Berg v. Popham

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

DAVID BERG; MARGE BERG, 
Plaintiffs-Appellants,
v.
DAVID POPHAM; TSUKIKO POPHAM,
Defendants, No. 01-35807
and  D.C. No.
CV-00-00151-JWS
NORGE CORPORATION, and its
successors in interest; MAGIC CHEF OPINION
CORPORATION; MAYTAG
CORPORATION; ABC INC.; ABC
CO.; ABC CORP.,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Alaska
John W. Sedwick, District Judge, Presiding

Argued August 7, 2002
Submission Withdrawn October 4, 2002
Resubmitted June 16, 2005
Anchorage, Alaska

Filed June 24, 2005

Before: Betty B. Fletcher, Arthur L. Alarcón, and
Susan P. Graber, Circuit Judges.

Opinion by Judge Alarcón

7531
7534 BERG v. NORGE CORP.

COUNSEL

Michael W. Flanigan, Walther & Flanigan, Anchorage,
Alaska, for the plaintiffs-appellants.

I. Franklin Hunsaker, Bullivant Houser Bailey, Portland, Ore-
gon, for the defendants-appellees.

OPINION

ALARCÓN, Senior Circuit Judge:

This matter is before us to review the Alaska state law
questions presented by the parties to this dispute.1 This appeal

1
In its notice of removal, Maytag alleged that the district court had fed-
eral question jurisdiction pursuant to 28 U.S.C. § 1331, and diversity juris-
 BERG v. NORGE CORP. 7535
presents a novel issue under Alaska law, i.e., is an entity sub-
ject to liability under Alaska Statute (“AS”) § 46.03.822(a)(4)
if it manufactured or sold a useful product that, when used as
designed and installed by the manufacturer, releases hazard-
ous substances.

The Maytag Corporation (“Maytag”) moved to dismiss the
second amended complaint filed by David and Marge Berg
(“the Bergs”) for failure to state a claim upon which relief can
be granted pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure. Relying solely on federal decisions interpret-
ing the Comprehensive Environmental Response, Compensa-
tion, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-
9675, Maytag argued that it was not liable under CERCLA or
its Alaska counterpart, AS § 46.03.822(a)(4). The district
court dismissed the second amended complaint without citing
any decision of the Alaska Supreme Court addressing the
issue before this court.

The Alaska Supreme Court accepted our request for certifi-
cation for its interpretation of Alaska law. In its response to
our request, the Alaska Supreme Court held that a manufac-
turer of a useful product can be held liable under
AS § 46.03.822(a)(4) if it was intended to direct a hazardous
substance into a city sewer system. Berg v. Popham, No. S-
10815, 2005 WL 1189660, at *7 (Alaska May 20, 2005); ___
P.3d ___. Accordingly, we vacate and remand that portion of
the district court’s judgment on the pleadings regarding
Maytag’s potential liability under AS § 46.03.822(a)(4).

diction pursuant to 28 U.S.C. 1332(a). In its order dismissing the second
amended complaint the district court held that it had supplemental juris-
diction pursuant to 28 U.S.C. § 1367(a). It stated that it could not deter-
mine if diversity existed between the parties because “the present record
does not afford the court with an adequate basis to evaluate this conten-
tion.” The Bergs have not challenged the district court’s subject matter
jurisdiction. The district court had subject matter jurisdiction over the state
law claims whether or not the parties were diverse because the Bergs also
asserted a federal question in their complaint. 28 U.S.C. § 1367(a).
7536 BERG v. NORGE CORP.
I

The Bergs filed this action in the Superior Court for the
State of Alaska alleging, inter alia, that Maytag was liable for
contribution pursuant to CERCLA and AS § 46.03.822(a)(4)
for a portion of the costs incurred in remediation resulting
from the discovery of percholoroethylene (“PCE”) emanating
from sewer lines in the ground connected to the Bergs’ dry-
cleaning business.

Maytag removed the action to federal court, alleging fed-
eral question and diversity jurisdiction. Maytag moved to dis-
miss the Bergs’ first amended complaint under Rule 12(b)(6)
of the Federal Rules of Civil Procedure. The Bergs moved for
leave to amend their complaint. The district court granted the
Bergs leave to file a second amended complaint.

The Bergs alleged in their second amended complaint that
they owned a dry-cleaning business in Anchorage, Alaska,
from 1972 through 1978 and again from 1980 through 1983.
The dry cleaning equipment was purchased from Norge Cor-
poration (“Norge”) before 1972. Maytag is Norge’s successor
in interest.2 Norge recommended that the Bergs use PCE in
the equipment as part of the dry-cleaning process. Norge
designed the layout of the equipment and installed the dry-
cleaning equipment and a water and PCE separator system
that “facilitated spillage, leakage and direction of [PCE] into
the city sewer system.”

In 1991, highway construction workers for the State of
Alaska discovered PCE in the soil near the Bergs’ former dry-
cleaning business. The State issued notices and filed liens on
the Bergs’ assets to create a pool of funds to be used in decon-
tamination efforts.
2
Maytag denies that it is Norge’s corporate successor and reserves the
right to litigate this issue at trial. However, for purposes of reviewing the
merits of its motion to dismiss and motion for judgment on the pleadings,
Maytag does not dispute that it is Norge’s successor in interest.
 BERG v. NORGE CORP. 7537
Maytag moved to dismiss the Bergs’ second amended com-
plaint for failure to state a claim upon which relief can be
granted. The district court granted Maytag’s motion, in part,
concluding that it could not be liable as an arranger or trans-
porter under CERCLA or AS § 46.03.822(a)(4). Subse-
quently, the court granted Maytag’s motion for judgment on
the pleadings regarding the Bergs’ remaining state-law claims
pursuant to Rule 12(c) of the Federal Rules of Civil Proce-
dure. The Bergs timely filed a notice of appeal from the dis-
trict court’s final judgment. This Court has jurisdiction over
this appeal pursuant to 28 U.S.C. § 1291.

II

The Bergs do not appeal from the portion of the district
court’s judgment dismissing their CERCLA claim. They
assert, however, that the district court erred in dismissing their
claim for contribution against Maytag under AS
§ 46.03.822(a)(4) because “the plain language of the Alaska
‘arranger’ language . . . allows for the present suit, since
Norge did by contract arrange for disposal of PCE through the
piping system it installed at the Bergs’ dry cleaning plant, by
and through the Norge dry cleaning machines it installed
plumbed to the sewers.”

We review “de novo a district court’s dismissal of a com-
plaint: for failure to state a claim pursuant to Federal Rule of
Civil Procedure 12(b)(6) . . . and for judgment on the plead-
ings pursuant to Rule 12(c).” Arrington v. Wong, 237 F.3d
1066, 1069 (9th Cir. 2001). “A complaint should not be dis-
missed unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of the claim that would entitle
it to relief. All allegations of material fact are taken as true
and construed in the light most favorable to the nonmoving
party.” Daniel v. County of Santa Barbara, 288 F.3d 375, 380
(9th Cir. 2002) (quotations and citation omitted).

[1] AS § 46.03.822(a) imposes strict liability for damages
and “the costs of response, containment, removal, or remedial
7538 BERG v. NORGE CORP.
action incurred” by the State of Alaska on persons responsible
for “an unpermitted release of a hazardous substance.” The
statute also authorizes private parties to file an action to “seek
contribution from any other person who is liable” under the
statute. AS § 46.03.822(j). Persons subject to the statute’s
joint and several liability scheme include owners and opera-
tors of facilities “from which there is a release . . . of a haz-
ardous substance.” AS § 46.03.822(a)(2). The Bergs, as
former owners and operators of the dry-cleaning business, are
subject to liability under this subsection and are entitled to
bring an action for contribution against other responsible par-
ties pursuant to AS § 46.03.822(j).

[2] In addition to imposing liability on “owners” and “oper-
ators,” AS § 46.03.822(a)(4) imposes liability on persons who
“arranged” for the disposal of hazardous waste. “Arrangers”
are defined as

any person who by contract, agreement, or otherwise
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 or vessel owned or
operated by another party or entity and containing
hazardous substances, from which there is a release,
or a threatened release that causes the incurrence of
response costs, of a hazardous substance[.]

§ 46.03.822(a)(4) (emphasis added).

[3] CERCLA, by contrast, defines the liability of a person
who arranges the release of a hazardous substance as

any person who by contract, agreement, or otherwise
arranged for disposal or treatment, or arranged with
a transporter for transport for disposal or treatment,
of hazardous substances owned or possessed by such
 BERG v. NORGE CORP. 7539
person, by any other party or entity, at any facility
or incineration vessel owned or operated by another
party or entity and containing such hazardous sub-
stances[.]

42 U.S.C. § 9607(a)(3) (emphasis added). Unlike the Alaska
statute, § 9607(a)(3) does not contain the disjunctive “or”
before the words “by any other party or entity.”

The Bergs alleged in their second amended complaint that
Maytag installed defective dry-cleaning equipment at the
Bergs’ dry-cleaning business that included a “still system
[that] when used as directed spilled [PCE] into the city sewer
system[ ]” and a “water/[PCE] separator system that when
used as directed, spilled [PCE] into the city sewer system.”
The Bergs argue that the district court erred in determining
that these allegations were insufficient to state a claim for
arranger liability under AS § 46.03.822(a)(4).

In construing CERCLA, we have recognized that “ ‘[n]o
court has imposed arranger liability 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.’ ” United
States v. Shell Oil Co., 294 F.3d 1045, 1058 (9th Cir. 2002)
(quoting United States v. Iron Mountain Mines, Inc., 881 F.
Supp. 1432, 1451 (E.D. Cal. 1995)). Maytag contends that it
cannot be liable as an arranger because the Bergs have not
alleged that it owned or possessed the hazardous substance
that was released into the sewer system.

Because we found no controlling precedent in decisions of
the Alaska Supreme Court interpreting the scope of the word
“arranged” as used in AS § 46.03.822(a)(4), we certified the
following two questions to the Alaska Supreme Court: (1)
“Alaska Statute section 46.03.822(a)(4), in contrast to 42
U.S.C. § 9607(a)(3), contains the word ‘or’ preceding the
phrase ‘by any other party or entity.’ In light of the inclusion
of the word ‘or,’ does section 46.03.822(a)(4) require that a
7540 BERG v. NORGE CORP.
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 as is
required under 42 U.S.C. § 9607(a)(3)?;” and (2) “[i]f the
answer to Question 1 is ‘no,’ may an entity be subject to
arranger liability under Alaska Statute section 46.03.822(a)(4)
if it manufactures, sells, and installs a useful product that,
when used as designed, directs a hazardous substance into the
city sewer system?”

In answering our first certified question, the Alaska
Supreme Court noted that “the Alaska legislature intended
that CERCLA be used as a framework for interpreting section
.822.” Berg, 2005 WL 1189660, at *3 (citing Bill Review let-
ter from Douglas B. Baily, Attorney General, to Governor
Steve Cowper on H.B. 68 (May 11, 1989), in Alaska State
Archives, Series 1185, Record Group 91, Box No. 7892, File
No. XXX-XX-XXXX). The Alaska Supreme Court explained that
its review of federal cases, however, “disclosed no federal
decision involving facts truly analogous to those of the pres-
ent case.” Berg, 2005 WL 1189660, at *4. The Supreme Court
of Alaska noted that, although Alaska law is generally mod-
eled on CERCLA,

there is an important difference between section .822
and CERCLA. While CERCLA lists four classes of
persons potentially responsible for the release of
hazardous substances, subsection .822(a) lists five.
Those potentially responsible under § 9607(a) are:
(1) the owner and operator of a vessel or a facility
from which hazardous substances were released; (2)
the owner or operator of a facility where hazardous
substances were disposed of, at the time of disposal;
(3) arrangers; and (4) transporters of hazardous sub-
stances. Subsection .822(a)(1) adds to CERCLA’s
classes of PRPs “the owner of, and the person having
control over, the hazardous substance at the time of
the release.
 BERG v. NORGE CORP. 7541
Id. (citing 42 U.S.C. § 9607(a) (West 2004)).

[4] The Alaska Supreme Court explained that, in interpret-
ing AS § 46.03.822(a)(4), “we cannot disregard subsection
.822(a)(1) or render it redundant. Because Alaska treats as
PRPs those who have ownership and control of a hazardous
substance as well as those who arrange for its disposal, these
classifications cannot be synonymous.” Id. The Alaska
Supreme Court explained that

[t]his difference between Alaska and federal law
reflects our legislature’s intent to expand liability
beyond CERCLA’s standards, even if section .822’s
legislative history is silent as to the interpretation
and application of arranger liability specifically.
While section .822 was modeled on CERCLA gener-
ally, it was revised in the months following the
Exxon Valdez catastrophe, so its scope would be
broader than that of its forebear . . .

In light of the textual distinctions between the fed-
eral and state statutes, and based upon our review of
the legislative history of section .822, we adopt a
standard of arranger liability that is broader than that
of the Ninth Circuit. Like most courts assigning
arranger liability under CERCLA, we hold that
arranger liability under AS 46.03.822(a)(4) requires
some “actual involvement in the decision to dispose
of waste” that was substantial or integral. However,
we note that actual involvement in a decision to dis-
pose of waste can encompass involvement in decid-
ing how to dispose of waste or in facilitating such
disposal. Involvement in deciding how to dispose of
waste can, in turn, include actions such as designing,
installing, or connecting a system that disposes of
waste on behalf of a third party.

Id. at *4 (quoting Gen. Elec. Co. v. AAMCO Transmissions,
Inc., 962 F.2d 281, 286 & n. 27 (2d Cir. 1992) (per curiam)).
7542 BERG v. NORGE CORP.
[5] In interpreting AS § 46.03.822(a)(4), the Alaska
Supreme Court relied upon R.R. Street & Co. v. Pilgrim
Enterprises, Inc., 81 S.W.3d 276 (Tex. Ct. App. 2001). In that
matter, the Texas appellate court held that a dry-cleaning sup-
plier was an arranger under the Texas equivalent of CERCLA
because the defendant “ ‘gave direct advice . . . as to how to
dispose of waste containing PCE,’ ” it thus “ ‘had some actual
involvement in the decision to dispose of the waste.’ ” Berg,
2005 WL 1189660, at *5 (quoting R.R. Street & Co., 81
S.W.3d at 295). In doing so, the Alaska Supreme Court noted:

Like the supplier in R.R. Street, Norge visited and
inspected the Bergs’ business and provided service
and technical advice. While Norge did not actually
conduct tests involving PCE, it did connect the dry
cleaning equipment to the plumbing system. We
apply the “actual involvement” standard articulated
in R.R. Street because this standard conforms with
the intent of the Alaska legislature when it revised
section .822 and broadened arranger liability.

Berg, 2005 WL 1189660, at *5 (citing R.R. Street & Co., 81
S.W.3d at 284). The Alaska Supreme Court held:

Alaska Statute 46.03.822(a)(4) does not require that
a person own, possess, have authority to control, or
a duty to dispose of a hazardous substance for that
person to face arranger liability for the release of that
substance. Rather, under 46.03.822(a)(4), any person
who was actually involved in a decision to dispose
of, or a decision on how to dispose of, a hazardous
substance may be liable.

Berg, 2005 WL 1189660, at *7.

After answering our first certified question in the negative,
the Alaska Supreme Court resolved our second certified ques-
tion concerning whether a person or entity lacking ownership,
 BERG v. NORGE CORP. 7543
possession, authority, or a duty to dispose can be liable for
making, selling, or installing a useful product that purposely
directs hazardous substances into the environment. In answer-
ing this question, the Alaska Supreme Court first discussed
the “useful product” exception, noting that “[federal courts]
have consistently held that a manufacturer who does nothing
more than sell a useful, albeit hazardous, product to an end
user has not arranged for disposal of a hazardous substance.”
Berg, 2005 WL 1189660, at *5 (citations omitted) (internal
quotations omitted). “[E]ven a company distributing a hazard-
ous chemical that later causes environmental harm can avoid
liability as an arranger under CERCLA.” Id. “The key inquiry
is often whether the alleged arranger’s intent was to dispose
of waste or to sell a product.” Id. (citing New York v. Solvent
Chem. Co. Inc., 225 F. Supp. 2d 270, 281-82 (W.D.N.Y.
2002)).

The Alaska Supreme Court also stated:

[T]he Alaska legislature clearly intended section
.822 to contain some exception from arranger liabil-
ity for useful products. . . . The legislature enacted
a law specifically designed to avoid imposing liabil-
ity on “virtually everyone in the chain of commerce
who had ever handled [a released hazardous] sub-
stance, even if that person had absolutely nothing to
do with the release.”

Berg, 2005 WL 1189660, at *6 (quoting Floor Memo for H.B.
68, Senate Judiciary Committee (undated), in Alaska State
Archives, Box #17568 (alteration in original)).

The Alaska Supreme Court noted, however, that none of
the federal cases discussing the useful-product exception
applied the doctrine to shield a party whose products or ser-
vices were known to facilitate another party’s disposal of haz-
ardous materials.
7544 BERG v. NORGE CORP.
[M]ost federal cases apply the exception to shield
suppliers of tangible physical goods put to further
productive use by their recipients. But this case deals
with machines and services specifically designed to
release hazardous substances as part of their essen-
tial function. As we noted above, the water/Perc sep-
arator flushed waste water into sewer lines, and post-
vaporization PCE-contaminated sludge was also
flushed into sewer lines. Thus, we are not persuaded
that the useful product exception to section .822 lia-
bility is applicable in this case.

Berg, 2005 WL 1189660, at *6 (citation omitted).

[6] The Alaska Supreme Court concluded that “[t]he pro-
vider of a ‘useful product’ is not automatically liable under
AS 46.03.822(a)(4) for the subsequent release of a hazardous
substance related to that product. But an entity may be liable
if it manufactures, sells, or installs a useful product that is
intended to direct, and when used as designed, directs a haz-
ardous substance into a city sewer system.” Id. at *7.

[7] Applying the Alaska Supreme Court’s interpretation of
AS § 46.03.822(a)(4) to this matter, we conclude that the
Bergs alleged sufficient facts to support a claim for arranger
liability under AS § 46.03.822(a)(4). The Bergs alleged in
their second amended complaint that Maytag recommended
that the Bergs use PCE in the equipment as part of the dry-
cleaning process, designed the layout of the equipment and
installed the dry-cleaning equipment and a water and PCE
separator system that “facilitated spillage, leakage and direc-
tion of [PCE] into the city sewer system.” Accepting those
allegations as true and construing them in the light most
favorable to the Bergs, it does not appear beyond doubt that
the Bergs can prove no set of facts in support of their claim
that would entitle them to relief. See Daniel, 288 F.3d at 380
(“A complaint should not be dismissed unless it appears
beyond doubt that the plaintiff can prove no set of facts in
 BERG v. NORGE CORP. 7545
support of the claim that would entitle it to relief.”). Under the
“actual involvement” approach adopted by the Alaska
Supreme Court, the Bergs have sufficiently alleged a claim
against Maytag for arranger liability under AS
§ 46.03.822(a)(4).

III

The Bergs also contend that the district court erred in dis-
missing their state law claims for contribution, equitable
apportionment, and implied indemnity, which the Bergs argue
are viable statutory causes of action independent of their
claim for contribution under AS § 46.03.822(a)(4). We dis-
agree. Alaska law does not provide the Bergs a cause of
action under any of these theories.

[8] The right to contribution in Alaska arises only by opera-
tion of statute. Arctic Structures, Inc. v. Wedmore, 605 P.2d
426, 436 (Alaska 1979). Along these lines, the citizens of
Alaska, by ballot initiative, eliminated the statutory right to
contribution for injuries occurring after March 5, 1989. Ben-
ner v. Wichman, 874 P.2d 949, 955-56 (Alaska 1994). The
Bergs therefore cannot have a state law claim for contribution
for injury occurring after this date. Prior to March 5, 1989, a
contribution claimant was required to show that 1) the claim-
ant and the contribution defendant are both tortfeasors who
are joint and severally liable for the same injury, 2) the claim-
ant has paid more than its pro rata share of the common liabil-
ity, 3) the claimant has extinguished the contribution
defendant’s liability, and 4) if the liability is extinguished by
settlement, the amount was reasonable. AS § 09.16.010; Ogle
v. Craig Taylor Equip. Co., 761 P.2d 722, 725-26 (Alaska
1988).3 Here, at least one reason the Bergs’ pre-1989 state law
contribution claim fails is because they did not allege in their
complaint that they have paid more than their pro rata share.
3
The change in Alaska tort law enacted in 1986 that was at issue in Ogle
is not relevant in the present case.
7546 BERG v. NORGE CORP.
[9] The Bergs also lack a valid claim for equitable appor-
tionment under AS § 09.17.080. Equitable apportionment
allows defendants, even after the repeal of the UCTA, “to mit-
igate their damages by filing third-party claims against other
potentially responsible persons.” Alaska Gen. Alarm, Inc. v.
Grinnell, 1 P.3d 98, 101 (Alaska 2000). Alaska Rule of Civil
Procedure 14(c) establishes “the procedure that defendants
could use for equitable apportionment of damages to third
parties who had no direct liability to the defendant but were
potentially responsible to the plaintiff.” Id. Pursuant to Rule
14(c), a defendant may “add as a third-party defendant any
person whose fault may have been a cause of the damages
claimed by the plaintiff.” The Bergs are not attempting to add
Maytag as a third-party defendant in an existing lawsuit.
Instead, the Bergs have filed a separate action for contribu-
tion. A separate action is not a way to seek equitable appor-
tionment under Rule 14(c). The Bergs’ claim for equitable
apportionment therefore fails.

[10] The Bergs’ claim for indemnity against Maytag also
fails. The Bergs failed to allege in their complaint that Maytag
expressly or impliedly agreed to indemnify them. “Express
and implied contractual indemnity claims require proof of a
contract to indemnify . . . .” AVCP Reg’l Hous. Auth. v. R.A.
Vranckaert Co. Inc., 47 P.3d 650, 655-56 (Alaska 2002).
Additionally, to state a claim for recovery under an implied
contractual indemnity theory, the Bergs were required to
allege that Maytag’s liability was extinguished. Id. at 658.
The Bergs did not allege that Maytag’s potential liability to
the State of Alaska was extinguished.

IV

Finally, the Bergs argue that the district court abused its
discretion in imposing sanctions against their attorney pursu-
ant to 28 U.S.C. § 1927. Because parties lack standing to
appeal an order imposing sanctions against their attorney, we
 BERG v. NORGE CORP. 7547
lack jurisdiction to review the award of sanctions. Cabrera v.
City of Huntington Park, 159 F.3d 374, 382 (9th Cir. 1998).

CONCLUSION

We hold that the district court erred in determining that the
Bergs’ allegations that Maytag installed the dry-cleaning
equipment that included a “still system [that] when used as
directed spilled [PCE] into the city sewer system[ ]” and a
“water/[PCE] separator system that when used as directed,
spilled [PCE] into the city sewer system,” were not sufficient
to support a claim for arranger liability under AS
§ 46.03.822(a)(4). We agree with the district court that the
Bergs’ claims for contribution, equitable apportionment, and
implied indemnity do not state a cause of action under Alaska
law. We also decide that the Bergs lack standing to appeal the
district court’s order imposing sanctions against their attor-
ney.

VACATED and REMANDED in part; AFFIRMED in
part; DISMISSED in part. The parties shall bear their own
costs on appeal.