Design and Management of Stormwater System Enough to Impose CERCLA “Arranger” Liability, District Court Holds

In an apparent first, a federal judge in Washington has held a state agency that manages highway stormwater runoff liable under CERCLA[1] as an “arranger” for disposal of hazardous substances. In United States v. Washington State Department of Transportation (WSDOT),[2] Judge Bryan of the Western District of Washington held WSDOT liable as an “arranger,”[3] because it designed, operated, and maintained the stormwater systems around several major highways that discharge to waterways that are part of a massive Superfund site. The case illustrates that the scope of “arranger” liability under CERCLA remains wide despite the Supreme Court’s 2009 Burlington Northern[4] decision, where the Court limited “arranger” liability to entities that have an “intent to dispose.” That standard was met here, according to Judge Bryan, because designing the stormwater system was “an action directed to a specific purpose” of discharging “the highway runoff into the environment.” The court also declined to rule – at this stage – on the adequacy of WSDOT’s defenses that it complied with Clean Water Act (CWA) discharge permits, and that the agency had no ability to control the countless drivers that use the highways. The decision, if upheld and followed, could have serious implications for municipalities and private entities that manage and design stormwater systems.

Factual Background

The WSDOT decision involved a portion of the Commencement Bay-Nearshore Tideflats Superfund Site in Tacoma, Washington. The Site has been on the Superfund National Priorities List since 1983 due to widespread contamination of water, sediments, and upland areas. The Site includes several project areas that are managed as distinct sites, including the Thea Foss and Wheeler Osgood waterways. Over the last 20 years, the United States has entered into consent decrees with over 80 entities to recoup its costs at the Site.

In 2008, the United States sued WSDOT to recover $6.8 million in costs incurred at the Thea Foss and Wheeler Osgood Waterways. The United States alleged that WSDOT was liable as an “owner/operator” and as an “arranger” under CERCLA due to its construction, design, ownership, and operation of highways and storm drains in the vicinity of the Site. Specifically, the United States alleged that WSDOT owned and operated the highways and drainage structures designed to drain runoff from the highways to the Thea Foss and/or Wheeler Osgood Waterways, and that the stormwater discharges contained hazardous substances, including phthalates, heavy metals, and petroleum hydrocarbons.

WSDOT and the United States filed cross-motions for summary judgment. The motions focused, in part, on whether WSDOT’s operation of stormwater systems on the state highways was sufficient to constitute “arranger” liability under CERCLA, and whether those discharges fell within the “federally permitted releases” exemption from CERCLA liability under CERCLA § 107(j) or the “third party” defense under CERCLA § 107(b).

District Court Decision

The district court held that WSDOT was liable as an “arranger” as a matter of law, and that WSDOT failed to carry its burden of showing that it qualified for the federally permitted releases exemption or the third party defense.

Regarding the arranger issue, WSDOT argued that its operation of stormwater systems on the highways did not expose the agency to arranger liability, because the agency neither controlled the contaminants that entered the stormwater, nor had the requisite “intent to dispose” of the hazardous substances under the Supreme Court’s Burlington Northern decision. The United States countered that WSDOT not only designed, constructed, and operated the stormwater drainage systems such that highway runoff was disposed of into nearby waterbodies, but that WSDOT had the ability to redirect, contain, and treat its contaminated runoff.

In a mere two paragraphs of analysis, citing only Burlington Northern and a factually unrelated Ninth Circuit decision, the district court held WSDOT liable as a matter of law as an “arranger.” CERCLA § 107(a)(3) defines an “arranger” as “any person who … arranged for disposal or treatment … of hazardous substances owned or possessed by … any party or entity, at any facility … owned or operated by another party or entity and containing such hazardous substances.”[5] The court noted that “disposal activities that were legal when conducted can nevertheless give rise to liability [as an arranger] if there is an actual or threatened release of such hazardous substances into the environment.”[6] The court also acknowledged that, under the Supreme Court’s Burlington Northern decision, arranger liability is limited to entities that “take[] intentional steps to dispose of a hazardous substance,” and that “the word ‘arrange’ implies action directed to a specific purpose.”[7] But WSDOT’s actions met that standard, the court opined, because the agency indisputably designed the stormwater system, “[d]esigning is an action directed to a specific purpose,” and that “purpose was to discharge the highway runoff into the environment.”[8] WSDOT knew that the runoff contained hazardous substances, according to the court, had “control over how the collected runoff was disposed of,” and had “the ability to redirect, contain, or treat its contaminated runoff.”[9]

Having found WSDOT liable as an arranger, the district court rejected WSDOT’s argument that it satisfied the “federally permitted release” exemption. CERCLA § 107(j) exempts from CERCLA liability any “response costs or damages resulting from a federally permitted release,”[10] and CERCLA § 101(10)(A) defines a “federally permitted release” as including discharges “in compliance with” a permit issued under the National Pollutant Discharge Elimination System (NPDES) program in CWA Section 402.[11] WSDOT argued that it had operated the stormwater system under a state-issued NPDES permit since 1995, in addition to a municipal stormwater permit, and that any discharges from the stormwater system complied with the CWA. The United States countered that “the mere existence of a permit does not immunize WSDOT from liability,” because WSDOT could still be held liable for any releases that were not expressly permitted, exceeded the limitations of the permit, or occurred at a time when there was no permit, and that WSDOT bore the burden of establishing that the United States’ response costs associated with both permitted and unpermitted releases was divisible.[12] The court generally agreed with the United States, holding that WSDOT failed to establish that all stormwater discharges necessarily fell within the “federally permitted releases” exemption from CERCLA liability. Pointing to conflicting evidence regarding “the scope of the permits, whether there were releases outside that scope, and whether the injury is divisible,” the court found it “imprudent” to decide the issue before trial.[13]

For similar reasons, the court held that a question of fact existed as to whether WSDOT satisfied the “third party’ defense to CERCLA liability under § 107(b). That defense required WSDOT to show that “the release or threat of release” of hazardous substances was caused solely by third parties (i.e., highway traffic), that WSDOT “exercised due care” with respect to the hazardous substances, and that WSDOT “took precautions against foreseeable acts or omissions of” third parties and “the consequences that could foreseeably result from such acts or omissions.”[14] According to the court, WSDOT’s potential noncompliance with stormwater permits and pre-permit discharges undermined WSDOT’s assertion that it satisfied the “due care” element of this defense.

WSDOT filed a motion for reconsideration on June 21, highlighting the novelty of the court’s decision, stating that the agency cannot contain the stormwater on the highways at issue or the thousands of miles of state highways that are inundated with billions of gallons of stormwater each year, and arguing that managing this runoff is not evidence of an “intent to dispose.” Judge Bryan denied this motion the next day, holding that the agency failed to raise new legal or factual issues or errors by the court.

Conclusion

The WSDOT decision opens the door for CERCLA liability to a potentially broad class of parties, both public and private, that design and operate stormwater systems. Those parties are wise to ensure that they follow their discharge permits to the letter, and retain documentation of this compliance, particularly if the receiving water or its sediments are already contaminated. The decision is also noteworthy as an enlargement of the scope of “arranger” liability at a time when many courts have scaled back that scope in response to the Supreme Court’s Burlington Northern decision. Those cases have generally held that the “intent to dispose” standard under Burlington Northern at least requires a fact-intensive inquiry, and that mere knowledge that a disposal may occur in the design of a product is insufficient to infer such an intent.[15] The WSDOT court’s brief analysis of the Burlington Northern standard stands in stark contrast to those cases, showing that at least some courts will yet continue to expand the scope of CERCLA liability.

For more information on this case, please contact Meline MacCurdy or any other member of Marten Law’s Waste Cleanup practice group.