1. April 1, 2015 Volume 14 Issue 13
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It All Comes Out in the Wash: PERC Supplier Avoids
“Arranger Liability” in the Fifth Circuit
by Martin H. Alpert, Kim Hollaender, and Anthony Provost
In Vine Street LLC v. Borg Warner Corp., 776 F.3d 312 (5th Cir. Jan. 15, 2015),
the Fifth Circuit Court of Appeals recently held that a supplier of
perchloroethylene (PERC) that also supplied and installed wastewater
separators, knowing that the separators were not completely effective, did not
qualify as an “arranger” under § 9607(a)(3) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (CERCLA). The holding,
decided primarily on the basis of the Supreme Court decision in Burlington
Northern & Santa Fe Railway Co. v. United States, 556 U.S. (2009), reversed and
vacated the district court’s pre-Burlington Northern judgment finding the supplier
liable for 75 percent of cleanup costs. By highlighting the element of intent
required to find a party liable as an “arranger,” Vine Street illustrates the
significant change in the CERCLA liability scheme brought about by Burlington
Northern.
Section 9607(a) of CERCLA identifies potentially responsible persons for
purposes of apportioning liability for response costs associated with the release
(or threatened release) of a hazardous substance. Potentially responsible
persons include facility owners, operators, transporters, and the more amorphous
category of “arrangers.” The arranger category includes any 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) (emphasis
added).
The broad language of this section leads to the question of whether a supplier of
a useful hazardous substance, knowing that at least part of its useful product will
eventually be disposed of, can be found liable as an arranger. Although the
question remains “fact specific,” the Supreme Court decision in Burlington
Northern offered a bright-line rule for distinguishing arrangers from mere
suppliers of useful products based on intent to dispose of substances.
Burlington Northern involved an agricultural chemical distributer that purchased
several chemical products from the Shell Oil Company. The transfer of these
chemicals involved frequent leaks and spills at the distributer’s site. In an effort to
mitigate these known leaks and spills, Shell developed protocols and detailed
safety manuals for distributors. Despite these measures, parties to the cleanup
of the distributer’s site sought to hold Shell liable as an arranger. Interpreting §
9607(a)(3), the Court held that “an entity may qualify as an arranger . . . when it
takes intentional steps to dispose of a hazardous substance.” Burlington N. &
Santa Fe Ry. Co. v. United States, 556 U.S. 599, 611 (2009). Shell, despite its
knowledge of spillage associated with the delivery of its chemicals, was not found
liable as an arranger because “knowledge alone is insufficient to prove that an
entity ‘planned for’ the disposal, particularly when the disposal occurs as a
peripheral result of the legitimate sale of an unused, useful product.” Id. at 612.
Since this decision, district courts have continued to grapple with “arranger
liability,” particularly when the disposal at issue occurs ancillary to the legitimate
sale of a useful product. Vine Street represents the most recent federal appellate
decision addressing the issue.

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decision addressing the issue.
The underlying environmental cleanup in Vine Street arose from the operation of
a dry cleaning business in Tyler, Texas, from 1961 until 1975. Norge, a former
subsidiary of the Borg Warner Corporation, was instrumental in the design of the
dry cleaning operation. Norge supplied and installed dry cleaning machines and
provided an initial supply of PERC, a cleaning chemical common to the industry.
Moreover, Norge designed and connected a drainage system intended to capture
and recycle PERC from the wastewater stream. Although the drainage system
was not completely effective, Norge modified the design over the years of
operation to reduce the loss of PERC; records suggest that the design was
approximately 95 percent effective. Wastewater discharge from the cleaning
operation ultimately escaped from the sewer system, contaminating both the soil
and groundwater of property later acquired by Vine Street, the named plaintiff.
Vine Street participated in voluntary cleanup of the site in conjunction with the
Texas Commission on Environmental Quality, and later it filed suit against Borg
Warner to offset its costs. Vine Street sought to impose liability based on the
statutory authority of both CERCLA and its state-level analog, the Texas Solid
Waste Disposal Act (TSWDA).
Before Burlington Northern, courts in the Fifth Circuit recognized the “useful
product doctrine,” but they also used a “nexus” test to analyze the relationship of
a purported arranger to the disposal of waste. Under the “useful product
doctrine,” a party that merely engaged in the sale of a useful product, not properly
considered to be waste, would not be held liable as an arranger. In cases
involving activity beyond the “mere sale of a useful product,” courts did not
require intent to dispose of waste as a prerequisite to imposing arranger liability.
Instead, courts considered whether “there was a sufficient ‘nexus’ between the
purported arranger and the disposal of waste.” Vine Street v. Borg Warner (5th
Cir. 2015) (citing Geraghty & Miller, Inc. v. Conoco Inc., 234 F.3d 917, 929 (5th
Cir. 2000).
In Vine Street, the Fifth Circuit Court of Appeals rejected the “outdated nexus
standard” in favor of the Burlington Northern standard. Emphasizing the
importance of the intent requirement, the court plainly stated, “we need only
interpret the phrase ‘arranged for disposal . . . of hazardous substances.’ We
focus on the term ‘arrange,’ which implies a scienter requirement, and the term
‘disposal,’ which distinguishes between waste and useful products.” The court
considered both the nature of the chemical involved, PERC, and the business
relationship between Norge and the dry cleaning operation. Regarding the
product, the court found that “PERC was a useful product that was necessary to
[the cleaner’s] operation.” To underscore the useful nature of PERC, the analysis
noted that “[the dry cleaner’s] employees handled PERC with care and . . . Norge
designed its machines to recycle as much of the PERC as possible.”
With regard to the business relationship as a whole, the court found that “the
transaction centered around the successful operation of a dry cleaning business
—not around the disposal of waste.” The business relationship between Norge
and the dry cleaning operation went beyond that of a mere supplier. Norge
developed, supplied, and maintained the wastewater separators used to capture
discharges of PERC from the wastewater. Although these activities alone would
not constitute a disposal of hazardous substances, they are relevant to
establishing liability as an arranger under CERCLA. As stated by the court in
Vine Street:
The district court treated Norge’s subsequent remedial measures as evidence
that Norge did arrange for the disposal of a hazardous substance because the
measures confirmed Norge’s knowledge of the discharges. Following Burlington
Northern, however, it is evident to us that these remedial measures, coupled with
the design of the water separators, generally cut against a finding of intent.
In other words, the same evidence used to show knowledge of a discharge, was
later viewed as evidence showing lack of intent to discharge. Based on these
findings, the court held that Norge “did not intend to discharge PERC under the
standard set out in Burlington Northern,” thus precluding arranger liability. This
conclusion follows from the Burlington Northern holding that arranger liability
requires “intentional steps to dispose of a hazardous substance” and that
“knowledge alone is insufficient.”
The disparate opinions of the district court—held before Burlington Northern, and

3. the Fifth Circuit Court of Appeals—held after, illustrate the difficulty of
distinguishing between knowledge and intent. Arguably, at some point
knowledge, and the reckless disregard of it, gives rise to a finding of intent. In the
context of Vine Street, Norge knew that a hazardous substance would be
disposed. Furthermore, Norge designed, supplied, and installed the system
specifically to control the efficiency of recovery of the hazardous substance. Not
to find intent in these activities would appear, at best, subjective, and at worst, an
artificial exception to protect “legitimate” businesses (i.e., purveyors of “useful
products”).
To understand better the scope of arranger liability after Burlington Northern, it
may be helpful to consider the “arranger liability spectrum,” as termed by the Vine
Street court. On one end of this spectrum, “an entity is always liable under
CERCLA if it enters into a transaction ‘for the sole purpose of discarding a used
and no longer useful hazardous substance. ’” On the other end of the spectrum,
“an entity is [never] liable under CERCLA ‘merely for selling a new and useful
product if the purchaser of that product later, and unbeknownst to the seller,
disposed of the product in a way that led to contamination.’” Applying the facts in
Vine Street, the PERC supplied to the dry cleaning operation was “new and
useful,” so the case initially falls closer to the no liability side of the spectrum.
The nature of the machines and Borg’s knowledge of the disposal of PERC tends
to shift the case toward liability. However, the overarching purpose of the
relationship between Borg and the dry cleaning company focused on the
provision and the attempted retention of a new and useful product—thus
precluding arranger liability.
The Fifth Circuit interpretation of Burlington Northern illustrates a strict application
of the intent requirement needed to show “arranger liability” under CERCLA.
Vine Street and the related body of case law emerging in the wake of Burlington
Northern may provide purported “arrangers” with a valuable line of defense in the
face of an otherwise unforgiving regulatory scheme.
Martin H. Alpert is president and CEO of Environmental and
General Liability Consulting Group, Valencia, California. He
focuses on analyzing environmental, mass tort and insurance
issues. Mr. Alpert is a member of the CPCU Society Diversity
Committee and the 2015 CPCU Society Annual Task Force. He is
a member of DRI.
Kim Hollaender, partner, practicing from Philadelphia, is the chair
of Langsam Stevens Silver & Hollaender LLP’s insurance
defense practice group. His law practice is devoted to handling a
full spectrum of coverage and liability-related matters, including
environmental coverage and liability and mass tort litigation.
Throughout his distinguished career, Mr. Hollaender has
represented and partnered with a broad base of insurance
companies on a wide range of topics. He is a member of the DRI
Toxic Torts and Environmental Law Committee.
Anthony L. Provost is a third-year law student enrolled in the
Drexel University Thomas R. Kline School of Law. As a law clerk
with Langsam Stevens Silver & Hollaender LLP, Mr. Provost
works in the firm’s insurance defense group.
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