Many of the formidable hurdles businesses face when attempting to exonerate themselves from liability under CERCLA were evident in a single case that came before the U.S. Court of Appeals for the 4th Circuit. Multiple businesses that owned or leased parts of a 43-acre site in Charleston, South Carolina, filed suits to either absolve themselves of liability or to contest their portion of the liability for cleanup.  On virtually every count, the arguments by the litigants to absolve themselves of liability were rejected by a U.S. district court.  On appeal, the 4th Circuit affirmed all of the lower court’s rulings.

Fertilizer manufacturing

From 1884 to the early 1900s, seven phosphate fertilizer plants operated in close proximity to the site and provided potential sources for waste that may have been disposed of before 1906.  In 1906, one of the companies in the subject case, under another name, purchased the site and continued to manufacture phosphate fertilizer.

Before the 1930s, the company used pyrite ore as the primary fuel for its sulfuric acid production. The burning of pyrite ore generated a pyrite slag by-product containing high concentrations of arsenic and lead. The company spread the slag by-product to stabilize roads on the site. This accounts for the vast majority of arsenic and lead contamination found on the site today.  Subsequently, many companies occupied, owned, or operated on the site.

Five rulings

The primary district court decisions affirmed by the 4th Circuit include the following:

• A company that was a successor to a company that owned the site is a liable party even though the successor company itself never owned or operated the site.  The successor company argued that the acquisition agreement between the companies did not explicitly transfer all the original owner’s assets and liabilities, including CERCLA liabilities for the site.  The 4th Circuit found that ambiguous language in the transfer agreement did not uphold the successor company’s contention that CERCLA liabilities were not transferred. 
• A company alleged that a second company used earth-moving equipment that redistributed contamination (secondary disposal) and therefore became a liable party under CERCLA.  The second company responded that its accuser had no discrete proof that the earth-moving activities had actually dispersed contaminated soils.  While agreeing that there was no direct evidence, the 4th Circuit stated that CERCLA does not require a “smoking gun,” and CERCLA liability may be inferred from the totality of the circumstances and need not be proven by direct evidence.
• Regarding remediation costs for a part of the property, a leasehold company asserted that it could not be held liable because its leasehold was not part of the remediation conducted by another company.  The 4th Circuit rejected this argument, stating that CERCLA holds parties liable based on whether they occupy a contaminated area regardless of which part of that area was remediated. 
• A company’s attempt to escape liability by claiming CERCLA’s bona fide prospective purchaser (BFPP) exemption was rejected by both courts because the company failed to meet the eight criteria required by CERCLA to earn the BFPP exemption.  For example, the district court found that the company failed to clean out and fill in sumps that should have been capped, filled, or removed when related aboveground structures were demolished and that the company did not monitor and adequately address conditions relating to a debris pile and the limestone run of crusher cover on the site. The court concluded, and the 4th Circuit affirmed, that these inactions established that the company did not meet the BFPP criteria.
• A company appealed to the 4th Circuit to reverse the district court’s decision that the company had failed to provide technical evidence that supported its contention that it was responsible for a lower percentage of the contamination than the district court assigned.  The 4th Circuit affirmed that the company’s technical analysis was flawed because it did not account for secondary disposal. 

Ultimately, the 4th Circuit upheld the district court’s percentages of liability, ranging from 1 percent to 45 percent, assigned to the six companies. 

Click here for the 4th Circuit’s opinion in PCS Nitrogen Inc. v. Ashley II of Charleston .