California Department of Toxic v. Alco Pacific, Inc. ( 2007 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CALIFORNIA DEPARTMENT OF TOXIC 
SUBSTANCES CONTROL,
Plaintiff-Appellant,
v.
No. 05-55962
ALCO PACIFIC, INC.; MORRIS P.
D.C. No.
KIRK; DAVIS WIRE CORPORATION;
EXIDE TECHNOLOGIES (GNB); P.  CV-01-9294 SJO
KAY METAL SUPPLY, INC.; LEAD (FMOx)
PRODUCTS COMPANY, INC.; OPINION
PASMINCO, INC.; QUEMETCO, INC.;
RSR CORPORATION; and J.L.
SHEPHERD & ASSOCIATES,
Defendants-Appellees.

Appeal from the United States District Court
for the Central District of California
S. James Otero, District Judge, Presiding
Argued and Submitted
May 15, 2007—Pasadena, California
Filed November 28, 2007
Before: Raymond C. Fisher and Richard R. Clifton,
Circuit Judges, and Jeremy D. Fogel, District Judge.*
Opinion by Judge Fogel
*The Honorable Jeremy Fogel, United States District Judge for the
Northern District of California, sitting by designation.
15257
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15259
COUNSEL
Laurie R. Pearlman, Supervising Deputy Attorney General,
Edward H. Ochoa, Deputy Attorney General, Office of the
Attorney General, San Diego, California, for the appellant.
15260 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
Chris M. Amantea, Brandon J. Roker, Charles E. Weir,
McDermott Will & Emery LLP, Los Angeles, California,
Eugene J. Frett, Sperling & Slater, P.C., Chicago, Illinois, for
the appellees.
OPINION
FOGEL, District Judge:
The California Department of Toxic Substances Control
(“the State”) brought this cost recovery action under the Com-
prehensive Environmental Response, Compensation and Lia-
bility Act (“CERCLA”), 42 U.S.C. §§ 9601 et seq., seeking
cleanup costs arising from the release of hazardous substances
at a former lead processing facility (“the site”) operated by
Alco Pacific, Inc. and Morris P. Kirk (collectively, “Alco”).
The State asserts that Defendants RSR Corporation (“RSR”),
Quemetco, Inc. (“Quemetco”), Davis Wire Corporation
(“Davis”), Pasminco, Inc. (“Pasminco”), and P. Kay Metal
Supply, Inc. (“PKM”) (collectively “Defendants”) sold lead
content materials to Alco and thus are subject to “arranger”
liability for contamination of the site under CERCLA
§ 107(a)(3), 42 U.S.C. § 9607(a)(3). The district court granted
summary judgment for Defendants after concluding as a mat-
ter of law that the subject sales fell within the “useful product
doctrine” and thus did not constitute arrangements for dis-
posal or treatment of hazardous wastes under CERCLA. Cali-
fornia Department of Toxic Substances Control v. Alco
Pacific, Inc., No. CV-01-9294 (C.D. Cal., Feb. 6, 2004). We
have jurisdiction over the State’s timely appeal under 28
U.S.C. § 1291. We reverse and remand.
BACKGROUND
Alco operated a lead processing facility on the site from
approximately 1950 to 1990. During that period Alco refined
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15261
and reclaimed lead from raw materials acquired from thou-
sands of sources. These materials included lead ingots, auto-
mobile batteries, scrap metal, wheel weights, dross and slag.
The latter two materials are particularly important in the
context of the instant appeal. “Dross” is the material that rises
to the surface of melted metal that is not perfectly pure. Dross
typically is skimmed off the molten metal and stored for later
use or disposal. Depending on the care taken in skimming, the
dross thus removed may contain a significant percentage of
the metal itself. “Slag” also results from the separation of
impurities from metal during the smelting and refining pro-
cess. Alco purchased high lead content dross and slag that
were by-products of other lead processors’ operations. Mate-
rial was deemed to have high lead content if it contained
approximately thirty percent recoverable lead. The price Alco
paid for the dross, slag and other raw materials it purchased
was based upon an analysis of the lead content of the material
and the published market price of lead at the time of the trans-
action, as measured by the commodities price index quoted in
daily newspapers.
After processing the materials supplied by Defendants and
others, Alco sold the resulting refined and reclaimed lead in
various forms. For example, Alco cast lead sailboat keels and
produced sheet metal and lead anodes. Alco also sold lead in
the form of ingots or babbitts. Alco disposed of the waste
material resulting from its operations—low lead content slag
—at a facility authorized to accept hazardous wastes. Alco did
not dispose of dross generated during its operations, but rather
used the dross again in its smelting process.
Defendants RSR and Quemetco
RSR is the parent corporation of Quemetco. RSR did not
sell or transfer any materials to Alco, but it allegedly arranged
for the sale of materials to Alco on behalf of Quemetco. Que-
metco is a lead smelter that reclaims lead from scrap and lead-
15262 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
acid automobile batteries. Though Quemetco sold several dif-
ferent types of lead content materials to Alco, the parties have
focused on sales of lead content slag.
Quemetco generates three types of slag: “first run slag” or
“reverb slag,” which is produced during the initial processing
of scrap through a reverberatory furnace; “second run slag” or
“rerun slag,” which has been processed a second time; and
“inert slag” or “waste slag,” which has been processed at least
twice and is ready for disposal. On October 25, 1988, Que-
metco sold to Alco 47,920 pounds of “rerun antimonial lead
slag.” On October 31, 1988, Quemetco sold to Alco 49,580
pounds of “rerun antimonial lead slag.” Alco paid seven cents
per pound on both transactions, resulting in total payments of
$3,354.40 on the first purchase and $3,470.60 on the second
purchase.
Defendant Davis
Davis1 operated a wire manufacturing company that used
molten lead to treat wire. A by-product of this process was
lead content dross that was composed of lead and coke.
Between 1978 and 1988, Davis periodically sold lead content
dross to Alco at varying prices, depending on the amount of
lead contained in the particular shipment. Alco paid Davis at
least $110,000 for lead content dross during this period.
Defendant Pasminco
Pasminco operated a zinc smelting facility. Between 1978
and 1983, Pasminco periodically sold lead content dross and
other materials to Alco.
1
Prior to its bankruptcy, Davis Wire Corporation was known as Davis
Walker Corporation. Davis Wire Corporation sought summary judgment
in this action on bankruptcy grounds, but the district court denied that
motion, and Davis Wire Corporation voluntarily dismissed its appeal of
that ruling. Davis Wire Corporation and Davis Walker Corporation are
referred to collectively herein as “Davis.”
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15263
Defendant PKM
PKM operates a solder manufacturing facility, reclaiming
tin and lead in a manner similar to that used by Alco. PKM
reclaims tin, lead and other metals and converts them into sol-
der that it sells to others. PKM sold various materials to Alco,
including lead dross, solder dross and antimonial lead dies.
The parties have focused on the dross transactions. Between
1982 and 1989, PKM periodically sold lead and solder dross
to Alco at varying prices. PKM characterizes these transac-
tions as part of a “conversion” agreement whereby Alco pro-
cessed the dross to strip it of impurities and then returned the
extracted refined metal to PKM. PKM paid a fee for this con-
version process.
Contamination of the Site
During Alco’s operations, molten lead, slag and other mate-
rials, including dust and residue from the materials, occasion-
ally spilled or otherwise were deposited onto the ground at the
site. Additionally, solidified lead and slag were stored on the
ground at least temporarily. The State determined that surface
dust, soils and slag piles at the site were contaminated with
lead. It incurred significant cleanup costs at the site and filed
the instant action seeking reimbursement from Defendants on
the theory that the above-described transactions constituted
arrangements for the disposal or treatment of hazardous waste
under CERCLA § 107(a)(3), 42 U.S.C. § 9607(a)(3). The
State also seeks declaratory relief with respect to any future
cleanup costs.
The district court granted summary judgment for Defen-
dants, concluding as a matter of law that Defendants’ transac-
tions with Alco were within the scope of the useful product
doctrine. The State subsequently reached settlement with the
remaining defendants in the case, and the district court
entered a final order and consent decree resolving all out-
standing issues.
15264 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
STANDARD OF REVIEW
We review de novo a district court’s grant of summary
judgment. Olsen v. Idaho State Bd. of Med., 363 F.3d 916,
922 (9th Cir. 2004). Viewing the evidence in the light most
favorable to the non-moving party, we must determine
whether there are any genuine issues of material fact and
whether the district court correctly applied the relevant sub-
stantive law. Id. We may affirm on any ground supported by
the record. Id.DISCUSSION
[1] Under CERCLA, a plaintiff may attempt to recover
cleanup costs from four categories of persons, defined at 42
U.S.C. § 9607(a). Only the third category, persons defined as
“arrangers,” is at issue here:
[A]ny person who by contract, agreement, or other-
wise arranged for disposal or treatment, or arranged
with a transporter for transport for disposal or treat-
ment, of hazardous substances owned or possessed
by such person, by any other party or entity, at any
facility or incineration vessel owned or operated by
another party or entity and containing such hazard-
ous substances . . . .
42 U.S.C. § 9607(a)(3). We recently held that arranger liabil-
ity encompasses not only transactions in which the central
purpose is the disposal of hazardous waste but also “transac-
tions that contemplate disposal as a part of, but not the focus
of, the transaction.” United States v. Burlington N. & Santa
Fe Ry. Co., 479 F.3d 1113, 1139 (9th Cir. 2007).
CERCLA itself does not define the terms “disposal” and
“treatment,” but instead incorporates the definitions of those
terms as set forth in the Solid Waste Disposal Act (“SWDA”).
See 42 U.S.C. § 9601(29). The SWDA defines “disposal” as:
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15265
the discharge, deposit, injection, dumping, spilling,
leaking, or placing of any solid waste or hazardous
waste into or on any land or water so that such solid
waste or hazardous waste or any constituent thereof
may enter the environment or be emitted into the air
or discharged into any waters, including ground
waters.
42 U.S.C. § 6903(3). “Treatment” is defined as:
any method, technique, or process, including neutral-
ization, designed to change the physical, chemical,
or biological character or composition of any hazard-
ous waste so as to neutralize such waste or so as to
render such waste nonhazardous, safer for transport,
amenable for recovery, amenable for storage, or
reduced in volume.
42 U.S.C. § 6903(34).
[2] We have held that these definitions necessarily impli-
cate the concept of “waste,” and have developed a body of
case law distinguishing between the disposal or treatment of
“waste” and the sale of a “useful product.” See, e.g., Burling-
ton, 479 F.3d at 1140-41; A & W Smelter & Refiners, Inc. v.
Clinton, 146 F.3d 1107, 1112 (9th Cir. 1998); Catellus Dev.
Corp. v. United States, 34 F.3d 748, 750 (9th Cir. 1994). A
person may be held liable as an “arranger” under § 9607(a)(3)
only if the material in question constitutes “waste” rather than
a “useful product.” A & W Smelter, 146 F.3d at 1112; Catel-
lus, 34 F.3d at 750. Application of this distinction has been
referred to as the “useful product doctrine.”
Because the doctrine has developed piecemeal through case
law, its contours are not entirely clear. In Louisiana-Pacific
Corp. v. ASARCO, Inc., 24 F.3d 1565 (9th Cir. 1994), one of
our early cases touching on the useful product doctrine, the
relevant issue was whether a copper smelter’s sale of slag to
15266 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
logyards via a middleman gave rise to liability under CER-
CLA. The logyards used the slag like gravel, spreading it on
the ground to provide a firmer surface to aid in the storage of
logs and operation of heavy equipment. Id. at 1570-71. When
the slag became mixed with wood waste and other debris, the
logyards hauled it to a landfill and put down a new load of
slag. Id. at 1571, 1575. The logyards and landfill eventually
became contaminated with heavy metals from the slag, and
the smelter, ASARCO, was held liable under CERCLA. Id.On appeal, we did not refer explicitly to the useful product
doctrine, but phrased the question before us as “whether the
sale of slag to the logyards can simultaneously be both the
sale of a product with intrinsic value in trade or commerce
under Washington law, and the disposal of a hazardous sub-
stance under CERCLA.” Id. at 1574. We answered this ques-
tion in the affirmative, concluding that slag was a by-product
of ASARCO’s principal business—copper smelting—and that
the slag had only nominal commercial value in that the log-
ging companies paid only $3.50 per ton. Id. at 1575. Prior to
attempting to develop a market for its slag, ASARCO had
dumped the slag into a nearby bay with the permission of the
local park district. Id. We distinguished other cases in which
the sale of products was not considered disposal of hazardous
waste on the ground that those cases involved “the producers’
principal business products, not by-products that the produc-
ers had to get rid of.” Id. at 1575 n.6. Under the circum-
stances, ASARCO could be held liable as an arranger for
contamination caused by the slag ultimately sold to logyards.
Id. at 1575.
In Catellus Dev. Corp. v. United States, 34 F.3d 748 (9th
Cir. 1994), the defendant auto parts dealer, General, accepted
used automotive batteries from customers as trade-ins. Id. at
749. General in turn sold the batteries to a battery cracking
plant that extracted and smelted the lead and dumped the bat-
tery casings. Id. at 749-50. Tons of crushed battery casings
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15267
ended up on the property of the plaintiff, Catellus, and con-
taminated it with lead. Id. at 750.
We declined to read ASARCO as announcing a broad rule
that any sale of a nonprincipal business product or by-product
necessarily is an arrangement for disposal or treatment under
§ 107(a)(3). Catellus, 34 F.3d at 751. ASARCO was limited to
“the situation where the by-product being sold will have to
continue to be used in its identical state until it is disposed
of.” Id. However, given the battery recycling procedure at
issue, “[a]n inescapable fact is that the leftover battery casings
must be disposed of.” Id. at 752. The battery casings had to
be “gotten rid of” either by General, which could have
cracked the casings itself before selling the scrap lead, or by
the purchaser who bought the entire battery. Id. We concluded
that “General cannot escape having the battery casings
defined as discarded material simply by selling the battery to
another party who then disposed of the casings.” Id.We expressly rejected General’s argument that it could not
be held liable as an arranger under CERCLA because it did
not control the eventual disposition of the batteries’ remnants.
Catellus, 34 F.3d at 752. “Requiring continued ownership or
control for section 107(a)(3) liability would make it too easy
for a party, wishing to dispose of a hazardous substance, to
escape by a sale its responsibility to see that the substance is
safely disposed of.” Id. It is sufficient that the substance has
“the characteristic of waste” at the time it is delivered to
another party. Id. We likewise held that there is no require-
ment in treatment cases that there be a contract specifying
how treatment will take place, stating that, “[a]s with our
interpretation of the arrangement for disposal provision, all
that is necessary is that the treatment be inherent in the partic-
ular arrangement, even though the arranger does not retain
control over its details.” Id. at 753.
In Cadillac Fairview/California, Inc. v. United States, 41
F.3d 562 (9th Cir. 1994), we addressed the appropriate char-
15268 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
acterization of a series of transactions between manufacturers
of synthetic rubber and Dow, a supplier of styrene used in
rubber production. The rubber companies purchased styrene
from Dow, but could convert only sixty to seventy percent of
that styrene into rubber. Id. at 564. The unconverted styrene
contained contaminants from the rubber manufacturing pro-
cess, so the rubber companies sent the contaminated styrene
to Dow for re-distillation. Id. Dow cleaned the styrene of con-
taminants, which were deposited in pits near the styrene plant,
and returned the recovered styrene to the rubber companies
for use in rubber manufacturing. Id. Dow charged the rubber
companies nine cents a pound for styrene and credited them
seven cents a pound for contaminated styrene returned to
Dow for re-distillation. Id. When it was sued for contamina-
tion caused by styrene and other hazardous substances at the
site of its operations, Dow sought contribution from the rub-
ber companies as arrangers under section 107(a)(3) of CER-
CLA. Id.Citing ASARCO and Catellus, we held that it was not dis-
positive that the rubber companies did not own the contami-
nated styrene during the re-distillation process and did not
control the re-distillation process that resulted in the release
of contaminants. Id. at 565. We likewise held that it was not
dispositive that the transactions in question were character-
ized as sales. Id. at 566. Noting that the question on summary
judgment is, “whether the fact-finder could infer from all the
circumstances that a transaction in fact involves an arrange-
ment for the disposal or treatment of a hazardous substance,”
id. at 565 (internal quotation marks, alterations, and citations
omitted), we concluded that, “[a] trier of fact could find the
substance of the transactions to have been that the rubber
companies paid Dow two cents per pound to remove the con-
taminants from the used styrene and return the fresh styrene
to them—that they simply arranged and paid for treatment of
the contaminated styrene by Dow.” Id. at 566. We found that,
“[r]emoval and release of the hazardous substances was not
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15269
only the inevitable consequence, but the very purpose of the
return of the contaminated styrene to Dow.” Id.In A & W Smelter & Refiners, Inc. v. Clinton, 146 F.3d
1107 (9th Cir. 1998), the United States Environmental Protec-
tion Agency (“EPA”) ordered A & W to dispose of an ore pile
at its smelting facility because the pile contained quantities of
naturally occurring lead and slag. A & W complied and filed
a complaint seeking reimbursement of its compliance costs
under CERCLA. Id. at 1109. The district court granted sum-
mary judgment for the EPA and its co-defendants. We
reversed and remanded on the ground that there were triable
issues of material fact as to whether the ore pile constituted
“waste” or a “useful product.” Id. at 1113. Although the dis-
trict court had been persuaded that the pile could not be a use-
ful product because it was unusable in its current state, we
noted that “raw materials, by definition, can’t be used in their
current state” but rather “must be refined—a process which
separates the useful portion from the waste.” Id. at 1112. The
pile was waste only if the ore was mixed with so much slag
that it was no longer useable for A & W’s principal business.2
Id. at 1113. Whether this was the case could not be answered
on the existing record, but required consideration of other rel-
evant evidence regarding A & W’s actions and the market
value of the ore pile, if any. Id.We recently commented at length on arranger liability and
the useful product doctrine in United States v. Burlington N.
& Santa Fe Ry. Co., 479 F.3d 1113 (9th Cir. 2007). In that
case, Brown & Bryant, Inc. (“B & B”), operated an agricul-
tural chemical storage and distribution facility. Id. at 1121. As
2
Indeed, A & W Smelter recognized that A & W’s contract to have
another company process the ore “suggests the material was a useful prod-
uct,” even though “[s]melting unprocessed ore was A & W’s business”
and such a contract was necessary because the ore did not contain enough
precious metal to “justify smelting by A & W’s methods.” A & W Smelter,
146 F.3d at 1109, 1113.
15270 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
part of its business, B & B purchased, stored and distributed
chemicals manufactured by Shell. Id. at 1122. The chemicals
were shipped to B & B in common carrier trucks and trans-
ferred to large storage tanks by hoses. Id. The transfer process
was messy, with frequent spills. Id. Moreover, the chemicals
were corrosive and caused leakage in storage tanks only a few
years old. Id. Federal and state agencies ultimately found con-
tamination on the B & B site. Id. at 1123. Following a bench
trial, the district court held Shell partially responsible for
cleanup costs as an arranger under CERCLA. Id. We affirmed
Shell’s arranger liability on appeal. Id. at 1142.
[3] In discussing the necessity of adopting an expansive
view of arranger liability in light of CERCLA’s goals, we
observed that even “[a]rranging for a transaction in which
there necessarily would be leakage or some other form of dis-
posal of hazardous substances is sufficient” to impose
arranger liability. Id. at 1140-41. While acknowledging that
we have “refused to hold manufacturers liable as arrangers for
selling a useful product containing or generating hazardous
substances that later were disposed of,” we held that “[t]he
useful product cases have no applicability where, as here, the
sale of a useful product necessarily and immediately results in
the leakage of hazardous substances.” Id. We concluded that,
“[i]n that circumstance, the leaked portions of the hazardous
substances are never used for their intended purpose.” Id.Because leakage of the Shell chemicals was inherent in the
transfer process arranged by Shell and contemporaneous with
that process, the useful product doctrine was inapplicable. Id.We emphasized that, “Shell’s liability derives not from its
role as a manufacturer of a useful product but rather from its
role in leakage prior to use.” Id. at 1140 n.31. Shell owned the
chemicals at the time the sale was entered into, and had suffi-
cient control over and knowledge of the transfer process to be
considered an “arranger” under CERCLA. Id. at 1142.
In the instant case, the district court attempted to synthesize
our holdings into a cohesive approach to arranger liability and
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15271
the useful product doctrine. Relying primarily upon ASARCO
and A & W Smelter, the district court crafted a three factor
test, and used it to conclude that all of the ingots and other
high quality lead sold to Alco fall within the useful product
doctrine. The court noted that the slag and dross sold to Alco
present a more difficult case. However, the court was per-
suaded that these materials also fall within the useful product
doctrine because Alco paid prices that were tied to the pre-
vailing commodity price of lead and the lead content in the
particular dross or slag, and because Alco purchased the dross
and slag as raw materials for its smelting business in lieu of
purchasing virgin ore. The court found that although dross
and slag were by-products of Defendants’ businesses, on the
record before it dross and slag could not be characterized as
worthless waste that needed to be disposed of but rather were
valuable commodities.
[4] While at this juncture we refrain from expressly adopt-
ing or crafting a concrete test for this fact-intensive inquiry,
we agree that the factors upon which the district court relied,
including (1) “the ‘commercial reality’ and value of the prod-
uct in question”; (2) “a factual inquiry into the actions of the
seller in order to determine the intent underlying the transac-
tion”; and (3) “whether the material in question was a princi-
pal product or by-product of the seller,” are among the factors
appropriate to consider in determining “whether in light of all
the circumstances the transaction involved an arrangement for
disposal or treatment of a hazardous waste.” Cadillac Fair-
view, 41 F.3d at 566. However, because a reasonable finder
of fact could infer from the evidence in the record that this
question should be answered in the affirmative, we conclude
that the district court misapplied the factors in granting sum-
mary judgment for Defendants.
The first factor—the “commercial reality” of the
transaction—most strongly supports the district court’s grant
of summary judgment, particularly in light of the undisputed
fact that the prices at which the dross and slag were sold were
15272 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
linked to the market price of lead. The district court correctly
found that the link between the commodities market price of
lead and the price paid by Alco for the Defendants’ dross and
slag supported their claim that they were selling a useful prod-
uct, not disposing of waste. It is not particularly significant
that Defendants received only a fraction of the market price:
the dross and slag themselves contained only a fraction of
lead, and clearly Alco would have to expend further resources
in order to extract whatever portion of that fraction it could
ultimately successfully reclaim. Nor does it matter that the
prices at which the dross and slag were sold were “low” in
some absolute sense. A product does not become waste sim-
ply because it is inexpensive. Rather, it is the de-linking of the
price of a substance from the market value of whatever might
feasibly be extracted from it that supports a conclusion that a
price is nominal and a sale only a disguised disposal. There
is no conclusive evidence in the record of such de-linking.
Price, however, is only one indicator of whether a transac-
tion was an arrangement for the disposal of waste or the sale
of a useful product. Neither a product’s absolute price nor its
price in comparison with the value of the materials that might
be reclaimed from it is dispositive by itself. Evidence of the
frequency and volume of transactions, the parties’ prior deal-
ings, the nature of the processing carried out by the buyer and
previous or alternative arrangements for handling the by-
products of the seller’s business operations also are poten-
tially relevant. As the district court recognized here, “it is
clear that the dross and slag were by-products of the various
Defendants,” not their principal product. This finding under-
cuts the conclusion that the commercial reality factor unam-
biguously supports summary judgment for the defendants. See
RSR Corp. v. Avanti Dev., Inc., 68 F. Supp. 2d 1037 (S.D.
Ind. 1999) (distinguishing between “persons who sell a used
product to dispose of it, and those whose sale is their main
profit-making venture”).
[5] On the present record, a reasonable finder of fact could
conclude—after a full factual inquiry into the actions of the
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15273
parties—that almost all of the transactions were intended as
arrangements for the disposal or treatment of a hazardous sub-
stance. The existence of triable issues of material fact is par-
ticularly clear with respect to PKM. PKM’s transactions with
Alco were not straightforward sales; instead they involved a
conversion agreement under which Alco cleaned PKM’s
dross of impurities and then returned the extracted refined
metal to PKM. PKM paid a fee for this conversion process
that was incorporated into the sale price of the dross. These
facts are extremely close to those in Cadillac Fairview, in
which we held that the useful product doctrine would not
apply if the true nature of the transactions between the rubber
companies and Dow was an arrangement for treatment of con-
taminated styrene. Cadillac Fairview, 41 F.3d at 566.
Similarly, a reasonable fact-finder could conclude that
Davis and Pasminco sold slag and dross to Alco so that Alco
would treat and dispose of the material. Neither company was
primarily engaged in the sale of lead products. Davis was
engaged in the manufacture and sale of wiring products, not
slag and dross. See id. Pasminco operated a zinc smelting
facility. Even though the transactions between Davis,
Pasminco and Alco were “cast in the form of a sale,” id., a
reasonable fact-finder could conclude that Davis and
Pasminco sold the by-products of their manufacturing pro-
cesses primarily for treatment and disposal purposes.
Defendant Quemetco presents a closer question. As the dis-
trict court recognized, one of Quemetco’s primary business
activities was selling recycled lead products to third parties.
Accordingly, the State’s claim that Quemetco’s primary intent
in contracting with Alco was to “get rid of” its slag and dross
may be more difficult to prove. Nonetheless, it is undisputed
that slag and dross were by-products of Quemetco’s opera-
tions, and thus a fact-finder reasonably could infer that the
sales between Quemetco and Alco at least in part involved
arrangements for disposal or treatment of a hazardous sub-
15274 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
stance. Accordingly, we reverse the district court’s grant of
summary judgment as to all defendants.
[6] The State requests that we not only determine that the
district court erred in granting summary judgment for Defen-
dants but also conclude as a matter of law that the useful
product does not apply in this case. The State argues that
some spillage and leakage is inevitable during smelting, and
that Defendants were well aware of this fact. The State also
argues that a significant portion of the dross and slag sold to
Alco necessarily constituted “waste” that would have to be
disposed of eventually, and that Defendants in essence shifted
this responsibility to Alco by means of the transactions at
issue. However, while these facts obviously are relevant to the
appropriate characterization of the transactions as a whole,
they are not the only relevant facts; as discussed above, the
fact that the pricing of the slag and dross clearly was related
to the market value of lead cuts the other way. Thus, the cur-
rent record is insufficient to establish as a matter of law that
the useful product doctrine does not apply in this case. As we
held in Cadillac Fairview and discussed above, the trier of
fact must consider the totality of circumstances in determining
the proper characterization of the relevant transactions. Id.
The State also argues that the useful product doctrine
applies only to new products, manufactured specifically for
the purpose of sale, and can never apply to by-products. The
case cited for this proposition, State of California v. Summer
Del Caribe, Inc., 821 F. Supp. 574 (N.D. Cal. 1993), is a dis-
trict court decision that pre-dates all of the Ninth Circuit deci-
sions discussed above. In Catellus, we clarified explicitly that
classification of the material in question as “a nonprincipal
business product or a by-product” is not dispositive of the
applicability of the useful product doctrine. Catellus, 34 F.3d
at 751.
Finally, relying upon A & W Smelter, the State argues that
the useful product doctrine applies only if the material in
CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC 15275
question could be used in the producer’s principal business.
A & W Smelter does discuss the usefulness of the ore pile at
issue in terms of A & W’s principal business, stating that,
“[i]f the ore was mixed with enough slag so that it was no lon-
ger usable for A & W’s principal business, then it was waste.”
A & W Smelter, 146 F.3d at 1113. However, that decision
simply assumed without discussion that slag is a waste by-
product that never can constitute a useful product. Id. The
facts of the case did not involve the sale of slag from one
smelter to another. Thus, A & W Smelter cannot be read as
establishing a general rule that material can never fall within
the useful product doctrine unless the material is useful to the
producer’s principal business.
At oral argument, Defendants asserted that finding arranger
liability here will have adverse effects on the market, because
companies with commercially useful by-products will resort
to disposal rather than resale to avoid potential CERCLA lia-
bility from contamination arising out of subsequent reclama-
tion or manufacturing processes in which they have no part
and over which they have no control. While Defendants’ pol-
icy argument has some appeal, both the relevant statutory lan-
guage and our case law support a broad application of
CERCLA’s liability provisions. See Burlington, 479 F.3d at
1138-39. Moreover, Defendants’ policy concerns have not
gone unheeded by Congress. “[O]ne of the [Superfund Recy-
cling Equity] Act’s purposes is ‘to remove the disincentives
and impediments to recycling created as an unintended conse-
quence of the 1980 Superfund Liability provisions.’ ” Gould,
Inc. v. A & M Battery & Tire Serv., 232 F.3d 162, 171 (3d
Cir. 2000) (quoting Pub. L. No. 106-113, § 6001(a)(3), 113
Stat. 1501, 1501A-598 to 1501A-599 (1999)). Congress cre-
ated a recycling exemption to encourage reuse of materials,
42 U.S.C. § 9627, an exemption Defendants unsuccessfully
sought to claim before the district court.3
3
Defendants urge us to affirm the district court’s judgment on the inde-
pendent ground that the transactions at issue constituted arrangements for
15276 CALIFORNIA DEP’T TOXIC v. ALCO PACIFIC
[7] Accordingly, we reverse the district court’s grant of
summary judgment for Defendants under the useful product
doctrine and remand for further proceedings consistent with
this opinion.4
REVERSED AND REMANDED.
recycling of scrap metal and thus fell within the recycling exemption codi-
fied at section 127 of the Superfund Recycling Equity Act, 42 U.S.C.
§ 9627. See Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922 (9th Cir.
2004) (holding that a judgment may be affirmed on any ground supported
by the record). Under that statute, “a person who arranged for recycling
of recyclable material” is exempt from arranger liability under CERCLA.
42 U.S.C. § 9627(a)(1). Scrap metal is defined as recyclable material
under the statute provided that certain requirements are met. 42 U.S.C.
§ 9627(d). The district court properly concluded that Defendants failed to
offer evidence establishing at least one such requirement, that the recycl-
able material met a commercial specification grade at the time of the trans-
action, see 42 U.S.C. § 9627(c)(1), and thus properly denied Defendants’
motion for summary judgment under the recycling exemption. Defendants
point to a 2003 publication of the Institute of Scrap Recycling Industries,
Inc., entitled “Scrap Specifications Circular 2003,” but fail to explain how
this 2003 language established a specification grade for materials sold to
Alco in the 1970s and 1980s. Defendants also point to the testimony of
Alco’s designee, who stated that Alco preferred to purchase lead slag with
at least thirty percent lead content, but fail to explain why Alco’s prefer-
ence constituted a “commercial specification grade” within the meaning of
the statute.
4
The State also appealed the district court’s order excluding the testi-
mony of its expert witness, Mr. Brodwin. Because Mr. Brodwin’s pro-
posed testimony concerned the applicability of the recycling exemption,
this aspect of the appeal is moot.