Earlier this month, the Fifth Circuit held that sovereign immunity protected a number of state agencies and universities from Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) liability. Generally stated, sovereign immunity is a legal doctrine that prohibits private individuals from bringing civil lawsuits or criminal prosecutions against the state. State immunity from lawsuits is provided by the Eleventh Amendment, while the Supreme Court has established a similar rule for suits against the federal government. Sovereign immunity is not absolute, of course. The states and federal government may waive immunity or consent to the lawsuit.

The Fifth Circuit found that Texas had neither waived its immunity nor consented to the lawsuit in United States Oil Recovery Site Potentially Responsible Parties Group v. Railroad Commission of Texas, No. 17-20361, 2018 WL 3649653 (Aug. 1, 2018). The case concerned a Superfund site in Pasadena, Texas. In an effort to secure cleanup costs, a group of more than 100 entities, the United States Oil Recovery Potentially Responsible Parties Group (“PRP Group”), began working with the U.S. Environmental Protection Agency (“EPA”). The PRP Group eventually identified a group of entities, including a number of state agencies and universities, that they believed to be potentially responsible parties. After the PRP Group filed suit, the state agencies and universities filed a motion to dismiss, arguing sovereign immunity barred the lawsuit. The United States District Court for the Southern District of Texas denied the motion to dismiss without any analysis, and the state agencies and universities appealed.

On appeal, the state agencies and universities argued that sovereign immunity barred the CERCLA claim because the agencies and universities were “arms of the state.” The PRP Group did not argue that CERCLA abrogated state sovereign immunity. Instead, the group argued that the defendants were not entitled to sovereign immunity because they were engaged in “propriety functions.” The PRP Group further argued that sovereign immunity had been waived because the Texas Commission on Environmental Quality had participated in the CERCLA cleanup.

The Fifth Circuit was not persuaded by the PRP Group’s arguments and reversed the lower court’s order. Because neither party argued that CERCLA abrogated state sovereign immunity, the court framed the issue as whether the defendants were “arms of the state.” Applying Fifth Circuit precedent, the court easily concluded that the state agencies and universities were arms of the state. The court then quickly dismissed the PRP Group’s arguments. The court refused to find that the state defendants were engaged in proprietary functions, and it rejected the PRP Group’s waiver argument because the agencies and universities had not unequivocally waived immunity.

Historical Context

The issue of whether sovereign immunity bars private parties from bringing CERCLA actions against states and their agencies dates back to the 1980s. Prior to 1986, courts were divided on the issue. Then, in 1986, Congress passed the Superfund Amendments and Reauthorization Act (“SARA”), which amended CERCLA. The amendments changed the definition of liable persons to include states. Shortly thereafter, the Supreme Court concluded that the SARA amendments abrogated state sovereign immunity to CERCLA claims. Pennsylvania Coal v. Union Gas CO., 491 U.S. 1, 13 (1989). It was not a long-held opinion, though. Just seven years later, in 1996, the Court overruled Pennsylvania Coal in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 66. (1996). As a result of the ruling, the part of SARA revoking state sovereign immunity became unenforceable. After Seminole, private parties could no longer seek contribution from a state or its agencies under CERCLA unless the state waived its immunity or otherwise consented to the suit.

Key Takeaway

The Fifth Circuit’s holding is a reminder that private parties are generally barred from recovering against a state or its agencies in a CERCLA action absent waiver of the immunity or consent to the lawsuit. Whether a state has waived sovereign immunity is a particularly complex area of Eleventh Amendment immunity. See, e.g., Burnette v. Carothers, 192 F.3d 52, 58–59 (2d Cir. 1999) (holding Eleventh Amendment barred homeowner’s CERCLA claim against state and finding state had neither waived immunity nor consented to the lawsuit); Carolina Power & Light Co. v. 3M Co., 2010 WL 11420854, at * 13 (E.D.N.C. Mar. 24, 2010) (holding sovereign immunity barred CERCLA claims against state agencies and universities and finding state had not waived immunity); Louisville Pub. Warehouse Co. v. Indiana Dep’t of Transp., No. 01-140-C-B/G, 2001 WL 980583, at * 1–2 (S.D. Ind. Aug. 24, 2001) (finding CERCLA claim barred on sovereign immunity grounds and rejecting waiver argument because agency brought action in state court under state law counterpart to CERCLA); but see New York v. General Elec. Co., No. 1:14-CV-747, 2015 WL 12748007, at * 6–7 (W.D.N.Y. Sept. 29, 2015) (concluding state had waived sovereign immunity defense to common law recoupment counterclaims where state voluntarily commenced CERCLA action in federal court). Private litigants wishing to recover against the state or its agencies in a CERCLA action in federal court must be prepared to argue the waiver issue.