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Sixth Circuit Overrules "Threshold Of Significance" Defense To CERCLA Liability

December 1, 2000

The United States Court of Appeals for the Sixth Circuit, which has jurisdiction over federal courts in Michigan, recently held that someone who releases even a miniscule amount of hazardous substances is liable in contribution to a private party who remediates a site under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").

In Kalamazoo River Study Group v. Rockwell International, et al., 3 F. Supp. 2d 799 (W.D. Mich. 1998), the United States District Court for the Western District of Michigan granted judgment before trial to defendant Menasha Corporation, even though the evidence showed that Menasha discharged wastewater to the Kalamazoo River that tested positive for PCBs on four occasions (at levels less than 1.0 parts per billion, or "ppb"). The district court held that evidence of PCB discharges at such low levels was insufficient to establish liability under CERCLA, because it did not meet the so-called "threshold of significance" test, under which a few district courts have refused to impose CERCLA liability on contribution defendants whose releases of hazardous substances to a site are so small, in comparison with hazardous substances released by plaintiffs, that the defendant's releases did not realistically "cause" the incurrence of response costs. The district court also dismissed claims against Eaton Corporation based on low levels of PCBs released from Eaton's plants in Marshall and Kalamazoo. Kalamazoo River Study Group ("KRSG"), the contribution plaintiff, appealed the judgments in favor of Menasha and Eaton.

On October 5, 2000, the Sixth Circuit reversed the district court's judgments for Menasha and Eaton, and sent the case back to the district court for further action. The Sixth Circuit held that the district court had applied an improper test to determine liability in a CERCLA contribution action. The court held that the test for determining liability in a contribution action CERCLA is the same as the test for determining liability in a cost recovery action by the United States under CERCLA. In particular, the court held that, for purposes of determining liability, a claimant need not prove that there is any causal connection between a release of hazardous substances and the claimant's incurrence of response costs. Nor does the claimant need to prove that there had been a release of any minimum threshold amount of hazardous substances in order to impose liability. The court went on to say that it is appropriate for a district court to consider whether or not a release from caused the claimant to incur response costs "only in allocating response costs, not in determining liability."

The court went on to review the district judge's evaluation of the evidence relating to Menasha and Eaton. KRSG had presented evidence that, on four occasions, Menasha's effluent to the Kalamazoo River tested positive for low levels of PCBs (less than 1.0 ppb). KRSG also presented evidence that Menasha's finished paper products tested positive for PCBs on two occasions. Menasha presented evidence that the test results for its wastewater discharges were unreliable because laboratory technology available at the time of the test was not able to achieve detection limits below 1.0 ppb. Menasha also argued that any PCBs in its effluent might have been caused by PCBs in its raw intake water. The Sixth Circuit held that the conflicting evidence presented a genuine issue of material fact whether Menasha released any PCBs to the river, so that summary judgment for Menasha was improper.

The Sixth Circuit also reviewed the evidence regarding alleged PCB discharges from Eaton's plants in Kalamazoo and Marshall, and held that it was sufficient to defeat Eaton's motion for judgment before trial. KRSG argued that PCBs were present in the process oils at Eaton's Kalamazoo plant, based on testimony by Eaton's former Director of Environmental Engineering. Eaton did not deny that its process oils were discharged into the Kalamazoo River, but argued that they did not contain PCBs. The district court gave little weight to the testimony of Eaton's former employee because his testimony was based on his general knowledge that many oils used in the automotive industry were recycled and contaminated with PCBs, rather than on direct knowledge concerning the process oils used at Eaton's Kalamazoo plant. The Sixth Circuit held that this testimony, although only circumstantial, was enough to survive a motion for summary judgment. KRSG presented evidence that MDNR had performed a wastewater survey at the Marshall facility that detected PCBs in the effluent from the Marshall facility. The Sixth Circuit held that these test results were direct evidence that Eaton had discharged PCBs into the Kalamazoo River and were sufficient to withstand a motion for summary judgment, even though they were not supported by any other test results.

The Sixth Circuit sent the case back to the district court to hold a new trial and make new determinations of liability for Menasha and Eaton. The Sixth Circuit also stated that "after liability has been determined, the district court may properly consider the causal link between each defendant's waste and the resulting environmental harm, along with other relevant equitable factors, in allocating response costs among the liable parties."

It will now be more difficult for contribution defendants in Michigan and other Sixth Circuit states to extricate themselves from CERCLA litigation based on motions for judgment before trial. A district court may still choose to allocate a zero share to a contribution defendant that did not significantly contribute to the environmental problem, but only in the equitable allocation stage. This means that defendants in contribution actions will probably have to incur more defense costs. This will strengthen the bargaining position of CERCLA contribution plaintiffs.

Kalamazoo River Study Group v. Menasha Corp., 2000 W.L. 1472718 (6th Cir. Oct. 5, 2000).

This article was prepared by Christopher J. Dunsky, a partner in our Environmental Department, and previously appeared in the December, 2000 edition of the Michigan Environmental Compliance Update, a monthly newsletter prepared by the Environmental Department and published by M. Lee Smith Publishers.