Cal. Dept. of Toxic Substances v. Alco Pacific

• Decision Date: 28 November 2007
• Docket Number: No. 05-55962.,05-55962.
• Citation: 508 F.3d 930
• Parties: CALIFORNIA DEPARTMENT OF TOXIC SUBSTANCES CONTROL, Plaintiff-Appellant, v. ALCO PACIFIC, INC.; Morris P. Kirk; Davis Wire Corporation; Exide Technologies (GNB); P. Kay Metal Supply, Inc.; Lead Products Company, Inc.; Pasminco, Inc.; Quemetco, Inc.; RSR Corporation; and J.L. Shepherd & Associates, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

508 F.3d 930

CALIFORNIA DEPARTMENT OF TOXIC SUBSTANCES CONTROL, Plaintiff-Appellant, v. ALCO PACIFIC, INC.; Morris P. Kirk; Davis Wire Corporation; Exide Technologies (GNB); P. Kay Metal Supply, Inc.; Lead Products Company, Inc.; Pasminco, Inc.; Quemetco, Inc.; RSR Corporation; and J.L. Shepherd & Associates, Defendants-Appellees.

No. 05-55962.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 15, 2007.

Filed November 28, 2007.

Laurie R. Pearlman, Supervising Deputy Attorney General, Edward H. Ochoa, Deputy Attorney General, Office of the Attorney General, San Diego, CA, for the appellant.

Chris M. Amantea, Brandon J. Roker, Charles E. Weir, McDermott Will & Emery LLP, Los Angeles, CA, Eugene J. Frett, Sperling & Slater, P.C., Chicago, IL, for the appellees.

Appeal from the United States District Court for the Central District of California; S. James Otero, District Judge, Presiding. D.C. No. CV-01-9294 SJO (FMOx).

Before: RAYMOND C. FISHER and RICHARD R. CLIFTON, Circuit Judges, and JEREMY D. FOGEL, District Judge.^*

FOGEL, District Judge:

The California Department of Toxic Substances Control ("the State") brought this cost recovery action under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., seeking cleanup costs arising from the release of hazardous substances at a former lead processing facility ("the site") operated by Alco Pacific, Inc. and Morris P. Kirk (collectively, "Alco"). The State asserts that Defendants RSR Corporation ("RSR"), Quemetco, Inc. ("Quemetco"), Davis Wire Corporation ("Davis"), Pasminco, Inc. ("Pasminco"), and P. Kay Metal Supply, Inc. ("PKM") (collectively "Defendants") sold lead content materials to Alco and thus are subject to "arranger" liability for contamination of the site under CERCLA § 107(a)(3), 42 U.S.C. § 9607(a)(3). The district court granted summary judgment for Defendants after concluding as a matter of law that the subject sales fell within the "useful product doctrine" and thus did not constitute arrangements for disposal or treatment of hazardous wastes under CERCLA. California Department of Toxic Substances Control v. Alco Pacific, Inc., No. CV-01-9294 (C.D.Cal., Feb. 6, 2004). We have jurisdiction over the State's timely appeal under 28 U.S.C. § 1291. We reverse and remand.

BACKGROUND

Alco operated a lead processing facility on the site from approximately 1950 to 1990. During that period Alco refined and reclaimed lead from raw materials acquired from thousands of sources. These materials included lead ingots, automobile batteries, scrap metal, wheel weights, dross and slag.

The latter two materials are particularly important in the context of the instant appeal. "Dross" is the material that rises to the surface of melted metal that is not perfectly pure. Dross typically is skimmed off the molten metal and stored for later use or disposal. Depending on the care taken in skimming, the dross thus removed may contain a significant percentage of the metal itself. "Slag" also results from the separation of impurities from metal during the smelting and refining process. Alco purchased high lead content dross and slag that were by-products of other lead processors' operations. Material was deemed to have high lead content if it contained approximately thirty percent recoverable lead. The price Alco paid for the dross, slag and other raw materials it purchased was based upon an analysis of the lead content of the material and the published market price of lead at the time of the transaction, as measured by the commodities price index quoted in daily newspapers.

After processing the materials supplied by Defendants and others, Alco sold the resulting refined and reclaimed lead in various forms. For example, Alco cast lead sailboat keels and produced sheet metal and lead anodes. Alco also sold lead in the form of ingots or babbitts. Alco disposed of the waste material resulting from its operations—low lead content slag—at a facility authorized to accept hazardous wastes. Alco did not dispose of dross generated during its operations, but rather used the dross again in its smelting process.

Defendants RSR and Quemetco

RSR is the parent corporation of Quemetco. RSR did not sell or transfer any materials to Alco, but it allegedly arranged for the sale of materials to Alco on behalf of Quemetco. Quemetco is a lead smelter that reclaims lead from scrap and lead-acid automobile batteries. Though Quemetco sold several different types of lead content materials to Alco, the parties have focused on sales of lead content slag.

Quemetco generates three types of slag: "first run slag" or "reverb slag," which is produced during the initial processing of scrap through a reverberatory furnace; "second run slag" or "rerun slag," which has been processed a second time; and "inert slag" or "waste slag," which has been processed at least twice and is ready for disposal. On October 25, 1988, Quemetco sold to Alco 47,920 pounds of "rerun antimonial lead slag." On October 31, 1988, Quemetco sold to Alco 49,580 pounds of "rerun antimonial lead slag." Alco paid seven cents per pound on both transactions, resulting in total payments of $3,354.40 on the first purchase and $3,470.60 on the second purchase.

Defendant Davis

Davis¹ operated a wire manufacturing company that used molten lead to treat wire. A by-product of this process was lead content dross that was composed of lead and coke. Between 1978 and 1988, Davis periodically sold lead content dross to Alco at varying prices, depending on the amount of lead contained in the particular shipment. Alco paid Davis at least $110,000 for lead content dross during this period.

Defendant Pasminco

Pasminco operated a zinc smelting facility. Between 1978 and 1983, Pasminco periodically sold lead content dross and other materials to Alco.

Defendant PKM

PKM operates a solder manufacturing facility, reclaiming tin and lead in a manner similar to that used by Alco. PKM reclaims tin, lead and other metals and converts them into solder that it sells to others. PKM sold various materials to Alco, including lead dross, solder dross and antimonial lead dies. The parties have focused on the dross transactions. Between 1982 and 1989, PKM periodically sold lead and solder dross to Alco at varying prices. PKM characterizes these transactions as part of a "conversion" agreement whereby Alco processed the dross to strip it of impurities and then returned the extracted refined metal to PKM. PKM paid a fee for this conversion process.

Contamination of the Site

During Alco's operations, molten lead, slag and other materials, including dust and residue from the materials, occasionally spilled or otherwise were deposited onto the ground at the site. Additionally, solidified lead and slag were stored on the ground at least temporarily. The State determined that surface dust, soils and slag piles at the site were contaminated with lead. It incurred significant cleanup costs at the site and filed the instant action seeking reimbursement from Defendants on the theory that the above-described transactions constituted arrangements for the disposal or treatment of hazardous waste under CERCLA § 107(a)(3), 42 U.S.C. § 9607(a)(3). The State also seeks declaratory relief with respect to any future cleanup costs.

The district court granted summary judgment for Defendants, concluding as a matter of law that Defendants' transactions with Alco were within the scope of the useful product doctrine. The State subsequently reached settlement with the remaining defendants in the case, and the district court entered a final order and consent decree resolving all outstanding issues.

STANDARD OF REVIEW

We review de novo a district court's grant of summary judgment. Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922 (9th Cir.2004). Viewing the evidence in the light most favorable to the non-moving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Id. We may affirm on any ground supported by the record. Id.

DISCUSSION

Under CERCLA, a plaintiff may attempt to recover cleanup costs from four categories of persons, defined at 42 U.S.C. § 9607(a). Only the third category, persons defined as "arrangers," is at issue here:

[A]ny person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport 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 party or entity and containing such hazardous substances. . . .

42 U.S.C. § 9607(a)(3). We recently held that arranger liability encompasses not only transactions in which the central purpose is the disposal of hazardous waste but also "transactions that contemplate disposal as a part of, but not the focus of, the transaction." United States v. Burlington N. & Santa Fe Ry. Co., 479 F.3d 1113, 1139 (9th Cir.2007).

CERCLA itself does not define the terms "disposal" and "treatment," but instead incorporates the definitions of those terms as set forth in the Solid Waste Disposal Act ("SWDA"). See 42 U.S.C. § 9601(29). The SWDA defines "disposal" as:

the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water so that such solid waste or hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.

42 U.S.C. § 6903(3). "Treatment" is defined as:

any method, technique, or process, including neutralization, designed to change the physical, chemical, or biological character or composition of any hazardous waste so as to neutralize such waste or so as to render such waste nonhazardous,...