Fourth Circuit Affirms Ashley District Court Decision

In a much anticipated decision, the United States Court of Appeals for the 4^th Circuit finally issued a decision in the PCS Nitrogen v Ashley II of Charleston, 2013 U.S. App. LEXIS 6815 (4^th Cir. 4/4/13) case.

The decision, however, did not provide the clarity that many were hoping for about the controversial decision by the District Court that the purchaser of the property, Ashley II of Charleston, did not qualify as a Bona Fide Prospective Purchaser (BFPP) and receive exemption from liability because it had indemnified a responsible party and, therefore, had an improper “affiliation” with that party.   

Larry Schnapf’s always illuminating blog, Business Environmental Law and Transactional Support, has a full discussion of the ruling and many of the other issues in the case here.

I served as a mediator for the parties to assist them in resolving the allocation issues and settle the case before litigation. I will not comment about the many issues in the case or the 4^th Circuit decision – except to point out that, given the “much ado about nothing” results, as Larry described the decision, the parties could have resolved the case without litigation. Instead, no party “won” much and all parties lost something.

Certainly the cost of litigation could have funded some if not all of the costs of a negotiated settlement. 

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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