On June 25, 2024, the United States Court of Appeals for the Fourth Circuit issued a precedential opinion in 68th St. Site Work Grp. v. Airgas, Inc., No. 23-1155, reversing the district court’s order and finding that arranger liability under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §9607(a)(3), does not require scienter – i.e., knowledge that the disposed of waste contains hazardous substances. This decision affirms the decision of some other courts (e.g. United States v. GE, 670 F.3d 377 (1st Cir. 2012) that likewise have agreed that arranger liability does not require knowledge that the waste contains hazardous substances at the time of disposal.
The 68th Street Site Work Group (68th Street Group) is an unincorporated association comprised of nine entities that entered Consent Decrees with the U.S. EPA to settle claims of hazardous substance contamination at 68th Street Dump Superfund Alternative Site located in the Rosedale Area of Baltimore County and City of Baltimore, Maryland (the “Site”).
On November 20, 2020, 68th Street Group initiated a CERCLA 113 contribution action, 42 U.S.C. §9613 against 156 defendants seeking contribution for past costs and declaratory relief for future costs. Among the allegations raised in the Complaint, the 68th Street Group alleged that each defendant was liable as an “arranger” for the disposal of waste at the Site. Under CERCLA, arranger liability is defined as “any person who by contract, agreement, or otherwise arranged for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another person or entity and containing such hazardous substances.” 42 U.S.C. §9607(a)(3).
Following a series of settlements and voluntary dismissals, 31 defendants remained that filed motions to dismiss or motions for summary judgment. On September 16, 2021, the district court entered an Order dismissing the claims against the remaining defendants finding that the 68th Street Group failed to adequately plead arranger liability. In the dismissal order, the Court concluded that the plain language of arranger liability under CERCLA “requires an entity to take intentional steps with the specific intent to dispose of hazardous waste and not just waste that, to its knowledge, may or may not contain hazardous substances.” 68th St. Site Work Grp. v. Airgas, Inc., No. CV SAG-20-3385 at *42-43 (D. Md. Sept. 16, 2021).
The 68th Street Group moved to amend its complaint in an attempt to overcome the district court’s conclusion that scienter was required to be alleged for arranger liability under CERCLA. On January 26, 2022, the district Court entered an Order denying the motion to amend as futile because the 68th Street Group Complaint did not allege knowledge that the disposed of waste was hazardous.
Thereafter, following some unrelated motions and orders, on January 10, 2023, the district court entered its final order dismissing the case. The 68th Street Group filed an appeal.
The Appeal: 4th Circuit reverses the District Court
On appeal, the 4th Circuit reversed the district court and found that arranger liability does not require that a person “knew or should have known that the waste for which it arranged disposal was hazardous.” The 4th Circuit rejected Appellees argument that the “text [of CERCLA] requires both the intent to dispose and the specific intent to dispose of a hazardous substance” for a party to have arranger liability. (emphasis added). To the contrary, the 4th Circuit found that the plain meaning of CERCLA is clear that no knowledge is required of the type of waste disposal for a person to be liable as an arranger under 42 U.S.C. §9607(a)(3).
In reaching its conclusion, the 4th Circuit acknowledged the broad meaning and purpose of CERCLA – prompt and effective cleanup of hazardous sites and responsible parties pay. The court reasoned that “[r]equiring knowledge of hazardousness on the part of arrangers would undermine these goals by creating significant evidentiary issues and encouraging protracted litigation because a defendant might avoid all liability if it could create enough doubt about the state of mind of its employees decades earlier.”
The 4th Circuit discussed that CERCLA ordinarily imposes a strict liability scheme with only a few areas in the statute that expressly require knowledge. See United States v. Monsanto Co., 858 F.2d 160, 167 (4th Cir. 1988), see also 42 U.S.C. §9601(35)(A)(i), innocent landowner defense; see also 42 U.S.C. §9607(c)(2)(A) penalties conditioned on a party’s knowledge. Having reviewed the statutory scheme the 4th Circuit noted that had Congress intended to include the knowledge requirement as part of the arranger liability that the arranger “knew or should have known” that the waste was hazardous it would have done so.
Finally, the 4th Circuit set forth the standard to properly plead arranger liability in CERCLA – “a plaintiff must allege that a defendant intended to dispose of waste and that the waste was in fact hazardous.” The Court further noted that a plaintiff “need not allege that a defendant knew its waste was hazardous.” The 4th Circuit concluded that “district court applied an erroneous interpretation of §9607(a)(3)” and vacated the district court order and remanded the matter to the district court to consider the 68th Street Group’s proposed amended complaint.
What this means for CERCLA practice
The 4th Circuit’s decision reaffirms previous interpretations of prosecuting arranger liability claims under CERCLA. The district court’s erroneous conclusion that knowledge of hazardous substance was required in this case had the potential to make often complicated cases to prove even more cumbersome. Despite the 4th Circuit’s clear ruling on the meaning of arranger liability, appellees filed a petition for rehearing en banc on July 10, 2024, which the 4th Circuit denied on July 23, 2024.
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Langsam Stevens Silver & Hollander LLP’s environmental practice group has extensive litigation experience involving CERCLA related claims. For further information or questions on this topic, please contact the article’s author, Amanda Rauer at arauer@lssh-law.com or 215-557-4446.