On January 14, the U.S. Court of Appeals for the 5th Circuit ruled that the sale of a useful chemical did not make the seller an “arranger for disposal” under Superfund, even where seller knew that some of that chemical would be spilled during its use.
Vine Street LLC v. Borg Warner Corp., 2015 BL 8885, involved the sale of dry cleaning machines and PCE, a dry cleaning fluid, by Norge, a predecessor of Borg Warner. Norge equipped the machines with water separators, which it knew were not 100% effective. It continued to work with the dry cleaner to reduce spillage by modifying the separators’ design. Nonetheless, contamination resulted, and Vine Street, a successor landowner, sued Borg Warner for contribution to the cost of cleanup. The District Court held Borg Warner liable for 75% of the cost of cleanup based on its knowledge that some contamination resulted from these sales.
After the District Court’s ruling, the Supreme Court decided Burlington Northern & Santa Fe Ry. Co. v United States, 566 U.S. 599 (2009). Burlington Northern held, inter alia, that the touchstone of arranger liability is an “intent to dispose”. Knowledge of incidental spillage of a useful product after its sale was not enough to make the seller in Burlington Northern an “arranger for disposal”, especially since there were facts negating any intent to dispose.
The 5th Circuit found that Norge’s position was very much like that of the seller in Burlington Northern. As in Burlington Northern, the seller of an unused, useful product was aware of the possibility of spills but took steps to help its customers prevent them. As in Burlington Northern, any spills were the peripheral result of the sale rather than part of the intended outcome. As in Burlington Northern, the prophylactic steps taken by Norge did not cut in favor of liability (on the basis that it showed knowledge of spills) but instead cut against such a finding because those steps indicated an intent to avoid disposal.
This decision is part of a continuing evolution of the courts away from formulaic application of Supefund liability rules and towards the kind of fact-based inquiry mandated by Burlington Northern. This ruling should ease the concerns of manufacturers that they may have Superfund liability for their products’ subsequent disposal, at least where they take steps to prevent or limit such disposal. It should also be instructive in other cases―e.g., sales of scrap metal, reconditioning of transformers ―where contamination has occurred but an intent to avoid disposal can be shown.