The course of the Lower Fox River Superfund litigation has been a continual set of surprises, and its denouement was true to that pattern. In his post-trial decision last week, Judge Griesbach wrote the sentence that most CERCLA defendants have been waiting 30 years to hear: “It … seems doubtful that a defendant can ever be found to be an arranger if he did not know the substance in question is hazardous.” For a statute in which liability has always been held to be strict and without fault, a judicial pronouncement that liability hinges on the defendant’s knowledge is nothing short of stunning. However, as has often been the case in the Lower Fox River decisions, the Court’s novel utterances about Superfund issues ultimately give way to traditional holdings.
Notwithstanding the Court’s tantalizing assertion that knowledge of hazardousness should be an element of CERCLA generator liability, the Court’s actual holding is much more pedestrian. Specifically, the trial involved the issue of liability arising from the sale of a usable waste. In an earlier post, I noted that virtually all the usable waste cases followed the basic rule that a party will be held liable if it sells a waste that cannot be used without first causing the release of a hazardous substance. Judge Griesbach followed precisely this rule. He found that the defendant had sold scrap paper which was coated with PCBs to a buyer who recycled that scrap. The Court found that the defendant’s motive was primarily financial in selling the scrap and the buyer’s motive was to get a product it had a strong incentive to recycle into a marketable product. While the recycling process produced wastewater containing PCBs, there was no intrinsic reason why the buyer had to discharge that contaminated wastewater to cause the release of a hazardous substance.
As a result, the Court concluded that the defendant, the seller of the scrap paper, was not liable as an arranger. Although the Court suggested that it reached this result in part because the defendant did not know that its scrap paper was hazardous, the holding is better understood as simply affirming the rule that a seller of usable waste will not be liable when it the usable waste is actually sold and can be used without first causing the release of a hazardous substance.