Case Notes

John Magarian

UNITED STATES of America v. The ATLAS LEDERER COMPANY, et al.
85 F.Supp. 2d 828 (S.D. Ohio Feb. 16, 2000)

Livingston & Co., defendant in a CERCLA cost recovery action, brought a motion for summary judgment alleging its sale of used lead-acid batteries did not constitute an arrangement for disposal or treatment of a hazardous substance under the statute. The Court denied the motion, holding that:

• fact issues remained as to whether seller intended to arrange for disposal of battery acid and casings, and
• the used batteries were not "useful products" for purposes of determining seller’s CERCLA arranger liability.

Livingston insisted that it sold the batteries to the United Scrap Lead Company ("USLC") for the recycling of lead, not to "dispose" of used batteries containing hazardous substances. It argued that the lead in the constituted a "useful product;" thus it did not "arrange for" the disposal of hazardous substances.

The Court identified the proper inquiry for "arranger liability" as "whether the party intended to enter into a transaction that included an ‘arrangement for’ the disposal (or treatment) of hazardous substances." Citing US v. Cello Foil, 100 F. 3d 1227 (6^th Cir. 1996), the Court wrote that "intent need not be proven by direct circumstances, but can be inferred from the totality of the circumstances[ ]" and then limited the intent inquiry to the determination of whether a party is a PRP. "If an arrangement [for disposal of hazardous substances] has been made, that party is liable for damages caused by disposal, regardless of the party’s intent that the damages not occur. Moreover, a party can be liable for arranging for disposal, even when it has no control over the process leading to the release of substances."

The Court would not say, as a matter of law, that Livingston lacked the intent to enter an arrangement for the disposal of hazardous substances finding that the record contained evidence from which a trier of fact could infer that Livingston did intend to enter into such a transaction. Looking at the facts, the Court found that Livingston intended to provide USLC with lead for recycling and acid/lead contaminated battery casings for disposal. The court considered the fact that Livingston knew that the junk batteries it sold required "cracking" to extract lead from the worthless acid and battery casings.

Livingston admitted it knew that USLC planned to extract the scrap lead from the batteries, a process that has been recognized as "treatment" under CERCLA. Sale of batteries constitutes an arrangement for treatment because cracking is necessary to make the lead in the batteries amenable for recovery. See Catellus Development Corp. v. U.S., 34 F. 3d 748 (9^th Cir. 1994). Finally, the court rejected the claim that Livingston sold a "useful product." Livingston was not entitled to the useful product exemption for the battery transaction because the batteries were not sold to USLC for their original intended purpose. Since the batteries purchased by USLC were not suitable for use as batteries, the transaction did not constitute the sale of a useful product.

UNITED STATES of America v. The ATLAS LEDERER COMPANY, et al.

2000 WL 364048 (S.D. Ohio)

Defendant Livingston argued that the Superfund Recycling Equity Act, P.L. 106-113, enacted in November, 1999 contained a "potentially dispositive legislative development" which strengthened its argument for judgment as a matter of law as to its sale of whole, junk batteries to a facility that reclaimed the lead plates. The Court denied the motion, holding that the Amendment did not preclude third party contribution claims in action filed before its adoption.

As detailed above, the amendment provides that one who "arranged for" the recycling of "recyclable material" shall be exempt from CERCLA liability pursuant to CERCLA §§ 107(a)(3) and 107(a)(4). Livingston argued that its sale of junk batteries to the USLC qualified as an "arrangement for recycling" under the CERCLA amendment. Further, it argued that it would be unfair to hold it liable when the amendment, found at CERCLA § 127, codified the useful product defense. Although acknowledging that it was not entitled to a literal application of the amendment because of the language specifically excluding its application to actions filed by the United States prior to enacting of the amendment, Livingston argued that Court should consider the "spirit and intent" of the legislation. The Court disagreed, noting that it already had found the company’s "useful product defense" inapplicable in deciding the Livingston motion for summary judgment.

Livingston insisted that CERCLA § 127(i) precluded cross-claims or third-party claims for contribution. Livingston argued that the cross-claims or third party claims were not "initiated by the United States," but rather by the respondent group and thus were not covered in the statutory exemption. The court rejected this argument reasoning that the contribution action was part of the underlying judicial action initiated by the United States. The Court found that it would be incongruous to permit the U.S. to pursue a CERCLA case against a limited group of responsible parties and prohibiting those parties from seeking contribution through cross-claims and third party claims. Such a policy would punish the respondent group for accepting responsibility and settling with the government.

A.G.G. Enterprises, Inc. v. Washington County, Oregon and City of Beaverton, Oregon

2000 W.L. 361892 (D. OR.)

Note: This decision is not approved for publication

Plaintiff A.G.G. Enterprises ("AGG"), headquartered in Multnomah County, Oregon, is engaged in the business of hauling mixed solid waste and source-separated recyclable materials, which requires possession of a license issued by the County. There is no limitation on the number of nor is there any limit as to geographic service areas within the county.

Selected AGG customers in Multonomah County wished to use its services in neighboring Washington County, as dealing with a single transporter would reduce costs. Based on customer demand, AGG undertook to expand its operations into Washington County and the City of Beaverton.

Chapter 8.04 of the Washington County, Oregon Code on Solid Waste Control and Chapter 4.08 of the City of Beaverton, Oregon Code on Solid Waste Control Applicable City and County codes make it unlawful for anyone to engage in the business of trash transportation or disposal in their jurisdictions without first receiving the appropriate certificate or license.

Historically, the City had not awarded more than one license for any particular geographic area although multiple licenses are permitted under the ordinance. Violations of the ordinances may result in civil penalties. In fact, the only new licenses issued in over thirty years by the County and over twenty years in the City resulted solely from transfer of business ownership. AGG, operating without the required certificates, received citations upon its expansion into Washington County.

The certificates require individual haulers in the County to service the less profitable residential customers in addition to commercial accounts. These companies expressed concerned that allowing AGG to service only the more profitable business customers would put them at a competitive disadvantage.

AGG initiated an action in federal court against both the County and the City in an attempt to have the ordinances declared unenforceable. AGG based its suit on federal preemption, as well as claimed violations of both the Commerce Clause and the Equal Protection Clause.

At trial, the City and County argued that AGG lacked standing, the claims were not ripe for review, and that the court should abstain from ruling. The court found that AGG did have standing to raise its claims, because the requested relief would redress its injury, and it had no other means of redress. The court likewise determined that the matter was ripe for judicial review. AGG did not have to apply for a certificate in order to be able to challenge the statutes in court since the facts indicated that such would be a futile gesture. Lastly, the court declined to abstain from ruling, for the constitutionality of the state’s attempts to establish such a policy was of still greater importance.

Federal law may preempt a state law if the former is distinguished as the intent of Congress. The Federal Aviation Administration Authorization Act of 1994 ("FAAAA" or "Act") disallows a state from enacting any law that relates to "any motor private carrier, broker, or freight forwarder with respect to the transportation of property." Conflict arose from the fact that the term "property" was defined nowhere in the Interstate Commerce Act.

The defendants argued that the FAAAA did not apply as AGG was neither a motor carrier nor a motor private carrier. They asserted that because the trips at issue were not interstate commerce, AGG did not come within the protection of the FAAAA. The court disagreed, reasoning that since the ISA defines a motor carrier as "a person providing motor vehicle transportation for compensation," 49 U.S.C. 1302(12), and the activities of AGG fit within the definition, therefore, the FAAAA applied.

The defendants further argued that mixed solid waste loads were not "property" as intended in the Act. The FAAAA does not include a definition of "property." The City and County claimed that since AGG’s customers paid for the transport of the loads, the loads had only a negative value. This did not take into account the fact that the recovery facility utilized by AGG based its entire business on the economic value of recycling materials within the loads. Based on this, the court deemed both the source-separated loads and the MSW loads as "property" protected under the FAAAA. Thus, the FAAAA preempted local and state regulation of the loads.

AGG had argued that the ordinances were unconstitutional barriers to interstate commerce. The County and City argued that the local public interest protected by the ordinances the provision of safe and cost-effective commercial and residential waste disposal for all customers in Beaverton and Washington County. The court considered the likelihood that companies like AGG were more willing to take loads of mixed solid waste to a material recovery facility rather than to a landfill, resulting in an increase in recycled materials, and have what amounted to an incremental effect on interstate commerce. Based on this analysis the court held that the legitimate public interest protected by the subject ordinances outweighed the incidental impact on interstate commerce and thus did not violate the commerce clause. Having previously concluded that the ordinances were preempted by the FAAAA, the court did not address AGG’s claim that the ordinances violated the Equal Protection Clause.

The court issued a permanent injunction, barring the defendants from enforcing the ordinances against AGG. This was the only form of relief suitable to the specific circumstances in this case.

John Magarian just completed his first year at Brooklyn Law School and is a summer associate with the Millburn, New Jersey office of McGovern Noel & Benik.