A Wisconsin district court has ruled that NCR Corporation’s liability for contamination in the Fox River is limited to NCR’s share of contamination contributed to the river.

In the first case to explore in depth the Superfund divisibility defense after the US Supreme Court’s decision in Burlington Northern & Santa Fe Railway Co. v. U.S., 556 U.S. 599 (2009), a Wisconsin district court has ruled that NCR Corporation’s (NCR’s) liability for contamination in the Fox River is limited to NCR’s share of contamination contributed to the river. The US Court of Appeals for the Seventh Circuit overturned the district court’s original decision rejecting the divisibility defense in a September opinion. On remand, the district court concluded in its May 15 decision that “[t]he Seventh Circuit’s definition of ‘harm’ opens the door to a simple volumetric approach to divisibility.” Assuming the decision survives an almost certain appeal, the district court’s application of the divisibility defense may allow other potentially responsible parties to avoid joint and several liability at sites where they can establish their volumetric contribution to the contamination.

Background

By default, liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) is joint and several, meaning any contributor of pollution to a site can be held liable for the entire cost to clean up the site, notwithstanding other parties’ contribution to the pollution. The Supreme Court confirmed in Burlington Northern, however, that where a potentially responsible party (PRP) carries its burden of showing that the harm is capable of being divided and damages reasonably may be apportioned among the parties, the PRP is only liable for its own contribution to the harm. Proving divisibility of harm and a reasonable basis for apportionment therefore defeats joint and several liability. Proving divisibility of harm, however, has proved difficult in the past.

The recent case before the district court involved liability for polychlorinated biphenyl (PCB) contamination in portions of the Fox River and Green Bay, Wisconsin. Remediation of the river and bay is ongoing and constitutes one of the most expensive Superfund cleanups to date. Millions of cubic yards of sediments have been dredged, costing hundreds of millions of dollars. The United States sued NCR, seeking to compel it to clean up the site. NCR argued in response that the harm was divisible, that a reasonable basis for apportionment existed, and, therefore, NCR could not be held jointly and severally liable for the entire site cleanup.

After a 2012 trial, the district court held that NCR had failed to prove the harm at issue was divisible for purposes of determining liability under CERCLA, making NCR jointly and severally liable for the entire cleanup. However, on appeal, the Seventh Circuit took issue with the district court’s “binary” test for determining whether the harm was divisible, reversed the district court’s determination of joint and several liability, and directed the district court in assessing divisibility to focus on NCR’s contribution to the PCB contamination that caused harm to human health and the environment rather than on the propensity of NCR’s releases to require remedial action.

The District Court’s Decision

On remand, the district court began its analysis by noting that, to prove the divisibility defense, a PRP must show that (1) the harm is theoretically capable of being divided and (2) there is a reasonable way of apportioning the damages. The district court stated that, prior to the Seventh Circuit’s decision, the prevailing practice in assessing whether harm was capable of being divided was to focus on whether the PRP’s releases triggered the need for a remedy. If the PRP’s releases standing alone would have required remediation, the harm was not divisible. But the district court read the Seventh Circuit’s opinion as “re-defining the very harm that NCR’s [divisibility] defense attempts to divide.” Instead of assessing the harm as the remedy or costs triggered by NCR’s releases, the court concluded that “the harm is more properly defined as a release’s toxicity or danger to human health and the environment.” More simply put, “the harm is the contamination,” and the second step in the analysis, the apportionment of “damages,” is to be assessed in terms of “each party’s causation of remedial response costs.”

Using this new framework, the district court determined that to prove the harm was capable of being divided, it was enough for NCR “to demonstrate what percentage of the toxicity in [the river] was caused by its discharges.” Reviewing the expert testimony presented at trial, the court found that, although NCR’s contribution could not be determined with precision, the evidence was sufficient to establish an upper limit of how much of the contamination in the relevant section of the river could be attributed to NCR. The court thus found that the harm was “theoretically divisible.”

In determining whether a reasonable basis for apportionment of damages existed, the court stated that “NCR’s task . . . [was] to demonstrate a reasonable estimate of the extent to which its contribution to the contamination in the [river] gave rise to the remediation costs incurred.” Noting that the apportionment approach the Supreme Court accepted in Burlington Northern “equat[ed] remediation costs with the amount of contamination,” the court concluded that NCR’s percentage share of the PCB contamination in the relevant section of the river (28%) provided a reasonable basis to estimate or apportion the remediation costs for which NCR was responsible.

Implications

The specter of joint and several liability has driven how Superfund sites are cleaned up and how those cleanups are paid for. The US Environmental Protection Agency has relied on the doctrine of joint and several liability to require a single or small number of PRPs responsible for contaminating a site to bear the entire cost of cleanup. Such PRPs have been forced to pursue others for contribution. The divisibility defense, although theoretically available, has infrequently allowed PRPs to avoid joint and several liability. The district court’s “simplified” approach to the divisibility defense, which focuses on a PRP’s volumetric contribution, could, if adopted by other courts, change that.

It remains to be seen, however, how the district court’s analysis may be applied in other contexts. The contamination at issue in this case essentially was uniform and fungible; no party’s contamination was more or less harmful or costly to clean up than that of others. Many Superfund sites involve a mixture of pollutants, some of which pose greater risks to human health and the environment and may require different or more costly measures to clean up. In such cases, a party’s “volumetric” contribution is unlikely to provide an adequate basis for determining divisibility of harm or the apportionment of damages.