Environmental & Land Use Briefing - May 2020

ENVIRONMENTAL & LAND USE B R I E F I N G CERCLA itself unhelpfully defines “operator” as “any person … operating such facility.” In its landmark 1998 decision United States v. Bestfoods , the Supreme Court considered what “operator” means in the context of a parent and subsidiary relationship. It held that operator liability extends only to those that “manage, direct, or conduct operations specifically related to pollution.” Twenty-two years later, the Third Circuit doubled down on Bestfoods ’teachings in PPG Industries Inc. v. United States . Like many CERCLA cases, the facts date back to World War II, a time when the United States regulated chromium production and controlled chromium distribution due to chromium’s designation as a critical war material for military use. In 1954, the plaintiff purchased a facility from a former chromium chemical manufacturer, continuing to process chemicals and stockpile large volumes of waste on site until 1965. The plaintiff filed CERCLA cost recovery and contribution claims against the government seeking recovery of the $367 million it has spent to date cleaning up that facility. The plaintiff made two arguments in support of its claims. First it argued that the operator test in Bestfoods did not apply because it involved a parent-subsidiary, not a government contractor. Second, evenif Bestfoods didapply, theplaintiffarguedthat thegovernment shouldbeheldliable as an operator because of its“direction”or“general control”over the chromium chemical facility. A unanimous Third Circuit disagreed. Bestfoods , it held, is not limited to the parent-subsidiary context, and even though the government controlled certain aspects of chromiumdistribution (e.g., pricing, customer priority), the government did not manage, direct, or conduct operations related to pollution. The Third Circuit specifically rejected the plaintiff contention that the government’s directive to increase output of chromium made the government liable as an operator because “more production meant more waste.” Instead, the court found that it was entirely the plaintiff’s predecessor’s decision, not the government’s, to stockpile waste on site. The government’s alleged knowledge of that practice was insufficient for liability to attach; to be liable as an operator, it must actually “manage, direct, or conduct operations specifically related to pollution.” The Third Circuit’s holding offers valuable insight on the scope of operator liability. First, it clarifies that Bestfoods’ standard applies regardless of the parties: parent-subsidiary, government–private industry—the standard is the same. Second, thedecision reinforces that operator liability depends on the relationship between the potentially responsible party and the operations at the facility itself—not the potentially responsible party and the owner of the facility. Critically, an entity does not have to physically operate a facility to be liable as an “operator.” Instead, the key inquiry is whether an operator controls, directs, or manages “operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations.”