The chaos unleashed by Aviall continues in a recent decision by the Seventh Circuit. In Bernstein v. Blankert, the Seventh Circuit revisited the issue whether a party having entered into an Administrative Order by Consent had a claim against other PRPs for cost recovery under Section 107(a) or for contribution under Section 113(f)(1). Offering a novel and entirely misguided conclusion, the court found that whether a party has a claim for cost recovery or for contribution hinges on whether that party had completed all of its obligations under the AOC.
According to the Seventh Circuit, CERCLA provides that a party has a contribution action when it (1) is sued by the government or (2) has “resolved its liability to the United States or a State”. Because a party entering into an AOC has by definition not been sued by the government, the court reasoned that such a party can only have a contribution action if it has resolved its liability. So far so good, but the court then takes a sharp left turn where no court has previously gone when it determines that a party does not “resolve its liability” merely by entering into an AOC. Rather, that party’s liabilities are only resolved when its covenant not to sue becomes effective after it has performed all of its obligations under the AOC and after EPA has certified completion of those obligations. Prior to that time, the party has a cost recovery action under Section 107.
In concluding that the plaintiff in Bernstein had a cost recovery claim and not a contribution claim, the Seventh Circuit found an ingenious route around a statute of limitations issue that might have let a site operator of a badly contaminated property escape liability. However, in concluding as it did, the court unquestionably made bad law and interjected more confusion into an already confused area of CERCLA jurisprudence. If the Seventh Circuit were right that merely signing an AOC did not resolve a party’s liability, then that party could be successfully sued by the government even when that party was performing its obligations under the AOC. Plainly, that is not correct. Nor did the Seventh Circuit address why CERCLA would have been structured so that a party’s remedy gets worse after it has performed its obligations under an AOC than the remedy it had before it completed those obligations. Likewise the Seventh Circuit leaves unaddressed what happens when a cost recovery action morphs into a contribution action during a case because the plaintiff completed its performance under an AOC. Surely, the better rule would be that a party has a contribution claim when it enters into an AOC and that the statute of limitations for the claim, like for a cost recovery claim, does not accrue until after all obligations under the AOC are completed.