What a long, strange trip it's been: broader arranger liability in the Ninth Circuit and rethinking the useful product doctrine.

AuthorHenson, Tommy Tucker, II
  1. INTRODUCTION II. ARRANGER LIABILITY UNDER CERCLA AND THE NINTH CIRCUIT'S RECENT EXPANSION OF "BROADER" ARRANGER LIABILITY A. A Brief Introduction to CERCLA Liability B. Arranger Liability Under Section 107(a)(3) C. Recent Ninth Circuit Decisions Examining "Broader" Arranger Liability 1. United States v. Burlington Northern & Santa Fe Railway. Co. 2. California Department of Toxic Substances Control v. Alco Pacific, Inc. III. THE DISTINCTION BETWEEN VIRGIN AND SECONDARY MATERIALS, BROADER ARRANGER LIABILITY, AND THE USEFUL PRODUCT DOCTRINE A. Virgin Materials Must Be Distinguished From Secondary Materials B. The Current Ninth Circuit Analysis of Broader Arranger Liability C. The Impact o/Burlington on the Ninth Circuit's Arranger Liability Analysis D. The Current Application of the Useful Product Doctrine IV. THE USEFUL PRODUCT DOCTRINE AS APPLIED TO SECONDARY MATERIALS A. CERCLA's Definition of "Disposal" and Importation of the "Waste" Requirement B. The Current Useful Product Doctrine Analysis for Secondary Materials V. THE NINTH CIRCUIT'S APPLICATION OF THE USEFUL PRODUCT DOCTRINE TO SECONDARY MATERIALS IS INCORRECT BECAUSE THE FOCUS SHOULD LIE UPON THE TRANSACTION, NOT THE CURRENT STATE OF THE MATERIAL A. Importation of RCRA's "Waste "Requirement Misses the Mark 1. CERCLA Incorporates the Statutory Definition of "Hazardous Waste" from RCRA, Thus the RCRA Regulations Utilized by the Ninth Circuit are Inapplicable 2. No Version of RCRA Regulations Provides a Feasible Framework for the CERCLA Analysis; Therefore, the Ninth Circuit Erred in Looking to RCRA Regulations a. The Genesis of the CERCLA Definition of "Disposal" Predates RCRA Regulations b. Incorporation of RCRA Regulations That Were in Place at the Time of the Enactment of CERCLA Speaks Against the "Waste "Requirement and Complicates Interpretation c. Use of Current RCRA Regulations Forsakes Any and All Stability In the CERCLA Liability Analysis 3. The "Waste "Requirement Should Be Eliminated From the CERCLA Analysis B. Focusing on the Transaction and Dissecting the Secondary Material C. The Proper Analysis Should Distinguish Between Virgin and Secondary Materials and Focus on the Transaction 1. Step 1: Is this a Virgin Product or Secondary Material? 2. Step 2: Look to the Transaction and Dissect the Secondary Material 3. Step 3: Assign Liability for Disposal VI. THE CURRENT CONCEPTION OF BROADER ARRANGER LIABILITY AND THE PROPER USEFUL PRODUCT DOCTRINE ANALYSIS COMPELS THE DETERMINATION THAT THE SALE OF A SECONDARY MATERIAL IS AN ARRANGEMENT FOR DISPOSAL A. Useful Products Doctrine Aside, the Sale of Secondary Materials is an Arrangement for Disposal 1. Disposal is Inherent in the Transaction 2. The Sale of Secondary Products Meets the Arranger Liability Factors B. Secondary Substances Do Not T)'t Within the Proper Conception of the Useful Product Doctrine VII. CONCLUSION I. INTRODUCTION

    Arranger liability under section 107(a)(3) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (1) encompasses the furthest reaches of the statute, and the Ninth Circuit's current understanding of "broader" arranger liability represents the most expansive scope accepted by any federal court of appeals. The circuit recently expanded on this conception through two significant decisions: United States v. Burlington Northern & Santa Fe Railway Company (Burlington) (2) and California Department of Toxic Substances Control v. Alto Pacific, Inc. (3) Both decisions attempted to clarify the reach of liability under section 107(a)(3) and the "useful product doctrine" (UPD), which serves as the primary restriction of arranger liability, and, although the two decisions dealt with vastly different sorts of products, neither embraced this distinction.

    The Burlington court, in its examination of multiple sales of a hazardous virgin material, extended the scope of "broader" arranger liability into its outermost frontiers and, in doing so, cast a shadow of liability over sales of hazardous secondary materials. (4) This specter had risen to prominence in Alco Pacific, where the court's analysis of broader arranger liability as applied to sales of secondary materials veered erratically between the broad standard set in Burlington and the fluctuating UPD template cast in its prior decisions. (5) Although the court failed to distinguish between virgin and secondary materials, it readily employed a different UPD analysis than the Burlington court and considered the state of the product instead of the transaction. Ultimately, in reaching a decision seemingly based on equity as much as precedent, the Alco Pacific court clung to the idea that, for one to "arrange for disposal," the material must be "waste." Although the court sought to refine its UPD analysis, its decision did little more than infuse additional process in favor of lucidity.

    This Chapter begins with a brief overview of arranger liability under CERCLA and a short summary of Burlington and Alco Pacific. The Chapter then distinguishes virgin products from secondary materials in preparation for the subsequent analysis of "broader" arranger liability and the UPD, found in Part III. Part IV, through an assessment of the Ninth Circuit's prior decisions, examines the process and reasoning behind the current implementation of the UPD in relation to secondary materials. Part V argues that the current analysis is faulty and proposes an alternative analysis based upon a transaction-centric approach. Part VI applies the Ninth Circuit's current conception of broader arranger liability and the proposed UPD analysis to secondary materials, leading to the ultimate conclusion that the sale of secondary materials is an arrangement for disposal.

  2. ARRANGER LIABILITY UNDER CERCLA AND THE NINTH CIRCUIT'S RECENT EXPANSION OF "BROADER" ARRANGER LIABILITY

    1. A Brief Introduction to CERCLA Liability

      In 1980, Congress passed CERCLA to provide for effective, expedient responses to releases of hazardous substances and to eliminate the health and environmental threats arising from actual or potential releases. (6) CERCLA is meant to ensure, to the greatest extent possible, that the cost of responding to releases and remediating the resulting harm is borne by the party responsible for and/or benefiting from the harm. (7) To effectuate this policy, Congress fashioned CERCLA as a broad, strict liability statute. (8)

      For CERCLA jurisdiction to attach, there must be: 1) a "release" or "substantial threat" of a release, (9) 2) of a "hazardous substance," (10) 3) from a "facility." (11) "Release" is an expansive term, encompassing active forms of release such as spilling, pouring, emitting, and discharging, as well as passive releases, including leaching and abandonment. (12) "Hazardous substance" is also broadly defined and includes both hazardous substances designated pursuant to CERCLA, (13) as well as substances considered hazardous under the Resource Conservation and Recovery Act of 1976 (RCRA), (14) the Clean Water Act (CWA), (15) the Clean Air Act (CAA), (16) and the Toxic Substances Control Act (TSCA). (17) Finally, a "facility" includes "any site or area where a hazardous substance has ... come to be located...." (18)

      As virtually any contaminated area meets these elements, liability generally hinges upon whether a party falls under one or more of the "potentially responsible party" (PRP) classifications enumerated in section 107(a). (19) PRP classifications include: 1) current owners and operators of the facility; 2) owners and operators at the time of disposal of hazardous substances; 3) persons who "arranged for disposal or treatment" of hazardous substances; and 4) persons who accepted hazardous substances for transport to a treatment or disposal facility. (20) This chapter focuses upon the third PRP liability classification: arranger liability.

    2. Arranger Liability Under Section 107(a)(3)

      Section 107(a)(3) of CERCLA imposes liability upon any person who "arranged for disposal or treatment ... of hazardous substances." (21) "Arranged for" is undefined in the statute, but as discussed infra, is broadly interpreted. "Disposal" is defined by reference to the term's definition in RCRA, (22) which includes "the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste" in such a manner that the "waste" may enter the environment. (23) Inclusion of the passive term "leaking" indicates that disposal need not be intentional. (24)

      The Ninth Circuit recognizes two categories of arranger liability: "direct" arranger liability and "broader" arranger liability. "Direct" arranger liability applies to "transactions in which the central purpose of the transaction is disposing of hazardous wastes." (25) Because a person may circumvent this narrow construction by making disposal a secondary purpose of a transaction, thereby thwarting CERCLA's goal of allocating remediation costs to the party responsible for the contamination, the Ninth Circuit also recognizes "broader" arranger liability. Briefly, "broader" arranger liability "involves transactions that contemplate disposal as a part of, but not the focus of, the transaction...." (26) Broader arranger liability is discussed in detail in Section III.

    3. Recent Ninth Circuit Decisions Examining "Broader" Arranger Liability

      The Ninth Circuit recently issued two decisions applying broader arranger liability. In Burlington, the court assigned liability to a seller of an agricultural chemical for its role in spillage and leakage of the chemical upon the purchaser's property. (27) In Alco Pacific, the court reversed the district court's grant of summary judgment to defendants and remanded the case to determine whether the sale of industrial by-products with some commercial value constituted an arrangement for disposal. (28) These two cases represent the current analysis of arranger liability as to manufacturers of hazardous...

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