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No Knowledge Needed: Fourth Circuit Holds There Is No Scienter Requirement for CERCLA Arranger Liability

No Knowledge Needed: Fourth Circuit Holds There Is No Scienter Requirement for CERCLA Arranger Liability


Highlights

  • On June 25, the Fourth Circuit held that CERCLA arranger liability applies even when the arranger did not know the waste was hazardous
  • This ruling of first impression by a court of appeals could significantly expand the scope of CERCLA arranger liability
  • Businesses involved with the transport of materials to potential CERCLA sites should carefully review their practices to ensure they know what they are sending off site 

In a notable decision that could have far-reaching implications for Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) liability, the U.S. Court of Appeals for the Fourth Circuit in 68th Street Site Work Group v. Alban Tractor Co., Inc. revived claims against six companies that allegedly arranged for the disposal of hazardous waste in the 68th Street dumpsite in Baltimore. Reversing the decision of the U.S. District Court for the District of Maryland, the Fourth Circuit held entities can be held liable under CERCLA for the arrangement for disposal of hazardous waste, even if they were unaware that the waste was hazardous at the time of transport.

The District Court’s Ruling

The 68th Street Site Work Group, a collective of entities that paid for remediation work at seven landfill sites in Maryland, sued other entities who had sent waste to the site but neither contributed to remediation costs nor settled. The group sought contribution for past costs and a declaratory judgment that the defendants would be liable for contribution to any future costs.

The Work Group settled with most of the parties it sued for contribution, except for ‘arrangers,’ which are defined by federal law as “any person who by contract, agreement, or otherwise arranged for disposal or treatment . . . of hazardous substances owned or possessed by such person[.]”

The district court ruled that to recoup costs of cleanup from arrangers, the Work Group needed to claim, and prove, that the defendants knew their waste was hazardous when arranging for its disposal. Finding that the Work Group had failed to allege such knowledge, the district court dismissed the claims against the alleged arrangers. This interpretation, that scienter is an element of arranger liability, was challenged on appeal.

The Fourth Circuit’s Decision

The Fourth Circuit reversed the district court’s decision, finding entities that arrange for disposal of hazardous waste can be held liable under CERCLA even if they did not realize it was hazardous at the time. The court stated, “To sufficiently claim arranger liability, a plaintiff must allege that a defendant intended to dispose of waste and that the waste was in fact hazardous … But a plaintiff need not allege that a defendant knew its waste was hazardous.” (Emphasis added).

In reaching its decision, the court analyzed CERCLA’s language, finding that the law describes situations in which lack of knowledge about the substance precludes liability for hazardous waste, but noted that arranging for disposal is not one of those instances. The court stated, “where Congress chose not to create a defense or exemption from the strict-liability regime, we must conclude that it did so deliberately in order to serve CERCLA’s broad remedial goals.” The three-judge panel further noted that “had Congress intended to include a knowledge requirement as part of arranger liability, it easily could have done so … But Congress did not do so.”

The Fourth Circuit noted, “Because the district court required not just intent to dispose but also knowledge that the disposed-of substance was hazardous” and vacated the lower court’s order and remanded for consideration of the arranger claims.

Implications of the Decision

This decision, which is one of first impression for the appellate courts, has significant implications for businesses that arrange for the transport of materials to facilities that are or may become subject to CERCLA liability.

In cases involving past disposition of wastes, parties need to understand that “under CERCLA’s arranger-liability provision, a defendant is liable whenever they intentionally arrange for the disposal of a substance and the substance is hazardous,” regardless of whether the party knew it was hazardous.

Going forward, such entities should employ careful waste management practices and exercise rigorous due diligence in all transactions involving disposition of potentially hazardous materials. That should include characterization of all wastes designated for transport off site to determine if it includes listed or characteristic hazardous substances. Further, entities should be sure to keep a detailed record of documentation that tracks the transport of any such waste from their facilities to the location of final disposition.


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