Importance of Judicial Approval of CERCLA Settlements

Before a Superfund settlement becomes enforceable, it must be reviewed by a federal court to confirm that it is fair, reasonable, and consistent with CERCLA’s objectives.  This judicial review is at the heart of CERCLA’s settlement process.  Since Superfund settlements provide broad protection to settling parties, judicial approval provides the necessary and exclusive procedural mechanism  to vouchsafe that a proposed settlement is in the interest of the public as well as all  other parties.

Two recent appellate decisions underscore the central role of judicial review in Superfund settlements.   In ASARCO, LLC v. Union Pacific Railroad Company, the Eighth Circuit ruled that the owner of a contaminated site which had settled its CERCLA liability with the United States could not be collaterally sued by another PRP.  As the court explained, the PRP’s exclusive remedy was to challenge the proposed settlement  during the judicial review of that settlement.  In reaching this conclusion, the court rejected the PRP’s argument that the existence of a tolling agreement among the PRPs implicitly meant that neither of the parties could resolve its liability with the government:

We see nothing untoward in [the site owner’s] natural desire to receive the benefits of settlement conferred by Congress. [CERCLA’s] protections apply even in cases where the settling party is involved in pending contribution litigation.

The second decision was the Ninth Circuit’s opinion in State of Arizona v. City of Tucson, which my partner Seth Jaffe blogged about a few days ago.   There, the court overturned a district court’s approval of CERCLA de minimis settlements between the State of Arizona and a number of PRPs.  According to the Ninth Circuit, the district court had simply accepted the state’s assertion that the settlements were fair without conducting any independent analysis of the appropriateness of the liability shares being assigned to the settling parties.   Although the district court did not have to have a full factual record developed after discovery on which to base its decision, the court needed to engage in a comparative analysis with enough factual information to fairly assess the reasonableness of the proposed settlement.

These two appellate decisions are two sides of the same principle.  Each shows that proper judicial approval of Superfund settlements is the key to fullfilling CERCLA’s policy of facilitating early settlements while still protecting the rights of other parties and the public.



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