In a one-two punch, the Ninth Circuit Court of Appeals issued two decisions in different cases holding that manufacturers of dry cleaning equipment are not liable for pollution resulting from use of the equipment.   In Team Enterprises, LLC v. Western Investment Real Estate Trust,¹ a CERCLA case discussing the useful product defense,² the court affirmed summary judgment in favor of the defendant manufacturer of dry cleaning equipment.  The Team Enterprises court held that the sale of filtering and recycling equipment for perchloroethylene (PCE) was for a legitimate business purpose, and did not trigger “arranger” liability under Burlington Northern.³   

Less than a week later, the Ninth Circuit in Hinds Investments, L.P. v. Angioli, et al. extended similar protection to manufacturers alleged to have contributed to an imminent and substantial endangerment in a RCRA citizens suit.⁴  The Hinds court affirmed dismissal of the claims against the manufacturer of equipment used by a dry cleaner that processed PCE because RCRA “requires that a defendant be actively involved in or have some degree of control over the waste disposal process to be liable…”.⁵  The Team Enterprises and Hinds decisions, taken together, close the door in the Ninth Circuit to CERCLA and RCRA liability in the absence of a specific intent of the manufacturer to dispose.

The plaintiff in Team Enterprises endeavored to satisfy the “intent to dispose” requirement of Burlington Northern by asserting that intent could be inferred from the design of the PCE recycling equipment to make disposal inevitable.⁶  The court found that there was a possibility that the defendant might pour PCE down the drain, and thereby cause subsurface contamination when PCE leaked from the sewers, but declined to find “that [the defendant] intended the disposal of PCE”⁷….what is required to find arranger liability under §107 of CERCLA.

The plaintiff also argued that intent to dispose could be inferred from the failure of the defendant manufacturer to warn the plaintiff purchaser about the risk of contamination from improper disposal.⁸ The Team Enterprises court was unwilling to find liability because “a mere failure to warn would greatly expand the scope of arranger liability.”⁹ Therefore, the court held that liability could not be found unless “the plaintiff proves that the company entered into the relevant transaction with the specific purpose of disposing of a hazardous substance.”¹⁰

Finally, the plaintiff asserted that the manufacturer exercised control over the disposal process, and therefore was liable under CERCLA.¹¹  This argument, too, was rejected by the court because the mere opportunity to exercise control over disposal was insufficient to trigger liability.¹²  Instead, the defendant must have had an obligation to exercise, and in fact, exercised actual control over disposal in order to be found liable.¹³

The plaintiffs in Hinds took a different approach from those in Team Enterprises: these plaintiffs sought an injunction under the citizen suit provisions of RCRA on the grounds that the manufacturers, by supplying equipment used to process PCE, “contributed to” an imminent and substantial endangerment.   Citing to Webster’s definition of “contribute,” the court declined to expand the scope of RCRA liability to encompass a manufacturer who was alleged, by its design of PCE processing equipment, to have “helped” dispose of waste.¹⁴  The Hinds court referenced the language Congress chose in the statute to impose liability on those who handle, treat, store or dispose of the waste, and not with manufacturers who design equipment that might create waste as a byproduct.  “Designing machinery that has a purpose helpful to society, like the dry cleaning of clothes, even when that machinery may produce waste as a byproduct, does not render the manufacturer as a contributor to waste disposal.”¹⁵ The court stated that RCRA requires a more “active” role with a more direct connection to the waste, such as by handling, treating, storing, or disposing of it.  Therefore, “[w]e hold that to state a claim predicated on RCRA liability for ‘contributing to’ the disposal of hazardous waste, a plaintiff must allege that the defendant had a measure of control over the waste at the time of its disposal or was otherwise actively involved in the waste disposal process.  Mere design of equipment that generated waste, which was then improperly discarded by others, is not sufficient.”¹⁶  

For more information, please contact Kim Burke or any member of Taft’s Environmental Practice Group.