality Rambach operated as a scavenger of chemical materials, including off-grade and odd-lot materials; that these materials required treatment before being utilized as a product or product ingredient; and that this type of material was among the materials transported by Rambach to Syncon. Farber, however, admits that he is unable to present the court with specific documents, affidavits, or other evidence in support of his claims at this time, due to the fact that many of thedocuments of Syncon are still located on the contaminated Syncon site and because at this relatively early stage of the litigation he allegedly has not had an adequate amount of time to conduct his discovery against Rambach. In support of these claims, Farber's counsel has submitted affidavits pursuant to Fed. R. Civ. P. 56(f) which outline Farber's reasons for being unable to properly respond to this motion at this time.

Under Fed. R. Civ. P. 56(f), a court is given the authority to deny or delay ruling on a motion for summary judgment when it appears "from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition." While this court is satisfied with Rambach's legal argument that mere sale of hazardous substances does not expose it to CERCLA liability, Farber's contentions, if supported by factual evidence, could possibly create "a genuine issue of material fact" as to the characterization of the transaction between Rambach and Syncon, and thus defeat Rambach's current motion. For that reason, the court denies without prejudice Rambach's motion for summary judgment in order to allow Farber's counsel sufficient time to properly prepare its response.

[18 ELR 20857]

Conclusion

While disagreeing with Rambach's argument that a party may only be liable under CERCLA if they engage in a transaction involving hazardous waste, this court agrees with Rambach's assertion that the mere sale of a hazardous substance should not and does not expose the party to liability under CERCLA. However, due to the relatively early stage of this litigation and Farber's representation that a 90-day period in which to conduct discovery should be sufficient to gather those facts necessary to properly respond to the motion, the court denies without prejudice Rambach's motion.

For clarity, the court notes that the crucial determination to be made on a motion for summary judgment such as this is whether there exists any genuine issue as to the characterization of the transaction between the parties. For if there is no evidence that the transaction was ever more than a "mere sale," Rambach would be entitled to its summary judgment. At this time, however, the court concludes that such a determination would be premature.

An appropriate order in conformity with this opinion shall be submitted by plaintiff.

1. On September 21, 1982 Syncon and its subsidiaries were adjudged bankrupt.

2. The Environmental Protection Agency began its clean-up in December, 1982 and has already incurred costs over $ 750,000 with a potential cost of $ 2 million.

3. For example, one may "treat" a hazardous substance by using any method, technique or process, including neutralization, designed to change the physical, chemical or biological character or composition of it so as to render it nonhazardous, safer for transport, amenable for recovery, amenable for storage or reduced in volume.

4. Rambach similarly attempts to argue under 42 U.S.C. § 9607(a)(4) that since it was not involved with any waste products, it cannot be found liable for the transport of such. Again, however, the court notes the unambiguous and explicit language of CERCLA at 42 U.S.C. § 9607(a)(44), which speaks in terms of substances; ". . . accepted hazardous substances for transport to a disposal or treatment facility."