The Supreme Court's Limitation On Private Cost Recovery Actions Under Superfund: No Good Deed Goes Unpunished - Part I

Friday, April 1, 2005 - 00:00

Part II of this article will appear in the May issue of The Metropolitan Corporate Counsel.

Under § 113 of the Comprehensive Environmental Response, Compensation and Liability Act, ("CERCLA" or Superfund)1 a party who cleans up property contaminated by hazardous substances may seek contribution from another party that may be liable for the cleanup (otherwise called a "potentially responsible party" or "PRP").2 Specifically, CERCLA provides that any person "may seek contribution from any other person" who is liable or potentially liable under CERCLA § 107(a), "during or following any civil action under" CERCLA § 106 (which authorizes the government to require responsible parties to clean up contaminated sites) or § 107 (which authorizes the government and certain private parties to recoup their response costs for a cleanup from PRPs).3 Recently, in its December 13, 2004 decision in Cooper Industries Inc. v. Aviall Services Inc.,4 the U.S. Supreme Court limited the ability of PRPs to seek contribution from other PRPs under CERCLA. The decision will undoubtedly have a profound impact on how environmental liabilities are litigated among the groups of persons liable under CERCLA.5

Prior to the Cooper Industries decision, contribution actions under § 113 were frequently employed by PRPs who voluntarily cleaned up property to seek partial reimbursement for cleanup costs.6 In Cooper Industries, the Supreme Court reversed a Fifth Circuit decision, which held that CERCLA permitted a PRP who voluntarily cleaned up property to obtain contribution from other PRPs even if he or she hadn't been the subject of a § 106 or § 107 action.7 Rather, the Supreme Court reinstated a lower court decision that held that the language of CERCLA § 113(f)(1) limits CERCLA contribution to parties who have been ordered by the government to clean up a contaminated site pursuant to CERCLA § 106 or sued under § 107. The impact of this decision is that unless a PRP who voluntarily undertakes a cleanup of a contaminated site can persuade the government or an innocent party to commence an enforcement action, he or she cannot seek contribution for response costs from other PRPs under CERCLA. The Supreme Court's ruling appears to have given validity to the adage that, "no good deed goes unpunished."

Cooper Industries sold four aircraft maintenance sites in Texas to Aviall Services. After operating the sites for several years, Aviall discovered that both it and Cooper had contaminated the properties. Aviall notified the state environmental agency of the contamination. The agency directed Aviall to clean up the properties and threatened to pursue an enforcement action if it did not. However, neither the State nor the Federal government took judicial or administrative measures to require Aviall to remediate the sites. Seeking to avoid the time and expense of judicial or administrative proceedings, as many companies do, Aviall commenced a cleanup under the agency's supervision in 1984. After an eleven-year cleanup, Aviall sold the properties to a third party, but retained liability for approximately $5 million in cleanup costs. Aviall then filed an action against Cooper in the Northern District of Texas to recover its cleanup costs under CERCLA § 113(f)(1).

The District Court held that Aviall could not recoup its cleanup costs from Cooper because Aviall had not been sued under § 106 or § 107 of CERCLA.8 The Fifth Circuit eventually reversed the District Court, holding that § 113(f)(1) of CERCLA allows a PRP to obtain contribution from other PRPs regardless of whether it has been sued under § 106 or § 107. The Fifth Circuit reasoned that the first sentence of § 113(f)(1), sometimes referred to as the "enabling clause," which provides that any person "may" seek contribution from any other person "during or following a civil action" under § 106 or § 107, does not mean that contribution actions are "only" allowed in such circumstances.9 Moreover, the Fifth Circuit reasoned that the last sentence of § 113(f)(1), sometimes referred to as the "savings clause," which provides that "[n]othing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under [§ 106 or § 107 of CERCLA]," supported its conclusions that § 113(f)(1) authorized contribution actions not just during or following a civil action under § 106 or § 107, but even in the absence of such a proceeding.10

In reversing the Fifth Circuit, Justice Thomas, who wrote for the 7-2 majority, narrowly construed the language of the enabling clause of § 113(f)(1), holding that the natural meaning of the language "during or following"' a civil action under § 106 or § 107 created a limitation on the rights of PRPs seeking contribution.11 The Court reasoned that if § 113(f)(1) were read to authorize contribution actions regardless of the existence of a § 106 or § 107 action, then Congress need not have included the explicit "during or following" language in the enabling clause, as such language would be entirely superfluous.12 Moreover, according to Justice Thomas, Congress also would not have included CERCLA § 113(f)(3)(B),13 which permits contribution actions following an administrative or judicially approved settlement resolving liability to the United States or a State, as such a provision would also be superfluous. Lastly, the Supreme Court disagreed with the Fifth Circuit's interpretation of the savings clause and held that:

[t]he sole function of the [savings clause] is to clarify that § 113(f)(1) does nothing to 'diminish' any cause(s) of action for contribution that may exist independently of § 113(f)(1). In other words, the sentence rebuts any presumption that the express right of contribution provided by the enabling clause is the exclusive cause of action for contribution available to a PRP.14

According to the Court, its conclusion is supported not only by the plain meaning of § 113(f)(1), but by § 113 as a whole. The Court pointed out that § 113 provides limitations periods for the two express avenues of contribution it permits (contribution "during or following" a § 106 or § 107 action or contribution following an administrative or judicially approved settlement), one beginning at the date of judgment and one beginning at the date of settlement.15 However, the Court noted that § 113 does not contain a provision commencing the limitations period if a judgment or settlement never occurs, as would be the case with a purely voluntary cleanup. Based on the foregoing, the Court held that § 113(f)(1) authorizes contribution claims only "during or following" a civil action under § 106 or § 107, and a party that has never been subject to such an action cannot seek contribution under CERCLA.16

Citing Cooper Industries, the Eastern District of New York, in AMW Materials Testing Inc. v. Town of Babylon,17 recently dismissed a company's contribution claim under CERCLA § 113 because the company cleaned up the site voluntarily, not during or following a § 106 or § 107 action. In AMW Materials, a fire broke out at AMW's facility due to its use of a highly flammable solvent. As a result, toxic chemicals were released into the environment. The landowner and AMW voluntarily undertook cleanup efforts at the site. The NY State Department of Environmental Conservation monitored the cleanup, but never took judicial or administrative measures to compel a cleanup. The owner and AMW subsequently sued the town and local fire company, who had extinguished the fire, for, inter alia, contribution under CERCLA § 113. The Court held that plaintiffs' claim was barred under § 113 because their cleanup of the site was voluntary and a civil action under § 106 or § 107 had never been filed by the state or federal government.18

Plaintiffs, in AMW Materials, also sought indemnification under CERCLA § 107(a). Citing Commander Oil Corp. v. Barlo Equipment Corp.,19 the Court held that in order to bring such a claim, a plaintiff must be an innocent party. Id. The Supreme Court in Cooper Industries, however, re-opened the issue of whether a PRP may seek indemnification from other PRPs under CERCLA § 107. This issue, along with other issues raised by the Cooper Industries decision, will be explored more fully in Part Two of this article.

Conclusion

The Supreme Court's decision is likely to discourage PRPs from voluntarily cleaning up contaminated sites because they will not be able to recoup their response costs from other PRPs under CERCLA. Rather, PRPs will be relegated to asserting state statutory claims or common law claims to recover response costs, which method of recovery is typically not preferable, as such claims will not allow PRPs the same degree of access to the Federal courts. To preserve their right to seek contribution under CERCLA and avail themselves of the Federal courts, PRPs aware of contamination on their property may be apt to wait for government to compel a cleanup or remediate the site and sue for the recovery of its response costs. Given the government's limited resources and the less-than-aggressive posture of the Bush Administration (which submitted a brief supporting the prevailing party's decision) in environmental enforcement, many contaminated sites that otherwise may have undergone a voluntary cleanup may remain unremediated for longer periods of time.

1 42 U.S.C. § 9601 et seq.

2 42 U.S.C. § 9613(f)(1)

3 Id.

4 125 S.Ct. 577, 579 (2004)

5 CERCLA § 107(a) imposes liability on four classes of persons, including: (1) the current owner or operator of a facility; (2) the owner or operator of the facility at the time hazardous substances were disposed there; (3) any person who generated or arranged for the treatment or disposal of a hazardous substance at the facility; and (4) any person who transported hazardous substances to the facility. 42 U.S.C. § 9607(a).

6 See, e.g., Bedford Affiliates v. Sills, 156 F.3d 416 (2d Cir. 1998)

7 Aviall Servs., Inc. v. Cooper Indus., Inc., 312 F.3d 677 (5th Cir. 2002), rev'd and remanded by Cooper Indus., Inc. v. Aviall Servs., Inc., 125 S.Ct. 577 (2004)

8 Aviall Servs., Inc. v. Cooper Indus., Inc., No. Civ. A. 397CV1926D, 2000 WL 31730, at * 4 (N.D. Texas Jan. 13, 2000), rev'd by Aviall Servs., Inc. v. Cooper Indus., Inc., 312 F.3d 677 (5th Cir. 2002), rev'd and remanded by Cooper Indus., Inc. v. Aviall Servs., Inc., 125 S.Ct. 577 (2004)

9 Cooper Indus., Inc., 312 F.3d at 692

10 Id. at. 680

11 Cooper Indus., Inc., 125 S.Ct. at 583

12 Id.

13 42 U.S.C. § 9613(f)(3)(B)

14 Cooper Indus., Inc., 125 S.Ct. at 583-84

15 42 U.S.C. § 9613(g)(3)(A) and (B)

16 Cooper Indus., Inc., 125 S.Ct. at 584

17 348 F. Supp.2d 4 (E.D.N.Y. 2004)

18 Id. at 11.

19 215 F.3d 321 (2d Cir. 2000)

Richard G. Leland is a Partner and Toni L. Finger is an Associate at Kramer Levin Naftalis & Frankel LLP. Mr. Leland chairs the firm's Environmental Law Department, of which Ms. Finger is a member.

Please email the authors at rleland@kramerlevin.com or tfinger@kramerlevin.com with questions about this article.