Liability Limits & the Burlington Northern & Santa Fe Railway Co Case

Last week I wrote about a new case regarding hazardous waste law, the U.S. Supreme Court case Burlington Northern & Santa Fe Railway Co. v. United States (556 U. S. ____ (2009)).

While it will take time for all of the implications of the Burlington Northern case to sort out, some are immediately clear. Because the Court has narrowed the definition of “arranger,” parties are not likely to have “arranger” liability if they only sold product that contributed to the contamination.

The more interesting change flowing out of this decision is the divisibility or apportionment of liability issue.

The Burlington Northern case appears to allow settlement based on “several liability” (i.e. the share of costs attributable to that one party alone) at sites where the shares of liability (and costs) can reasonably be divided based on the facts and circumstances at that site.

This means that at sites where the harm can be apportioned, the government will be responsible for the costs attributable to “orphan shares” -- liability attributable to insolvent or defunct parties -- as responsible parties will have liability only for their divisible portion of the costs.

Burlington Northern seems to allow parties many avenues to limit their liability to their “divisible” or “several” share using “reasonable” apportionment calculations. Prior to this decision the courts restricted divisibility and several settlements to those rare cases were costs were clearly attributable to only one set of parties based on unusual circumstances.

This is a big deal at sites where the parties can establish a “reasonable basis” to apportion liability and there is a potentially large orphan share.

I believe this case will give incentives to PRPs to gather facts related to divisibility to support settlements based on several liability and to propose settlement with the government based on each party’s divisible liability, leaving the government with no one to pay for the costs attributable to the orphan shares.

This could lead to the government paying more for orphan shares than in the past, putting more pressure on Congress to reauthorize the “Superfund” tax, which expired in 1995.

More about Superfund, cost allocation and Superfund taxes in subsequent blogs.

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