The Comprehensive Environmental Response Compensation and Liability Act (CERCLA)1 imposes strict liability for environmental cleanup costs on several categories of parties, including current owners and operators that had no hand in contaminating the property in question. CERCLA is also retroactive,2 meaning that it “reaches back indefinitely into the past to make an entity liable for the cleanup of hazardous materials it may have properly disposed of decades ago.”3 CERCLA sites are often decades old, and cleanup work may take place in stages and over many years, sometimes by design and sometimes because the full extent of contamination is not discovered until years later. Litigants involved with these so-called legacy sites often raise statute of limitations defenses, resulting in several complex legal issues that confront CERCLA practitioners.
The first is whether a party has asserted a cost-recovery claim under CERCLA Section 107(a) or a contribution claim under Section 113(f). Because the two causes of action carry different limitations periods, the application of CERCLA’s statute of limitations depends on which of these mutually exclusive remedies is available.
The second issue is when the statute of limitations accrues (or starts to run), a superficially simple question that has spawned a host of litigation over issues like the elusive distinction between a “removal” or “remedial” action4 and whether the precise wording of a consent order imposes an obligation to clean up the property in question.5
SECTIONS 107 AND 113: MUTUALLY EXCLUSIVE CLAIMS FOR RELIEF
CERCLA provides plaintiffs with two distinct statutory mechanisms to recover response costs or to shift those costs to others: Section 107(a) cost recovery claims and Section 113(f) contribution claims.6 As a general rule, the remedies set forth in Sections 107 and 113 are mutually exclusive. “[C]osts incurred voluntarily are recoverable only by way of § 107(a)(4)(B), and costs of reimbursement to another person pursuant to a legal judgment or settlement and recoverable only under § 113(f).”7 Because these claims for relief have different statutes of limitations, which type of claim a party is entitled to bring may determine whether that claim is timely, and therefore whether that party can recover any of its response costs under CERCLA.
Claims for response costs under Section 107
Section 107(a) of CERCLA authorizes the United States, a state, or “any other person” to seek reimbursement for all removal or remedial costs associated with the hazardous materials on a property. Section 107(a)(4)(B) provides for the recovery of “necessary” response costs incurred that are consistent with the National Contingency Plan (NCP).8 Entities that have incurred response costs cleaning contaminated sites may sue to recover those costs from four categories of potentially responsible parties (PRPs): (i) present owners and operators of facilities; (ii) past owners and operators at the time the hazardous substances was disposed of; (iii) those who arranged for disposal or treatment at a facility; and (iv) those who transported hazardous substances to a facility.9
Section 107(a) cost recovery claims presumptively impose joint and several liability and have two statutes of limitations.10 The Supreme Court’s decision in US v. Atlantic Research has been interpreted to mean that “[w]ith regard to § 107(a) cost recovery claims … a private party who voluntarily undertakes a cleanup action … [and] remediates the hazardous material without the judicial spur of § 106 or § 107 – can seek recovery of response costs under § 107(a)(4)(B).”11
Indeed, “every federal court of appeals to have considered the question since Atlantic Research …has said that a party who may bring a contribution action for certain expenses must use the contribution action, even if a cost recovery action would otherwise be available.”12 As discussed below, this issue becomes more complex when the costs in a prior action vary from the costs in a subsequent action.
Armed with the presumption of joint and several liability, a plaintiff bringing a CERCLA action for response costs under Section 107 does not have to prove the equitable share (or responsibility) of a defendant for the total response costs once its prima facia case is proven and can shift the allocation problems to the defendants. Another significant tactical advantage is the potential to avoid liability for the “orphan” share of the response costs. However, some of this advantage may be blunted by the defendant’s ability to counterclaim against the plaintiff for contribution under Section 113, provided that the plaintiff is a PRP under Section 107(a). But so long as the plaintiff properly brought its claim under Section 107, it will benefit from the statute of limitations applicable to such claims even if the defendant can dull the other tactical advantages by filing a counterclaim under Section 113.
Claims for contribution under Section 113
A CERCLA contribution claim can be brought in two circumstances. First, Section 113(f)(1) provides that “[a]ny person may seek contribution from any other person who is liable or potentially liable … during or following any civil action under section 9606 … or under section 9607(a).” Second, Section 113(f)(3)(B) provides a right of contribution against third parties to those who have resolved their CERCLA liability with “the United States or a State in an administrative or judicially approved settlement.” In either instance, there must be a “trigger” or condition precedent to allow a CERCLA contribution action to go forward.
As opposed to the joint-and-several liability standard that applies in Section 107 actions, the plaintiff in a Section 113 action has the burden of proving each defendant’s “equitable share” under either of these two contribution claims for relief.13 Section 113(f)(1) provides that a court “may allocate response costs among liable parties using such equitable factors as the court determines are appropriate.”
The phrase “equitable factors” grants the court wide discretion to fashion an allocation.14 “[T]he law does not command mathematical preciseness from the evidence in finding damages. Instead, all that is required is that sufficient facts … be introduced so that a court can arrive at an intelligent estimate without speculation or conjecture.” 15
A critical benefit for PRPs that settle with the government is that CERCLA protects them from “claims for contribution regarding matters addressed in the settlement.”16 This scheme was created to ensure “swift and effective response to hazardous waste sites,”17 by encouraging the government “and potentially responsible parties to launch clean-up efforts first, then recover the cost from other responsible parties later – through settlements, consent decrees and, if need be, judgments.”18 Not only do “non-settlors lose their contribution rights, [but] defendants who are parties to a CERCLA settlement retain the right to seek contribution from the non-settling PRPs.”19 Although Section 113(f)(2)’s contribution bar applies only to settlements with “the United States or a State,” courts frequently extend similar contribution protection to settlements with private parties using the courts’ equitable discretion under Section 113(f)(1).20 Private plaintiffs have also provided the common law equivalent—indemnification—to the settling defendants to facilitate the settlement.
To determine whether a contribution action is barred by a prior consent decree or settlement, courts consider whether the subject matter of the settlement and the contribution action are the same. If they are not, courts turn to the text of the agreement as a starting point for interpreting the scope of the matters addressed.21 When interpreting such an agreement, courts look to various factors, including “the particular location, time frame, hazardous substances, and clean-up costs covered by the agreement.”22 This topic, which is discussed in greater detail below, can prove outcome determinative when a statute of limitations defense is raised.
Preclusion of Section 107 claims
A Section 107 claim is not available when a party has a claim for contribution under Section 113 for those same costs. The various circuit courts have recognized that allowing a party to proceed under Section 107 would “in effect nullify” congressional intent of creating a distinct contribution remedy under Section 113.23
Although courts have coalesced around this clear rule in the years following Atlantic Research, some litigants faced with preclusion of their Section 107 claim still argue that Atlantic Research may allow Section 107 actions where the PRP incurred costs (or entered into an agreement) “voluntarily.” However, as the Third and Seventh Circuits have recently observed, “[v]oluntariness is irrelevant.”24 The basic rule is that simply incurring response costs prevents a party from bringing a cost recovery action under Section 107 if those cost are incurred pursuant to some form of an agreement or litigation.25
A critical, but largely unanswered, question is whether the settling parties’ contribution bar precludes the non-settlor that has actually incurred response costs from bringing a cost recovery action under Section 107. Clearly, if the non-settlor has incurred those costs by virtue of litigation or a consent decree, it would be precluded because it would be restricted to a contribution claim. However, the Supreme Court suggested that a voluntary expenditure might not preclude an action for response costs. Similarly, a non-settlor that incurs response costs after being issued a unilateral administrative order may be able to maintain a Section 107 action.
CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Real Estate Lawyer.
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