By Andrew H. Perellis, Patrick D. Joyce, and Craig B. Simonsen

The Fifth Circuit recently held that a seller of dry cleaning chemicals did not assume Superfund “arranger” liability by merely selling a useful but hazardous chemical with the intent that it be used by a dry cleaning business that then subsequently discharged the contaminant into ground water. Vine Street, LLC v. Borg Warner Corp., No. 07-40440 (5th Cir., January 14, 2015).

Vine Street is one of the first Court of Appeals to consider “arranger” liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9607(a)(3), in light of the Supreme Court’s decision in Burlington N. & Santa Fe Ry. Co. v. U.S., 556 U.S. 599 (2009), holding that arranger liability attaches only if there is an intent to dispose of a hazardous substance..

A Borg Warner Corp. subsidiary, Norge, designed and sold dry cleaning equipment to Vine Street LLC in the early 1960s.  Despite efforts to prevent discharge through an engineered reclamation system, some of the perchloroethylene (PERC) used in the dry cleaning process was discharged into the sewer.  In 2006, the District Court held a bench trial and ruled that Norge was liable to Vine Street for 75% of the costs associated with cleaning up PERC plume because Norge knew its reclamation system was not 100% effective and some of the PERC might end up in the sewer.

Borg Warner appealed the judgment to the 5th Circuit, but it was stayed due to ongoing bankruptcy proceedings.  By the time the stay was lifted, the Supreme Court had published its ruling in Burlington Northern that “knowledge alone is insufficient to prove an entity planned for the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.”

In Vine Street, Borg Warner argued that Norge (and therefore Borg Warner) was not liable to Vine Street under CERCLA because it did not intend to dispose of the PERC when it sold the dry cleaning equipment and an initial supply of PERC to the cleaners in the 1960s.  The Fifth Circuit Court reversed the District Court judgment against the seller, finding that the “purported arranger [must take] intentional steps to dispose of a hazardous substance.”  The District Court had applied an outdated Fifth Circuit standard that only required a “nexus” between a purported arranger and the disposal of waste (Geraghty & Miller, Inc. v. Conoco, Inc., 234 F.3d 917 (5th Cir. 2000).

Vine Street presents us with another reminder that CERCLA’s arranger liability depends upon a fact-specific inquiry as to whether the entity had the necessary intent to dispose of a hazardous substance.