Here the Third Circuit vacated a District Court’s allocation determination. There is a lot of commentary on this case so I won’t restate the general observations. As an allocator what find interesting is the District Court’s willingness to craft its own allocation model adopting portions of the parties’ positions. The court then fell into errors sometimes made by allocators which the Third Circuit identified as an abuse of discretion. The court failed to articulate how the allocation related to costs sought by plaintiff. It made analytical errors by improperly comparing volume to square feet, an example cited by the Third Circuit of fatal flaw.
One consideration I took away from this ruling is that while the application of equitable factors by a court to determine an allocation is given broad discretion, there is a limit. Equitable factors must be just that, equitable. So the comparative analysis of square feet to volume compounded without regard to cost causation exceeded the equitable discretion granted by the law.
See the Third Circuit’s opinion here: http://www2.ca3.uscourts.gov/opinarch/161994p.pdf