R.R. Street & Co. v. Pilgrim Enterprises

• Decision Date: 10 June 2005
• Docket Number: No. 02-0758.,02-0758.
• Citation: 166 S.W.3d 232
• Parties: R.R. STREET & CO. INC., Petitioner, v. PILGRIM ENTERPRISES, INC., et al., Respondents.
• Court: Texas Supreme Court

166 S.W.3d 232

R.R. STREET & CO. INC., Petitioner, v. PILGRIM ENTERPRISES, INC., et al., Respondents.

No. 02-0758.

Supreme Court of Texas.

Argued January 14, 2004.

Decided June 10, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Nishita S. Shah, Gardere & Wynne, Dallas, amicus curiae Halogenated Solvents Industry.

D. Patrick Long, Patton Boggs LLP, Dallas, amicus curiae International Fabricare Instit.

Brian M. Keller, John B. Thomas and, Laura Rowe, Hicks Thomas & Lilienstern, L.L.P., Houston, Mike A. Hatchell and Molly H. Hatchell, Locke Liddell & Sapp LLP, Austin, for Petitioner.

Jennifer Bruch Hogan and Richard P. Hogan Jr., Hogan & Hogan, L.L.P., Jean C. Frizzell and Laura Hanley Carlock, Gibbs & Burns, L.L.P., David Kent Mestemaker, Gibbs & Burns, Dennis C. Reich, Reich & Binstock, L.L.P., N. Terry Adams and Jeffery T. Nobles, Beirne Maynard & Parsons, L.L.P., Robert E. Morse III, Crain Caton & James, P.C., Michael A. Pohl, Law Offices of Michael A. Pohl, Alice Oliver-Parrott, Barrow & Parrott, L.L.P., Houston, William Powers Jr., The University of Texas School of Law, Austin, for Respondents.

Justice O'NEILL delivered the opinion of the Court.

The owner of several dry-cleaning facilities filed this suit under the Texas Solid Waste Disposal Act ("SWDA") seeking to recover costs that it incurred to remediate environmental contamination. SWDA imposes responsibility for solid waste cleanup costs on persons who "arranged" to dispose of solid waste. In this case of first impression, we must decide the intended scope of "arranger liability" under SWDA, in particular when the alleged arranger was an equipment and chemical supplier who provided waste disposal advice and improperly discarded test-vial waste fluid. We hold that under the circumstances this case presents, the supplier was not an arranger subject to potential liability under SWDA based upon its giving advice regarding waste disposal. We also hold that a fact issue exists as to whether the supplier is potentially liable as an arranger based upon its own disposal of test-vial waste fluid. The court of appeals therefore erred in failing to remand the case for a new trial on the SWDA cause of action, and we reverse the court of appeals' judgment in part and remand to the trial court for further proceedings consistent with this opinion.

I. Background¹

The Robertson family bought Pilgrim Laundry & Cleaners² in 1945, and over a span of five decades Pilgrim operated a chain of dry-cleaning facilities in Houston and San Antonio. Pilgrim used perchloroethylene ("PCE") in its dry-cleaning operations, a chemical solvent commonly used in the industry. In 1994, in the course of selling its assets, Pilgrim conducted a mandatory environmental assessment which revealed that the soil and groundwater at sixteen of Pilgrim's twenty facilities were contaminated with PCE. Pilgrim notified the Texas Natural Resources Conservation Commission ("TNRCC" or "the Commission")³ of the findings and entered into a voluntary cleanup agreement to remediate the sites. The TNRCC approved the remediation and closure plans, and the total cleanup cost to conduct the activities approved under the plans amounted to over $7 million.

Pilgrim purchased PCE and equipment from R.R. Street & Co. Inc., which designed, manufactured, and distributed dry-cleaning equipment and products. For nearly forty years, from 1958 to 1997, Pilgrim's principal contact at Street was Harold Corbin. Corbin had complete access to Pilgrim's facilities, and Pilgrim dealt almost exclusively with him. Among other products, Corbin sold Pilgrim equipment that recycled dirty PCE for reuse. One piece of such equipment, a filter, circulated dirty PCE through cartridge filters, which had to be replaced periodically. Following common industry practice, Pilgrim disposed of the used cartridge filters that had collected PCE by simply discarding them in dumpsters located on the premises. Another piece of equipment Street manufactured and sold to Pilgrim was called a still. Dirty PCE was heated in the bottom of the still until it evaporated and rose to the top along with some water. The soils and unevaporated PCE that remained at the bottom were also discarded by Pilgrim in dumpsters, again pursuant to industry practice at the time. The evaporated PCE was partially separated from the water and reused. Corbin advised Pilgrim to dispose of the remaining PCE-contaminated "separator water" by pouring it down the drain, which Pilgrim did. Corbin also advised Pilgrim to dispose of PCE-contaminated separator water that remained after the clothes-drying process in the same way. In 1985, in accordance with new federal regulations, Pilgrim hired Safety-Kleen, a waste disposal company, to dispose of the PCE waste at proper facilities. In 1991 Pilgrim switched companies and began using AAD for its disposal needs.

On his visits to Pilgrim's facilities, Corbin conducted titration tests to determine the concentration of the plant's detergent. He performed the tests by combining a 1.25-cc sample of PCE, taken from a dry-cleaning machine, with other chemicals. Corbin used the results of these tests to evaluate the plant's level of success in using PCE efficiently and to make any needed suggestions. When finished with the test vial, Corbin testified that he would dump the approximately 40 cc's of waste fluid down the sink or toilet. According to Corbin, he likely did so on thousands of occasions. There was evidence, albeit disputed, that at least some of the facilities' sewage pipes had leaked, creating a potential source of contamination from the test-vial fluid and separator water. There was also evidence that spills of varying amounts occurred "about every week" at the facilities during PCE deliveries from distributors other than Street.

After Pilgrim discovered the contamination and entered into the voluntary cleanup agreement with the TNRCC, Pilgrim sued Street and several other PCE and PCE-equipment manufacturers and distributors. In addition to its SWDA cost-recovery claim, Pilgrim alleged causes of action for negligence, fraud, products liability, breach of fiduciary duty, and DTPA violations. All defendants but Street settled with Pilgrim before trial, and after Pilgrim presented its evidence at trial, the trial court granted a directed verdict for Street on Pilgrim's breach of fiduciary duty claim. After all the evidence was presented, the trial court refused Street's request to submit jury questions regarding Street's arranger liability under SWDA, deciding the questions as a matter of law in Pilgrim's favor and apportioning $1.5 million of the approximately $7 million cleanup costs to Street. The jury decided Pilgrim's remaining claims in Street's favor, and both parties appealed. The court of appeals affirmed the judgment in Street's favor on the common-law and DTPA claims, and as Pilgrim does not complain of that portion of the judgment in this Court, it is not before us. With regard to the SWDA portion of the judgment, the court of appeals is affirmed in part and reversed in part. 81 S.W.3d 276, 306.

The court of appeals held that, while Street was entitled to have a jury resolve fact issues relating to Pilgrim's SWDA claim, id. at 287-88, the trial court did not err in failing to submit the SWDA liability issue to the jury because Pilgrim had established Street's liability as a matter of law. Specifically, the court of appeals held: (1) Street, through Corbin, was a "person responsible for solid waste" under SWDA because it had arranged for the disposal of solid waste by instructing Pilgrim to pour separator water into the sewer and by pouring PCE test-vial mixtures down the sinks and toilets at Pilgrim's facilities, id. at 295-96; (2) Pilgrim's remedial actions were approved by the TNRCC, id. at 299; (3) there was a "release" of a solid waste (PCE) into the environment, id.; (4) Pilgrim's remedial costs were reasonable and necessary, id. at 299-302; and (5) Pilgrim made reasonable attempts to notify Street of the release and Pilgrim's intent to remedy it. Id. at 302-03.

In conjunction with those holdings, the court of appeals rejected Street's argument that the "domestic sewage exclusion" applied to the PCE-mixture Corbin poured into the sewer system. Id. at 296-98. In addition, the court of appeals concluded that causation is not an element of liability under SWDA and therefore Pilgrim did not have to prove that Street's actions caused Pilgrim to incur response costs in order to sustain its cause of action; rather, the court of appeals held, causation is a factor for the trial court to consider in apportioning costs after liability is established. Id. at 298. Finally, because fact issues remained as to the amount of waste attributable to Street and whether Street's actions were causally related to Pilgrim's remedial activities, the court of appeals reversed and remanded only that portion of the judgment awarding Pilgrim damages for the jury to make the requisite factual determinations and for the trial court to apportion costs. Id. at 304-06.

We granted Street's petition for review to consider whether Street was an "arranger" within SWDA's meaning, and other related issues.

II. SWDA

A. Purpose and General Provisions

SWDA, embodied in chapter 361 of the Texas Health and Safety Code, is our state counterpart to two federal environmental statutes: the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901-6992, and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). 42 U.S.C. §§ 9601-9675. While RCRA "is designed primarily to regulate on-going treatment, storage, and disposal of solid and hazardous wastes," B.F. Goodrich Co. v. Murtha, 958 F.2d 1192, 1201 (2d Cir.1992), CERCLA was enacted to facilitate the prompt clean-up of hazardous substances that have already been released into the environment and to ensure that those responsible for the hazardous...