The U.S. Supreme Court recently declined to review the Sixth Circuit's decision in Hobart Corp. v. Waste Management, 758 F.3d 757 (6th Cir. 2014), cert denied 2015 WL 231991 (U.S. Jan. 20, 2015), leaving intact the Sixth Circuit's holding that all CERCLA Section 113 contribution claims are subject to a three-year statute of limitations.
The Sixth Circuit's decision draws a clear bright line on statute of limitations issues, but further complicates the interplay between Section 107 cost recovery claims and Section 113 contribution actions. Given the often extended timelines associated with remediation of complex contaminated sites, the decision also puts further pressure on responsible parties to remediate and litigate simultaneously.
CERCLA Section 113(f) grants private parties a right of contribution either (a) "during or following a civil action under [CERCLA Sections 106 or 107(a)]," or (b) once a party "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." CERCLA Section 107(a) also creates a separate cost recovery right of action for a private party that has incurred cleanup costs.1 In its 2007 Atlantic Research Corp. decision, the Supreme Court attempted to distinguish Section 113 contribution actions from Section 107 cost recovery actions, holding that the two claims were generally distinct and that contribution actions could only be brought when the Section 113 statutory criteria have been met-i.e., during or following a civil CERCLA cost recovery action or upon resolution of liability in an administrative or judicial settlement.
However, as a practical matter, the bright lines the Supreme Court attempted to draw have not played out well in practice, in large part because the terms of administrative settlements can vary widely from agency to agency and from site to site, and therefore whether the Section 113 criteria have been met is not always clear. For example, in Bernstein v. Bankert, 733 F.3d 190 (7th Cir. 2013), the Seventh Circuit concluded that a responsible party who had entered into an administrative consent decree to perform cleanup work could not bring a Section 113 claim because the consent decree's covenant not to sue was conditioned upon successful completion of the work. In other words, because the consent decree contained a conditional covenant not to sue, it was not a full and final resolution of liability that satisfied the prerequisites for a Section 113 contribution claim. Thus, the responsible party could only bring cost recovery claims under Section 107.
The confusion over the interplay between Section 107 cost recovery claims and Section 113 contribution claims is made more complicated by the significant differences in the statutes of limitations that apply to these claims. Generally, Section 107 cost recovery actions must be commenced either within six years from the initiation of physical on-site remediation actions or within three years from completion of a removal action ("Cost Recovery Limitations Period").2 In comparison, Section 113 contribution claims must be commenced within three years of:
- the date of judgment in any action under this chapter for recovery of such costs or damages, or
- the date of an administrative order under section [122(g)] (relating to de minimis settlements) or [122(h)] (relating to cost recovery settlements) or entry of a judicially approved settlement with respect to such costs or damages. ("Contribution Limitations Provision").3
The Contribution Limitations Provision's silence as to what statute of limitations applies to administrative settlements that create a right of contribution-but are not de minimis or cost recovery settlements under Sections 122(g) or (h), respectively-perpetuates the confusion surrounding CERCLA's statute of limitations. Historically, courts have resolved this silence in several ways, including finding that: (1) no statute of limitations applies; (2) the Cost Recovery Limitations Period applies; or (3) the Contribution Limitations Provision applies, but does not begin to run until after the party has paid more than its equitable share of costs.4 Many of these decisions, however, predate the U.S. Supreme Court's decisions in United States v. Atlantic Research Corp., 551 U.S. 128 (2007) and Cooper Indus., Inc. v.Aviall Servs., Inc., 543 U.S. 157 (2004) that clarified the role and purpose of Section 113 contribution claims. The Sixth Circuit in Hobart appears to be the first Court of Appeals to have addressed this issue in the wake of Atlantic Research and Cooper Industries.
The Sixth Circuit Offers a Bright Line Rule in the Face of CERCLA's Silence
The Sixth Circuit resolved the issue by holding that: (a) the Contribution Limitations Provision "provides the statute of limitations for all [CERCLA] contribution claims;" and (b) "the effective date of the [administrative settlement] is the most logical and triggering event" for the commencement of this three-year statute of limitations.5 Therefore, because Plaintiffs brought their Section 113 claims more than three years after entering an administrative settlement and order on consent ("ASAOC") to conduct a remedial investigation and feasibility study, the Court ruled that the claims were time-barred.6
The plaintiffs argued that the Court should apply the longer Cost Recovery Limitations Period because the ASAOC was not one of the administrative settlements listed in the Contribution Limitations Provision (i.e., Section 122(g) or (h) settlements). The Sixth Circuit rejected this argument, explaining that the prior decisions that applied the Cost Recovery Limitations Period to certain contribution claims (so long as there had not been a preceding Section 107(a) cost recovery claim) were no longer good law in light of the clarifications in Cooper Industries and Atlantic Research that Sections 107 and 113 offer mutually exclusive causes of action.7 Because the Contribution Limitations Provision is silent as to when the three year period should commence for administrative settlements other than those under Sections 122(g) or (h), the Court also held that the same commencement date applies to all administrative settlements-the settlement's effective date.8
Although the Hobart decision is not binding outside the Sixth Circuit, environmental practitioners and the regulated industry should be mindful of this decision when entering into an administrative settlement agreement or an administrative order at a CERCLA site-especially one that requires the performance of work-and when assessing contribution claims arising from such settlements. The Sixth Circuit appears to be drawing a number of bright line rules: (a) the entry of an administrative consent order gives rise to a Section 113 contribution action, not a Section 107 cost recovery action, even if that order does not cover all remedial activities and costs at a site; and (b) the applicable statute of limitations is three years from the effective date of the order.
Subsequent courts may find the Sixth Circuit's decision to be very persuasive, in part because it has the benefit of simplicity. Responsible parties, however, often find themselves in much more complicated situations where such bright lines create practical and pragmatic difficulties. In complex sites, administrative orders often cover only a small portion of the required work (such as the remedial investigation) and concomitant response costs. When orders are issued for the early stages of a cleanup, responsible parties may not understand the nature of the contamination, the potential overall costs of remediation, or the role of other responsible parties in a way that facilitates the efficient litigation of contribution actions. And, at some sites where there may be dozens or hundreds of responsible parties, multiple responsible parties may wish to establish PRP groups or engage in mediated allocation proceedings-all of which take time-before initiating litigation against recalcitrant PRPs.
The Sixth Circuit's decision makes some of these actions more difficult. It puts a premium on securing tolling arrangements among PRPs, and it may incentivize the early defensive filing of contribution actions by cooperating PRPs, particularly at complicated multi-party sites.