Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

My partner Robby Sanoff blogged last week about the “Illusion of Finality in CERCLA.” His post addressed City of Emeryville v. Sherwin-Williams, in which the 9^th Circuit Court of Appeals held that a person who was not a party to a prior settlement could bring a contribution claim against such a settling party, at least where the new claim involved contamination at a downgradient property, rather than the property that was the subject of the first settlement.

City of Emeryville seems to have been rightly decided. The only real lesson it teaches is that a PRP who wants to settle and achieve finality must do everything possible to ensure that all potentially liable parties are brought to the table and that the site is properly defined.

However, a case from earlier this summer just came to my attention. Its lesson is different. Its lesson is that CERCLA is just plain nuts, and judges’ efforts to harmonize its decisions can do more harm than good. Ashland v. Gar Electroplating teaches that there is no finality under CERCLA and that parties who step up to the plate to settle with the government and perform cleanups can be subject to joint and several cost recovery claims brought by recalcitrants. Alice in Wonderland, here we come.

Although Ashland seems wrong, Judge Lisi’s decision is a not surprising consequence of the simplistic CERCLA jurisprudence announced by Justice Thomas in Aviall and Atlantic Research. In holding that contribution claims are limited to those who have been the subject of litigation or certain kinds of settlements with the United States or a state, and that PRPs not subject to suits or administrative orders can bring cost recovery actions under § 107 of CERCLA, the Supreme Court has opened a Pandora’s Box.

What evil genie was loosed in Ashland? The facts are too complicated for a complete recital, but some history is required. Here goes:

1.                   The government sued a number of parties, including United Technologies, under CERCLA. The claims related to the Davis Liquid Waste Site, in Smithfield, Rhode Island.

2.                   The defendants brought third-party claims against a number of other PRPs, including Ashland.

3.                   Some original defendants (including this firm’s client, Ciba-Geigy) settled.

4.                   The United States went to trial against UT and obtained a finding of liability. UTC then settled with the government and agreed to perform a portion of the remedy. It also agreed to allocate sums recovered from the third-party defendants with the government.

5.                   A number of third-party defendants, not including Ashland, settled with UTC – and the government. 

6.                   The case against Ashland (and some other non-settlors) went to trial. Ashland was found liable. The judge allocated liability and imposed a percentage share on Ashland. 

7.                   At some point, EPA directly notified Ashland that it was a PRP and sent Ashland an administrative order on consent, requiring it to perform certain groundwater cleanup.

8.                   It is not clear if Ashland signed the AOC, but, according to an EPA affidavit, Ashland agreed to perform certain cleanup work.

9.                   Ashland spent approximately $2 million performing the work.

10.               It then brought claims under § 107 of CERCLA.  It had no contribution claim, because nothing had happened to bring Ashland under the ambit of § 113.

11.               The United States and the State of Rhode Island both filed amicus briefs on behalf of those sued by Ashland, arguing that their respective settlements with UTC barred Ashland’s claims.

Faced with these facts, what did Judge Lisi do? First, she found that Ashland does have a right to bring claims under § 107. Because it was not sued by the United States or Rhode Island, Ashland was not limited to contribution claims.

Second, Judge Lisi found that the allocation previously reached in the private action was not applicable to this case, precisely because the private case was for contribution and this case is a claim under § 107, which is assumedly one for joint and several liability. While Judge Lisi noted that the defendants in this action can bring counterclaims for contribution, the burden is on them to prove that the harm is divisible. 

As someone might say, OMG. Here’s what Justice Thomas has done to us. The recalcitrant party has a joint and several claim against those who settled with the government, and the burden is on the good guys to prove that liability should not be joint and several. 

If I may be permitted to gloat, I raised this specter following Aviall and Atlantic Research, and was generally told not to worry; the district courts would find ways to reach practical results. Plan B would seem to be the 1^st Circuit Court of Appeals. Plan C? I can’t wait to see what Justice Thomas would make of this fine mess.

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There are only two permissible answers to this question:

1.                   Yes

2.                   I don’t know.

I was reminded of this reality in reading the decision issued earlier this month in Solutia v. McWane, in which Chief Magistrate Judge Greene of the Northern District of Alabama held that a party which incurs response costs pursuant to a consent decree or administrative order may not bring an action for cost recovery under § 107 of CERCLA and is instead limited to a contribution action under § 113 of CERCLA. 

For those of our readers who are either masochists or do Superfund law for a living and thus have to keep up with this stuff, the decision is worth reading; it’s a useful summary of the post-Atlantic Research, post-Aviall case law. At bottom, the decision is a reasonable, practical result. Why should the nature of a private party’s right of action depend on whether the party did the cleanup itself or instead reimbursed the government for costs incurred pursuant to a government-led cleanup?

I will say that it’s not obvious to me that the Supreme Court would agree, were it to hear the case, simply because the Supreme Court has appeared to be so fixated on the traditional common law understanding of the nature of contribution as the right of a contribution plaintiff to receive a payment from a third party defendant when the contribution plaintiff has paid to the original plaintiff more than its fair share of a common liability.  Direct response costs don’t fit neatly into that traditional contribution model. However, it's probably a moot point, because it is hard to picture this issue getting to the Supreme Court. I expect the justices to conclude that they’ve heard enough of these cases by now.

We’re still left with my original question. Why is it that 30 years after CERCLA was passed and 24 years after the SARA amendments, the nature of third party claims still isn’t clear? Because CERCLA is incomprehensible, that’s why.

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One of the outstanding questions following the Supreme Court decisions in Aviall and Atlantic Research was whether a party which had entered into a consent decree with the United States and incurred direct response costs as a result could bring an action for cost recovery under § 107 of CERCLA or whether such a settling party would instead have a contribution action under § 113. The problem facing practitioners and the courts following Atlantic Research was that the Supreme Court seemed to have backed itself into a corner. By focusing its analysis of § 113 so narrowly on the traditional common law understanding of contribution, it at least suggested that contribution claims under § 113 might be limited to situations in which the plaintiff had paid “reimbursement” to satisfy a “common liability.”

Unfortunately, if a party which settled with the government and paid direct response costs could instead bring an action under § 107, then the defendant in the private action would face the specter of joint and several liability, notwithstanding that the private plaintiff was also liable. The Supreme Court thought it addressed this issue in Atlantic Research by noting that the defendant in a private action under § 107 could bring a contribution counterclaim, thus forcing an equitable allocation. However, as the Third Circuit noted in Agere Systems v. Advanced Environmental Technology, decided earlier this week, the Supreme Court’s solution doesn’t work when the private plaintiff has entered into a consent decree with the government pursuant to which it has protection against claims for contribution under § 113. Can Justice Thomas say “oops”?

What was the Third Circuit’s solution? Like Justice Thomas, it chose the straightforward approach. It simply barred private claims under § 107 where the private plaintiff would otherwise be liable under CERCLA, but, by virtue of contribution protection, would be immune from a counterclaim under § 113. While the holding is certainly right as a matter of policy, as a matter of law it seems largely a case of what we lawyers might call ipse dixit – basically, it’s so because I say so. Because it would be unfair to allow a private liable party to obtain a joint and several verdict against another private party, the court simply forbid it.

Interestingly, the Third Circuit did not address the question whether the plaintiffs had a right to bring a contribution action under § 113; it appeared to assume that they had such a right, without discussing the Supreme Court’s indication that contribution claims might be limited to reimbursement. If forced to face the issue directly, the Third Circuit would presumably have said that, just as we have to be fair to private defendants and not impose joint and several liability on them, we have to be fair to private plaintiffs and give them some kind of remedy. If they don’t have claims under § 107, they simply must have claims under § 113.

Given the practicality of the result, it seems likely that other courts of appeal will follow the Third Circuit’s lead. However, if the issue does somehow make it up to the Supreme Court, I still wouldn’t bet on the outcome there. They have surprised us before with their Superfund jurisprudence.

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For those following developments in Superfund cost recovery and contribution case law after the Atlantic Research decision, it seemed worth noting that the Second Circuit Court of Appeals recently held, in W.R. Grace & Co. – Conn. v. Zotos International, Inc., that a party who incurs response costs pursuant to a state consent order has a right to bring an action to recover those response costs under § 107 of CERCLA.

Thus, the 2^nd Circuit has answered the question left open by note 6 in Atlantic Research, and come down on the side of actions under § 107, rather than § 113. Although it is only dicta in Zotos, the 2^nd Circuit also seemed to support the view the claims under § 113 will be narrowly limited to those that really are traditional contribution claims, i.e., actions in which the contribution plaintiff seeks to recover from one party payments that it made to another party – usually the United States or a State – to address the contribution plaintiff’s potential liability under CERCLA.

I’m tempted to say that this result is unsurprising and perhaps even obvious – except that nothing is unsurprising or obvious under CERCLA. As I have previously noted, only the Supreme Court seems to think that interpreting CERCLA is a straightforward exercise, so there is no assurance that the Zotos interpretation will sweep the land.

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For those of you who haven’t been keeping up with the law on private cost recovery and contribution claims under CERCLA, following the decision in Atlantic Research, I recently participated in a panel discussion on the issue. A copy of my presentation can be found here.

The most contentious issue during the discussion was whether private parties who have settled with the government and performed direct cleanups – as opposed to reimbursing the government – as a result of such settlements have an action for cost recovery under § 107 of CERCLA or an action for contribution under § 113 of CERCLA. 

My own view is that the Supreme Court has backed itself into a corner by so narrowly associating claims under § 113 with traditional contribution claims. It seems to me that the Court has limited contribution claims to situations where one liable party has reimbursed the original plaintiff for more than the contribution plaintiff’s fair share of the common liability. Thus, in a situation where the private plaintiff has directly incurred response costs – even if following a consent decree – no contribution claim lies. This is also consistent with a plain reading of § 107 – and we know that the Supreme Court loves plain language interpretations of CERCLA – which provides for claims for response costs, without any distinction being drawn between whether those costs were incurred voluntarily or not.

As I said at the panel, I just wish that the language of CERCLA was as clear to me and all of the practitioners with whom I work as it apparently is to Justice Thomas and the rest of the Supreme Court.

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