On March 20, 2015, in Consolidation Coal v. Georgia Power, the US Court of Appeals for the Fourth Circuit held that an electric utility company was not liable as an "arranger" under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) for hazardous waste cleanup costs resulting from the sale of electrical transformers lined with polychlorinated byphenyls (PCBs) (No. 13-1603, (4th Cir. Mar. 20, 2015)).

In the 1980s, Georgia Power Company, a utility company supplying power to Georgia, sold at auction 101 used electrical transformers to Ward Transformer Company. Some of these transformers held insulating oil containing PCBs, a hazardous substance. Ward was in the business of purchasing used transformers, repairing and reconditioning them for resale.

In the same period, Savannah Electric and Power Company (which later merged with Georgia Power) sold 20 functioning transformers containing PCBs to Electric Equipment Company of New York (EECNY). EECNY shipped the transformers to Ward, who performed some work on the transformers.

Ward resold at a profit all 101 transformers from Georgia Power and all 20 transformers from EECNY as functioning transformers. During the time Ward stored and worked on the transformers, PCBs were discharged, contaminating the site.

In 2005, Duke Energy Progress, Inc. and Consolidated Coal Company entered into an administrative settlement with the EPA to rid the Ward site of PCBs. PCS Phospate Company, Inc. later joined the cleanup efforts. Consol and Progress sued Georgia Power, PCS and other defendants seeking contribution for the remediation costs under CERCLA. PCS counterclaimed, and Consol, Progress and PCS alleged that Georgia Power was liable as an "arranger" under CERCLA.

To establish liability under CERCLA, a plaintiff must show that the defendant is a responsible person (42 U.S.C. § 9607(a)). The arranger category of responsible persons extends liability to any person who arranges for the disposal of a hazardous waste (42 U.S.C. § 9607(a)(3)).

The district court granted summary judgment for Georgia Power, holding that it did not possess the necessary intent to create arranger liability. Consol and PCS appealed.

The Fourth Circuit held that determining whether a party arranged for the disposal of hazardous materials under CERCLA requires a fact-intensive examination. The court analyzed the evidence in terms of the four factors identified by the court in Pneumo Abex Corp. v. High Point, Thomasville and Denton Railroad Co. (142 F.3d 769, 775 (4th Cir. 1998)):

The court then analyzed the facts under the Burlington intent standard, asking whether Georgia Power had knowledge that Ward could spill PCBs. (Burlington N. & Santa Fe Ry. Co. v. United States 556 U.S. 599 (2009).) The court held that since Georgia Power's intent was to sell a valuable product on the open market and it had no knowledge of how Ward processed the transformers, it possessed no knowledge of future PCB disposal once the transformers were acquired by Ward.

Finding no intent to dispose of PCBs supporting an arranger liability argument, the court affirmed the ruling of the district court.

This case demonstrates a growing trend among federal courts to limit the scope of arranger liability under CERCLA (see Legal Update, Fifth Circuit: Arranger Liability under CERCLA Requires Intent to Dispose of Hazardous Materials). This decision specifically reaffirms the difficult and fact-specific nature of proving intent in an arranger liability case. However, companies should take all precautions to limit the risk of future arranger liability when selling a product containing a hazardous substance, such as removing the substance or ensuring that it will not be released during transport.