On December 19, 2012, the Seventh Circuit decided issues left unresolved after several U.S. Supreme Court decisions interpreting certain provisions of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601, et seq. (CERCLA). Bernstein v. Bankert, 702 F.3d 964 (7th Cir. 2012) (Nos. 11-1501, 11-1523), addresses the rights of parties, who settle with the EPA, to pursue non-settling parties for payment of their costs. The circuit court’s decision revived CERCLA causes of action that a lower court had ruled were barred under CERCLA’s statutes of limitations.

The Bernstein plaintiffs are trustees of a fund that had been established to pay costs of complying with two Administrative Orders on Consent (AOCs) that potentially responsible parties (PRPs) had signed with the EPA ‒ one in 1999 and one in 2002 ‒ to address contamination of a property in Indiana known as Third Site. At Third Site, prior to 1982, the now defunct Environmental Chemical and Conservation Company (Enviro-Chem) had conducted waste handling and disposal activities. The 1999 AOC, which had been executed by both de minimis and other PRPs, required an environmental investigation and engineering analysis at the Site and payment of government costs. In October 2002, U.S. EPA approved the settling parties' activities under that first AOC. In November 2002, the EPA issued a second AOC, this one requiring PRPs to pay for the removal action that the EPA selected for the Site. Although several PRPs paid into the trust established to fund the requirements of both AOCs, the alleged former individual owners of the Site ("the Bankerts"), their corporate entity Enviro-Chem, and their insurers did not pay.

In 2008, while the removal action was still ongoing, the trustees filed a complaint against the Bankerts in the Southern District of Indiana seeking CERCLA § 9607 cost recovery, a declaration of CERCLA liability, cost recovery under Indiana's Environmental Legal Actions statute (ELA), and recovery under other state law claims. In response to the Bankert’s summary judgment motion, the trial court first found that the trustees could not bring a § 9607 cost recovery claim, only a § 9613(f) contribution claim, and granted the Bankert’s motion for summary judgment on statute of limitations grounds with respect to the federal and state law claims, mooting claims for declaratory judgment and against the insurers. The trustee plaintffs appealed.

The Bernstein decision resulted in several important CERCLA and related holdings that, unless modified upon rehearing or en bancor by the U.S. Supreme Court, will govern environmental litigation within the Seventh Circuit. Those holdings include:

  • A PRP who qualifies for a CERCLA § 9613(f) contribution action must use that cause of action to recover costs from other PRPs, and cannot use a CERCLA § 9607 cost recovery action.
  • Each government settlement agreement at a single site invokes a distinct payment obligation, each of which can be the basis for a CERCLA cause of action and, therefore, a new running of the applicable statute of limitations.
  • A PRP's right to bring a CERCLA § 9613(f)(3)(B) contribution action in response to its settlement with the government is not triggered unless and until the government issues a final release of the PRP's liability, typically upon acceptance of all work under the settlement agreement. Until that time, a PRP seeking to recover costs of response can only proceed under § 9607.
  • A PRP who executed a settlement with the government and who was ‘compelled’ to pay response costs is entitled to proceed under § 9607; however, that plaintiff PRP will not be able to impose joint and several liability if the defendant PRPR can prove a reasonable basis for apportioning liability.