Where Does Responsibility Lie?

Invoking a "more sensible, less formalistic" approach to Superfund liability, a California federal court has ruled that a company who sold spent auto batteries to a lead reclamation firm is not responsible for cleanup costs at the site where the firm later dumped battery casings.

U.S. District Judge Eugene F. Lynch acknowledged that the car batteries were no longer useful for their original purpose. Nevertheless, he concluded that under the federal Superfund law, General Automotive Inc., "did not . . . arrange for the disposal of hazardous materials," when it sold the car batteries to the reclamation firm.

Under Section 107(a)(3) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), anyone who arranges for the disposal of hazardous wastes can be held liable.

The judge stated that the batteries still had a productive use when General delivered them to Morris P. Kirk & Sons of Emeryville, Calif., and that General had no say in the final disposition of the batteries. After extracting the lead from the batteries, the Kirk firm crushed the casings and dumped them at a site in Richmond, Calif.

The owner of the site, Catellus Development Corp., cleaned up the contamination and then took General and the other parties to court to get reimbursed for its costs. Catellus urged Judge Lynch to saddle General with liability because the sale of the batteries to Kirk & Sons was essentially an arrangement for their disposal. Catellus unsuccessfully argued that at the time of sale the batteries no longer served their original function.

General might have qualified as an arranger for disposal, Judge Lynch conceded, but the U.S. Court of Appeals for the Ninth Circuit, which covers California and several other Western states, has adopted a kinder, gentler test: Did the hazardous materials have a "productive use" when they left the hands of the party who is targeted for liability?

Yes, answered the district court, because a market existed for the lead they contained. Moreover, when Kirk & Sons acquired the batteries, General "was divested of any right or ability to control the batteries, their treatment or their ultimate disposal." General could not be linked to the contamination at the Richmond site.

Judge Lynch viewed General's predicament as different from situations where sellers of dead auto batteries were held liable for the cleanup of contamination on the buyers' own properties. In such circumstances, he noted, the law presumed that the sellers "knew or had good reason to know of the disposal of hazardous substances at the CERCLA facility." Similarly, General could not be held liable under Superfund for arranging for the treatment of the batteries. Nothing in General's contract with Kirk & Sons mentioned anything about "handling, processing or treatment of the batteries," the ruling said.

Punishment on Hold. Corporate environmental offenders will not face punishment under federal sentencing guidelines until late next year, said a member of the U.S. Sentencing Commission.

Organizations and individuals still have time to suggest alternatives to calculating fines, jail terms and other sanctions against convicted corporate defendants, while the Commission sifts through draft recommendations.

For example, should a corporate officer be held responsible when a subordinate caused environmental damage without the officer's knowledge? Under federal environmental laws, prosecutors must prove that the accused's misdeeds are intentional and not accidental. The U.S. Justice Department said that proof of an environmental crime can be established by showing that the defendants knew what they were doing, not that they knew they were acting illegally.

Another nagging issue is whether fines should be pegged to the cleanup and restoration costs or to the savings and other economic benefits enjoyed by the noncomplying corporate offender.

Lawyers who represent corporations point out that environmental laws are constantly changing and even well-intentioned firms can be caught out-of-step with requirements. Yet critics charge, the proposed guidelines seem to treat all violations the same.

If a consensus exists that companies with meaningful corporate compliance programs should be assessed lower fines, then the Commission must still wrestle with the concept of mitigating penalties on an all-or-nothing basis or on relative merit.

Still, questions remain about prosecutors who decide to prosecute fewer than all possible violations in a case. Many federal judges are irked by "kitchen sink" indictments that run the gamut of potential liability, lacking any sense of priority, proportion or perspective.

Ultimately, the workability and credibility of the guidelines will depend on how successfully the Commission fashions standards that bow to statutory requirements but still inspire responsible corporate behavior.

Although the Commission is now sifting through draft recommendations prepared by an advisory group,

For example, the Commission has not yet decided on how to set fines or to determine criminal intent and responsibility standards; how (if at all) corporate environmental compliance programs should offset penalties and punishments; and how much discretion prosecutors should have in bringing charges.

Checking prosecutorial discretion, without defeating Congress' apparent formula for chalking up violations, will be a tricky task for Commission members in the coming months.

"[E]very relevant consideration suggests that [General] did not make the crucial decision to place the hazardous materials into the contaminated facility," Judge Lynch wrote.

for the costs of cleaning up the effects of improper disposal of such wastes

The Justice Department, however, concedes that an accused corporate officer must have some actual knowledge of the offense but that the law in this area is still fuzzy leading to consequences ranging from trivial to tragic.