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Federal District Court Rejects Divisibility of Harm Defense, Imposing Joint and Several Liability in CERCLA Action

On December 6, 2023, in Short Creek Development v. MFA Incorporated, No 22-05021, 2023 WL 8452430 (W.D. Mo. Dec. 6, 2023), a Federal District Court in Missouri held that Defendant Missouri Farmers Association, Inc. ("MFA") failed to demonstrate that a divisibility of harm exception to the rule of joint and several liability should be applied in apportioning responsibility to pay for the cleanup costs at a fertilizer plant.  The case underscores the challenges associated with establishing divisibility of harm in a CERCLA action.

Between 1953 and 1954, MFA operated a fertilizer plant in Missouri and produced phosphogypsum as a byproduct in the manufacturing process.  MFA stored approximately 200,000 tons of the phosphogypsum on site creating a gypstack.  When it rained, water percolated through the gypstack, drawing out its components, resulting in leachate.  The leachate had the potential to contaminate surface water and groundwater.

In 1957, Farmland Industries, Inc. ("Farmland") became the owner of the plant and by the time it stopped manufacturing fertilizer in 1971, it had added an additional 2,540,000 tons of phosphogypsum to the gypstack.  In 1999, Farmland sold the plant to PCS Phosphate Company, Inc. ("PCS") and then filed for bankruptcy in 2002 leaving the FI Missouri Remediation Trust ("FIMRT") to address and manage the future remediation of the leachate.  The United States Environmental Protection Agency ("EPA") soon directed FIMRT to install a leachate management system as part of the remediation of the site to address high concentrations of various pollutants.  In 2012, the EPA placed mining wastes and soil contaminated with heavy metals on top of the gypstack after the 2011 Joplin tornado.

In 2021, Plaintiff Short Creek Development, LLC ("SCD") acquired the site and took over operation of the leachate management system. Thereafter, SCD sought cost recovery from MFA, pursuant Section 107(a) of CERCLA, 42 U.S.C. § 9607(a).  SCD and MFA filed cross-motions for summary judgment on MFA's liability.  SCD argued that MFA was jointly and severally liable for response costs associated with the site.  MFA argued that the environmental harm at the site was divisible.

CERCLA generally provides for joint and several liability.  An exception exists when the harm is divisible, i.e. when liability may be divided according to the volumetric or mass contributions of each entity that caused the underlying environmental harm.  The defendant asserting the divisibility defense bears the burden of proof and must show that the environmental harm is capable of apportionment, taking into account the type of pollution at issue, who contributed to the pollution, and how the pollutant presents itself in the environment after discharge.  If the harm is capable of being divided, the actual apportionment of damages is a question of fact and must be guided by principles of causation alone.  If causation among the parties is unclear, the court should instead impose joint and several liability.

In this case, MFA sought to divide the harm on a volumetric basis.  MFA’s expert opined that MFA had produced about six percent of the total phosphogypsum on the site (200,000 tons) and therefore was responsible for that percentage of the environmental harm caused by the gypstack.  MFA argued that Farmland would be responsible for the remaining percentage of environmental harm, i.e. 94 percent.  

In order to successfully establish that harm is divisible on a volumetric basis, a defendant must show that, apart from each potentially responsible parties’ volumetric contributions of a pollutant, “independent factors had no substantial effect on the harm to the environment.”  The court found that defendant had failed to carry this burden sufficient to create a genuine dispute of material fact.  Here, defendant’s expert had acknowledged that several independent factors apart from strictly volume had the potential to affect the phosphogypsum produced and placed by MFA, including attenuation, additional phosphogypsum placed by others, the mining wastes placed by EPA, and the operation of the leachate management system.  In other words, there was no dispute that several other factors besides merely volume had a substantial effect on the environment.  But defendant’s expert had not accounted for these independent factors when he concluded that the environmental harm is divisible.  

Lastly, the court found that MFA's expert failed to apportion responsibility to the five contributors of environmental harm that the expert had identified:  MFA, Farmland, FIMRT, EPA and SCD, instead only dividing the environmental harm between MFA and Farmland.  Based on these shortcomings, the court declined to enter a judgment on the issue of divisibility of harm and found MFA jointly and severally liable under CERCLA.

This ruling illustrates the difficulty in establishing the divisibility of harm exception to joint and several liability in CERCLA cases.