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When One Door Closes, Another Opens: U.S. Supreme Court Holds That Potentially Liable "Volunteers" Can Recover CERCLA Cleanup Costs

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In-Sites Special Alert

June 15, 2007

Owners of contaminated industrial properties — as well as government officials and others who wish to see such properties cleaned up and redeveloped — got some good news in early June. A unanimous United States Supreme Court, in United States v. Atlantic Research Corp., No. 06-052 (U.S. June 11, 2007), held that Section 107(a)(4)(B) of the federal Comprehensive Environmental Response, Liability, and Compensation Act (“CERCLA”), 42 U.S.C. § 9607(a)(4)(B), provides them with a cause of action to recover the cleanup costs they have incurred — even if they themselves are among those parties that CERCLA makes liable for such costs. Rejecting the government’s position that Section 107(a)(4)(B) applies only to “innocent” parties, the Court ruled that the plain language of the provision authorizes cost recovery actions by any private parties, including so-called “potentially responsible parties” or PRPs.

Until late 2004, the issue decided by the Atlantic Research Court was a purely academic one. Courts had uniformly held that PRPs who conducted cleanups could seek contribution from other PRPs under Section 113(f)(1). The case law essentially erected a set of traffic signs for private parties seeking to recover some or all of their costs in Superfund cleanups: innocent parties to Section 107(a), and PRPs to Section 113(f)(1). (Parties who settled with the government could take advantage of separate contribution rights provided by Section 113(f)(3)(B)).

But then the Supreme Court changed one of the signs and appeared to leave some PRPs with nowhere to go. In Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), the Court held that private parties could not use Section 113(f)(1) to seek contribution unless they had already been the subject of an administrative or cost recovery action under Section 106 or 107(a). Writing the for Aviall Court, Justice Thomas focused on the text of section 113(f)(1), which provides that “[a]ny person may seek contribution … during or following a civil action” under Section 106 or Section 107, to hold that section 113(f)(1) simply did not authorize a contribution action in the absence of a civil action against the contribution plaintiff.

Click here to see related articles on Aviall and Post-Aviall decisions

Aviall changed the landscape of CERCLA litigation. PRPs who voluntarily cleaned up their sites could no longer use Section 113(f)(1). Could such non-innocent volunteers use any other portion of the statute to recoup at least some of their costs? The Aviall Court deliberately sidestepped the question, leaving it to the lower courts to decide, for example, whether Section 107(a) contained an “implied” right of contribution — as many courts had concluded before Congress added Section 113 to the statute in 1986 — and whether PRPs could bring a so-called “direct” cost recovery action against other PRPs under Section 107(a). In the wake of Aviall, four circuit courts, including the Eighth Circuit in the Atlantic Research litigation, addressed these questions, reaching a variety of conclusions. The circuit split created by these decisions set the stage for the Supreme Court’s grant of certiorari in Atlantic Research.

Click here to see related article on Post-Aviall decision

Once again writing for the Court, Justice Thomas began, as he had in Aviall, with the language of the statute. Section 107(a)(4) grants cost recovery rights to two groups of plaintiffs: the federal government, a State, or an Indian tribe, which can recover “all costs of removal or remedial action incurred” under Section 107(a)(4)(A); and “any other person,” who can recover “any other necessary costs of response incurred” under Section 107(a)(4)(B). For the government, “any other person” meant any person besides those made liable by subsections (1) through (4). For the Court, however, “any other person” had to mean any person besides the plaintiffs listed in Section 107(a)(4)(A). Because of the broad scope of liability created by CERCLA — it is difficult to think of any person likely to incur cleanup costs who is not also a PRP — any other reading of the statute would effectively read Section 107(a)(4)(B) out of existence, wrote Justice Thomas.

The government argued that allowing PRPs to recover costs under Section 107(a)(4)(B) would create friction between Section 107 and Section 113 by permitting PRPs to circumvent Section 113(f)’s shorter statute of limitations (three years versus six years for Section 107(a)) and by undermining the protection against subsequent contribution actions granted by Section 133(f)(2) to parties who settle with federal or State authorities. There is no conflict, said Justice Thomas, because the two sections provide two “clearly distinct” remedies, separately addressing “persons in different procedural circumstances.” Stressing that the right expressly provided by Section 107(a)(4)(B) is a right to “cost recovery” and not a right to contribution — which by its nature is reserved for circumstances where two or more parties share a common liability to a third party — Justice Thomas set up another set of traffic signs. Only parties that have themselves incurred response costs may sue under Section 107(a)(B). A party that pays money under a settlement with the government, or to satisfy a court judgment, does not thereby incur response costs. Such a party is limited to a contribution action under Section 113(f). There is thus no danger of plaintiffs picking and choosing between the two sections, according to the Court. Moreover, while Section 107(a), unlike Section 113(f), has been read to permit the imposition of joint and several liability, in practical terms a PRP’s ability to sue under Section 107(a)(4)(B) will make little difference, as a defendant in such a suit can be expected to assert a Section 113(f) counterclaim, whose resolution would require the court to allocate the cleanup costs equitably among all liable parties, including the PRP that initiated the action.

The Court acknowledged that its holding changes the rules for PRPs that have settled with the government, who are immune from contribution actions under Section 113 but not from such Section 107(a) actions. In words that are likely to be more reassuring to policymakers interested in promoting settlements than to actual PRPs, Justice Thomas argued that this should not unduly discourage settlements. As noted above, PRPs who are sued by other PRPs can assert their own Section 113(f) counterclaims, and settlements will still provide protection from suits by PRPs that have merely reimbursed the government (as opposed to incurring their own response costs) and thus cannot use Section 107(a)(4)(B).

Notwithstanding Justice Thomas’s optimistic declaration that private-party actions under Section 107(a) and Section 113(f) can be neatly divided between different procedural circumstances, the complex realities of CERCLA litigation may muddy the distinction. Indeed, in a footnote near the end of his opinion, Justice Thomas admitted that there is some overlap between Section 107(a)(4)(B) and Section 113(f). For example, there may be cases where a PRP incurs costs pursuant to a consent decree after a Section 107 suit by the government. Are such “compelled costs of response,” neither voluntarily incurred response nor reimbursements to the government, recoverable under Section 113(f)? Under Section 107(a)? Both? (Neither?) For now, the Supreme Court is not saying. Also left unresolved by the Court’s decision is whether, in addition to the express right to cost recovery granted to parties like Atlantic Research, Section 107(a) also contains an implied right to contribution for parties who cannot sue under Section 113(f). Like a picture that appears to resemble different objects as it is viewed from different angles, CERCLA may continue to frustrate the Court’s quest for plain meaning in its notoriously complicated structure.