1. Michael K. Murphy
Gibson Dunn & Crutcher LLP
Suzanne Ilene Schiller
Manko, Gold, Katcher & Fox, LLP
Arranger
Liability
Under
CERCLA
January 21, 2015

2. Topics
• The text of Section 107 of CERCLA, 42 U.S.C §
9607
• The Supreme Court’s decision in Burlington
Northern & Santa Fe Railway Company v.
United States, 556 U.S. 599 (2009)
• Recent cases applying Burlington Northern

3. Section 107 of CERCLA
Michael K. Murphy

4. Liability for Response Costs Under CERCLA
• CERCLA § 107, 42 U.S.C § 9607, permits
recovery of response costs from potentially
responsible parties (PRPs) for cleanup of
hazardous substances
▫ Four categories of PRPs:
 Current owner/operator
 Past owner/operator
 Arranger
 Transporter

5. Defining “Arranger:” Starting with the Text
• 42 U.S.C. § 9607(a)(3):
“[A]ny 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 or incineration vessel owned or
operated by another party or entity and containing
such hazardous substances . . . .”

6. Taking a Closer Look at Arranger Liability
• Purpose: close a loophole
▫ Prevent entity from avoiding CERCLA liability by
contracting with another party to arrange for the
disposal of the entity’s hazardous waste
• “Arranged for” not defined in statute
• Courts previously implemented varying standards of
liability:
▫ Specific intent that waste will be disposed of
▫ Mere knowledge that waste will be disposed of
 Inferring intent where PRP knew or should have known
about hazardous material releases
▫ Strict liability

7. The Decision in Burlington
Northern
Michael K. Murphy

8. “Arranger” Interpreted: Burlington Northern
• Burlington Northern & Santa Fe Railway Company
v. United States, 556 U.S. 599 (2009)
▫ Issue: Is intent to dispose of hazardous materials
required for arranger liability or is knowledge
sufficient?
• Facts:
▫ Shell Oil Company sold the pesticide D-D to B&B, a
chemical distributor
▫ During transfer from tanker trucks to B&B’s bulk
storage containers, spills of D-D occurred
 Shell had actual knowledge of some degree of spillage
▫ Shell identified as PRP under arranger liability theory

9. Burlington Northern: Procedural History
• Ninth Circuit, 520 F.3d 918 (2008):
▫ Shell not “traditional” arranger – had not directly
contracted to dispose of hazardous material
▫ Shell still liable under “broader category of
arranger liability” because disposal of D-D was
foreseeable byproduct of transaction with B&B
• Supreme Court, 556 U.S. 599 (2009):
▫ Reversed Ninth Circuit decision
▫ Shell not liable as arranger because it had no
intent to dispose of D-D

10. A Textual Analysis
• The Court began with the language of the statute:
▫ “It is plain from the language of the statute that
CERCLA liability would attach under § 9607(a)(3) if an
entity were to enter into a transaction for the sole
purpose of discarding a used and no longer useful
hazardous substance.”
▫ “It is similarly clear that an entity could not be held
liable as an arranger merely for selling a new and
useful product if the purchaser of that product later,
and unbeknownst to the seller, disposed of the product
in a way that led to contamination.”
• But what about those cases in between?

11. Crafting a Rule for the Cases In Between
• Giving “arrange” its ordinary meaning:
▫ “In common parlance, the word ‘arrange’ implies action directed
to a specific purpose.”
▫ “Consequently, under the plain language of the statute, an entity
may qualify as an arranger . . . when it takes intentional steps to
dispose of a hazardous substance.”
• And limiting the inference of intent:
▫ “While it is true that in some instances an entity’s knowledge that
its product will be leaked, spilled, dumped, or otherwise discarded
may provide evidence of the entity’s intent to dispose of its
hazardous wastes, knowledge alone is insufficient to prove
that an entity ‘planned for’ the disposal.”

12. The Court’s Holding: Shell Not an Arranger
▫ “In order to qualify as an arranger, Shell must
have entered into the sale of D-D with the
intention that at least a portion of the product be
disposed of during the transfer process . . . .”
▫ “Shell’s mere knowledge that spills and leaks
continued to occur is insufficient grounds for
concluding that Shell ‘arranged for’ the disposal of
D-D within the meaning of § 9607(a)(3).”

13. The Upshot of Burlington Northern
• Some indicia of intent to dispose of at least a
portion of a hazardous substance is required
▫ Especially for unused, useful products
• Mere knowledge of facts leading to disposal is
insufficient
• Courts left to examine facts of each case to
determine intent of the parties to the transaction

14. Inconsistent Decisions
• Compare American Int’l Specialty Lines Ins. Co.
v. United States, 2010 WL 2635768 (C.D. Ca.
2010) (finding arranger) with Lockheed Martin v.
United States, 2014 WL 1647147 (D.D.C.), 79
ERC 1311 (no arranger liability).
▫ Both cases addressed solid rocket manufacturers
working for the United States and the disposal of
government-owned materials in burn pits under
government contracts in accordance with
government manuals

15. Degree of “Control” under BNSF
• ASLIC: United States knew that hazardous
substances would be removed from motors and
discarded; mandated the use of certain materials;
knew the manufacturing process would generate
waste; and had the right to supervise disposal
• Lockheed Martin: Those facts are not sufficient:
“Instead, arranger liability attaches only if the
government exercised direction and control over
waste disposal activities related to its contracts with
LPC.”

16. Recent Cases
Suzanne Ilene Schiller

17. Key Issues
• Waste vs. Useful Product
▫ Is the product the hazardous substance, or is the hazardous
substance merely contained on/within the product?
▫ Is there an established market for the product?
▫ What is the value of the product to the purchaser?
▫ What is the value of the product to the seller?
▫ Has the seller taken steps to minimize potential disposal of the
hazardous substance by the buyer?

18. Key Issues (cont.)
• Knowledge and Intent
▫ Is there knowledge of the hazardous nature of product?
▫ Is there an intent to dispose of the product? Is there an intent to dispose
of the hazardous substance?
• Ownership and Control
▫ Who owns the product at the time of the disposal of the hazardous
substance?
▫ Who controls the method and manner of disposal?

19. Common Subjects

20. Transformers
• Schiavone v. Northeast Utilities Service Co.,
2011 WL 1106228 (D. Conn. Mar. 22, 2011)
• Carolina Light & Power Co. v. Alcan Aluminum Corp.,
921 F. Supp.2d 488 (E.D.N.C. Feb. 1, 2013)
• Wilson Road Development Corp. v. Fronabarger Concreters, Inc.,
971 F. Supp. 2d 896 (E.D. Mo. Sept. 11, 2013)

21. Schiavone v. Northeast Utilities Service Co.,
2011 WL 1106228 (D. Conn. Mar. 22, 2011)
Facts: From 1971 – 1978, Defendants sold used transformers to Kasden for scrap metal. Beginning in
1973, Defendants drained the transformers of PCB-containing oil prior to pick-up by Kasden.
How Raised: Summary Judgment
Holding: Defendants were not arrangers
Reasoning: Defendants intended to dispose of the metal transformers, not the oil inside. This level of
intent was not enough to impose arranger liability, even if Defendants knew that oil was in the
transformers and would be discarded by Kasden.
21

22. Carolina Light & Power Co. v. Alcan Aluminum Corp.,
921 F. Supp.2d 488 (E.D.N.C. Feb. 1, 2013)
Facts: Defendants auctioned used transformers which Ward purchased to refurbish and resell.
Defendants usually removed oil from the transformers before sale.
How Raised: Summary Judgment
Holding: Defendants were not arrangers
Reasoning: Used transformers were sold for high value, and resold at a profit, and therefore were
useful. The pre-sale drainage of the transformers was evidence of a lack of intent to dispose of
hazardous oils. The defendants’ mere knowledge of potential spills or leaks was not sufficient to
impose arranger liability.
22

23. Wilson Road Development Corp. v. Fronabarger Concreters, Inc.,
971 F. Supp. 2d 896 (E.D. Mo. Sept. 11, 2013)
Facts: From 1954 – 1988, MEW (a) repaired transformers for Defendants and (b)
purchased transformers and then sold or discarded them.
How Raised: Summary Judgment
Holding: Disputed issues of fact regarding intent precluded summary judgment
Reasoning: As to the repairs, the defendants retained title and knew that oil would
be drained during the process and so intended that the oil would be disposed.
Because there was no sale of the transformers, the useful product defense would be
unavailing. As to the sold transformers, there was insufficient evidence that the
transformers were valuable and in good condition at the time of sale and some
evidence that they were leaking oil and only valuable as scrap metal, for which
credit memos and not cash were paid. The mere fact that some were resold does
not establish that they were useful products.
23

24. Broke
• NCR Corp. v. George A. Whiting Paper, Co.,
768 F.3d 682 (7th Cir. Feb. 28, 2014)
• Georgia-Pacific Consumer Prods. LP v. NCR Corp.,
980 F. Supp. 2d 821(W.D. Mich. Sept. 26, 2013)

25. NCR Corp. v. George A. Whiting Paper, Co.,
768 F.3d 682 (7th Cir. Feb. 28, 2014)
Facts: NCR manufactured PCB-containing emulsion which it sold to Appelton
Coated Paper Company (“ACPC”) for use in the production of carbon copy paper.
ACPC sold “broke,” a fibrous by-product of the manufacturing process, to recyclers.
In the recycling process, the PCBs from the emulsion entered the Fox River.
How Raised: Trial
Holding: ACPC and NCR were not arrangers
Reasoning: ACPC’s knowledge that chemicals from processing broke would be
treated as wastewater and end up in the river was insufficient for arranger liability
as there was no intent for this to occur; at most, it was indifference. There was also
insufficient evidence of an intent to dispose of the emulsion because, while broke
was waste to ACPC, it was useful and valuable to the recyclers as there was a well-
established market for the broke. Finally, there was no evidence that ACPC knew
the broke contained hazardous substances. Finally, NCR was not liable as an
arranger because sending the emulsion to ACPC was not disposal, but rather sale of
a useful product.
25

26. Georgia-Pacific Consumer Prods., LP v. NCR Corp.,
980 F. Supp. 2d 821(W.D. Mich. Sept. 26, 2013)
Facts: NCR manufactured PCB-containing emulsion for use in production of carbon copy paper
which NCR manufactured. NCR sold the broke to recyclers. In the recycling process, the PCBs from
the emulsion contaminated the Kalamazoo River.
How Raised: Trial
Holding: NCR was an arranger
Reasoning: NCR learned by the late 1960s that as part of the normal recycling process, hazardous
PCBs were being generated as waste. NCR had internal meetings to seek other methods for disposing
of the PCB-contaminated broke or controlling its disposal; when that could not be accomplished,
NCR continued to sell it to the recyclers. Further, had recyclers known of the dangers, they would not
have purchased it and thus it was not a “useful product.”
26

27. Wastewater
▫ United States v. NCR Corp.,
2012 WL 5893489 (E.D. Wisc. Nov. 23, 2012)
▫ United States v. Washington State Dept. of Transp.
716 F. Supp.2d 1009 (W.D. Wash. June 7, 2010)
▫ United States v. Washington State Dept. of Transp.
2010 WL 5071277 (W.D. Wash. Dec. 7, 2010)
▫ Gregory Village Partners, LP v. Chevron USA, Inc.,
2012 WL 832879 (N.D. Ca. Mar. 12, 2012)

28. United States v. NCR Corp.,
2012 WL 5893489 (E.D. Wisc. Nov. 23, 2012)
Facts: CBC and WTM used recycled broke and discharged the contaminated wastewater into the Fox
River.
How Raised: Summary Judgment
Holding: CBC and WTM were arrangers
Reasoning: CBC and WTM intended to dispose of the wastewater, which had no other purpose.
Thus, “knowledge about the specific nature of the matter disposed of is far less relevant.”
28

29. United States v. Washington State Dept. of Transp.
716 F. Supp.2d 1009 (W.D. Wash. June 7, 2010)
Facts: WSDOT owned highways from which run-off was directed into the Thea Foss Waterway. US
alleged that the run-off was contaminated with hazardous substances and that WSDOT was liable as
an arranger for the disposal of those substances.
How Raised: Summary Judgment
Holding: WSDOT was an arranger
Reasoning: WSDOT knew that the run-off contained hazardous substances and the drainage system
was designed to discharge run-off into the Waterway. Neither creation or ownership of the
hazardous substances was a requirement for arranger liability.
29

30. United States v. Washington State Dept. of Transp.
2010 WL 5071277 (W.D. Wash. Dec. 7, 2010)
Facts: WSDOT alleged that the Army Corps of Engineers’ permitting activities in connection with
dredging the Waterway and directing the disposal of the dredged materials caused hazardous
substances to enter the Waterday.
How Raised: Summary Judgment
Holding: USACE was not an arranger
Reasoning: USACE did not exercise “actual control” of the hazardous substances, which it never
owned or possessed. Further, the permit conditions were aimed at protecting human health and the
environment and thus negate any inference that USACE intended to arrange for the disposal of
hazardous substances into the Waterway.
30

31. Gregory Village Partners, LP v. Chevron USA, Inc.,
2012 WL 832879 (N.D. Ca. Mar. 12, 2012)
Facts: Chevron owned property which housed a gas station and dry cleaner and was serviced by a
sewer line owned by the Contra Costa County Sanitary District that ran past Gregory Village’s
property, which was contaminated with PCE, TCE and petroleum hydrocarbons. Gregory Village
alleges that the contamination arose from, among other sources, leaks in the sewer system.
How Raised: Motion to Dismiss
Holding: District was not an arranger
Reasoning: There was no allegation that the District intended for hazardous substances to be
disposed into the sewer system.
31

32. Dry Cleaning Equipment
▫ Hinds Investments, L.P. v. Angioli,
654 F.3d 846 (9th Cir. August 1, 2011)
▫ Team Enterprises, LLC v. Western Investment Real Estate Trust,
647 F.3d 901 (9th Cir. July 26, 2011)
▫ Heim v. Estate of Heim,
2014 U.S. Dist. LEXIS 46297 (N.D. Cal. April 2, 2014)
▫ Vine Street LLC v. Borg Warner Corp.,
_____ F.3d ____ (5th Cir. January 14, 2015)

33. Hinds Investments, L.P. v. Angioli,
654 F.3d 846 (9th Cir. August 1, 2011)
Facts: Defendants manufactured dry cleaning equipment which Team used at its dry cleaning
premises. The equipment utilized PCE and defendants included instructions for the handling and
disposal of wastewater from the machines into an open drain.
How Raised: Motion to Dismiss
Holding: Defendants were not arrangers
Reasoning: Ownership, possession and control of the hazardous substance are the most critical
factors for determining liability, and defendants had none of that with respect to the PCE and
wastewater. Defendants did not install the equipment or connect it to drains. Defendant’s knowledge
of the likely disposal was not sufficient under BNSF. Finally, the machines were useful products
when sold and, further, were not themselves hazardous substances.
33

34. Team Enterprises, LLC v. Western Investment Real Estate Trust
647 F.3d 901 (9th Cir. July 26, 2011)
Facts: Appeal of summary judgment granted to other manufacturer defendants in the Hinds case.
How Raised: Appeal after summary judgment
Holding: Affirmed that manufacturers were not arrangers
Reasoning: There was no viable evidence that defendants intended for the equipment to be used for
disposal of hazardous substances. At best, defendants were “indifferent” to the manner of disposal of
PCE-containing wastewater. Indeed, the fact that the machine recaptured PCE negated such intent.
Intent to dispose cannot be inferred from a failure to warn of the risk of contamination. In addition,
there was no ownership or possession of the PCE nor duty to dispose of the wastewater or PCE.
Instructions, in addition to discussing wastewater, also provided guidance as to how to prevent the
PCE from going down the drain.
34

35. Heim v. Estate of Heim,
2014 U.S. Dist. LEXIS 46297 (N.D. Cal. April 2, 2014)
Facts: Heim used ALMI’s Ajax Vapor Adsorption Unit to collect PCE. Heim tried to
distinguish the case from Hinds and Team Enterprises by arguing ALMI directed users, through
the Ajax manual, to place contaminated wastewater into the drain without alternative.
How Raised: Motion for Summary Judgment
Holding: ALMI was not an arranger because it did not have intent to dispose of PCE, nor
control over Heim’s operations.
Reasoning: Court found that the Ajax manual actually instructed users to connect the machine
to a drain or trough, thereby providing alternative disposal methods and leaving the operator of
the machine with a level of control over the hazardous substance. Furthermore, the court noted
that the Ajax manual instructed users to comply with all state and local laws concerning waste
disposal to streams, municipal treatment plans, or the ground. Taking all the evidence together,
the ALMI was at most indifferent to the possibility of PCE-laden wastewater being emitted and,
therefore, lacked the requisite intent.
35

36. Vine Street LLC v. Borg Warner Corp.,
_________ F.3d _________ (5th Cir. Jan. 14, 2015)
Facts: Borg Warner Corp.’s predecessor, Norge, furnished dry cleaning equipment, design assistance
and an initial supply of PERC to College Cleaners, which had been located on property owned by Vine
Street.
How Raised: Appeal following bench trial
Holding: Trial court held that Norge was an arranger; Circuit Court overturned
Reasoning: The evidence established that both Norge and College Cleaners treated the PERC as a
valuable commodity and any discharge, even through the sewer, was unintentional. Court was
“unmoved” by the fact that Norge actually installed the equipment and connected it to the sewer line
given the facts that negated intent.
36

37. Other Wastes, Scrap and Abandoned
Products
• United States v. General Electric Co.,
670 F.3d 377 (1st Cir. Feb. 29, 2012)
• United States v. Dico, Inc.,
892 F. Supp.2d 1138 (S.D. Iowa Sept. 24, 2012)
• W.D. Grace & Co. – Conn v. Zotos Int’l, Inc.,
2013 WL 5488939 (W.D.N.Y. Sept. 30, 2013)
• United States v. Federal Resources Corp.,
2014 U.S. Dist. LEXIS 97511 (D. Id. July 14, 2014)

38. United States v. General Electric Co.,
670 F.3d 377 (1st Cir. 2012)
Facts: GE manufactured electrical equipment containing Pyranol, an insulator
which it manufactured from PCBs. When the manufactured Pyranol was below
spec, it was considered scrap and placed into drums. From 1953 – 1967, the drums
were first given, then sold to a chemical scrapper, Fletcher, who used the off-spec
Pyranol as a paint additive.
How Raised: Appeal after Trial
Holding: GE was arranger
Reasoning: GE considered the product to be a waste, and any income from the sale
was subordinate and incidental to disposing of the Pyranol. Among other things,
this was evidenced by the fact that other methods of disposal were used (such as
sending to a landfill). In addition, except for Fletcher, there was no market for the
product. There was no quality control of the Pyranol sent to Fletcher, who
complained that much of it could not be used, and there was evidence that in the
final year, GE was merely dumping off-spec Pyranol on Fletcher and would “credit”
him for the unusable Pyranol rather than replace it.
38

39. United States v. Dico, Inc.,
892 F. Supp.2d 1138 (S.D. Iowa Sept. 24, 2012)
Facts: Dico sold to SIM certain buildings which SIM intended to demolish and remove steel and
possibly other useable materials. SIM moved the steel beams, which were contaminated with PCBs,
to its facility and disposed of everything else from the buildings.
How Raised: Summary Judgment
Holding: Dico was an arranger
Reasoning: Dico was aware of past PCB contamination of the buildings, which has been at least
partially remediated. Purpose of the transaction was to dispose of the buildings, and Dico knew that
disposal of PCB insulation would result. There was no market for the buildings and they were not
otherwise useful. From this, court found that intent was to dispose of PCBs. In reliance on pre-BNSF
case, Also held that where reclamation is the sole useful purpose and further processing is required
before reuse, the useful product doctrine is inapplicable.
39

40. W.D. Grace & Co. – Conn v. Zotos Int’l, Inc.,
2013 WL 5488939 (W.D.N.Y. Sept. 30, 2013)
Facts: ECI manufactured and packaged hair care products that Zotos sold for the
retail market. ECI also warehoused these products for Zotos. Under the relevant
agreements, Zotos and/or ECI determined whether returns from distributors should
be reconditioned/repackaged or be destroyed as unusable. ECI determined how
and where to dispose of unsalvageable products.
How Raised: Trial
Holding: Zotos was an arranger
Reasoning: Zotos had title and ownership of products returned to ECI by
distributors and controlled the decision as to whether to salvage or dispose of them.
Zotos also determined what products in ECI’s inventory were obsolete and should
be disposed. Although Zotos characterized its actions as abandonment of products,
Zotos intended that ECI would dispose of these products and knew how the disposal
was being carried out. With regard to returns, Zotos paid for disposal services.
That Zotos did not physically dispose of the product or direct where and how it
should be disposed was not a bar to arranger liability.
40

41. United States v. Federal Resources Corp.,
2014 U.S. Dist. LEXIS 97511 (D. Id. July 14, 2014)
Facts: FRC engaged in mining work at the Conjecture Mine site. F&M also engaged in mining
at the Conjecture site under a Federal mining contract, which gave the U.S. the right of entry and
inspection and provided that the U.S. could consult with and advise F&M on all phases of the
work. At one point, the U.S. advised F&M to change its digging direction, a direction F&M
declined to follow. F&M constructed a flotation mill at the Conjecture site (possibly upon
instruction from the Government), which produced waste tailings that were dumped in on-site
ponds. The U.S. was aware of the waste tailings. FRC brought a counter claim against the U.S.
alleging that the Government was partially responsible for cleanup costs as an arranger.
How Raised: Motion for Summary Judgment on Defendant’s Counterclaim
Holding: The United States was not an arranger.
Reasoning: The court found that the U.S. did not take intentional steps to dispose of hazardous
waste tailings from the mining efforts for the following reasons: (1) the U.S. did not have actual
control over mining operations and the fact that the U.S. suggested that F&M change its drilling
direction was not proof otherwise; (2) the mere fact that the Government possibly encouraged
the construction of the flotation mill is not evidence that the Government intended hazardous
substances to be dumped on the site; and (3) mere knowledge that hazardous mill tailings were
being discarded at the site was not enough to show that the U.S. was an arranger.
41

42. Questions?
Michael K. Murphy Suzanne Ilene Schiller
Gibson, Dunn & Crutcher LLP
MMurphy@gibsondunn.com
202-955-8238
www.gibsondunn.com
Manko, Gold, Katcher & Fox, LLP
SSchiller@mankogold.com
484-430-2354
www.mankogold.com