Case summaries.

• Position: Environmental law - US Court of Appeals for the 9th Circuit

1. ENVIRONMENTAL QUALITY

   1. Hazardous Waste

      1. A & W Smelter & Refiners, Inc. v. Clinton, 1246 F.3d 1107 (9th Cir. 1998).

         A & W Smelter (A & W) possessed an ore pile at its processing facility in the Mojave Desert. The ore included small amounts of silver and gold, some naturally occurring lead, and slag--a waste product of smelting. A & W decided to move the ore pile and contracted with Relief Mining Company to process the ore in Baja, Mexico. A & W packed the ore into drums and began shipping it. Several trucks were stopped at the Mexican border and their contents labeled "hazardous" because of the lead. Mexico returned these trucks several months later. The United States Environmental Protection Agency (EPA) ordered A & W to reclaim the ore within three days; when A & W failed to comply, EPA declared the ore abandoned and took it to a storage facility. EPA issued an order to A & W directing it to dispose of the ore in an approved landfill. Meanwhile, A & W had diverted six other truckloads of ore to Nevada. EPA directed A & W to ship this ore to a hazardous waste landfill, but A & W claimed that the Nevada site was a temporary storage site.

         A & W eventually complied with both orders and filed a complaint seeking reimbursement of its compliance costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).(1) EPA moved for summary judgment, which the district court granted. A & W then appealed.

         According to CERCLA, "when the President determines that there may be an imminent and substantial endangerment to the public health or welfare or the environment because of an actual or threatened release of a hazardous substance from a facility," he may issue disposal orders.(2) Those who pay for cleanup but believe they should not have done so may petition for reimbursement of reasonably incurred costs.(3) If EPA refuses, violators may sue in district court.(4) Additionally, violators may be reimbursed if the order was arbitrary and capricious,(5) even if the violator was otherwise liable. A & W claimed reimbursement on both grounds.

         EPA argued that A & W was responsible for cleanup costs under section 9607(a) of CERCLA, which holds liable "any person who by contract, agreement, or otherwise arranged for disposal or treatment ... of hazardous substances owned or possessed by such person ... from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance."(6) EPA labeled the ore pile hazardous because it contained lead. CERCLA defines "hazardous substance" pursuant to several other statutes or to EPA regulations promulgated under the Act.(7) EPA pointed to regulations promulgated under CERCLA(8) and to Clean Water Act regulations listing lead as a hazardous substance(9) to support the contention that A & W violated CERCLA. A & W countered by requesting that the court read a minimum hazard level requirement into the statutes and regulations.

         First, the Ninth Circuit noted that neither section 9601(14) of CERCLA nor EPA regulations establish minimum levels for classifying substances as "hazardous." Moreover, the Second, Third, and Fifth Circuits all agree that CERCLA's definition of hazardous substance has no minimum level requirement. Consequently, the Ninth Circuit declined to read a limitation into the statute, reasoning that such a reading would intrude into Congress's province.

         Second, the Ninth Circuit addressed whether the shipment sent to the disposal facility constituted a release. "Release" is defined as "any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any hazardous substance or pollutant or contaminant)."(10) Although the ore stayed within the drum, the government claimed that there was an abandonment because A & W did not move the shipment within EPA's three-day time limit. While case law does not define "abandonment" under CERCLA, according to common law, property is "abandoned" when the owner intends to relinquish all interest in it. A & W claimed it intended to retrieve the ore but did not have the means to do so within the time limit. EPA did not present evidence of any regulation or well-established agency practice defining abandonment.

         The court stated that although ad hoc agency action is entitled to deference, the degree of deference depends on how much deliberation went into reaching the decision and whether it fits within a policy the agency has consistently followed. Here, there was no indication that the agency considered objections to its conclusion that the ore was abandoned. Additionally, since there was no suggestion that there was another meaning of the term other than that intended by Congress, the court held that there was no reason to defer to EPA's interpretation of the statute.

         Third, the court discussed whether A & W was liable under CERCLA. A & W would be liable only if it arranged for "disposal or treatment" of hazardous substances.(11) Disposal is "the discharge of any solid waste or hazardous waste."(12) Treatment is "a method, technique, or process ... designed to change the ... 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."(13) The court explained that A & W disposed or treated the ore only if it was waste, but that the ore was not waste and not subject to CERCLA if it was a useful product. In this case, the ore had not been processed, because smelting unprocessed ore was A & W's business. Therefore, the ore was one of the producer's principal business products. However, slag, a by-product of smelting, was also mixed with the ore. If the ore had been mixed with enough slag so that it was no longer usable for A & W, it would be considered waste. The court held that examining A & W's actions and commercial practices would determine whether the ore mixture was a waste. Consequently, the court remanded this issue to the district court.

         Finally, the Ninth Circuit discussed whether EPA's order was arbitrary and capricious. It noted that EPA may issue an order if the agency determines there is "an imminent and substantial endangerraent to the public health or welfare or the environment."(14) A & W claimed that the guidelines issued by EPA defining its use of this power were void for vagueness. Therefore, it claimed that EPA's actions were arbitrary and capricious and that A & W should be reimbursed. The Ninth Circuit rejected this argument, noting that only a "minimal rationality" is needed to withstand arbitrary and capricious review. Because the meaning of "imminent and substantial" was not absolutely clear, the court defined "substantial" here as a release that does more than present a minimal threat to health, welfare, or the environment. The court then noted that A & W did not argue that its release was not a substantial endangerment to health or the environment. Due to the obscurity on this issue, the court stated that this question could be raised on remand to the district court.

      2. Atchison, Topeka & Santa Fe Railway Co. v. Brown & Bryant, Inc., 159 F.3d 3,58 (9th Cir. 1998).

         In this case, the Ninth Circuit revised a 1997 opinion(15) in which the court refused to assign successor-in-interest liability to the purchaser of interests of a liable party under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).(16) The revised opinion substantially repeats the analysis and holding of the prior opinion, but does not hold that state law determines the scope of successor liability.

         Plaintiff railroad companies, Atchison, Topeka & Santa Fe Railway Company and Southern Pacific Transportation Company (Railroads), brought this contribution action under CERCLA to recover cleanup costs for soil contamination on property leased to defendant Brown & Bryant (B & B). Railroads sought contribution from defendant PureGro, which had purchased many of B & B's assets once B & B realized it could not afford to comply with cleanup orders issued by the Environmental Protection Agency (EPA) pursuant to CERCLA. The Ninth Circuit held that PureGro was not liable for contribution because it was not the successor-in-interest. First, the Ninth Circuit declined to apply CERCLA's "mere continuation" exception to the general rule that asset purchasers are not liable as successors-in-interest.(17) Second, the court found that PureGro's purchase of B & B's assets did not qualify for the "fraudulently entered transaction" exception to the same rule.(18)

         Aside from minor grammatical and citation amendments, the court altered its analysis in the revised opinion only in its discussion of the expanded "substantial continuation" exception.(19) The court in the prior opinion determined, on the basis of a series of United States Supreme Court cases, that state law dictates the parameters of successor liability. The court declined to assign liability because the governing law of California includes no substantial continuation exception.(20)

         In the revised opinion, the court noted that its decision not to extend the mere continuation exception to include the notion of a substantial continuation rendered the same result under either state or federal law. The court did not need to determine whether state law governed the scope of successor liability, because in this case both state and federal law reached the same result. The court also deleted a paragraph from the earlier opinion that rejected an argument for expanding the "mere continuation" rule on the basis that such expansion would increase the funds available to finance CERCLA cleanup operations.

      3. United States v. Chapman, 146 F.3d 1166 (9th Cir. 1998).

         Harold...