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Dividing Environmental Liability: Hope Springs Eternal, Litigation Lasts Almost as Long

September 11, 2009

James K. O’Brien

Article Originally Published: September 2009

The information contained in this article is not intended to be legal advice. Readers should not act or rely on this information without consulting an attorney.

One of the biggest “hammers” wielded by the government to impose environmental liability on private companies with contaminated property is the federal environmental law that can impose “joint and several” liability for cleanup costs at a polluted site. In theory, the government (and in some cases, an innocent private party that has conducted a cleanup) could lay 100% of the multimillion-dollar cost to clean up a polluted site at the feet of a party that contributed only a very small amount to the overall contamination. At an even higher level of theory, there exists the possibility that a party could show that only a portion of the cleanup costs resulted from its contamination alone and thereby limit its liability to that amount. In practice, most severely contaminated sites (landfills, dumps, solvent reclamation facilities, etc.) contain a jumbled mixture of all the parties’ waste contributions and attempts to convince a court that a party’s contribution was small and logically divisible, was futile.

New hope for dividing and limiting a company’s liability at such sites came in the form of the Supreme Court’s recent opinion in Burlington Northern and Santa Fe Railway Co. and Shell Oil Co. v. U.S. There were essentially two important holdings in the case, both of which bucked the trend of earlier decisions:

1. A company that sells a useful product is not liable under federal environmental law for pollution after the sale, just because it knows that some of the product is likely to spill during the delivery process; and

2. A judge has discretion to reject “joint and several liability” and limit a party’s liability for contamination at a site in accordance with a rough estimate of the contamination caused by the company’s individual actions.

At least one federal court in Michigan (ITT Corp v. Borgwarner Inc.) has been presented with an argument based on the Burlington case, seeking a division of liability over objections (by other liable parties and the government) that contamination at the site was too mixed to allow division. The court’s response: the issue could not be decided until there had been a full presentation of the facts in an evidentiary hearing.

As a result, hopes of limiting liability at an early stage of litigation, which flourished after the Burlington decision, now appear to be premature, at least in the Sixth Circuit.