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Supreme Court Unanimously Reinstates Right to Reimbursement Under CERCLA for Voluntary Environmental Cleanup Costs
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July 2, 2007
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By Geoffrey H. Yost
Thelen Reid Brown Raysman & Steiner LLP
In a key ruling that clarifies years of confusion and conflict among the lower courts, the U.S. Supreme Court has reinstated the classic "Section 107" environmental cost recovery claim under the federal Superfund law, the Comprehensive Environmental Recovery, Compensation and Liability Act (CERCLA). U.S. v. Atlantic Research Corp., No. 06-562, 551 U.S. __, 127 S.Ct. 2331 (2007).
In a 2004 decision, the court severely limited the CERCLA §113 "contribution action." Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157, 125 S.Ct. 577 (2004). Section 113 actions had been the one avenue of CERCLA cost recovery still available to private parties that: (a) had cleaned up property voluntarily; and (b) were themselves potentially responsible for some part of cleanup costs. The court held that a private party could not seek contribution if its payment of cleanup costs was voluntary, i.e., not compelled by a lawsuit or a government order. But Justice Thomas left open the question of whether a direct cost recovery under CERCLA §107 was available to private parties. Previous Circuit Court rulings had held that such a recovery was available only to the federal government or to "innocent" parties.
In Atlantic Research, the Supreme Court addressed the §107 question and decided it in favor of cost recovery by plaintiffs.
Plaintiff Atlantic Research leased property from the Department of Defense where it retrofitted rocket motors for the surrounding Shumaker Naval Ammunition Depot. The property was found to be contaminated, and Atlantic Research cleaned it up at its own expense. Because it operated at the property and may have contributed to the contamination, Atlantic Research was a potentially responsible party or PRP. Atlantic Research had not, however, been sued over the contamination or ordered by the government to clean it up. Atlantic Research sought to recover some of its cleanup costs from the government by suing for contribution under CERCLA §113.
When the Supreme Court foreclosed §113 contribution actions arising from "voluntary" cleanups in Cooper and Atlantic Research's claim was dismissed, it amended its complaint to include a §107 claim. But, the District Court dismissed the §107 claim, too, relying on prior 8th Circuit precedent holding that PRPs, as non-innocent parties, do not have the right to bring §107 actions. This left Atlantic Research with no federal statutory tool for recovering its cleanup costs, and it appealed. The 8th Circuit reversed the District Court and joined the 2nd and 7th Circuits in holding that §107 does authorize a suit by "any person," even PRPs. The Supreme Court affirmed.
It is settled law that CERCLA §107 imposes liability on any person responsible for cleanup or "response" costs incurred by the United States, any state or any Native American tribe. One phrase of §107, subsection (a) (4) (B), imposes liability for "costs of response incurred by any other person." The arguments in the Supreme Court focused on who these "other persons" were and, thus, who else besides governments and tribes should be able to bring §107 claims. The federal government argued that "other persons" meant non-PRPs. Atlantic Research argued that it was broader, applying to everyone beyond governments and tribes.
The Supreme Court analyzed the subsection and agreed with Atlantic Research: "[T]he plain language of subparagraph (B) [of CERCLA Section 107 (a) (4)] authorizes cost-recovery actions by any private party, including PRPs." It found that because even parties that did not actually cause contamination can be defined as PRPs, the government's interpretation "would reduce the number of potential plaintiffs to almost zero, rendering §107(a)(4)(B) a dead letter."
The government argued that the distinction between a §107 and §113 action could be lost, and because §107 is available to recover voluntary cleanup costs and has a longer statute of limitations, §113 would be ignored. The court rejected this notion and delineated when each section is appropriate. A PRP that pays to satisfy a judgment or settlement does not directly incur response costs and thus would not have a §107 action. That party would have a §113 action and could bring that action "during or following" a CERCLA §107 lawsuit to ensure equitable allocation of response costs. On the other hand, a PRP that cleans up contamination voluntarily, without being sued or ordered to do so, could bring a §107 claim.
Finally, the court seemed to reinstate what was historically a CERCLA plaintiff's favorite leverage: joint and several liability. The court stated in a footnote: "We assume without deciding that §107(a) provides for joint and several liability," but at the same time, the court gave some comfort to PRP defendants. A plaintiff "could not avoid §113(f)'s equitable distribution of reimbursement costs among PRPs," the court held, "by instead choosing to impose joint and several liability on another PRP in an action under §107(a)." Since §113 actions may be brought "during" a CERCLA lawsuit, the defendant could ensure "equitable apportionment of costs among the liable parties," including the PRP plaintiff, by responding to a §107 claim with a §113 counterclaim. This does not, however, protect parties from being liable for a portion of the "orphan shares," which are the costs attributable to absent or insolvent PRPs.
Atlantic Research appears to be the clear statement on cost recovery remedies under CERCLA that the lower courts and environmental litigators have sought for decades. It comes from a unanimous court. Justice Thomas expressed skepticism in Cooper Industries about implied rights of recovery under federal statues. But, consistent with that skepticism, Justice Thomas wrote in Atlantic Research that the ruling comes from the "plain meaning" of the text of CERCLA, not from any inference.
Private parties that have to pay to clean up someone else's mess, whether it be under compulsion or voluntarily, have regained the right to bring a potentially strong, strict liability CERCLA claim that can impose joint and several liability on the defendants. District Courts that dismissed §107 claims based on the Cooper Industries decision in 2004 will be asked to reinstate them in pending cases.
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For more information about the issues covered in this report, please contact Geoffrey H. Yost in our San Francisco office at (415) 369-7552 or at gyost@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2007 Thelen Reid Brown Raysman & Steiner LLP
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