CERCLA Divisibility Defense Is Alive and Well - Comprehensive Environmental Response, Compensation, and Liability Act
On May 15, 2015, the United States District Court for the Eastern District of Wisconsin held that a defendant successfully established a divisibility defense in a government enforcement action dealing with the cleanup of the Fox River Superfund Site in northeastern Wisconsin (the Site). United States v. NCR Corp., No. 10-C-910 (E.D. Wis. May 15, 2015). The ruling appears to be the first district court decision to uphold a divisibility defense under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) since the Supreme Court’s 2009 decision in Burlington Northern. It remains to be seen whether this is an indication of how courts will address divisibility going forward.
The government originally brought the action to enforce a unilateral administrative order that required several potentially responsive parties (PRPs) to cleanup portions of the Fox River. The Site was contaminated with paper mill wastewater containing polychlorinated biphenyls (PCBs). One of the PRPs, NCR Corporation (NCR), asserted a divisibility defense for a section of the Site and argued that the cleanup costs should be apportioned. In an earlier post-trial order, the district court found that the defense did not apply. In that order the court focused on how much the discharge gave rise to the need to remediate the site; either the portion of the Site needed to be remediated, or it did not as a result of the PRP’s contribution. However, as we explained in our prior post, the Seventh Circuit reversed on appeal and found that the environmental harm was “theoretically capable of apportionment” if NCR could show the extent to which it contributed to PCB concentrations. United States v. P.H. Glatfelter Co., 768 F.3d 662, 678 (7th Cir. 2014).
On remand, the district court observed that there are two main aspects to a divisibility defense. NCR Corp., No. 10-C-910 at 2. “The first question asks whether the harm is theoretically capable of being divided, while the second asks whether there is a reasonable way of apportioning the damages.” Id. Prior to the Seventh Circuit’s decision, courts often defined harm as the remedy or costs incurred and considered whether such remedy or costs could be divided. The question was binary – did a party’s contamination give rise to the remedy. The Seventh Circuit found that the question is not binary, but “continuous” because harm increases as the concentration of contamination increases. According to the Seventh Circuit the harm is no longer to be viewed with respect to remedy, but instead with respect to actual toxicity, i.e., the “harm to human health and the environment.” P.H. Glatfelter Co., 768 F.3d at 676-77. Simply put, according to the Seventh Circuit the focus is on the release’s danger to health and the environment, not the release’s propensity to trigger a remedy. Id. at 677-78. The district court observed that this analysis “removes the somewhat cumbersome link between discharges, remediation rules and cost.” NCR Corp., No. 10-C-910 at 3. Court’s arguably no longer need to assess whether a given release would give rise to the need for a specific remedy. Id. “Instead, the primary question as to whether harm is theoretically capable of being divided is now simply this: to what extent did [the PRP] contribute to the contamination….” Id.
The court elaborated that the Seventh Circuit’s definition of the harm as being “continuous” also created the ability to apply a “volumetric approach” to apportionment. Id. at 6. The court clarified, however, that it “d[id] not mean volumetric in the sense of dividing harm by how much toxin each party released.” Id. at 6 n.2. “Instead, the analysis here examines how much of each party’s release stayed in [the Site].” Id. (emphasis in the original). After reconsidering the evidence in the record, including expert testimony, the court found that NCR had “sufficiently” established that it contributed no more than approximately one-third of the PCBs that contaminated a section of the Site. Id. at 12-13. Thus, the court concluded that the harm was theoretically divisible. Id. at 13.
As for the court’s analysis of the second component of a divisibility defense, whether there was a reasonable way to apportion the damages, the court explained that NCR needed to demonstrate a “reasonable estimate of the extent to which its contribution to the contamination . . . gave rise to the remediation costs incurred.” Id. at 13. Within this context, the court noted that the Seventh Circuit viewed both the harm as continuous, as well as the associated cleanup costs as continuous. Id. at 14. More specifically, the Seventh Circuit “concluded that cleaning up a given portion of the [Site] becomes more expensive the more toxic that portion is.” Id. at 14-15. The district court then reasoned that “[if] 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.” Id. at 15. Thus, a volumetric or loading calculation was also used to apportion costs. Id. 15-17. The court found that NCR was responsible for cleanup costs that were proportional to the amount of PCBs that NCR contributed. Id.
Accordingly, the court held that NCR successfully established a divisibility defense for the portion of the Site that was in dispute on remand. Id. at 18. That is, NCR “established the harm [was] theoretically capable of division and that there [was] also a reasonable basis to apportion its share of the remediation costs of [the portion of the Site] at 28 percent.” Id.