18 ELR 20998 -- Florida Power & Light Co. v. Allis-Chalmers Corp.

Florida Power & Light Co. v. Allis-Chalmers Corp.

No. 86-1571-Civ-Atkins (S.D. Fla. March 22, 1988)

The court rules that sale of a product containing a hazardous contaminant does not automatically subject the seller to liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). A utility that was held liable under CERCLA in connection with the disposal of electrical transformers contaminated with polychlorinated biphenyls (PCBs) sued for contribution from the manufacturer that sold it the transformers. The court holds that the manufacturer is not liable, since it was not involved in and had no control over the disposal of the waste. Whether the utility intended to "dispose" of the PCBs within the meaning of CERCLA is irrelevant, since as the owner of the waste it is strictly liable. The manufacturer did not "arrange for disposal" of the PCBs by allowing the utility to use and ultimately dispose of the transformers, since it sold the utility new, useful products and the utility eventually made the decision to dispose. The manufacturer's knowledge as to the likelihood that the transformer would eventually need repair or disposal is also irrelevant to determining CERCLA liability.

Counsel for Plaintiffs
Norman A. Coll
Coll, Davidson, Carter, Smith, Salter & Barrett, P.A.
3200 Miami Center
100 Chopin Plaza, Miami FL 33131
(305) 373-5200

Counsel for Defendants
David F. McIntosh
Corlett, Killian, Hardeman, McIntosh & Levi
116 W. Flagler St., Miami FL 33130
(305) 377-8931

[18 ELR 20998]

Atkins, J.:

Order Granting Summary Judgment

THIS CAUSE is before the court on defendants' Motion for Partial Summary Judgment on Count I of Plaintiffs' Amended Complaint. Count I alleges that plaintiffs are entitled contribution under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C., section 9607, and section 403.727 of the Florida Statutes.^[*] Upon consideration of the pleadings, the record as a whole, the relevant law, and after hearing oral argument, it is

ORDERED AND ADJUDGED that the motion is GRANTED.

Defendants manufactured electrical transformers as part of their regular business operations. The transformers contained mineral oil in accordance with their design. The mineral oil turned out to be contaminated with polychlorinated biphenyls ("PCBs").

The transformers were sold to Florida Power and Light Company ("FP&L") for use in its utility business. FP&L used the transformers in the course of its regular business for up to forty years. At the end of their useful life, FP&L contracted with Pepper's Steel & Alloys, Inc. for the sale of the mineral oil transformers as scrap. Pepper's Steel salvaged the transformers for recovery of various metals and oil contained in them at its disposal site in Medley, Dade County, Florida.

Section 9607(a)(3) provides for liability for costs of removal and clean-up on:

(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, by any other party or entity at any facility owned or operated by another party or entity and containing such hazardous substance. . . .

The terms "disposal" and "treatment" are defined by reference to the Solid Waste Disposal Act. 42 U.S.C., section 9601(29). "Treatment" is defined 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 waste or any constituent thereof may enter the environment or be emitted into any waters, including ground [sic].

42 U.S.C., section 6903(34). The term "disposal" is defined as:

the discharge, deposit, injection, dumping, spilling, leaking, 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 groundwaters.

42 U.S.C., section 6903(3). The term "arrange" is not defined in the act.

Courts have held that the sale of a product per se is not a disposal arrangement giving rise to liability under CERCLA. In United States v. Westinghouse Electric Corp., 22 Env't Rep. Cas. (BNA) 1230, 1233 [14 ELR 20483] (S.D. Ind. 1983), the government sued Westinghouse under CERCLA for sending PCB-contaminated waste to a landfill in Indiana. Westinghouse then brought a third party complaint against Monsanto, which had originally supplied the PCBs to Westinghouse for use as a dielectric fluid in electrical equipment manufactured by Westinghouse at its facility in Bloomington, Indiana. The court dismissed the CERCLA claims against Monsanto. It reasoned:

The claims of the United States are not based on its control of the manufactured product of Monsanto as sold to Westinghouse but are based on Westinghouse's waste product disposition in issue. Monsanto did not generate or dispose of any hazardous waste and did not contract for disposal of waste and therefore Monsanto is not, under the facts alleged in the complaint of the United States and third-party complaint, liable to Westinghouse.

The court focused on which party actually contracted for disposal of the waste. The distinction between supplier of the contaminant, manufacturer of the equipment containing it, and user of the equipment was irrelevant to the court's decision.

In United States v. Ward, 618 F. Supp. 884 [16 ELR 20127] (E.D.N.C. 1985), the court distinguished Westinghouse Electric on the ground that the Defendant Ward agreed to pay Burns for removal of PCB-contaminated oil from Ward's facilities, and for removal of contaminated oil from transformers. The court held that Ward had arranged for disposal of PCBs by contract with a transporter. It distinguished Westinghouse Electric as follows: "[Ward] was not selling it to Burns as a new product, but rather as an industrial waste product." Id. at 895.

In United States v. A & F Materials Co., 582 F. Supp. 842 [14 ELR 20432] (S.D. Ill. 1984), the court stated a rule for determining which party is liable under section 9607(a)(3):

Thus liability for release under [section] 9607(a)(3) is not endless; it ends with that party who both owned the hazardous waste and made the crucial decision how it would be disposed of or treated, and by whom.

Id. at 845. In that case, McDonnell Douglas Corporation's process for manufacturing jet aircraft generated a spent caustic solution. It agreed to pay A & F Materials to transport the solution to A & F's clean-up facility. McDonnell Douglas argued that it was not liable under CERCLA because it had merely arranged for the sale of a hazardous substance. The court rejected this argument, and explained that the "relevant inquiry is who decided to place the waste into the hands of a particular facility that contains hazardous waste." Id. at 845 (emphasis in original).

In United States v. Conservation Chem. Co., 619 F. Supp. 162 [16 ELR 20193] (W.D. Mo. 1985), the court rejected the defendants' argument that the sale of an otherwise hazardous substance in the ordinary course of business for use in treating and neutralizing wastes from other generators does not constitute an arrangement for disposal. Citing A & F Materials, the court held that the defendants owned the hazardous substances and made the decision how to dispose of them. It further rejected the notion that the court must determine whether the defendant was acting with the intent to dispose.

BOC's argument is misguided to the extent that it asserts [18 ELR 20999] an "intent" requirement under CERCLA because CERCLA requires neither intent nor even negligence, but provides for strict liability.

Id. at 241 (emphasis added).

In Jersey City Redevelopment Auth. v. PPG Indus., 655 F. Supp. 1257 [17 ELR 20763] (D.N.J. 1987), the court held that the original generator of hazardous waste was not liable under CERCLA where it had sold its entire property, including waste mud, to another business. The court rejected plaintiff's argument that "it was clearly foreseeable that waste mud remaining at the Garfield Avenue site after its transfer to Clif Associates would continue to be put to that use." Id. at 1260. Citing A & F Materials, it held that liability turns on the party who made the "crucial decision" as to how the waste would be disposed. "Section 107(a)(3) requires that, in some manner, the defendant 'dumped' his waste on the site at issue." Id.

Consistent with its holding as to the original generator of the waste, the Jersey City Redevelopment court held the purchaser of the property containing the waste mud strictly liable for sale ofthe mud for use as land fill on a construction project. It rejected the purchaser's argument that it did not know about the hazardous substances contained in the mud, and therefore could not have arranged for disposal of such substances. "[A]s a matter of law, defendant's lack of knowledge, though perhaps a basis for an affirmative defense, cannot remove defendant from the coverage of [section] 107(a)(3)." Id. at 1261.

These cases have rejected the arguments offered by plaintiffs in opposition to the present motion. The cases have consistently held that intent to dispose, and foreseeability of the eventual need to dispose are irrelevant under CERCLA. They have held that sale of a useful product containing a contaminant does not subject the seller to CERCLA liability. Liability under CERCLA is narrowly construed; only the party who owns the hazardous waste product (as opposed to the useful product containing it) can be liable, and then only if that party is the one that decided how and by whom it would be treated and disposed. As noted in Conservation Chemical, CERCLA imposes strict liability for the disposal on that party.

These principles were strictly applied in Allied Towing Corp. v. Great Eastern Petroleum Corp., 642 F. Supp. 1339 (E.D. Va. 1986), where the court held that only the last purchasers in a series of purchasers of an oil-based by-product would be liable under CERCLA. In that case, Philadelphia Gas Works generated the oil-based by-product during its process for converting fuel oil into gas. Sealand Ltd. originally purchased the by-product. Sealand arranged for the removal and transportation of the by-product to a tank farm owned by Publicker Industries. When Sealand failed to pay for tank rental, Publicker foreclosed on a warehouseman's lien. It then sold one million gallons of the material to yet another purchaser, Great Eastern Petroleum Corporation. Great Eastern subsequently formed a joint venture with Petroferm USA, Inc., to resell the by-product. They finally sold it to Allied Towing. The court held that Publicker was not liable under CERCLA. While it acknowledged that Publicker could not "contract away" its responsibilities, it relied on the test in A & F Materials, and held that Publicker could not be liable because it did not make the crucial decision as to where to place the waste. The court commented that perhaps Great Eastern and Petroferm determined where to place the substance.

Plaintiffs' argument adds that extra step consistently rejected by the courts in construing CERCLA liability. They argue that, "Defendants decided to arrange for disposal of the PCB's by allowing FP&L to use and ultimately dispose of the transformers." Memorandum of Law in Opposition at 15. FP&L purchased the transformers for use in their ordinary course of business. Defendants sold FP&L new, useful products. FP&L eventually made the decision to dispose of the transformers. According to A & F Materials, FP&L made the crucial decision "to place the waste into the hands of a particular facility that contains hazardous waste." 582 F. Supp. at 845.

FP&L further argues that defendants knew that the transformer would ultimately need "repair, routine maintenance, or disposal" which would likely result in a release of the hazardous substance. However, defendants' knowledge is irrelevant todetermining CERCLA liability. In Jersey City Redevelopment Authority, the court refused to hold the original generator of hazardous waste liable under CERCLA despite plaintiff's argument that it was foreseeable that the waste mud on the property it sold would continue to be put to use.

DONE AND ORDERED at Miami, Florida, this 21st day of March, 1988.

* Section 403.727(4)(c) of the Florida Statutes is identical to section 9607(a)(3). The discussion and ruling in this order should be treated as applicable to both statutes.