A Wisconsin district court has ruled that NCR Corporation’s
liability for contamination in the Fox River is limited to NCR’s share
of contamination contributed to the river.
In the first case to explore in depth the
Superfund divisibility defense after the US Supreme Court’s decision
in Burlington Northern & Santa Fe Railway Co. v. U.S., 556 U.S. 599
(2009), a Wisconsin district court has ruled that NCR Corporation’s
(NCR’s) liability for contamination in the Fox River is limited to NCR’s
share of contamination contributed to the river.
The US Court of
Appeals for the Seventh Circuit overturned the district court’s original
decision rejecting the divisibility defense in a September opinion. On
remand, the district court concluded in its May 15 decision that “[t]he
Seventh Circuit’s definition of ‘harm’ opens the door to a simple
volumetric approach to divisibility.”
Assuming the decision survives an
almost certain appeal, the district court’s application of the
divisibility defense may allow other potentially responsible parties to
avoid joint and several liability at sites where they can establish
their volumetric contribution to the contamination.
Background
By default, liability under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA or
Superfund) is joint and several, meaning any contributor of pollution to
a site can be held liable for the entire cost to clean up the site,
notwithstanding other parties’ contribution to the pollution.
The
Supreme Court confirmed in Burlington Northern, however, that where a
potentially responsible party (PRP) carries its burden of showing that
the harm is capable of being divided and damages reasonably may be
apportioned among the parties, the PRP is only liable for its own
contribution to the harm. Proving divisibility of harm and a reasonable
basis for apportionment therefore defeats joint and several liability.
Proving divisibility of harm, however, has proved difficult in the past.
The recent case before the district court involved
liability for polychlorinated biphenyl (PCB) contamination in portions
of the Fox River and Green Bay, Wisconsin. Remediation of the river and
bay is ongoing and constitutes one of the most expensive Superfund
cleanups to date. Millions of cubic yards of sediments have been
dredged, costing hundreds of millions of dollars.
The United States sued
NCR, seeking to compel it to clean up the site. NCR argued in response
that the harm was divisible, that a reasonable basis for apportionment
existed, and, therefore, NCR could not be held jointly and severally
liable for the entire site cleanup.
After a 2012 trial, the district court held that
NCR had failed to prove the harm at issue was divisible for purposes of
determining liability under CERCLA, making NCR jointly and severally
liable for the entire cleanup.
However, on appeal, the Seventh Circuit
took issue with the district court’s “binary” test for determining
whether the harm was divisible, reversed the district court’s
determination of joint and several liability, and directed the district
court in assessing divisibility to focus on NCR’s contribution to the
PCB contamination that caused harm to human health and the environment
rather than on the propensity of NCR’s releases to require remedial
action.
The District Court’s Decision
On remand, the district court began its analysis
by noting that, to prove the divisibility defense, a PRP must show that
(1) the harm is theoretically capable of being divided and (2) there is a
reasonable way of apportioning the damages.
The district court stated
that, prior to the Seventh Circuit’s decision, the prevailing practice
in assessing whether harm was capable of being divided was to focus on
whether the PRP’s releases triggered the need for a remedy. If the PRP’s
releases standing alone would have required remediation, the harm was
not divisible.
But the district court read the Seventh Circuit’s opinion
as “re-defining the very harm that NCR’s [divisibility] defense
attempts to divide.” Instead of assessing the harm as the remedy or
costs triggered by NCR’s releases, the court concluded that “the harm is
more properly defined as a release’s toxicity or danger to human health
and the environment.” More simply put, “the harm is the contamination,”
and the second step in the analysis, the apportionment of “damages,” is
to be assessed in terms of “each party’s causation of remedial response
costs.”
Using this new framework, the district court
determined that to prove the harm was capable of being divided, it was
enough for NCR “to demonstrate what percentage of the toxicity in [the
river] was caused by its discharges.”
Reviewing the expert testimony
presented at trial, the court found that, although NCR’s contribution
could not be determined with precision, the evidence was sufficient to
establish an upper limit of how much of the contamination in the
relevant section of the river could be attributed to NCR. The court thus
found that the harm was “theoretically divisible.”
In determining whether a reasonable basis for
apportionment of damages existed, the court stated that “NCR’s task . . .
[was] to demonstrate a reasonable estimate of the extent to which its
contribution to the contamination in the [river] gave rise to the
remediation costs incurred.”
Noting that the apportionment approach the
Supreme Court accepted in Burlington Northern “equat[ed] remediation
costs with the amount of contamination,” the court concluded that NCR’s
percentage share of the PCB contamination in the relevant section of the
river (28%) provided a reasonable basis to estimate or apportion the
remediation costs for which NCR was responsible.
Implications
The specter of joint and several liability has
driven how Superfund sites are cleaned up and how those cleanups are
paid for. The US Environmental Protection Agency has relied on the
doctrine of joint and several liability to require a single or small
number of PRPs responsible for contaminating a site to bear the entire
cost of cleanup.
Such PRPs have been forced to pursue others for
contribution. The divisibility defense, although theoretically
available, has infrequently allowed PRPs to avoid joint and several
liability. The district court’s “simplified” approach to the
divisibility defense, which focuses on a PRP’s volumetric contribution,
could, if adopted by other courts, change that.
It remains to be seen, however, how the district
court’s analysis may be applied in other contexts. The contamination at
issue in this case essentially was uniform and fungible; no party’s
contamination was more or less harmful or costly to clean up than that
of others.
Many Superfund sites involve a mixture of pollutants, some of
which pose greater risks to human health and the environment and may
require different or more costly measures to clean up.
In such cases, a
party’s “volumetric” contribution is unlikely to provide an adequate
basis for determining divisibility of harm or the apportionment of
damages.