PCS Nitrogen Inc. v. Ashley II of Charleston: Required Reading for Superfund Lawyers

The Fourth Circuit handed down a primer on CERCLA liability last week in PCS Nitrogen Inc. v. Ashley II of Charleston.   It should be required reading for Superfund lawyers.  The facts in the case are worthy of a law school law school exam question on CERCLA – contamination arising from manufacturing of fertilizer beginning in the 19th century with the original corporate operator long since dissolved giving rise to new generations of corporate owners and operators — some of whom knowingly moved contaminated soils around the site.   While the decision does not make new law, it offers a helpful articulation and compendium on a wide range of CERCLA liability issues:

  • distinguishing apportionment from CERCLA allocation on the basis that the former is rooted in causation whereas the latter is determined by equitable factors and noting that the former does not assign any portion of orphan shares whereas the latter does;
  • holding that there can never be a “zero share” apportionment since apportionment was never intended to be a liability defense and would trench upon CERLCA’s actual liability defenses — for third party releases, innocent owners,  and bona fide purchasers;
  • setting forth the standard for successor liability under CERCLA in the 4th Circuit as in most other jurisdictions (which uses the “substantial continuity” test as well as the “mere continuation” test); and
  • reaffirming that CERCLA liability can be based on “secondary disposal” from the relocation of previously contaminated soils.

Finally, the decision illustrates the typical distribution of CERCLA contribution shares based on an equitable factor allocation:  the largest shares going to the parties who succeeded to the liability of the parties that caused the contamination in the first place, the next to largest shares going to the parties that knowingly exacerbated the contamination by secondary disposal or who purchased the site at a large  discount, and the smallest shares  (5% and 3%) going to the current owners of the site who purchased the site with knowledge of the contamination and took some steps, although not all steps, to begin to remediate the contamination.