Can Entering Into a CERCLA Consent Decree Preclude Subsequent Cost Recovery Actions?

Posted By on December 4, 2012

Congress enacted the Superfund Act, whose formal name is the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, in 1980 to promote the clean up (remediation) of properties, typically abandoned landfills or other sites, that had been contaminated by the disposal of hazardous materials. To further this goal, Congress cast a wide net and imposed strict liability for all “Potentially Responsible Parties” (PRPs) who contributed to the contamination at a site. See 42 USCS Sec. 9607(a). 

CERCLA provides certain exemptions from liability, most importantly for bona fide prospective purchasers, that is, those whose due diligence uncovers contamination and who thereafter observe certain precautions and cooperation with government-sponsored cleanups, and a handful of limited legal defenses to liability for PRPs.  However, the law does allow a PRP to undertake certain actions for cost recovery or contribution from other PRPs, although court rulings, including several U.S. Supreme Court decisions, make it less than clear when a cost recovery or, alternatively, a contribution action may be brought. See the Periconi, LLC Environmental Law Blog here for an introduction to the landowner liability protections under Superfund, and here for a discussion of the “continuing obligations” required to maintain landowner liability protections.

Add to this mix a recent case from the Eleventh Circuit, which has cast doubt on whether a party pursuing a contribution claim under 42 USC Sec. 9613(f)(1) may also seek cost recovery under 42 USC Sec. 9607(a). In Solutia, Inc. v. McWane, Inc., 672 F.3d 1230 (11th Cir. 2012), the Eleventh circuit affirmed a magistrate judge’s ruling that Solutia could not pursue a cost recovery action for sums that a Preliminary Consent Decree with the EPA had already provided contribution rights for. In essence, the court concluded that cost recovery actions and contribution actions under CERCLA were mutually exclusive.

Such a position has important implications for PRPs around the country. While cost recovery actions under CERCLA Section 107 permit the imposition of joint and several liability, contribution actions under CERCLA Section 113 only allow for equitable apportionment of costs and have a shorter statute of limitations. The Supreme Court has touched on the relationship between cost recovery and contribution in both Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004)(“Aviall”), and United States v. Atlantic Research Corp., 551 U.S. 128 (2007)(“Atlantic Research”), but it has not conclusively defined the relationship between the two provisions. For previous coverage of these and associated Superfund cases on the Periconi, LLC Environmental Law Blog, see here and here.

In Aviall, the court addressed the relationship between contribution and cost recovery insofar as an action for contribution may only be brought during or following an action for cost recovery. 543 U.S. 157 at 166. In Atlantic Research, the Court noted the potential for overlap between the two provisions, but declined further analysis after determining it was sufficient to conclude that “at a minimum, neither remedy swallows the other.” 551 U.S. 128 at 139 n. 6.

The Eleventh Circuit’s ruling in Solutia is the first to explicitly declare them mutually exclusive, a decision that the court reached on a public policy basis, rather than through statutory interpretation. To reach this conclusion, the court cited Atlantic Research for the proposition that “CERCLA must be read as a whole, such that its remedies remain clearly distinct.” 672 F.3d 1230 at 1237 (quotation marks and internal citations omitted). Such an interpretation was required, the court explained, to prevent parties from “repackaging” a contribution claim as a cost recovery claim to “shop” for a more favorable statute of limitations or make an end run around the protection afforded to a party who has settled with the EPA. Id

However, in citing Atlantic Research, the Eleventh Circuit skirted the portion of the decision cited above where the Supreme Court noted the potential overlap between the two provisions. Solutia, Inc. pounced on this discrepancy in its recently filed petition for certiorari requesting the Supreme Court to review the Eleventh Circuit’s decision. Huron Valley Steel Corporation, a respondent PRP in the earlier action, has already filed a brief in opposition to Solutia’s petition for cert, and the two petitions were scheduled for Conference on September 24 and October 5, respectively. On October 9, 2012, the Supreme Court denied Solutia Inc.’s petition for certiorari.

Until the Supreme Court weighs in on the Eleventh Circuit’s decision in Solutia, parties considering a settlement of potential CERCLA liability with the government would do well to consider the possible impact on any potential future contribution actions against additional PRPs, and push for government cooperation in crafting language in the consent decree that maximizes the potential for a settling party’s recovery (by whatever name) of some portion of its costs of settlement from other responsible parties.

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