Notes
Outline

OVERVIEW OF ELECTRONICS LIABILITY
Indiana Recycling Coalition Shareholder’s Meeting

                            March 2, 2004
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This Barnes & Thornburg publication should not be construed as legal advice or legal opinion on any specific facts or circumstances.  The contents are intended for general informational purposes only, and you are urged to consult your own attorney on any specific legal questions you may have concerning your situation.
Potential Liability Exposure
Federal Environmental Statutes
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”)
Resource Conservation and Recovery Act of 1976 (“RCRA”)
Data Security Issues
State-Law or common law theories
Tort Claims
Potential CERCLA/RCRA Liability
What is so bad about e-waste?
EPA and The National Safety Council (“NSC”) estimates that over 20 million computers became obsolete in 1998, and only 13% were reused or recycled.
EPA estimated in 1999 that at least 1.8 million tons of consumer electronics was generated nationally, accounted for about 1% - 2% of the municipal solid waste stream (this is growing . . .).
NSC estimates that by next year there will be 315 million obsolete computers in the U.S.; many of them ending up either in landfills, incinerators, or for export to other countries.
NSC estimates that by 2007 accumulated obsolete PCs will total some 500 million.
Potential CERCLA/RCRA Liability
EPA states that e-wastes can contain such hazardous materials as lead, mercury, and hexavalent chromium.  If improperly handled, these materials can be released into the environment.
EPA notes that mercury from electronics has been cited as a leading source in municipal waste.
A typical 17 inch computer monitor contains approximately 2 lbs. of lead; larger monitors may contain up to 10 lbs.
For more information, see Exporting Harm – The High-Tech Trashing of Asia (Feb. 2002) at http://www.svtc.org/cleancc/pubs/technotrash.pdf.
Potential CERCLA/RCRA Liability
B.  Who should be concerned?  State and local governments.
C.  Elements of a CERCLA Claim:
The site is a “facility” within the meaning of CERCLA;
A release of a hazardous substance for the site has occurred;
The release or threatened release has resulted in response costs being incurred consistent with the “national contingency plan”; and
Defendant is a “covered person” under § 107(a) of CERCLA.
42 U.S.C. § 9607 (a); Kerr-McGee Chem. Corp. v. Lefton Iron & Metal Co., 14 F.3d 321, 325 (7th Cir. 1994); Environmental Trans. Sys. Inc. v. Ensco, Inc., 969 F.2d 503, 506 (7th Cir. 1992).
Potential CERCLA/RCRA Liability
D.  “Facility” means:
Any building, structure, installation, equipment, pipe or pipeline (including any pipe into a sewer or publicly owned treatment works), well, pit, pond, lagoon, impoundment, ditch, landfill, storage container, motor vehicle, rolling stock, or aircraft, OR
Any building, structure, installation, equipment, pipe or
Any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located; but does not include any consumer product in consumer use or any vessel.
42 U.S.C. § 9601(a).
Potential CERCLA/RCRA Liability
E.  “Hazardous substance” = “RCRA hazardous waste” +
Defined at 42 U.S.C. § 9601(14).
Covers a staggering array of substances.
Only substances specifically excluded are natural gas and oil.
Pursuant to 9601 (14)(B), EPA has designated over 700 hazardous substances (See 40 C.F.R. § 302.4).
Does not impose any quantitative requirement or concentration level―rather substance must simply fall within one of the designated categories.
Potential CERCLA/RCRA Liability
Includes municipal solid waste if that waste contains a hazardous substance, found in any amount, that is listed in any of the subsections of this definition.
(Goodrich Corp. v. Town of Middlesbury, 311 F.3d 154
(2nd Cir. 2002), cert. denied.
CERCLA § 113(f) provides:  “Any person may seek contribution from any other person who is liable or potentially liable under § 9607(a) … In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate.”
Potential CERCLA/RCRA Liability
(The successful) Contribution claims against the municipalities were posited on the presence of hazardous substances, as constituent parts of consumer and industrial products, in the MSW that the municipalities dumped into the landfills.
What does this case mean going forward?
Potential CERCLA/RCRA Liability
F.  CERCLA defines a “covered person” as:
(1)  the owner or operator of a facility;
(2)  any person who at the time of the disposal of any hazardous
   substance owned or operated any facility at which such
   hazardous substances were disposed of;
(3)  any person, who by contract, agreement or otherwise
   arranged for the disposal or treatment of hazardous
   substances at the facility; and
 (4) persons who transported hazardous substances to the  facility.
42 U.S.C. 9607(a)(1)-(4); Redwing Carriers, Inc. v. Saraland Apartments,
94 F.3d 1489, 1497 (11th Cir. 1996).
Potential CERCLA/RCRA Liability
RCRA was developed to regulate and control the management of solid and hazardous waste
RCRA regulatory universe includes: generators of hazardous wastes; transporters of hazardous wastes; and hazardous waste treatment, storage, and disposal facilities
Beyond scope to address all of RCRA’s specific requirements (note: if e-waste is disposed of it must be handled in accord with RCRA (manifesting key concern))
Failure to adhere to RCRA regs likely to result in significant civil fines and potential criminal liability.
Potential CERCLA/RCRA Liability
RCRA liability:  fines leveled for improper handling of electronic wastes where failure to determine whether the solid waste generated constituted hazardous waste and stored wastes without proper permits.
Manhattan College ($111,199)
Pratt Instit. ($301,000)
Source – Federal Electronics Challenge Web Site at wwww.federalelectronicschallenge.net
Data Security Issues
Who should be concerned –  anyone who manages “sensitive” data (e.g., colleges, hospitals, local and state governments).
Security Issues – PC and server hard drives contain sensitive data, such as, but not limited to the following:  medical records, financial data, customer/employee data, intellectual property.
Recent Examples:
Kentucky – discarded hard drives containing records of thousands of patients with AIDS and other diseases (found in internal audit).
Jury in West Virginia awarded $2.3M to three woman whose confidential health records were not kept private
Data Security Issues
D. Recent Examples (cont.):
New York Times article about a woman in NV who purchased  a used PC for $159 and discovered thousands of patient records from a pharmacy in Arizona.
Business Software Alliance in Sept. ‘03 stated: “If a company breaches its software license agreements by copyright infringement, or if old software falls into unlicensed hands, the company getting rid of the software and the recipient could face legal action that includes paying penalties of thousands of [dollars].”
Data Security Issues
Can you sanitize a hard drive? If security is a top concern then only certain option is total destruction of the hard drive.
In Jan. 2003 two MIT graduate students purchased 158 used hard drives.
Only 12% were properly sanitized.
Discovered – 5,000 credit card numbers, highly sensitive corporate information, love letters, 9,500 emails, etc.
State-Law Theories
Available to foreign plaintiffs seeking redress for environmental harms that occur abroad in state courts.
The most straight forward common-law theories include:
Negligence
Strict liability
Nuisance
Trespass
Harms from abnormally dangerous or ultra hazardous activities
Wrongful death claims if linked to environmental effects to certain activity
Toxic Torts
A. Why an issue – increase in alleged actions of envtl. disasters in developing nations being caused by multinational corporations operating under relaxed legal regimes and less stringent envtl. regs.
B. Toxic Torts require a Plaintiff to establish that the defendant corporation was:
The source of a toxic substance;
Causal link to Plaintiff’s injury or disease; and
Exposure through the fault of the defendant corporation’s actions or inactions.
C. This theory was recently used by a class of Costa Rican, Honduran, and Philippino Plaintiffs against Dow Chemical to recover for sterility and birth defects in connection with a certain pesticide.
Toxic Torts
Alien Tort Claims Act (“ATCA”) at 28 U.S.C. §1350 – passed by U.S. Congress over 200 years ago.
ATCA states – “The district courts will have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”
Foreign plaintiffs bringing envtl. claims in U.S. federal courts under ATCA may only proceed if cause of action is cognizable under some form of international law, either treaty law or customary international law (“CIL”).
Growing sense that U.S. Corporations allegedly committing envtl. torts abroad should be held accountable to ensure not abusing less stringent standards abroad.
Toxic Torts
Examples of ATCA claims:
In 1999 – group of Indonesian tribesmen brought suit for envtl. damage stemming from U.S. Corp’s open pit copper, gold, and silver mining in Indonesia.
In 2002 – group of Ecuadorian Ps brought suit for envtl. damage caused by Texaco’s oil drilling in Ecuador.
In 2002 – class action for D’s mining operations in New Guinea alleging:  “destroyed the island’s environment, harmed the health of its people, and incited a ten-year civil war.”
Toxic Torts
Flores v. Southern Peru Copper Corp., 343 F.3d 140 (2d. Cir. 2003).
Group of Peruvian Ps sued U.S. Corp for alleged envtl fallout of copper smelting operations in Peru.
Court determined Ps failed to establish the existence of a customary international law “right to life” or “right to health” or that international pollution violates customary international law.”
Case was dismissed – but highlights yet another potential exposure to liability.
International Trends
The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal was adopted on Mar. 22, 1989.
U.S. is only developed country not to ratify the Basel Convention (bars export of hazardous wastes from developed to developing nations).
 (http://www.basel.int/)
Potential nexus to ATCA claims??
2003 EPA Waste Chief Horinko has maintained that foreign markets play an integral role in e-waste recycling and reuse
International Trends
European Union:  On Dec. 18, 2002, the European Parliament approved legislation to enact an EU Waste Electrical and Electronic Equipment Directive, which in part mandates manufacturers to pay the entire cost of recycling end-of-life electronic products starting in 2005.
The EU also adopted a rule that starting in 2006 will prohibit electronics makers from using lead, mercury, and other heavy metals in their products.
Four global electronics firms, including H-P and Sony, have agreed to consider jointly purchasing services to comply with this directive.
International Trends
Japan:  Requires firms to take-back certain electronic products, which will include computers.  Japan’s Pollution Release and Transfer Registry requires disclosure of chemicals used in production.
South Korea: In part due to the EU legislation, electronics exporters adopted declaration on Feb. 11, 2004 establishing priorities for implementing environmentally friendly design, production, and phasing out the use of six toxic substances:
Lead  mercury, cadmium, hexavalent chromium, PCBs, and PBDE starting in July 2006.
State Trends
National Electronics Product Stewardship Initiative:  created to bring stakeholders together to develop solutions to the issue of electronic products management.
Stakeholders:  US EPA; Recycling groups; Non-profit environmental groups; Manufacturers such as Sony, Microsoft, HP, Nokia; and many States, including Minnesota, California, New Jersey, and Oregon.
NEPSI failed to reach an agreement on how to finance a national electronic recycling system by end of ‘03 and as promised EPA has dropped out.
State Trends
2002 survey conducted by the Association of State and Territorial Solid Waste Management Officials (“ASTSWMO”) found only 20% of states regulate recyclable used electronics as hazardous waste.
An increasing number of states and local government are considering options/legislation for managing e-wastes (including computers, TVs, cell phones, etc.)
Some e-wastes (CRTs, computers) are currently banned from disposal in landfills in Massachusetts.
State Trends
E. 24 states have introduced “Electronic Waste Legislation” for 2003 – 2004 (http://www.ncel.net) (site updated as of 11/11/2003)
Region 5:  Michigan, Illinois, & Minnesota.
F. At least 4 states – Colorado, Georgia, Arkansas, and New Jersey – have already enacted some form of legislation relating to “Electronic Waste” (ranging from creating recycling funds, educational initiatives, & study groups).