Under Section 9607(a)(3) of CERCLA, a party who has arranged for the disposal of hazardous substances at a facility may, like other categories of Potentially Responsible Parties, be strictly liable for response costs.  Where the PRP has engaged in the sale of a “useful product,” even one known to be hazardous, is not liable as an arranger unless the PRP has taken “intentional steps to dispose of a hazardous substance.”   Burlington Northern and Santa Fe Ry. Co. v. U.S., 556 U.S. 599, 609-10 (2009)(“BNSF”).  Mere knowledge that there might be a discharge of hazardous substances in connection with the transport or use of the product is not sufficient to impose arranger liability.  Id. at 611.  As a result, “whether an entity is an arranger requires a fact-intensive inquiry that looks beyond the parties’ characterization of the transaction . . . and seeks to discern whether the arrangement was on Congress intended to fall within the scope of CERCLA’s strict-liability provisions.  Id. at 610.  Just such a “fact-intensive inquiry” was undertaken by the United States District Court for the Western District of Michigan last week in Georgia-Pacific Consumer Products LP v. NCR Corp., Case No. 1:11-CV-483 (W.D.MI. Sept. 26, 2013), one of a number of cases dealing with the recycling of “broke,” or scraps of carbonless copy paper coated with a PCB-containing emulsion produced by NCR from the mid-1950’s until 1971. 

In Georgia-Pacific Consumer Products LP, the plaintiffs alleged that NCR sold, and encouraged others to sell, broke to recyclers rather than dispose of it in other ways because NCR was aware that the recycling process would result in PCB-contaminated effluent, and knew that any other method of disposal would be expensive and difficult.  NCR maintained that broke was a useful product which was highly sought after by recyclers and thus it did not “intend” to dispose of any hazardous substance in selling the broke to recyclers.

The Western District Court was having none of that, however.  In an opinion detailing NCR’s knowledge of the hazards of PCBs contained in the broke, its failure to disclose those hazardous to its business partners, and its awareness that the recycler’s processing of the broke would necessarily result in the discharge of contaminated effluent, held that “no one with NCR’s knowledge of the situation could have believed that [the] broke was a useful product.”  Id. at *20.  Specifically, the Court found that by 1969, NCR “clear[ly] and unequivocal[ly]” knew that selling broke to recyclers was “facilitating” the disposal of a hazardous substance and thus not legitimate “attempts to sell a genuinely useful product.”  Id.   This conclusion was supported, in particular, by the fact that from 1969 to 1971, NCR was “scrambling to find alternative ways of disposing of the . . . broke, rather than selling it to paper recyclers,” an acknowledgement that NCR knew that the broke was a “legal liability, not a useful product.”  Id. at 19-21.   Georgia-Pacific Consumer Products LP thus stands as a blueprint for other courts to follow in determining whether an entity’s knowledge of the hazardous properties of its waste products, and the manner in which such products would be processed by a buyer, is sufficient to make the entity an arranger strictly liable under CERCLA.

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