David and Marge Berg, former owners of a dry cleaning business in Anchorage, Alaska, sued Maytag, the successor in interest of Norge, the manufacturer of equipment used in the Berg's business under both the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)[1] and the Alaska state law counterpart.[2] The district court granted Maytag's motion to dismiss both claims. The Bergs appealed the court's dismissal of the state law claim to the Ninth Circuit. To determine whether a manufacturer is liable under Alaska law if it manufactured or sold a product that, when installed and used as intended, caused the release of hazardous substances, the Ninth Circuit certified the question to the Alaska Supreme Court. After the Alaska Supreme Court held that the manufacturer of a product can be liable under Alaska law if a discharge of hazardous substances resulted from its intended use, the Ninth Circuit vacated and remanded the district court's dismissal of the state law claim as insufficient to support a claim for arranger liability. Thus, the Ninth Circuit agreed with the logic of the Alaska Supreme Court in holding that the Bergs sufficiently alleged a claim against Maytag for arranger liability under Alaska Stat. § 46.03.822(a)(4). However, the Ninth Circuit affirmed the district court's dismissal of the Bergs' subsequent state law claims for contribution, equitable apportionment, and implied indemnity, and dismissed for lack of standing the Bergs' appeal of the sanctions the district court imposed against their attorney.

The Bergs owned a dry cleaning business in Anchorage, Alaska in the 1970s and early 1980s. The dry cleaning equipment used in the business was purchased from Norge Corporation, for which Maytag is the successor in interest.[3] Norge designed the layout for the Bergs' dry cleaning equipment and recommended that percholoroethylene (PCE) be used as part of the dry cleaning process. Norge installed the dry cleaning equipment at the Berg's business, as well as a water and PCE separator system that caused PCE to spill, leak, and be directed into the city's sewer system. In 1991, highway construction workers discovered PCE in the soil near the site of the Bergs' former business. The state placed a lien on the Bergs' assets to fund decontamination of the site. The Bergs subsequently filed suit against Maytag in Alaska state court, alleging the company was liable for contribution for a portion of the PCE clean-up costs under both CERCLA and Alaska Stat. § 46.03.822(a)(4). Maytag removed the suit to federal district court on the grounds of federal question and diversity jurisdiction. The federal district court granted Maytag's motion to dismiss for failure to state a claim upon which relief could be granted for both the CERCLA and state law claims. It concluded that Maytag was not liable as an arranger under either CERCLA or state law, and granted Maytag judgment on the pleadings regarding the Bergs' remaining state law claims. The Bergs appealed the state law claims, but not the CERCLA claim.

The Ninth Circuit reviewed the district court's dismissal of the state law claims for failure to state a claim upon which relief could be granted and for judgment on the pleadings de novo.[4] The court began its analysis by contrasting the definitions of liability under CERCLA and Alaska Stat. § 46.03.822(a). The Bergs argued on appeal that the district court erred in its interpretation of arranger liability under Alaska law. The Alaska law imposed strict liability for damages and clean-up costs on anyone responsible for the "unpermitted release of a hazardous substance"[5] and authorized liable parties to "seek contribution from any other person who is liable."[6] Because the Bergs were liable for costs related to the PCE clean-up, they were entitled to seek contribution against other responsible parties. In addition to owner and operator liability, the state law imposed liability on anyone who arranged for the disposal of the waste. In the Alaska statute, "arrangers" were defined as "any person who . . . arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by the person, other than domestic sewage, or by any other party or entity, at any facility . . . from which there [was] a release . . . ."[7] In contrast, the CERCLA definition of "arranger" did not contain the disjunctive "or" before the phrase "by any other party or entity."[8] Because the Bergs did not allege Maytag owned or possessed the PCE, Maytag argued it cannot be liable under either CERCLA or Alaska law. Under CERCLA, arranger liability has never been imposed on a party "who never owned or possessed, and never had any authority to control or duty to dispose of, the hazardous materials at issue."[9] However, there is no such controlling precedent determining the scope of "arranged" under Alaska law.

Because the case involved a question of state statutory interpretation that had not yet been addressed by the Alaska courts, the Ninth Circuit certified two questions to the Alaska Supreme Court: 1) Does Alaska law "require that a person own, possess, have 'authority to control,' or 'have a duty to dispose of' the hazardous substance that is released, before that entity can be subject to arranger liability,"[10] as required by CERCLA?; and 2) if the answer to the first question is no, could an entity be subject to arranger liability "if it manufactures, sells, and installs a useful product that, when used as designed, directs a hazardous substance into the city sewer system?"[11]

In addressing the first question, the Alaska Supreme Court noted that while the state law was based on CERCLA, it was not identical. While CERCLA listed four classes of persons potentially responsible for the release of hazardous substances,[12] the state law included an additional category for "the owner of, and the person having control over, the hazardous substance at the time of the release."[13] Unlike CERCLA, the state law differentiated between persons who had ownership or control of a hazardous material and those who arranged for its disposal. Thus, the state law included a broader definition for arranger liability than CERCLA. While the state law required "actual involvement in the decision to dispose of waste" for arranger liability, liability may be incurred through "involvement in deciding how to dispose of waste or in facilitating such disposal."[14] Further, involvement in deciding how to dispose of waste may include "designing, installing, or connecting a system that disposes of waste on behalf of a third party."[15] In its interpretation of "arranger", the Alaska Supreme Court looked to a Texas decision in which a dry cleaning supplier was deemed liable as an arranger under the Texas equivalent of CERCLA because the supplier had "actual involvement" in the waste disposal by specifying how to dispose of hazardous waste.[16] The Alaska court believed the broader "actual involvement" standard of arranger liability applicable under the state law.[17] Thus, under Alaska law, arranger liability applies to "any person who was actually involved in a decision to dispose of, or a decision on how to dispose of, a hazardous substance."[18]

The Alaska Supreme Court next addressed the second question, whether a person could be liable for making, selling, or installing a "useful product" that directs hazardous substances into the environment. The court noted that a manufacturer who does nothing more than sell a "useful product"--even if that product is hazardous--is not liable as an arranger under CERCLA.[19] While this exception shields manufacturers, it had never been invoked to shield a person selling products or services which facilitated the disposal of hazardous materials by another party. Because the equipment at issue was designed specifically to separate out hazardous materials and flush it into the sewer lines, the Alaska court concluded the "useful product exception" did not apply to this case.[20]

Applying the Alaska Supreme Court's interpretation of the state law, the Ninth Circuit concluded the Bergs had asserted sufficient facts to support a claim. Under the "actual involvement" standard established by the Alaska court, the Maytag's alleged recommendation that the Bergs use PCE, its design of the Bergs' dry cleaning system, and its installation of that system and a separator system supported a claim against Maytag for arranger liability under Alaska law.

The Ninth Circuit next addressed the Bergs' state law claims for contribution, equitable apportionment, and implied indemnity independent of their claim under Alaska Stat. § 46.03.822(a)(4). The court held these claims were properly dismissed by the district court. In Alaska, there is a statutory right to contribution.[21] However, the Bergs' contribution claim failed because they did not allege they paid more than their pro rata share of liability to the state. The Bergs' claim for equitable apportionment failed because Alaska law allows parties to mitigate damages through equitable apportionment only against third parties, not in separate actions.[22] The Bergs' claim for indemnity against Maytag failed because the Bergs neither alleged in their complaint that Maytag expressly or impliedly agreed to indemnify them nor did they allege Maytag's liability to the state was extinguished under implied contractual indemnity. Finally, the Ninth Circuit dismissed the Bergs' request that it review the district court's sanctions against the Bergs' attorney because it lacked jurisdiction.

In conclusion, the Ninth Circuit vacated the district court's grant of summary judgment to Maytag on the grounds that the Bergs failed to state a claim upon which relief could be granted. To reach this conclusion, the court certified two questions of state law to the Alaska Supreme Court: 1) Did arranger liability under Alaska law apply to a wider scope of potential parties than CERCLA? and 2) Did this liability extend to manufacturers of products intended to facilitate the disposal of hazardous materials? The Alaska Supreme Court held that arranger liability under the state law was broader in scope than under CERCLA and that manufacturers of products designed to release hazardous substances into municipal sewer systems could be liable as arrangers under the state statute. Applying this standard, the Ninth Circuit vacated and remanded the Alaska Stat. § 46.03.822(a)(4) claim because the Bergs alleged sufficient facts to establish arranger liability. However, the Ninth Circuit affirmed the district court's decision to dismiss the Bergs' other state law claims.