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Will The Other Shoe Drop?: Supreme Court To Decide Whether Potentially Liable "Volunteers" Can Recover CERCLA Cleanup Costs



April 18, 2007

A little more than two years ago, the United States Supreme Court surprised many observers — and dismayed more than a few corporate counsel — when it held, in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), that a private party that incurs cleanup costs but has not been the subject of an administrative or cost recovery action under section 106 or 107(a) of the federal Comprehensive Environmental Response, Liability, and Compensation Act (“CERCLA”), 42 U.S.C. §§ 9606, 9607(a), cannot obtain contribution from other liable parties under section 113(f)(1), 42 U.S.C. § 9613(f)(1). Relying on the text of section 113(f)(1), which provides that “[a]ny person may seek contribution . . . during or following a civil action during or following a civil action under section 9606 . . . or under section 9607(a)” (emphasis added), the Aviall Court held 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 view earlier article.

To be sure, Aviall did not foreclose all contribution actions by parties that perform cleanups without being sued. For example, section 113(f)(3)(B) of the statute authorizes contribution actions by parties that settle with the government. See 42 U.S.C. § 9613(f)(3)(B). But the Court’s deliberately narrow decision in Aviall left unanswered many questions about the contribution rights of potentially liable parties (i.e., those that would be held liable if sued) that have neither been sued nor settled with the government. Is there an “implied” right of contribution under section 107(a), as many courts had concluded before Congress added section 113 to the statute in 1986? Can a potentially liable party bring a so-called “direct” cost recovery action against other liable parties under section 107(a)?

The Court is now poised to answer at least some of the questions it skirted in Aviall. On January 19, it agreed to hear the government’s appeal of the Eighth Circuit’s decision in Atlantic Research Corp. v. United States, 459 F.3d 827 (8th Cir. 2006), cert. granted, 127 S. Ct. 1144 (2007). In Atlantic Research, the circuit court — reversing the judgment of the district court — answered both of the questions in the preceding paragraph in the affirmative: a potentially liable party that has neither been sued nor settled can use section 107 to bring a direct cost recovery action or a contribution action. In so doing, the Eighth Circuit had to steer a course around a pre-Aviall decision that — like the decisions of every other circuit that had considered the question — had barred potentially liable parties from using section 107, forcing them to use section 113. Dismissing these earlier decisions as mere exercises in “directing traffic between the sections,” the Eighth Circuit reopened the door to section 107 to potentially liable parties that have not been sued.

Four circuit courts have now addressed the rights of potentially liable parties in the wake of Aviall. The Atlantic Research court actually adopted the reasoning of the Second Circuit in Consolidated Edison Co. v. UGI Utilities, Inc., 423 F.3d 90 (2d Cir. 2005), petition for cert. filed, 74 U.S.L.W. 3600 (U.S. Apr. 11, 2006) (No. 05-1323). Like the Eighth Circuit, the Second Circuit had to distinguish an earlier decision that had forced potentially liable parties to use section 113. Holding that section 107 and section 113 address “different procedural circumstances,” the Consolidated Edison court held that potentially liable parties that have not been sued can bring a cost recovery action under section 107. Just two days before the Supreme Court granted certiorari in Atlantic Research, the Seventh Circuit reached a similar conclusion in Metropolitan Water Reclamation District v. North American Galvanizing & Coatings, Inc., 473 F.3d 824 (7th Cir. 2007), reh’g en banc denied (Mar. 13, 2007).

Unlike its three sister circuits, the Third Circuit reaffirmed its earlier decisions to hold that, even after Aviall, there is no “implied” right of contribution in section 107, and potentially liable parties seeking to recover their costs must use section 113. E.I. DuPont de Nemours and Co. v. United States, 460 F.3d 515 (3d Cir.), petition for cert. filed, 75 U.S.L.W. 3296 (U.S. Nov. 21, 2006) (No. 06-726). Thus, under DuPont, a potentially liable party that incurs cleanup costs without settling or being sued has no right to contribution from other liable parties, and thus remains an uncompensated volunteer While the other courts emphasized the need to effectuate the statutory policy of encouraging cleanups, even — and especially — voluntary cleanups, the DuPont court stressed other important statutory policies that are effectuated by its reading of the statute. Limiting the contribution rights of potentially liable parties to those that have been sued or have settled with the government may not encourage all cleanups, but it does help to ensure sound and adequate cleanups by encouraging (via the reading of section 113(f)(1) announced in Aviall) those that are controlled by some level of oversight. Forcing non-sued potentially liable parties to settle with the government before gaining contribution rights serves the statutory goal of encouraging settlements (and thus reducing litigation costs), which is also reflected in the grant in section 113 (f)(2) of immunity from subsequent contribution actions to those parties that settle with the government. 42 U.S.C. § 9613(f)(2).

The Supreme Court will hear oral argument in Atlantic Research on April 23. The Court’s decision, expected by the end of the current term, will have wide-ranging effects on the pace of CERCLA cleanups, and on the business and financial risks faced by industrial landowners across the country.