September 23

Cradle to Grave Responsibility And Long-Tail Liability

Written by Stephen Henshaw, P.G., President & CEO, EnviroForensics
As seen in the September 2013 issue of Cleaner & Launderer

Most people that purchase, handle and manage cleaning solvents, are familiar with the terms “Cradle to Grave Responsibility” and “Long-Tail Liabilities”.  Cradle to Grave responsibility has been used to describe the fact that any person that generates a waste material that is classified, as a hazardous substance is responsible for that waste from the time it is generated until pretty much the end of time.  The Cradle to Grave system is a provision with legislation known as the Resource, Conservation and Recovery Act (RCRA) which passed in 1976 and focuses to a large degree on the management of hazardous waste. There is no time limit or expiration date that will release a generator from this long-term management responsibility.  This is why the management of hazardous substances is termed Long-Tail Liability.

Everyone knows that when a site is contaminated, the person that caused the contamination is responsible for cleaning it up.  But what happens when the party that operated the site is no longer around, either financially or administratively.  Who then pays for the cleanup?  Such was the case back in the 1970’s with sites known as Love Canal in New York and Valley of the Drums in Kentucky where hazardous waste was dumped indiscriminately from tanker trucks and in barrels.   As result of these sites where the operating company could not afford the cleanup, legislation known as the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, but more commonly known as Superfund was enacted.  Since this time, it has been the cornerstone of cleaning up a multitude of smaller sites, where the business owner has been unable or unwilling to fund the environmental cleanups.  When the business does not fund the environmental cleanup, the Federal or State government either cleans the site up, looks to other responsible parties to reimburse those costs, or it gives the responsible party a chance to come up with its own cleanup approach.

A responsible party (RP) is the term used for any businessperson that fits the classification of owner, operator, generator or transporter.  More specifically, anyone that owns or operates a facility that is impacted with hazardous substances, owned or operated a facility at the time hazardous substances were being disposed, arranged for the treatment or disposal of hazardous substances, or anyone that accepts any hazardous substances for transport to a facility requiring cleanup, assuming the transporter selected the facility.

Over the years, the State and Federal governments have spent billions of dollars cleaning up abandoned contaminated sites.  Many of the sites that are cleaned up have not been significantly reimbursed, which means that the taxpayers are paying for the cleanups.  It was recently reported that over 100 million dollars spent by the State of California on cleaning up contaminated sites has not been reimbursed.  So, naturally, when this kind of story hits the news, the push is on to collect this money from the responsible parties.

This cost recovery process is currently affecting dry cleaners at two different locations in California.  One of the cleanup sites was a facility in northern California, licensed by the State to treat, store and dispose of hazardous waste, including the waste generated by dry cleaners (still bottoms and spent filters).  The other site was located in southern California and was also at one time licensed to treat, store and dispose of hazardous waste from dry cleaners.  Both sites had operating records that included waste material received on manifests that indicated the name of the generator, the type of waste, the date shipped, etc. 

In the first situation, the State of California approached a number of dry cleaners with records of sending waste and, without filing a lawsuit, offered a settlement.  In the second situation, the State sued dozens of dry cleaners for contribution, alleging that the waste they sent to the facility caused the environmental problem.

Unfortunately, for the dry cleaners that sent waste to these facilities, the law is very clear: they are considered RPs; because they are RPs they are considered jointly and severally liable.   Joint and several liability means that any one RP is legally obligated to pay for any or all of the response costs incurred to address the environmental conditions. 

Practically speaking the cleanup costs are generally allocated by the volume of waste that each business (or individual) sent to the site.  Imagine a pie being divided.  The business that sent the most waste to the site has a larger piece of the pie.  When one of the RPs cannot be found or is insolvent (e.g. bankruptcy, dissolution or even death of the individual), their allocated amount is now distributed proportionally to the other RPs.

So, what options do RPs have when a settlement demand or a lawsuit is filed for contribution?  They could ignore the suit or demand, fight and challenge the suit or demand, hire a lawyer to represent them on the matter, or join a group of other RPs to try to control the costs or carve out a deal with the regulators.

Ignoring the demand is not a tactic that is recommended, although for people that have no ability to pay the demand or a lawyer, it can be the only alternative.  Ignoring a demand or suit is like playing Russian roulette.  You may survive and not be legally pursued by the government, but conversely, the government can be very, very hard on those that do not respond to the suit or demand, filing criminal charges and assessing significant fines.

Fighting and challenging the suit or demand is a costly alternative.  The law is not on the side of the RP, and therefore, any challenge must be picked carefully.  If you or your business meets the definition of a responsible party, you have joint and several liabilities, period.  I wouldn’t waste money trying to plead any issues of fairness, because while Superfund is unfair, it’s equally unfair. 

Hiring a lawyer can be a good idea.  Make sure that you know what your lawyer is proposing and how much the various steps will cost.  Except when the RP is issued a settlement demand for a fixed amount, a lawyer will not be in a position to tell you how much the matter will cost you to resolve the liability.  A trusted lawyer can help you navigate the initial findings and discussions with the government, but there will be many aspects of this type of lawsuit that can be managed by a smart businessperson. 

Often times the responsible parties will form a group and pool together to address the government’s lawsuit collectively.  Most RPs are pulled in because they generated hazardous waste and sent it to the site so, their interests are similar among one another.  This group may then hire one lawyer to represent their common interests.  For most of the issues being addressed by the government, a common group lawyer is a cost effective approach.  Of course, some issues may be different between the generators.  I had a situation on a site where several years of records were missing and I felt that my client was being asked to be responsible for a greater percentage of the allocated volume because these records were missing.  In situations like this, you will need to bring evidence to the group that supports those assertions, while still being represented by the group lawyer on the balance of the lawsuit.

The key to getting out of a Superfund demand or lawsuit is to try and cut the best deal you can cost wise.  That may mean a dollar amount with payment terms.  It may mean that a phase of remediation (soil cleanup, groundwater cleanup, etc.) is taken on by a group of RPs.  It could even mean that you stay in the lawsuit with the hopes that other RPs are found and your allocation goes down.  Such decisions are difficult to stomach and difficult to make because they are costly.  However, cutting the best deal and getting out sooner rather than later is often times the best you can hope for.

Going forward, what can be done to minimize Long-Tail Liability on a site you operate?  With respect to waste disposal, audits should be conducted of the waste disposal facility.  Like any other audit, a waste facility audit is a good way to evaluate the operating conditions of a particular site.  An auditor can evaluate how well the facility operates, how clean the working conditions are, the records keeping criteria and procedures, and the status of the facility’s compliance with its operating permit.  No audit is certain, but most of the times, an audit will indicate, relatively speaking, whether the facility is operating well or whether it is a real “pit” in terms of environmental conditions, housekeeping, violations, etc.  Because an audit may be cost prohibitive for any one generator to pay for, the idea of pooling resources together may be an option. State and federal trade organizations such as International Fabricare Institute, California Cleaners Association or any other strong, membership-based trade organization may be an excellent way to pool resources together to provide facility audits.

Short of an audit, common sense is always a good barometer.  If the cost to dispose of waste with one disposer is significantly less than the competition, there may be a reason for that and that involving increased risk and cutting corners.

You can also search online for the transportation company or treatment facility.  The States usually have a web-based search engine that will allow you to review the inspections and correspondence.  Such a search may allow you to find notices of violation or other citations that could effect your waste management decisions. 

In the end, there is no one thing that can protect you and your company from Long-Tail Liability, but it is important to manage your risks and exposures.  That goes for how your business is legally established and maximizing protection of your personal assets, the insurance you procure, your own housekeeping practices (spill prevention and spill response), your waste disposal and waste management decisions, the equipment you are using, and the manner in which you store and minimize your waste solvents.