Federal Court Dismisses Entire Complaint, Including all Federal and State Law Claims, Against Dry Cleaning Equipment Manufacturer

2010 U.S. Dist. LEXIS 23395

On March 12, 2010, the United States District Court for the Eastern District of California in Hinds Investments, L.P. v. Team Enterprises, Inc., 2010 U.S. Dist. LEXIS 23395 (“Hinds”), dismissed a complaint asserting federal and state law claims against Kirrberg/Multimatic, the manufacturers of a dry cleaning machine, citing the “arranger” liability holding in Burlington Northern and Santa Fe Railway Co. v. United States, 129 S. Ct. 1870 (May 4, 2009). In so doing, the Hinds court extended its earlier decision dismissing plaintiffs’ complaint against Cooper Industries, LLC, another dry cleaning equipment manufacturer. (See Hinds Investments, L.P. v. Team Enterprises, Inc., 2010 U.S. Dist. LEXIS 3233 *12-13 (noting that plaintiffs “ignore[d] that inBurlington Northern[], the U.S. Supreme Court held that a pesticide manufacturer was not an arranger despite its knowledge of pesticide spills during transfers and deliveries, and due to equipment failures”).)

In Hinds, plaintiffs first alleged that the defendant equipment manufacturers were liable as arrangers because they manufactured a dry cleaning machine and prepared operating instructions allegedly directing the operator to discharge hazardous substances into the environment, making them responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The court granted the defendant manufacturers’ F.R.Civ.P. 12(b)(6)motion to dismiss after considering Burlington Northern’s explanation that “under the plain language of the statute, an entity may qualify as an arranger under § 9607(a)(3) when it takes intentional steps to dispose of a hazardous substance.” Burlington Northern, supra, U.S. 129 S. Ct., 1879.

The Hinds court rejected plaintiffs’ allegation that because the defendants’ machine’s purpose “was to get rid of PCE,” defendant manufacturers had taken “intentional steps” to dispose of PCE. Plaintiffs alleged that the defendant equipment manufacturers intended that at least a portion of the PCE would be disposed of into the environment during the machine’s operation. Noting that “proof of ownership, or at least possession, of the hazardous substance is required” by CERCLA’s plain language, the court admonished plaintiffs for taking legal precedent out of context and “conveniently ignor[ing] the ownership/possession factor of arranger liability.” Importantly, the Hinds court also noted that plaintiffs’ allegations of “intentional” PCE disposal were negated by the absence of allegations that the equipment manufacturer defendants “installed the…machine, connected it to floor drains, directed waste disposal from the…machine, or inspected the…machine and its waste disposal.” The court also discussed and implicitly adopted the “useful product” defense asserted by the equipment manufacturer defendants, noting that plaintiffs “offer nothing substantial to negate” it.

Based on its analysis, the court dismissed plaintiffs’ CERCLA “arranger” claim and related CERCLA declaratory relief claim, agreeing with the defendant manufacturers’ argument that under Burlington Northern, “knowledge of likely disposal” does not impose arranger liability given that “knowledge alone is insufficient to prove that an entity ‘planned for’ the disposal.”

The court applied a similar analysis to plaintiffs’ RCRA claim and dismissed it as well. The court found that the complaint “fails to establish that [the equipment manufacturers] are subject to RCRA liability as generators.” In particular, the court found that plaintiffs failed to allege in their complaint any “active involvement in handling or storing of [PCE]” by the defendant equipment manufacturers. Instead, the complaint alleged only that defendants engaged in passive conduct limited to manufacture of the dry cleaning machine which others operated. The court also noted that the Ninth Circuit has indicated that it would not hold manufacturers liable as RCRA contributors since it has “refused to hold manufacturers liable as arrangers for selling a useful product containing or generating hazardous substances that later were disposed of,” citing Burlington Northern, 502 F.3d at 808 (italics in original).

The court also dismissed plaintiffs’ claims to recover response costs under the California Hazardous Substance Account Act (“HSAA”), and for related declaratory relief, since those claims were derivative of plaintiffs’ failed CERCLA and RCRA claims. “[T]he absence of valid CERCLA and RCRA claims dooms plaintiffs’ HSAA claims.”

Finally, the court dismissed plaintiffs’ state law claims for nuisance, trespass and comparative equitable indemnity, finding that plaintiffs’ complaint failed to allege facts establishing all of the necessary elements of each claim. Again, the court specifically focused on the fact that the equipment manufacturers took no “affirmative steps” leading to the discharge of any PCE at any of the dry cleaning facilities at issue. Plaintiffs’ allegations that defendants were liable for “manufacturing a system designed to dispose of wastes improperly” or “instructing users of its products to dispose of wastes improperly” were rejected as insufficient by the court. Having dismissed all of plaintiffs’ substantive federal and state law claims against the equipment manufacturers, the Hinds court also dismissed plaintiffs’ claims for state law declaratory relief and for attorneys’ fees under CCP § 1021.5.