Posted By James J. Periconi, Esq. on June 28, 2010
Our last post discussed the Second Circuit’s recent decision in Niagara Mohawk v. Chevron, 596 F.3d 112 (2d Cir. Feb 24, 2010). We left off when the District Court was about to review its prior decision in light of the Supreme Court’s decision in Cooper Industries v. Aviall Services (“Aviall”).
The Aviall Court held that a private party could only maintain a § 113(f)(1) action for contribution if it has first been sued itself judicially under §§ 106 or 107. After the Second Circuit remanded the case for a ruling consistent with Aviall, NiMo had to concede that it could not maintain a 113(f)(1) action because the State’s consent order did not constitute suit under §§ 106 or 107, but asserted that it could seek contribution under 113(f)(3)(B). This provision of § 113 allows a party that has settled with the United States or a state in an administrative or judicially approved settlement for partial or full costs of response to seek contribution from other PRPs that have not likewise settled. In contrast, only a judicial action under §§ 106 or 107 can be the basis for a contribution action under § 113(f)(1).
The District Court held that § 113(f)(3)(B) contribution was not available to NiMo because DEC had not been granted the authority to settle CERCLA claims by the EPA, although the Court conceded that the Order on Consent may be an administrative resolution of NiMo’s liability to the state. The Court also held that NiMo could not use § 107(a) as a basis for cost recovery because it has settled its CERCLA liability with the state.
In our opinion, the District Court missed the mark on reading § 113(f)(3)(B), because the set of facts present here – where the PRP settles its CERCLA liability with a state – is exactly the situation that the statute contemplates. This failure of the District Court to give the language of § 113(f)(3)(B) its plain meaning after conceding that NiMo resolved its liability to the state necessitated the protracted litigation and appeals that follow.
The Supreme Court then issued the Atlantic Research decision. Addressing the issue left open in Aviall, the Court held that § 107(a)(4)(B) authorizes private parties that incurred response costs to recover those costs from PRPs. Further, the Court distinguished cost recovery actions under § 107(a) from contribution actions under §113(f)(1), as available to “persons in different procedural circumstances.” Parenthetically, for the purposes of whether a PRP can use § 107(a) to recover response costs, the Court does not distinguish those PRP’s that have entered into an administrative order on consent from those parties that voluntarily clean up the site without making a deal with the government. That issue was left open, and the Second Circuit later addressed it in W.R.Grace v. Zotos Int’l, 559 F.3d 85 (2d Cir. 2009), which we blogged about here.
As before, an appeal followed and the Second Circuit remanded for a finding consistent with Atlantic Research, which the Supreme Court decided while the NiMo appeal was pending. The District Court determined that the holding in Atlantic Research did not require a change in its prior decision that § 107(a) does not provide a remedy for NiMo because it incurred response costs under its Orders on Consent with the DEC and, therefore, are not costs incurred “voluntarily”.
This ruling was consistent with Second Circuit case law holding that expenses incurred under an administrative consent order with a government agency are not costs incurred “voluntarily” (Con Ed v. UGI Utility, 423 F.3d 90 (2d Cir. 2005)). The requirement that costs sought to be recovered under § 107(a) be incurred “voluntarily” is not mandated by statute; rather, it seems to be a requirement introduced in the Second Circuit by the Con Ed case. We now know that whether a PRP enters into a Order on Consent before beginning remediation “is of no legal significance with respect to whether or not the party has incurred response costs as required under § 107(a).” W.R. Grace, 559 F.3d, at 92.
The District Court did not reconsider its decision on NiMo’s § 113(f)(3)(B) claim, as the Atlantic Research decision does not address this section of CERCLA.
Our next post will consider the latest appeal, which is the basis for the Second Circuit’s most recent decision concerning § 113(f) contribution.