Environmental Litigation
Action Item: On March 15, 2015, the United States District Court for the Eastern District of Wisconsin in United States v. NCR Corp., No. 10-C-910 (E.D. Wis. May 15, 2015), held that a potentially responsible party ("PRP") at a cleanup site met its burden of establishing the divisibility defense and, in turn, was not jointly and severally liable for the entire cost of remediation under Section 107 of the Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA"), 42 U.S.C. § 9607. This ruling is among the first, if not the first, to uphold the defense since the U.S. Supreme Court embraced it in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). The district court's analysis of the divisibility defense in NCR should serve as a useful guidepost to PRPs seeking to reduce their liability for cleanup costs under CERCLA and pay only their divisible share.
In a victory for potentially responsible parties ("PRPs") at multiparty contamination sites, a federal district court in United States v. NCR Corp., No. 10-C-910 (E.D. Wis. May 15, 2015), held that a PRP established that environmental harm at a Superfund site was divisible, thereby relieving the PRP of joint and several liability under Section 107 of the Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA"), 42 U.S.C. § 9607, and, more precisely, responsibility for tens of millions of dollars in cleanup costs. This ruling is particularly significant given the reluctance of most, if not all, courts to find that parties have met their burden of proving divisibility of harm to the environment since the United States Supreme Court embraced the divisibility defense in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). The ruling in NCR also serves as useful guidance to PRPs seeking to reduce liability for cleanup costs under CERCLA and pay only their divisible (and fair) share for the harm.
In NCR, the United States filed an action against NCR Corporation ("NCR") and other PRPs under CERCLA to enforce remediation of the Lower Fox River in Wisconsin, a Superfund site contaminated with polychlorinated biphenyls ("PCBs") that were discharged with wastewater between 1954 and 1971 by NCR while manufacturing carbonless copy paper and paper mills in the paper recycling business. The Fox River site was divided into five geographic sections, or operable units, numbered 1 through 5 (OU1 - OU5), and the cost to remediate the site was estimated at $1.5 billion. NCR already had incurred cleanup costs at OU4 and sought to avoid additional costs by asserting a divisibility defense.1 Specifically, NCR argued that the harm at OU4 is divisible among the PRPs and therefore the cleanup costs should be apportioned.
The district court initially concluded the harm to OU4 was not divisible and entered a judgment against NCR finding it jointly and severally liable for remediation of the Fox River site and enjoining NCR and others to perform the cleanup. In so ruling, the court defined the harm in terms of the remedy and attendant costs, focusing on how much each party's discharge of PCBs gave rise to the need for remedial action at portions of the river. The United States Court of Appeals for the Seventh Circuit reversed the district court's ruling on divisibility and concluded that "the harm would be theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations in OU4," and if such a showing was made, "a reasonable basis for apportionment could be found in the remediation costs necessitated by each party."2 The Seventh Circuit defined the harm not as the remedy or costs triggered by each party's PCBs, but by actual toxicity, i.e., the harm to human health and the environment. The Seventh Circuit remanded the case to the district court to reconsider NCR's divisibility defense consistent with its opinion.
On remand, the district court in NCR followed the Seventh Circuit's framework on divisibility and held that NCR had, in fact, established that the harm to OU4 was theoretically capable of division and there was a reasonable basis to apportion NCR's share of the remediation costs of OU4. The court began its analysis by outlining the two components of the divisibility defense: (1) whether the harm is theoretically capable of being divided (i.e., theoretical divisibility), and (2) whether there is a reasonable way to apportion the damages (i.e., reasonable basis for apportionment). As to theoretical divisibility, the district court focused not on the more complicated issue of the remedy and costs attributable to a party's discharge, but on the extent to which NCR contributed to the PCB contamination in OU4. The court applied a "simple volumetric approach to divisibility" that "examines how much of each party's release stayed in OU4."3 This approach required only that NCR "demonstrate a reasonable correlation between the volume of PCBs it is responsible for and the concentrations present in the river."4 The district court concluded that the load or mass-percentage estimates produced by another PRP's expert model sufficiently established the extent to which NCR contributed to the PCB contamination in OU4, which, at most, was roughly one-third of the PCBs in OU4. Therefore, the court concluded that the harm to OU4 was theoretically divisible.
To establish a reasonable basis for apportionment, the district court stated that NCR must "demonstrate a reasonable estimate of the extent to which its contribution to the contamination in OU4 gave rise to the remediation costs incurred."5 Importantly, the court declared that "it is reasonableness, not scientific precision, that governs the apportionment analysis.6 Noting that remediation of a portion of a site becomes more expensive the greater the toxicity of the portion, the court reasoned that "[i]f costs are correlated to contamination (harm), then one would expect the costs may be apportioned on roughly the same lines as the harm itself: the more harm each party causes, the more cost he is responsible for."7 NCR's expert extrapolated the volumetric or loading estimates of PCBs from the model of another PRP's expert and concluded that only 28 percent of the cleanup costs in OU4 were attributable to NCR. The court concluded that this estimate of NCR's share of the cleanup costs at OU4 was "reasonably accurate."8 Therefore, the court held that NCR established the divisibility defense, was severally liable, and was responsible for only 28 percent of the cleanup costs at OU4.
PRPs confronted with CERCLA claims should be encouraged by NCR and reconsider their opportunity to limit CERCLA liability substantially by raising a divisibility defense. Environmental cleanups are costly, and being on the hook for all response costs at a site based on a finding of joint and several liability could cripple a business. The district court's decision in NCR reaffirms the Supreme Court's conclusion in Burlington Northern that divisibility need not be proven to a scientific or mathematical certainty and requires only a reasonable estimate as to how much a party's discharge contributed to the contamination. This undertaking does not require the same type of complicated modeling exercise required to show whether a release would give rise to the need for a specific remedy and demands less from experts. In short, it requires an expert to develop a relatively basic model estimating a party's contribution to the contamination at the site and a basis by which to apportion liability among the parties that is grounded on reasonableness. If such a showing is made, then a PRP will be liable for only its divisible share of the cleanup rather than the entire price tag under traditional joint and several liability.
Footnotes
1 NCR did not argue that the harm in OU2, OU3, or OU5 was divisible, and NCR had no responsibility for cleanup in OU1 because it did not release PCBs in that portion of the site.
2 United States v. P.H. Glatfelter Co., 768 F.3d 662, 678, 682 (7th Cir. 2014).
3 United States v. NCR Corp., No. 10-C-910 (E.D. Wis. May 15, 2015), at 6, n.2.
4 Id. at 8, 11.
5 Id. at 13.
6 Id. at 15.
7 Id.
8 Id.at 18.
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