Eastern District’s Application of BNSF in Hinds Doesn’t Eliminate Manufacturer-Arranger Liability.

Written by Justin Gifford, J.D., Environmental Compliance Manager

Applying the Supreme Court’s ruling in Burlington Northern & Sante Fe v. U.S.[1], the Eastern District of California dismissed a CERCLA claim against a dry-cleaning machine manufacturer in Hinds Investments, L.P. v. Team Enterprises, Inc.[2] as a matter of law rather than a fact-intensive review of intent.

BNSF in the Ninth Circuit and the Supreme Court

The Ninth Circuit’s decision imposed CERCLA liability on Shell Oil, the manufacturer of agricultural chemicals contaminating the site, based on CERCLA’s definition of arrangers as “any person who by contract, agreement or otherwise, arranged for disposal or treatment…of hazardous substances. [3]”  The Ninth Circuit held that although Shell’s intent was to sell the product rather than to dispose of it, it was often spilled with Shell’s knowledge.  As contamination was the foreseeable result, Shell’s knowledge alone was sufficient to apply arranger liability. 

The Supreme Court’s 8-1 reversing opinion held that intent to become involved with the disposal of hazardous waste was pivotal in attaching arranger liability[4].  Since Shell had taken “numerous steps to encourage its distributors to reduce the likelihood of such spills, providing them with detailed safety manuals, requiring them to maintain adequate storage facilities[…][5]” the Court found Shell lacked the necessary intent to function as an arranger.  Justice Ginsberg, dissenting, conceded that even she felt that the case was a close call[6].

Hinds and Intent

Shortly following BNSF, the Hinds case involved an action brought by property owners who had leased their property to dry cleaners operating the Multimatic Solo Plus 35 dry cleaning machines between 1974 and 2000.

Initially, the decision appears to be a clear application of the BNSF decision: the manufacturer-defendant instructed purchasers to dispose of waste water into open drains; plaintiffs claimed such instruction was evidence of intent to dispose of a hazardous waste.

The district court rejected that argument utilizing two analyses.  First, the court distinguished the case from Vine Street[7], another CERCLA arranger liability case in which the manufacturer “had the authority to and did exercise actual control over the method and manner of the PERC’s disposal,[8]” and agreed with the defendant’s argument that their knowledge of likely disposal did not equate to intent under BNSF.

Second, the court applied the “useful product” defense – if the substance is part of a new sale and is useful only to be disposed of at a later date, the manufacturer does not qualify as a CERCLA arranger[9].  Holding that the manufacturer-defendant had sold a useful product without the intent to dispose of hazardous waste, the court dismissed the CERCLA claim.

There are two factors not immediately apparent.  The Hinds court discusses how the claim might have been worded differently in order for the court to accept the CERCLA arranger claim (or at least not dismiss it), indicating that if plaintiffs had more carefully drafted their complaint, the court might have rejected defendant’s motion to dismiss.  The court also chastises the plaintiff for attempting to mislead the courts by misquoting the Vine Street decision.

Although neither factor is dispositive, combined they may indicate that the Eastern District of California considers BNSF to have only created a hurdle to manufacturer-arranger liability, not killed it.

[1] 129 S. Ct. 1870 (2009)
[2] 2010 WL 922416 (E.D. Cal. 2010)
[3] 42 U.S.C. § 9607(a)
[4] Supra FN 1 at 1880
[5] Id.
[6] Id. at 1884
[7] Vine Street, LLC v. Keeling.  460 F.Supp.2d 728 (E.D.Tex. 2006)
[8] Id. at 752
[9] Cal. Dept. of Toxic Substances v. Alco Pacific, Inc. 508 F.3d 930, 934 (9th Cir.2007)