The Seventh Circuit issued two significant decisions relating to the cleanup of the Lower Fox River and Green Bay Superfund Site (the “Site”) on September 25, 2014. In the first, NCR Corp. v. George A. Whiting Paper Co., No. 13-2447 (7th Cir. Sept. 25, 2014), the Court reaffirmed that a CERCLA plaintiff with a cause of action for contribution under CERCLA § 113(f) may not bring a cost recovery action under § 107(a). The Court then rejected the “equitable factors” analysis used by the lower court to allocate costs among the potentially responsible parties (PRPs) at the Site, finding that the lower court impermissibly considered only one relevant factor to the exclusion of others. In the second decision, U.S. v. P.H. Glatfelter Co. and NCR Corp., No. 13-2436 (7th Cir. Sept. 25, 2014), the Court, on the basis of new evidence presented at trial, revisited its earlier finding that the environmental harm at the Site was not capable of apportionment among the PRPs. Because new evidence showed that cleanup costs were more complex and nuanced than previously understood, the Court held that the cleanup costs could be divided among the PRPs, and remanded the case for further factual findings. Together, these cases provide important guidance in key areas of CERCLA jurisprudence, particularly with respect to the CERCLA apportionment defense.
From the mid-1950s through the 1970s, NCR Corp., P.H. Glatfelter Co., and other paper mills discharged polychlorinated biphenyls (PCBs) into Wisconsin’s Lower Fox River, which feeds into the Site. Working in conjunction with the Wisconsin Department of Natural Resources (WDNR), the EPA developed a remedial plan in 1998 that divided the Site into five operable units.
In 2007, the agencies issued a Unilateral Administrative Order directing the PRPs to clean up the Site with a combination of sediment dredging, capping, and sand covering. NCR took the lead in remedial efforts and shouldered the majority of the remediation costs, then filed suit in 2008 for contribution from the other PRPs. The district court not only ruled against NCR and denied its contribution claim; it also found NCR to be 100 percent responsible for the PCB contamination and required NCR to reimburse the other PRPs for their response costs. The first of the Seventh Circuit’s two decisions addressed NCR’s contribution claim against those other PRPs who operated paper mills along the Lower Fox River.
NCR Corp. v. George A. Whiting Paper Co., No. 13-2447 (7th Cir. Sept. 24, 2014).
Reviewing the district court’s findings de novo, the Seventh Circuit affirmed the district court’s conclusion that NCR could not bring a claim for cost recovery under CERCLA § 107(a) if it satisfied the statutory prerequisites for a contribution claim under § 113(f), which it did. However, the Seventh Circuit found that the district court abused its discretion when it ordered NCR to pay 100 percent of the cleanup costs.1
NCR’s claims are limited to contribution under CERCLA § 113(f).
The Seventh Circuit affirmed the district court’s ruling that NCR was limited to a contribution claim under CERCLA § 113(f) and could not seek cost recovery under CERCLA § 107(a). Pursuant to section 113(f), a party subject to an action under CERCLA §§ 106 or 107, or that has resolved its liability to the United States or a State for some or all of a response action, may seek contribution from other PRPs under section 113(f). Conversely, a party that has incurred qualifying response costs but is not subject to an enforcement or liability action, or who is not party to an administrative order or a settlement with the government, may seek cost recovery under section 107(a).
In this case, NCR’s response costs at the Site arose under three government orders: a consent decree following a 2001 suit by the EPA and WDNR, an Administrative Order of Consent for design work in 2004, and a Unilateral Administrative Order for remedial work in 2007. These agreements and orders triggered the availability of a section 113(f) action and raised the question of whether NCR could also seek recovery from the other PRPs under section 107(a).The Seventh Circuit agreed with the lower court and with several other circuits that a plaintiff is limited to a section 113(f) contribution action where one is available.2
A more vexing issue for the Seventh Circuit related to Appvion, a paper mill that was initially identified as a PRP but later held to fall outside of CERCLA’s statutory grounds for liability. Appvion was only an indemnitor of NCR. It sued to recover the response costs it paid while designated a PRP. Noting that this was an issue of first impression, the Seventh Circuit held that Appvion could recoup its costs under section 107(a) and reversed the district court’s order. The court noted that Appvion could not sue under section 113(f) because contribution existed only among joint tortfeasors, and Appvion was no longer a PRP. It determined that section 107(a) was appropriate because Appvion’s response payments were constructively voluntary. Had Appvion been properly characterized from the start as NCR’s indemnitor, any payments it might have made would have been entirely voluntary. The Court applied this absence of compulsion retroactively, finding that Appvion could sue under section 107(a) because “something should be available” for a party like Appvion that incurred response costs as a misclassified PRP and not as an indemnitor.
District court must consider totality of circumstances in determining cost allocation.
The Seventh Circuit next reviewed the district court’s denial of NCR’s contribution claim against the other Fox River PRPs. In reaching its decision, the district court limited the parties’ discovery to two issues: when each party knew or should have known that recycling carbonless paper resulted in the discharge of PCBs, and what action each party took upon acquiring such knowledge. The district court gave considerable weight to correspondence showing that NCR was aware by the late 1960s that PCBs posed a risk of environmental harm. In its view, the record left no doubt that NCR knew long before the other PRPs that PCBs posed a long-term environmental risk. The importance of this early knowledge, the court reasoned, drowned out all other equitable factors. The district court thus held that NCR was responsible for 100 percent of the response costs — both its own costs and those paid by the other PRPs.
NCR argued that the district court abused its discretion by impermissibly considering only one factor in determining the parties’ cost allocation. The district court, it contended, must consider the totality of circumstances, including the parties’ relative volumes of PCB discharges, sources of PCBs in the river other than carbonless copy paper, and the parties’ levels of voluntary cooperation with the government’s cleanup effort. The Seventh Circuit agreed and found that the district court abused its discretion by focusing entirely on one equitable factor. The Court emphasized “a distinction between determining an action based on a single factor, and considering only certain factors on the way to the decision.” While it noted that the district court’s decision may be justifiably swayed by one factor alone, at a minimum, it had a duty to weigh other relevant factors. The Seventh Circuit reversed the district court’s decision and remanded with instructions to determine cost allocation on the basis of a more complete record.
United States v. P.H. Glatfelter Co. and NCR Corp., No. 13-2436 (7th Cir. Sept. 25, 2014).
The second of the Seventh Circuit’s two decisions revisited the Court’s 2012 ruling concerning NCR’s apportionment defense.3In 2009, after the district court ruled against NCR and held it responsible for 100 percent of the response costs, NCR decided it would no longer comply with the EPA’s 2007 Administrative Order, arguing that it had already paid more than its equitable share. NCR cut its remediation work in half in 2011 and refused to perform any work in 2012, prompting the U.S. to file suit to compel compliance with the EPA work order. In that action, NCR argued that the harm at the Site was “divisible,” that NCR could quantify its responsibility for the contamination, and that NCR could therefore not be held jointly and severally responsible for the entire site cleanup. The Seventh Circuit rejected NCR’s divisibility defense, which was premised on the theory that remediation costs at the Site may be divided among the PRPs on the basis of their volumetric contribution of PCB contamination. The Court determined that NCR’s contribution to the PCB contamination, standing alone, would have been sufficient to raise the PCB levels above the 1.0 ppm threshold, the point at which the EPA required remediation. The Court further found that the remediation work — soil dredging — did not become more expensive as PCB concentrations increased. Together, these findings created a binary situation in which contaminant levels over the 1.0 ppm threshold resulted in static costs. Because NCR’s contaminants alone pushed the Site above that threshold, NCR could be fairly held responsible for the entire Site.
In this opinion, the Seventh Circuit reexamined NCR’s apportionment defense in light of new evidence raised at trial. It also reversed the lower court’s imposition of injunctive relief, finding that such relief was unnecessary and improper.4
Harm may be divisible and can be apportioned based on a party’s share of the remediation costs.
The Seventh Circuit held that a party may be able to prove that harm is divisible by showing the extent to which it contributed to the harm or contamination. Upon this showing, the Court determined that a reasonable basis for apportionment could be the remediation cost required of each party.
In this case, the district court rejected NCR’s argument that harm was capable of apportionment, based on its conclusion that PCB concentrations above 1 ppm were harmful and always imposed the same remediation costs above that level. The district court further found that PCB concentrations below 1 ppm were not harmful and would impose no remediation costs. Because NCR could not refute that its discharges alone pushed PCB concentrations above the 1.0 ppm threshold, the district court found that the harm could not be apportioned.
The Seventh Circuit characterized the district court’s binary treatment of harm at the 1.0 ppm level as an “oversimplification.” The Court credited evidence proving that the 1.0 threshold was not actually a proper line of demarcation, as it was not in fact the EPA’s remedial goal. EPA instead sought a surface weighted average concentration (SWAC) of 0.25 ppm, which could be achieved by some form of remedial action wherever PCB concentrations exceed 1 ppm. Thus, sediment pockets with a PCB concentration of 0.99 ppm would be left alone not because they are uncontaminated, but because they are insufficiently contaminated to push the site-wide SWAC above 0.25 ppm, after other areas with higher concentrations had undergone remediation. The Seventh Circuit recognized that not all concentrations above EPA’s remedial thresholds were equally harmful and that even concentrations at the 0.25 ppm target SWAC posed a threat to human health and the environment. In light of this, the Court concluded that harm resulting from PCB contamination was not an “on/off switch.”
The Seventh Circuit next determined that the continuous nature of PCB contamination carried with it dynamic remediation costs, rejecting the district court’s assumption that PCB concentrations above 1.0 ppm would always impose the same remediation costs. The court recognized that soil dredging was the default and most expensive remedial approach, but that other, cheaper approaches were available, such as sand covering and capping. While higher PCB concentrations nearer the surface were likely to be dredged, lower concentrations of PCB at greater depths were likely to be capped or covered with sand.
Because remediation costs varied with both the volume and placement of contamination, the Court concluded that site-wide remediation costs be “theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations in OU4.” NCR could then attempt to apportion the site-wide harm among the PRPs by offering evidence of the additional remediation costs imposed as a result of each party’s PCB releases.
The Seventh Circuit then turned to NCR’s proffered expert testimonies that calculated each party’s remediation costs and found that the district court impermissibly rejected this evidence without adequate explanation. The Court remanded the case to the district court for further factual findings.
Injunctive relief is not a proper remedy under CERCLA.
The Seventh Circuit reversed the district court’s grant of permanent injunctive relief to the EPA. It found that such a remedy was improper under CERCLA and unnecessary to enforce an administrative cleanup order. The Court agreed with NCR and Glatfelter that an injunction was suitable only in emergency situations where the EPA did not have time to compile a thorough record and issue an administrative order. In this case, the EPA had already issued several administrative orders. The Seventh Circuit further found that the EPA was empowered under CERCLA to levy civil penalties of $25,000 per day against non-compliant parties, thus rendering the injunction superfluous.
These twin decisions implicate several important areas of CERCLA jurisprudence. First, they affirm that a plaintiff who satisfies the conditions to bring a contribution action under section 113(f) cannot also bring a claim for cost recovery under section 107(a). This decision puts more pressure on those circuits that have not yet resolved this issue, including the Ninth Circuit, to do the same. Second, the Seventh Circuit set an important boundary on the discretion afforded district courts in weighing equitable factors to determine a reasonable cost allocation. While it recognized a district court’s freedom to favor one equitable factor over others, a district cannot simply ignore other relevant factors without explaining why they are unpersuasive.
Finally, and perhaps most importantly, the Seventh Circuit appears to have greatly expanded the applicability of the apportionment defense, which, if successful, can shield a CERCLA PRP from joint and several liability. The approach laid out in the United States v. P.H. Glatfelter decision is broadly applicable to many kinds of cleanups, as the only criteria for apportionment is whether the defendant can quantify its individual contribution to the total site remediation costs. Theoretically, this defense could even be applied on the basis of volumetric contributions alone at simple sites. This decision could therefore signal a very significant turn in the way defendants approach CERCLA sites, and mark a major limitation on the traditional imposition of joint and several liability.