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EFFECTIVE USE OF THE PESTICIDE EXCEPTION TO CERCLA

By Thomas A. Packer and Scott T. Rickman

Originally appeared in the Pesticide Litigation Manual, 1998 ed. reprinted by permission

The most common form of pollution liability, the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601, et seq. (1988), is casting a widening web of liability. Section 107(a) of CERCLA allows a party who has incurred response costs to sue any potentially responsible parties (PRPs) to recover those costs which were necessary and consistent with the National Contingency Plan. 42 U.S.C. § 9607(a). Section 107(a) also provides that an "owner or operator of a ... facility," is a "responsible person" under CERCLA. Section 101(9) of CERCLA defines "facility" broadly so as to include any property which contains "hazardous substances." Section 101(14) of CERCLA defines "hazardous substances" to include a variety of substances, including various pesticides. A farmer, rancher or other applicator of pesticides fits within the definition of "operator" of a facility and consequently can be regarded as a "responsible person" under CERCLA § 107(a).

There are only three express statutory defenses under CERCLA: act of God, act of war or act of an unrelated third party. 42 U.S.C. § 9607(b). However, 42 U.S.C. § 9607(i) provides an exception to the general rule of CERCLA liability for contamination resulting from the application of pesticides registered under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). This provision has been referred as the "farmer's exemption." South Florida Water Management District v. Montalvo, No. 88-8038-CIV-DAVIS 1988 WL 242688 (S.D. Fla. 1988), aff'd, 84 F.3d 402 (11th Cir. 1996). It was intended to prevent the "typical pesticide user" from incurring liability under CERCLA for purchasing and applying pesticides in the customary manner. Jordan v. Southern Wood Piedmont Co., 805 F.Supp. 1575, 1581 (S.D. Ga. 1992). The exemption should also apply to claims against the Superfund (42 U.S.C. §§ 9611 and 9612).

There is little case law or legislative history to offer guidance on the pesticide exception. What legislative history there is, however, illustrates that Congress was aware of the scope of pesticide use and the problem of pesticide contamination. The Congressional Record contains comments such as, "... some contaminants are widespread in the waters of the United States. The pesticides DDT and (PCB) are two such substances." Statement of Senator Stafford, 126 Congressional Record S. 9954-59 (Daily Ed. July 25, 1980). On another occasion, Senator Stafford commented that, "One-third to one-half of the wells in the San Joaquin Valley [the heart of California's agricultural region] (are) contaminated by a pesticide, DBCP." 126 Congressional Record S. 11245-46 (Daily Ed. August 19, 1980). Senator Stafford continued, "Virtually every person in the United States carries body burdens of (numerous chemicals, including) DDT." Id. Given this record, Congress and EPA were aware at the time of enactment of the exception for pesticide application that tens of millions of pounds of pesticides were being applied to cropland and livestock annually.

The very scope of widespread pesticide use and contamination led Congress to make a policy decision to exempt farmers from CERCLA in order to protect the agricultural sector from financial ruin. No doubt lobbying from senators and congress members from agricultural states influenced this policy outcome as well. This explanation is supported by the court's opinion in United States v. Hardage, No. CIV-86-1401-P (W.D. Okl. Nov. 9, 1989), 1989 U.S. Dist. LEXIS 17877 at 12, "The exclusion was designed to protect farmers from liability for release attributable to application of pesticides at their place of use."

Application of the pesticide exception requires a two-part test: (1) was the pesticide at issue registered under FIFRA and (2) did the contamination, "result ... from the application of a pesticide product?"

Since 1947 FIFRA has required registration of all pesticides sold in interstate commerce. Prior to that time, the United States Department of Agriculture had regulatory jurisdiction over pesticides. In 1972 the registration requirement was extended to all pesticides sold in both interstate and intrastate commerce, essentially all commercial pesticides.

The opinions which have applied the exception have not addressed whether the pesticide applied need be registered under FIFRA at the time it was used or at the time the exception is asserted. The relevant opinions involve both pesticides which have been registered during use and pesticides which were registered at the time the exception was asserted.

Given Congress' awareness of the historical use of pesticides and the probability of widespread contamination, the retroactive nature of CERCLA generally, and its failure to include any limiting language in the pesticide exception, one may infer that Congress intended to apply the pesticide exception retroactively and to any pesticide which was or eventually became registered. Since the whole scheme of CERCLA's liability is retrospective and remedial, CERCLA's statutory exceptions to liability should be considered retroactive as well. This reasoning is supported by the decision in U.S. v. Shell Oil, 605 F.Supp. 1064 (D.C. Colo. 1985) where the court held that where Congress has intended a liability provision (and by the same reasoning, an exception to such liability) of CERCLA to have only prospective operation, it has stated so explicitly.

As noted above, the issue of whether the pesticides used were registered under FIFRA may or may not be easily answerable, depending upon when the pesticides were used. Some chemicals, for example DDT, were used prior to the enactment of FIFRA in 1947. Defense counsel should seek the assistance of environmental consultants versed in pesticide registration research if there is an issue as to whether and when a pesticide was registered under FIFRA. Since the United States Department of Agriculture had regulatory authority over pesticides prior to the enactment of FIFRA in 1947 a common sense argument should be made that such a pesticide should be considered "registered" for purposes of the farmers' exception. Furthermore, if the pesticide eventually did become registered, the logical argument would be that the pesticide consequently falls within the farmers' exception. There is no explicit statement in the statutory exemption requiring that the pesticide be registered at the time of its application.

Another issue arises when a pesticide's FIFRA registration is suspended after the time period during which it was applied and allegedly contributed to contamination, resulting in a subsequent CERCLA action. However, the court in U, 875 F.Supp. 1545 (S.D. Ala. 1995), rev'd on other grounds, 94 F.3d 1489 (11th Cir. 1996), held that FIFRA pesticide registration cancellations should not be applied retroactively. The court found that applying them retroactively would improperly impair rights existing before cancellation, increase liability for past conduct or impose new duties with respect to transactions already completed and expressly declined to apply registration cancellation retroactively.

Further testimony at the Congressional hearings dealing with the pesticide exception included comments that, "The prohibition on use of the (cleanup) Fund is a narrow one, covering only those releases which are field applications in accordance with the purposes of the product." 126 Cong. Rec. 5. 11245-46 (Daily Ed. Aug. 19, 1980).

The legal opinions which have addressed the scope of exception have focused on interpretation of the term "application." Defense counsel must strive to portray the pesticide user defendant as the "typical pesticide user" that Congress intended to protect and that the application of the pesticides at issue was the kind which Congress intended to exempt from CERCLA liability. An "application" is, "... the placement of a pesticide at or on the site where the pest control or other responses is desired." Jordan v. Southern Wood Piedmont Co., supra, 805 F.Supp. at 1582. "Application" has been interpreted to also include the "integral acts necessary to apply the pesticide." South Florida Water Management District v. Montalvo, supra, 1988 WL 242688. "Application" also appears to include any use of the pesticide in accordance with manufacturers' instructions. United States v. Morrison-Quirk Grain Corp., 1990 W.L. 482139 (D. Neb. 1990).

However, "application" does not include disposal of pesticides. United States v. Hardage, Case No. CIV-86-1401-P (W.D. Okla. Nov. 9, 1989), 1989 U.S. Dist. LEXIS 17877. Nor does "application" include spills or other activities which would constitute a "release" under CERCLA and which are not an integral part of the application process. 42 U.S.C. section 9601(22) and In re Sun Dance Corp., Inc., 149 Bankruptcy Reporter 641 (E.D. Wa. 1993). A "release" under CERCLA is generally any spilling, leaching, leaking, discharging, disposing, etc. into the environment. 42 U.S.C. § 9601(22). Pesticide "releases" have been found to include such incidents as storage tank explosions and pouring pesticides down rat holes. Morrison-Quirk Grain Corp., supra, 1990 WL 482139.

The court in United States v. Hardage, supra, explained that the pesticide application was "... intended to mean the use of a pesticide in accordance with its purpose." See also, Jordan v. Southern Wood Piedmont Co., supra, 805 F.Supp. 1575, 1581 ("the intent of CERCLA's pesticide exclusion is to prevent the typical pesticide user from incurring CERCLA liability when he has done nothing more than purchased and applied a pesticide in the customary manner." [Citing Hardage] (Note to reader: The citation to Hardage in the Jordan decision is incorrect. Hardage went up and down through the federal courts for years. The citation in Jordan is to another opinion in the Hardage case which did not address the pesticide exclusion. This clerical error occurred between the original Jordan opinion [1992 U.S. Dist. LEXIS 13796] and the subsequently published version. The original (unpublished) opinion in Jordan contains the correct citation to the Hardage decision cited and discussed in this article.)

In South Florida Water Management District v. Montalvo, supra, 1988 WL 242688, the court denied the application of the pesticide exception in a case involving a crop dusting company which contaminated the land around its hanger, supply area and air strip. The actual application of the pesticide was done at farms which were not involved in the case. The court noted that EPA had concluded it did not consider a spill of a pesticide to be either an "application" of a pesticide or in accordance with a pesticide's purpose. The court found that such interpretations are to be accorded great deference. The court also pointed out the admissions that spills occurred and a tank was intentionally emptied under the runway which then led to drain ditches. The court found it could not agree with the defendant's argument that such spills are integral acts necessary to apply the pesticide, rather, the court found that such acts are exactly what CERCLA is aimed at.

In United States v. Hardage, supra, 1989 U.S. Dist. LEXIS 17877, Oklahoma National Stockyards Company sought summary judgment based on CERCLA's pesticide application exclusion. The stockyard had used the pesticide toxaphene in a government controlled program to eradicate the scabies mite from livestock. The waste from the pesticide dipping vat, in which cows were "dipped," or emersed, in this solution, was transported to the contaminated site. Stockyards argued that the statutory pesticide exclusion extended to the disposal of used pesticides since the disposal "results from" the application of toxaphene by stockyards. Stockyards also argued that other language within CERCLA, that is, the "generator" definition contained in 42 U.S.C. at 9607(a)(3) concerning liability of persons who "arranged for disposal," and the definition of "release" contained in 42 U.S.C. at 9601(22) which excludes "the normal application of a fertilizer," showed Congress' intended to exclude liability under CERCLA for releases "resulting from" the application of a pesticide. Stockyards then asserted that disposal of pesticide waste, after the use of a pesticide, was such a release.

The court noted that the word "application" was not defined in CERCLA, but reasoned that when Congress adopted the FIFRA registered pesticide application exclusion in section 107(i), it was presumed to have been aware of regulations implementing FIFRA which defined "application of a pesticide" as follows: The term "application of a pesticide" means the placement for effect of a pesticide at or on the site where the pest control or other response is desired. 40 CFR 162.3(j). The court found that reading the statute as a whole, together with the appropriate regulations, showed clearly that Congress intended that no person be permitted to recover response costs or damages attributable to the actual use of a registered pesticide at its place of use.

The court also found that section 107 of CERCLA, of which the section 107(i) pesticide exclusion is a subpart, established liability for, "(3) any person who by contract, agreement or otherwise arranged for disposal...." The fact that the general liability standard for disposal was omitted from the narrow exemption of section 107(i), the court found, meant that Congress is presumed to have been aware of regulations implementing FIFRA as defined above.

The court further found that an examination of the legislative history strengthened the court's interpretation that the pesticide exclusion is a narrow one. The court noted that the final version of CERCLA's pesticide application exclusion evolved from an early Senate Bill, S. 1480, which originally included three separate exclusions relating to fertilizer and pesticides, all of which were designed to exclude from liability releases due to the normal "field" application of fertilizer or pesticides. See, remarks of Senator Cannon, 126 Cong. Rec. 30984 (Nov. 24, 1980). The court decided that, when read together, these sections made clear that the exclusion was designed to protect farmers from liability for releases attributable to application of pesticides at their place of use. Section 2(b)(16) of Senate Bill 1480 excluded "the normal field application of fertilizer," from the definition of "release," while section 4(k) exempted from liability "removal costs or damages resulting from the field application of a pesticide product...."

Significantly, the court in Hardage found that the committee report on Senate Bill 1480 issued on July 11, 1980 by the Senate Committee on Environment and Public Works, and discussed by Congress, wanted to limit the exclusion under section 4(k) (the pesticide exclusion) to field application only, and not to disposal:

The court also noted that other legislative history further reinforced Congressional intent to have a narrow exemption from liability limited solely to applications to place of use. An example it cited was the American Farm Bureau's opposition to Senate Bill 1480 because it felt the exception was too narrow since it did not apply to transport or storage of pesticides. 126 Cong. Rec. S. 26058 (Sep. 18, 1980). In considering a similar bill in September 1980, the House discussion indicated the pesticide exclusion was designed to apply to "farmers who applied chemicals on their own property." See remarks of Rep. Breaux, 126 Cong. Rec. 26334 (Sep. 19, 1980). While the pesticide exception in Senate Bill 1480 was later changed on the floor of the Senate to remove the word "field," statements made at the time show, "these changes in no way ... alter the original intent of these exclusions reflected in the legislative history accompanying S. 1480 as originally reported." See remarks of Senator Cannon, 126 Cong. Rec. S. 15006 (Nov. 24, 1980).

In United States v. Morrison-Quirk Grain Corp., supra, 1990 WL 482139, Morrison-Quirk owned and operated a grain elevator and grain storage facility and stored liquid grain fumigants, including a product called Max-Kill 10, in a 3,000 to 4,000-gallon tank on top of one of the elevators. Max-Kill 10 contained carbon tetrachloride (CC14) and ethylene dibromide (EDB), among other compounds. Both EDB and CCC14 are highly volatile compounds which are defined as hazardous substances under CERCLA. During the time that Max-Kill 10 was used at the defendant's site, it was also a pesticide product registered under FIFRA.

A grain dust explosion occurred at the site. The United States alleged that the contamination subsequently discovered at the site was a result of the grain dust explosion and not a routine application, while defendant contended otherwise.

Defendant contended that Max-Kill 10 was "applied" to the grain and therefore there was not a "release" of a hazardous substance since there was no leakage, spillage or other release into the environment, other than the application of a registered pesticide which was exempted from liability because of the pesticide exclusion. Defendant further contended that its use of Max-Kill 10 followed manufacturer's instructions as well as regulations and industry practice. It also contended that during the grain dust explosion, the tank containing Max-Kill 10 did not rupture.

However, the court found that testimony indicated the tank was moved by the explosion and the tank did not contain the same amount of grain fumigant as it had previously. If it did not spill, the fumigant apparently went down into the bins in the grain elevator. The court found this was not consistent with an application based on the manufacturer's instructions. The court also noted that there was a "hot spot" at the site which was near both the bin where the fumigant was used but also under the tank where it was stored and could have entered the soil as a result of the explosion.

The court also found that several of defendant's employees indicated that it was a fairly common practice to pour the fumigant down rat holes at the site. Former employees also testified about a stain on the side of the elevator which they believed could have been caused by a spill from the tank on the top and also testified that buckets used to carry the fumigant to rail cars may have been overfilled at times, spilling, but no more than a cup at a time. There was also testimony describing leaks in hoses leading from the fumigant tank and from a portable tank as well as some spillage when filling cans. The court concluded there was adequate evidence to indicate that no question remained as to whether some type of release into the environment occurred at the site, either as a result of the explosion, spilling and leaking or pouring the fumigant in rat holes. The court granted the government's motion for partial summary judgment on the pesticide exclusion defense.

In Jordan v. Southern Wood Piedmont Co., supra, 805 F.Supp. 1575, property owners brought a CERCLA and common law court action against a wood treatment facility's owner and operators and a chemical manufacturer. Dow Chemical, sued as the manufacturing defendant, argued that the pesticide exclusion applied because the pesticide at issue, Penta, a pesticide product used to kill micro-organisms and insects in wood products, was a FIFRA registered pesticide. While Dow evidently argued that pesticides are excluded from CERCLA coverage under all circumstances such that it is a complete defense to a CERCLA claim if the chemicals involved are FIFRA registered pesticides, the court found that this interpretation exaggerated the scope of the pesticide exclusion. The court cited United States v. Hardage, supra, and United States v. Morrison-Quirk Grain Corp., supra, as demonstrating that the intent of CERCLA's pesticide exclusion was to prevent the typical pesticide user from incurring CERCLA liability when he has done nothing more than purchased and applied a pesticide in the customary manner. Although the court granted summary judgment on other grounds, it found that, like the Hardage defendants, Dow had provided no case law or legislative history to support its broad interpretation of section 9607(i).

In United States v. Louisiana Pacific Corp., et al., 1994 U.S. Dist. LEXIS 20636 (E.D. Cal. 1994), an unpublished opinion, it was alleged that defendant released a wood fungicide mixture containing PCP in a spray area and disposed of leftover solution into rock piles and also washed it onto the ground. The court addressed the viability of Louisiana Pacific's assertion of the pesticide exclusion in opposition to motions for summary judgment on CERCLA liability brought by the plaintiffs and Louisiana Pacific's own motion for summary judgment.

Although defendant Louisiana Pacific conceded that there were some leaks from the system, it argued that the leakage was irrelevant because the fungicide labels prohibited only direct application to lakes, streams and ponds and thus by implication permitted incidental releases to the ground accompanying an authorized application. The court noted that it was true that FIFRA only forbids applications of pesticides inconsistent with the label, but found that this prohibition was not at issue in the case. Rather, the question for CERCLA exclusion purposes is whether the release was an application. Since the court concluded that "application" of the pesticide for purposes of the exclusion is limited to the placement of the pesticide where the fungicide was intended to be employed, that is, on the lumber, not in the soil or other areas where the PCP was spilled, the fact that the releases were not in violation of the FIFRA regulated label did not result in freedom of liability by virtue of the pesticide exclusion.

Defendant Louisiana Pacific further argued that the phrase "resulting from the application of the pesticide," should be interpreted to include all releases that EPA reasonably expected would occur from the use of the pesticide by the applicator and that because application of pesticides inevitably involve incidental releases into the environment, such incidental releases should fall within the exclusion. However, the court found that exclusions of liability are construed narrowly. The court acknowledged that the term "application, "upon which the exclusion turns, is undefined in CERCLA. The court went on to state that the standard dictionary definition of "application" was to mean "the act of laying on or of bringing into contact." The court acknowledged that the plain meaning of application suggests that the act of laying on or bringing the PCP in contact with lumber could not give rise to liability, however, the plain meaning did not compel a conclusion that spills incidental to application are also excluded. The court found that the admonition to construe the exclusion narrowly suggested that any unintended contact with the soil is not an application within the meaning of the exclusion.

The court also acknowledged that alternatively, the term "application" as used in connection with pesticides may be viewed as a term of art but that such analysis also leads to the conclusion that incidental releases are not covered by the exclusion. The court examined FIFRA's provisions which make it unlawful, among other things, "to use any registered pesticide in a manner inconsistent with its labeling." 7 U.S.C. section 136j(a)(2), (G). The term "use" encompasses "application of the pesticide." 40 CFR section 170.9(a)(2) (1993). When CERCLA was enacted, FIFRA's implementing regulations defined "application of a pesticide" to mean "the placement for effect of pesticide at or on the site where the pest control or other response is desired." 40 CFR section 162.3(j) (1980). Thus, while placement of the pesticide on lumber is not governed by CERCLA, the common meaning of "application" as a term of art does not compel a construction that incidental spills are protected. The court found that, given the requirement of a narrow reading of the exclusion, it had to be concluded that the incidental spilling is not within the exclusion. The court concluded that, whether viewed as a matter of plain or technical meaning, releases of pesticides incidental to applications excluded under FIFRA are releases outside the exception to CERCLA liability. Plaintiffs' motions for summary judgment on CERCLA liability were granted and Louisiana-Pacific's cross-motion for summary judgment was denied.

Although courts are broadly interpreting the liability provisions of CERCLA, the pesticide use exception from liability has been narrowly construed. Defense counsel asserting the exception must present a well documented case that the pesticide is to be considered a registered chemical under FIFRA and that the contamination at issue resulted from its application. The circumstances of the pesticides application will usually be the decisive factor with defense counsel's biggest challenge being whether or not incidental releases can ultimately be deemed an integral part of the normal use of the pesticide.

Thomas A. Packer is a partner in the firm of Gordon & Rees, with offices in San Francisco, Los Angeles and San Diego. He is a member of the Environmental and Chemical Exposure Committee of the Defense Research Institute, the American Agricultural Law Association, the Northern California Association of Defense Counsel and the California and Oregon Bars. Mr. Packer's practice includes environmental, toxic tort and product liability litigation.

Scott T. Rickman is Associate General Counsel for Del Monte Foods Company in San Francisco.