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Supreme Court Says “Yes,” Private Parties Can Sue Under Superfund To Recover Voluntary Cleanup Costs

On Monday, June 11 the United States Supreme Court issued its long-awaited decision in United States v. Atlantic Research Corp., –- S.Ct. –- (2007). The Court’s decision confirms that private parties may sue other persons, including the United States and state governments, to recover costs spent voluntarily (i.e., without the party first being the subject of a cost recovery lawsuit or entering into a settlement with the government), to perform cleanup work at environmentally contaminated properties.

Background

As anyone with environmental responsibility for an old landfill, manufacturing plant or industrial property likely is aware, until the end of 2004 most courts and parties believed that there was a “right of contribution” under the federal environmental laws. If a potentially responsible party (“PRP”) performed or paid for an environmental cleanup at a “facility” (any location where “hazardous substances” had been stored, treated, transported, disposed or came to be located), that PRP could sue other co-responsible parties to make them contribute a fair share towards the costs of cleaning up the property. This right existed without regard to whether the PRP did the work “voluntarily” or because a federal or state regulator told the PRP to do the work or approved the cleanup work when done.

Then in December, 2004 the United States Supreme Court decided Cooper Industries, Inc. v. Aviall Services, Inc., 125 S.Ct. 577 (2004), and that broad right to sue for contribution disappeared. The Court looked at Section 113(f)(1) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”), 42 U.S.C. §9613(f)(1), and determined that the statute only provides a right to seek contribution from other PRPs if the party demanding contribution first has been the subject of a “civil action” under CERCLA Section 106 (to compel performance of a cleanup) or Section 107(a) (to recover back cleanup costs already spent). Generally speaking, only the federal or state governments file such suits to compel cleanup work or recover costs, so unless a PRP previously had been hauled into court by the United States Environmental Protection Agency (“EPA”) or a state environmental regulator, that PRP could not sue for contribution under Section 113(f)(1) to make anyone else help pay for a cleanup.[1]

After Cooper Industries v. Aviall, many companies sought other mechanisms that would allow them to recover cleanup costs for work performed at contaminated properties. One such company was Atlantic Research Corporation, a former tenant of the United States at the Department of Defense’s Shumaker Naval Ammunition Depot in Camden, Arkansas.

Atlantic Research worked at the Naval Depot retrofitting rocket motors for the government. As part of the retrofitting procedure, Atlantic Research used a high-pressure water spray to remove pieces of propellant from the rocket motors and then disposed of the propellant by burning. These washing and burning processes contaminated the soil and groundwater at the Depot, and Atlantic Research “voluntarily” (i.e., without a lawsuit from or settlement with EPA or the state of Arkansas), began cleanup work.

In 2002 Atlantic Research filed suit against the United States to obtain contribution towards its cleanup costs based on CERCLA Sections 113(f)(1) and 107(a)(4)(B). In June, 2005 the trial court dismissed Atlantic Research’s lawsuit, reasoning that Cooper Industries v. Aviall had removed the right to sue for contribution towards a “voluntary” cleanup, and that pre-Aviall appellate court decisions had disallowed cost recovery by private parties attempting to use Section 107(a)(4)(B).[2] On August 11, 2006 the Eighth Circuit appeals court reversed the trial court’s dismissal, finding that the cost recovery rights created by Section 107(a)(4)(B) could, in fact, be used by private parties.[3] The government objected to the Eighth Circuit’s interpretation of CERCLA and applied to the Supreme Court for certiorari review based on a split of authority between two similar holdings from the Second and Seventh Circuits, and a contrary result from the Third Circuit.[4]

On January 19, 2007 the United States Supreme Court agreed to accept certiorari and resolve the conflict among the appellate courts.

The New Supreme Court Decision

The cost recovery provisions of the Superfund law, CERCLA Section 104(a), provide as follows:

Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section—

  1. the owner and operator of a vessel or a facility,
  2. any person who at the time of 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 disposal or treatment, or arranged with a transporter for transport for disposal or treatment, 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 hazardous substances, and
  4. any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance, shall be liable for:

    (A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; [and]

    (B) any other necessary costs of response incurred by any other person consistent with the national contingency plan.

CERCLA Section 107(a)(4)(A) – (B), 42 U.S.C. §9607(a)(4)(A) – (B) (emphasis added). A RIGHT TO RECOVER VOLUNTARY CLEANUP COSTS Atlantic Research Court’s analysis[5] begins by observing that the crux of the dispute centers on a statutory language determination:  what “other person” did Congress intend to allow to file suit under CERCLA Section 107(a)(4)(B)

The government argued that the statutory phrase “any other person” means persons other than the four classes of PRPs defined by Section 107(a)(1) through (4): current owners; past owners or operators at the time of disposal; persons who “arranged” for the disposal of hazardous substances (otherwise known as generators); and transporters who selected the disposal site. As an example of a party who could sue under Section 107(a)(4)(B), the government offered an “innocent” PRP – a person who did nothing to cause, create or contribute to environmental contamination at a disposal site.

Atlantic Research suggested that the Court instead look to Section 107(a)(4)(A), the subparagraph immediately preceding 107(a)(4)(B).Atlantic Research argued that the reference to “any other person” in subparagraph (B) means any person other than the three types of entities identified in subparagraph (A).

The Court agreed with Atlantic Research.

The phrase “any other person” therefore means any person other than those three [the United States, a State or an Indian Tribe]. See 42 U.S.C. §9601(21) (defining “person” to include the United States and the various States). Consequently, the plain language of subparagraph (B) authorizes cost-recovery actions by any private party, including PRPs. – S.Ct. –, slip op., at *6 (emphasis added).

The Court observed that the government’s suggested reading of the statutory language makes little textual sense and, because the sweep of Superfund liability is so wide, “logically precludes all PRPs, innocent or not, from recovering cleanup costs. Accordingly, accepting the Government’s interpretation would reduce the number of potential plaintiffs to almost zero, rendering §107(a)(4)(B) a dead letter.”Id. at *7.

THE  RELATIONSHIP BETWEEN SECTION 107(a) COST RECOVERY AND SECTION 113(f) CONTRIBUTION.

The Court then uses the rest of the Atlantic Research opinion to clarify the interaction between the contribution rights found in Section 113(f) and the cost recovery claims available to private PRPs under 107(a)(4)(B).Justice Thomas noted that in Cooper Industries v. Aviall and other prior Superfund decisions, the Court recognized that Sections 113(f) and 107(a) provide two “clearly distinct” remedies.Id. at *8. Section 113(f) explicitly allows a PRP to seek contribution “during or following” a lawsuit under Section 106 or 107(a).

Thus, §113(f)(1) permits suit before or after the establishment of common liability. In either case, a PRP’s right to contribution under §113(f)(1) is contingent upon an inequitable distribution of common liability among liable parties. Id. at *9.

Section 107(a)(4)(B), in its turn, permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under §107(a) without any establishment of liability to a third party. Moreover, §107(a) permits a PRP to recover only the costs it has “incurred” in cleaning up a site. Id. The Court then further explains the differences between the two mechanisms for recovery or reimbursement of Superfund site expenses.

Accordingly, the remedies available in §§107(a) and 113(f) complement each other by providing causes of action “to persons in different procedural circumstances.” [Citations omitted.] Section 113(f)(1) authorizes a contribution action to PRPs with common liability stemming from an action instituted under §106 or §107(a). And §107(a) permits cost recovery (as distinct from contribution) by a private party that has itself incurred cleanup costs. Hence, a PRP that pays money to satisfy a settlement agreement or a court judgment may pursue §113(f) contribution. But by reimbursing response costs paid by other parties, the PRP has not incurred its own costs of response and therefore cannot recover under §107(a). As a result, though eligible to seek contribution under §113(f)(1), the PRP cannot simultaneously seek to recover the same expenses under §107(a).Id. at *9-10.

The Court finishes its analysis by addressing three potential complications identified by the government as reasons to disallow private actions under Section 107(a): the longer statute of limitations (as compared to Section 113)(f)); the availability of joint and several liability; and potential avoidance of the contribution protection given to settling parties by Section 113(f)(2).

First, according to the Court there is no conflict regarding limitation periods. A PRP can only use Section 107(a) to recover costs incurred “voluntarily,” and must use Section 113(f) to seek contribution towards reimbursement paid to a third party in excess of the PRP’s equitable share.

Second, the Court notes that joint and several liability is not always available or appropriate under Section 107(a). Even if a PRP does seek to impose joint and several liability on a defendant co-PRP, the Court reads CERCLA as authorizing a defendant to file a counterclaim under Section 113(f) and thereby trigger a trial court’s ability to equitably apportion responsibility among the parties as authorized by Section 113(f)(1).

Finally, the Court does not view allowing a private right of action under Section 107(a) as eviscerating the settlement and contribution protection provisions of Section 113(f)(2). A trial court can take a defendant’s prior settlement with a government plaintiff into account in the trial court’s equitable apportionment analysis under Section 113(f)(1), and has the inherent power under equity jurisdiction to adjust the liability calculus among co-liable parties. Contribution protection also will continue to disallow cross-claims from other PRPs sued by the same plaintiff PRP. Lastly, the Court highlighted a “finality” benefit to a settling party inherent in reaching closure concerning the PRP’s liability to the United States or a state.

Unresolved Questions/Next Steps

The Atlantic Research decision does not resolve all questions regarding Superfund cost recovery or contribution claims. At least six, and likely many more, items remain open.

Which statutory rights and corresponding statutes of limitation apply when a PRP performs cleanup work “involuntarily” under a judicially-approved Consent Decree or administrative settlement?
  1. What happens if a PRP both performs work and reimburses the United States or a state for past or future costs incurred by the government?
  2. Which statute of limitations applies – the six year right to sue to recover response costs, or the three year limitations period for contribution claims?
  3. Does performing work under a unilateral administrative order (“UAO”) issued pursuant to CERCLA Section 106 qualify as “voluntary” response work recoverable under Section 107(a)(4)(B)?
  4. If a party receives a cleanup order from EPA under an environmental statute other than CERCLA (for example, corrective action orders under Section 3008(a) or 3008(h) of the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §6928(a) and (h)), will the party who performs the corrective action be able to sue under Superfund for contribution or cost recovery? Similarly, what treatment will courts give RCRA corrective action permits requiring mandatory cleanup work – “voluntary” or “involuntary” status?
  5. Will a state regulatory agency’s demand or order requiring a PRP to perform an environmental cleanup under state law render that cleanup “involuntary” for purposes of a federal suit?
  6. If a PRP reimburses a state regulator for costs the state incurred in overseeing performance of a cleanup under the state’s voluntary cleanup program, will the PRP have a right to file suit in federal court seeking contribution or recovery of those costs?
  7. Will the presence or absence of an agreement between the state and the PRP concerning the work or the reimbursement impact any rights to sue?

With regard to the first question, the Atlantic Research Court expressly raises it in a footnote, but refuses to provide an answer. The Court acknowledges that a PRP may be compelled involuntarily to incur costs under a federal settlement (for example, a Consent Decree), but also concedes that such “compelled costs” will be paid directly by the PRP and not reimbursed to a third party.

We do not decide whether these compelled costs of response are recoverable under §113(f), §107(a), or both. For our purposes, it suffices to demonstrate that costs incurred voluntarily are recoverable only by way of §107(a)(4)(B), and costs of reimbursement to another person pursuant to a legal judgment or settlement are recoverable only under §113(f). Id. at *10, FN 6.

As for questions two through six and beyond, PRPs and the courts likely will wrestle with them for many years to come.

The Atlantic Research decision does provide a definitive “yes” answer to one key question created by the Supreme Court’s 2004 Cooper Industries v. Aviall opinion. Yes, a PRP voluntarily may perform necessary cleanup work at an environmentally-impaired property and file suit in federal court to recover some or all of the costs of such work from other persons. As with most Supreme Court decisions, the answers to other questions, interpretations and legal wrinkles arising from the opinion remain to be explored by later parties and courts.

If you have questions about rights or defenses regarding contaminated properties, please contact any member of the Spencer Fane Britt & Browne Environmental Practice Group or ask the Spencer Fane attorney you work with to put you in contact with one of the Group members.

1. The Cooper Industries v. Aviall opinion did not disturb contribution rights under a different part of the Superfund contribution statute, Section 113(f)(3)(B). To invoke a right to sue under that part of the law, however, a PRP again must first negotiate with EPA or the state and sign a court-approved or administrative “settlement.” Unfortunately, after Cooper Industries v. Aviall several courts ruled that the typical regulatory administrative consent order (which requires a party to “investigate and study” or “clean up until told to stop”), does not really “settle” anything at all and so may not authorize a contribution lawsuit seeking cleanup dollars under Section 113(f)(3)(B).2. Atlantic Research Corp. v. United States, slip op., 2005 U.S. Dist. LEXIS 20484 (U.S.D.C.,W.D. Ark. June 1, 2005).3. Atlantic Research Corp. v. United States, 459 F.3d 827 (8th Cir. 2005).4. Consolidated Edison Co. v. UGI Utilities, Inc., 423 F.3d 90 (2d Cir. 2005); Metropolitan Water District v. North American Galvanizing & Coatings, Inc., 473 F.3d 824 (7th Cir. 2007); and E.I. DuPont de Nemours & Co. v. United States, 460 F.3d 515 (3d Cir. 2006).5.  Justice Clarence Thomas authored the 2004 Cooper Industries v. Aviall decision, and he also wrote for the unanimous Court in United States v. Atlantic Research.