Scope of Post-BNSF Arranger Liability at Issue in New Hampshire Case

A motion in a case currently pending before the U.S. District Court for New Hampshire may help litigants interpret the scope of “arranger” liability under CERCLA, following the Supreme Court’s landmark BNSF[1] decision. General Electric Company (GE) has asked Judge Paul J. Barbadoro to withdraw his prior Oral Order and Bench Ruling holding GE liable as having “arranged for disposal” when it sold PCB-containing “scrap Pyranol” to a paint manufacturing company.[2] GE maintains that “[t]he legal standard announced in [BNSF] precludes the imposition of ‘arranger liability’ on the basis of … ‘constructive intent,’ and instead requires proof of actual intent to dispose of hazardous substances.”[3] Based on Judge Barbadoro’s previous finding that GE lacked actual intent to dispose of the scrap pyranol when it sold it,[4] GE claims that the court must now enter judgment in its favor.

Background

The United States sued GE in 2006 to recover remediation costs expended at the Fletcher’s Paint Works and Storage Facility Site in Milford, New Hampshire. Both EPA and GE (under an administrative order from EPA) undertook response actions following discovery of PCBs at the Site. The PCBs came from Fletcher’s disposal of “pyranol.” Pyranol was GE’s trade name for a mixture that GE used as a dielectric fluid in some of its capacitor manufacturing operations. There was no dispute that pyranol contained PCBs and other hazardous substances. There was also no dispute that, in the event that pyranol became contaminated with dirt, solvents or other impurities such that it could not be used by GE, GE either disposed of the waste pyranol or, when possible, sold it to third-parties.

During the 1950s and 1960s, GE sold “scrap Pyranol” to Fletcher’s Paint Works, the former operator of a paint manufacturing and retail sales facility at the Site. Following a bench trial on liability, the court determined that Fletcher “disposed” of the scrap pyranol at the Site through three pathways: (1) Fletcher may have used some of the material as a dust suppressant, (2) Fletcher may have used some of the material as a defoliant or herbicide, and (3) Fletcher may have maintained some of the material on-site in drums that, after years or decades of exposure to the elements, eventually leaked some of their contents into the surrounding environment.[5]

Based on these facts, GE’s liability turned on whether it “arranged for disposal” of hazardous substances through its sale of pyranol to Fletcher. In November of 2008, while the bench trial on the issue of GE’s liability was ongoing – and after the Supreme Court granted certiorari to hear the BNSF case – Judge Barbadoro requested supplemental briefing on the role of the element of “intent” in establishing a party’s liability as an “arranger” within the meaning of CERCLA.
In response, the United States argued that “[i]n determining GE’s intent, the United States need not rely solely on direct evidence, but can rely on circumstantial evidence of GE’s knowledge.”[6] Under the government’s theory of liability, GE could be held liable as an arranger if, “based on an analysis of the facts and circumstances of the transactions at the time they occurred, there was a substantial certainty that some portion of the scrap pyranol ‘sold’ by GE would end up being disposed of,” either by being sprayed on the ground to suppress dust or for use as a defoliant, or because the product would leak out of drums.[7] The United States maintained that arranger liability could be based on GE’s “constructive intent” to dispose, based on its knowledge of Fletcher’s use of the pyranol, which showed that “disposal was a substantial certainty.”[8] Ironically, the United States eschewed reliance on the Ninth Circuit’s BNSF decision, because that decision “involved the sale by a manufacturer of a new product,” whereas the GE case involved GE’s sale “of a hazardous waste.”[9]

For its part, GE argued that the phrase “arranged for disposal” required “an intentional action toward achieving the purpose: disposal.”[10] While acknowledging that arranger liability had been imposed where disposal was not the “sole purpose” of the transaction, GE argued that “intentional action” was necessary for arranger liability, requiring “proof that GE either intended for Fletcher to dispose of the pyranol, or at least knew that Fletcher would do so.”[11]

Trial Court’s Findings

Following the bench trial last November, Judge Barbadoro made oral findings of fact and conclusions of law.[12] The court also articulated its understanding of the legal standard for demonstrating arranger liability, namely, that arranger liability could be could be “imposed even without an actual intent to dispose as long as,” at the time of the arrangement, the defendant “knows that disposal is substantially certain to result from the arrangement.”[13] The court found that, while GE was aware that some of the material it sold to Fletcher “would not have been usable … and would have to be disposed of,”[14] GE did not specifically intend to dispose of the pyranol, at least that was not the focus or the “objective” of GE’s contract with Fletcher.[15]

GE Argues That Evidence of “Actual Intent” is Necessary for Arranger Liability

The Supreme Court issued its decision in BNSF on May 4, 2009, following completion of the bench trial, but before the court’s findings and conclusions had been issued, or any judgment entered.[16] In response to the BNSF opinion, GE moved for judgment in its favor, claiming that BNSF precluded the possibility that the United States could demonstrate arranger liability through circumstantial evidence or based on a “constructive intent” to arrange:

[T]he Supreme Court made clear that arranger liability requires proof of an actual intention to dispose … and that while evidence of knowledge may be probative of intent, knowledge alone is insufficient to prove that an entity ‘planned for’ the disposal of a hazardous substance. … [T]he two-pronged legal standard [for arranger liability adopted by Judge Barbadoro] did not survive [the BNSF decision, which] precludes a finding of arranger liability on the basis of … ‘constructive intent,’ [and] unequivocally requires proof of actual intent to dispose.[17]

According to GE, in order to support arranger liability, the evidence had to show that GE actually knew and desired that disposal would occur – not merely that it “should have known.”[18] GE read the BNSF decision to have “clarified the role that a finding of knowledge may play in an arranger-liability case: a defendant’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. …’”[19] However, according to GE, “[i]ntent to dispose is the sine qua non of an arrangement for disposal; and unless the evidence proves that the defendant took ‘action directed to a specific purpose,’ – that is, unless the evidence establishes that the defendant actually ‘planned for’ disposal to occur … there is no arranger liability.”[20]

United States’ Response Still Forthcoming

GE filed its motion on August 21; the deadline for the United States’ response has been extended by stipulation to September 21, 2009.[21] In order to avoid dismissal of its cost-recovery action, the United States must rebut GE’s argument that the BNSF opinion requires a showing of actual intent to dispose. Some indication of the United States’ position may come from its prior memorandum on the role of intent in establishing arranger liability. In that brief,[22] the United States maintained that it “need not rely solely on direct evidence [to show intent], but can rely on circumstantial evidence of GE’s knowledge”[23] and that a finding liability is appropriate “even though the arranger does not have the specific intent that its waste be disposed of, and even though disposal is not a substantial certainty.”[24]

Both of those arguments have been called into question by the BNSF decision, and GE now contends that its mere knowledge that some of the scrap pyranol would not have been usable and would have to be disposed of does “not amount to intent.”[25] In other words, “[e]ven if GE ‘knew’ that some disposal in some form would eventually occur,” “acting with such knowledge does not amount to an arrangement for disposal of hazardous substances, as the Supreme Court has now defined that term.”[26]

Conclusion

GE’s motion is one of the first to rely on the Supreme Court’s BNSF decision regarding the scope of arranger liability and to request that a court determine the evidence necessary to support such liability. Following submission of the United States’ response later this month, Judge Barbadoro will need to decide whether the Supreme Court’s clarification of the intent necessary to support arranger liability has been met by the evidence presented at last year’s bench trial. The court’s decision should prove instructive for both plaintiffs and defendants engaged in litigation regarding the scope of arranger liability under CERCLA.

For more information on this case or the Burlington Northern decision, please contact Meline MacCurdy, Steve Jones, or Bradley Marten.