U.S. v. Burlington Northern & Santa Fe Ry. Co.

• Decision Date: 04 September 2007
• Docket Number: No. 03-17153.,No. 03-17169.,No. 03-17125.,03-17125.,03-17153.,03-17169.
• Citation: 502 F.3d 781
• Parties: UNITED STATES of America, Plaintiff, and Department of Toxic Substances Control, State of California, Plaintiff-Appellant, v. BURLINGTON NORTHERN & SANTA FE RAILWAY COMPANY, as successor in interest to the Atchison, Topeka & Santa Fe Railway Company; Union Pacific Transportation Company, as successor in interest to the Southern Pacific Transportation Company; Shell Oil Company, Defendants-Appellees. United States of America, Plaintiff-Appellant, and Department of Toxic Substances Control, State of California, Plaintiff, v. Burlington Northern & Santa Fe Railway Company, as successor in interest to the Atchison, Topeka & Santa Fe Railway Company; Union Pacific Transportation Company, as successor in interest to the Southern Pacific Transportation Company; Shell Oil Company, Defendants-Appellees. United States of America; Department of Toxic Substances Control, State of California, Plaintiffs-Appellees, v. Burlington Northern & Santa Fe Railway Company, as successor in interest to the Atchison, Topeka & Santa Fe Railway Company; Union Pacific Amending Transportation Company, as successor in interest to the Southern Pacific Transportation Company, Defendants, and Shell Oil Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

502 F.3d 781

UNITED STATES of America, Plaintiff, and Department of Toxic Substances Control, State of California, Plaintiff-Appellant, v. BURLINGTON NORTHERN & SANTA FE RAILWAY COMPANY, as successor in interest to the Atchison, Topeka & Santa Fe Railway Company; Union Pacific Transportation Company, as successor in interest to the Southern Pacific Transportation Company; Shell Oil Company, Defendants-Appellees.

United States of America, Plaintiff-Appellant, and Department of Toxic Substances Control, State of California, Plaintiff, v. Burlington Northern & Santa Fe Railway Company, as successor in interest to the Atchison, Topeka & Santa Fe Railway Company; Union Pacific Transportation Company, as successor in interest to the Southern Pacific Transportation Company; Shell Oil Company, Defendants-Appellees.

United States of America; Department of Toxic Substances Control, State of California, Plaintiffs-Appellees, v. Burlington Northern & Santa Fe Railway Company, as successor in interest to the Atchison, Topeka & Santa Fe Railway Company; Union Pacific Amending Transportation Company, as successor in interest to the Southern Pacific Transportation Company, Defendants, and Shell Oil Company, Defendant-Appellant.

No. 03-17125.

No. 03-17153.

No. 03-17169.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 12, 2005.

Submission Withdrawn September 14, 2005.

Resubmitted and Filed March 16, 2007.

Amended September 4, 2007.

Aaron P. Avila, Department of Justice, Washington, DC, argued the case for appellant EPA; Kelly Johnson, Acting Assistant Attorney General, David C. Shilton, James R. MacAyeal, and John T. Stahr, Department of Justice, Environment and Natural Resources Division, Washington, DC, Allyn Stern, Office of Regional Counsel, EPA, were on the briefs for appellant EPA.

Reed Sato, Deputy Attorney General of the State of California, Sacramento, CA, argued the case and was on the briefs for appellant California Department of Toxic Substances Control; Bill Lockyer, Attorney General of the State of California, Tom Greene, Chief Assistant Attorney General, and Theodora P. Berger, Senior Assistant Attorney General, Sacramento, CA, were on the briefs for appellant California Department of Toxic Substances Control.

John F. Barg, San Francisco, CA, argued the case for appellees Burlington Northern & Santa Fe Railway Company and Union Pacific Transportation Company; Marc A. Zeppetello, San Francisco, CA, was on the briefs for the appellees.

Michael K. Johnson, San Francisco, CA, argued the case for appellee-cross-appellant Shell Oil Company; Randall J. Heldt,

Shell Oil Company, Houston, TX, was on the briefs for appellee-cross-appellant Shell.

Appeal from the United States District Court for the Eastern District of California; Oliver W. Wanger, District Judge, Presiding. D.C. Nos. CV-92-05068-OWW, CV-96-06226-OWW, CV-96-06228-OWW.

Before: B. FLETCHER, JOHN R. GIBSON,^* and MARSHA S. BERZON, Circuit Judges.

ORDER

The opinion filed March 16, 2007, slip op. 3209, and published at 479 F.3d 1113 (9th Cir.2007) is hereby amended as follows:

1. Replace State of California> with defendant oil companies> in the second sentence of footnote 30 on page 3250 of the slip opinion, 479 F.3d at 1139

2. In the last paragraph of the opinion, on page 3256 of the slip opinion, 479 F.3d. at 1142, replace with "Dinoseb hot spot."³²>

3. Add the following text as footnote 32: district court found that the "Dinoseb hot spot" was a discrete area contaminated by Dinoseb (a Dow product) as the result of a major spill in 1983, that Shell did not manufacture or ship that product, and that Shell thus bore no responsibility for any part of the $1.3 million cost of cleaning up this discrete spill. The governments did not challenge this finding on appeal. That finding therefore stands, and the district court should not include the $1.3 million dollar cleanup costs for the "Dinoseb hot spot" in the calculation of Shell's liability.>

The petition for rehearing and petition for rehearing en banc remain pending.

OPINION

BERZON, Circuit Judge:

A now-defunct company, Brown & Bryant, Inc. (B & B), owned and operated a facility at which toxic chemicals were stored and distributed. Part of the land on which the chemical operation was located was owned by two railroad companies (the Railroads), and some of the chemicals used by B & B were supplied and delivered to the facility by Shell Oil Company (Shell). Because toxic chemicals remaining at the facility threatened groundwater and may continue to do so in the future, the United States Environmental Protection Agency (EPA) and the State of California's Department of Toxic Substances Control (DTSC) spent a considerable amount of money to clean up the site and may need to spend more in the future. The two agencies sought to recover these response costs under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601, 9675¹ (CERCLA), but the district court held the Railroads and Shell liable for only a minor portion of the total cleanup costs. B & B was defunct by that time, and so could not contribute to the cleanup costs. The agencies were thus left holding the bag for a great deal of money.

Seeking to hold the Railroads and Shell jointly and severally liable for the entire judgment, the agencies appeal. Shell cross-appeals, claiming that it was not an "arranger" under CERCLA, § 9607(a)(3), and therefore is not a party on whom any cleanup liability can be imposed. We reverse the portion of the judgment that declined to impose full joint and several liability on the Railroads and Shell and affirm the portion of the judgment that imposed liability on Shell as an arranger.²

I. Background

Beginning in 1960, B & B operated an agricultural chemical storage and distribution facility in Arvin, California on a 3.8-acre parcel of land (the B & B parcel). In 1975, B & B's agricultural chemical distribution business outgrew that parcel, and B & B began leasing a 0.9-acre parcel of land adjacent to its own parcel. The 0.9-acre parcel (the Railroad parcel) was jointly owned by the Railroads — Atchison, Topeka & Santa Fe Railroad Co., the predecessor in interest to Burlington Northern & Santa Fe Railway Co., and Southern Pacific Transportation Co., the predecessor in interest to Union Pacific Transportation Co. B & B used the Railroad parcel principally to park fertilizer rigs.

The Railroad parcel comprised the western portion of the Arvin site.³ Directly to the east of the Railroad parcel sat B & B's warehouse. The Railroad parcel, like the rest of the Arvin site, was graded toward a drainage pond on the B & B parcel.

B & B used the Railroad parcel as an integral part of its overall agricultural chemical facility. From its facility B & B sold local growers agricultural chemical products produced by various manufacturers. In particular, B & B purchased, received delivery of, stored on the Arvin site, and distributed two Shell-produced agricultural chemicals: the soil fumigants D-D and Nemagon. D-D and Nemagon — members of a class of chemicals called nematocides — are designed to kill nematodes, microscopic worms that attack the roots of crops. Nematocides work by penetrating the soil and then dispersing. B & B also stored on the Arvin site dinitro (dinoseb) weed killer, purchased from Dow Chemical Company.

During the 1960s and 1970s, Shell strongly encouraged its customers, including B & B, to purchase D-D in bulk, a policy requiring customers to maintain large storage tanks. Shell delivered the bulk D-D to B & B "FOB Destination" via common carrier trucks.⁴ When the trucks carrying D-D arrived at the Arvin facility, the contents of the trucks were transferred to B & B's large tanks by hoses. The process was quite messy, with frequent spills.

To apply D-D to growers' fields, B & B used rigs loaded with the chemical. The rigs were stored on the Railroad parcel, as were bulk containers of dinoseb and, occasionally, empty fertilizer cans. Chemicals also reached the Railroad parcel through water flow from the B & B parcel.

In 1978, after a windstorm destroyed the bulk D-D storage tank used to store Shell D-D, B & B began using converted stainless steel milk trailers to store the bulk D-D. The chemical, which is highly corrosive and eats through steel, can cause leakage in steel tanks only a few years old. B & B kept these leak-prone tanks all over the Arvin facility, including on the Railroad parcel.

D-D, when it leaks, evaporates quickly if exposed to air but is highly soluble in water. When D-D infiltrates the ground, it moves through the soil by molecular diffusion, dispersing in all directions. A slight pull from gravity, however, makes the chemical a bit more likely to flow downward into groundwater than laterally through the soil. Dinoseb, similarly, tends to move to the groundwater table if there is water movement in that direction. No toxic chemicals can reach the groundwater level currently used as a source of drinking water because of an impermeable layer of soil. The next highest level, however, is a potential source of drinking water, and contamination can reach that level.

After more than twenty years of leakage and dissemination of hazardous materials, the DTSC in 1983 found B & B in violation of several hazardous waste laws. The EPA investigated separately and found evidence of substantial soil and groundwater contamination at B & B's Arvin facility. The EPA and DTSC (the Governments) began to remedy the contamination pursuant to their cleanup authority under CERCLA, incurring substantial remediation costs. In 1991, the EPA ordered the Railroads to take specific preventative steps on the Railroad parcel, including installing groundwater monitoring wells. None of the contamination requiring immediate remediation was on the Railroad parcel.

In 1992, the Railroads filed an action against B & B and certain of its principals for...