Who’s in Charge Here?: Third Circuit Holds That Government Was Not an “Operator” of Jersey City Chromium Facility for Purposes of Superfund Liability

Federal courts have long struggled to determine the shape and boundaries of the wide liability net cast by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law. In its recent decision in PPG Industries Inc. v. United States, the Third Circuit applied circuit and Supreme Court precedent to hold that the government’s influence over a chromite ore processing plant in Jersey City during World War I and World War II was not pervasive or intrusive enough to make the government a past “operator” of the plant and thus liable for cleanup costs.

Prior to PPG’s 1954 acquisition of the plant (which it continued to operate until 1963), Natural Products Refining Corporation (NPRC) operated the plant, which processed chromite ore into various chromium chemicals, including sodium bichromate. During both World War I and World War II (when it designated the plant’s output as critical war materials, i.e., products manufactured for direct military use), the government regulated the production of chromium chemicals. Through a variety of price, labor, and production controls, the government sought to encourage increased production of these key chemicals. Those efforts, however, did not extend to direct control over day-to-day operations or to the use of government employees to run the facility. Moreover, while the government was aware that the plant produced waste materials and stored them at the site, it did not mandate specific production methods or determine how wastes should be handled. Those wastes contaminated the site, and were also used in construction and roadway projects at a number of other locations in Hudson County.

PPG, which has been remediating the site (as well as the other locations to which its wastes were taken) since 1990, sued the government in 2012, alleging that the government’s oversight and influence rendered it liable for at least a portion of the costs incurred by PPG in cleaning up these hazardous substances under Section 107(a)(2) as “a person who at the time of disposal . . . operated at any facility at which such hazardous substances were disposed of.” The district court disagreed, granting the government’s motion for summary judgment, and PPG appealed.

The Third Circuit affirmed, finding that the government’s actions did not rise to the level and type of control required by the Supreme Court’s 1998 decision in United States v. Bestfoods and by its own prior decisions in FMC Corp. v. United States Department of Commerce and Litgo N.J., Inc. v. Commissioner, N.J. Department of Environmental Protection. Applying the Bestfoods standard (over the objection of PPG, which argued for a separate standard in cases where the putative operator is the government), the court found that the evidence failed to show that the government “manage[d], direct[ed], or conduct[ed] operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous wastes or decisions about compliance with environmental regulations.” The court distinguished FMC, where the government had built and owned nearby facilities, had a representative on site, ordered the facility to make a different product, supplied employees for a rayon manufacturing plant during wartime, and in general “exerted considerable day-to-day control” over the plant’s owner. Similarly, while the current operator of the site at issue in Litgo had not directly caused or exacerbated the contamination there, it was liable because it made compliance decisions, hired environmental consultants, and oversaw their work, all of which were activities “having to do with” the disposal of hazardous waste. In sum, while Bestfoods had shifted the focus of the “operator” analysis from control over the entity running the plant to control over the operations of the plant itself, both FMC and Litgo were consistent with Bestfoods in requiring a significant level of involvement in actual operations that went beyond the economic influence exercised by the government over the NPRC plant and touched directly on pollution-related activities.

PPG Industries clarifies certain issues involving governmental liability, but leaves other questions unanswered. For example, what standard should apply, and how can it be satisfied, in cases where the government took over existing operations, or expanded or altered operations or production? CERCLA’s notoriously unhelpful definition of an “owner or operator” of a facility as “any person owning or operating such facility” will surely continue to frustrate litigants and courts as they deal with different factual scenarios not specifically considered in past decisions.