In Team Enterprises v Western Investment Real Estate Trust (9th Cir. July 2011), the 9th Circuit Court of Appeals held that the manufacturer of dry cleaning equipment was not liable under CERCLA for releases of hazardous substances from equipment it sold. The Court noted that pursuant to the Supreme Court’s Burlington Northern decision, 129 S. Ct. 1870 (2009), a party can be liable for having “arranged for disposal” only if the party takes “intentional steps to dispose of a hazardous substance” and sale of a useful product (the dry cleaning machines) does not evidence intent to dispose of a hazardous substance. The court noted that the “useful product doctrine” prevents a seller from being liable even when the product itself is a hazardous substance, some of which will be later disposed of as waste.
Significance of the Decision: The Court’s analysis of the “useful product doctrine” as a defense could serve to broaden the defense. If the test for arranger liability is whether someone took “intentional steps to dispose of a hazardous substance,” the useful product defense has often been applied to the second part, i.e. sale of a useful product is not disposal of a hazardous substance. The Ninth Circuit has now applied it to the first part, i.e. sale of a useful product is evidence related to the intent element. Intent to sell something useful shows that the intent was not to dispose of a hazardous substance, even if disposal of a hazardous substance was a result of the sale. Thus, the Court’s analysis could expand the useful product defense.
New Publication Analyzing “Arranger” Liability: An article by Aaron Gershonowitz published this summer in the University of Baltimore Law Review, provides a more thorough analysis of “arranger” liability. The article, entitled “Does the Supreme Court’s Burlington Northern Decision Require Reconsideration of the Aceto Line of “Arranger” Liability Cases?” is published at 40 U. Balt. L.Rev. 383 (2011). Among the issues dealt with are: whether when the Court required “intentional steps to dispose” is meant something different from intent to dispose; and what the Court meant by “peripheral” when it concluded that knowledge that the sale would be result in disposal is not sufficient for liability if the disposal is “peripheral” to the larger transaction.