This entry was authored by MGKF Summer Associate Karina Zakarian

On June 25, the United States Court of Appeals for the Fourth Circuit, in a case of first impression, vacated the United States District Court for the District of Maryland’s holding in 68th Street Site Work Group v. Alban Tractor Company et al., No. 23-1155 (4th Cir. Jun. 25, 2024), that arranger liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) requires a potentially responsible party to have knowledge that the waste it discards is hazardous. Rather, the Fourth Circuit found that the mere intent to dispose of waste suffices to establish liability under CERCLA. According to the Court, imposing scienter on arrangers of waste disposal would contradict both legislative intent and the strict liability scheme governing superfund site remediation.

The appeal reviewed arises from litigation brought by the 68^th Street Site Working Group (the “68^th Street Group”) against a large number of potentially responsible parties who had arranged for disposal of waste at the 68^th Street Dump Superfund Alternative Site. After initiating emergency actions to remediate the landfills, EPA entered into settlement agreements and a consent decree with the 68^th Street Group to continue the cleanup process. The 68^th Street Group then sued 156 non-performing, non-settling entities for contribution under CERCLA. In its Complaint, the 68^th Street Group sought damages and a declaratory judgment stating defendants would be liable for future cleanup expenses. The 68^th Street Group specifically alleged that defendants were arrangers under CERCLA and liable for both generating materials containing hazardous substances and contracting with transporters to dispose of that waste.

Relevant to the Fourth Circuit’s decision, the district court dismissed the 68^th Street Group’s claims against thirty-one of the defendants on the ground that the 68^th Street Group failed to sufficiently plead scienter. Following this determination, the 68^th Street Group unsuccessfully moved to amend its Complaint, the court finding that plaintiff’s failure to allege the defendants knew the waste being disposed of was hazardous fatally impeded its claims. Subsequently, defendants who had already answered the Complaint jointly moved for judgment on the pleadings based on the district court’s denial of the motion to amend, and their motion was granted. On January 10, 2023, the district court entered a final order dismissing the last defendant from the matter, after which the 68^th Street Group appealed to the Fourth Circuit.

Upon evaluating the 68^th Street Group’s appeal, the Fourth Circuit recognized the ambiguity in the statutory phrase “arranged for disposal . . . of hazardous substances.” 42 U.S.C. § 9607(a)(3). While CERCLA’s arranger liability provision could be read to include scienter given the “specific purpose” behind arranging for waste disposal, the Court observed that CERCLA more broadly invokes strict liability. In contrast to provisions such as the innocent landowner defense and penalties for willful misconduct or negligence, the Court noted that Congress refrained from explicitly imposing a scienter requirement for arranger liability. The wide scope underlying section 9607(a)(3) thus ensures parties contributing to environmentally harmful waste disposals engage in effective site remediation and bear accountability.

In coming to its decision, the Fourth Circuit rejected several arguments made by the appellees. First, it refuted the argument that the decision in Burlington Northern & Santa Fe Railway Company v. United States, See Burlington N. Ry. Co. v. United States, 556 U.S. 599 (2009), broadly stated that an intent to dispose of materials known to be hazardous must exist. The Court instead found that the case only stands for the proposition that there must be some intent to dispose of waste. The Court also rejected appellees’ assertion that arranger liability solely applies to entities attempting to contract around CERCLA. The Court reasoned that appellees’ argument was inconsistent with CERCLA’s strict liability regime, and that the statute can impose liability in multiple ways. Lastly, the appellees argued that interpreting CERCLA’s arranger liability provision without a scienter requirement would substantially hinder businesses’ waste disposal efforts. To this argument, the Court explained that Congress, not the courts, decides who assumes arranger liability under CERCLA and that, even if adhering to a strict liability regime unfairly holds parties accountable who lacked knowledge of disposing hazardous waste, Congress designed that standard to serve CERCLA’s “broad remedial goals” and retroactive application to past disposals.

The Fourth Circuit vacated the Order denying the 68^th Street Group’s motion to amend the Complaint and the Order granting the joint motion for judgment on the pleadings, remanding it to the lower court for further proceedings consistent with its opinion, without ruling on other defenses that the appellees had raised to liability.

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