Part I of this article appeared in the April 2005 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 In its recent decision in Cooper Industries Inc. v. Aviall Services Inc.,3 the United States Supreme Court limited this contribution right by holding that a PRP cannot sue another PRP for cleanup costs under CERCLA without first being the subject of a civil action under § 106 or § 107 of CERCLA.4 As noted in Part One of this article, the Supreme Court's decision will likely discourage PRPs from voluntarily cleaning up contaminated sites because they will not be able to recoup such costs from other PRPs under CERCLA.
The Supreme Court's decision will also likely impact cleanups undertaken by private parties pursuant to state voluntary cleanup programs or Brownfield agreements. Because such parties cannot seek contribution under § 113(f)(1) in the absence of a § 106 or § 107 action, the only other avenue to obtain contribution under CERCLA is under § 113(f)(3)(B), which provides a right of contribution for "[a] person who has resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement."5
In order to avail themselves of this contribution right, such parties may try to shoehorn voluntary cleanups into "administrative settlements." However, state voluntary cleanup agreements and Brownfield agreements that are not undertaken pursuant to CERCLA or do not provide for CERCLA-quality cleanups probably do not qualify as "administrative settlements" under CERCLA § 113(f)(3)(B). Recently, for example, in City of Waukesha v. Viacom International, Inc.,6 the Eastern District of Wisconsin held that the City of Waukesha could not assert a claim for contribution under CERCLA § 113(f)(3)(B) because a "cost share pilot program contract" the City entered into with the state environmental agency did not constitute "an administrative or judicially approved settlement that resolves the City's CERCLA liability to [the State]."7 In order to recover environmental cleanup costs, therefore, parties undergoing voluntary cleanups may be relegated to state or common law claims. However, this method of recovery is typically not preferable because merely asserting state law claims will not allow parties the same degree of access to the Federal courts to recoup cleanup expenses. Thus, in the absence of the availability of a CERCLA contribution claim, parties may hesitate to enter into state voluntary cleanup agreements, especially in states where state "superfund" statutes do not permit a private right of action for contribution.
The Cooper Industries decision also re-opened what most practitioners considered a closed related issue; the right of a PRP to seek indemnification under CERCLA § 107. This issue is of elevated importance in light of the Supreme Court's decision, as CERCLA § 107 may be the only vehicle left for a PRP who has conducted a voluntarily cleanup to recover its response costs. Unlike CERCLA § 113, which is specifically delineated as providing a right of contribution among PRPs, CERCLA § 107 is a direct cost recovery action. The principal difference between a § 107 claim and a § 113 claim is that liability under § 107 is joint and several, meaning that any one PRP that is found liable for response costs under CERCLA is liable for all response costs, not just its share. Courts of Appeal in virtually all of the circuits8 have held that a PRP is precluded from commencing a § 107 claim against another PRP and is relegated to a contribution action in which the court has discretion to allocate liability among PRPs based on a number of equitable factors.9 Through a procedural quirk in the case, however, the Supreme Court opened the door for a change in this widely accepted rule.
When Aviall commenced an action in the Northern District of Texas to recover approximately $5 million in cleanup costs from Cooper Industries, Aviall included a claim under CERCLA § 107(a) as the basis for a cost recovery claim against Cooper and a claim under CERCLA § 113 as the basis for a contribution claim. Aviall later amended its complaint to include a combined § 107/113 claim. Justice Thomas, writing for the 7-2 majority, noted that the District Court took the consolidated claim to mean that Aviall was relying on § 107, "not as an independent cause of action" but "only to the extent necessary to maintain a viable" contribution claim under § 113(f)(1) and that the merits of a § 107 claim were not addressed in the courts below.10 Aviall did, however, raise the issue of its entitlement to bring a § 107 claim in its brief before the Supreme Court, apparently relying on language in a prior case, Key Tronic Corp. v. United States,11 which dealt principally with a party's ability to recover litigation expenses under CERCLA. The Supreme Court, however, dodged the issue, deciding not to address an issue that had not been decided by the Courts below,12 but left the door open for a definitive ruling on the issue by remanding the case to the Fifth Circuit.13
In a dissenting opinion, Justice Ginsberg asserted that remand was unnecessary because the Fifth Circuit, which reviewed the District Court's decision, had decided the issue of whether Aviall could pursue a § 107 claim for relief against Cooper. She observed that Aviall identified § 107 as the grounds for an independent cost-recovery claim in its original complaint, but had amended its complaint to allege § 107 in tandem with § 113 as the basis for its contribution claim in accordance with then-governing Fifth Circuit precedent.14 According to the dissent, the Fifth Circuit clearly held that § 107 supplied the right of action for Aviall's claim, while § 113 supplied the procedural framework. Moreover, Justice Ginsberg noted that in the previous Key Tronic decision, the Supreme Court had suggested, in dictum, that a private right of action may exist under § 107.15 Thus, the dissent made clear that it would not have deferred a definitive ruling by the Court and would have decided that Aviall could have proceeded against Cooper under § 107.
The issue the Supreme Court dodged, whether a PRP can assert a § 107 claim, may likely return to the Supreme Court for resolution after it is decided by the Fifth Circuit. Many PRPs will likely seek to relitigate this issue because the reasoning that many Courts of Appeal invoked as the basis for their determination that a PRP could not assert a § 107 cost recovery claim may no be longer valid in light of the Cooper Industries decision. CERCLA § 113(f)(1) allocates liability based on equitable considerations and has a three-year statute of limitations.16 CERCLA § 107, however, provides for joint and several liability and has a six year statute of limitations.17 Those Courts of Appeal reasoned that § 113(f)(1) would be meaningless if a PRP were permitted to elect recovery under either § 107(a) or § 113(f)(1).18 As the Second Circuit noted in Bedford Affiliates v. Sills, "[a] recovering liable party would readily abandon a § 113(f)(1) suit in favor of the substantially more generous provisions of § 107(a).19 Thus, these Courts refused to interpret § 107 (a) so broadly that it would become a nullity. However, the Cooper Industries decision providing that a PRP may not maintain a contribution action under § 113(f)(1) unless it is subject to a § 106 or § 107 action eliminates the concern that § 113(f)(1) would be a nullity because PRPs not subject to § 106 or § 107 actions may not recover under § 113(f)(1), thus § 107 may be their only vehicle to recover cleanup costs. Therefore, it is likely that the question of whether a PRP may assert a § 107 claim, or whether it is limited to seeking contribution pursuant to § 113, will likely be re-opened and before the Supreme Court in the future.
The issue was recently raised in the Southern District of New York in Elementis Chemicals, Inc. v. TH Agriculture & Nutrition, L.L.C.20 In Elementis, the current owner of several contaminated sites sought to bring, inter alia, a § 107(a) cost recovery action against the former property owner. The plaintiff maintained that current Second Circuit precedent, set forth in Bedford Affiliates, precluding a PRP from proceeding under § 107(a) is no longer binding in light of the Cooper Industries decision, which re-opened the issue. The Southern District, however, rejected this argument, holding that the Supreme Court in Cooper Industries, expressly withheld judgment regarding the correctness of Bedford Affiliates and other Courts of Appeal holding that a PRP may not pursue a § 107 action, and declined to decide whether a PRP had an implied right of contribution under § 107.21 The Court further held that in the Second Circuit the "Supreme Court will not be held to have implicitly expressed an opinion on a question which it explicitly declined to addressÉeven if the Supreme Court's future expression of that opinion is viewed by some as quite likely."22 Thus, it appears that the question of how §§ 107 and 113 of CERCLA were meant to co-exist is still a complicated one that may be taken up by the Courts of Appeal and the Supreme Court in the near term.
1 42 U.S.C. § 9601 et seq .
2 42 U.S.C. § 9613(f)(1)
3 125 S.Ct. 577, 579 (2004)
4 Id. at 584
5 42 U.S.C. § 9613(f)(3)(B)
6 01-C-0872 (JPS)(E.D.Wisc. Mar. 23, 2005) at p. 3.
8 See United Technologies Corp. v. Browning-Ferris Indus. Inc ., 33 F.3d 96, 99-103 (1st Cir. 1994); Bedford Affiliates v. Sills, 156 F.3d 416, 423-24 (2d Cir. 1998); New Castle County v. Halliburton NUS Corp., 111 F.3d 1116, 1120 (3d Cir. 1997); Pneumo Abex Corp. v. High Point, Thomasville & Denton R.R. Co., 142 F.3d 769, 776 (4th Cir. 1998); Centerior Serv. Co. v. Acme Scrap Iron & Metal Corp., 153 F.3d 344, 349-56 (6th Cir. 1998); Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 764 (7th Cir. 1994); United States v. Colorado & E. R.R Co., 50 F.3d 1530, 1536 (10th Cir. 1995); 118 F.3d 1298, 1301-03 (9th Cir. 1997); Redwing Carriers, Inc. v. Pinal Creek Group v. Newmont Mining Corp Saraland Apartments, 94 F.3d 1489, 1496 (11th Cir. 1996)
9 Some courts allocate liability using six factors, commonly referred to as the "Gore factors," which are the: (1) ability of the parties to demonstrate that their contribution to a discharge, release or disposal of a hazardous waste can be distinguished; (2) amount of hazardous waste involved; (3) degree of toxicity of the hazardous waste involved; (4) degree of involvement by the parties in the generation, transportation, treatment, storage, or disposal of the hazardous waste; (5) degree of care exercised by the parties with respect to the hazardous waste concerned, taking into account the characteristics of such hazardous waste; and (6) degree of cooperation by the parties with Federal, State, or local officials to prevent any harm to the public health or the environment.
10 Cooper Indus., Inc., 125 S.Ct. at 584-85
11 511 U.S. 809 (1994)
12 Cooper Indus., Inc ., 125 S.Ct. at 585-86
13 Id. at 586
14 Id. at 587-88
15 Id. at 588
16 42 U.S.C. § 9613(g)(3)
17 42 U.S.C. § 9613(g)(2)
18 Bedford Affiliates, 156 F.3d at 424 ; United Technologies Corp ., 33 F.3d at 100-01 ; New Castle County, 111 F.3d at 1122-23 ; Colorado & E.R. Co., 50 F.3d at 1536.
19 Bedford Affiliates, 156 F.3d at 424
20 03 Civ. 5150 (LBS) 2005 U.S. Dist. Lexis 1404 (S.D.N.Y. Jan. 31, 2005)
21 Id. at p. 33.
22 Id . at p. 36.
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.