Fourth Circuit Weighs In On CERCLA Arranger Liability
In the early 1980s, a utility company sold multiple electrical transformers containing insulating oil with polychlorinated biphenyls (“PCBs”) to Company A. Company A repaired and rebuilt the transformers for resale to meet third-party customers’ specifications. In the process, one of Company A‘s facilities became contaminated with PCBs. Following an EPA action related to removal costs, the companies that covered most of the removal costs filed suit against the utility company and other suppliers of some of the transformers to Company A under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) for contribution.
The key question was whether the utility company was liable under CERCLA as an “arranger”–i.e., “persons who arrange for disposal or treatment of hazardous substances.” The U.S. District Court for the Eastern District of North Carolina concluded that the utility company was not subject to arranger liability under CERCLA and granted summary judgment in the utility company’s favor. In a 2-1 decision, the Fourth Circuit agreed.
The Fourth Circuit reasoned, “Anytime an entity sells a product that contains a hazardous substance, it also ‘intends’ to rid itself of that hazardous substance in some metaphysical sense. But intent to sell a product that happens to contain a hazardous substance is not equivalent to intent to dispose of a hazardous substance under CERCLA. For arranger liability to attach, there must be something more.” In this particular case, the court concluded that there was no direct evidence that the utility company intended to arrange for the disposal of PCBs through the transactions with Company A.
The dissenting opinion, filed by Judge Wynn, believed that enough evidence existed in the record to defeat summary judgment and send the case to the jury. Specifically, the judge believed that the utility company knew that to function as transformers again, the “broken and obsolete transformers” it was selling would have to be repaired and the toxic oil-saturated parts replaced (and disposed of).
